The project
Maputo Water Supply serves the Greater Maputo area of 1.7 million inhabitants. In this area 48% of the population lives in absolute poverty and only 40% has access to adequate drinking water. By significantly augmenting the population that has access to safe drinking water, the EIB project contributes to the achievement of Mozambique's Millennium Development Goals (MDG) on water, health and poverty eradication, which are central to the country's Poverty Reduction Strategy.
The project has four specific objectives: (i) to increase installed production capacity to ensure constant supply to the 730 000 people presently connected to the existing water supply system (currently the system does not provide a 24-hour supply) and increase the population served by the international operator by 467 000 people in 2010 and by an additional 145 000 by 2014; (ii) to improve the system's performance by reducing unaccounted for water (so-called unmetered water or UFW) from 60% to 40%; (iii) to expand the water supply in the poorer areas on the outskirts of town (so-called peri-urban areas) with the support of small local private operators, in order to extend services to an additional 110 000 people; and (iv) to improve the promoter's capacity and financial sustainability, which will contribute to the improvement of water services in all cities under the promoter's responsibility.
The project builds on earlier sector reforms and project work by the World Bank and brings together the national water agency FIPAG (Fundo do Investimento e Património do Abastecimento de Água) and the Mozambican government with a group of international development finance organisations: the European Investment Bank (EIB), the European Commission's Water Facility (ACP-EU WF), FMO of the Netherlands and Agence Française de Développement (AFD). The EIB subsidised loan (EUR 31m), the grants from the European Union Water Facility (EUR 25m), AFD (EUR 6.6m) and FMO (EUR 18.6m), and support from Mozambique's government (EUR 13.8m) were all agreed in 2005/06.
THE ACP-EU WATER FACILITY was established by the ACP-EU Council of Ministers in May 2004 and aims to achieve the Millennium Development Goal targets in the water sector (see ACP-EU Water Facility). It is an instrument of the European Commission for grant-funding that, when blended with EIB loans, enables the Bank to set up sustainable financing structures to support the extension of services to the lower-income groups of poor countries.
To support the design and implementation of projects that are feasible, sustainable, and provide appropriate and affordable services to lower-income people, the Bank can now become involved earlier in the project cycle, helping to improve project preparation. With support from the ACP-EU WF, the Bank has set up an EIB-ACP Project Preparation Facility for the grant-financing of project preparation and technical assistance. With the new Facility, the Bank is also able to support the design and implementation of more innovative projects, whose benefits can reach more vulnerable communities.
MDG. The seventh UN Millennium Development Goal - ensuring environmental sustainability - includes two specific targets: (i) reducing by half the proportion of people without sustainable access to safe drinking water, and (ii) reducing by half the proportion of people without sustainable access to improved sanitation.
EIB's decision for the financing of the project
EIB lending is provided under the Cotonou Agreement that mandates the EIB to provide loans for projects that aim at the reduction and ultimate eradication of poverty and the integration of the ACP economies into the world economy (http://www.eib.org/acp). The EIB funds the project from the Investment Facility, which is financed by EU Member States. The Investment Facility focuses on investment in the private sector and the commercially-managed public sector. The EIB's objectives in water and sanitation projects are: a) quality of life, health and environmental development; b) sustainability of the project and good service at least cost; c) affordability and cost effectiveness; and d) developing managerial capabilities in order to contribute to attaining the Millennium Development Goals in water and meeting the basic needs of poor communities.
The project contributes to poverty alleviation, better quality of life, health and environmentally sustainable development. Sustainability and affordability are ensured by a combination of low-cost funding, good regulatory policy (notably regarding tariffs and institutional autonomy), appropriately designed and regulated private-sector participation in service provision, and involvement of NGOs at the point of delivery. The promoter's (FIPAG) managerial capabilities are supported by technical assistance. The project contributes to FIPAG's overall financial sustainability, and thus to better water services in other Mozambican cities under its responsibilities.
The operation of the water supply system in the lease area is undertaken by an international private operator, while the peri-urban autonomous schemes will be operated by local small-scale providers. This new system of delegated management to the private sector, either international or local, contributes to the efficiency of the system and the sustainability of the project. In addition, the involvement of small-scale local providers will have a significant employment and growth impact on lower-income areas. The project increases the sustainability of independent providers' activities, while improving control of their services' tariffs and quality.
This is a flagship project whose general principles and key features are being replicated in other ACP countries after appropriately tailoring their design to the local context.
Environmental and social issues
Under Mozambique legislation, the environmental impacts of the project and enforcement of environmental management are governed by the Act on the Environment of 1997. This Act provides a legal framework for environmental protection, including water resources development and use, to ensure sustainable development. The Act commits the government to implementing National Environmental Management Programmes applicable to activities that can have an influence on the environment. Responsibility for formulation of environmental policies and water quality standards, as well as for the survey of the quality of water for human consumption lies with different ministries within the government.
As recommended by national regulations as well as international donors, all studies pertaining to this project give due consideration to the expected environmental impacts, as well as their mitigating measures. The promoter has a detailed Environmental Management Plan (EMP) providing guidance for the development of the project and its components.
Hydro-geological studies and fieldwork provide assurances that existing groundwater resources will be managed in a sustainable manner and that adequate quality for drinking purposes will be ensured.
Overall, environmental impacts due to the project are deemed to be largely outweighed by the improved quality of life of the population through its implementation.
There are no priority forests, natural habitats, original species of vegetation and wildlife or historical or cultural heritage of significance that could be in danger as result of the project.
There are a few negative socio-economic impacts that include the limited displacement of inhabitants and some disruption of public services during construction. Adequate mitigation measures will be put in place. Unavoidable construction effects such as safety risk to passers-by of truck traffic, accumulation of stagnant waters in bore pits and quarries, and noise and nuisance dust will be adequately dealt with.
The key positive socio-economic aspects are the result of the improvement of services to the currently served population and the extension of services to areas currently not served. If the project were not executed, the extension of services would be blocked and their deterioration could be expected, as installations are working beyond design capacity. To ensure the realisation of socio-economic benefits the project focuses on meeting the populations' needs, with respect to (i) the selection of service and income levels to respect affordability, and (ii) the encouragement of participatory management structures, especially for shared water supply services (standpipes), strengthening the sense of ownership in local communities.
A key impact of the project is the reduction of the time spent by families on long distance water collection. Water collection is generally the responsibility of women and young girls; the project should free time for them to engage in productive or educational activities generating substantial additional wealth and increasing the likelihood of girls receiving formal education. The project will also create opportunities for women to participate in water committees and other community-based organisations and so contribute to a fairer gender balance in the management of water services.
A second significant impact is on health. Access to safe water is a dominant factor in the reduction of cholera and other water-borne diseases. In Maputo, studies show there are cholera cases every year and an epidemic every three years. In peri-urban areas there are an average of 3 000 cholera cases per annum, while diarrhoea cases are estimated at about 63 000 per annum. The project is expected to significantly reduce morbidity from these diseases.
Finally, as the project is expected to strengthen the financial position of FIPAG, the promoter, its positive effects will extend beyond the project area to all cities under FIPAG's management.
The economic analysis of the project, including consideration of direct and indirect benefits (tariffs paid by people for different services in different areas, as well as the value of time saved, of reduced morbidity from waterborne diseases, and of induced economic activity) shows a satisfactory and robust Economic Internal Rate of Return.