Case Study — Chimoio , Manica , and Gondola , Mozambique

1 Chimoio, Manica, and Gondola, Mozambique Context • Low-income country • Aggregation covering urban areas • Low level of water performance Purpose Performance, professionalization, economic efficiency Scope Water functions and services Scale • Administrative boundaries • Localities covered: 3 for water • Population covered: 263,101 inhabitants for water • Coverage: 64% for water • Connections: 42,458 for water • Network length: 1,358 km for water Process Voluntary and incentivized Governance • Merger • Public administration • Decision making: almost all decisions are vested in FIPAG, which is under guardianship of the Ministry of Public Services, Housing, and Water Resources • Asset transfer: assets are the property of FIPAG • Liability: liabilities and debts from previous operators are not taken over by aggregated utility • Staff transfer: all staff was transferred • No clear entry and exit rules Outcome Negative: very little improvement Findings Investment projects supported by external funding, technical assistance provided by donors, performance-based monitoring, limited improvement W S S G S G U T I L I T Y T U R N A R O U N D S E R I E S W A T E R G L O B A L P R A C T I C E


A Water Sector Reform That Tried to Unbundle Investment and Operation Functions
In the mid-1990s, the government of Mozambique initiated a series of political, economic, and social reforms.

An Aggregation Supported by Large Investments
The cities of Chimoio, Gondola, and Manica are in central   3).
To some extent, this outcome can be explained by the fact that the expansion of coverage (see table 2) has not yet translated into an increase in revenues collected by the utilities.Because of the creation of new infrastructure, operating expenses have increased in a higher proportion than water services incomes have.
In addition, it should be noted that average water tariffs in Chimoio, Manica, and Gondola have increased by 50 percent in four years, most likely further lowering the collection ratio (figure 4).
The However, the metering level is very high, at 95 percent.3 shows the data gathered.As a whole, although the aggregation of the water services of Chimoio, Manica, and Gondola was supported by some external funding, which acted as a Big Push and allowed the expansion of the network, the benefits of the aggregation have not materialized yet.Customer service has improved somewhat, but economic

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Decision making: almost all decisions are vested in FIPAG, which is under guardianship of the Ministry of Public Services, Housing, and Water Resources • Asset transfer: assets are the property of FIPAG • Liability: liabilities and debts from previous operators are not taken over by aggregated utility • Staff transfer: all staff was transferred • No clear entry and exit rules Outcome Negative: very little improvement Findings Investment projects supported by external funding, technical assistance provided by donors, performance-based monitoring, limited improvement the water supply systems of Chimoio, Manica, and Gondola were physically connected and aggregated under the Fund for Investment Ownership and Water Supply Assets (Fundo de Investimento e Património do Abastecimento de Água; FIPAG), a national public agency set up to own and manage urban water assets throughout Mozambique.FIPAG also took over operation and maintenance of those three utilities, which are located in the center of Mozambique.External funds incentivized the aggregation, creating a Big Push to develop water infrastructure and expand coverage.However, aggregation benefits take time to materialize, and despite the Big Push, improvements in economic efficiency and service quality have not been achieved yet.
Those reforms included measures to restructure the water supply and sanitation sectors, which were in dire straits.The transformation of the water supply subsector in particular was fueled by the National Water Policy 1 and the Water Tariff Policy, 2 which enabled the growth of water coverage.In addition, to have a more controlled rollout of this new strategy, the government instituted the delegated management framework 3 (DMF).(See figure 1.)This framework defined the separation of powers and functions among key sector players-namely, the Fund for Investment Ownership and Water Supply Assets (Fundo de Investimento e Património do Abastecimento de Água; FIPAG) and the Water Regulatory Council (Conselho de Regulação do Abastecimento de Água; CRA).The government's initial plan was to aggregate the investment function of urban water services under FIPAG, which owns and manages urban water assets and is responsible for associated investment programs.The operation and maintenance of these urban systems were to be handed out to private operators through calls for tenders.Water utilities regionalization was supposed to create an appealing market for the private sector.FIPAG started on a pilot basis, focusing only on the five largest water supply systems in the country.Its investment portfolio was progressively extended to cover 21 main urban areas.(See map 1.)However, despite several attempts to attract private operators and because of unsuccessful calls for tender, FIPAG had to take over operation in 18 additional cities in the central, northern, and southern regions of the country.
FIGURE 1. Institutional Delegated Management Framework of Water Utilities in Mozambique value of 42 percent across FIPAG-operated systems.Water losses in the water supply systems of Chimoio, Manica, and Gondola have fallen from more than 30 m 3 /km/day in 2009 to a negligible level.That result, however, should be nuanced by the decrease in service continuity and the fact that water production is lagging the rapid expansion of the network.The variation of the IQS in the FIPAG central region shows a homogeneous evolution among water utilities (figure5).The main challenge is related to the quality of the water, which needs to be improved.Water quality is not yet systematically monitored, and it varies widely from year to year.Hence, consistency in collection and analysis in water samples still needs to be improved.Table

FIGURE
FIGURE 5. Evolution of IQS in the Central Region already exist.In doing so, service providers select solvent customers for good revenue collection and seek to avoid sunk investment costs and associated increases in operating expenses.This situation happened in Mozambique, where cherry-picking practices have been observed because of the low commercial attractiveness of urban water services.The initial plan of the Mozambique government, launched in 1998 and called the delegated management framework, was to differentiate investment and operation functions for urban water services.The investment function for all urban water services was to be aggregated into an autonomous public entity, FIPAG, whereas the operation function would be delegated to private operators through bidding processes.The first call for tenders was issued in 1999 and concluded in 2004 for Maputo and four other major cities.But the contract was prematurely terminated in 2010 for commercial reasons.FIPAG launched several other bids, which were unsuccessful because urban water services suffer from low revenue collection and significant political interference in the form of tariff policy.The lack of private sector interest in managing urban water services prompted FIPAG to become the operator of urban utilities across the country.

FIGURE
FIGURE 7. Average Response Time Following a Complaint

TABLE 1 . IDER Performance Indicators Criterion (Level 1) Criterion (Level 2) Performance indicator Unit
Gondola is still subsidized.Moreover, the level of the operating cost coverage ratio has fluctuated quite a bit since aggregation took place in 2009 (see figure

Average Tariffs in the Central Region
Note: MZN = Mozambican metical.