The World Bankdocuments.worldbank.org/curated/en/963121468279868898/pdf/ICR7000P... · PO Private...

Document of The World Bank

Report No: ICR0000700

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-32470 IDA-32471 IDA-3247A NETH-23187)

ON A

CREDIT

IN THE AMOUNT OF SDR 65.6 MILLION (US$90 MILLION EQUIVALENT)

TO THE

REPUBLIC OF MOZAMBIQUE

FOR A

SECOND NATIONAL WATER DEVEOPMENT PROJECT

September 30, 2009

Urban and Water (AFTUW) AFCS2 Africa Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

ii

CURRENCY EQUIVALENTS

(Exchange Rate Effective June 16, 2009)

Currency Unit = New Meticais (Mtn) 26.56 MZN = US$ 1 US$ 1.54 = SDR 1

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AdeM Águas de Moçambique (Water of Mozambique) AdeP Águas de Portugal (Water of Portugal) AfDB African Development Bank CAS Country Assistance Strategy CIDA Canadian International Development Association CPS Country Partnership Strategy CRA Conselho de Regulação de Água (Water Regulatory Board) CREE National Contract Committee DCA Development Credit Agreement DNA Direcção National de Águas (National Directorate of Water) EA Environmental Assessment EMS Environmental Management Framework FIPAG Fundo de Investimento e Patrimonio do Abastecimento de Água (Water Sector Assets Investment Fund) GDP Gross Domestic Product GOM Government of Mozambique GPOBA Global Partnership on Output-Based Aid HQ Headquarters ICA Investment Climate Assessment IDA International Development Association LIBOR London Interbank Offered Rate M&E Monitoring and Evaluation MCC Millennium Challenge Corporation MOPH Ministério das Obras Públicas e Habitação (Ministry of Public Works and Housing) MOU Memorandum of Understanding NDF Nordic Development Fund NWDP National Water Development Project NWP National Water Policy PAD Project Appraisal Document PARPA Action Plan for Reduction of Absolute Poverty PDO Project Development Objective PO Private Operator

iii

PPIAF Public Private Infrastructure Advisory Facility PR Periodic Review PRSP Poverty Reduction Strategy Paper PSP Private Sector Participation RPF Resettlement Policy Framework SDR Special Drawing Rights TA Technical Assistance WASIS Waster Services and Institutional Support Project WHO World Health Organization VAT Value Added Tax

Vice President: Obiageli Katryn Ezekwesili

Acting Country Director: Peter Nicholas

Sector Manager: Jaime Biderman

Project Team Leader: N. Jane Walker

ICR Team Leader: Midori Makino

iv

MOZAMBIQUE Second National Water Development Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ....................................... 12. Key Factors Affecting Implementation and Outcomes ....................................... 53. Assessment of Outcomes .................................................................................. 124. Assessment of Risk to Development Outcome .................................................. 175. Assessment of Bank and Borrower Performance .............................................. 186. Lessons Learned ................................................................................................ 217. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .... 24Annex 1. Project Costs and Financing .......................................................................... 25Annex 2. Outputs by Component ................................................................................. 26Annex 3. Economic and Financial Analysis ................................................................. 28Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 32Annex 5. Beneficiary Assessment Results ................................................................... 34Annex 6. Stakeholder Workshop Report and Results ................................................... 40Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 43Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 53Annex 9. List of Supporting Documents ...................................................................... 56

MAP

v

A. Basic Information

Country: Mozambique Project Name: MZ-Natl Water 2 (FY99)

Project ID: P052240 L/C/TF Number(s): IDA-32470,IDA-32471,IDA-3247A,TF-23187

ICR Date: 09/30/2009 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF MOZAMBIQUE

Original Total Commitment:

XDR 55.4M Disbursed Amount: XDR 65.6M

Revised Amount: XDR 65.6M

Environmental Category: B

Implementing Agencies: Fundo de Investimento e Patrimonio do Abastecimento de Água (FIPAG), and Conselho de Regulação de Água (CRA)

Cofinanciers and Other External Partners: African Development Bank, Government of the Netherlands B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 01/09/1995 Effectiveness: 03/08/2000

Appraisal: 06/19/1996 Restructuring(s): 04/15/2004

Approval: 06/17/1999 Mid-term Review: 10/03/2003

Closing: 09/30/2005 03/31/2009 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Satisfactory

Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Satisfactory

Overall Bank Performance:

Satisfactory Overall Borrower Performance:

Satisfactory

vi

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments

(if any) Rating

Potential Problem Project at any time (Yes/No):

Yes Quality at Entry : None

Problem Project at any time (Yes/No):

Yes Quality of Supervision :

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 4 10

Sub-national government administration 34 10

Water supply 62 80

Theme Code (as % of total Bank financing)

Municipal governance and institution building 50 50

Regulation and competition policy 50 50 E. Bank Staff

Positions At ICR At Approval

Vice President: Obiageli Katryn Ezekwesili Callisto E. Madavo

Country Director: Peter Nicholas (acting) Phyllis R. Pomerantz

Sector Manager: Jaime M. Biderman Jeffrey S. Racki

Project Team Leader: N. Jane Walker N. Jane Walker

ICR Team Leader: Midori Makino

ICR Primary Author: Stephan K.L. von Klaudy

Devendra Bajgain F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The objective of the Project was to improve the quality, reliability and sustainability of water services for the cities of Maputo, Beira, Quelimane, Nampula, and Pemba (target cities) through promoting greater private sector participation in the provision of these services. More specifically, the Project sought to:

vii

Commence institutional and regulatory reform within the urban water sector with the introduction of commercial principles in the operation and management of water services through the use of a private sector operator;

Accelerate capacity building and human resource development for the sector through training and demonstration effects within the context of the private operator contract;

Provide an institutional framework that improves the quality and sustainability of users services and acts as an operational model for water services, as these begin to be decentralized to municipal based management.

Key Indicators:

Mandated tariff policy set out in law that water pricing will be based on principles of cost recovery;

Creation of autonomous publicly owned asset holding company, Fundo de Investimento e Patrimonio do Abastecimento de Agua (FIPAG) to manage the contracts in its five target cities and the new assets created under the Project with output performance;

Greater participation by municipalities though their role in the Stakeholders Forum and through their direct assistance in the selection of the Board of FIPAG;

Creation of a water regulatory agency, CRA for urban water provision. Revised Project Development Objectives (as approved by original approving authority) The PDO was not revised during project implementation. (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Maputo: % of customers receiving <24 hours supply/day Value quantitative or Qualitative)

N/A 20% Average supply per day

14 hours

Date achieved 12/31/2000 09/30/2004 03/31/2009 Comments (incl. % achievement)

Due to difficulty in tracking the original output indicator, it was modified for achieving continuous water supply.

Indicator 2 : Maputo: Number of connections Value quantitative or Qualitative)

77,793 95,000 109,932


At Project closing, 116% of the original target was met.

Indicator 3 : Maputo: Production (1000 m3)

viii

Value quantitative or Qualitative)

49,027 68,000 64,045


By 12/31/2008, 94% of the original target had been met. However, compared to the baseline in 2000, the production volume increased by 130%.

Indicator 4 : Beira: % of customers receiving <24 hours supply/day Value quantitative or Qualitative)


24 hours


Due to difficulty in tracking the original output indicator, it was modified for achieving continuous water supply. Original target exceed by Project closing.

Indicator 5 : Beira: Number of connections Value quantitative or Qualitative)

10,156 20,000 22,224



Indicator 6 : Beira: Production (1000 m3) Value quantitative or Qualitative)

9,297 10,000 13,007


By 12/31/2008, 130% of the original target had been met.

Indicator 7 : Nampula: % of customers receiving <24 hours supply/day Value quantitative or Qualitative)


24 hours


Due to difficulty in tracking the original output indicator, it was modified for achieving continuous water supply. Original target was exceeded by Project closing.

Indicator 8 : Nampula: Number of connections Value quantitative or Qualitative)

4,613 8,000 13,838



Indicator 9 : Nampula: Production (1000 m3) Value 4,438 5,000 5,505

ix

quantitative or Qualitative) Date achieved 12/31/2000 09/30/2007 12/31/2008 Comments (incl. % achievement)


Indicator 10 : Quelimane: % of customers receiving <24 hours supply/day Value quantitative or Qualitative)


22 hours



Indicator 11 : Quelimane: Number of connections Value quantitative or Qualitative)

1,978 4,000 9,001



Indicator 12 : Quelimane: Production (1000 m3) Value quantitative or Qualitative)

953 2,500 3,301



Indicator 13 : Pemba: % of customers receiving <24 hours supply/day Value quantitative or Qualitative)


18 hours



Indicator 14 : Pemba: Number of connections Value quantitative or Qualitative)

2,980 5,000 6,512



Indicator 15 : Pemba: Production (1000 m3) Value quantitative or

989 3,500 2,933

x

Qualitative) Date achieved 12/31/2000 09/30/2007 03/31/2008 Comments (incl. % achievement)

By 12/31/2008, 84% of the target had been met. However, the production volume increased by 3 times compared to the baseline in 2000.

Indicator 16 : % of microbiological water quality samples meeting target values in all five cities:


50% 95% 100%


At Project closing, the original target was exceeded.

Indicator 17 : The financial self sufficiency of FIPAG improves. Recovery of O&M and depreciation of FIPAG for 2004; full cost recovery by 2005.


69% 100% 88%


FIPAG is expected to achieve full cost recovery by FY2009 ending December 2009.

Indicator 18 : Population with improved access to safe reliable water supplies in the five target cities.


800,000 1,100,000 1,275,713



(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Key national urban water supply policies, strategies and plans Value (quantitative or Qualitative)

N/A Completed Had been completed already.

Date achieved 03/08/2000 09/30/2007 Comments (incl. % achievement)

xi

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 06/30/1999 Satisfactory Satisfactory 0.00 2 12/20/1999 Satisfactory Satisfactory 0.00 3 05/15/2000 Satisfactory Satisfactory 0.00 4 12/22/2000 Satisfactory Satisfactory 1.39 5 06/14/2001 Satisfactory Satisfactory 1.91 6 12/21/2001 Unsatisfactory Unsatisfactory 3.90 7 04/30/2002 Satisfactory Unsatisfactory 5.34 8 12/18/2002 Satisfactory Unsatisfactory 8.31 9 05/29/2003 Satisfactory Unsatisfactory 10.69

10 06/26/2003 Satisfactory Satisfactory 11.23 11 11/21/2003 Satisfactory Satisfactory 13.05 12 05/20/2004 Satisfactory Satisfactory 15.96 13 11/18/2004 Satisfactory Satisfactory 20.90 14 04/28/2005 Satisfactory Satisfactory 28.52 15 12/01/2005 Satisfactory Satisfactory 40.66 16 06/19/2006 Satisfactory Satisfactory 49.99 17 12/20/2006 Satisfactory Satisfactory 58.02 18 06/13/2007 Satisfactory Satisfactory 64.97 19 11/29/2007 Satisfactory Satisfactory 78.10 20 05/20/2008 Satisfactory Satisfactory 91.56 21 10/23/2008 Satisfactory Satisfactory 94.68 22 03/12/2009 Satisfactory Satisfactory 95.65

H. Restructuring (if any)

Restructuring Date(s)

Board Approved

PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

04/15/2004 No Change S S 15.90

IDA approved a supplemental credit to cover cost increases due to under pricing of the original bid and other unforeseen circumstances. Key changes made include; (i) reduction of on-lending rate of IDA credit to 2% per annum; (ii) CRA became the second implementing agency; (iii) Project was extended for two years to close in 2007.

xii

I. Disbursement Profile

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal 1. Country Background: Mozambique has sustained rapid economic growth since achieving peace in 1992, transforming itself to a market economy. However, it remains one of the world's poorest countries with a GDP per capita of US$210. In 1998, the first annual household survey showed that, while conditions had improved, 69% of Mozambicans still lived below the poverty line. As part of a strategy to maintain high levels of growth and reduce poverty, the Government of Mozambique (GOM) formulated a Five-Year Program (2000-2004) and prepared an Action Plan for the reduction of Absolute Poverty (PARPA) in the framework of its interim Poverty Reduction Strategy Paper (PRSP). The PARPA's strategy emphasized economic growth, public investment in human capital and productive infrastructure, and institutional reform. 2. Sector background: In August 1995, GOM adopted a comprehensive sector strategy document entitled the National Water Policy (NWP). It called for: increased beneficiary participation, recognition of water as an economic as well as a social good; decentralized autonomous and financially self sustaining provision of water supply and sanitation services, integrated water resources management taking environmental impacts into account; multi-objective investment planning; a greater focus on capacity building; and an increased role for the private sector.

3. To implement these polices GOM prepared and approved a National Water Development Program (NWDP), which was supported by two International Development Association (IDA) Credits. The National Water Development I Project (NWDPI, Cr. 3039-MOZ), co-financed by the Nordic Development Fund (NDF), became effective in June 1998 and closed in October 2005. It focused on water resources management, rural water supply, and institutional reform. The Second National Water Development Project (NWDPII) became effective in March 2000 and closed in March 2009. The total cost of the Project was estimated at US$115 million and financing included a US$75 million equivalent IDA Credit, US$10 million grant from the Government of the Netherlands and US$20 million credit from the African Development Bank (AfDB). A supplemental IDA Credit of US$15 million was approved in 2004. This Project focused on the improvement of urban water supply, specifically in five major cities, and provided policy and regulatory support.

4. Rationale for Bank assistance: Strong government ownership and a clear focus on the appropriate institutional and legal setting proved conducive to trigger effective cooperation by the donor community in implementation of the NWP. The Bank, through IDA, had been particularly active in the development of the water sector in Mozambique since the mid 1990s and had been a keen supporter of GOM's NWP. It was also the lead donor in NWDPI. Within the donor community, the Bank Group had at that time already accumulated substantial experience with a range of early Private Sector Participation (PSP) efforts in the sector, within the region, and globally. Therefore the Bank could add value by facilitating the GOM’s approach which was based on "buying in" needed

2

experience to jump start the sector after the civil war. The Project was designed to support several key Country Assistance Strategy (CAS) objectives. It would promote sustainable economic growth through better quality water supply for major urban areas, and higher efficiency of service provision and introduction of cost-recovery principles. It would contribute to capacity building and development of human resources primarily through the promotion of private sector-led service delivery. It would also strengthen the development partnerships between GOM, the donors, municipalities and the private sector.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

5. PDO: According to Section A of the Project Appraisal Document (PAD), Project Development Objective, the main objective of the Project was to improve the quality, reliability and sustainability of water services for the cities of Maputo, Beira, Quelimane, Nampula, and Pemba (target cities) through promoting greater private sector participation in the provision of these services. More specifically, the Project sought to: Commence institutional and regulatory reform within the urban water sector

with the introduction of commercial principles in the operation and management of water services through the use of a private sector operator;

Accelerate capacity building and human resource development for the sector through training and demonstration effects within the context of the private operator contract;

Provide an institutional framework that improves the quality and sustainability of user services and acts as an operational model for water services, as these begin to be decentralized to municipal based management.

6. The improvement of service coverage level was also included in the PDO in both Annex 1 of the PAD, Project Design Summary and in the Development Credit Agreement (DCA) Schedule 2, Description of the Project. 7. Key performance Indicators: The following were defined in the PAD as Outcome/Impact Indicators:

Mandated tariff policy that water pricing will be based on principles of full cost recovery.

Work towards the establishment of autonomous publicly owned water companies in the 5 targeted cities that are run on commercial principles of cost recovery and that are managed and run by private sector operators.

Assist in the devolution of the responsibility to provide water supply to the Local Authorities as municipalities take an increasing role in direction and ownership of the new water companies.

Creation of a water sector regulatory agency for urban water service provision. 8. The following were defined in the PAD as Output Indicators.

Chief Executive Officer of FIPAG in place by Project effectiveness, and Technical Assistance (TA) contract operational by January 2000.

Conselho de Regulação do Abastecimento de Água (CRA) Chairman and

3

Board appointed by March 2000 and staff in place and fully operational by December 2000.

Lease and management contracts signed. Contract adjustment and re-negotiations are successfully completed

without resorting to arbitration or contract termination. Financial self-sufficiency of Fundo de Investimento e Património do

Abastecimento de Água (FIPAG): recovery of O&M and depreciation by 2004; full cost recovery by 2005.

Improvements in key service levels, including the reliability of service and % of microbiological water quality samples.

In the target cities, increase of the population with improved access to safe reliable water supplies from the current level of 0.8 million to 1.1 million by 2004.

Network renewal and extension takes place in line with programmed targets. Environmental Management Plan implemented. Policies and strategies incorporate lessons learned in the lease and

management contracts and are supported by stakeholders. Strategies for four cities with management contracts developed by Dec.

2003, for remaining eight medium size cities by Dec. 2004. 9. It is noted that the DCA did not reflect the key indicators above, but included as Schedule 6 a set of detailed performance indicators as defined in Annex 2, Section 4 of the PAD. A baseline for key indicators was not defined at appraisal with exception of the population with improved access to safe reliable water supplies and the indicator for service coverage.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

10. The PDO and the key indicators were not revised during Project implementation. However, during the mid-term review of the Project the Bank and the implementing agencies agreed on modification and simplification of the detailed indicators. The agreed list of revised indicators was then incorporated as new Schedule 6 in the amendment of the DCA on April 15, 2004. 1.4 Main Beneficiaries

11. The Project intended to directly benefit an estimated 1.1 million people, representing about 47% of the consumers in the five cities. Of those already served by house, yard or standpipe connections (about 800,000 people, or about 35% of all potential consumers), most received only limited, interrupted supplies of poor quality water at low pressure. The Project aimed to bring services close to continuous water supply and meet national standards of pressure and microbiological quality. Customers with existing connections would have to pay higher water tariffs, but for the new customers, mostly the poor, the cost of water would be much lower with formal water connections, compared to what they pay for alternative services, such as the water vendors. Besides, the poor would no longer have to walk long distances to fetch water. Improved water services would also remove constraints on operations by commercial and industrial enterprises and promote

4

confidence and increased investments.

1.5 Original Components (as approved) 12. The Project, estimated at a total cost of US$114.8 million, consisted of three components summarized as follows: 13. Component A: Private Sector Management of water supply systems for five cities (US$42.7 million; 37.2%), with the following sub-components:

A 15-year lease contract with a private operator for the greater Maputo area Five-year management contracts with a private operator for the cities

Beira, Quelimane, Nampula and Pemba (US$6.9 million) Delegated works, undertaken by the Private Operator (PO) in lease and

management contracts (US$17.6 million) Services in lease and management contracts (US$2.76 million) Management of components A and B by FIPAG (US$14.6 million) Human resources development of FIPAG Headquarter (HQ) staff and staff of

the 4 cities under the management contract (US$0.9 million)

14. Component B: Capital works and services (US$64.4 million, 56.1%) in the five cities, with the following sub-components:

Water supply works (US$58.9 million) Design and supervision (US$5.5 million)

15. Component C: Urban Water Supply Policy and Strategy (US$5.1 million, 4.4%), with the following sub-components:

Equipment for CRA (US$0.4 million) Consulting services and TA for CRA, regulatory studies, urban water supply

strategy, urban water and sanitation pilot and management of component C (US$4.7 million)

16. It is noted that the Project cost tables A2.1 and A2.2 of the PAD include a line item "interest during construction" (US$2.65 million, 2.3%) which was not allocated to any of the above components.

1.6 Revised Components

17. The components were not revised during Project implementation. However, since the implementing agency for component C changed from DNA to CRA at the time the supplemental financing was approved, as detailed in section 1.7, the activity related to urban water and sanitation pilot and management led by DNA was dropped. Instead, a number of other activities and studies were added to be implemented by CRA under this component, as detailed in section 3.2.

5

1.7 Other significant changes

18. On 7/20/2004 IDA approved a supplemental credit of SDR 10.2 million (US$15.90 million) to cover cost increases due to under pricing of the original bid and other unforeseen circumstances. The approval was preceded by an ownership change in the operating company and re-negotiation of the lease and management contracts (see 2.1 and 2.2 below). At the same time the on-lending rate for the IDA Credit from GOM to FIPAG was reduced from 6% p.a. to 2% p.a. calculated on the US$ amount of FIPAG’s borrowing. This was much closer to a market based interest rate as LIBOR had dropped to 1.4% p.a. in April 2004 and was 2.4% p.a. in July 2004, with the average LIBOR for 2004 at 1.5% p.a. In addition, the role of the regulator CRA as a second implementing agency was confirmed by creation of a special account under its name. At the time of the supplemental the Project was extended by two years, to September 30, 2007. In March 2007, the Bank agreed to finance 100% of taxes to expedite the implementation of contracts for which the payment of Value Added Tax (VAT) had become a major issue and also extended the closing date by six months until March 2008 because of weather related construction delays. The Periodic Review (PR) of the lease contract, which occurs every four years, covers the revision of the operator’s tariff, indexation and adjustment formula, and changes in performance standards. Leading up to the 2008 Review, the GOM requested that the credit be extended to support TA resources that may be necessary to support these negotiations with the PO. Overall, the Project was extended three times for a total of three and a half years.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry 19. The Project's overall Quality at Entry is rated “satisfactory”, based on the consistency of objectives with GOM's and the Bank's CAS priorities, the quality of design, and the assumptions about relevant external factors. The Project was not subject to a Quality at Entry review as such reviews had not been introduced on a regular basis at the Bank at the time of project initiation. The Project was well prepared, took lessons of similar projects in other countries into account (as it was the first one of its kind in Mozambique), incorporated design elements specific to Mozambique, and tried to identify and mitigate potential risks to the extent possible. At project preparation, GOM was well aware that the country as a whole had limited capacity to dramatically improve service delivery after the civil war, and it was clear that the municipalities were not ready to take on this responsibility. The key project concept was therefore the involvement of a professional PO to assist with its experience and expertise to improve the service provision of FIPAG through carrying out system upgrading, and simultaneously building operational capability of the operating companies in the cities to provide water supply services. The selection of the options for private sector involvement (lease for Maputo and management contracts in the four Northern cities), the choice of the five cities, and the focus of investments appear appropriate in hindsight despite the implementation hurdles later faced by the Project. 20. Given the importance of the PO, the procurement process for its selection was concluded prior to project start. An initial procurement plan was prepared during project

6

appraisal, and it was defined in more detail and finalized during project implementation. Plan for the delegated works was part of the PO's task, and the plan for non-delegated works was prepared by FIPAG in coordination with the PO. This approach intended to ensure an optimal rehabilitation and maintenance strategy for the poorly maintained water supply schemes and therefore appropriate under the circumstances. IDA financed the capital works in the four secondary cities only, while parallel funding was provided by African Development Bank (AfDB) for the capital works in Maputo. There were substantial implementation delays in the Maputo's capital works and this has negatively affected the performance of the PO with respect to the lease contract and key output indicators for the water supply services in Maputo given the size and high profile of Maputo within the FIPAG portfolio.

21. The key event that seriously impacted the Project in the early stages was the withdrawal of the original consortium leader, SAUR International S.A. (SAUR), the largest equity holder of the operating company, Águas de Moçambique (AdeM). This event, which caused approximately two years of implementation delay, could not have been foreseen during project design as it was the result of; (i) the damage caused by heavy flooding right after the Project start in February 2000; (ii) a substantial shift in SAUR’s corporate strategy with respect to involvements in developing countries; and (iii) underbidding of the consortium. Technical studies for the appraisal had been prepared with limited information and restricted site access due to the security situation, and doubts were raised about the investment proposal’s sustainability. However, an independent engineer’s review concluded that the proposal was sound and realistic. Furthermore, SAUR had run a successful operating contract for five years in Matola, a large municipality adjacent to Maputo. This provided confidence that the company had appropriate experience in operating a water supply system under the prevailing circumstances in Mozambique, and that it would bid accordingly.

2.2 Implementation 22. Contract re-negotiation: Following a disastrous year 2000 as a consequence of the heavy flooding in February/March, operational mishaps and the underbidding of its contractual services, the Mozambican operating company AdeM submitted on February 21, 2001, about 18 months after beginning operations, a request for an interim review of the operator tariff and the tariff indexing formula in the Maputo lease contract. An independent auditor appointed by FIPAG and agreed to by AdeM, concluded that the criteria for a material change of circumstance had not been met as many of the changes in circumstances cited by AdeM were not outside of its control. However, as spelled out in the contract, CRA instructed the parties to undertake an interim review, judging that the restoration of financial equilibrium was in the interest of the customers. In July, FIPAG and AdeM/SAUR started negotiations which led to an understanding that the price basis of the original bid was no longer valid and the tariff and remuneration formulas of the contracts could be modified. However, SAUR then suspended negotiations two months later and in October 2001 informed GOM that they were pulling out of AdeM. SAUR terminated its involvement in the lease and management contracts as of December 14, 2001, and offered its share to the second shareholder, Águas de Portugal (AdeP), for a nominal value of € 1.0.

7

23. The possibility of re-bidding was discussed but its chance of success was considered low. Therefore, FIPAG signed a Memorandum of Understanding (MoU) with AdeP under which AdeM continued to operate based on the original lease and management contracts while contractual modifications were negotiated. The MoU was initially designed to last for 15 months but remained valid much longer since the revised lease and management contracts were not signed until end-October/mid-November 2003 and became effective only in June 2004. While IDA gave a no-objection to the ownership change in AdeM, it did not recognize the MoU with respect to the legal agreements and disbursements. Even though the Project’s PDO was only rated unsatisfactory once, right after SAUR's retreat, its implementation performance was rated unsatisfactory four times until mid-2003 when re-negotiations had sufficiently advanced. The key event described above led to a delay of about four years in project implementation. Very little was achieved in the first two years due to the start-up difficulties with SAUR. Subsequently, during the drawn-out contract re-negotiations the PO was not operating with adequate capacity and effort as AdeP was not prepared to fully engage in the operation until the new contracts were signed. Furthermore, the attention of FIPAG was focused almost entirely on the re-negotiations. 24. The changes in the contractual agreements resulted in a higher operator tariff for the Maputo lease and significant project cost increases. The unit rates for delegated works, the oversight costs for the PO (including program management, procurement, and site supervision) and fees relating to the management contract for the four cities (which after re-negotiations became four separate contracts) were raised. This amounted to about US$8.5 million. In order to make up for the implementation delays, the operating cost deficit of FIPAG in the four secondary cities needed to be covered for an additional two years, amounting to about US$7.15 million. As a response IDA approved a supplemental credit of SDR 10.2 million (US$15.0 million equivalent) on 2/26/2004 which became effective on 7/20/2004.

25. A Periodic Review (PR) of the critical aspects of the contract, including the operator’s rate, the indexation and adjustment formula, and future performance standards has been undertaken every four years. The PR was successfully concluded in May 2008 and the agreements reached by the two parties will apply to the contract from 2008 to 2011.

26. Payment of rental fees by PO to FIPAG: Delayed rental fee payments by AdeM to FIPAG for the Maputo lease was a persistent issue until two years before project closure. While the small fixed fee (about US$35,000 per month) has by and large been regularly transferred, AdeM started reneging on payments of the much larger variable fee after signature of the MoU in December 2001. The issue was flagged at the time of the mid-term review in September 2003 and by September 2004 arrears of about US$2 million had been accumulated. Following the review mission in April 2005, this was raised as a key issue in every aide-memoire but not resolved. A comprehensive assessment was carried out for the April 2006 review mission that determined the total amount of arrears including interest from 1999 to December 2005 at US$5.6 million, of which US$2 million up to 2002 was certified by an independent consultant. A settlement was envisaged encompassing the preparation and implementation of a payment schedule and the introduction of an escrow account or alternative mechanism to regularize future

8

payments. Over the subsequent 12 months major progress was achieved as AdeM paid off all arrears from 1999 to September 2006. However, transfers of the variable lease fee remained erratic and by November 2007 new arrears of US$1.7 million had built up. As a consequence of persisting payment delays, FIPAG called for the first time on the contractual performance guarantee in late December 2007. Ever since the financial security in the amount of US$400,000 was accessed by FIPAG in December 2007, AdeM has been making its fixed and variable rental fee payments to FIPAG in full and in a timely manner. Adoption of such timely payment mechanism has positively affected FIPAG’s financial sustainability, as these rental fees from the Maputo operation are still the major source of revenue for FIPAG, accounting for about 25% of its total revenues. 27. There appears no justification for the long history of arrears and erratic transfers that have plagued the Maputo lease. Alleged cash flow shortages of the operator caused by government entities have sometimes been used as an explanation. Delays did occur in FIPAG’s reimbursements to AdeM for delegated works but these peaked at US$600,000 and have since been mostly cleared up. Some public institutions have also been delinquent in their tariff payments to the PO but these arrears have been minor. With regards to the unpaid water bills from the five eligible public institutions which have been accumulating for AdeM, the outstanding arrears from January 2006 to September 2007 in the amount of Mt 13 million (US$565,000) have been cleared through payment of 75% of these bills by the Government. It might therefore appear that the PO used the non-payment of the lease fee as an interest-free loan with flexible repayment terms, instead of adhering to the contractually fixed payment schedule.

28. Payment of counterpart funds/VAT: The counterpart funds expected to be contributed by GOM, nearly exclusively for Components A and B, amounted to US$7.55 million according to PAD projections. Of this, US$4.9 million was estimated to be necessary for Component B of which a large part pertained to works in Maputo financed by the AfDB, and US$0.7 million for different sub-components of Component A. In the DCA, the Bank required the Government contributions of US$2 million which corresponded to counterpart funding for operating costs of the four secondary cities. These funds were deposited as scheduled in an account in the name of FIPAG.

29. A specific issue emerged with the introduction of the VAT at a rate of 17% in April 2000 i.e after the Project was approved. This tax led to a higher financing requirement for the Project, but taxes were at that time not eligible for financing under IDA rules. Dedicated GOM counterpart funds were not sufficient since they had been estimated for project costs without VAT. This issue did not really affect project implementation until 2004/05 when large contracts started and significant amounts of VAT were required to be paid. FIPAG, as the contracting party could neither revert to IDA nor to the government to pay for these VAT expenses. Therefore, bottlenecks in payments to contractors for the VAT portion of their invoices started to emerge in early 2005. Between then and March 2007, amounts due to contractors rose dramatically to US$2.7 million for contracts under the IDA Credit and Dutch grant, and US$4 million for contracts financed by the AfDB, mainly due to the VAT issue. This resulted in a number of claims for late payment which further aggravated the situation. As a consequence, GOM requested and IDA approved in March 2007 the disbursement against taxes out of

9

the Credit. This modification of the DCA was consistent with the Country Financing Parameters for Mozambique, approved August 25, 2004 which confirmed that taxes and duties were eligible for IDA financing. In addition, GOM made a special effort on its part to resolve the situation by tripling transfers to FIPAG in 2007 to US$2.7 million and budgeting an allocation of US$3.9 million for 2008. From April 2007 onwards the payment arrears to contractors were thus significantly reduced and by November 2007, all outstanding issues related to counterpart funding for the IDA funded components were resolved. Subsequently, by year 2009 the counterpart funding issues for AfDB funded components were also resolved. While this issue did not have a significant impact on overall project implementation, it unnecessarily slowed down the Project's progress at a time when the PO contracts had been re-negotiated and the Project was on track again. 30. Private Operator Performance: Following contract re-negotiations, AdeM improved its operational performance considerably from late 2004. Progress took place in the implementation of delegated and non-delegated works, water quality had generally been lifted to World Health Organization (WHO) standards, water mains and distribution systems were rehabilitated and/or upgraded, connections were renewed, a limited number of new connections were installed, and billing and collection systems improved. As a result sufficient and reliable water supplies were assured except in Maputo where the AfDB-financed increase in storage capacity encountered delays. While some cities including Nampula and Quelimane experienced significant progress and service improvements, other areas like Maputo experienced less progress than expected. The extent of water testing was not always adequate as it varied depending on the equipment available, and some of the tests for less common pollutants were never initiated. AdeM lagged behind in bulk and retail metering and the share of unaccounted-for water has increased in all cities. The latter issue is a combination of technical and commercial factors. A large part of the networks still consists of old pipes which suffer high water losses through leakage when they are put under constant high pressure. Tardy retail meter installation, lack of bulk meters, tampering and destruction/theft of meters, and negligent reading practices, combined with billing or collection problems have contributed to large commercial losses. 31. Apart from these operational issues, the cooperation of AdeM with FIPAG has not been smooth and effective in some areas. The PO’s reporting has been irregular, and customer relationships have not always been managed well. The operator’s lack of experience with Bank procurement procedures led FIPAG to eventually take back the procurement responsibility. The implementation of delegated works in the four secondary cities encountered delays when it became clear that their costs had been underestimated. The delay had a negative effect on the unaccounted-for-water which the delegated works were designed to reduce. 32. Management of operations in the four cities also proved difficult at times as authority in FIPAG’s personnel matters was not always very clear. Under the management contract(s) the PO selected and recommended the area Directors (FIPAG's employees) and trained them in Portugal. Towards the end of the contract the responsibilities under the management contracts were re-defined, with FIPAG personnel assuming the task of day-to-day operations while the PO focused on important unresolved issues such as metering and water leakage. The AdeM Management Contract

10

for the 4 cities ended on March 31, 2008 after about 9 years. At the time of project closure, FIPAG was managing the systems on a temporary basis with specific short-term TA for various specialized activities while advancing the contracting for new lease operators for the four cities. The four cities will continue to be supported under a repeater project to NWDP II entitled Water Services and Institutional Support Project (WASIS). 33. In the Maputo lease contract the responsibilities of the PO are clearer but the flow of information to FIPAG was at times insufficient and constant arrears in payment of the lease fees represented a serious threat to FIPAG’s financial viability, particularly between 2004 and 2007. As referred to above, the PR with the PO was successfully concluded in May 2008 and the lease contract will continue up to the next PR in April 2011. Further, it was decided that for the mutual benefit of all parties, the extension of the Lease Contract beyond its original 15 years will be considered before the next PR, depending on the performance of the PO.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 34. The M&E framework was clearly set out in the PAD (section C.5 and Annex 1). The framework was adequate and was used effectively by the Borrower, its agencies and the Bank to follow implementation progress and achievements, and to address emerging issues. Key elements in this framework were FIPAG and CRA reports and audits and the monitoring of key performance indicators both under the lease and the management contracts. Another important element was the Stakeholder Forum that met annually with FIPAG as intended. It served as a mechanism for coordination with key central and local government entities and assumed in addition to M&E also the function of an important platform to discuss and decide on implementation of GOM's water sector policy, in particular decentralization aspects. An additional significant M&E instrument consisted of annual independent technical audits of the PO performance commissioned by FIPAG. M&E deviated only in one respect from the initial design. As it became clear that Component C was in essence geared towards regulatory activities, the main responsibility for monitoring progress of that component was shifted from DNA to CRA. This did not require any formal revisions of project scope as it only entailed a change in emphasis and since CRA had been entrusted an important role in implementation of Component C from the beginning. Finally, it included periodic beneficiary assessments by CRA in peri-urban areas to monitor consumer satisfaction and prices not only for those connected to AdeM, but for those not connected.

2.4 Safeguard and Fiduciary Compliance 35. The NWDP II is an Environmental Assessment (EA) Category B project since there were expected to be minor environmental impacts on construction, some land acquisition, and/ or compensation for losses and damages to the property. These safeguard concerns were managed through the implementation of FIPAG's Environmental Management System (EMS) and the Resettlement Policy Framework (RPF) prepared for the Project. FIPAG, over the course of the Project, has developed a strong capacity, and has a demonstrated commitment and track record for employing these instruments to avoid or minimize adverse safeguards issues. As a key example, the

11

Bank's senior social scientist assigned to the Project undertook a final review of the implementation of the RAPs for Domela (Quelimane) and Mutua (Beria) villages in March 2008. The review confirmed that the RAPs have been implemented in a highly satisfactory and a satisfactory manner, respectively for the two villages. Clearance for completion of the RAP in good standing was given. 36. The two main implementing agencies developed and maintained accounting and financial management systems which have the capacity of recording all transactions and balances correctly. These systems were used for preparing regular financial statements and safeguarding the entities' assets. The auditing arrangements were also carried out in accordance with Bank requirements. The implementing agencies maintained acceptable financial management arrangements for the Project including the Project's system accounting, reporting, auditing and internal controls. Financial management issues that emerged during supervision missions, audit reports, and management letters were discussed with the agencies and resolved satisfactorily.

2.5 Post-completion Operation/Next Phase 37. Over the project implementation period, FIPAG and CRA have evolved into fully functional and adequately-staffed sector institutions with clearly defined roles and responsibilities. They are thus well-equipped to continue fulfilling these functions after completion of the Project but they are also slated to assume growing responsibilities as the delegated management framework in the urban water sector is expanding. The Maputo operation is designed to continue for another four years under the original lease contract, and should, barring adverse factors, be subsequently extended under a new contractual arrangement. Financing for additional investments, particularly in supply capacity and network expansion for Maputo, has been secured from the EU, EIB, FMO, AFD and GOM under the Maputo Water Supply Project. GPOBA financing is also expected to provide 10,000 low-income connections in Maputo. 38. The operations in the four secondary cities are currently in the process of being tendered to private operators under lease arrangements, with modifications to the existing one in Maputo. The Bank will provide further support to these operations as well as to CRA through financing of investments and technical assistance under the repeater project WASIS. Millennium Challenge Corporation (MCC) is also funding works in three of the cities. The cities are also benefiting from the provision of 30,000 connections to low -income consumers funded by GPOBA. Four additional cities in the Northern region, whose investments will be supported by AfDB, MCC, and GOM have been transferred to be under the responsibility of FIPAG.

39. Overall, NWDP II has also been instrumental in the implementation of GOM's urban water supply policy which is now fully based on the concept of the delegated management framework. FIPAG's centralized asset management functions are involved in decision making locally through the Stakeholder Forum and on-site coordination mechanisms. FIPAG’s planning and business development unit has qualified staff who own and operate its financial model, uses it as a strategic business tool to assess the impact of taking on new cities, and makes recommendation to its management and the Government. When the proposal emerged that FIPAG would be given the mandate to

12

take over the water supply operations of four additional cities in the Northern part of the country, FIPAG carefully analyzed the financial and operational impact of such a proposal, and requested the Government to inject US$2 million in operating subsidies specifically targeted to support these four cities. This was granted by the Government to ensure that FIPAG’s financial sustainability and its capacity to repay its debts would not be compromised with increasing responsibilities.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation 40. The original project objectives remain consistent with current country, sectoral and global priorities, and Bank assistance strategies. Provision of potable and reliable water supply is a critical element of infrastructure expansion in Mozambique. It significantly affects the well-being of people through its impact on health, education, gender equality, and productivity. Unreliable water services have also been identified as a key constraint to the business environment in the 2002 Investment Climate Assessment (ICA) for Mozambique. GOM’s action plans for poverty reduction in the past decade - PARPA I (2001-2005) as well as PARPA II (2005-2009) - include the lack of potable drinking water as a critical area for improvement. The Country Partnership Strategy (CPS) objectives support the growth pillars outlined in PARPA II and set an outcome indicator of "improved access, reliability and quality of water in targeted areas of high demographic growth" to meet the goals in Pillar 2, specifically equitable access to public services. The design and implementation of the Project correspond well to these goals, as the successful outcome of the Project demonstrates.

3.2 Achievement of Project Development Objectives 41. Private sector participation was promoted through the 15-year lease contract for the city of Maputo and a four-year management contract for the cities of Beira, Quelimane, Nampula, and Pemba, both with AdeM. A key factor in achievement of the Project's objectives was the successful establishment of a credible institutional framework including FIPAG as the main contracting party with private sector operators and the independent regulatory authority CRA. The momentum created by FIPAG and CRA has meanwhile resulted in expanding the delegated management framework from the five project cities to 20 cities with assets under FIPAG management slated to increase almost four-fold from US$115 million to US$500 million. 42. Water quality has considerably improved with almost 100 percent of microbiological samples with respect to water quality indicators for meeting WHO standards for total coloiform and fecal coliform tests meeting target values across the five cities compared to initial values of 50 percent in 2000. This achievement is all the more notable as it relates to a much larger water volume and significantly extended operating hours. The improvements in reliability of service are demonstrated by a dramatic increase in service hours per day particularly over the last couple of years. In Nampula and Beira, customers already received water 24 hours per day in 2007-2008, seven days a week up from previous levels ranging around 10-12 hours a day, while Quelimane and Pemba have dropped from 24 hours per day in 2007 to 22 and 18 hours respectively in 2008.

13

This is a result of erratic power supplies unrelated to FIPAG's investments. Maputo has performed less well on this score increasing its daily service from 11 hours in 2000 to 14 hours in 2008. This result is a combination of insufficient treatment and storage capacity which will be addressed by the Maputo Water Supply Project to be completed in 2012 which should also result in Maputo reaching a 24 hours supply. Other issues such as inadequate leakage control and widespread theft are being addressed through operational efficiency measures by AdeM. 43. The Project also achieved a substantial improvement in service levels. One measure for this has been the overall increase in water production by 63 percent in the five cities. The fact that the number of connections rose by only 34 percent during this period reflects the improvement of service levels not only overall, but also per connection due to longer and more reliable service. The Project’s principal goal was to augment production capacity essentially through new works and upgrading of treatment plants and existing primary networks. An increase in total population coverage was therefore not incorporated in the PDO but was included in the performance indicators (see Section 1.2). The Project substantially raised coverage within and to a limited extent outside the existing networks due to new connections. But the overall coverage of the urban population increased only marginally as a result of rapid growth of the urban population. With existing facilities and networks were upgraded under the Project, more substantial increases in service coverage of the total population can be achieved through network expansions. The funding for such expansions is to be provided under the repeater project WASIS and the Maputo Water Supply Project. 44. The three beneficiary assessments, conducted by CRA during project implementation, as well as the feedback from the stakeholders have shown that the connected customers in peri-urban areas served by FIPAG report that the quality, pressure, hours and frequency of outages has improved since 2001. At the same time, with one of the water sources most frequently used by the poor, standpipes, satisfaction with aspects of management and price declined, reflecting both a lack of attention to these and a preference among consumers for purchase of water from others with house connections. As FIPAG improves its performance, more municipalities and local governments are expressing their interests to have their water supply operations transferred to FIPAG for improved service delivery in their areas.

45. It can also be said that NWDP II has almost met its financial sustainability objective as well, as FIPAG is very close to achieving full cost recovery in 2008 as compared to its cost recovery of 68 percent in 2003. If the tariffs had been increased at the rate of inflation, FIPAG would have achieved a breakeven point by 2008. On cash terms, FIPAG has maintained a positive cash position over the past few years, and the financial projections show that FIPAG will be able to pay its debt service obligations when they start in two years time, comply with the Project’s debt service coverage covenant, and continue to maintain full cost recovery during the next ten years.

46. Component A-Private Sector Management (US$42.7 million PAD, US$38.5 million actual)-Moderately Satisfactory: While the lease contract did not imply any costs, the actual costs of the management contract(s) at US$5.5million were nearly identical to the PAD projection (without contingencies). Implementation of the

14

delegated works (US$14.5 million) were 13 percent lower than the PAD estimates and demonstrated clearly the challenges of assessing investment needs of an old network with deficient technical information, leading to numerous plan modifications. The length of pipe and meter replacements exceeded initial estimates and additional standpipes were installed, while connection renewals and new connections were lower than planned, except renewals for Quelimane. Expenses for delegated services at US$3 million were somewhat higher than planned. Contract management costs of FIPAG exceeded projections minimally, with more emphasis on technical assistance, consultancies and FIPAG equipment, and less on working capital and O&M costs for the four cities due to the Project’s implementation delays. Even though works and services under this component have been by and large satisfactorily implemented, the rating has taken into account the delays caused by the ownership change and contract renegotiations (see Sections 2.1 and 2.2) and the mixed PO performance since 2002 (see also Section 2.2). The private operator's' performance improved after the lease was fully re-negotiated in 2004. Most recently, years 2008 to 2009 show a more robust improvement. It can not be denied that the presence of the private sector contract and the provision of clear "rules of the game" as a result contributed greatly to the increase in investments provided by donors. This is particularly true of the large EU/EIB investment in Maputo under the Maputo Water Supply Project. 47. Component B-Capital Works and Services (US$64.4 million PAD, US$89.6 million actual)-Satisfactory: Under this component, major investments were carried out to secure water supply to the networks. Investments in the four secondary cities were funded by the IDA Credit and the Dutch grant. The total costs of capital works in Quelimane remained somewhat below appraisal estimates which is particularly noteworthy as they included the largest IDA financed work contract of about US$13 million. Works in Beira, Nampula and Pemba were affected by significant cost overruns compared to the PAD as major rehabilitation needs (water treatment plants, distribution centers) had to be added or their costs adjusted. In Beira, additional cost overruns were incurred due to flooding that required de-mining twice in two seasons and delayed construction of the new intake, transmission mains, and a new distribution center, as well as refurbishment of the water treatment works. Cost overruns have in some cases resulted from the need for re-design due to operational considerations, and there have also been a few cases of low design quality and weak performance of AdeM’s supervision team. Despite these shortcomings, the principal investments in the four secondary cities have been satisfactorily completed and have achieved the objective of ensuring water supply for the current networks and for a major increase in connections in the future. The rating for this component is principally based on the successful execution of works in the four cities. 48. Substantial implementation delays and cost increases of 44 percent pertained to the AfDB financed capital works in Maputo. While rehabilitation of the water treatment facilities cost less than expected, repair and renewal of the distribution system was much more expensive than planned. However, despite these capital works adequate water supply to the existing networks in Maputo is not yet assured (see “Achievement of Project Development Objectives” above). To reach this goal, a substantial expansion in water storage capacity is necessary which is envisaged to be installed under the Maputo Water Supply Project.

15

49. Component C-Urban Water Supply Policy and Strategy (US$5.1 million PAD, US$5.1 million actual)-Satisfactory: The component, designed to support CRA’s establishment was initially to be implemented by DNA. As the mid-term review approached, the Component had progressed very little, and it had become clear that, after full establishment of CRA, it would be appropriate to entrust the principal responsibility for the component’s implementation to that institution. This was subsequently recognized as part of a broader DCA amendment approved in February 2004 and effective in July 2004 when a special account under CRA’s management was created. The component, initially affected by the overall project implementation delays and by cumbersome administration arrangements, was then largely implemented as planned. It financed i.e. equipment for CRA, design and implementation of an action plan for the institution, beneficiary assessments, an institutional development study, a tariff study, general technical assistance over 18 months, and training for CRA staff. In addition, the Component also financed part of the preparatory work for WASIS through a study focused on institutional, regulatory and financial aspects of water supply in smaller cities, and through transaction advisers on the bidding process for the future lease contracts in the four secondary cities.

3.3 Efficiency 50. Procurement under the Project followed Bank guidelines and most works, goods and services were competitively tendered. As a result of the fast economic development over the 15 years after the end of the civil war, and given the vicinity to South Africa, there is a wide variety of foreign and increasingly local contractors and suppliers, as well as consultants in Mozambique to ensure cost effectiveness. 51. The contract re-negotiation with the PO and the ensuing increase by about 30% of the PO's unit rates for delegated works and the operator tariff for Maputo did not result from low cost effectiveness of the PO (under changed ownership) but were a consequence of the initial underbidding of the contract coupled with the need to adapt designs and operating methods to the actual state of the network as it became known. The level of unit O&M cost of water production, reflected in the tariffs, appears reasonable in comparison with other water supply operations under similar circumstances, but further efficiency gains should be possible through reduction of unaccounted-for water and expansion of networks.

52. Financial rate of return was not calculated in the PAD. As a result of an increase in the number of new connections in the four secondary cities during 2007, FIPAG achieved significant performance improvements, almost reaching full cost recovery. FIPAG overall has shown steady improvements in its financial performance over the past years. Its revenues have increased at the rate of 10%-20% annually for the last two years. However, lack of regular tariff increases over the last two years has caused FIPAG to run a small deficit, risking FIPAG’s debt repayment capacity. The GOM has agreed to postpone FIPAG's debt service obligations for the payment of IDA and AfDB debt from 2008 to 2010 to allow FIPAG’s cash flows to build up and be consolidated. As a result, FIPAG’s debt repayment capacity has been strengthened significantly. The reasons for this deviation from the more optimistic PAD projections are; (i) the delay in project

16

implementation caused principally by the contractual difficulties and re-negotiations during the first four years; (ii) slower than projected increases in tariffs in 2007 and 2008 although it had been very regular up to this point; (iii) persisting high rates of unaccounted-for (i.e. unpaid) water in the four secondary cities; and (iv) irregular payments and arrears of the Maputo lease fee. By the end of 2009 FIPAG is expected to achieve a financial break-even point and its net cash flows are expected to turn positive. 53. The lease contracts for the four cities, supported under the follow-on WASIS project should enable FIPAG to be relieved of operational short-falls from the four secondary cites. The improved and more reliable payments of the variable rental fee from the Maputo lease will also support cash flow. Under the assumption of reliable revenues from the Maputo lease, a one-time tariff adjustment in 2010, and annual tariff revisions thereafter, and good performance on the increase in new connections and on bill collection, FIPAG is likely to achieve medium to long-term financial sustainability.

3.4 Justification of Overall Outcome Rating 54. Despite considerable implementation issues over the first few years and notwithstanding the resulting delays, the Project has reached most of its development objectives. It has also been instrumental in implementing GOM’s urban water sector policy by establishing an overall institutional, regulatory and operating framework for urban water supply. This has led to the efficient provision of water services under the delegated management framework not only in the five project cities, but also in additional cities under the responsibility of FIPAG. While the financial results are somewhat below those projected at appraisal, they need to be seen in the context of the longer-term framework which offers good prospects for reaching the desired efficiency at the wider sector level in the future. For these reasons the overall outcome of the Project is rated satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above)

(a) Poverty Impacts, Gender Aspects, and Social Development (Not Applicable)

(b) Institutional Change/Strengthening (covered in 2.1 and 2.5 above)

(c) Other Unintended Outcomes and Impacts (Not Applicable)

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 55. A case study detailing Mozambique’s experience in delegated management framework for the urban water sector has been prepared using Public Private Infrastructure Advisory Facility (PPIAF) grants in 2008, summarizing the evolution of the sector during the past ten years. A dissemination workshop was held in Maputo in June 2009, attended by all major stakeholders in the sector. The workshop report is attached at Annex 6 of this ICR. While there were some challenges raised and discussed with regards to FIPAG’s future expansion and financing plans, the results of the workshop were generally positive, with the municipalities and the beneficiaries expressing their satisfaction towards FIPAG and CRA’s contribution to improving the

17

water services in the urban centers of Mozambique during the past years.

4. Assessment of Risk to Development Outcome Rating: Moderate 56. The water regulatory framework and the regulatory agency CRA are fully functional (see Sections 2.5 and 3.2). The risk of unraveling of the relatively advanced regulatory framework in the sector therefore appears very low. CRA has for the most part been effective in the maintenance of a mandated tariff policy based on full cost recovery. Even when the tariff was not increased during the last two years of the Project, the Government took proper measures to ensure that FIPAG’s cost recovery policy was not compromised. For the purposes of development outcomes, full cost recovery has been interpreted pragmatically by CRA and the Borrower to mean full recovery primarily of O&M costs, and recovery of depreciation and capital cost to the extent feasible, given consumers' ability to pay, operating efficiency, and public good considerations. This was also accepted by the Bank in the 2004 DCA amendment, appears appropriate under the Mozambican circumstances, and reflects experiences in other poor countries. Therefore the development outcomes would not be considered at risk even if the sector continued to require capital cost support/subsidies for some time. 57. The devolution of responsibilities to local authorities has been achieved through appropriate arrangements with FIPAG and not through establishment of publicly owned water companies in the five cities. The municipalities participate in the annual general assembly of FIPAG and are represented on the FIPAG administration board. The municipalities assess FIPAG’s performance, participate in the definition of priority areas for the development of water services in the municipal areas, and advise the Government on the overall sector development. While there is consensus that water operations should be run on commercial principles of cost recovery and managed by private operators, the local governments have recognized the advantages of centralized asset management as provided by FIPAG. Under this arrangement, the municipalities whose water services are currently supplied by FIPAG are in general satisfied with the performance of FIPAG and feel sufficiently included in the decision processes relating to investments and operations at the local level. As FIPAG improves its performance,, other municipalities are expressing their interests in transferring their water supply operations to the responsibility of FIPAG. 58. Risks to development outcomes could emerge if unexpectedly the main shareholder and operator of the Maputo lease decided to pull out due to a lack of agreement on the operator tariff and unit rates for works, or if there are issues with the selected private operator for the four cities under the lease arrangements proposed in the bidding documents. These risks appear small as the Maputo lease contract has recently been successfully re-negotiated for another four years and the lease operator for the four cities has already been selected. Further, if these risks occurred, they would most likely be temporary since under an established asset management and proven regulatory framework, and with essential investments and operational improvements implemented, there is no reason why suitable contractual options could not be found to attract private partners.

18

59. FIPAG's financial sustainability appears likely and it should be able to start servicing its debt as of 2010 (see Sections 3.2 and 3.3).

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality of Entry. Rating: Satisfactory 60. The Bank responded effectively to GOM's request for support to the reform of the urban water sector. Following identification, substantial Bank input was provided over the course of two years for project preparation. This period covers the preparation of the National Water Development Project I and II as these were originally prepared as a single project. The Projects were subsequently divided and were presented to the Board in 1998 and 1999 respectively. The decision to split it off was justified as it allowed a sharper focus on the specific requirements of private sector involvement and ensured full attention of the Bank, GOM and participating institutions to the preparatory process. The Bank undertook considerable efforts during project preparation to help GOM choose an appropriate overall project design and minimize the potential risks to the operation. The Bank also assisted GOM in completing the necessary studies, estimating project costs, defining a new sectoral framework and establishing the needed institutional infrastructure. Adequate attention was given to technical, financial, economic, fiduciary, and safeguard issues. Project investment cost estimates, while thorough and comprehensive, did not go into detailed design issues as these were to be managed by an experienced private operator in cooperation with FIPAG. Most importantly, the Bank worked with the GOM throughout the selection process for the private operator which was concluded by the time of appraisal. It thus ascertained that the lease and management contracts were in place at the start of the Project and that implementation could begin without delays after Credit approval and effectiveness. The main implementation issues faced later on were not predictable at that time (see Sections 2.1 and 2.2 above).

(b) Quality of Supervision. Rating: Satisfactory 61. The Bank fielded 18 missions during the Project's nine years of implementation, with typically a two week mission taking place twice a year. The missions - consisting of four members on average- reviewed, assessed and monitored operational, management, technical, financial, fiduciary and safeguard issues, and compliance with legal covenants. The relationships with the Borrower agencies, specifically Ministério das Obras e Habitação (MOPH), FIPAG and CRA developed in a positive and constructive way, and problems were discussed and resolved in a cooperative manner. The Bank also maintained communication and cooperated with the private operator to the extent appropriate given its indirect relationship with the company. Supervision reporting was of high quality and detail, and flagged important issues early and persistently (e.g. initial contractual problems with SAUR, non-payment of the Maputo lease fees). The mid-term review undertook a thorough assessment of the Project at the time when the contracts with the PO had at long last been re-negotiated. Important decisions taken during the mid-term review and implemented thereafter included (i) revision of the detailed

19

performance indicators; (ii) flexible interpretation of cost recovery; (iii) modification of on-lending terms to FIPAG; and (iv) creation of a second special account for CRA -Component C. 62. There was a high degree of continuity on the Bank team - with only one task manager and one external engineer on all the supervision missions. Three consecutive financial analysts with thorough understanding of the sector were instrumental in helping FIPAG develop and use its financial planning and forecasting model. Procurement and financial management support were provided in a satisfactory manner through the regional hub and country office. Safeguard support was excellent in quality and produced a good result. A resident senior water specialist joined the team during 2007, contributing valuable experience from Latin America and East Asia and providing continuity for the repeater project WASIS and other sector-related matters. 63. Nevertheless, some aspects in the supervision process could in hindsight have been handled more effectively. The potential effect of the VAT introduction in April 2000 on required counterpart funds could have been recognized by the Bank earlier during project implementation (see Section 2.2). Tax payments were declared eligible for IDA disbursements with the modification of the country parameters for Mozambique in August 2004. However, it was not until March 2007 that the DCA was modified correspondingly which negatively affected procurement and disbursements. The Bank might also have taken a more proactive approach on the issue of non-payment of lease fees by pursuing more forcefully with the Borrower and the implementing agencies the establishment of an escrow account or other mechanism to secure these payments.

(c) Justification of Rating of Overall Bank Performance. Rating: Satisfactory 64. The Bank played an instrumental role in advising GOM on the reform, creation of the institutional framework, and involvement of private operators in the urban water sector. It contributed constructively to project preparation and assisted GOM in adequately anticipating the principal risks foreseeable at that time. Intense supervision efforts helped the Government address major implementation issues. The Bank’s support thus helped to keep the Project on track so that it was able to meet its development objectives.

5.2 Borrower Performance

(a) Government Performance Rating: Satisfactory 65. The Government worked closely with the Bank team on all important aspects of the Project. Preparation (commenced under NWDP I) addressed the organizational, management, operational and commercial aspects satisfactorily, and adequately addressed the technical assistance and training requirements of key sector institutions, specifically FIPAG and CRA. The lease and management contracts were prepared in great detail with specialized technical assistance, a private operator (consortium) was selected through a competitive bidding process, thorough financial and economic analyses were undertaken, environmental and social impact assessments were carried out

20

and fiduciary aspects were well defined. During implementation, the Government demonstrated remarkable leadership by steadfastly pursuing and supporting the sector reform initiated under the Project. It cooperated closely with the Bank, its cofinanciers, the Dutch Government and the AfDB, and the shareholders of the private operator to address the major implementation issues that emerged over the couple of years and led to re-negotiation of the lease and management contracts. The Government's constructive and forward-looking approach was instrumental in re-vitalizing the Project after the ownership change in AdeM, enabling the achievement of its development objectives despite delays. The Bank’s project review missions received serious attention and wrap-up meetings were always taken to the highest level, i.e. the respective Ministers who demonstrated keen interested in the outcomes. 66. However, there were also implementation issues on which the Government performed less satisfactorily. While the government provided counterpart funds at levels estimated at appraisal, it failed to anticipate - similarly to the Bank - the effect of the VAT introduction in 2000 on contractors’ costs and thus on the corresponding increase in required counterpart funds (see Section 2.2). The Government did eventually contribute additional counterpart funds to cover FIPAG’s increased payment requirements to contractors, but only at a late stage. It also took a long time to request an amendment to the DCA which finally made VAT payments eligible for disbursements under the Credit as of April 2007. A related issue was the slow contract approval by the National Contract Committee (CREE). These two issues caused implementation delays and triggered cost increases due to escalation clauses in the contracts. The Government could also have played a more pro-active role in assisting the PO with respect to tariff payment arrears and defaults by qualifying state-owned entities and could have given renewed consideration to the issue of payment delays of non-qualifying institutions. However, it is noted that these two issues were not a project specific issue as it cut across all sectors. The issues were also raised in review meetings of the Bank’s portfolio with GOM.

(b) Implementing Agency or Agencies Performance Rating: Satisfactory 67. FIPAG implemented components A and B - in cooperation with AdeM - satisfactorily and largely in line with initial expectations regarding the components' content. As outlined above, the substantial delays incurred over the first three years and the resulting cost overruns on some sub-components were not predictable and largely beyond the control of FIPAG. During periods of serious operational difficulties of AdeM under SAUR's leadership, while the contracts with AdeM were being re-negotiated, FIPAG played a very constructive role and succeeded in keeping the Project moving ahead against overwhelming odds. After the contracts were re-negotiated and AdeM's new management under leadership of AdeP was in place, FIPAG cooperated well and built a close working relationship with the PO that made up significantly for initial delays. An adequate organizational structure was put in place at FIPAG, local management and technical personnel was successfully trained, effective operational and financial systems were introduced, performance indicators agreed at appraisal and modified after the mid-term review were by and large well monitored, legal covenants were complied with and reporting was kept up to date. FIPAG also cooperated very well with the Bank ensuring excellent quality of briefing materials for review missions and adequate information flow in between.

21

68. FIPAG's operational and financial results depend to a significant extent on AdeM's performance. While there have clearly been considerable operational improvements under private management, AdeM's performance in some areas has at times been lagging behind expectations (see Sections 2.2 and 3.2). FIPAG addressed these issues in the four secondary cities from 2006 on by targeting the remaining PO resources under the management contracts strategically to the weaker areas and taking direct control over some established aspects of day-to-day operations. In the case of the Maputo lease, FIPAG's leverage was much smaller and continuous delays of lease fee payments put substantial strain on its cash flow.

69. CRA established itself as independent regulator and performed the balancing role between consumers' and operators' interests very skillfully (see Sections 2.5 and 3.2). Project administrative matters relating to Component C were handled effectively. An adequate organizational structure was put in place, management and technical personnel was successfully trained, operational and financial systems were set up, and legal covenants were complied with. Tariffs were adjusted periodically for the most part in line with inflation and taking into account operating cost development (evolution of tariff revisions is summarized in Annex 3), and CRA proved itself independent regulator in difficult circumstances. Even when the tariff increase could not take place during the last two years of the project, GOM introduced other measures to ensure the financial sustainability of the sector, as detailed in section 3.3 and Annex 3.

(c) Justification of Rating of Overall Borrower Performance Rating: Satisfactory 70. Both the government and the implementing agencies were fully committed to the Project and the reforms of the urban water sector. They maintained strong support for the development objectives throughout the Project and played an instrumental role in overcoming the serious implementation issues in the first three years. While some of these issues could have been handled more effectively, the Borrower's overall performance contributed to the Project reaching its objectives and the intended sector reforms to be implemented.

6. Lessons Learned 71. Strong Government commitment can ensure success even under adverse circumstances: Strong commitment on the part of GOM to sector reform and private participation ensured the satisfactory outcome of the Project. An institutional framework was put in place well before the Project’s start. This structure provided stability and prevented the Project from ending in disaster when it faced serious start-up problems. The commitment to the process also helped overcome the protracted period of contract re-negotiations, put the Project on a lasting basis, ensured post-completion continuity, and helped mobilize substantial additional funding to expand the sector framework to other cities. 72. Bidding processes for the selection of private operators need to take into consideration uncertainties about the condition of old networks: The bidding process

22

for the lease and management contracts resulted in retrospect in the need for GOM to make a difficult choice. The proposal of the consortium headed by SAUR offered a far lower operator tariff for the Maputo lease and lower unit rates for delegated works and fees for services than the competing proposal. Despite some doubts about the proposal’s sustainability, an independent engineer’s assessment provided no technical justification to discard the lower bid and select the alternative, i.e. the second-ranked proposal submitted by a consortium headed by another reputable and experienced international operator, Lyonnaise des Eaux. In reality, the operator tariff requested for the Maputo lease as well as the cost estimates (unit rates) for delegated works were unrealistically low and therefore unsustainable. One of the main problems was the uncertainty regarding rehabilitation costs and – for the Maputo lease – the revenue potential because of insufficient knowledge about the status of the network and its customer base. This problem was exacerbated by the damages that the flooding caused at the very outset of the Project particularly in southern Mozambique. In retrospect it might have been more appropriate to include in the bidding process an initial “transitional” operating period for network reconnaissance, followed by a negotiation process based on more précis knowledge the networks and customers. This could have meant a two-step bidding process. The first step would only have covered the initial transitional period under a technical/management assistance arrangement, and the second step, open to all interested and previously pre-qualified bidders, would have been the main bid for the lease/management contracts. 73. Private operator performance depends on the adjustment to local conditions: Before the Project started, the principal participants believed that it would be sufficient to involve an experienced international operator with good reputation that would offer its operational experience and methods as a package in order to achieve fast operational improvements. However, the practical results have shown that such an operator may not be easily able to adapt its methods to the specific local requirements and may thus not achieve a satisfactory knowledge transfer. It is therefore very difficult for the contracting institutions to predict how suitable an operator’s approach will be within the local reality. Under the given circumstances, the departure of the lead partner SAUR and necessary re-negotiation of the contracts were in part consequence of this adaptation issue, which caused substantial time loss and implementation delays. As became evident in the Project, there are a number of practical aspects to the adjustment difficulties outlined above. Despite the strong bidding team which had a firm grasp of the Project, a well structured and organized take-over team was not in place at the commencement of private operations. Missing team coherence thus impeded an efficient transition and leadership from the international partners’ headquarters was not apparent. This was aggravated by the fact that a number of team members had been hired from outside and were not even familiar with SAUR’s and AdeP’s corporate cultures and operations. Moreover, each of the two main partners delegated its own team to AdeM and these two teams were not efficiently coordinated. Private operations have also suffered from a rapid turnover of managers, with four managers so far for the Maputo lease and three for the secondary cities (since 2004). For these reasons and against initial expectations, the experience accumulated by SAUR in the Mozambican setting through a previous 5-year operating contract in Matola was not transferred to contracts under this Project. 74. In a comparable situation it would be important to ensure that a strong take-over team be assembled, that the contracting institutions have a chance to assess the team

23

members’ qualifications – possibly through interviews and trial periods, that the main international partners demonstrate how the team members are linked to their headquarters and have access to corporate support and institutional memory, that this team coordinates closely with the sector institutions from the beginning and that a policy of promoting Mozambican staffing be designed and put in place early during project implementation. It might even be justified to require as part of the bidding and selection process that the take-over team be put through a special training period at the main international partner’s headquarters to familiarize its members fully with the Project, provide them with the corporate views on the operations, i.e. the link to the bidding team, and create the necessary team spirit and cohesion before they are sent to the field. 75. Promotion/development of local water operators: At the outset of the Project, the use of the international private sector was expected to be an expeditious way forward to provide improved service levels quickly in post conflict Mozambique that had a serious capacity shortage. There were few engineers and almost no capacity in financial management and utility management when the Project was being developed. The idea was to "buy-in" expertise and overtime build up local management capacity within the utility as local manpower would reduce costs and improve profits for the private operator. The expected results have materialized with significant delays. Over the past ten years the number of expatriates of the PO has been reduced from over ten at the start of the project, to only three in September 2009. It is expected that the lease contracts in the secondary towns will provide an opportunity for locally based entrepreneurs to bid in cities that are smaller and have completely upgraded infrastructure that should reduce operational risks.

76. Cost recovery and sustainability need to be flexibly defined: The original goal at the time of project preparation/appraisal was to achieve a cost basis and efficiency level that would allow full cost recovery through user tariffs. In reality this goal turned out to be over-ambitious for the following reasons (i) despite the proven willingness of customers to pay a higher tariff per unit when service improves, beneficiary surveys and continuous contacts through customer relations demonstrated that tariffs much above the current levels (varying around US$0.50 per m3) would not be accepted. Even if there were no open resistance, as has happened in other places, full cost recovery tariffs would likely to lead to significant reductions of volumes consumed per connection and/or per user. This would prevent FIPAG/PO to attain economies of scale and reduce costs with the existing networks.

77. The optimal tariff level, determined by the relevant elasticity, is therefore likely to remain in the near term beneath full cost recovery, and this should be considered appropriate for the following reasons: (i) Since the Project supported a substantial sector reform program, tariffs should not be expected to reflect the total costs of the program. Therefore, the practice applied under the Project appears justified to exclude some of the soft costs (e.g. technical assistance, training) from the cost recovery goal. (ii) Specifically in poor countries such as Mozambique, the public-good nature and secondary benefits of water supply need to be taken into account in tariff setting. (iii) It takes years to fully rehabilitate and expand war-ravaged networks, and to build up local, and even foreign operating capacity to best-practice standards. In the medium term, there is a strong possibility of substantial revenue increases and unit cost decreases through new connections to the large part of the population that is currently not served through the

24

networks and switch from public standpipes to yard/household connections. Due to volume effects, this would reduce unit costs so that future tariff increases may not need to be significant. The repeater project WASIS with its OBA component and the Maputo Water Supply Project are expected to have that effect.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies No issues were raised by the borrower/implementing agencies. (b) Cofinanciers No issues were raised by the cofinanciers. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) No issues were raised by the other partners and stakeholders.

25

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate

(USD million)

Appraisal Estimate

(USD million)

Actual/Latest Estimate (USD

million)

Percentage of Appraisal (including

contingencies Private Sector Management of Water Supply Systems for Five Cities

36.79 42.72 38.54 90.2

Capital Works and Services

54.07 64.38 106.92

197.7

Urban Water Supply Policy and Strategy

4.60 5.09 4.54 89.2

Total Baseline Cost 95.46 NA 150.00 NA Physical Contingencies 7.39 - - - Price Contingencies 9.35 - - - Interest during Construction

2.65 2.65 - -

Total Project Cost 114.84 114.84 150.00 130.00

(b) Financing

Source of Funds Type of

Cofinancing

Appraisal Estimate

(USD million)

Actual/Latest Estimate (USD

million)

Percentage of Appraisal (including

contingencies International Development Association (IDA)

75.00 90.00 120.00

Government of the Netherlands

Joint 10.00 10.00 100.00

African Development Bank (AfDB)

Parallel 19.60 35.00 179.00

Borrower Joint 10.24 15.00 146.00 TOTAL COSTs 114.84 150.00 130.00

26

Annex 2. Outputs by Component

Components Output Indicators Results as of March 31 2009

1. Regulatory Council (CRA) and asset holding vehicle fund (FIPAG), responsible for assets and investments) established.

- FIPAG Chairman and CEO in place by project effectiveness. TA contract operational by January 2000.

- Completed in November 1999

- CRA Chairman and Board appointed by March 2000. Staff in place and fully operational by December 2000.

- Completed in November 1999

2. Contracts for lease and management of the 5 water systems awarded to competent Private Sector (PS) operator and the framework for contract adjustment and re-negotiations is set up.

- Contract Signed. - Original contract signed in September 1999

- Contract adjustments and re-negotiations are successfully completed without resorting to arbitration or contract termination.

- Interim revision completed in 2001 with the new operator. - Renegotiation completed in 2004 - Periodic Review with PO completed in 2008

3. Financial Performance improves for each city water supply system; FIPAG achieves full cost recovery by 2003.

The financial self sufficiency of FIPAG improves. Recovery of O&M and depreciation for FIPAG for 2004; full cost recovery by 2005.

FIPAG is expected to achieve full cost recovery in FY2009

4. Service Levels are improved

Key service performance levels: - Reliability of service improves: % of customers receiving <24 hrs supply/day Cities 09/99 09/02 09/04 Maputo 80% 60% 20% Beira 95% 55% 5% Quelim 100% 60% 5% Nampula 100% 50% 5% Pemba 100% 70% 5%

March 2009 Performance:- Reliability of service as the average hour of supply per day Maputo 14 hours Beira 24 hours Quelimane 24 hours Nampula 22 hours Pemba 18 hours

- % of microbiological water quality samples meeting target values: 12/02, 12/04 All cities 50% 95%

March 31 2009 Performance:100%

- In the target cities, population with improved access to safe reliable water supplies and would increase from the current level of 0.8 million to 1.1 m by 2004.

March 31 2009 Performance:Population with improved access to safe reliable water supply total 1,275,713 people, an increase from 961,935 people in 2005

5. Investment takes place in rehabilitation and new water

- Network renewal and extension take place in line

Completed in 2009

27

supply infrastructure, at levels sufficient to improve service levels.

with programmed targets.

6. Environmental impacts of the Project resulting from intensification of water usage, construction and operations, are managed in line with the project Environmental Management Plan and national environmental guidelines.

- Environmental Management Plan (EMP) implemented.

Completed

7. Key national urban water supply policies, strategies and plans

- Policies and strategies incorporate lessons learned in the lease and management contracts and are supported by stakeholders.

Completed

- Strategies for the four cities after the mgt contract expires are developed by Dec 2003. Strategies for the remaining 8 medium size cities are developed by Dec. 2004.

The lease operator is expected to be hired for the four Northern cities by September 2009. Strategy for the four Southern cities was developed by 2004. Strategy for the four Western cities was developed by 2006. Strategy for the four new Northern cities was developed in 2009.

28

Annex 3. Economic and Financial Analysis Economic Analysis: 1. The implementation of NWDP II has led to increased capacity of water supply in the five target cities, Maputo, Beira, Nampula, Quelimane, and Pemba. This has paved the path for the follow on project, WASIS (with a total project cost of US$30 million), which created the networks in the four cities of Beira, Pemba, Nampula, and Quelimane, to deliver the new production capacity to consumers. Therefore, economic impact of NWDP II is measured in the context of new households that will benefit from the formal network of water supply, following the investments under both NWDP II and WASIS. About 10,000 new connections are being made by the WASIS investments in the four project towns in the form of yard taps, which will add approximately 53,000 new consumers to the formal network, assuming an average household size of 5.3. 2. A cost-benefit analysis using a “with and without project” methodology has been used to calculate the EIRR and NPV of the two projects. The economic benefits are derived from the new connections in the areas where households previously dependent on neighbor’s yard tap, standpost, or wells/boreholes are shifting to a formal yard tap connection. The economic analysis estimates the benefits accruing to the project beneficiaries, quantified in the form of incremental expenditure on meeting the household water demand and time savings as a result of lower collection time. The time savings constitute the largest component of the economic gains even when the collection time is valued at a highly discounted rate. In addition to the direct benefits, the ability to access water within the yard provides significant indirect productive and educational opportunities primarily to women and children. Table 1: With and Without Project Scenario Beira Nampula Pemba Quelimane Planned New Connections 3000 2500 2250 2250 With project Average Consumption (Individual Connections/Yard Taps) (liters/capita/day)

63 56 60 57

Average Tariffs of Individual Connections/Yard Taps (USD/m3)

0.51 0.45 0.47 0.47

Water collection time (yard tap) 10 10 10 10 Without project Households dependent on Public Standposts (%) 40 30 45 50 Households dependent on Neighbor’s yardtap (%) 40 35 35 30 Households dependent on Wells/Handpumps (%) 20 35 20 20 Average Consumption of Public Standposts (liters/capita/day)

27 24 24 24

Average Tariffs of Public Standposts (USD/m3) 0.28 0.29 0.28 0.28 Average Consumption of Neighbor’s yardtap (liters/capita/day)

22 25 25 27

Average payment for Neighbor’s yardtap (USD/m3)

0.95 1.41 0.53 3.54

Average Consumption of Wells/Handpumps (liters/capita/day)

21 29 21 32

Average payment for Wells/Handpumps 0 0 0 0

29

(USD/m3) Water collection time (neighbor’s tap) 9 21 26 44 Water collection time (public standpost) 35 28 17 79 Water collection time (wells/boreholes) 31 30 48 78 Source: Beneficiary Assessment for NWDP II, 2003; WB-FIPAG Financial Model 3. The incremental economic benefits are projected over a 15 year period to arrive at the EIRR and NPV based on a 10% (the hurdle rate IDA uses in WSS projects) discount rate. The economic analysis suggests that the project has a positive economic NPV of US$51 million and an EIRR of 60%. This implies that the project is beneficial to the citizens of the four cities of Beira, Nampula, Pemba, and Quelimane in alleviating their water supply concerns.

Financial Analysis: 4. At the time of project appraisal, FIPAG’s financial projections were made to assess its financial sustainability. According to the analysis, FIPAG would be able to generate a positive net income after the third year of operations, with an initial cash injection of about US$2.5 million during the first years to cover the working capital requirements for new works and US$2 million to fund liabilities of the former utilities. 5. After ten years of operation, FIPAG has increased its customer base through a large number of new connections, improved its collection efficiency, and controlled its expenses to approach a financial breakeven point. FIPAG is likely to achieve full cost recovery by end of December 2009. The lack of tariff increase during the past two years has delayed FIPAG’s cost recovery (evolution of the tariffs up to 2007 is summarized in the table below). If the tariff had been raised according to inflation during the past two years, FIPAG would have achieved full cost recovery by year 2008. It should be noted that the two year postponement of the debt repayment to GOM is also helping FIPAG’s financial situation, as GOM had accepted the request from FIPAG to match the benefits derived from the capital investments made under the project with the timing of debt repayment. Table on Evolution of Average Tariffs (in Mt/M3):

Actual Approved

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Maputo 5.06 6.50 8.50 9.80 11.90 12.50 13.60 15.11 15.11 15.11 18.10

Beira 4.64 5.90 7.60 8.70 10.70 11.20 12.60 13.66 13.66 13.66 16.40

Quelimane 4.64 5.90 7.60 8.70 9.90 10.40 12.00 13.50 13.50 13.50 16.20

Nampula 3.50 4.20 5.10 5.90 9.70 10.20 11.70 13.35 13.35 13.35 16.00

Pemba 4.64 5.60 7.00 8.10 9.80 10.30 11.80 12.97 12.97 12.97 15.60

Historical

6. In terms of the capacity and capability of FIPAG to operate according to commercial principles, significant progress has been made over the past years as the strategy and business development unit has been established in FIPAG’s HQ, with qualified personnel operating FIPAG’s financial model. FIPAG fully owns its financial model and uses it effectively as a strategic business tool to make informed decisions about its plans for future investments and expansion. FIPAG, together with the regulator CRA, as credible institutions, have to date attracted over half a billion dollars in urban

30

water investments from donors and financiers including the EU, EIB, AfDB, Netherlands, and France to expand their operations to 20 municipalities by year 2009.

7. An updated financial projection analysis has been carried out at project closure According to the base case scenario FIPAG is expected to generate sufficient cash to cover its obligations and the related debt service covenant during the next ten years. The cumulative effect on FIPAG’s cash situation is illustrated in the graph below. The key assumptions made under the base case include;

Lease Contract in the Northern Cities: The lease contract under preparation in

Beira, Nampula, Quelimane, and Pemba is expected to start in year 2010. The fee has been lowered to provide financial comfort to the bidders during the first two years.

AfDB funded Cities: Nacala, Lichinga, Cuamba, and Angoche whose investments are funded under the AfDB loan are included. Operating subsidies in the amount of $2 million has been committed by the Government of Mozambique to cover the operating deficit for these cities in the initial years until they achieve an operational break-even point starting in 2015 according to the projections. The loan from the AfDB on-lent to FIPAG in the amount of US$22 million is incorporated in the debt repayment schedule.

Maputo works: The expected delays in the rehabilitation and expansion work and the related revenues in Maputo by one year due to the higher than estimated bids by the contractors in incorporated.

Tariff: According to the letter from GOM dated April 27, 2009 the adjustment will take into account inflation, affordability, and remaining gap to sustain the sector investments, and that in principle GOM agreed to approve the 20% tariff increase in November 2009, effective in February 2010. The model assumes this commitment by GOM and for the tariff rate to grow with inflation thereafter.

Debt Repayment: GOM has approved the postponement of FIPAG’s repayment of IDA and AfDB loans on-lent by GOM by two years, to start in FY10. FIPAG is requesting the postponement of the EIB loan repayment for two years as well in order to match the revenues from the investments with the debt repayment. Since there is sufficient indication from GOM to support this request, this has been incorporated in the model.

Number of new connections: The number of new connections will increase at

the rate indicated in the GPOBA plan for the first three years, and during the remaining period the connection rate will be in accordance with the actual capacity of the towns. For Maputo, the number of new connections is in accordance with the targets specified in the MOU between AdeM and FIPAG.

Other Indicators: Unaccounted for water, collection ratio, and real metering rate for Maputo in the model are also in accordance with the targets specified in the

31

MOU between AdeM and FIPAG. For other cities, these ratios are based on historical performance.

32

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty Lending Jane Walker Team Leader AFTU1 John Shepherd Sr. Water Resource Mgmt Spec. AFTU1 Subhash Dhingra Sr. Procurement Spec. AFTU1 Alain Locussol Sr. Water & Sanitation AFTU1 James Pannett Program Assistant AFTU1 Nga Nguyen Sr. Staff Assistant AFTU1 Agnieszka Grudzinska Private Sector Develop. Spec. TWUWS Catherine Seibert Financial Analyst SECBO Mehrnaz Teymourian Financial Analyst EASPS Mamta Murthi Economist PA22P Marie-Laure Lajaunie Economist MNSRE Shobha Shetty Economist MNSRE Kishor Uprety Legal Counsel LEGAF James Coates Resident Representative AFMMZ Isabel Nhassengo Procurement Assistant AFMMZ

Sarah Keener Consultant AFTU1Beneficiary Assessment Spec.

Joao Wemans Consultant AFTU1Project Planning Spec.

Supervision/ICR Jane Walker Team Leader AFTUW Mohamed Arbi Ben-Achour Lead Social Scientist AFTCS Slaheddine Ben-Halima Sr Procurement Spec. AFTPC Antonio L. Chamuco Procurement Spec. AFTPC Fook Chuan Eng Sr Financial Analyst SASDU Theresa Marissa J. Gamulo Procurement Analyst AFTUW Midori Makino Sr Financial Analyst AFTUW Luiz Claudio Martins Tavares Lead Water & Sanitation Spec. AFTUW Sudeshna Banerjee Economist SASDE Joao Tinga Financial Management Analyst AFTFM

David Weston Consultant AFTUW Water & Sanitation Engineer

33

(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY98 39.14 FY99 118.11 FY00 1 3.36

Total: 1 160.61 Supervision/ICR

FY98 0.00 FY99 0.72 FY00 21 94.39 FY01 18 85.29 FY02 22 121.12 FY03 23 129.23 FY04 26 153.93 FY05 23 175.85 FY06 25 153.23 FY07 33 168.23 FY08 10 36.49

Total: 201 1118.48

34

Annex 5. Beneficiary Assessment Results 1. Three beneficiary assessments have been carried out by CRA in an effort to monitor how water services and prices evolved not only for the center urban connected population, but also for the poorer unconnected peri-urban residents. The outcomes of the most recent assessment, which focused on peri-urban areas in Maputo in 2006, and compared the situation to 2001, are summarized below. Key Conclusions - 2006 Beneficiary Assessment 2. Coverage: In 2001, AdeM supplied approximately 86% of peri-urban residents with water either directly (through their own connection) or indirectly (via resale from yard taps or standpipes). In 2006 this number dropped to 63% partially because of high urban population growth, a decline in the maintenance and use of public standpipes, and flourishing small scale independent providers (SSIPs) who provide a good quality service, albeit at a substantially higher price than AdeM. During this period the proportion of the peri-urban population reliant on SSIPs doubled as those reliant on standpipes and AdeM connections decreased proportionally. In peri-urban areas in 2006, there were more households obtaining water from those with house connections (26%) than there were people with house connections (23%). 3. The continued high reliance on re-sold AdeM water means that [a] to some degree existing consumers in these areas are protected against higher tariffs as they resell, normally based on estimated not actual consumption billed; [b] the benefits of improvements in water services affect more than the number formally connected; and [c] the poorer unconnected population is less protected from price increases than those with connections, who tend to have better welfare indicators. 4. Quality: In peri-urban areas, consumer response on satisfaction with the quality of services from AdeM sources showed a majority believed the level had improved for indicators related to water (hours, pressure, quality). Not surprisingly, consumers were less pleased with the price increases, and were relatively split on aspects related to management such as the waiting time to pay a bill.

35

Table 1: Consumer Satisfaction with Service Levels - Connected Consumers Total Respondents all Standpipes (n=166) Better Same Worse No OpinionQuality of Water 54 31 11 4 Pressure 51 25 22 2 Hours of Supply 35 33 28 4 Price 16 20 50 2 Time to Wait to Pay Bill 31 35 17 12 Waiting for Service 17 14 35 27 Rupture in Supply 40 26 9 2 Those with AdeM Connection (N=137) Quality 56 29 11 4 Pressure 55 22 20 2 Hours of Supply 40 31 26 3 Price 17 17 52 12 Time to Wait to Pay Bill 37 32 17 9 Waiting for Service 20 11 35 27 Rupture in Supply 46 26 18 7

Table 2: Consumer Satisfaction with Service Levels from Standposts Total Respondents all Standpipes (n=161) Better Same Worse No OpinionDistance 16 45 33 5 Quality 49 35 6 6 Price 21 22 40 12 Waiting Time to Collect 25 14 47 11 Frequency of Outages 40 22 15 18 Interruption in Service Due to No Electricity 37 15 13 21 Hours of Supply 35 33 16 13 Users of AdeM Standpipe Connections (n=86) Distance 19 59 17 5 Quality 58 37 2 2 Price 19 26 47 4 Waiting Time to Collect 31 19 45 5 Frequency of Outages 51 30 10 7 Interruption in Service Due to No Electricity 45 20 10 14 Hours of Supply 38 38 17 6

5. Poverty Aspects: As one would expect, poor households are more likely to be reliant on public standposts whereas only 5% of the lowest quintile and less than 15% of the next to lowest quintile have their own AdeM connection. However, the most common source of water for poorer households is a neighbour’s tap.

36

Figure 1: Source of Water by Quintile

6. Prices: Higher water prices affect all consumers, not just those with AdeM connections. Overall, consumers report that water prices between 2001 and 2006 have increased 340% for AdeM connections, and 233% for those purchasing from neighbors with AdeM connections. Households with connections have been more insulated against the price increase as they resell and many pay only according to estimated (not actual) consumption. Again, high demand (high population growth) is a key driver of these prices as is evident in the higher cost of water from SSIPs. 7. Water consumption by households with their own connection is de facto decreasing, as well as that of households without a connection. The decrease of consumption vis-à-vis the expansion of the sources of water, could be due to limited system design in relation to the number of legal and illegal connections, as well as to constraints brought about by the price of water. The use of alternative sources of water is increasing, indicating limited capacity to pay, and the use of sources of free water has remained the same. Given that in general free water sources are not in any way protected against contamination, it is of interest not to force additional water use reductions by the poorer strata (quintiles 1 and 2) through price increases. 8. Public Standpipes: The decline in management aspects of public standpipes is of concern as although imperfect, they nonetheless represent the second most common source of water for peri-urban consumers in lower quintiles. Contributing factors to the decline in public standposts includes: lack of consumer knowledge on management structures duties or accountabilities which in turn contributes to poor transparency in management, lack of pressure for accountability from residents, and illegal connections that undermines standpipe performance.

0

5

10

15

20

25

30

35

40

Quintil 1- poorest Quintil 2 Quintil 3 Quintil 4 Quintil 5- least poor

AdeM connections SSIP connections Neighbours tap Public SP Private SP

% consumers using source

37

9. Willingness and Ability to Pay: In the peripheral neighbourhoods of the cities of Maputo and Matola the demand for better water supply conditions, particularly for domestic connections, is increasing among members of the social strata with a medium, medium-high and high economic level - quintiles 3, 4 and 5. 10. The limits of capacity to pay for domestic connections are mainly evident among consumers without a connection of their own, but a small proportion has capacity to pay for the current average level of consumption. In relation to standpipes, the poor performance of AdeM standpipes and of the management structures influenced people’s willingness to choose no more than the minimum price. PROFILE OF CHANGES SINCE 2001

11. The following table summarizes the observations and the differences observed between the 2001 BA and the 2006 BA. Beneficiary Assessment

2001

2006

WHICH WATER SOURCE?

32 % has a domestic connection or yard tap.

25 % uses a neighbour’s tap.

9% is supplied by small private operators through connections or standpipes1.

The rest uses small system standpipes (17%), network standpipes (12%), private wells/boreholes (2.6%), own wells (2%) or public wells (0.3%).

22.8 % has a domestic connection or yard tap.

26 % uses a neighbour’s tap.

A total of 22.8% is supplied by small private operators, of which 11.5% via connections and 11.3% by standpipes2.

The rest uses small system standpipes (3.7%), network standpipes (10.7%), private wells/boreholes (6.8%), own wells/boreholes (5.5%) or public wells/boreholes (1.8%).

WHAT DOES THE POPULATION PAY?

Average price is 8.16 MT/m3 (US$ 0.38) for the whole sample. 51% pay more than the average price. Households (HH) with AdeM domestic connections pay on average 3.3 MT/m3 (US$ 0.15) and with small private operator connections pay 8.7 MT/m3 (US$0.40).

Average price is 19.6 MT/m3 (US$ 0.75) for the whole sample3. 48.6% pay more than the average price. HH with AdeM domestic connections pay on average 15.3 MT/m3 (US$0.59) and with small private operator connections pay 22.8 MT/m3 (US$0.88).4

1 In 2001 this observation was not disaggregated.

2 The water supply sources were aggregated so that the results could be compared, thus applying to small private operators and neighbour’s well/borehole. In 2001, small private operators were categorized as “Private borehole with pump” aggregating HHs that had connections to private boreholes or that were supplied by private standpipes.

3 All cases are included in the calculation except HH with connections who do not pay for water according to consumption, where is not possible to calculate the price per cubic metre.

4 For the two types of connections, the calculation of the price per cubic metre is based on the subgroup of those who pay according to consumption (see Table 4.5).

38

Beneficiary Assessment

2001

2006

For the users of network standpipes the water price is 7.20 MT/m3 (US$ 0.33) and for the users of small systems the price is 12.1 MT/m3 (US$ 0.56) For the users of neighbours’ taps the average price of water is 9.22 MT/m3 (US$0.43) Private boreholes with pumps sell water at an average price of 16.54 MT/m3 (US$ 0.77) In the peri-urban zones water is more expensive than in the central zone (the cement zone) of the City.

For the users of network standpipes the water price is 14.8 MT/m3 (US$ 0.57) and for the users of small systems the price is 23.45 MT/m3 (US$ 0.90) For the users of neighbours’ taps the average price of water is about 20.6 MT/m3 or (US$ 0.79/m3) Small private operator standpipes sell water at a price of 25.2 MT/m3 (US$ 0.97) In the peri-urban zones water is more expensive than in the central zone (the cement zone) of the City.

HOW MUCH WATER DO THEY USE?

Families with domestic connections or yard taps use an average of 14.73 m3/ month. Families without domestic connections use an average of 4.83 m3/ month.

Families with domestic connections or yard taps use an average of 11.9 m3/ month. Families without domestic connections use an average of 3.79 m3/ month.

WILLINGNESS TO PAY?

The majority is willing to pay for domestic connections or yard taps to reduce the price they pay at present and to obtain a better level of service.

The majority is willing to pay for domestic connections or yard taps to reduce the price they pay at present and to obtain a better level of service.

Peri-urban Peri-urban

Volume of AdeM sales in 2000 (US$)

% use of water sources, BA2, 2001

Amount paid for water by consumers in 2001 (US $)

Volume of AdeM sales* in 2005 (US$)

% use of water sources, BA3, 2006

Amount paid for water by consumers in 2006 (US $)

Domestic connection/yard tap 2,823,106 32 2,823,106 3,989,275 22.8 4,762,529 Neighbour’s tap 25 1,607,031 25.8 2,552,636 Public network standpipe 25,516 12 1,591,360 67,453 10.7

559,359 Public PSAA standpipe 17 1,566,533 3.7 Small private operator pump, standpipe, domestic connection

9 1,306,794 22.8

6,417,581 Private well 0 11,101 6.8 Public well 3 61,126 - - Own Well 2 - 5.5 - Public manual pump - - 1.8 522 TOTAL 2,848,622 100 8,967,052 4,056,728 100 14,292,628

Note * = Sales were 80% of the volume billed in MT, being the proportion collected in 2005. RECOMMENDATIONS 12. Specific recommendations resulting from this consumer assessment include the following more important ones:

39

One of the pillars of the strategy for improving water facility management should be a focus on human resources, their professionalization and satisfaction.

A strategic approach should be designed that guarantees poor people their right to low-priced water supplies. The solution may exclude continuing community management of the standpipes. Instead of this, existing standpipe operators might be replaced by micro-entrepreneurs wishing to take up standpipe management, and who have a level of education that can guarantee efficient management. Contracting out management through competitive mechanisms could be a way of locating these micro-entrepreneurs who, after having been selected, would be submitted to training so as to ensure their capacity, both in terms of management and in technical terms.

Network standpipes might function as micro-enterprises in which young entrepreneurs can deal directly with the water company, and within the framework promoted by CRA can coordinate with water committees or residents’ committees with a regulatory function, without interference in standpipe management and finances.

The applicability of payment by month for standpipe water should be re-examined, since it can protect vulnerable families and is preferred by the majority, leaving the payment per bucket for cases in which families prefer it that way.

Without an improvement in the management systems and related service quality, it will be difficult for AdeM to increase income. Installation of prepaid standpipes in various neighbourhoods does not respond to operators or users’ interests, and may promote an increase in the number of consumers using small private operators.

40

Annex 6. Stakeholder Workshop Report and Results

Delegated Management of Urban Water Supply Services in Mozambique, 1999 -2007

Summary of the Workshop held on 29 June 2009 in Maputo

1. The workshop was organized by FIPAG and was held at the Centro de Conferências Joaquim Chissano. It was attended by about 100 persons, including His Excellency Eng. Felício Zacarias, Minister of Public Works and Housing. The workshop agenda and the list of participants are attached. 2. Miguel Alves, General Manager of FIPAG opened the workshop, noting that it had been ten years since the delegated management framework (DMF) had been established and that the objective of the workshop was to recount the history and report results to water sector stakeholders.

Session 1 - Presentations

3. Manuel Alvarinho, President of CRA, traced the 20-year history of the water supply sector from 1977 – 1997, describing the chaotic situation that existed at the time of independence, the various efforts the government had made to govern the sector, and eventually the policy reforms and the adoption of the DMF in the late 1990s. The objective of these reforms was to enable services to gradually become financially sustainable through a realistic cost-recovery policy. 4. José Óscar Monteiro, the team leader of the lawyers in charge of preparing the various legal instruments that ushered in the DMF, recalled how, before the DMF, the regulatory function had been mixed with policy supervision. He also noted that separation and decentralization of functions and powers was not an easy legal exercise, and that the current generation of stakeholders should recognize the innovative approach that was adopted by the stakeholders who introduced the reforms.

Session 1 – Discussion

5. During the discussion, in response to a question about the role of small-scale providers in peri-urban areas and how they will fit into the DMF, it was noted that there are plans to engage them through partnership agreements with FIPAG and delegated managers. 6. Another participant asked why FIPAG had not been made responsible for all the urban systems from the beginning. It was pointed out that the strategy was to introduce the DMF gradually, so as to develop the capacity to manage it. 7. A participant noted that Mozambique’s water sector stakeholders have proved to be very advanced when compared to other countries with similar conditions.

41

Session 2 - Presentations

8. Thelma Triche, author of the case study, Delegated Management of Urban Water Supply Services in Mozambique, 1999 - 2007, presented a summary of the study. After tracing the history and the initial difficulties with the original contracts with Águas de Moçambique, she outlined the terms of the revised lease contract with AdeM for services in Maputo and the revised management contract with AdeM for services in Beira, Nampula, Quelimane and Pemba. She also described the technical assistance arrangements FIPAG had put in place for four additional cities, Chokwe, Xai-Xai, Inhambane and Maxixe in 2004, with the intention of preparing them for delegated management contracts with private operators. She reported that, while the performance of AdeM had not been consistently good and the implementation of capital works for which both FIPAG and AdeM were responsible had been delayed, services had improved by 2007 and a solid foundation had been established for the future sustainability of services. Among the factors that contributed to the success were the government’s firm commitment to the reform, the stability and credibility of the new sector institutions, the persistence of the private operator and effective consultation with the stakeholders. 9. Nelson Beete, President of FIPAG, presented performance data for the services through 2008, showing that in most cases, performance had continued to improve. He then went through the list of systems that have been entrusted to FIPAG to date. In addition to the original five service areas, the list now includes 15 others (Chokwe, Xai-Xai, Inhambane, Maxixe, Manica, Chimoio, Gondola Tete, Moatize, Lichinga, Cuamba, Angoche and Nacala). FIPAG is classifying the systems into two groups, those that are suitable for delegated management and those that require technical assistance to establish the conditions that would make them attractive for delegated management. FIPAG is now developing a strategy for supporting the development of the latter group.

Session 2 – Discussion

10. A participant noted that FIPAG and CRA’s approach has always been to promote a sound and open discussion of the issues relevant for the water sector. In that spirit, while acknowledging that a number of challenges have been confronted and much has been accomplished, the sector faces serious challenges that need to be acknowledged, among these: FIPAG will need to mobilize significant investment finance, much of it from commercial banks – will it be able to do so?. The addition of smaller and less viable service areas to FIPAG’s mandate could undermine its financial viability as smaller systems have higher average costs. Likewise, the strategy of expanding service by connecting lower-income households will also reduce financial viability. Strategies for dealing with these challenges need to be developed. 11. A participant emphasized that there are effective strategies for serving the poor – for example through cross-subsidies, the use of pre-paid meters. He also mentioned that one of the most serious challenges remains the high level of unaccounted water. 12. A participant asked whether concession contracts would be introduced in the near future. The response was – it is not likely as these involve a higher financial risk for the operator/concessionaire and the international water companies do not seem to be willing

42

to take those risks in African countries. 13. A question was raised about the effectiveness of management contracts. In response, it was suggested out that one of the main problems is to clearly define the long-term objectives: a management contractor who has no stake in the future may not have the incentives to improve services, while one who can count on a longer-term involvement, either through a renewable management contract or conversion to a lease contract, would be more motivated.

Closure by His Excellency the Minister of Public Works and Housing

14. The closing session of the workshop was conducted by His Excellency Eng. Felício Zacarias, Minister of Public Works and Housing who congratulated the efforts of the team that made the Case Study possible as well as those who directly and/or indirectly assisted the team to which he started by stating the importance of the case study for all the stakeholders of the Mozambican Water Sector. 15. In his own words, the Minister said that the content of the case study represents the awakening of people´s conscience about what we have done that can enable us to learn from our past mistakes and allow us to reap benefits from what has gone well and replicate the experience whenever necessary with the final objective providing a better service to our population. 16. At another point during his speech, the Minister said that despite the successes that have been attained, the lack of water in our country is still a reality, whether in urban or in rural areas. This situation was inherited from the period prior to the independence in 1975. Several reforms were implemented and each is adjusted to its own period and lessons. 17. He acknowledged that the current Delegated Management Framework is a tested model. Even under difficult circumstances, it has managed to provide consistency and continuity to the reform process, promote a partnership with the Municipalities, inspiring the confidence of investors and become subject to national and internationally recognition. And, before declaring the workshop officially closed, he thanked all the professionals of the water sector, the academic community, the business people, the financing partners, the government itself, local authorities and water consumers (of which we all are) so that the lessons of this work serve as a reference in our future decisions.

43

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 1. This section is the Borrower´s contribution to the ICR and it focuses on the Project activities financed under the Second National Water Development Project (NWDP II) through IDA Credit, grant from the Netherlands and loan from the African Development Bank. 2. The section summarizes the review of the project performance covering the various issues which directly or indirectly have influenced, positively or negatively, the implementation and the level of achievement of the project objectives. 3. This Annex of the ICR is based on the Project Appraisal Document, project files, mid-term review, Aide Memoires and consultations with various stakeholders involved in the design and implementation of the Project.

1. ASSESSMENT OF DEVELOPMENT OBJECTIVES

1.1. Original Objectives

4. The overall purpose of the Project was to improve the quality, reliability and sustainability of water services in the five cities of Maputo, Beira, Quelimane, Nampula and Pemba based on the private sector participation which should provide these services. 5. The specific project objectives as stated in the Project Agreement Document (PAD) and in the Development Credit Agreement (DCA) were to:

Commence institutional and regulatory reform within the urban sector with the introduction of commercial principles in the operation and management of water services through the participation of a private sector operator;

Accelerate capacity building and human resources development for the sector through training and demonstration effects within the context of the private operator contract;

Provide an institutional framework that improves the quality and sustainability of user’s services and acts as an operational model for water services, as these begin to be decentralized to municipal based management.

1.2. Revised Project Objectives

6. The project objectives were not revised. Nevertheless, during the Mid Term Review the Bank and the Implementing Agencies agreed on modification and revision of detailed indicators to simplify the review and assessment of the performance of the private operator and the implementing agencies. In general the objectives of the Project have been achieved 1.3. Original Project Components

44

7. As set out in the Development Credit Agreement the Project consisted of three components estimated at total cost of US$114.8 million. 1.3.1. Component A

8. This component comprise a Private Sector Management of water supply systems for five cities of Maputo, Beira, Quelimane, Nampula and Pemba which includes a lease contract for Maputo, a management contract for the remaining four cities, delegated works for rehabilitation, meter installation and new connections, investment program management and supervision handled by the Private Operator. Within the Component A it was included a technical assistance, human resources development and training to FIPAG. The costs estimated for this component were US$42.7 million, being as follows:

Five year management contracts with PO for 4 cities : US$6.9 million Delegated works carried out by PO: US$17.6 million Services in lease and management contracts: US$2.76 million Human resources development of FIPAG staff at HQ and under the management

contract in the four cities: US$0.9 million

1.3.2. Component B

9. This component refers to water supply works which were not part of the contracts with the Private Operator. Component B was estimated at US$64.4 million being for:

Water supply works: US$:58.9 million Design and supervision: US$:5.5 million

1.3.3. Component C

10. This component was to support the urban water supply policy and strategy which included equipment and technical assistance for the Water Regulatory Council (CRA) and DNA which included:

Equipment, consulting services and TA for CRA: US$1.8 million Urban water supply strategy for further development of urban water supply and

sanitation services, including the strategy for the next stage: US$ 2.0 million Urban water and sanitation pilot for peri-urban areas: US$ 0.4 million Project management for the component: US$ 0.4 million

1.4. Revised Project Components

11. No major changes were made to these components during project implementation. Nonetheless it is noted that on 2004 a supplementary agreement of US$15.0 million has been approved by IDA to cover cost increases as a result of under pricing of the original bid, delays on the implementation of delegated works, changes on the PO shareholders structure, among other circumstances. To accelerate the implementation of the investment program, the Bank agreed to finance the payment of VAT of the consulting firms, goods and works. In addition, the closing date for credit has been extended 3.5 years, as a request of the Government due to delays on the implementation of the investment program, long period for renegotiations of the revised lease contract for Maputo after the withdrawal of Saur International from Águas de Moçambique (PO).

45

2. ASSESSMENT OF PROJECT OBJECTIVES AND PROJECT IMPLEMENTATION

2.1. Overall Assessment

12. The Government of Mozambique (GOM) objectives as stated in the National Water Policy in 1995 and revised in 2007 are addressing the strategy in which the Government is committed with the increasing of beneficiary participation, recognition of water as an economic and social good, and an increasing of the role for the private sector participation on the provision of a sustainable water supply and sanitation services. Moreover, the action plans for global poverty reduction PARPA I (2001-2005) and PARPA II (2005-2009) support the improvement of potable water supply towards the Government Goals as well as the Millennium Development Goals (MDGs). 13. The strong commitment of the Government to sector reform and Private Sector Participation has contributed for a significant improvement on the urban water supply services. The original project objectives remain aligned with GOM strategies and goals as well as the World Bank assistance strategies. 2.2. Achievement of Project Objectives and Outputs

2.2.1. Reliability and Sustainability of Water Services

14. Over the period of lease and management contracts the water supply services have been improved in all the five cities. With the commissioning of the works, the rehabilitation and upgrading of the systems, the production capacity, transmission and storage of water have been optimized and upgraded contributing for reliability and sustainability of water services. The population coverage increased due to additional number of connections and standpipes which rose from 830,000 inhabitants served in 2000 to 1,671,000 in year 2009. Water quality got better complying with WHO standards, hours of supply increased to the cities of Beira, Quelimane and Nampula with 24 hours per day, Pemba with 22 hours. Non-revenue water has been reduced in the four Northern cities while in Maputo less impact has registered. Good results have been achieved on technical, operational and commercial performance. 15. All delegated works as well as non delegated works have been completed over the project period. 16. The project financial sustainability was conditioned by the performance and the reliability of services. In the early period of the Project, the lapsed time between the investment in major infrastructure and the time they become operational did not induced to the positive timely revenue generation and create the impact on the cash flow. Since the major infra-structure works were finished in 2006, the functionality of the water system become more reliable and the borrower were able to increase the customer base through the new connections conducting to the better revenue base to sustain the service. The improvements in services have also allowed the adjustment of the water tariff to the O&M cost recovery level. It is expected that a reasonable increase of the water tariff

46

combined with the continuous improvement of NRW and collection ratios will enable the borrower to reach the break even of the relevant costs including the debt service. 2.2.2. Institutional and Regulatory Reform

17. An institutional Delegated Management Framework (DMF) for urban water supply service was set up in 1998 allowing the transference of operational responsibilities for water supply service to private sector. It also addresses the separation and clarification of government functions, the setting of an independent regulator (the CRA) and of asset holding authorities (the FIPAG). During the project implementation period, FIPAG and CRA have been established. Contracts for technical and commercial operations of the water supply service have been signed with Private Operator Águas de Moçambique for Maputo (lease contract for 15 years) and for Beira, Quelimane, Nampula and Pemba (management contract for 5 years and then extended for 2 additional years). 18. CRA has been effective with regard to regulation of the services, tariff setting, consumer protection and mediation while the National Directorate of Water Affairs (DNA) has been responsible to set up government policies and strategies. 2.2.3. Capacity Building and Human Resources Development

19. Financial, human resources and technical assistance have been assigned to CRA and FIPAG for improvement of operational capacity and strengthening of these organizations. Training programs have been developed for FIPAG at HQ and FIPAG´s operational staff in 4 cities. Nevertheless, the Project did not contemplate financial resources for PO´s staff for the Operator in Maputo. In spite of training programs carried out, there is still a need for additional training to cover the specific gaps of CRA and FIPAG. 2.3. Major Factors Affecting the Project

20. The major factors which affected the project implementation are as follows: Withdrawal of SAUR International as the major shareholder of the consortium

from the Private Operator (AdeM) causing a delay of 2 years the implementation of the lease and management contracts;

Difficult renegotiation during the first four years of original lease and management contracts after the withdrawal of SAUR International and the heavy floods which happened at the earlier stage of the contract implementation in 2000;

Project cost increases of the Private Operator (PO) due to delay on implementation of delegated works, program management;

Low performance of PO during the first years of implementation of lease and management contracts caused by long period of negotiations to revise the contracts, delays on the implementation of capital works in Maputo and delegated works in the remaining four cities;

Irregular payment of variable rental fee by PO to FIPAG until December 2007; Unclear responsibilities under management contracts which led to redefinition of

the role of PO management of operations being FIPAG managing the four systems on a temporary basis with short term technical assistance after the

47

termination of the Management Contract with AdeM in March 2008, while the new POs were not in place;

Inclusion of procurement, program management and site supervision under the responsibilities of the PO proved to be not effective resulted in delays with implementation of civil works program;

Delay on the payment of counterpart funds (VAT) by the Government to contractors causing constraints on project implementation of works during initial years.

The World Bank approval of using the credit for payment of all taxes and duties related to Project funded by IDA from March 2007 onwards;

Delay on the procurement process for contracting new operators for provision of water services in the four Northern cities of Beira, Quelimane, Nampula and Pemba after ending the management contracts with AdeM.

2.4. Costs and Financing

21. The IDA credit provided SDR 55.4 million (US$75.0 million equivalent) to be disbursed in 6 years. The total project cost including Government contribution (US$10.24 million) and parallel financing by AfDB (US$19.6 million) and Netherlands(US$10 million) as presented in the PAD was US$114.84 million. An IDA supplementary credit of US$15 million was approved in 2004 bringing the total IDA funds available to US$90 million even though an amount of about US$1.96 million remained undisbursed by the project closing. 22. The dollar value of the IDA Credit increased by about US$13.9 million due to the appreciation of the SDR against the US dollar. The IDA credit was almost fully disbursed at 99.4%. Parallel financing from AfDB and Netherlands have since closed and the activities financed by these donors were completed. 23. The actual amount of disbursements from AfDB also increased due to the appreciation of UA against the USD. With regard to the Government contribution, the actual amount US$8.5 million less than the appraisal amount of US$10.24 million, because since April 2007, the IDA started disbursing 100% of all categories, including taxes as shown in Table 3.1.

Table 3.1 - Project Financing

Source Appraisal Supplementary Credit

Total Estimated

Cost

Actual (June 2009)

Variance

Remark

(US$ million)

(US$ million) (US$ million) (US$ million) (US$ million)

IDA 75.00 15.00 90.00 101.94 13.90 Undisbursed Amt =

48

US$1.96 million

AfDB 19.60 19.60 25.00 5.40

Netherlands 10.00 10.00 10.00 0.00

GOM 10.24 10.24 8.50 (1.74) GOM contribution

was reduced.

TOTAL 114.84 15.00 129.84 145.44

IDA Total Estimated credit value disbursed is US$88.04 M (US$90 M initial credit minus US$1.96 M undisbursed)

3. BANK AND BORROWERS PERFORMANCES

24. The overall performance of the Bank was considered satisfactory as the main objectives of the Project have been achieved. From the starting phase till the completion of the Project the Bank have been working closely in assisting the Government, the borrowers and the implementing agencies to carry out the reforms of the water sector in Mozambique. Good communication, consultations and discussions among the Bank and stakeholders (MOPH, CRA, FIPAG and PO) have been a solution to anticipate and solve current problems in a positive and constructive manner. 25. The borrower´s and implementing agencies performance were also rated as satisfactory. During the project preparation and implementation phase the Government took an important role to coordinate the relationships with the funding agencies such as the World Bank, the Dutch Government and African Development Bank as co-financiers, the sector organizations, namely CRA and FIPAG, as well as the PO. Key issues to make the Project successful such as the project management, capacity building, requirement for technical assistance, training to sector organizations among others, have been well planned and performed. Nonetheless, delays on the disbursements of counterpart funds have caused cost increases of the contractor´s works which has been solved with an amendment of the DCA considering the payment of all taxes by the Bank.

4. LESSONS LEARNT

26. During the project implementation the following lessons and observations have been identified:

The strong commitment of the Government made feasible and sustainable the process for PSP for provision of urban water supply services;

The setting up of delegated management framework for PSP provided a clear definition and separation of responsibilities among the Government, investment

49

and asset holding organization and regulator, allowing a good working environment among the stakeholders;

It has been noted the importance of the requisite to start on with an adequate baseline information before the operator´s take over the implementation of contracts for provision of water services to avoid difficulties on the performance of the PO;

It has been required to assess with detail the key staff assigned to contracts in order to have in place an adequate, experienced and qualified staff, preferably coming from mother companies to achieve the expected results on the provision of water supply services;

The transference of know-how and promotion of local staff for senior positions within the organizations has been an important issue which should be considered as part of training and capacity building to make the utilities reliable and sustainable;

The experience to deal with the private sector participation indicated then need for promotion of local operators in the provision of water supply services, having in mind that there are no experience and adequate expertise in this field of activity within the country.

PO should not be responsible for program management, procurement and site supervision.

50

APPENDIX 1 – PROJECT COSTS

Project Costs by Component Appraisal/Suppl Estimate

Actual % of Appraisal

(in million US$ equivalent) US$ millions US$ millions A Component A: Private Sector

Management Water Supplies for five cities

41.79 44.9 107%

B Component B: Works Program for FIPAG

76.06 86.47 114%

C Component C: Urban Water Supply Policy and Strategy - Activities undertaken by DNA

11.99 14.07 117%

Total Project Cost 129.84 145.44 112%

51

APPENDIX 2 - PROCUREMENT ARRANGEMENT

Estimated Project Costs by Procurement Arrangements'

Appraisal US$75 million and supplementary US$15 million

(in US$million equivalent)

Expenditure Category Procurement method Total Cost

1. Works ICB NCB Other NBF

Civil Works 31.8 3.5 0.8 28 64.1

(31.2) (3.4) (0.7) (35.3)

2. Goods (a) Vehicles, computers, office equipment & furniture 0.5 0.4 0.6 1.5

(0.5) (0.3) (0.6) (1.4)

(b) Plant and equipment 0.3 0.2 0.1 0.6

(0.3) (0.2) (0.1) (0.6)

(e) Chemicals 0.3 0.3 0.1 0.7

(0.3) (0.3) (0.1) (0.7)

3. Services

(a) Engineering services and studies ** 32.7 32.7

(32.2) (32.2)

(b) Technical Assistance 4.7 4.7

(4.7) (4.7)

4. Training 0.8 0.8

(0.8) (0.8)5. Miscellaneous

(a) Operations costs 3.4 3.4

(3.4) (3.4)

(b) Operations (GOM support to FIPAG) 2 2

(c) Interest during construction 2.7 2.7

(d) Unallocated 10.9 5.8 16.7

IDA Unallocated (10.9) (10.9)

TOTAL 32.9 4.4 54.1 38.5 129.9

IDA (32.3) (4.2) (53.5) 0 (90.0)

52

Actual Project Costs by Procurement Arrangements' (in US$million equivalent)

Expenditure Category Procurement method Total Cost

1. Works ICB NCB Other NBF

Civil Works 50.46 0.86 23.00 74.32

IDA (49.09) (3.40) (0.70) (53.19)

2. Goods

(a) Vehicles, computers, office equipment & furniture 0

(0.50) (0.30) (0.60) (1.40)

(b) Plant and equipment 2.07 0.29 2.36

(0.30) (0.20) (0.10) (0.60)

(e) Chemicals 1.99 1.99

(0.30) (0.30) (0.10) (0.70)

3. Services

(a) Engineering services and studies ** 36.20 2.00 38.20

(32.20) (32.20)

(b) Technical Assistance 10.07 10.00 20.07

(7.70) (7.70)

4. Training 0

(0.80) (0.80)

5. Miscellaneous

(a) Operations costs 0

IDA (3.40 (3.40)

(b) Operations (GOM support to FIPAG) 8.50 8.50

(c) Interest during construction 0

(d) Unallocated

TOTAL 54.52 1.15 44.27 43.50 145.44

IDA (50.19) (4.20) (43.60) (99.99)

53

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

Executive Summary from the Project Completion Report of African Development Bank, February 2009

1. Project Objectives: The Government of Mozambique (GOM) carried out the Provincial Towns Water Sector Study in the early nineties, which included Maputo and 12 other towns. GOM adopted the National Water Policy (NWP) in 1995 which laid down the objectives and policies of the water sector. As a result of the policy, a goal of ensuring provision of adequate quantity and quality of water and adequate sanitation services for the whole population of Mozambique was defined. Furthermore, GOM approved in 1997, a National Water Development Programme (NWDP) which covered policy and institution building, preparation for privatization of urban water supplies, rural water supply and sanitation, water resources management and human resources development. 2. The project sought to rehabilitate and augment the water supply system of Maputo, and to implement an integrated health education, sanitation and solid waste component aimed at improving sanitation, drainage and hygiene behaviour for the peri-urban populations of Maputo in Hulene, Laulane and Mahotas. This increased the population served with safe water by at least 225,000 in 2008 and 330,000 in 2027 and the remaining project life. 3. Project Description: The project activities as defined at appraisal were as follows: (i) New filter unit at the treatment works in Umbeluzi; (ii) New trunk main from Matola to Cimentos to Chamanculo; (iii) New trunk main from Chamanculo to Laulane and distribution centre at Laulane; (iv) Distribution network covering Hulene, Laulane and Mahotas; (v) Rehabilitation of Chamanculo to Maxaquene pipeline; (vi) Modification of Chamanculo distribution centre; (vi) New storage reservoir at Maxaquene and (vii) health education/Sanitation and solid waste component. By the time the project started, component (ii) had been executed through other funding, but all others were implemented as planned. 4. Implementation: The Project took 8 years to complete after loan approval. Implementation was initially planned for 4 years starting from January 1999. However construction was only completed in December 2007. Implementation of the project got delayed by 58 months. The delays were a result of two consecutive years of heavy rains causing serious flooding, and the cessation of works by the civil works contractor of the water component due to late payment of certificates. 387 days of these delays can be attributed to period between engagement of the Consultant of the Water Supply component to the approval of the detailed design. The deadline for final disbursement was extended to 31st December 2008. 5. The sanitation component was even slower in commencing. It started procurement in November 2005 and completed in December 2007.

54

6. Monitoring and Supervisions: The Bank was able to regularly monitor the progress in implementation through regular supervision missions. These missions were found to be useful. Most of the expected outputs of the project were met. 7. Achievements of Project Outputs and Outcomes: The physical implementation of the water supply component was highly satisfactory. The project achieved all its objectives as all planned items were implemented except the Matola-Cimentos-Chamanculo Trunk main which was constructed before the project commenced using other funding. The area covered by the network is three times the original plan at appraisal. The Distribution Centre and the trunk Main (Chamanculo-Laulane) are bigger than planned because of the changes that occurred in the development of the area between appraisal and implementation of the project. 8. Similarly, the sanitation aspect was successfully implemented, even though more could have been achieved had the IA not wasted so much time in the start up. Less than the targeted population benefitted. The project was successful in educating the communities in health, hygiene and sanitation practices. As a result of the health education and support, communities are aware of the importance of personal hygiene, safe household water storage practices, prevention of HIV/AIDS and protection against cholera, diarrhoea and malaria. Artisans were trained, latrine workshops established and 300 communal latrines constructed in the four communities, but the continuation of the building of latrines is not sustained as people complained that they do not have the financial means to pay for latrines to be built in their households. The project provided the materials for the squatting slabs and underground holding tanks but expected the community to contribute labor and in cash for the construction of the walls of the latrines in compounds. 9. Loan Utilization: The project utilized UA17.44 million out of UA17.50 million (or 99.66%) of the loan and UA1.68 million of the UA2.16 million (or 77.78%) of the TAF grant. 10. Counterpart Funding: At appraisal, the Government of Mozambique was to contribute UA4.06 million. However, a total of UA4.21 million which was 4% more than the pledged amount. In general, all payments demanded from GOM were honored. 11. Sustainability and Viability: According to a recent survey, there is a high consumer willingness to pay 0.025MZM per liter (US$0.0012). Only 34% and 15% of the same population would agree to pay double and four times respectively. The existing price at public standpipes is 0.0166MZM per liter (US$0.0008 per liter), and 0.025MZM (US$0.0012) at private standpipes. Up to 68.5% of those without a house connection are willing to pay up to 2,500 MZM for a connection. The current level is 2,300 MZM 12. Direct involvement by the communities in the development of the sanitation project was key to passing on the ownership of the services to the beneficiaries. The technology is simple to operate and maintain. However, the intention for the community to continuously engage the artisans to build more private latrines does not seem to be case, as most people in the communities say they cannot afford the cost of construction.

55

13. Conclusions and Recommendations: Despite the delays with the project implementation, the project was successfully executed. The project was found to be technically sound, economically feasible, socially acceptable and environmentally friendly. Therefore, the GOM should continue undertaking the measures conducive to the sustainability of various components of the project.

56

Annex 9. List of Supporting Documents

1. Project Appraisal Document dated May 12, 1999 2. Mission Aide Memoires 3. Supplemental Credit Document, April 2004 4. Environmental Assessment of the Mozambique NWDP II, July 1996 5. Consultancy Services for Assisting in the Procedure for Transforming the Water

Services in Five Cities of the Republic of Mozambique Report, June 1997 6. Management Development Plan for Ara Sul Report, December 1998 7. Environmental Management Plan, February 1999 8. Project Implementation Manual, October 1999 9. Request for Interim Review of Operator Tariff and Indexation Formula Report,

May 2001 10. The Second Beneficiary Assessment of Maputo, February 2002 11. Beira New Intake – Environmental Assessment, April 2003 12. New Wellfield and Transmission Main – Social Impact Assessment Report, May

2004 13. Pemba Water Supply System Social Assessment and Management Plans –

Resettlement Action Plan, October 2004 14. Network Expansion – Maputo, Beira, Quelimane, Nampula and Pemba Report,

January 2006 15. Netherlands Trust Fund – Implementation Completion Report (ICM), June 2008 16. Mozambique’s experience of Delegated Management Framework in the Urban

Water Sector – the Case Study of FIPAG and CRA, May 2009 17. AfDB – Project Completion Report, February 2009

The World Bankdocuments.worldbank.org/curated/en/963121468279868898/pdf/ICR7000P... · PO Private...

Documents

Transcript of The World Bankdocuments.worldbank.org/curated/en/963121468279868898/pdf/ICR7000P... · PO Private...