Urban water supply

The privatization processin Mozambique

Christophe NothombBarcelona, 21.11.08

Mozambique

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

SUSTAINABLE WATER SERVICES

INVESTMENTS + OPERATIONS + TARIFFS

RATIONALE OF DELEGATED MANAGEMENT FRAMEWORK

Private Sector Participation (PSP):

Increase efficiency Technical (reduction of water losses, of chemical

consumption, energy, etc.) Commercial (improve customer relations, billing and

collection, etc.)

Training and development of HR Training Responsibilities Perspectives

Principles of the Delegated Management Framework

Principles of the Delegated Management Framework

Benefits for the consumers Service levels Cost of water

Increase coverage GoM objectives and MDGs, via increase in n° of connections

Sustainability of the sector reforms Debt service Capacity of attracting funding for investments

DisputeResolution

Public Sector

Customer

Private Sector

Regulator / Supervision

Unit

DisputeResolution

Public Sector

Customer

Private Sector

Regulator / Supervision

Unit

DisputeResolution

Public Sector

Customer

Private Sector

Regulator / Supervision

Unit

DisputeResolution

Public Sector

Customer

Private Sector

Regulator / Supervision

Unit

Performance contract

Ministry of Public Works and Housing

Customers (14 urban centres)

DNA (National Water Directorate)

•Sets water and sanitation policy•Supervises sector and draft investment plans

•Support to semi-urban and rural schemes

Local Authorities (Municipalities)

•Review investment plans

FIPAG (Assets holding and investment company)

•Full investment responsibilities

Águas de Moçambique

ARA-Sul •Issue water

permits•Monitor water

resources

Lease, Management or Technical Assistance

contracts

Ministry of Health •Set drinking water

standards•Monitor quality

Subscription contracts

CRA• Economic regulation• Approval of tariffs

• Protection of customers

Council of Ministers

Institutional Framework

???Vitens (NL)

Urban Water Supply Reform Process

Civil war up to 92 : very limited investment 1991 : Water law 1995 (revised 2007) : National water policy

Principle of PSP 1998 : Tariff policy

Water as a social but also economic good 1998 : Delegated Management Framework 1999 : Lease contract award to Águas de Moçambique

(AdeM) for Maputo 2000 : Major floods 2001 : SAUR quits AdeM 2004 : Revised Lease Contract 2008 : Periodic Review Process

48%35% 32%

40%

DELEGATED

MANAGEMENT

FRAMEWORKGOVERNMENT

TARGET

60%

70%

MDG

MWSP TARGET

73%

STATE OWNED

UTILITIES

Urban Water Service Coverage

1980 1990 2000 2007 2009 2015

9

Maputo case

Peri-urban area Expansion started in the

year 2000 Population: 300.000

Growth rate: 6% to 10%

Peri-urban area Expansion started in the

80´s Population: 700.000

Growth rate: 2%

Cement city Population: 800.000

Growth rate: 1%

Total population: 1.8 Million

Official Maputo Water Supply System

Maputo/Matola : 1 700 000 inhabitants,(1 250 000 in peri-urban areas)

Conventional system in a delegated management framework :

15 years lease to private operator (Águas de Moçambique - AdeM, since 1999)

from public asset holding company (FIPAG)

with an independent regulator : CRA

Main characteristics (2008):•~1000 km network, •~100 000 connections,•350 functioning standpipes,•average distribution time : 12 hrs/day, •38% population coverage•High level of UFW (55% losses) and low collection rate (~80%)

Water quality and quantity Quality improved Quantity

Key data

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

2000 2001 2002 2003 2004 2005-2006

2007

Years

Volu

mes

of w

ater

(m³)

Abstracted w ater m3

Pumped w ater (after treatment) m3

Distributed w ater m3

Water available for invoicing m3

Key performance standards

Non-revenue water2000 : 44%2002 : 53%2004 : 58%2008 : 55%

UFW 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Contrato de Cessão Revisto (2004) 50% 45% 35% 30%Proposta de Revisão (11/01/08) 56% 54% 52% 50% 48% 42% 41% 39%Dados históricos (Modelo AdeM) 58% 62% 58% 57%

Collection rates

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

94.000

96.000

98.000

100.000

102.000

104.000

106.000

Nº of customers

Nº of customers

Nr of Customers

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

Tariffs

Cumulative Investment (Maputo)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

US

D (

Mil

lio

ns)

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

Maputo Water Supply

19

Maputo case- Water Supply

SMALL SCALE INDEPENDENT PROVIDERS- SSIP

Serves the two expansion areas with own networks (purely private investment)

SERVICE PROVIDERS Formal: AdeM -15 years lease

contract Informal- 427 SSIP

Operators N° of private connection

N° of operational standpipes

Access to water

AdeM 100,000 300 38%

SSIP´s 38000 300 20%

Domestic water resale 26%

ADEM Manage the conventional

network : All the historical centre Most part of the first

expansion area FIPAG´s Investment

22

Maputo case- SSIP

Water service: metered private connection, standpipes

Water tariffs: 1$/m3, 100$ connection fee (all included)

Water available for the consumers 20h/day (average)

Evolution of SSIP in Maputo

17 19 24 26 31 40 45 47 66 73 94124

154189

234284

350

427

0

100

200

300

400

500

23

% of client managed according to SSIP typology

Between 200 and 500 clients

23%

Above 500 clients

31%

Below 20 clients

2%

Between 100 and 200 clients

27%

Between 20 and 100 clients

17%

Maputo case- SSIPSSIP typology

30%

38%

20%

8%4%

0%

10%

20%

30%

40%

50%

Below 20 clients Between 20 and100 clients

Between 100and 200 clients

between 200 and500 clients

Above 500clients

Biggest SSIP´s

Mr. Luís Faquene: 7 systems

with 2100 PC

Mr. Calmo Nualane:

2 systems with 2000PC, one with

1500 PC

Mr. Arlindo Xavana:

2 systems with 1900 PC

24

Maputo case- Integration of SSIP PRINCIPLES

Recognition of SSIP role Making profit of SSIP know how SSIP as potential partners in urban water sector

VISION Build on the existing capacities to develop reliable

Mozambican water distribution companies

CONSTRAINTS SSIP´s Low technical capacities Weak organization: 2 associations covering 50% of the

SSIP Higher Number of different types of SSIP: Network

overlaps

25

Maputo case- Integration of SSIP CHALLENGES Enabling environment

Security through licensing Opportunities for partnerships with water sector institutions and

financial entities

Maputo water market structuring Concentration of market : fewer and bigger SSIP Integration of SSIP´s infrastructure

Capacity building through partnership On the job training to create national water companies FIPAG/SSIP contractual arrangement conducive to building

capacity

Conclusions Privatization process

Mixed evaluation – private operator Positive for consumers on water quality, quantity and reliability Negative for efficiency and customer services Negative for time spent in contract negotiations Neutral for tariffs

Positive evaluation – government attitude Stability and strenghtening of institutions, open attitude Financiers confidence Negative for speed of investment implementation

Specific context of small providers services Move towards « hybrid system »

Challenges Regulation

Thank you