MOZAMBIQUE’S INFRASTRUCTURE: A CONTINENTAL PERSPECTIVE period (table 11). The increase in the total number of connections compounded with the reductions of staff allowed for an increase in the number of connections per employee from 104 in 2002 to 137 in 2006.

The creation of the water authority (CRA) in 1998 and subsequent delegation of the management and operation of water utilities to private investors resulted in performance improvements. Collection ratios increased from 61 percent of the bills in 2002 to 90 percent in 2009. The government set a cost-recovery policy requiring urban utilities to achieve full cost recovery. Systematic adjustments have been carried out since, so that between 2002 and 2009 the overall gap between the average effective tariff and the average total costs declined (table 12). An important difference still remains, however: in 2009 the average total cost was reported at 1.13 per m<sup>3</sup> and the average effective tariff at 0.64 per m<sup>3</sup> . The absence of costrecovery tariffs has led to underinvestment and delays on asset maintenance, which in turn translate into high system losses. Despite the decline in the level of nonrevenue water, as of 2009 it still represented 45 percent of production, more than twice the level of a well-performing utility.

**Table 12. Evolution of operational indicators associated with Mozambique utilities**

||Water<br>delivered|System losses|Collection ratio|Average total<br>cost|Average<br>effective tariff|Total hidden<br>costs*|Total hidden<br>costs|
|---|---|---|---|---|---|---|---|
||(million<br>m<sup>3</sup>/year)|(%)|(%)|($/m<sup>3</sup>)|($/m<sup>3</sup>)|($ million/year)|(% revenues )|
|2002|68|55|61|0.86|0.30|32|294|
|2003|75|59|68|1.04|0.31|39|306|
|2004|81|53|45|0.94|0.32|45|203|
|2005|85|60|78|1.08|0.33|45|232|
|2006|85|56|71|1.08|0.35|49|225|
|2007|84|54|81|1.14|0.39|49|185|
|2008|87|49|90|1.14|0.52|47|144|
|2009|91|45|90|1.13|0.64|44|113|

_Source:_ Derived from Briceño-Garmendia, Smits, and Foster (2009). _Note:_ Water delivered (million m<sup>3</sup> /year) and total hidden costs ($/year) are reported as the sum of the Beira, Maputo, Nampula, Pemba, and Quilimane utilities. The other indicators reported in the table are weighted averages.

Progress on performance and the adjustment of tariffs have resulted in drastically decreasing hidden costs due to inefficiencies (box 3). In 2002 the mispricing of water services, distributional losses, and—to a lesser extent—collection inefficiencies accounted for almost 300 percent of the revenues on average (figure 10). In 2009 hidden costs represented about 110 percent of the revenues. Underpricing continues to be the main driver of hidden costs, with a contribution of around 50 percent, which is reflected in low operating and total cost-recovery ratios (see table 11).

# **Challenges**

Despite the reforms in the urban water and sanitation sector, progress on increasing access to the safest forms of water supply and sanitation has been slow. In 2008 only 9 percent of the population used piped water, just above 1997 levels of 7 percent. On average, only 0.55 percent of the population gained access each year between 2003 and 2006 (figure 11a). Access to standposts decreased from 19 percent in 1997 to 17 percent in 2008. . Between 1997 and 2008 access to septic tanks increased just 1.1 points, from 4.4 28