Document of The World Bank · Document of The World Bank ... Regional Vice President: Makhtar Diop...

Document of

The World Bank

Report No: ICR00003336

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(TF-91213)

ON A

GRANT

IN THE AMOUNT OF US$ 5.0 MILLION

TO

THE REPUBLIC OF MOZAMBIQUE

FOR A

MOZAMBIQUE WATER PRIVATE SECTOR CONTRACTS - OBA FOR

COVERAGE EXPANSION PROJECT

December 17, 2014

Water Global Practice (GWADR)

Country Department AFCS2

Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective as of November 13, 2014)

Currency Unit = New Meticais (Mtn)

US$1.00 = 30.85 Mtn

US$1.00 = SDR 0.68

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

AdeM Aguas da Regiao de Maputo

AdM Aguas de Mozambique

ACGF Africa Catalytic Growth Fund

AFD Agence Française de Devéloppement

AusAID Australian Agency for International

Development

CRA Conselho Regulatorio de Aguas

DMF Delegated Management Framework

EIB European Investment Bank

EU European Union

FIPAG Fundo de Investimento e Património do

Abastecimento de Água

GPOBA Global Partnership on Output Based Aid

GMWSP Greater Maputo Water Supply Project

ICR Implementation Completion and Results Report

IFC International Finance Corporation

IMVA Independent Monitoring and Verification Agent

ISR Implementation Status Report

MCC Millennium Challenge Corporation

NWDP National Water Development Project

OBA Output Based Aid

PDO Project Development Objectives

TF Trust Fund

WASIS Water Services and Institutional Support Project

Regional Vice President: Makhtar Diop

Snr GP Director Junaid Kamal Ahmad

Country Director: Mark Lundell

Practice Manager: Jonathan S. Kamkwalala

Project Team Leader: Luiz Claudio Martins Tavares

ICR Team Leader: David Malcolm Lord

REPUBLIC OF MOZAMBIQUE

Mozambique Water Private Sector Contracts –

OBA For Coverage Expansion Project (P104945)

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 ............................................... 1

2. Key Factors Affecting Implementation and Outcomes .............................................. 5

3. Assessment of Outcomes .......................................................................................... 11

4. Assessment of Risk to Development Outcome ......................................................... 18

5. Assessment of Bank and Borrower Performance ..................................................... 18

6. Lessons Learned ....................................................................................................... 22

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 24

Annex 1. Project Costs and Financing .......................................................................... 25

Annex 2. Outputs by Component ................................................................................. 26

Annex 3. Economic and Financial Analysis ................................................................. 29

Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 33

Annex 5. Beneficiary Survey Results ........................................................................... 34

Annex 6. Summary of Borrower's ICR ......................................................................... 42

Annex 7. List of Supporting Documents ...................................................................... 54

A. Basic Information

Country: Mozambique Project Name:

Mozambique Water

Private Sector

Contracts - OBA for

coverage expansion

Project ID: P104945 L/C/TF Number(s): TF-91213

ICR Date: 12/15/2014 ICR Type: Core ICR

Lending Instrument: SIL Grantee: FIPAG -

Original Total

Commitment: USD 6.00M Disbursed Amount: USD 4.77M

Revised Amount: USD 4.77M

Environmental Category: C

Implementing Agencies:

Aguas da Regiao de Maputo

Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 01/19/2007 Effectiveness: 07/01/2008

Appraisal: Restructuring(s): 02/12/2012

Approval: 06/19/2007 Mid-term Review:

Closing: 12/31/2011 06/30/2014

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Low or Negligible

Bank Performance: Moderately Satisfactory

Grantee Performance: Satisfactory

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

Bank Ratings Borrower Ratings

Quality at Entry: Moderately

Unsatisfactory Government: Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing Satisfactory

Agency/Agencies:

Overall Bank

Performance: Moderately Satisfactory

Overall Borrower

Performance: Satisfactory

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): No

Quality at Entry

(QEA): None

Problem Project at any

time (Yes/No): Yes

Quality of

Supervision (QSA): None

DO rating before

Closing/Inactive status: Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Water supply 100 100

Theme Code (as % of total Bank financing)

Urban services and housing for the poor 100 100

E. Bank Staff

Positions At ICR At Approval

Vice President: Makhtar Diop Obiageli Katryn Ezekwesili

Country Director: Mark R. Lundell Michael Baxter

Practice

Manager/Manager: Jonathan S. Kamkwalala Jaime M. Biderman

Project Team Leader: Luiz Claudio Martins Tavares N. Jane Walker

ICR Team Leader: David Malcolm Lord

ICR Primary Author: Elisabeth Sherwood

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The objective of the Grant is to increase piped-water access to the poor in the Recipient's

cities of Maputo, Beira, Nampula, Quelimane, and Pemba, by providing Output-Based

Payments to Private Operators.

Revised Project Development Objectives (as approved by original approving authority)

The objective of the Project is to increase access to piped water for the poor in the

Recipient's city of Maputo.

(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 : Number of subsidized yard tap connections serving families with continued

water services for three months

Value

quantitative or

Qualitative)

0 28950 28950 29541

Date achieved 04/03/2008 12/31/2011 06/30/2014 06/30/2014

Comments

(incl. %

achievement)

End target exceeded.

Indicator 2 : Number of people in urban areas provided with access to Improved Water

Sources under the project

Value

quantitative or

Qualitative)

0 468000 468000 163357

Date achieved 04/03/2008 12/31/2011 06/30/2014 06/30/2014

Comments

(incl. %

achievement)

Estimated based on data at completion (30,764 connections, 5.31

persons/household & 1 household/connection). If same assumptions are used as

originally (3 households/connection & 5.31 persons/household), the end target is

exceeded (490,070)

(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 : Number of subsidized yard taps installed

Value

(quantitative

or Qualitative)

0 28950 28950 30764

Date achieved 04/03/2008 12/31/2011 06/30/2014 06/30/2014

Comments

(incl. %

achievement)

End target exceeded.

Indicator 2 : Number of water utilities that the project is supporting

Value

(quantitative

or Qualitative)

0 N/A 1 1

Date achieved 04/03/2008 04/03/2008 06/30/2014 06/30/2014

Comments

(incl. %

achievement)

Target achieved.

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived DO IP

Actual

Disbursements

(USD millions)

1 12/30/2008 Satisfactory Satisfactory 0.00

2 05/28/2009 Satisfactory Satisfactory 0.00

3 11/30/2009 Moderately

Unsatisfactory Satisfactory 0.00

4 06/21/2010 Moderately

Unsatisfactory

Moderately

Unsatisfactory 0.00

5 12/20/2010 Unsatisfactory Unsatisfactory 0.40

6 08/16/2011 Unsatisfactory Moderately Satisfactory 0.40

7 04/14/2012 Satisfactory Moderately Satisfactory 2.00





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

02/12/2012 Y U MS 0.40 Corrective restructuring

If PDO and/or Key Outcome Targets were formally revised (approved by the original approving

body) enter ratings below:

Outcome Ratings

Against Original PDO/Targets Unsatisfactory

Against Formally Revised PDO/Targets Satisfactory

Overall (weighted) rating Satisfactory

I. Disbursement Profile

1

1. Project Context, Development Objectives, and Design

1.1 Context at Appraisal

1. The Mozambique Water Private-Sector Contracts for Output-based Aid

Expansion Project was prepared in the context of an urban water supply sector that had

seen significant restructuring and rehabilitation following several decades of lack of

investment, due in part to civil war. The World Bank had engaged closely with the

Government of Mozambique beginning in 1998 with the National Water Development

Project (NWDP) I and with its follow-on, the NWDP II. These projects focused

investment in the five major cities of Maputo, Beira, Nampula, Quelimane, and Pemba

and piloted the delegated management framework (DMF) for urban water supply

operations. Under the DMF, a single asset holding company was established – the Fundo

de Investimento e Patrimonio do Abastecimento de Agua (FIPAG) – a private-sector

operator was engaged for the large urban water supply systems, and the independent

regulator was created, the Conselho Regulatorio de Aguas (CRA). At appraisal, access to

piped water service in urban areas was estimated to be approximately 37 percent.

2. Operations of the largest urban water supply system in the country – servicing

Maputo – had been bid out to Aguas de Mozambique (AdM), a private sector operator led

by Aguas de Portugal, in 2000 under a 14-year lease contract. AdM was also the operator

of the other four cities under management contracts expiring in 2007. It was expected

that operations for these cities would continue to be managed by the private sector, under

new lease contracts, which were under procurement at the time of appraisal. This was

expected to result in improved operational efficiencies and leveraging of private sector

investment to expand networks. In addition, the World Bank, jointly with FIPAG, was in

the process of preparing the Water Services and Institutional Support Project (WASIS),

which would support system expansions in the major cities outside of Maputo. WASIS

would leverage investments from other financiers, including the Millennium Challenge

Corporation (MCC), the Africa Catalytic Growth Fund (ACGF), and, later, the Australian

Agency for International Development (AusAID). In Maputo, large investments in

expansion of supply and network were being undertaken by the European Investment

Bank (EIB), the European Union (EU), and Agence Française de Développement (AFD).

3. It was within this context that the GPOBA grant was proposed to provide support

for the “last mile” of network extensions, i.e., subsidies for poor households who would

not otherwise be able to afford the cost of connecting to the network. At the time of

project preparation, households were expected to pay the full cost of connections, which

ranged from an average of US$167 equivalent per connection in Maputo to US$241

equivalent per connection in Beira. While projections showed that water tariffs would

likely cover operating costs in the target cities as long as the number of connected

households increased, tariffs were not structured in such a way to cross-subsidize new

connections. The project was intended to provide output-based payments for connections

supporting densification of the existing network and network expansion.

2

4. The rationale for the Bank’s involvement was founded on similar and relevant

experience and a deep engagement in the water sector reforms for Mozambique. The

project was tightly aligned with the World Bank strategy, which focused on assisting

Mozambique in the implementation of sector reforms and investment financing to expand

access, improve quality of services and support long-term operational sustainability. The

OBA project was considered complementary to the objectives of related projects, in

particular the Water Services and Institutional Support Project (WASIS), which would

support system expansions in the major cities outside of Maputo.

1.2 Original PDO and Key Indicators

5. The objective of the Project as defined in the Grant Agreement (dated April 3,

2008) was to increase piped-water access to the poor in the Recipient’s cities of Maputo,

Beira, Nampula, Quelimane, and Pemba by providing Output-Based Payments to

Private Operators.

6. The wording of the objective as defined in the GPOBA Commitment Paper (June

5, 2007) provides additional detail in terms of the number of beneficiaries and the terms

of the output-based payment, as follows: “the objective of the project is to increase

piped-water access to about 470,000 poor Mozambicans living in five cities – Maputo,

Beira, Nampula, Quelimane, and Pemba – by providing an output-based subsidy to

private operators after their delivery of functioning yard-taps and the demonstration of

continued service for a period of time.”

7. This Implementation Completion and Results report (ICR) evaluates the success

of the project against the primary objective – to increase piped water access to the poor.

The ICR considers the secondary aspect of the stated original objective – “through

output-based subsidies to private operators” – to be a modality for achieving the primary

objective, and not part of the project objectives itself. This report also notes that, while

the payments were to operators, the subsidy was to low-income households. The

payments were straightforward reimbursements of the cost of connections to operators

and did not include a subsidy or incentive to the operator.

8. Key indicators established to measure progress towards the achievement of the

project objective were as shown in the Table below.

City Subsidized Connections

Maputo 8,000

Beira 6,750

Quelimane 4,900

Nampula 4,900

Pemba 4,400

Total 28,950

3

1.3 Revised PDO and Key Indicators

9. The project was formally restructured1 in February, 2012. Restructuring included

a revision of the PDO, as follows: “The objective of the Project is to increase access to

piped water for the poor in the Recipient’s city of Maputo.” (Grant Agreement

Amendment No. 1, dated February 8, 2012; countersigned February 23, 2012.).

Specifically, this change included the removal of the four secondary cities and of the

modality of providing output-based payments to private operators.

10. At restructuring the total number of connections remained the same, but the

allocations for the four cities were transferred for implementation in Maputo. Revised

outcome indicators were therefore changed to reflect the new connection targets for

Maputo: 28,950 connections. In addition, in accordance with World Bank policy, the

number of beneficiaries was introduced as a PDO indicator, calculated according to the

assumptions at project design, i.e., that three households of an average size of 5.6 persons

would use each yardtap. The end-of-project beneficiary target was therefore 468,000

persons.

11. The project restructuring also included an extension of the closing date to June 30,

2014 (30 months) and a cancellation of US$ 1.0 million in grant funds. This was due to a

lower cost of connection in Maputo (US$ 167 per connection) compared to the secondary

cities (US $190 in Quelimane; US$ 238 in Pemba and Nampula; and US$ 241 in Beira),

and therefore fewer funds were required to connect the equivalent number of households.

12. The restructuring was initiated in response to a formal request from the

Government (dated March, 2010), to reallocate US$4.43 million from the secondary

cities to Maputo. The reallocation was proposed after the Government failed to engage

private-sector operators for the secondary cities in 2009. This had implications for the

project implementation, as the Grant Agreement specified that the recipient would

establish and maintain lease contracts with private operators in the target cities, and

therefore funding could not be provided to subsidize household connections as planned.

This was therefore a corrective restructuring, which accounted for challenges faced

during project implementation and enabled project activities to continue through a refined

focus on poor recipients in Maputo.2

1.4 Main Beneficiaries

13. The project was designed to target low-income / poor households. The original

number of project beneficiaries was as follows:

1 Restructuring paper dated January 12, 2012 – approved February 12, 2012. 2 It is not clear why payments for connections in the four secondary cities was not kept in the project

through a change in the terms of the grant agreement to enable payments to be made to FIPAG, given that

FIPAG took over operations of the secondary city systems following the failure of the lease bidding

process.

4

City Individual Beneficiaries

Maputo 143,520

Beira 107,325

Quelimane 68,640

Nampula 74,970

Pemba 74,088

Total 468,543

14. Following project restructuring, the project beneficiaries would be limited to

Maputo:

City Individual Beneficiaries

Maputo 468,000

1.5 Original Components

15. The original project consisted of three components: (i) the provision of payments

based on verified yardtap connections and three months of water service to low-income

households in Maputo; (ii) the provision of payments based on verified yardtap

connections and three months of water service to low-income households in the cities of

Beira, Quelimane, Nampula, and Pemba; and (iii) technical assistance for the verification

of outputs under components 1 and 2. Total project costs were US$ 6 million.3

1.6 Revised Components

16. Under the restructured project there was a single component that incorporated the

provision of payments based on verified yardtap connections and three months of water

service to low-income households in Maputo and the verification of those connections

and water service. Total project costs were US$ 5 million.

1.7 Other significant changes (in design, scope and scale, implementation

arrangements and schedule, and funding allocations):

17. Two changes were made to the operational manual during implementation in

order to improve implementation and the likelihood of the achievement of project

objectives. The Bank approved in early 2010 the extension of the project beyond the

Laulane service area, which had been the geographic focus of the project as originally

designed. Early implementation experience indicated that there were insufficient eligible

households within the service area to meet project objectives. Expansion of the

geographic area to all of Maputo and Matola enabled eligible households throughout the

city to benefit from the connection subsidy.

3 The US$ 6.0 million total project costs do not include an additional $170,000 financed by GPOBA for

direct World Bank supervision costs.

5

18. In early 2013, with 18 months of the implementation period remaining, FIPAG

requested an adjustment to the eligibility criteria for beneficiary households; this was

approved in June, 2013. The original criteria had been a positive list of housing

characteristics – i.e., if a residence displayed a minimum number of criteria (e.g., dirt

floors; no exterior wall on the property; no paint finishes on the walls of the house, etc.) –

which AdeM determined was eliminating households that should otherwise have

benefitted from the program. Eligibility was revised to be a negative list of housing

characteristics, the presence of at least three of which would disqualify a household.

Additional detail regarding the original and revised eligibility criteria are provided in

Annex 2.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design, and Quality at Entry

19. Project preparation was thorough, and the analysis indicates a high degree of

knowledge regarding water supply operations, costs, investment needs, and customer

behavior and willingness and ability to pay. Project preparation benefitted heavily from

the World Bank long-standing engagement in the sector and strong Government

commitment to the project and water sector reforms.

20. The design approach for subsidizing the cost of new yardtap connections for poor

households was sound and based on research evidence which indicated that customers

were willing and able to pay the monthly water tariffs but that connection costs were far

outside their ability to pay (providing an access barrier). As a result households were

using a combination of water sources – neighbors’ taps, public standposts, and water

from unprotected sources - which increased the amount of time spent for water collection

and increased risks associated with poor water quality. Surveys used for project

preparation showed that, given a choice, households would prefer to be connected to the

formal piped water network.

21. A weakness of the background analysis, however were the estimates related to

availability of treated water to meet demands from the new connections. Information

provided in the Commitment Paper indicated that water production would increase during

the early stages of implementation and furthermore water availability would also increase

as result of programs to reduce unaccounted-for-water. These assumptions however were

not realized and in fact, additional treated water came on-stream much later than

anticipated, and expected reductions in unaccounted-for-water were not achieved. This

had important impacts on implementation in Maputo.

22. In addition, project preparation did not look critically at the assumption that the

water supply systems in the secondary cities would be operated by the private sector,

through contracts that had not yet been established. This may have been the other side of

the coin of the team’s long-standing engagement in the sector – it was too close to the

goals of the delegated management framework and therefore did not see warning signs

that private participation might not work. As noted in the ISRs, the bidding process for

6

private lease contracts coincided with the onset of the global financial crisis, which

resulted in a reduced appetite for risk. In addition, it was likely too early to engage the

private sector at a reasonable price in the secondary cities: conflicts between FIPAG and

the private operator in Maputo were already in evidence, and assets and operations were

still in very poor condition in the secondary cities. The project’s risk framework under-

assessed the risk that private operators would be engaged and did not introduce

appropriate mitigation measures in the design.

23. The original and restructured project also specified that approximately 16 people

would benefit from each residential yardtap, and that therefore 468,000 people would

directly benefit from the project. This figure was derived from a government statistical

construct that, in low-income areas with piped water service, an average of three

households share a single yardtap. This assumption appeared valid at preparation;

however, given the intention of densifying the network, the ratio for sharing was reduced

during project implementation and many households in areas benefitting from subsidized

connections no longer needed to share neighbors’ connections. The final survey at

completion indicates that each yardtap was being used predominantly by a single

household, with some but limited sharing. For this reason, the target value for project

beneficiaries (468,000) was overestimated, and could not be reached through the

installation of 28,950 new yard tap connections, as planned.

24. Project preparation also under-assessed the readiness, capacity, and possibly

willingness of the incumbent operator in Maputo – AdM – to implement the project. As

of December, 2010 (30 months after effectiveness, and with only 12 months prior to

original closing date), AdM had only connected 1,917 households (of the 8,000 original

target) under the project. That said, the relationship between FIPAG and the joint venture

had seriously deteriorated at that point, and discussions were underway for FIPAG to buy

out the majority shareholder. Once AdM reverted to public-sector ownership – fully

operating under commercial principles – management re-engaged strongly in the project

and was able to complete nearly 7,000 qualifying connections in the year 2011. This

demonstration of progress and commitment to the project enabled the restructuring of the

project to move forward.

2.2 Project Implementation

25. As per the project design and procedures outlined in the operations manual, the

operator identified eligible households and provided connections through yardtaps. The

agreed connection costs were reimbursed by the project upon verification by the

Independent Monitoring and Verification Agent (IMVA). While the project exceeded the

final targets for connections, the implementation progress throughout was generally

lagging, and the connection rate varied significantly from month to month; depending

largely on the completion of new networks and the availability of funding for the

purchase of connection materials. During project implementation there were a number of

important factors which affected progress towards the achievement of the development

objectives. Those factors which contributed most significantly to successes or gave rise to

problems are discussed below.

7

26. Failure of the lease process with private sector operators in the secondary cities.

This issue was described above in the context of project preparation. Because project

implementation was structured around private-sector operators in those cities,

implementation could not proceed at all without the conclusion of contracting. This was

addressed through project restructuring, which removed the secondary cities from the

project and transferred connection outputs and objectives to Maputo.

27. Uncertainty regarding restructuring of the project. Implementation momentum

in Maputo built in 2011 was effectively lost due to delays in restructuring of the project,

as the implementing agency could not plan for or make connections after the original

closing date of the project without risking reimbursement. This was not possible until late

February, 2012 (2 months after the original closing date), at which point AdeM was able

to re-start the outreach and connection process. While the Bank team was well aware of

and documented the need for restructuring, the process was intentionally delayed until

implementation progress improved. Connection rates only started to substantially

increase in 2011, and by the close of that year the original targets were achieved, -

enabling the restructuring to proceed. The delayed process resulted in the submission of

a retroactive request for extension of the closing date and restructuring.

28. Water availability in Maputo. There were issues with respect to the completion of

complementary projects in water supply and network expansion, which were necessary

preconditions to water availability for new connections. There were indications up until

2012 that new connections could not be made at the expected rate due to the

unavailability of water. In addition, information provided by the verification agent

indicated that hours per day of water availability was falling in the initial service area –

from 8 hours per day in 2009 to as low as 5.1 hours per day in late 2010. Additional

water supply came on stream only in 2012, when availability increased to 17 hours per

day. This enabled AdeM (under new management) to substantially increase both OBA-

supported and unsubsidized connections.

29. Strict beneficiary targeting criteria. Initial beneficiary targeting included both a

geographic component (the area served by the Laulane distribution area) and a poverty

component, which used housing characteristics as proxies to identify very-low-income

households. The original connection target for Maputo (8,000 connections) could not be

met within the limited Laulane service area, and the Bank approved expansion of the

geographic area to the whole of Maputo and Matola in early 2010. The eligibility criteria

– which had been extensive and very specific and which were judged to exclude

numerous other low-income households – were amended in mid-2013, becoming a

negative list of housing quality criteria that would make a household ineligible for the

subsidy, while still ensuring support to very-low-income residents.

30. Universal lowering of connection fees. In September, 2010, the regulator (CRA)

changed the connection pricing policy by lowering residential connection fees to Mt.

2,000, including an option to pay that amount over a period of 18 months. This

represented a significant discount for new customers, who previously had to pay the total

8

cost of a new connection – Mt. 4,300 – prior to being connected. It should be noted that

the regulatory decision did not establish a way to pay for the un-paid portion of the cost

of connection. The impact of this decision on implementation was mixed. On the one

hand, it had a negative impact on AdeM’s cash flow, which had no source of funding for

the installation of new connections (see below). At the same time, the decision

significantly increased demand for new household connections, enabling AdeM to justify

expansion into new service areas. Where outside funding was available to pay for

network expansion, this likely assisted in the successful implementation of the project as

it brought many additional eligible households within reach of networks.

31. Cash-flow constraints and inability to pre-finance materials. Pre-financing of

materials for yardtap connections became a significant problem during implementation,

as AdeM’s cash flows were insufficient to bridge the up-to-nine-month period between

the purchase of materials and the reimbursement of 70 percent of the subsidy amount

after verification. Reimbursement of the remaining 30 percent of the subsidy amount

required additional time. The problem appears to have become worse after CRA’s

decision to set connection fees at Mt 2,000, with no funding source to cover the

remaining cost. The situation improved when AFD financing was finalized and FIPAG

was able to purchase a large stock of connection materials to jump-start the installation of

new connections across Maputo.4

2.3 Monitoring and Evaluation Design, Implementation, and Utilization

32. M&E Design: The project included a well-designed system for tracking and

recording implementation progress (number of connections), but had limitations with

regard to the measurement of associated outcomes. Baseline indicators were established

by the IMVA as part of the inception report in mid-2009, and the same agent consistently

tracked progress on those indicators as part of the verification exercise, reporting them on

a semi-annual basis to FIPAG. The system allowed monitoring both of outputs and of

core impacts related to water delivery.

33. Annex 6 of the Commitment Paper specified indicators that would be collected by

the IMVA on an annual basis. These were also included in the Operational Manual

prepared for the project and included:

Number of households benefiting from increased access (to piped water);

Average monthly consumption or use per OBA beneficiary at the household level;

Average expenditure on service by OBA beneficiaries as a percentage of total

household expenditure;

Average residential tariff for OBA beneficiaries;

Collection efficiency; and

4 The funds received by GPOBA were effectively recycled into the purchase of materials for other

connections. During the period in question, approximately 100,000 non-OBA financed connections were

undertaken by AdeM AFD funds were provided to FIPAG as a loan, and amounts used for the benefit of

AdeM are repaid by AdeM through its lease payments to FIPAG.

9

Average hours per day of access to service.

34. Expenditure on service and the average residential tariff for OBA beneficiaries

were not tracked through the M&E system, although it should be noted that the second

could be reviewed separately from the tariff bulletins published by CRA, and the first

could be calculated using monthly consumption and tariff data.

35. Monitoring and Evaluation Implementation: The indicators were tracked

consistently on a semi-annual basis by the verification agent. The information collected

provides a useful picture of water supply to low-income recipients of the OBA subsidy

over time in the different project areas. The quality of the data collected appears sound,

and the verification agent reported clearly the source of data and when adjustments were

made in source or methodology.

36. Monitoring and Evaluation Utilization: The focus during project

implementation was on ensuring that project outputs – connections to eligible low-

income households – were made in a timely manner. For that reason and due to on-going

delays, relatively little attention seems to have been paid to other indicators during

implementation. At the outset of the project it was reported that CRA (the regulator)

wished to use lessons from the project to design a connection subsidy program. In fact,

however, the regulator decided to reduce the connection fee prior to there being a critical

mass of experiences or lessons from this project.

37. The project-related data are effectively a subset of data that FIPAG tracks and

will continue to track related to water supply in all service areas, including areas which

are predominantly comprised of low-income households. These indicators are tracked in

order to monitor operator performance and to meet regulatory reporting requirements.

Safeguards and Fiduciary Compliance

38. Environmental and Social Safeguards: No issues arose during project

implementation with respect to environmental or social safeguards or fiduciary

compliance. The project was an EA Category C project, as it involved only installing

simple yard taps fed from water distribution pipes in the roadway adjacent to households.

No land acquisition was required, and the implementing agency’s contracting

arrangements included provisions for the restoration of pre-implementation conditions.

No environmental or safeguards issues were identified during implementation.

39. Procurement: No issues arose during project implementation with respect to

procurement, although difficulties in the selection/procurement of the verification agent

at the start of the project caused minor delays in project implementation. During project

preparation, an up-front procurement capacity assessment was carried out at AdM that

concluded that adequate capacity existed to procure necessary materials. Because of the

output-based nature of the project, the average cost of yardtap connections was confirmed

as part of project preparation, and no further assessments were required during

implementation.

10

40. Financial Management: No issues arose during project implementation with

respect to financial management. It was noted that FIPAG was slow in submitting

withdrawal requests to the Bank, and that therefore project disbursement information

does not reflect actual project implementation. These delays do not seem to have affected

FIPAG’s reimbursement to AdeM of connection costs.

Post-Completion Operations/Next Phase

41. There are no particular issues with respect to post-project operations for this

project. Low-income residential customers whose connections were subsidized through

the OBA project are fully incorporated into the AdeM customer database and are

considered to be the same as any other customer. Data on consumption, billing, and

collection is maintained within AdeM’s commercial databases, and customer follow-up

(delivery of bills, etc.) is managed at the service district level.

42. FIPAG and AdeM consider the project to have been a major success, having

contributed approximately 30,000 connections to low-income customers in Maputo

during a period where net connections increased by approximately 75,000.5 Many of

those customers would not have been able to have formal yardtap connections without

the program. FIPAG is preparing a follow-on OBA operation that would incorporate

lessons learned from this operation, including providing somewhat smaller subsidies for

connections for low-income households which would then be consistent with the pricing

structure established by CRA in 2010. Additional analysis will need to be done, in

particular, to assess the effectiveness and impacts of the 2010 pricing structure on the

operators. Depending on the timing of such an application, it may be useful to undertake

a follow-up analysis of consumption and payment information on customers of the first

program. In addition, it would be important to consider an efficient mechanism for

program outreach and beneficiary screening while avoiding the risk of disincentivizing

non-poor households from applying for connections.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design, and Implementation

Overall Relevance Rating: Substantial

43. Relevance of Original Objective: The original objective was consistent with the

development priorities and circumstances at the time of project preparation; the key

objective – increasing piped-water access for the poor – remains highly relevant at this

time. The current Country Partnership Strategy (CPS; 2012 – 2015) recognizes that water

service remains a major challenge in the country, and that – despite significant

5 AdeM made more than 100,000 new, non-OBA connections during the project period, however, it also

undertook a review of existing accounts, cancelling non-operational or non-payment accounts. The net

increase in non-OBA customers was approximately 75,000.

11

investments and expansion – service provision has not kept pace with rapid urbanization.

The original approach of providing services through private sector operators, was fair at

the time of project preparation, given progress in the establishment of the “delegated

management framework“ and related policies pursued by the government. However, it is

considered unnecessary to have specifically restricted the modality of OBA payments to

private operators, in the original PDO statement and Grant Agreement.

44. Relevance of Restructured Objective: The restructured objective was in line

with development priorities and appropriate for the circumstances at the time of project

restructuring and, as with the original objective, remains highly relevant at this time.

Expansion and improvement of urban water supply remains a key objective of the

Government and of the Bank – in particular in Maputo, for which the World Bank

approved in 2013 the US$ 173 million equivalent Greater Maputo Water Supply Project

(GMWSP), which will increase the production capacity of treated water by 25 percent, or

60,000 m3 per day. At current per-capita consumption and water loss rates, this is likely

to serve approximately an additional 318,000 residents.

45. The Government and the Bank are also preparing WASIS II, for further

investment in water system expansion in targeted secondary cities and to enable

continued support to the Government’s evolving institutional reforms. It is the intention

of the Government to include under WASIS II a component for connection subsidies to

low-income families. Currently, the Government and FIPAG still intend for the private

sector to manage water supply operations, and have engaged IFC to analyze potential

structures and to act as a transaction advisor.

Relevance of Design/Implementation

46. Relevance of Original Design: The project was designed to address the problem

of the “last mile” in piped water provision; i.e., how to support yardtap connections to

households who, while likely able to afford the cost of water consumption, are not able to

afford the cost of the installation of the yardtap itself, which ranged from US$167 to

US$241 per connection. The concept of subsidization of yardtap connections for low-

income households, while not pursued previously in Mozambique, was established

elsewhere. Final survey results carried out at completion indicate that ability to pay

connections fees is limited, and despite reduced connection fees and the introduction of

payment plans, it remains a barrier to access for many low-income families.

47. However, the modality of delivery in the original design – as part of lease

contracts with private-sector operators – was precipitate: private-sector appetite for

operations of water supply systems in secondary cities was overestimated. The

assumption that the water systems would be leased by the private sector was

inappropriately built into the original objective statement and design of the project,

considering that there were no clear mechanisms in the project to support that outcome or

to incentivize private sector operators.

12

48. Relevance of Restructured Design: Project restructuring in 2012 retained all

aspects of the original design and implementation arrangements, with the exception that

yardtap connections would be made in Maputo. The restructured design was highly

relevant to the development needs and priorities at the time, with major network

extensions being undertaken, as well as investments in the rehabilitation of water

treatment plants, which enabled additional treated water to be delivered to previously

unserved neighborhoods. In addition, the Maputo operator had been bought out by

FIPAG (the asset holder) one year before; while operating under commercial principles,

the new management’s goals with respect to the expansion of service to low-income

areas were fully aligned with the project. The subsidization of yardtap installation costs to

households remained highly relevant. However, there were significant challenges with

respect to implementation of the additional proposed 21,000 connections. These included,

in particular, the more difficult identification of eligible households in newly networked

areas.6 Nevertheless, the output connection target was reached, benefitting some of the

poorest segments of the population of Maputo.

3.2 Achievement of the Project Development Objectives

Original PDO Efficacy Rating: Low

49. As defined in the original project description, the project’s development

objectives were straightforward and tightly linked to the project outputs – i.e., the number

of output-based subsidies paid upon the installation of yardtaps and subsequent delivery

of water for three months. The following table summarizes the achievement of that

objective, broken down by target city and in aggregate, over the original 42-month

implementation period (up to the original closing date of December 31, 2011):

City

Objective:

Number of

yardtaps

Outcome/Output:

Number of

subsidized yardtaps

% achieved

Maputo 8,000 8,610 107%

Beira 6,750 0 0%

Quelimane 4,900 0 0%

Nampula 4,900 0 0%

Pemba 4,400 0 0%

Total 28,950 8,610 30%

50. The target values were exceeded for Maputo, but connections were not enabled in

the other four cities due to failure of the selection process for private operators. The

overall achievement of the original PDO is therefore assessed as low.

6 The initial 8,000 connections had been made in existing service areas, and therefore potentially

eligible households were more readily identified (i.e., they did not have connections even though their

neighbors did, and were therefore likely to be poor). In newly serviced / expansion areas, no households

had connections, and therefore very different outreach efforts had to be developed to identify potentially

eligible households.

13

Restructured PDO Efficacy Rating: Substantial

51. The restructured project was highly successful in increasing access to piped water

for the poor in Maputo. The project exceeded the restructured primary PDO indicator

target of 28,950 yardtaps providing at least 3 months of water service in the city of

Maputo. At completion a total of 30,764 yard tap connections had been made and verified

of which 29,541 connections were verified as receiving three months of water service.

52. A broader analysis of the achievement of development objectives also provides

very positive findings with respect to the targeting of beneficiaries and the actual and

perceived benefits of the project. Information provided by the verification agent on a

quarterly and semi-annual basis and as part of an end-of-project survey (see Annex 5)

documented the following additional information:

The project was highly successful in targeting very poor households who would

not otherwise have been able to connect to the formal water system. Eligibility

criteria heavily weighted toward very poor households ensured that connection

subsidies were correctly provided to households that could not otherwise afford to

connect; post-project evaluation results indicate that OBA beneficiaries continue

to fall in the lowest deciles of income distribution. In addition, results of the

survey show that improving access to the formal water supply system has not

resulted in displacement of low-income households; an estimated 98 percent of

beneficiaries remain in the homes that received the yardtap connections.

Water consumption among project beneficiaries is 25 percent higher than pre-

project estimates and 33 percent higher than non-connected low-income

households. In addition, water quality within the formal system has been

consistently acceptable (no water has failed fecal coliform tests), and therefore

beneficiaries are less likely to be at risk from contamination, compared to non-

connected households.

A significant impact/outcome from the project has been household time savings.

Various surveys indicate that, for households without a yardtap, between 55 and

106 minutes per day is required to fetch water. For beneficiary households, the

time spent fetching water was on average only 17 minutes per day. Beneficiary

households themselves estimated that, prior to obtaining a yardtap, they spent an

average of 58 minutes per day fetching water. This indicates a time savings of at

least 40 minutes per day, on average, per household.

Related to the above-noted household time savings, the household survey

indicated that those time savings accrued overwhelmingly to women and girls.

Households reported that approximately 65 percent of time savings benefitted

women, while an additional 20 percent benefited girls. Responses regarding the

use of time savings indicated that 47 percent of time savings was used for

studying, work or income generation, and child care.

Households report that they are satisfied with the water services. Based on the

findings from the post-project household survey, 93 percent of respondents

14

reported that they were satisfied with the water quality, while 76 percent are

satisfied with the service received (the primary complaint being the hours of water

availability).

53. Despite exceeding the connection targets and achieving clear and positive results,

as described above, the project did not reach the target value for the second PDO

indicator introduced at restructuring – i.e. a total of 468,000 people to be provided with

access to improved water sources under the project. This was not due to a failure of

project implementation, but rather was the result of the assumptions used to estimate the

target value. More specifically, the calculation of beneficiaries is a consequence of the

number of connections and the target value of 468,000 people evolved from assumptions

at project preparation which did not materialize. The key issue is the sharing rate,

derived from a government statistical construct used to estimate beneficiaries, which

assumes an average of three households accessing water from each yardtap connection in

low-income areas. Available data from the sample survey of OBA connections at closure

is not definitive, but indicates that, whilst sharing of yard tap connections does still occur,

it is of a smaller and limited scale. Therefore, in the absence of conclusive data on the

level of sharing, and using the best available information at completion, the ICR has

conservatively estimated the number of beneficiaries to be 163,357, based on 30,764

yardtaps installed, with average household size of 5.31, and one household per

connection.7

54. The assumption regarding the degree of sharing among beneficiary households –

which was unfortunately not adjusted in the Bank’s monitoring system – is the only

reason for a downgraded restructured PDO efficacy rating to Substantial (rather than

High). However, as this issue did not materially affect implementation of the project, and

the development objective of increasing access to piped water for the poor was achieved

through exceeding the design target number of household connections, it is considered a

minor shortcoming only.

55. This review also looked at connection patterns in non-program cities to see if any

comparisons could be made with program implementation and results in Maputo. The

fact that secondary cities were removed from the project as part of restructuring could

provide a useful comparison with the OBA project results. The following table

summarizes (i) GPOBA-subsidized connections in Maputo; (ii) new non-GPOBA

connections in Maputo; and (iii) new connections in the secondary cities over the project

period.

7 IMVA Semi-Annual Verification Report 10, for period January 2014 – June 2014.

15

New connections in selected cities, 2009 - 2014

2009 2010 2011 2012 2013 2014 Total

Maputo GPOBA 193 1,724 6,693 6,917 9,474 5,764 30,765

Maputo non-GPOBA 10,548 8,793 29,222 33,111 11,943 6,920 100,537

Beira 6,100 6,862 11,598 5,477 5,268 3,959 39,264

Pemba 2,556 3,086 2,212 1,528 1,414 1,099 11,895

Quelimane 2,885 2,588 3,084 928 1,470 1,240 12,195

Nampula 2,095 4,970 5,890 2,472 2,622 1,380 19,429

New connections in selected cities, 2009 – 2014

as a percentage of 2008 total connections

Total new connections % increase over 2008

connections

Maputo GPOBA 30,765 28%

Maputo non-GPOBA 100,537 93%

Beira 39,264 193%

Pemba 11,895 176%

Quelimane 12,195 171%

Nampula 19,429 146%

Total in selected cities 214,085 137%

56. On the surface, the above data could be interpreted that cities without the OBA

program experienced higher connection rates than Maputo. However, a number of factors

make it impossible to draw clear lessons or conclusions. These include:

No information is available regarding the income profile of non-OBA recipients.

While the rate of new connections was far higher in the secondary cities, the

inclusion of low-income households is likely to be significantly lower.

Existing coverage rates were extremely low in the secondary cities as of the

beginning of the review period; in addition, investments in water production and

networks had been in process for several years, with water and networks

becoming available during the project period.

Effective demand for new connections at all income levels was drastically

increased following the decision of the regulator in September, 2010 to reduce

fees charged to households for new connections.

Significant outside funding from international donors and financiers (including

under WASIS) was available for the purchase of connection materials in the

secondary cities, removing the problem of cash constraints for the purchase of

materials.

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3.3 Efficiency

Project Efficiency Rating: Substantial

57. The efficiency of the project is rated substantial, reflecting the achievement of

significant results with reasonable costs. Delays in project implementation did not affect

the ability of the operator to achieve / exceed the target connection values within the

funds allocated for the project. The costs for independent monitoring and verification

agent (IMVA) remained within the allocation despite the time extensions, due to cost

savings associated with cancellation of their services for the four secondary cities. The

total costs for IMVA services for this project were very reasonable at around 4%8 of the

restructured Grant amount, which also included the beneficiary survey, carried out as

additional scope of works at completion.

58. The ex-post economic cost-benefit analysis – undertaken as part of the ICR –

shows positive results supporting the substantial efficiency rating. Costs included the full

cost of new connections supported by the project (i.e., portions paid by the recipient

household and the project) as well as pro-rata costs of tertiary networks related to each

connection. It was estimated that approximately one-third of project-supported

connections were infill – i.e., areas whose tertiary network was already built out – and

therefore tertiary network costs were not included for those connections. Benefits were

limited to the time savings of beneficiary households, who no longer have to access water

from public standposts, wells, or neighbors’ taps, and the value of additional water

consumed compared to the pre-project situation. Because indications of health

improvements related to the provision of yardtaps were hard to identify, and because it

was not possible to prove causality, health benefits were not estimated. A 14-year period

of benefits was projected.9

59. The ex-post estimate of the economic rate of return for the project is 31 percent.

At a 10 percent discount rate, the project’s net present value is estimated at US$ 5.9

million.10 Additional information regarding the economic analysis is provided in Annex 3.

60. By definition, the amount of GPOBA subsidy was US$150 per connection. Given

an assumed 5.31 persons per household, the per capita subsidy was US$28, which falls

below GPOBA’s required threshold and is considered good value for money.

8 A total US$212,096 was disbursed from the Grant under consultancy services category to cover IMVA

costs. 9 The original economic analysis projected benefits out for a 10-year period, with implementation

over a 2 ½-year period. However, because actual project implementation took significantly longer – with

half of the connections made in years 5 and 6 – the post-project economic analysis was extended to 14

years in order to establish an equivalent period for the evaluation of benefits. 10 The original economic analysis used a 12 percent discount rate, however, at this time a 10 percent

discount rate appears to be standard. At a 12 percent discount rate, the ex-post net present value is

estimated at US$ 4.6 million.

17

3.4 Justification of Overall Outcome Rating (combining relevance, achievement

of PDOs, and efficiency)

Overall Outcome Rating: Satisfactory

61. The overall outcome rating for the project is Satisfactory. This rating reflects

substantial, efficient achievement of key development objectives, particularly after

project restructuring.

62. The overall assessment considered the ratings against both the original and

revised PDO and weighs this assessment against the proportion of funds disbursed before

and after the restructuring, as shown in the table below.

Original PDO

Rating:

Revised PDO

Rating Combined

1. Rating: Unsatisfactory Satisfactory

2. Rating Value: 2 5

3. Weight (% disbursed before

and after PDO revision): 8% 92%

4. Weighted Value: 0.16 4.6 4.76

5. Final Rating: Satisfactory

Note: 1 – Amount disbursed at time of approved restructure was US$ 400,565 or 8% of the total disbursed amount of US$5,000,000. 2. Assigned values for each rating – Highly Satisfactory = 6, Satisfactory = 5, Moderately Satisfactory = 4, Moderately Unsatisfactory = 3, Unsatisfactory = 2, Highly Unsatisfactory = 1

3.5 Overarching Themes, Other Outcomes and Impacts

63. While the formal project PDO indicators were limited to the number of yardtaps

installed and related beneficiaries, the project also tracked other associated impacts or

outcomes through the IMVA. These were documented in the semi-annual monitoring

and evaluation reviews and through an end-of-project household survey. These have been

presented in section 3.2 due to their being direct impacts of the provision of connection

subsidies. In addition to those beneficiary-specific impacts, this report judges that there

has been limited financial impact on AdeM. AdeM generates a profit from its operations

(i.e., not including depreciation, provisions for uncollected revenues, or interest expense).

Its operational cost coverage (operational revenue/operational expenses) is 1.12, and its

average cost per customer is M 3,500 per year (approximately M 290 per month, or

US$ 10 equivalent). The post-project household survey as well as a review of

consumption and billing data for project beneficiaries indicate that monthly water bills

for project beneficiaries is approximately M 200 (US$ 6.70). While revenue from

beneficiary households is therefore below the average cost of service to AdeM, the

contribution of low-income households is consistent with a rising-block tariff structure,

which relies far more on higher-consuming customers than on low-income, low-

consuming customers. In addition, payment patterns (i.e., the collection ratio) from OBA

beneficiaries have been largely consistent with the average AdeM collection ratio.

18

64. From the analysis of collected data, the results are inconclusive with respect to the

project’s impacts on (i) health outcomes and (ii) reduced expenditures on water. While

95 percent of respondents to the post-project household survey reported health

improvements as a result of the yardtap connection, no specific health information was

available to attribute impacts. In addition, when comparing beneficiary households, non-

beneficiary households with yard taps, and low-income households without a yardtap,

expenditures on water are roughly the same on an absolute basis. However, beneficiary

and non-beneficiary households with yardtaps consume between 25 and 33 percent more

water than low-income households without yardtaps, indicating considerable consumer

surplus accruing to households with yardtaps.

4. Assessment of Risk to Development Outcome

65. The risk to development outcomes is low. This assessment is based on the

incorporation of project beneficiaries into the general operations of the water utility and

the positive and improving performance of the water utility in the provision of water

services to the residents of Maputo and surrounding areas. In terms of the specific project

development outcomes (provision of yardtaps to low-income households), the post-

project review indicated that only a small percentage of beneficiary households – less

than three percent – have been disconnected from the system due to non-payment of

water bills. AdeM does struggle with key aspects of its operations – in particular,

unaccounted for water (UFW), which remains high, and operational cost recovery, which,

while positive, remains low. That said, service indicators – hours of water availability,

total customers, total water production and sales – have all notably improved over the last

decade due to a combination of management commitments, regulatory oversight, and

international financing for major system rehabilitation and investment. There is a robust

interaction between AdeM (the operator), FIPAG (the asset holder), CRA (the regulator),

and international financiers that supports adequate revenues for ongoing operations, the

maintenance of water quality and service standards, and planning and implementation of

necessary system rehabilitation and investment.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry:

Rating: Moderately Unsatisfactory

66. Preparation of the project was noticeably thorough with respect to the costs and

benefits of the proposed project and the modalities for implementation. However, there

were areas where the Bank misjudged the risks to the project. As noted previously,

implementation difficulties were faced due to the assumption that private-sector operators

would be operating the secondary city water systems, and due to the assumption that

AdM (and later AdeM), in Maputo, would be able to rapidly identify eligible

beneficiaries in service areas with sufficient networks and water availability. The Bank’s

19

assessment of water availability appears to have been optimistic, based in part on

reductions in unaccounted-for-water that have still not occurred. Project design was

inadequate in that the achievement of the original objectives, as defined, was dependent

on actions over which the project had no influence (i.e., contracting a private operator).

67. This ICR also notes that monitoring and evaluation arrangements were not fully

developed during project preparation, and there was some discrepancy within the project

Commitment Paper with respect to the ultimate outcomes expected to be achieved

(beyond the formal objectives of yardtaps provided to low-income residents) and that

would be tracked by the project. That said, a monitoring and evaluation plan was

established as part of the inception report of the verification agent in mid-2009, and data

tracked were largely appropriate and useful.

(b) Quality of Supervision:

Rating: Moderately Satisfactory

68. The Bank team reviewed project implementation progress on a regular basis,

consistently fielding semi-annual supervision missions, which were part of

comprehensive sector wide supervision and preparation missions, which strengthened

integration and complementarity of the project towards sector development objectives.

The team leader and key members were consistent throughout the project period,

facilitating considerable institutional memory and proactively engaging in problem-

solving to facilitate progress.

69. The Bank team identified early on the problems related to the leasing of water

operations in the secondary cities and that the OBA subsidies could not be disbursed in

accordance with the grant agreement. Thereafter, a project restructuring was initiated in

order to enable the subsidies to be applied to low-income connections in Maputo.

Processing of the restructuring was intentionally delayed, as per guidance of Bank

management, until the original Maputo-specific objectives were achieved.

70. In addition, the Bank supervision team closely tracked implementation progress in

Maputo, focusing on AdeM’s proposals for reaching eligible households first within

existing networks and then in areas that would require new network extensions. The

implementing agency believes that this intense focus on outputs and on the grant

financing pushed them to make connections and extend to areas that they probably would

not have prioritized if not for the OBA program. The support from the Bank helped them

to meet internal and government service targets. Finally, the Bank responded to client

requests to make adjustments in implementation guidelines in order to reach intended

beneficiaries. These included the expansion of geographic areas eligible for connection

subsidies, and re-definition of household eligibility criteria, changing from a list of

required characteristics of house quality (i.e., indicators of poverty) as a proxy for income,

which AdeM believed was disqualifying many low-income residents who should

otherwise qualify, to a negative list of characteristics associated with higher income

households, the presence of three or more would make a household ineligible.

20

71. The Bank’s positive performance notwithstanding, this review notes areas where

more careful attention could have been paid. First, while the original project design target

of 8,000 yardtap connections for low-income residents in Maputo was clearly feasible

within the time frame, the restructured target of an additional 21,000+ yardtap

connections for Maputo was ambitious. AdeM struggled financially and in terms of

internal capacity to put in place the necessary infrastructure – physical and human

resources – to identify and connect the substantial increase of eligible beneficiaries.11 In

addition, at project restructuring the Bank’s internal M&E system required the

introduction of the number of individual beneficiaries as a PDO core indicator. As

discussed earlier, the 3:1 sharing ratio which was assumed to calculate the end target

value was not realized. M&E results during implementation had indicated that yardtap

sharing was declining among project beneficiaries (and the post-project household survey

and review of billing data confirm this), yet the 3:1 sharing assumption and thus end

target values were not adjusted in the Bank’s M&E framework, which unfortunately

resulted in a downgrading of the restructured efficacy rating (Substantial rather than

High) and is considered a moderate shortcoming contributing to a downgraded rating of

Bank supervision performance (Moderately Satisfactory rather than Satisfactory).

(c) Justification of Rating for Overall Bank Performance:

Rating: Moderately Satisfactory

72. The overall assessment of the Bank’s performance has been rated Moderately

Satisfactory. This reflects the Moderately Unsatisfactory Quality at Entry rating and the

Moderately Satisfactory Supervision rating, taking into consideration the Moderately

Satisfactory Overall Outcome rating.

5.2 Borrower Performance

(a) Government Performance:

Rating: Satisfactory

73. Government involvement in the project was limited, both by design and due to the

output-based nature of the project. Government support for the sector has been

longstanding, provided in the form of support for the structure and framework for the

sector, including its relative independence from political pressure. Government fully

supported the proposed project, including the leasing of secondary cities’ water systems.

11 The issue is not the lack of low-income residents in Maputo – there are many. However, it proved a

significant challenge to identify low-income residents (i) in areas served by AdeM; (ii) meeting the

eligibility criteria; (iii) still able to make the required initial deposits to connect to the system; and (iv) in a

manner that did not discourage households who did not meet the OBA criteria from connecting to the

system.

21

Government intervention was not required or requested at any point of time during the

project.

(b) Implementing Agency Performance


74. As the original project was unimplemented in the secondary cities (i.e., there was

no implementing agency in those cities), the assessment of borrower performance is

based on implementation experience in the sole target city of the restructured project –

Maputo. Implementation was undertaken by the leaseholder for the Maputo water supply:

first Aguas de Mozambique (AdM), and, following the buyout of the shares of Aguas de

Portugal by FIPAG, by the renamed company, Aguas da Regiao de Maputo (AdeM).

75. As the implementing agency had very little experience connecting new customers

outside of the normal connection framework (e.g., household applies for a connection and

makes a substantial deposit on the full cost of connection, making it highly unlikely for

low-income households to apply), there was a steep learning curve in implementing the

project. Project implementation was initially very slow. This was in part due to the time it

took to develope internal procedures for identifying potential beneficiaries, assisting

households in the application process, and ensuring that yardtaps remained eligible

during the full verification process. However, the Bank supervision team also reports that

the private-sector operator was openly unwilling to make connections to low-income

customers despite the project. Only once it was clear that the private operator would be

bought out by FIPAG and removed from management did implementation begin to

progress.

76. The performance of the implementing agency (by that time under public sector

ownership) was exemplary during post-restructuring implementation, when nearly 22,000

low-income connections were completed in a period of two and a half years, or

approximately 4,400 connections every six months. AdeM faced serious constraints

regarding the capacity of potential beneficiaries (illiteracy, inability to amass the

approximately US$ 17 deposit12), low availability of water due to slower-than-expected

waterworks rehabilitation and programs to reduce unaccounted-for-water, and lack of

networks in areas with a higher concentration of potentially eligible households. AdeM

reports that in order to meet the implementation targets, among other measures they (i)

devised payment plans for households unable to afford the initial connection deposit; (ii)

assisted potential beneficiaries in the application process; and (iii) revised network

extension plans in order to access neighborhoods with low-income populations. The

borrower stated that their commitment to full implementation was due in part to the

12 At the time of project preparation, the total connection cost to households in Maputo was US$ 167

equivalent, consisting of US$ 150 in direct connection costs (material and labor) and a US$ 17 deposit,

calculated based on three-months of low-volume usage, which in effect acted as a security deposit against

non-payment of water bills. Under the OBA project, the project effectively paid for materials and labor,

while the household paid for the connection deposit.

22

desire not to “lose” potential grant funding, and in part due to the project’s implicit

support for government targets for extensions of water service.

77. It should be noted that AdeM’s commitment to project implementation came

despite serious financial disincentives resulting from: (i) an inability to finance the cost of

new connections from internal funds; and (ii) considerable unreimbursed staff and

materials costs in project implementation (e.g., for outreach, assistance, protective

materials against equipment theft in low-income areas, etc.). AdeM reports that it often

had to borrow at local, commercial rates to pre-finance equipment for periods between

six and nine months – at a 16 percent interest rate, this could be more than US$ 15

equivalent per connection. While AdeM did not monitor the additional costs associated

with project implementation and this review was not able to confirm such costs, these are

costs that are neither included in AdeM’s tariff, nor reimbursed in other ways.

(c) Justification of Rating for Overall Borrower Performance


78. The overall performance of the Government and the Implementing Agency has

been rated as Satisfactory, taking into consideration the implementation strengths

discussed above, achievement of results and compliance with agreements, safeguard and

fiduciary controls, towards the achievement of the development outcomes.

6. Lessons Learned

79. The following lessons learned have been distilled from the project’s

implementation experience and challenges:

80. With respect to the output-based nature of the project:

81. Output-based payments do not inherently provide incentives for change in

behavior or investment. Whilst, the primary objective of this project was to increase

piped water access to the poor, implemented through the operator, OBA projects are

often intended to provide incentives to the private sector to undertake investments that

they might otherwise not engage in. This project subsidized low-income households to

connect to the water system, but was not designed to incentivize the operator to pursue

those connections. Under the arrangements for new connections at the time of project

design and initial implementation, an OBA payment was at a disadvantage compared to

“regular” connections: For a regular connection, the operator would be paid up-front for

the cost of the connection (Mt 4,300, or approximately US$ 167 at the time of design),

and there would be no risk to the operator. For an OBA connection, the operator had to

pre-finance the cost of the connection and face the risk that, after as much as a 6-month

or 9-month delay, he might not be fully reimbursed for its cost (or even reimbursed at all).

Furthermore, from the operator’s perspective, additional efforts are required to reach low-

income households, with limited benefits due to low consumption rates and potential

collection issues.

23

82. Only once the policy for payment arrangements for normal connections was

changed was there a real financial incentive for the operator to increase his efforts to

connect low-income households relative to non-beneficiary households. Under the new

policy, households only had to pay Mt 2,000 (US$ 78 equivalent) to receive a new

connection (and that could even be paid over an 18-month period), even though the cost

of providing that connection was still Mt 4,300. As no arrangements had been made to

cover the remaining cost, at that point the OBA payment became a more attractive

proposition to the operator.

83. Output-based programs need to assess ability of the recipient to pre-finance

investments and consider pre-financing support mechanisms. In the case of this

operation, the ability of the operator to pre-finance investments was not adequately

assessed. For the secondary cities, it was assumed that the lease bids received from

private operators would include pre-financing in the overall cost of their bids. Had the

lease arrangements moved forward, the cost of pre-financing would in theory have been

embedded in the overall cost structure. In Maputo, however, the existing operator was

under severe cash constraints for a variety of reasons, and struggled to pay for the initial

investments in connections. After the change in government policy regarding the cost of

connections to consumers, the cash constraints became worse – requests and expectations

for household connections increased considerably, while available cash to pay for those

connections reduced. Investment pre-financing can be a significant implementation

challenge, which can be addressed through a financial assessment during preparation and

the incorporation of support mechanism, where appropriate (e.g pre-financing advances

or ‘line of credit’ utilized under the Bank’s PforR instrument).

84. Verification procedures should focus on the ultimate objectives of the operation.

The operation included two stages of verification: the first was intended to verify the

existence of the connection, the availability of water, and the eligibility of the household

(i.e., that the household was very low income); the second was intended to verify the

ongoing provision of water and the billing of consumption to the household for a

minimum of three months. In practice, this resulted in a verification exercise every three

months. If the purpose of the second verification was to prove the sustainability of the

investment, it is unclear that three months of water supply and billing is adequate. A

single verification step, established at a reasonable time period after installation of the tap,

may have been more appropriate.

85. There needs to be a very strong understanding of the characteristics of the

intended beneficiaries. In the case of this operation, targeted beneficiaries were notably

poorer than the operator’s regular customers, but it was assumed that there would be no

appreciable differences in terms of providing them with yardtap connections. In fact, the

target beneficiaries generally faced significant challenges in amassing even the reduced

US$17 application/connection fee and meeting the bureaucratic requirements of applying

for a connection. In order to implement the program – in particular, at the scale required

after the project restructuring – the operator had to develop capacity to support

households with low levels of literacy and record keeping, in effect developing skills

24

normally seen in a social service or non-profit agency. The operator also developed

programs for the gradual payment of the US$17 application fee. It took a significant

amount of time for the operator to work through the challenges of the target beneficiaries,

which slowed implementation.

86. All the costs of program implementation accruing to the operator should be

factored into the OBA payments. The operator believes that it incurred significant costs

related to the implementation of the program that were not factored into the OBA

payments. These included staffing and time costs related to program outreach, financing

costs related to costs that intended beneficiaries were not able to pay, and pre-financing

costs for materials. While it could be considered that the OBA payments “leveraged”

these investments by the operator, in fact the operator could not afford to make the

investments, and there are no long-term returns on the investments given the low rates of

water consumption and collections by the beneficiaries.

87. Lessons learned that are applicable to any type of investment operation include:

88. There needs to be a full appraisal at the time of project restructuring. The

operator faced significant challenges in the full implementation of the project (i.e.,

meeting the target of 28,950 yardtap connections for very low-income households) in the

allocated time. One of the key reasons for this is likely that, while there were many very

low-income households within the formal Greater Maputo and Matola service areas, there

was not, initially, sufficient water to service them, and they were not within easy access

of existing networks. The operator has reported that in order to meet the objectives of the

OBA project, it re-prioritized network expansion plans so that it would be able to reach

more very low-income households. This had knock-on effects, though, due to the cost of

the new networks and the cash-flow impacts of the resulting demand for non-OBA

financed connections. A full appraisal at restructuring may have also shown that yardtap

sharing was not taking place at the assumed 3:1 ratio used to calculate the number of

beneficiaries. This also affected the economic returns to the project.

89. Implementation arrangements need to be realistic; assumptions regarding

implementation need to be linked to the relevant project, rather than to goals related to

other projects or programs. The failure to implement the program as initially designed

was due to the fact that implementation in the four secondary cities was dependent upon

the success in the leasing of water operations to private sector operators. These

transactions were not well advanced when the OBA project was appraised, and ultimately

failed due to a combination of factors. While it is unlikely that any arrangements could

have ensured success of the leasing process, that process was entirely independent of the

OBA project, and vice versa.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Grantee/Implementing agencies

(b) Cofinanciers/Donors

25

Annex 1. Project Costs and Financing

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

Components

Appraisal

Estimate (USD

millions)

Restructuring

Estimate (USD

millions)

Actual/Latest

Estimate (USD

millions)

Percentage of

Restructured

Amount

A. Program for

Maputo 1.20 5.00 5.00 100%

B. Program for Beira,

Pemba, Quelimane,

and Nampula 4.43 0.00 - -

C. Verification of

completed yard tap

connections and

service delivery

0.37 0.00 - -

Total Project Costs 6.00 5.00 5.00 0.00

(b) Financing

Source of Funds

Appraisal

Estimate (USD

millions)

Restructuring

Estimate (USD

millions)

Actual/Latest

Estimate (USD

millions)

Percentage of

Appraisal

Global Partnership on

Output-based Aid (Trust

Fund Grant)

6.00 5.00 5.00 100%

26

Annex 2. Outputs by Component

Original Project

The original project consisted of three components: (1) the connection program for

Maputo; (2) the connection program for Beira, Pemba, Quelimane, and Nampula; and (3)

the verification of completed yard tap connections and service delivery.

Over the course of the original project implementation period (up to December 31, 2011),

Component 1 was fully implemented, connecting more than the connection target of

8,000 yardtap connections. Component 2 was unable to be implemented. Component 3

was implemented as it related to verification in Maputo only; related disbursements were

proportionate.

Component 1: The following table and chart shows the implementation of Component 1

up to December 31, 2011.

2008 2009 2010 2011

Verified new connections 0 193 1,724 6,693

Cumulative connections 0 193 1,917 8,610

Component 3: In the original project period, the verification agent undertook a baseline

study and nine (9) quarterly verification exercises. In addition, the verification agent

prepared five semi-annual progress reports.

Restructured Project

The restructured project consisted of a single component: the connection program for

Maputo and the verification of completed yard tap connections and service delivery.

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

2007 2008 2009 2010 2011

Total planned connections

Total actual connections

27

Over the full implementation period of the restructured project (up to June 30, 2014), the

component was fully implemented. The following table and chart indicates

implementation progress.

2008 2009 2010 2011 2012 2013 2014

Verified new

connections 0 193 1,724 6,693 6,917 9,474 5,764

Cumulative

connections 0 193 1,917 8,610 15,527 25,001 30,765

It is important to note that the presentation of progress on an annual basis masks the high

degree of variability in the progress of implementation (on the monthly basis). Rather

than proceeding in a linear fashion, the installation of yardtap connections took place in

marked fits and starts as the operator accessed funds for materials and works.

In addition to the above yardtap connections completed, the verification agent undertook

ten (10) quarterly verifications and prepared five semi-annual progress reports during the

additional implementation period (January, 2012 – June, 2014). Following the close of

the implementation period, the verification agent undertook one additional verification

(of connections made during the implementation period) and a survey of beneficiary

households. That additional work was paid directly by FIPAG and is not included in the

project’s overall disbursement figures.

Eligibility Criteria

Eligibility criteria were established jointly by AdM staff and the verification agent, taking

into consideration program objectives of targeting poor households unconnected to water

systems. It was agreed that characteristics of potential beneficiaries’ dwellings would be

used to establish eligibility as a proxy for income, as income would be difficult to verify.

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

2007 2008 2009 2010 2011 2012 2013 2014

Total planned connections

Total actual connections

28

Initial guidelines established in the operations manual included pictures of six dwellings

– three considered to be eligible and three considered to be ineligible – but did not clearly

specify the housing criteria to be used. Shortly after the verification agent was engaged,

detailed eligibility criteria were established, which prescribed that beneficiary household

dwellings/property should exhibit four of the following eight characteristics, including

the mandatory characteristic of accessing water from a standpipe or a neighbor’s tap.

Eligibility Criteria: Four Characteristics Required

Characteristic Description

Water access From a standpipe or a neighbor’s tap

(mandatory)

House fence Nothing or vegetation

House roofing Zink or fiber cement

Doors and windows No armed doors or windows

House walls In straw or non-plastered blocks

House floor Dirt

Bathroom Outside the main house

Kitchen Outside the main house

Over time, it became clear that a considerable number of households were being excluded

from the program – despite obvious poverty – due to the existence of one or more of the

above criteria. For example, the property of a household living in poverty may effectively

have blockwork exterior property walls on three sides due to neighbors’ being wealthy

enough to erect their own property walls, which are of course shared by the adjacent

property. Other more common housing characteristics among poor households were the

existence of concrete floors and interior plastering of concrete blocks. As per the view of

FIPAG, some of the housing improvements are made possible through cultural practices

of incremental upgrading with support from community and family contributions. As

such, some of these improvements in the dwelling (although still very basic) can mask

the level of household poverty or distort this proxy for income.

In order to address these issues, FIPAG proposed and the World Bank provided its no-

objection to the following negative list of housing characteristics, the existence of three

of which would disqualify the household from the program:

Eligibility Negative List

Characteristic Description

House fence Plastered conventional wall with car gate

House roofing Concrete slab roof

Door and windows Windows with timber(ed) glass (panes) or net frame

(timber frames are acceptable)

House walls Outside wall fully plastered and/or painted

House floor Tiles or timber

Bathroom Inside the main house with taps or flushing system

29

Annex 3. Economic and Financial Analysis (including assumptions in the analysis)

An ex-post economic cost-benefit analysis was undertaken as part of the ICR exercise.

Costs included the full cost of new connections supported by the project (i.e., including

portions paid by the recipient household and the project) as well as pro-rata costs of

tertiary networks related to each connection. It was estimated that approximately one-

third of project-supported connections were infill – i.e., areas whose tertiary network was

already built out – and therefore tertiary network costs were not included for those

connections.

Benefits included a calculation of the time savings of beneficiary households, who no

longer have to access water from public standposts, wells, or neighbors’ taps, and the

value of additional water consumed compared to the pre-project situation. Because

indications of health improvements related to the provision of yardtaps were hard to

identify, and because it was not possible to prove causality in any case, health benefits

were not estimated. A 14-year period of benefits was projected. The original economic

analysis used a 10-year time horizon; however, because the actual implementation period

was significantly longer than originally estimated, the time horizon was extended four

years in order to establish a similar period for the projection of project benefits.

Assumptions used in the economic analysis were as follows:

Project Costs13:

Materials and installation of yardtap US$ 167/yardtap

Materials and installation of associated

tertiary network US$ 250/yardtap

Percentage of yardtaps associated with

new tertiary network 67%

Project Benefits:

Beneficiary Households 30,765

Average Household Size 5.31

Water Consumption:

Pre-project water consumption 30 liters/person/day

Post project water consumption 45 liters/person/day

Water expenditures:

Pre-project cost of water US$ 1.53/m3

Post-project cost of water US$ 0.91/m3

13 Total project costs used for the post-project economic analysis are US$ 10.3 million. This consists

of approximately US$ 5.1 million for materials and installation of connections (paid for by GPOBA and

household connection contributions) and US$ 5.1 million for materials and installation of the associated

tertiary network (i.e., 67 percent of US$ 250 per connection), paid for by various sources.

30

Time savings:

Pre-project time spent gathering water 55 minutes/household/day

Post-project time spent gathering water 17 minutes/household/day

Value of time saved

Monthly minimum wage US$ 119.50

Discount for purposes of analysis 50%

Project implementation took place over a five-year period, from 2009 through 2014.

Actual implementation was used to estimate project costs during the period of

implementation; project benefits were assumed to begin accruing in 2010 for the initial

beneficiaries, with remaining beneficiaries coming on stream in line with implementation,

up to an end period of 2022 (a 14-year period for the economic analysis).

The calculation of costs and benefits resulted in the following. The stream of costs and

benefits is provided in the appendix to this annex.

The ex-post estimate of the economic rate of return for the project was calculated to be 31

percent. At a 10 percent discount rate, the project’s net present value is estimated at

US$ 5.9 million. As the original economic analysis used a 12 percent discount rate, the

net present value was also calculated using that rate, resulting in an NPV of US$ 4.6

million.

Economic Rate of Return 31%

Net Present Value (10% discount rate) US$ 5.9 million

Net Present Value (12% discount rate) US$ 4.6 million

These results were compared with the economic analysis undertaken at appraisal. That

analysis undertook a city-by-city economic analysis that indicated a range of economic

returns:

City Economic Return

Maputo 12%

Beira 53%

Nampula 48%

Pemba 27%

Quelimane 96%

There were several differences in the calculation of costs and benefits in the original

analysis. First, costs were expected to be significantly higher, as the per-yardtap cost of

tertiary network was estimated to be US$1,200/yardtap. This report cannot find any

justification for costs that high, particularly as the analysis stated that it was only for

related tertiary network, not for related increases in treatment or transmission. (The

revised cost for tertiary networks was estimated based on recent contracted costs in

Mozambique for tertiary network expansion of US$ 10 per linear meter, with an

assumption of 25 meters per houseplot.) Second, the benefits included a calculation of

health benefits – a reduction in treatment costs and an increase in productive days per

31

year. These benefits were, however, calculated to be very small – only a tiny percentage

of the value of time saved. The large majority of benefits from the initial economic

analysis were derived from time savings, however, most of those time savings accrue to

the household with the yardtap connections – the time savings accrued to the two families

who were assumed to share the connection were relatively small. The difference in the

estimated economic benefit estimated for Maputo between the appraisal analysis (12%)

and the ex-post analysis (31%) is due largely to lower investment costs in the associated

tertiary network, and to the fact that aggregate time savings were not significantly smaller

than originally assumed. This reduction in assumed costs results in significantly higher

estimate of benefits despite the substantial reduction in the total number of beneficiaries.

It should be noted that it is not entirely clear why the expected economic returns for

investments in Maputo were noticeably lower than for the other cities in the appraisal

analysis. The investment costs in other cities were somewhat higher than in Maputo,

while benefit streams were very similar.

32

Table: Calculation of Project Costs and Benefits

2009 2010 2011 2012 2013 2014 2015 – 2022

(annually)

Project Costs

Number of yardtap connections installed 193 1,724 6,693 6,917 9,474 5,764

Direct Costs of yardtap connections (US$) 32,231 287,908 1,117,731 1,155,139 1,582,158 962,588

Indirect Costs of associated Tertiary

Network (US$) 42,328 288,770 1,121,078 1,158,598 1,586,895 965,470

Total Project Costs: (US$) 64,559 576,678 2,238,809 2,313,737 3,169,053 1,928,058

Project Benefits

Time Saved:

Total time saved (hours per year) 22,308 243,881 1,216,746 2,789,835 4,684,361 6,445,620 7,111,843

Value of time saved (US$) 7,405 80,955 403,892 926,070 1,554,948 2,139,588 2,360,737

Consumer Surplus:

Additional water consumers (m3/year) 1,916 20,948 104,509 239,626 402,352 553,631 610,854

Value of additional water consumed (US$) 1,744 19,062 95,104 218,060 366,140 503,804 555,878

Total Project Benefits: (US$) 9,148 100,017 498,996 1,144,130 1,921,088 2,643,392 2,916,614

Net Project Benefits (55,410) (476,661) (1,739,813) (1,169,607) (1,247,965) 715,334 2,916,614

Economic Rate of Return: 30.7%

NPV (Discount rate of 10%): US$ 5.9 million

NPV (Discount rate of 12%): US$ 4.6 million

33

Annex 4. Grant Preparation and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty

Lending/Grant Preparation

N. Jane Walker Lead Water & Sanitation Specialist AFTU1 Team Leader

Yogita Mumssen GPOBA Transaction Advisor GPOBA

Luiz Claudio M. Tavares Sr. Water and Sanitation Specialist AFTU1

Midori Makino Sr. Financial Analyst AFTU1

Sudeshna Ghosh Banerjee Economist AFTPI

Priyanka Sood Consultant GPOBA

David Weston Consultant AFTU1

Slaheddine Ben-Halima Procurement Hub Coordinator AFTPC

Antonio Chamuco Sr. Procurement Specialist AFTPC

Joao Tinga Sr. Financial Management Specialist AFTFM

Arbi Ben-Achour Sr. Social Scientist AFTS1

John Boyle Sr. Environmental Specialist AFTS1

Devendra Bajgain Operations Officer AFTU1

Rildo Santos Language Program Assistant AFTU1

Salma Chande Team Assistant AFCS2

Supervision/ICR

Luiz Claudio Martins Tavares Lead Water & Sanitation Specialist GWADR Team Leader

David Malcolm Lord Water & Sanitation Specialist GWADR ICR Team Leader

Elisabeth Sherwood Consultant GWADR ICR Author

Ubaldo Daniel Coila Quispe Operations Analyst GSUOU GPOBA

Caroline van den Berg Lead Water Economist GWADR ICR Peer Review

Peter Hawkins Snr Water & Sanitation Specialist GWADR ICR Peer Review

Victor Vazquez Alvarez Water & Sanitation Specialist GWADR ICR Peer Review

Rildo Santos Language Program Assistant GSURR

Arlete Quiteria Comissario

Nkamate Program Assistant AFCS2

(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

FY08 0.92

Total: 0.92

Supervision/ICR

Total: 9.84 177.00

34

Annex 5. Beneficiary Survey Results

Below contains a summary of results from the Completion Survey Report, prepared by the

Independent Monitoring and Verification Agent (October, 2014).

Survey Sample Overview

Two samples were established for the survey. The first sample was for customers benefiting

from the subsidy: these customers were randomly selected from the IMVA database. 280

customers were selected, representing 1% of the OBA beneficiaries. The second sample was for

households not connected to the water facility and thus obtaining water either through private

operators or from private or public wells and standpipes; 50 households were selected from the

same bairros in which the operator’s customer surveys were carried out. Households were

randomly selected.

The following figure shows the breakdown of the households surveyed per category.

Figure A5.1: Number of customers per year of connection

Summary of Results

Household characteristics

The composition of the households remained relatively stable over time and the findings are the

same as those seen throughout the verifications:

There are five persons per households on average (the median is the same).

The head of the household is a man in 59% of households and a woman in 41%.

35

Figure A5.2: Status of the head of the household

The heads of the household are mostly single.

The vast majority of households own their own house:

Figure A5.3: Home ownership

Ownership for households without a connection is 10 percentage points lower than for the OBA

beneficiaries.

Survey results shows that 86% of the heads of the household are still the original customer

registered in the commercial database. Only 1% of those who are not listed as the customer

moved into the house after the connection had been installed.

Upgrading the connection

Only 0.7% of beneficiaries upgraded their connection. The vast majority of households are still

using a yard tap.

36

Household income and expenditure

The survey included a section on expenditure on basic commodities (water, electricity, telephone

and basic consumption) and declared income.

Figure A5.4: Household expenditure on commodities for the sample of project beneficiaries

Total average monthly expenditure registered through the survey is 3.473 MT (median of 3.192

MT).

Monthly income came to an average of about 4.471 MT (median of 4.000 MT).

96% of the households surveyed declared that they receive a regular income.

Figure A5.5: Non-OBA households’ monthly expenditure on commodities

37

Total average monthly expenditure amounts to 3.321 MT (median of 3.580 MT). Total monthly

income, came to an average of around 4.984 MT (median of 5.000 MT).

Service Level

84% of respondents stated that they had water every day over the previous month. For those

households that experienced water service interruptions, they were without water for an average

of 1.3 days over the previous week and 2.9 days over the previous month.

Measurements showed that it took an average of 46 seconds, i.e. 7 minutes, to obtain 200 liters

of water (the average daily water consumption of a household). These measurements correspond

to those taken during the Output Verification exercises (an average of 56 seconds for the 1,152

measurements conducted during the verifications).

Customer billing

97% of households stated that they receive a bill every month.

Surveyors viewed the last 3 monthly bills for 64% of these households. In 93% of the household

visited, the surveyors were shown at least one bill.

Customer satisfaction

Nearly all households (93%) were satisfied with the water quality.

76% of households are satisfied with the water supply service.

The water availability constraints each day is main reason for households’ lack of satisfaction

with the service. Following this is the water tariff and then water quality.

Households that did not benefit from the project

Water source

The alternative water source to a private connection used by non-connected households is the

standpipe and neighbor’s tap:

38

Figure A5.6: Primary water source for non-connected households

The households without a domestic water connection usually alternate between two main water

sources: the standpipe and neighbor’s tap (or several neighbors’ taps).

Satisfaction level

74% of the non-connected households surveyed are not satisfied with their current water source.

Figure A5.7: Reasons for dissatisfaction of non-connected households

Reasons for not being connected to the network

39

Figure A5.8: Reasons for not being connected to the network

Water Usage

Survey results showed an average daily water consumption of 40 liters per capita. This is 20%

lower than either the first 3 month or first 6 months’ water consumption measurements for all the

OBA customers verified during the project (where the average was 50 liters per capita per day).

The surveyor results showed that for non-OBA households the average daily per capita water

consumption of 31 liters (the median is the same).

Water usage trends

85% of the households confirmed, water usage has not changed over time.

Active customers

2.5% of OBA customers have been disconnected for failure to pay their bills and 1.7%

disconnected at their own request.

Difficulties paying the bills and level of debt

The survey shows that 77% of households stated they pay their bill every month and 30% of the

customers surveyed admitted finding it difficult to pay their bills.

40

29% of the respondents were able to estimate the debt they owed to the operator. The average

level of debt is 2,548 MT with a median of 1,153 MT. These levels of debt equate to about 8.5 to

3.9 months of water consumption, which is quite significant.

Water consumption trends

Results show that the longer the customer has been connected, the higher their monthly water

consumption.

Figure A5.9: Average monthly customer water consumption per year of connection

Figure A5.10: Customers’ monthly water consumption per number of available readings

41

Time saved collecting water

Figure A5.11: Beneficiaries of the time saved

42

Annex 6. Summary of Grantee's ICR

1. Project Context and Design 1.1 Project Context In context of implementation of the second Plan for Alleviation of Absolute Poverty -

PARPA II (2006-2009), for urban water supply it is expected that the coverage should

increase from the current 37% to 70% in the next ten years, in order to achieve the

Meeting the Millennium Development Goals (MDGs) in the water and sanitation sectors

by 2015. In 2007, Government of Mozambique established the Delegated Management

Framework (DMF) to allow participation of the private sector in the management of

water supply services in order to improve public services, as well as increased coverage

of the population.

Is important to remark that the Private Sector Participation (PSP) in urban water supply in

Mozambique started in 1999 with the incorporation of five cities in FIPAG, namely

Maputo, with a lease contract transferring for operation for fifteen years, and a

management contract for five years to Beira, Quelimane, Nampula and Pemba, between

the FIPAG and the company Águas de Mozambique (AdeM) Private Operator (World

Bank, 2009).

With the necessity of to increase the coverage rate especially for peri-urban areas the

Government of Mozambique represented by FIPAG, signed a Grant Agreement with the

World Bank to implement the project GPOBA (Global Partnership for Output Based Aid)

in April 2008.

GPOBA funding was provided to assist low-income households with subsidized yard

connections in Maputo. The subsidy from GPOBA is a grant and the amount financed is

the difference between the cost of the connection and the user contribution.

The objective of the GPOBA project was to increase piped-water access to over 468,000

poor Mozambicans living in five cities – Maputo, Beira, Nampula, Quelimane and Pemba

who could not afford to pay connection costs and were excluded from the network. This

objective was to be achieved by providing an output- based subsidy to private operators

after their delivery of: 1) functioning yard-taps; and 2) the demonstration of continued

service for a period of time. Approximately 29,000 yard-taps were to be installed. Each

yard tap was officially estimated to serve approximately three households.

In Maputo, these outputs have been provided by the existing incumbent operator, Águas

de Mozambique (now renamed Águas da Região de Maputo, AdRM), who hold a lease

contract to supply water services in Maputo until 2014. In Beira, Nampula, Quelimane

and Pemba, existing management contracts were close to expire at the time of this project

identification and should have been replaced by lease contracts which were to be bid out

on a lowest subsidy required basis (with pre-determined tariffs and lease fees). These

contracts were expected to be for 15 years and the OBA subsidies would be disbursed

during the first 5 years of the lease contracts.

43

However, the bidding process was cancelled and the water supply service provision

was handed over to the operational entities of FIPAG. As a result the OBA subsidies

amount could not be applied to Beira, Nampula, Quelimane and Pemba.

1.2 Project Design From the original project document the total project cost to extend the existing

system to over 468,000 people was about US$ 42 million. This included IDA and EIB

co-financing for extending the secondary and tertiary water supply networks to these

468,000 people, as well as the US$ 6 million in GPOBA subsidies for the connection

charge (the “last mile”) and user contributions in the form of guarantee deposits

(about 10% of the connection charge). This project was built upon previous IDA-

funded schemes that developed the initial production, treatment, and network facilities,

and developed the institutional framework on which this GPOBA-funded project

relied.

Table 1: Cost and Subsidy for the Yard Tap Connections

City

Total

yard

taps

Total Cost Total Subsidy

Cost per

yard

tap

Subsidy per

yard

tap

User deposit

per yard

tap

People

per

yard

tap 1)

Number

of

persons

Subsidy

per

person

Maputo 8000 $1,336,000 $1,200,000 $167 $150 $17 17.9 143,520 $8.4

Beira 6750 $1,626,750 $1,498,500 $241 $222 $19 15.9 107,325 $13.9

Nampula 4900 $1,166,200 $1,092,700 $238 $223 $15 15.3 74,970 $14.5

Pemba 4900 $1,166,200 $1,082,900 $238 $221 $17 15.1 74,088 $14.6

Quelimane 4400 $836,000 $756,800 $190 $172 $18 15.6 68,640 $11.0

28,950 $6,131,150 $5,630,900 468,543 $12.0 Note: 3 households per yard tap; household size varies per city between 5 – 6 people

For Maputo the original target was 8.000 yard connections to be executed by the Operator up to December 2011.

1.2.1. Institutional Framework FIPAG was the grant recipient and signatory. As per the Agreement an Operations

Manual was established by the recipient, which sets the implementation arrangements,

including the roles and responsibilities of FIPAG and AdeM (Private Operator), the

eligibility criteria for household to receive the subsidized connections, and the

arrangements for billing, disbursement arrangements and monitoring/verification.

1.2.2. – Outputs Monitoring and Subsidy Disbursement The criteria for selecting the eligible household connections were developed by FIPAG

and Águas da Região de Maputo and was approved by the World Bank in 2007 (section #

2, Grant No. TF091213). The table below indicates some of the criteria used for selection

of household eligible for the subsidy. Criteria were directly related to housing quality as a

proxy for poverty.

44

Table 2 - Criteria for the different type of housing

Types of housing related to suitable

applicants

Types of housing related to unsuitable applicants

One room blockwork dwelling A quality dwelling which indicates that the owner can

afford to pay the full cost of a water connection

Habitation constructed using re-cycled used

materials

A small house, but located on a large plot of cultivated

land which indicates that the owner can afford to pay the

full cost of a water connection

Habitation with blockwork walls but

without a paved floor

A large plot of land with garden and leisure centre which

indicates that the owner can afford to pay the full cost of a

water connection

As defined in the 70% of the subsidy were disbursed upon submission of working yard

tap connections. The remaining 30% of the subsidy were to be released after three months

of verified service provision. Monitoring and verification were the responsibility of

FIPAG as the Implementing Agency. FIPAG appointed an independent Monitoring

and Verification Agent using Bank procurement procedures.

Following an application from the customer, the Operator would assess the property for

eligibility, collect the advance payment from the customer and implement the yard tap

connection. An Independent Monitoring and Verification Agent (IMVA) would randomly

verify outputs. After verification the Operator will be eligible to receive 70% of the

subsidy payment. The remaining 30% of the subsidy payment would be claimed after the

first 3 months of satisfactory service provision supported by records and independent and

random verification by the IMVA.

2. Project Implementation

2.1. Phase 1 – 8.000 yard connections

After signature of the Grant Agreement on 3rd of April 2008, the project became effective

in July 2009 after the recruitment of the Independent Monitoring and Verification Agent.

To enable fulfillment of the prerequisites for disbursement of the Grant Funds FIPAG

started the process for selection of the IMVA using Bank procurement procedures in

January 2009. As only one expression of interest was received, the process was re-

advertised on February 18. The Contract between FIPAG and the JV

Hydroconseil/Salomon was signed on 20th July 2009.

The selected IMVA started immediately and produced in August 2009 the inception

report which includes the baseline situation on the targeted bairros and some concrete

selection criteria for targeting the subsidy for the poor households. The final version of

the inception report was submitted to the bank on the 2nd October 2009 and the

instruction to the operator for the start of works was given immediately. The operator

started the selection of the beneficiaries’ activities and submitted an action plan in

November 2009.

45

The first quarter activities for the Operator concerned October-December 2009 during

which only 193 yard connections where executed as an output. Although this number was

low it was deemed acceptable considering that the Operator was still experimenting

application of the selection criteria and mobilizing an adequate team. Expectation was

that they would mobilize to other bairros quickly. The verification for the said period was

implemented smoothly and the first payment to the Operator released in January 2010.

By the time the Operator was only working in one bairro with a connection rate of 97

connections per month.

The reasons put forward by the operator for this low performance were at this period the

long delay taken by the client to pay for the subsidized connection fee and the fact that

there were too few households meeting the selection criteria based of the fact that many

of them had already a private connection through a small private operator.

In the beginning of 2010 project status was still not high but still coherent with the

connection plan. Along 2010 FIPAG and operator have agreed to introduce tap on the

standard connection implemented under the GPOBA according to the standard of the

normal connection and expectation of the customers. Therefore the Operator presented

logistic problems respective to the provision of tap. This created a financial impact for

the operator because households would remove the tap when not in use to prevent theft.

This resulted in low success rate for the 30% certification and lower payments than

expected by the operator. This technical issue of the tap was resolved at the beginning of

2012 with the removal of the tap as a requirement for verification; the success rates for

the 30% verification have been above 95% ever since.

Figure 1: Success rate evaluation along project implementation

The number of connections per quarter improved in 2011; the Operator managed to

connect more than 2,500 clients in two consecutive quarters. By the end of 2011 the

46

Operator had managed to connect 8,610 new clients using the subsidy. Nine verification

processes had been finalized with a total amount of US$ 1,215,180 paid to the operator.

2.2. Phase 2 - Reallocation of the northern cities GPOBA funds to Maputo

With the cancellation of the bidding process for the northern cities (Beira, Quelimane,

Nampula and Pemba) FIPAG had requested the reallocation of GPOBA funds earmarked

for the northern cities to Maputo. Proposal was approved by the Bank in February 2012

and as a result the project would now cover a much larger area than originally planned

(from district 4 to the entire lease area of the operator in Maputo and Matola) and the

total number of targeted connections was increased from 8,000 to 28,850. With this

approval, activities where now expanded to all Maputo and Matola municipalities.

The activities in the beginning of 2012 had a decrease in performance due to lack of

information on the continuation of the GPOBA project as the Operator was given

information on its continuation in March 2012 only. Only 129 new connections were

submitted for verification for this first quarter of 2012. Although project activities were

now extended to all Maputo and Matola the Operator performance was characterized with

lower performance along all 2012 with a drastic improvement on the last quarter (from

900 to 6,000 connections) but still behind the plan for reaching the 28,850 connections

target. The year was closed with 8.660 additional connections approved, with a

noticeable effort made by AdRM to meet the plan.

By the end of 2013, 50 months of the project had passed and AdRM had managed to

connect 25.001 new clients using the subsidy, 17 verification processes and a total

amount of US$3,529,110 certified for payment. In the last quarter of 2013 the average

success rate was 93%. The main reason for rejection within certification of 70% of the

subsidy was the fact that many connections could not be found and were thus refused for

the subsidy.

Following a request from the Operator the Bank approved in June 2013, some changes in

the selection criteria agreed between FIPAG and the operator in September 2009.

Essentially the main changes approved where the reduction of the criteria from 8 to 6; the

consideration of 3 out of 6 parameters to be eligible; the change on the description of 3

indicators namely the water access, house fence, house walls and the house floor. Main

reason was that with the expansion of the project area to the whole of Maputo and

inclusion of Matola municipality rather than Laulane area only brought to light the fact

that poverty is characterized in different ways and these proposed changes in the

eligibility criteria would create space for a more inclusive GPOBA project. This change

of the selection methodology has not changed drastically the Operators performance.

At the project end after 56 months of operation AdRM has managed to connect 30,765

new clients using the subsidy, 20 verification processes where finalized and

US$ 4,559,670 certified to the Operator.

47

2.3. Main constraints during project implementation The main constraints experienced and the actions taken during project implementation

are summarized in table 2 bellow. Other constraints such as non availability of the

network in the expansion areas with potential clients for the project could not have an

immediate response as considerable investments were involved and could not be

mobilized during the project implementation.

Table 3: Summary of main constraints and actions taken

Nr. Problems encountered Actions taken

1 Low progress from AdeM Continuous pressure on the operator, regular

meeting to see how to improve the operator

performance: one of the main problems was the

cash flow issue of the operator preventing it from

purchasing in advance the material for making the

connections.

2 The private operation of the 4 northern

cities never materialized meaning that the

OBA arrangement could not be pursuit

Reallocation of the connections for Maputo with an

increase of the project implementation area and

extension of the project deadline

3 Original eligibility criteria were likely to

eliminate poor households that did not

qualify

Changes of the eligibility criteria – June 2013

simplified a bit the number of criteria enabling

qualification of more poor households

4 In the new areas GPOBA connections

could not be done alone

Mobilization of funds to purchase materials for

both GPOBA and normal connections in parallel

Households meeting the eligibility

criteria but with no condition to pay the

10% connection fee

AdeM would consider payment of the connection

fee in two instalments

2.3.1. Other constraints faced in the management of the project

Other challenges are highlighted below:

Problems to locate the new connections due to a lack of a reliable database with

the household address/geographical information (FIPAG, 2013 - OVR nº14);

There was inconsistent data regarding the households connections expected to be

already in place. Such as secondary and tertiary pipelines network, which made it

difficult for the operator to work;

The original selection criteria required modification. According to the Operator

the low-income families improved the physical appearance of their houses

sometimes even before the first verification leading to the rejection of that

connection;

48

The fact that the full payment of the connection subsidy was only done between 6

to 9 months after its installation created some cash flow constraints for the

Operator.

3. Monitoring and Evaluation (M&E)

Under the Grant Agreement the monitoring and verification of the outputs was the

responsibility of FIPAG as the Implementing Agency (recipient) and on the basis of the

indicators detailed in Operations Manual. FIPAG appointed the IMVA for that purpose.

According to the said Operations Manual the outputs of the project upon which GPOBA

subsidies would be disbursed included:

Certified working connections.

Certification that the supply of water from certified new connections is being

adequately provided for the first 3 months of operation.

The verification process was done on a sample of 15% of the submitted outputs and was

divided in two phases. A first verification occurred at the end of the quarter when the

connection was constructed and submitted for verification; it certified the payment of

70% of the subsidy. A second verification occurred the following quarter in order to

verify the quality of service provided and in order to certify the payment of the

remaining 30% of the subsidy.

Monitoring and evaluation was mostly done by the IMVA, quarterly and semiannually,

using predefined monitoring indicators, and by FIPAG for the financial data and forecast

as well as through the semiannual reports to the Bank.

With the project end we believe that the project monitoring will still be in place as AdRM,

the Operator, does a monthly update of its performance indicators and have recorded

location of the GOPBA clients. On the other side CRA, the regulator, will continue

monitoring and benchmarking service quality indicators.

3.1. Independent and Monitoring Verification Contract

Original contract with the IMVA represented by the firm Hydroconseil in association

with Salomon was signed in July 2009 in a total amount of US$ 57,665 for the

verification of 8,000 yard connections. To accommodate the reallocation of the 20,850

connections from the northern cities to Maputo the same consultancy firm was selected

for services to be implemented from January 2012 to December 2013 and the Contract

was signed in October 2011 with an amount of US$ 139,986. Recently with the extension

of the Grant from December 2013 to June 2014 an Addendum was signed to cover

verification of additional yard connections, total budget was US$ 14,445.

4. Project Safeguards (environmental and/or social safeguards), Procurement

Rules, Disbursement and Financial Management Rules

With regard to the procurement rules, disbursement and financial management rules the

Grant Agreement conjugated with the Operations Manual gave clear orientation on how

49

those matters should be treated. In general there were no particular issues or problems

during project implementation. Procurement rules where used and respected for the

selection the IMVA as reported in 3.1 above.

5. Project Sustainability

Main project objective was to subsidize connection fee to the poor as the cost of the

connection was considered as the main barrier for water access. The water tariff structure

is already prepared to ensure sustainability as it is cross subsidized. This justifies the fact

that in general the GPOBA clients are being able to pay their bills.

To ensure sustainability AdeM undertook sensibilization campaigns along the project

implementation disseminating messages of how to save water.

In order to gather more data on post project behaviors and findings surveys was

contracted by FIPAG to the IMVA. The survey targeted a sample of 1% of total

connections implemented during the project and can be found in Annex I. Within this

sample we can state that project is sustainable as no GPOBA client has been disconnected

due to non payment.

Nevertheless there are some challenges left by the project that may define its

sustainability along the time which we should reflect on when considering similar

agreements in future and those are mainly related to billing and collection for this new

group of clients. In our view project should incorporate funds to develop tools/strategies

to deal with those possible post constraints.

For the future FIPAG want to increase piped-water access to low income households in

Maputo by providing an output-based subsidy to private operators. To achieve the desired,

FIPAG is designing project application for the extension of the current project.

6. Project Outcomes

Even with the considerable challenges during project implementation it was still possible

to achieve objectives in the 2 phases. With the last extension of the project it was even

possible to surpass the target by 1,915 new connections.

Table 1 bellow summarizes the project implementation and Operator performance from

November 2009 till June 2014.

50

Table 4: Summary of project outputs

8. Other Impacts

The characterization of the beneficiary households done by the completion survey

confirms that these households are among the poorest in Maputo and therefore that there

was no “leakage” of benefits to better off households and that the project reached the

target group of beneficiaries.

The completion survey identified and estimated the following impacts:

Table 5: Summary of project outputs Impacts Baseline value Post-project value Comment

Per capita

water

consumption

About 30 liters per

capita per day for non-

private connection

users

Between 40 to 50 liters per

capita per day

The per capita

consumption is

increasing over time

Use of protected

water source

The water source is

protected but the water

can still be

contaminated during

transportation

73% of the households use

their yard tap only and no

longer use an alternative

water source

No quantitative

estimation

OVR Date Submitted Approved Submitted Approved

nº1 Nov - Dec 09 194 193 0 0 $20.265

nº2 Jan - Mar 10 283 283 193 192 $38.355

nº3 Apr - Jun 10 539 538 283 283 $69.225

nº4 Jul - Sep 10 306 305 538 398 $49.935

nº5 Oct - Dec 10 952 598 305 272 $75.030

nº6 Jan - Mar 11 529 527 598 595 $82.110

nº7 Apr - Jun 11 2.506 2.473 527 453 $280.050

nº8 Jul - Sep 11 3.172 3.156 2.473 1.880 $415.980

nº9 Oct - Dec 11 540 537 3.156 2.841 $184.230

nº10 Jan - Mar 12 128 116 537 508 $35.040

nº11 Apr - Jun 12 170 170 116 109 $22.755

nº12 Jul - Sep 12 964 961 170 170 $108.555

nº13 Oct - Dec 12 6.148 5.670 961 959 $638.505

nº14 Jan - Mar 13 504 405 5.670 5.669 $297.630

nº15 Apr - Jun 13 1.625 1.609 405 405 $187.170

nº16 Jul - Sep 13 4.107 3.770 1.609 1.609 $468.255

nº17 Oct - Dec 13 4.174 3.690 3.770 3.746 $556.020

nº18 Jan - Mar 14 3.951 3.410 3.690 3.688 $524.010

nº19 Apr - Jun 14 2.615 2.354 3.410 3.410 $400.620

n°20 Jul - Sept 14 0 0 2.354 2.354 $105.930

33.407 30.765 30.765 29.541 $2.504.835

Paid

Total payment $4.559.670

70% of subsidy 30% of subsidy

$3.230.325 $1.329.345Payment

Total

51

Time saved The standpipe users

spend about 50 to 100

minutes per day per

household fetching

water

Yard tap users spend

between 17 to 20 minutes

per day

The main beneficiaries

of the time saved are

women and girls

Health

improvements

A qualitative indication of

the general health

improvements in the

household after installation

of the yard tap

No quantitative

estimation of impact,

the main beneficiaries

are again women and

girls

The impacts are focused on women and girls according to the completion survey; women

and girls are the first responsible for the water chore and the main beneficiaries of the

time reduction for fetching water and of the improvement of health in the household.

9. World Bank Performance

FIPAG as the project recipient and implementing entity evaluates the World Bank

Performance as positive with a strong presence during all project duration.

Apart from the biannual reports submitted by FIPAG to the Bank with copies of the

semiannual reports from the IMVA, the Bank team dedicated enough time for discussions

on the project issues during their supervision missions.

The Bank provided advice in time to secure that objectives were met in a sustainable way.

A dedicated Task Team Leader with clear understanding of the project environment was

of great value as it enabled timely response and advice to problems encountered.

Following justification above the table below attempts to score the Banks performance

from 1 to 5 being 1-poor and 5 excellent.

Table 6: World Bank Performance score

Indicator Score Comments

Project Preparation 4

Project Supervision 5 Project supervision was done between once to twice

a year and had an important contribution for project

success

Provision of advice 5 Discussions with both FIPAG and Operator during

Banks supervision missions

Responses to project

request

3 Discussions and decisions on changes to selection

criteria could have happened earlier than June 2013

It is of pride to emphasize that along these years a lot of visits where paid to the project

by the Banks visitors apart from project team.

52

10. Borrower Performance

For this case there were not so many inputs required from the Government to the

implementing agency, nevertheless, there were also some complaints with regard to

delays in payments specially to the IMVA as payment was done out of the country and

Government procedures for corresponding taxes is long and could take more than 60 days.

Although project was not so demanding in skills and capacity there was always from the

FIPAGs a project coordinator and assistant to manage both contract with the Verification

Agent and AdeM’s performance.

In the first 2 years of the project implementation the Operators performance clearly

affected the disbursement performance of FIPAG with risks project cancellation. But it

was then possible to revert the scenario.

11. Lessons Learned

The thing that made this project get on its tracks and meet the objectives was the pressure

put to the Operator in a consistent and constructive way, with focus on the constraints and

way forward. Although the operator was sometimes very far behind schedule he did

manage to reach and overcome the objective.

As a lesson learned and considering this specific type of project we could refer to the

following:

Some time should be allowed for Operator to get familiarized with procedures

especially when these are new;

Implementing agencies should have the capacity to expand the project, as far as

agreed selection criteria are respected;

The Operator improved its ability to do high number of connections at the same

time, only with the GPOBA project they manage to do around 6,000 in a quarter;

Definition of eligibility criteria should take into account culture aspects;

The Operator may face problems with billing and profits collection particularly

from households benefited from the project, since many of the poor household

struggle to pay the monthly bill at the end of the month. For future projects it

should be considered the design and implementation of other collection strategies.

12. Project Costs and Financing

Project costs categories were only two and this simplified disbursement process from

FIPAG side. Financing conditions were also clear under the Grant Agreement.

Table 7 below summarizes information regarding (requested, approved) disbursements

from the GPOBA grant. No additional amounts are expected to be invoiced, or paid by

FIPAG from the Grant.

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Table 7: Disbursement Summary

Category Description Allocated Disbursed Undisbursed

4 GPOBA Subsidy for Water Supply 4,350,000 4,559,670 -209,670

5 Consulting Services, including audits

(after Feb 2012) 650,000 212,096 437,904

Total 5,000,000 4,892,742 228,234

Total undisbursed amount is US$ 228,234 mainly resulting from savings under the

category 5- Consulting Services. This amount represents approximately 4% of total Grant,

thus disbursement can be classified as good.

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Annex 7. List of Supporting Documents

1. GPOBA Commitment Document, 2007

2. GPOBA Project Restructuring Paper, 2012

3. GPOBA Grant Agreement, 2008

4. Amendment to the GPOBA Grant Agreement, 2012

5. GPOBA Project Operations Manual, 2009

6. GPOBA Output Verification Reports (OVRs), prepared quarterly by IMVA

7. GPOBA Semi-Annual Reports, prepared by IMVA

6. Water Sector Implementation Support Mission Aide-Memoires, 2010 – 2014

7. Project Implementation Status and Result (ISR) Reports

8. GPOBA Household Survey Report, 2014

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