[1][4] Consequences on living conditions are multiple, ranging from poor health to lower productivity due to the time needed to fetch water.

In 1998 two key institutions were created to implement the National Water Policy: The regulatory agency CRA and the Asset Holding Company FIPAG.

When an independent review denied tariff increases to compensate for the flood damages, SAUR withdrew from the contract in October 2001.

[8] Subsequently, FIPAG and AdeM renegotiated the contracts, obtaining higher fees and improvements in the specification of service obligations and procedures.

[2] In 1999 the World Bank approved the Second National Water Development Project[9] In 2004 the five-year management contract for the smaller cities was extended by three years.

[12] In 2004, FIPAG entered into a three-year contract with the Dutch company Vitens under which the latter provided management support services and training in four small southern cities – Xai-Xai, Chokwe, Inhambane and Maxixe.

Another contract between FIPAG and Vitens was signed in 2006 for services in five additional small cities in central Mozambique – Tete, Moatize, Chimoio, Manica and Gondola.

[13] Canada, the Netherlands, UNICEF, Switzerland, the UK and the African Development Bank contributed to the Common Fund.

[15][16] In mid-2011 the director and financial administrator of the central regional office of the Asset Holding Company (FIPAG), José Duarte and Henriques Leonardo, were fired because they were accused of having created a private water supply company, Recta, which competed with FIPAG to supply water to ships in Beira port.

Its mission is “to ensure a balance between the quality of the service, the interests of consumers and the financial sustainability of the water supply systems.” It does so by approving tariffs, setting service quality targets, monitoring compliance with the targets, reviewing investment programs and hearing complaints by users and municipalities.

De facto, municipal governments play a very limited role in water supply and sanitation despite their legal responsibilities.

Due to the contract structure, the limited inflation-adjusted increases benefited the public asset holding company FIPAG, not the private operator.

According to the World Bank, the urban asset holding company FIPAG is "achieving full cost recovery and can graduate from government subsidies".

[22] On the other hand, the Mozambique MDG status report for water and sanitation notes that the sector as a whole still strongly depends on donor financing.

[6] According to the World Bank, in 2007 Mozambique's delegated private sector management approach has attracted about US$350 million to urban water over the previous six years.

[24] Because of the poor condition of the networks, illegal connections and vandalism of meters, unaccounted-for water (UfW) was over 50 percent in most areas in 2007.

According to a World Bank study, staff productivity in Maputo (5.4 employees per 1000 connections) compared favorably with large water companies in the Africa region.

[25] The main donors in the water and sanitation sector are the African Development Bank, Switzerland, the Netherlands, UNICEF and the United States.

Other donors in the water and sanitation sector include Austria, Canada, the European Commission, France, Ireland, Italy, Japan and the UK.

Donor coordination is most advanced in rural areas, where Canada, the Netherlands, UNICEF, Switzerland, the UK and the African Development Bank together with the government pooled their financial resources in a Common Fund.

[26] In 2010 it approved a 28m Euro combined grant and loan to support rural water supply and sanitation in Nampula and Zambezia Province.

More than 8m Euro were approved in 2008 to support the activities of the public Dutch water company Vitens in four cities (see further above under history).

The Swiss program was revised in 2003 to focus more on promoting, documenting and disseminating innovative experiences and bring them to the national debate in partnership with other donors such as the World Bank and the European Union.

[29] UNICEF carried out a 40 million Euro Water Supply, Sanitation and Hygiene (WASH) program from 2007–2011 in the provinces Gaza, Zambezia, Manica, Sofala and Tete.

The urban component was supposed to "develop the capacity of local stakeholders for adequate planning and implementation of decentralised WASH interventions", as well as "stimulation of demand for improved WASH services" and hygiene promotion, providing "at least 100,000 new users in poor urban and peri-urban with access to safe drinking water facilities in six targeted municipalities" and "100,000 new users with access to improved latrines".

[31] In 2007 the Millennium Challenge Corporation approved a US$203.6 mn Water Supply and Sanitation Project for six cities, two mid-sized towns and 600 villages.

[32] The project is part of a larger programme covering the three Northern Provinces Zambézia, Nampula and Cabo Delgado.

[34] The World Bank was closely involved in the promotion of private sector participation in urban water supply through two projects.

It aims to provide subsidized water connections for domestic consumers in Maputo, Beira, Nampula, Quelimane, and Pemba.

The project is implemented by FIPAG and expects to subsidize the construction of more than 30,000 shared yard taps which would impact approximately 468,000 people.