Water and Sanitation Regulatory Council GOVERNANCE_ IMPRESSAO... · 2018-10-16 · 18 de Março de 2016 Elaborado pelo consultor RPG, Lda. Water and Sanitation Regulatory Council

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.

Water and Sanitation Regulatory Council

Manual of Regulatory Governance and Substance Legislation referred to in this Manuel can be found on the CRA´s website

July 2016

Inglês | English

Manual of Regulatory Governance and Substance

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

Sanitation 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.


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Contents

1 INTRODUCTION 12

2 LEGAL AND REGULATORY FRAMEWORK 14

2.1 OVERVIEW 14

2.2 LEGAL FRAMEWORK 14

2.2.1 The Water Law and Delegated Management Framework 14

2.2.2 Policies and regulations of the water sector in Mozambique 19

2.2.3 Regulations and laws associated with the water sector 22

2.2.4 Other legal document with impact in the water sector 24

2.2.5 Main legislation to be considered 25

2.3 INSTITUITIONL FRAMEWORK 29

2.3.1 Institutional actors of the water sector in Mozambique 29

2.3.2 Water supply and Sanitation Services 31

2.3.3 Other Ministries with responsibilities on the water sector 33

2.3.4 International development partners 34

3 MARKET STRUCTURE AND DESCRIPTION OF REGULATED WATER SECTOR 36

3.1 MARKET STRUCTURE 36

3.1.1 FIPAG 37

3.1.2 AIAS 39

3.1.3 Small private operators 42

3.2 DESCRIPTION OF REGULATED WATER SECTOR 43

3.2.1 Quality of Service 45


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3.2.2 Performance Index of Regulated Entities (IDER) 47

4 REGULATORY GOVERNANCE 50

4.1 OVERVIEW 50

4.2 REGULATORY GOVERNANCE of CRA 50

4.2.1 Scope of regulation 50

4.2.2 Organizational structure 50

4.2.3 Principles 51

4.3 SUMMARY TABLE of REGULATORY GOVERNANCE of CRA 51

5 REGULATORY SUBSTECNCE 53

5.1 OVERVIEW 53

5.2 REGULATORY SUBSTANCE OF CRA 55

5.2.1 Activities 55

5.2.2 Tariff Structure 82

5.2.3 Tariff levels 84

5.2.4 Quality of service 90

5.2.5 Conflict resolution 94

5.2.6 Complaints 95

5.2.7 Social 100

5.2.8 Dissemination of public information 100

6 CONCLUDING REMARKS 101

6.1 Concluding remarks 101

BIBLIOGRAPHY 103


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Index of Figures

Figure 1 – Systems under FIPAG’s management (CRA, 2015) 38

Figure 2 – Evolution of the number of new private water supply providers (ÁguaGlobal, 2014) 42

Figure 3 – Quality of service of FIPAG’s water supply systems (2014) 46

Figure 4 – Symbols adopted in CRA regulatory substance macro processes 54

Figure 5 – Flowchart of CRA direct regulation 56

Figure 6 – Flowchart of ALC procurement process 57

Figure 7 – Flowchart of secondary systems indirect regulation 58

Figure 8 – Flowchart of secondary systems indirect regulation (cont.) 59

Figure 9 – Flowchart of the sanitation services regulation in cities of primary systems 61

Figure 10 – Flowchart of the sanitation services regulation in cities of primary systems (cont.) 61

Figure 11 – Flowchart of non-autonomous systems consultative regulation 62

Figure 12 – Flowchart of AR setting between CRA and FIPAG 63

Figure 13 – Flowchart of AR setting between CRA and AIAS 64

Figure 14 – Flowchart of QR setting in the primary systems of FIPAG 66

Figure 15 – Flowchart of QR setting in the secondary systems of AIAS 66

Figure 16 – Flowchart of a delegated management contract procedure 68

Figure 17 – Flowchart of the periodic revision procedure 69

Figure 18 – Flowchart of the regulatory tax payment in primary systems 71

Figure 19 – Flowchart of the regulatory tax payment in secondary systems 71

Figure 20 –Flowchart of periodic information reporting by the operators 74

Figure 21 – Flowchart of periodic information reporting by the operators (cont.) 74

Figure 22 – Flowchart of periodic information reporting of secondary systems operators,through the TIC–

RECO system 76

Figure 23 – Flowchart of daily information collection among customers 77

Figure 24 – Flowchart of ALC periodic reporting process 79

Figure 25 – Flowchart of CORAL periodic reporting process 79

Figure 26 – Flowchart of periodic information reporting by CRA to the Government 82

Figure 27 – Flowchart of periodic information reporting by CRA to the Administrative Court 82

Figure 28 – Flowchart of the tariff setting procedure for the primary systems 86

Figure 29 – Flowchart of the tariff setting procedure for the secondary systems 88

Figure 30 – Flowchart of the tariff setting procedure for the secondary systems (cont.) 88

Figure 31 – Flowchart of quality of service regulation 92

Figure 32 – Flowchart of quality of service regulation (cont.) 93


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Figure 33 – Flowchart of the quality of service regulation (definition of IDER) (Cont.) 94

Figure 34 – Flowchart of the complaints handling from primary systems customers, by ALC 98

Figure 35 – Flowchart of the complaints handling from primary systems customers, by ALC (cont.) 98

Figure 36 – Flowchart of the complaints handling from secondary systems customers, by CORAL 99

Figure 37 – Flowchart of the complaints handling from secondary systems customers, by CORAL (cont)

99

Figure 38 – Matters that are object of information to the customer of a good regulatory practice 100


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Index of Tables

Table 1 – Main documents concerning the water sector legal framework of Mozambique 25

Table 2 – Available water resources in watershed by ARA 36

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

37

Table 4 – Secondary water supply systems of AIAS 40

Table 5 – Sanitation systems of AIAS 41

Table 6 – Water services in Mozambique 43

Table 7 – Water services in Mozambique 44

Table 8 – Performance indicators for the quality of service overall assessment 45

Table 9 – Performance indicators for the quality of service overall assessment 46

Table 10 – Set of performance indicators considered in IDER 48

Table 11 – Set of performance indicators considered in IDER 49

Table 12 – Summary of the comments on regulatory governance of CRA 51

Table 13 – Report of information of the operators, established in AR and QR 72


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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


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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

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


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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

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


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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 and

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

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

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

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

aspects of Regulation, namely governance and substance. 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). This Manual, in a first stage, was based on th e 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.

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 Wa ter 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


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the stakeholders involved in the water sector of Mozambique and the current and

potential role of CRA in promoting its sustainable development.

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.

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).

The sixth and last chapter of the Manual summarizes its main co ntributions concerning

regulatory governance.

All legislation referred to in the Manual can be found on CRA´s website.


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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 the centralized

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

quality of service.


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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

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


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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 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


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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 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


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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 and Sanitation 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.

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


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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, Chókwè, 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 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.


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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. 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


21 P.027.15.R3_RCRA

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 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.


22 P.027.15.R3_RCRA

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 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 resource s 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 co urses. The

document established the parameters of water quality assessment, which vary

according to the category of water use.


23 P.027.15.R3_RCRA

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

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


24 P.027.15.R3_RCRA

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 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,


25 P.027.15.R3_RCRA

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.

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 th e

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


26 P.027.15.R3_RCRA


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

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,


27 P.027.15.R3_RCRA


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)

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

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


28 P.027.15.R3_RCRA


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

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


29 P.027.15.R3_RCRA

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.

Therefore, among other functions, this institution should ensure the availab ility 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 responsib ility of

this institution, among other functions set out in Resolution No. 19/2015, July 17.


30 P.027.15.R3_RCRA

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.

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 Govern ments

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.


31 P.027.15.R3_RCRA

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 distribu ted in

four regions, including the Northern Region (six systems - Nampula, Nacala, Angoche,

Lichinga, Cuamba and Pemba), Central Region (four systems - Beira-Dondo, Manica,

Tete- Moatize and Quelimane), the Southern Region (four systems - Xai-Xai, Chókwè,

Inhambane and Maxixe) and the region of Maputo, whose 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 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 serv ices

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


32 P.027.15.R3_RCRA

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,

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 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 Bo ane 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


33 P.027.15.R3_RCRA

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 infrastru cture

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 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.


34 P.027.15.R3_RCRA

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

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 Po rtuguese 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.


35 P.027.15.R3_RCRA

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

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.


36 P.027.15.R3_RCRA

3 MARKET STRUCTURE AND DESCRIPTION OF REGULATED WATER

SECTOR

3.1 MARKET STRUCTURE

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

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%)


37 P.027.15.R3_RCRA

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.

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 table 3.

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 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.

3.1.1 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.

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.


38 P.027.15.R3_RCRA

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 perfor mance.

In the region of Maputo, the operation is performed through a concession contract with

a private operator (AdeM operates the main system and FIPAG signed with small

private operators management contracts to run services in sixteen small systems at

peri-urban areas of Maputo), 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.

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


39 P.027.15.R3_RCRA

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.

3.1.2 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 (Province 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 4 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 Ilha de Moçambique and of Mocímboa da

Praia, whereas the system of Moamba was signed in early 2016. From these systems,

only the Ilha de Moçambique and Moamba systems have an operator (FIPAG on the Ilha

de Moçambique, 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., Ulónguè, Mopeia and Mocuba).


40 P.027.15.R3_RCRA

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


41 P.027.15.R3_RCRA

The table 5 presents the sanitation systems whose management, in the future, will also

be transferred to AIAS ownership, given the context of the expansion 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; Chigubo; Mabalane; Massagena; Manssingir; Chongoene

Maputo Maputo; Matola; Boane

Manhiça; Magude; Xinavane; Marracuene; Bela-Vista; Moamba; Ressano Garcia


42 P.027.15.R3_RCRA

3.1.3 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 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 the country 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.

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


43 P.027.15.R3_RCRA

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 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.

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

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)

3.2 DESCRIPTION OF REGULATED WATER 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 table 7 summarizes the most relevant information of the 15 systems under FIPAG

management (main systems) and 3 under AIAS management (secondary systems).


44 P.027.15.R3_RCRA

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. The total

population served by FIPAG’s systems, taking into account both types of service, is more

than 3.6 million. Still, about 1.8 million people have to resort to alternative sources of

water supply, including the POP.

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.

The water service by standpipe continues to be quite expressive, specially, 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 thousand standpipes in the regulated

systems.

Table 7 – Water services in Mozambique

As a whole, the regulated water supply systems represent a volume of more than 87

million of m3 of water sold, which shows a per capita consumption daily average of

about 65 liters per inhabitant per day. The abstraction/treated water represent a

volume of more than 142 million of m3 pointing out a non-revenue water of 39%.

Main systems 15

Secondary systems 3

total population 5 491 764

População Servida por Ligações 2 593 746

Population served by standpipes 1 125 500

Total connections 510 917

Abstraction of water / Treated water (m3/103) 142 008

Invoiced water (m3/103) 87 028

Operational Income (MZN 103) 2 338 616

Operational Costs (MZN 103) 2 004 425

Average tarrif (MZN) 27

Surface abstractions 11

Groundwater abstraction 54

Pipeline (Km) + distribution network 5 207

Reservoirs 167

Storage capacity (m3) 233 945

Standpipes 2 223

Employees per 1000 connections 5

Non-revenue water 39%

Collection rate 87%

Costs coberage ratio 1.17

INFRASTRUCTURES

ECONOMIC AND FINANCIAL

SUSTAINABILITY

Data - 2014

REGULATED ENTITIES

WATER VOLUME

INCOME AND COSTS


45 P.027.15.R3_RCRA

In financial terms, regulated 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 average tariff was around MZN 27.

3.2.1 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 ope rators 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 evaluate the

operators’ performance. It also indicates the reference values for each performance

indicator.

Table 8 – 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 collection 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

Invoicing based on meter readings ≥85 %

DRINKING WATER QUALITY

Controlled parameters ≥80 %

Compliance of parameters =100 %

Figure 3 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.


46 P.027.15.R3_RCRA

Figure 3 – Quality of service of FIPAG’s water supply systems (2014)

The methodology for calculation of performance indicators, the disclosure of which is

presented in table 9, it is known in advance by all regulated entities.

Table 9 – Performance indicators description

INDICATORS DESCRIPTION Coverage

In terms of percentage, this indicator is obtained through total ratio of the population living in the served area through

household connections or pubic standpipes divided by the total population living in the area served by the system. According to the average household in Mozambique, it is

estimated that household connection supplies around 5.3 people and a public standpipe supplies around 500 people. From 2015 the number of people served by standpipes it

was resized for 300 people, as guidelines of MOPH, based on a study for “METHODOLOGICAL IMPROVEMENT OF COVERAGE RATE CALCULATION STANDARD FOR DISPERSED WATER SOURCES”.

Availability average period

It is measured as being the availability average period of all Distribution Districts (CDs) of the system. The analysis of this indicator should be associated to the pressure since

consumers living outskirts the network usually receive less hours of water when compared to those living close to the CDs.

Non-revenue water

Reflects the technical and commercial losses and it is the difference between the abstraction/treated water and water sold, expressed as a percentage of net water supplied.


47 P.027.15.R3_RCRA

INDICATORS DESCRIPTION Total collection rate

It is defined in percentage, by the ratio between total revenue collected from water sold is divide by total revenue invoiced in a certain period.

Employees per 1000 connections

Corresponds to the proportion between the number of the full time employees of the ER and the total number of the operational connections multiplied by 1000.

Operational cost coverage ratio

It is obtained by percentage between the invoiced amount and the amount of the operational costs in the period under review.

Complaints answered

It is obtained in terms of the percentage between the number of complaints answered divided by the total number of complaints received by the ER in a determined period of

time. Average time to answering complaints

It is defined as the average response time to complaints submitted by customers in a determined period.

Invoicing based on meter readings

It is expressed in percentage, between the number of the

invoiced connections based on meter reading divided by the total number of the recorded connections in the system.

Controlled parameters

The number of parameters to be controlled in each sample

as established in the QR. Compliance of parameters

It is defined as the total of compliance within controlled parameters.

3.2.2 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 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.


48 P.027.15.R3_RCRA

Table 10 – Set of performance indicators considered in IDER

INDICATOR UNIT

ISEF

Collection rate %

Coverage of operating costs %

ISO

Employees per 1000 connections (no./1000 conn)

Non-revenue water (total losses) %

IQS

CUSTOMER SERVICE

Total coverage %

Employees per 1000 connections (no./1000 conn)

Availability average period hours/day

WATER QUALITY

Controlled parameters %

Compliance of controlled parameters %

CUSTOMER SERVICE

Average time of response to complaints days

Complaints per connection (no. of complaints/100

connections)

Complaints answered %

The weight of each indicator after the harmonization process between CRA and the

regulated entities it is shown in table 11.


49 P.027.15.R3_RCRA

Table 11 – Set of performance indicators considered in IDER

INDICATORS CRA FIPAG AdeM WEIGHT

HARMONIZATION

Collection rate 5.72% 10.29% 8.27% 7.50%

Operational costs coverage ratio 16.15% 7.69% 9.88% 12.47%

Employees per 1000 connections 2.97% 7,15% 4.67% 4.44%

Non-revenue water 18.68% 33.16% 25.35% 23.97%

Total Coverage 7.02% 1.66% 4.81% 5.13%

Invoicing based on meter readings 3.84% 4.33% 5.77% 4.45%

Availability average period 7.96% 2.83% 2.95% 5.42%

Controlled parameters 8.06% 10.31% 6.08% 8.12%

Compliance of controlled parameters 24.35% 16,12% 26.28% 22.78%

Average time of response to complaints 1.55% 1.69% 2.63% 1.85%

Total of complaints 0.65% 2.63% 1.09% 1.26%

Percentage of response to complaints of

total of complaints

3.06% 2.13% 2.23% 2.62%

The analysis to IDER evolution enables to observe the overall performance of the

regulated entities and to percept wich of the composed indicator contributes most for

the overall performance of each entity.


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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,

some prticular areas are considered for the characterization of the regulatory activity

of CRA in the water sector. This chapter addresses each of these areas, characterizing

CRA's practice.

4.2 REGULATORY GOVERNANCE OF CRA

4.2.1 Scope of regulation

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 and reinforced by the

Decree nº 23/2011.

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.

The Board of CRA is the deliberative body and maximum authority in the organizational

structure of the water sector regulatory agency. 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 take place. The Executive Secretary of CRA participates in

the Board meetings, but with no right to vote.


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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.

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 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.

4.3 SUMMARY TABLE OF REGULATORY GOVERNANCE OF CRA

The following table summarizes the regulatory governance of CRA.

Table 12 – Summary of the comments on regulatory governance of CRA

Scope of Regulation

The scope of regulation focuses in the water supply systems on major cities, the aforementioned main systems and the water supply systems to municipality headquarters and surrounding towns, the secondary systems and public waste water drainage systems.

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.

Principles The CRA ´s fundamental principles and values in its regulatory activity is based on participation and pragmatism, as well as in consistency and reliability, accountability and transparency.

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.

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.

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 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


52 P.027.15.R3_RCRA

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 CRA specifies the personal and professional requirements they must meet in order to perform functions in CRA.

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.

Regulatory Coordination

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).

Autonomy

CRA holds some organic autonomy and manages the human resources according to its needs. The Board are appointed by the Council of Ministers, 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.

Accountability 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 regulator y 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 the previous

preparation of all processes, preliminary draft and matters to be analyzed by the Board,


54 P.027.15.R3_RCRA

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 4 – 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” corresponds to a positive outcome

resulting from a particular activity (e.g. resolution of conflict) while a "Negative


55 P.027.15.R3_RCRA

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 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, 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 o perators.


56 P.027.15.R3_RCRA

Figure 5 – 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 cand idates

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 6 – 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.

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

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 regulato ry

activities performed by CRA, under this regulatory regime, are illustrated schematically

in the following flowcharts.


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Figure 7 – Flowchart of secondary systems indirect regulation

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.


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Figure 8 – Flowchart of secondary systems indirect regulation (cont.)

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 (Ilha de Moçambique, 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 decentralized regulation by ALC/CORAL, is also

established by QR signed with AIAS and with the local authority where the systems are

located.


60 P.027.15.R3_RCRA

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 percentag e

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 9 – Flowchart of the sanitation services regulation in cities of primary systems

Figure 10 – 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 11 – 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.


63 P.027.15.R3_RCRA

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 invo lved. 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 e qual 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 12 – Flowchart of AR setting between CRA and FIPAG


64 P.027.15.R3_RCRA

Figure 13 – 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 analysed 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 a bout the QR

approval, who transmits the endorsement to the Executive Secretariat for the

preparation of the QR final version of the system considered.


65 P.027.15.R3_RCRA

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 14 – Flowchart of QR setting in the primary systems of FIPAG

Figure 15 – Flowchart of QR setting in the secondary systems of AIAS


67 P.027.15.R3_RCRA

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 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 an d

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 16 – 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 da Região de Maputo 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 17 – 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.


70 P.027.15.R3_RCRA

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 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 18 – Flowchart of the regulatory tax payment in primary systems

Figure 19 – 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


72 P.027.15.R3_RCRA

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.

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 13 – 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.

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


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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 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 adve rsarial

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, bef ore

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.

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 20 –Flowchart of periodic information reporting by the operators

Figure 21 – Flowchart of periodic information reporting by the operators (cont.)


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i) Implementation of a TIC system for periodic reporting of information

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.


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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

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 22 – 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


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validation of the information submitted by the operators. The information collected 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 23 – 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 Agreements with local

authorities, ALC have the responsibility to follow up and monitor the activities


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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 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.


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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 24 – Flowchart of ALC periodic reporting process

Figure 25 – Flowchart of CORAL periodic reporting process


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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 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 to

the 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.


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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.

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.

After approving by the board, the Executive Secretariat submit the Managerial Accounts

to the Administrative Court until the end of March, through a standard form. In the

event of a financial audit by the Administrative Court that will happen between the

months of April and May.

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 this event, 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.


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Figure 26 – Flowchart of periodic information reporting by CRA to the Government

Figure 27 – Flowchart of periodic information reporting by CRA to the Administrative Court

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.


83 P.027.15.R3_RCRA

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 ensu re

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

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 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.


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5.2.3 Tariff levels

According to the good regulatory practices 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.

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 the proposal and, after


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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

analysing 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

following regulatory cycle, taking into account the policies of the sector and the

accounts reports of the previous regulatory cycle.


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The figure below represents schematically the sequence of processes associated with

tariff setting in FIPAG’s primary systems.

Figure 28 – 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. 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


87 P.027.15.R3_RCRA

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 neces sary 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 pro posal 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.

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


88 P.027.15.R3_RCRA

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 29 – Flowchart of the tariff setting procedure for the secondary systems

Figure 30 – Flowchart of the tariff setting procedure for the secondary systems (cont.)


89 P.027.15.R3_RCRA

c) Tariff setting in the autonomous sanitation services

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 subdivided in four blo cks,

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


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authorities. Whenever a tariff updating takes place during the regulatory cycle, there is

an addendum to the QR.

5.2.4 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.

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 formula 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.

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


91 P.027.15.R3_RCRA

and weaknesses of each regulated system. This is accomplished through the calculation

of a set of indicators defined for this purpose.

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 Ilha de Mpçambique

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,

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.

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.

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).


92 P.027.15.R3_RCRA

The Board of CRA is responsible for the final approval of the perfor mance 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 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 31 – Flowchart of quality of service regulation


93 P.027.15.R3_RCRA

Figure 32 – Flowchart of quality of service regulation (cont.)

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, as

mentioned before.

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 (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 proces s,

shown in the figure below. Later, this approval is communicated to FIPAG and AdeM.


94 P.027.15.R3_RCRA

Figure 33 – 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

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.

5.2.5 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.

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.

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


95 P.027.15.R3_RCRA

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

search for solutions to promote the reconciliation of interests between the owners and

operators, whenever requested by both parties.

5.2.6 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.

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.

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.


96 P.027.15.R3_RCRA

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 pro cess 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 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.


97 P.027.15.R3_RCRA

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, th e 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 forward the complaint to

judicial authorities, and to seek the resolution of the dispute on trial in the courts.

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.


98 P.027.15.R3_RCRA

Figure 34 – Flowchart of the complaints handling from primary systems customers, by ALC

Figure 35 – Flowchart of the complaints handling from primary systems customers, by ALC (cont.)


99 P.027.15.R3_RCRA

Figure 36 – Flowchart of the complaints handling from secondary systems customers, by CORAL

Figure 37 – Flowchart of the complaints handling from secondary systems customers, by CORAL

(cont.)


100 P.027.15.R3_RCRA

5.2.7 Social

The good practice of regulation should take into account the needs of the poorest

population.

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-

subsidization system needs to be reviewed due to the changes in consumption patterns

that have been taking place in the regulated systems.

5.2.8 Dissemination of public information

The following figure shows schematically the information that CRA makes available

publicly on its website, as well as the information that is suggested to be made available

in the future, as well as the information that CRA´s considering to spread in near future

in favor for the sake of the of the water sector progress and deve lopment and

improvement of CRA’s regulatory substance and transparency (regulatory governance).

Figure 38 – 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 ca lculation 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

• Publ ic consultation mechanisms of regulatory procedures • Codes of Ethics and Conduct

• Procedures of monitorization and inspection to the operators

• QR (reference va lues of performance indicators)

• Accounts reports

• Management information/accounting information • (...)

MATERS THAT ARE LIKELY TO BE OBJECT OF INFORMATION

TO CUSTOMERS


101 P.027.15.R3_RCRA

6 CONCLUDING REMARKS

6.1 CONCLUDING REMARKS

The Manual of Regulatory Governance provides support to the identification of

regulatory practices of CRA

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 focus ed

on the regulatory framework of CRA, including the legal and institutional framework.

The main documents and legal instruments governing activities in the water sector

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, as well as other legal

documents of relevance that directly or indirectly have influence on CRA regulatory

activities.

The water sector institutional framework 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.

The description of regulatory practice by CRA in the scope of governance and substance

it was prepared based on a set of interviews with the key personnel o f the water sector

and of CRA and through CRA´s documentation. The regulatory substance, particularly,

the definition of the sequence of regulatory procedures and CRA´s regulatory practices,

were closely made with key elements of CRA and that allowed to establish the necessary

base for a better understanding by stakeholders, about the current regulatory model, as

well as it´s motivations, purposes and 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.


102 P.027.15.R3_RCRA

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os Sistemas Secundários Urbanos de Abastecimento de Água. Volume II, Relatório 4 –

Quadro Detalhado de Regulação”, Relatório final. Projecto de Apoio Institucional para os

Serviços de Água em Moçambique (WASIS Project).

OECD (2014). “The Governance of Regulators – OECD Best Practice Principles for

Regulatory Policy”. Book, OECD Publishing.

PWC (2013). “Designing Strategic and Business Plan 2015-2020: Business Plan”.

Relatório final. PricewaterhouseCoopers.

PWC (2013). “Designing Strategic and Business Plan 2015-2020: Strategic Plan”.

Relatório final. PricewaterhouseCoopers.

República de Moçambique (2014). “Memorando de Entendimento entre o Co nselho de

Regulação de Águas e o Laboratório Nacional de Higiene de Águas e Alimentos”.

República de Moçambique (2015). “Ficha de Avaliação do Desempenho Individual do

Pessoal com Função de Direcção, Chefia e Confiança”.


Pessoal de Apoio Geral e Técnico”.


Pessoal Técnico e Administrativo”.

República de Moçambique (2015). “Proposta do Programa Quinquenal do Governo,

2015-2019”.

República de Moçambique (-). “Critérios de Avaliação Horizontal – Ficha de Avaliação do

Desempenho Individual do Pessoal”.

SAL e Consultoria em Desenvolvimento Social (2007). “Avaliação de Satisfação dos

Consumidores: Abastecimento de Água na Aglomeração de Maputo”, Relatório final.

SeeSaw (2014). “Robust ICT monitoring for small systems – List of indicators collected

from Systems C and O compared with regulation”, Presentation.

SeeSaw (2014). “Robust ICT monitoring for small systems – System C training”,

Presentation.

SeeSaw e CRA (2014). “Uso das TIC para o monitoramento dos Sistemas Secundários de

AA – Formação Sistema O”, Apresentação.

SUWASA/USAID (2010). “Reform Work Plan – Support for Sustainable Small Scale

Operators in Moçambique – Pequenos Operadores Privados in Maputo and Matola”,


107 P.027.15.R3_RCRA

Relatório. Sustainable Water and Sanitation in Africa / US Agency for International

Development.

SUWASA/USAID (2015). “Mozambique – Accountable Water Services from Private

Water Operators”. Sustainable Water and Sanitation in Africa / US Agency for

International Development.

Triche, T. (2009). “Gestão Delegada do Abastecimento de Água Urbana em Moçambique:

Estudo de Caso do FIPAG e CRA”.

USAID (2009). “Mozambique – Water and Sanitation Profile”. US Agency for

International Development.

WASHCost Moçambique (2012). “Mecanismos e Instrumentos de Planificação e

Orçamentação no Sector de Águas em Moçambique”, Folheto informativo.

WE Consult e Métier (2011). “Abastecimento de Água nas Zonas Rurais: Ava liação dos

Progressos para a Prestação de Serviços Sustentáveis”.

WSP-Moçambique (2008). “Levantamento de Iniciativas nas Áreas Peri-Urbanas de

Maputo”. Water and Sanitation Program.

WSP-Moçambique (2010) “Gestão Sustentável de Pequenos Sistemas de Abastecimento

de Água em África”, Relatório do Workshop 6 a 8 de Outubro de 2010. Water and

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appropriate sanitation tariff for Maputo”, Report 2. Water & Sanitation for the Urban

Poor.


108 P.027.15.R3_RCRA

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;


109 P.027.15.R3_RCRA

• Law No. 8/2003, of 19 May – Principles and Rules of the Organization, Powers

and Functioning of Local Authorities;

• 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;


110 P.027.15.R3_RCRA

• 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;

• 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;


111 P.027.15.R3_RCRA

• 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;

• 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.