The review mission in 2001 developed a logframe for continued German support during this phase, that started in 2002 and ended in June 2006. During this phase the project supported the Government of Namibia with the main purpuse to develop a comprehensive policy framework for the Namibian water sector, as well as policy, legal and management proposals for institutional reform geared towards more equitable access to water by all Namibians.

Three result areas were identified for the project:
- Institutional changes for the water sector as directed by cabinet are implemented;
- Capacity of water sector institutions and individuals is strengthened to promote the effective and efficient functioning of the sector;
- A pricing and regulatory framework to guarantee consumer protection is developed.

The review team recommended that the Phase III should concentrate its support in the area of integrated water basin management. Since then, the focus of the project has shifted towards integrated land and water resources management in the Cuvelai Basin in north-central Namibia.