Embed Size (px)
Citation preview
AFRICAN DEVELOPMENT BANK GROUP
PROJECT: ARUSHA SUSTAINABLE URBAN WATER AND
SANITATION DELIVERY PROJECT
COUNTRY: UNITED REPUBLIC OF TANZANIA
APPRAISAL REPORT
September 2015
OWAS
Pu
bli
c D
iscl
osu
re a
uth
ori
zed
Pu
bli
c D
iscl
osu
re a
uth
ori
zed
TABLE OF CONTENTS
Loan Information ........................................................................................................................... ii
Project Summary ........................................................................................................................... iii
Results Based Logical Framework ................................................................................................ iv
Project Time Frame ....................................................................................................................... vi
I – STRATEGIC THRUST & RATIONALE ....................................................................... 1
1.1 Project linkages with country strategy and objectives ............................................... 1
1.2 Project linkages with Bank’s Strategy and operational priorities .............................. 1
1.3 Rationale for Bank’s involvement in the Project ....................................................... 2
1.4 Donor coordination in Tanzania ................................................................................ 2
II – PROJECT DESCRIPTION ............................................................................................. 3
2.1 Sector goal, development objectives, Project description and components .............. 3
2.2 Technical solutions retained and other alternatives explored .................................... 5
2.3 Project type ................................................................................................................ 5
2.4 Project cost and financing arrangements ................................................................... 5
2.5 Project’s target area and population ........................................................................... 7
2.6 Participatory process for Project identification, design and implementation ............ 8
2.7 Bank Group experience and lessons reflected in Project design ............................... 9
2.8 Key performance indicators and monitoring of targets ............................................. 9
III – PROJECT FEASIBILITY ........................................................................................... 10
3.1 Financial and Economic analysis ............................................................................. 10
3.2 Environmental impacts and social safeguards ......................................................... 11
3.3 Climate Change ........................................................................................................ 12
3.4 Gender and social ..................................................................................................... 12
IV – IMPLEMENTATION ................................................................................................... 14
4.1 Implementation arrangements .................................................................................. 14
4.2 Procurement arrangements....................................................................................... 14
4.3 Financial management and disbursement arrangements .......................................... 15
4.4 Monitoring of Project implementation activities and progress ................................ 16
4.5 Governance .............................................................................................................. 16
4.6 Sustainability............................................................................................................ 17
4.7 Risk management ..................................................................................................... 18
4.8 Knowledge building ................................................................................................. 19
V – LEGAL INSTRUMENTS AND AUTHORITY ........................................................... 19
5.1 Legal instruments ..................................................................................................... 19
5.2 Conditions associated with Bank’s intervention ...................................................... 19
5.3 Compliance with Bank Policies and Strategies ....................................................... 20
VI – CONCLUSION AND RECOMMENDATION ........................................................... 20
Appendix I: Tanzania - Comparative Socio-Economic Indicators – May 2015 ........................... I
Appendix II. Table of AfDB’s Country Portfolio ....................................................................... II
Appendix III. Key Related Projects in the Country ................................................................... IV
Appendix IV. Map of the Project Area ....................................................................................... V
Appendix V. Justification for ADB financing of more than 50% of the Project cost. ............... VI
i
Currency Equivalents
May 2015
1 UA = TZS 2,555.19
1 UA = USD 1.40642
1 UA = EURO 1.25405
Fiscal Year 1 July – 30 June
Weights and Measures 1 metric tonne = 2204 pounds (lbs)
1 kilogramme (kg) = 2.200 lbs
1 metre (m) = 3.28 feet (ft.)
1 millimetre (mm) = 0.03937 inch (“)
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres
List of Acronyms
ADB African Development Bank KfW Kreditanstaltfuer Wiederaufbau
ADF African Development Fund M&E Monitoring & Evaluation
AGTF Africa Growing Together Fund MDGs Millennium Development
ACC Arusha City Council Goals
AUWSA Arusha Urban Water Supply and MoEVT Ministry of Education and Vocational
Sanitation Authority Training
CAG Controller and Auditor General MoF Ministry of Finance
CFRA Country Fiduciary Risk MoW Ministry of Water
Assessment MTS Medium Term Strategy
CIFA Country Integrated Fiduciary NAO National Audit Office
Assessment NGO Non-Governmental Organization
CSP Country Strategy Paper NSGRP National Strategy for Growth
DAWASA Dar es Salaam Water and and Reduction of Poverty
Sewerage Authority NRW Non- Revenue Water
DoE Department of Environment OCGS Office of Chief Government Statistician
DP Development Partner PER Public Expenditure Review
EA Executing Agency PEFA Public Expenditure and Financial
ESAP Environmental and Social Accountability
Assessment Procedure PIU Project Implementation Unit
ESIA Environmental and Social PFM Public Financial Management
Impact Assessment RWSSP Rural Water and Sanitation Program
ESMP Environmental and Social O&M Operation and Maintenance
Management Plan Department
GEF Global Environmental Facility PRSP Poverty Reduction Strategy Paper
GoT Government of the United QPR Quarterly Progress Report
Republic of Tanzania RWSSI Rural Water Supply and Sanitation Initiative
HBS Household Budget Survey RMC Regional Member Countries
IA Implementing Agency TZFO Tanzania Field Office
IFIMS Integrated Financial Mgmt. System UA Unit of Account
IWRM Integrated Water Resources WSDP Water Sector Development Program
Management WSS Water Supply and Sanitation
ii
Loan Information
Client’s Information
BORROWER: United Republic of Tanzania
EXECUTING AGENCY: Arusha Urban Water Supply and Sanitation Authority (AUWSA)
Financing Plan
Source USD’ 000 UA’ 000 Instrument
ADB 143,647 102,137 Loan
ADF 25,316 18,000 Loan
AGTF 42,000 29,863 Loan
GOV. OF TANZANIA 22,953 16,320 Counterpart
TOTAL COST 233,916 166,320
ADB’s / AGTF Key Financing Information
Interest Type Enhanced Variable Spread Loan
Interest Rate Spread Floating Base Rate+ Funding Cost Margin + Lending
Spread
Funding Cost Margin 1 Refer footnote 1
Lending Margin 60 basis points (0.60 %)
Commitment fee None
Repayment Semi-Annual
Tenor Up to 20 years inclusive of grace period
Grace Period Up to 5 years
ADF key financing information
Interest rate spread None
Commitment fee 0.5% per annum
Service charge 0.75% per annum
Duration 40 years
Grace period 10 years
Key financial and economic analysis information
FIRR 6.11% and NPV TZS 117.7 billion (at 4% base case)
EIRR 17.6% and NPV TZS 287.1 billion (at 10% base case)
Timeframe - Main Milestones (expected)
Project approval September 2015
Signing of Loan Agreement November 2015
Project completion / closing December 2019
Project Last Disbursement June 2020
Last repayment ADB Dec 2037; ADF Dec 2057
1 The six months adjusted average of the difference between: (i) the refinancing rate of the Bank as to the borrowings linked to 6- month LIBOR
and allocated to all its floating interest loans denominated in USD and (ii) 6-month LIBOR ending on 30 June and on 31 December. This spread
shall apply to the 6-month LIBOR which resets on 1 February and on 1 August. The Funding Cost Margin shall be determined twice per year on 1
January for the semester ending on 31 December and on 1 July for the semester ending on 30 June.
iii
Project Summary
Project Overview: The objective of the Project is to provide safe, reliable and sustainable water and
sanitation services in Arusha city, Tanzania and thereby contribute to improvement in health, social
well-being and living standards of the beneficiaries. The Project will improve existing infrastructure and
enhance the operational, commercial and service delivery efficiency of the Arusha Urban Water Supply
and Sanitation Authority (AUWSA). The total cost of the Project is USD 233.92 (equivalent to UA 166.32
million) and will be implemented over a period of four years from 2016 to 2019. AUWSA currently meets
all its costs from internally generated revenue and has been rated as the best performer, in cost recovery,
among all the 23 regional water utilities in Tanzania. As shown in the Project need below, the water access
coverage in Arusha city is low, while its only existing sewage treatment plant is critically overloaded posing
a major environmental and health hazard. Thus, the operation is of high priority to the Government. The
Project is technically feasible, environmentally sustainable and economically and socially viable and
justifiable.
Project Beneficiaries and Impact: At completion, the Project will benefit a resident population of
more than 600,000 people in Arusha city and 250,000 additional people, who commute to the city,
at daytime, for business purposes. Over the Project horizon, about one million people will benefit.
Improved access to water and sanitation services will complement other social services and boost socio-
economic activities in the city, while providing a conducive business environment. The Project will also
provide climate adaptation benefits in relation to water sources management and it will lead to reduction
of water borne diseases and associated health-care costs. It is estimated that water borne diseases in the
Project area account for about 40% of per capita health expenditure. Furthermore, there will be
employment opportunities during construction. The Project will provide capacity building to AUWSA
and will support the Utility in adopting the National Gender Policy and in addressing the needs of
vulnerable groups.
Project Rationale: The Project is consistent with the Country’s Development Framework as laid
out in the National Vision 2025, which aims to improve the living standards through sustainable
development, including investment in basic infrastructure, such as water and sanitation facilities. It is
also aligned with the National Strategy for Growth and Reduction of Poverty NSGRP (2011-2015), the
Tanzania 5 years Development Plan (2011/12 – 2015/16), the Tanzania National Water Policy 2002
and the Bank’s Tanzania CSP (2011-2015). The Project is consistent with the Bank Group Strategy
(2013-2022), the Bank’s Integrated Water Resources Management Policy (2000) and the Gender
Strategy “Investing in Gender Equality for Africa Transformation” 2014 – 2018.
Project Need: In spite of the strategic importance of Arusha city, as a major business, diplomatic
and tourism hub, its water coverage is currently less than 44%. Its sewerage network caters to
less than 7.6% of the city’s inhabitants, and the treatment plant is critically overloaded. Significant
capital investment is required to address the current challenges and to avoid potential negative health
and environmental problems. The Project will lead to transformative improvement of water and
sanitation services in the city which is a pressing requirement at this point in time, and a key sector
priority.
Bank Value Added: Consistent with its operational priorities, the Bank has an important role in
the provision of resources to support Government development Projects. The Bank financing in
the Water Sector Development Program (WSDP) has to date been dedicated to the rural water and
sanitation subsector, and with this Project the Bank’s support is expanded to the urban subsector,
contributing much needed financial resources and bringing its vast experience in the urban subsector.
The Bank has vast experience in supporting water utilities, in water supply, sanitation and water
resources management, which are among its core competencies. The Bank field office will continue to
play an active role in the implementation of the Project and policy dialogue with the Government of
Tanzania, Development Partners and other key stakeholders.
Knowledge Management: The operation shall enhance Bank’s knowledge in the sector and it shall
impart knowledge to the beneficiaries through sensitization activities. This knowledge will be
captured through systematic monitoring and evaluation of the Project outputs and outcomes, Project
reports, supervision missions, a mid-term review, findings of stakeholder consultations and a Project
completion report at the end of the operation.
iv
Results Based Logical Framework
COUNTRY AND PROJECT NAME: Tanzania – Arusha Sustainable Urban Water and Sanitation Delivery Project PROJECT PURPOSE: To provide safe, reliable and sustainable water and sanitation services and contribute to improvement in health, social well-being and living standards of the beneficiaries.
RESULTS CHAIN PERFORMANCE INDICATORS MEANS OF
VERIFICATION RISKS/MITIGATING
MEASURES Indicators Baseline (2014) Target
IMP
AC
TS
Improve health and social well-being through reliable water and sanitation services
Access to water and sanitation services in urban regional centres
65%
100% in 2025 EWURA, WSDP
reports, NBS & HBS
surveys
RISK 1: Non - Compliance with counterpart funding obligations Mitigation: The General Condition requiring the Borrower to meet its counterpart contribution will be strictly applied during Project implementation. The country macro-economic situation and water budgetary allocation as well as the relatively good financial performance and position of AUWSA, limits this risk. RISK 2: Unwillingness of the consumers to pay increased tariff for water and sanitation services Mitigation: Detailed tariff and affordability study supported by sensitization campaigns and undertaking to implement recommended tariff, in line with the regulatory process. RISK 3: Catchment deterioration Mitigation: The Project includes a water resources management component, under which catchment management plans will be developed and implemented. RISK 4: Financial management risk: Details and mitigation measures are given in Annex B4 (sections B4.3, B4.13 and B4.14)
Under five mortality rate 81/1000 in 2012 54/1000 in 2025
Target in 2020
OU
TC
OM
ES
Improved access to sanitation services
Sewerage service coverage 7.6% 30% (main infrastructure)
AUWSA reports/ Project quarterly reports
People with improved on-site sanitation 142,000 (52% female)
300,000 (52 % female)
Sewerage services functionality
Sewerage effluent vs Tanzania effluent standard
Standard not met Standard met
Sewer blockage incidents 230 per month 100 per month Improved access to water services
Water supply service coverage 44% 100 % Population with reliable piped water services
325,000 (52% female)
600,000 (52% female)
Water services functionality
Quality of water vs Tanzania quality standard
- Standard met
NRW management (% of NRW) 48% 25%
OU
TP
UT
S
COMPONENT 1: SANITATION INFRASTRUCTURE AND SERVICES
IMPROVEMENT
AUWSA reports / Project quarterly reports
Sewerage infrastructure Length of sewerage pipelines laid 45 km (existing) 135 km (new) Sewerage connections 3,300 20,000 New treatment ponds system built 1 (existing) 1 (new)
Onsite sanitation New facilities constructed - 100 School sanitation blocks New sanitation blocks constructed - 100 Sanitation and hygiene campaign/sensitization and awareness in HIV/AIDS, cholera etc.
People engaged in campaign (male, female)
0 50,000 (52% female)
Sex disaggregated on-site public sanitation facilities, which are user friendly to physically challenged users
0 100 (segregated by gender / physically challenged users)
COMPONENT 2: WATER SUPPLY INFRASTRUCTURE AND SERVICES
IMPROVEMENT
Water sources capacity Intake/spring rehabilitated / constructed + m3
- 4 (33,000 m3)
Water boreholes (number and capacity in m3)
19 (existing) 30 (57,600 m3) - new
Water storage capacity Water storage tanks + capacity m3 15 (existing) 17 (19,045 m3) – new
Water distribution Length of rehabilitated and new pipelines laid
289 km (existing) 355km (new) 55km (rehab.)
District /bulk metering No. of district/bulk meters installed 0 38/ 50 Water sources management
Gender informed catchment mgmt. plans
None Developed and adopted
COMPONENT 3: INSTITUTIONAL SUPPORT AND PROGRAM
DELIVERY SUPPORT
Tariff study Tariff and affordability study conducted
None 1 Detailed Tariff Study
v
Environmental / gender plan
Environmental / gender mgmt. plan None Developed and adopted
Staff training Staff trained in key identified areas .. Training in 7 key areas
IFMS Integrated financial mgmt. information system
.. Operational
Organisation review study Institutional and organizational review study
None Carried out and adopted
KE
Y
AC
TIV
ITIE
S ACTIVITIES INPUTS
Component 1-Sanitation Infrastructure and Services Improvement: consultancy services; contract works for the supply of equipment and working tools to enhance smooth operations and carrying out measures to promote use of improved and environmentally safe on-site sanitation facilities in areas not covered by the sewerage system; Component 2-Water Supply Infrastructure and Services Improvement: consultancy services for studies, detailed designs and supervision; contract works for water sources and water infrastructure and conservation of water sources: Component 3-Institutional Support and Program Delivery Support: Capacity building of AUWSA staff; supply of Project equipment; Project management; Project auditing; compensation; studies and other support activities. More details are given in section 2.1 and the Technical Annexes sections A2 and B2.
Total Project Cost - UA 233,916, 000
ADB - UA 102,137,000
ADF – UA 18,000,000
AGTF – UA 29,863,000
United Republic of Tanzania – UA
16,320,000
vi
Project Timeframe
1
Report and Recommendation of the Management of the AfDB Group
to the Boards of Directors on a Proposed Loan to Tanzania for the Arusha
Sustainable Urban Water and Sanitation Delivery Project
Management submits the following report and recommendation on a proposed ADB loan of
USD 143.65 million, an ADF Loan of USD 25.32 million and an AGTF Loan of USD 42 million
to finance the Arusha Sustainable Urban Water and Sanitation Delivery Project in the United
Republic of Tanzania.
I – STRATEGIC THRUST & RATIONALE
1.1 Project linkages with country strategy and objectives
1.1.1 Alignment with Country Development Agenda: The overarching focus of the
country development agenda includes growth, reduced poverty and improvement of social
well-being. The Project objective is consistent with the country’s development framework and
long-term socio-economic development goals as laid out in: (a) Tanzania’s Vision 2025, which
aims to reduce poverty and improve living standards through sustainable development,
including investment in basic economic and social infrastructure, such as water and sanitation
facilities (b) the medium-term national growth and poverty reduction strategy 2011-2015, which
focuses on three broad clusters, namely: growth and reduction of income poverty; improvement
of quality of life and social well-being, and governance and accountability, and (c) the 5 years
Development Plan 2011/12 – 2015/16.
1.1.2 The Project will be carried out under the umbrella of the water sector development
program (WSDP) which was developed following policy reforms and enactment of an
enabling legal and regulatory framework in the water sector, including: (a) the National Water
Policy 2002 (b) the Water Sector Strategy 2006 and (c) Water Resources Management Act No.
11 of 2009 and Water Supply and Sanitation Acts No. 12 of 2009. Details are given in section
A1.2 of the Technical Annexes.
1.2 Project linkages with Bank’s Strategy and operational priorities
1.2.1 The Project is in line with the Bank Integrated Water Resources Management
Policy (2000) and the Bank Group Strategy (2013-2022) core operational priorities which
include supporting Africa’s transformation by promoting sustainable economic growth through
investment in infrastructure, while enhancing inclusive growth, community participation and
gender parity which are all addressed by the Project. The Project is further supported by the
Bank’s Urban Development Strategy (2011) and the Bank Gender Strategy 2014 – 2018, since
gender equality is an important aspect of Africa’s transition to green growth.
1.2.2 The Project is consistent with Pillar 1 of the Tanzania Country Strategy Paper
(CSP) 2011-2015 which focuses on infrastructure, including water supply and sanitation, as an
enabling factor to boost economic growth and improve the quality of life and social well-being.
The Project will also promote pillar 2 of the CSP through the institutional support sub-
component including use of applicable country systems. The Bank is a key development partner
in supporting the Government to address water and sanitation infrastructure and service delivery
needs in the country and the Government of Tanzania (GoT) is keen on continuing with its
cooperation with the Bank in the sector.
1.2.3 Inclusive Growth: The Project will support GoT efforts towards inclusive growth
by improving the sustainability and access to water and sanitation services to 66% of the
population of Arusha city that is currently unserved. Supporting inclusive economic growth
is a key development priority for Tanzania, to enable social well-being and poverty reduction
to the population as a whole. The Project will complement other social services and boost economic
activities in the Project area.
2
Inclusiveness: The Project will respond, with targeted solutions, to the needs of all groups
including the economically disadvantaged, and will complement and enhance AUWSA’s
current pro-poor strategy. It will ensure that the urban poor are adequately protected; on-site
sanitation and promotional activities will be carried out in areas not covered by the sewerage
system; public kiosks will be installed in designated areas; and Project interventions will include
gender considerations. AUWSA’s current pro-poor strategy is further discussed in section B9
of the Technical Annexes. The Project will also offer employment opportunities during
construction.
1.2.4 Green growth: The Project will support green growth by promoting sustainable
development of the investment, by ensuring reduction / mitigation of environmental risks,
including avoidance of environmental degradation through water sources and catchment
management.
1.3 Rationale for Bank’s involvement in the Project
1.3.1 Arusha city is the headquarters of the East African Community (EAC) and other
international institutions. It is a major diplomatic and business centre and the country’s most
important tourist hub (tourism is the country’s biggest export earner). Responsibility for the
water and sanitation services in the city, is vested in the AUWSA. The Authority’s goals and
business approach are covered in its Strategic and Business Plans, under which investments
have been made in the improvement of its operational systems including metering all its
customers, recruitment of qualified staff and rehabilitation of water and sewerage pipes.
1.3.2 Following upgrading from a municipality to a city in 2010, the service area of
AUWSA has more than doubled, to 208 km2, while the service coverage has remained low
(44% for water and 7.6% for sewerage). AUWSA has thus commissioned studies and detailed
designs, to improve its infrastructure, but has not been able to access financing for the required
investment. Hence the GoT has submitted to the Bank a request for financing of the proposed
Water and Sanitation Service Delivery Improvement Project. The objective of the investment
is consistent with the country’s development framework and the Bank Group Strategy 2013 –
2022.
1.3.3 Accordingly, this strategic Project has been prepared to enable transformative
improvement of water and sanitation services in Arusha city, as detailed in subsequent
sections of this report. The Project is aligned with the sector objectives and WSDP
implementation arrangements and targets. Currently the Bank is supporting transport and
financial sectors in the city through regional integration initiatives namely the Arusha-Holili
and the EAC transport Projects and the EAC Payments and Settlement Systems Integration
Project. With the new Project the Banks support will be expanded to the water and sanitation
sector. The Project investment has sound potential for sustainability.
1.3.4 The Project will be under the umbrella of component 3 of the WSDP, which covers
regional urban centres, district headquarters and small towns and areas serviced by national
Projects. It will support the WSDP targets in the urban sub-sector, which are to serve, by 2019,
some 8.1 million beneficiaries in Dar es Salaam and the 23 regional urban centres, 109 district
headquarters and small towns and areas served by 7 national Projects.
1.4 Donor coordination in Tanzania
1.4.1 The country’s development cooperation landscape includes 4 multilateral
organizations, 16 United Nations agencies and 18 bilateral Development Partners (DPs).
There is a well-established structure for dialogue with the Government and Donor coordination
is carried out at both national and sector levels. The Bank is active in all key sectors, with a
strong presence in infrastructure development, including the water sector. Water sector
3
coordination is conducted through the Development Partners Group for Water (DPG-W). A
Memorandum of Understanding (MOU) sets out the roles and responsibilities in supporting the
sector, particularly the WSDP, which is jointly financed by DPs and the Government, as shown
in the table below.
1.4.2 The Bank Group financing in the WSDP has to date been dedicated to the rural
water and sanitation subsector, and with the Project the Bank’s support is expanded to
the urban subsector. The Bank is a key member of the water sector dialogue with the
Government, which comprises: (i) annual joint water sector reviews, involving GoT, DPs and
stakeholders to review institutional, policy, financing and sector performance (ii) steering
committee meetings; (iii) thematic and water sector working group meetings; (iv) DPG-W
meetings; and (v) thematic working group meetings.
1.4.3 Sector financing is shown in Table 1.4 while additional information on donor support
is given Annex A1.
Table 1.1: Sector financing
II – PROJECT DESCRIPTION
2.1 Sector goal, development objectives, Project description and components
2.1.1 Sector Goal and Project Development Objective
The sector goal is to improve quality of life and social wellbeing of the population and
enhance the performance of the national economy by ensuring equitable provision of
adequate, reliable and sustainable water and sanitation services. The Project is a constituent
part of the national WSDP. The Project shall contribute to the national effort towards
improvement of public health and quality of life, hence poverty alleviation among the urban
population. The Project objective is to improve water supply and sanitation services within the
service area of AUWSA.
2.1.2 Project Description
The Project will improve quality of water supply and sewerage services in the service area
under AUWSA, and comprises the following three main components: (a) Sanitation
Infrastructure and Services Improvement; (b) Water Supply Infrastructure and Services
Improvement and (c) Institutional Support and Project Delivery. A description of the Project
components is given in section 2.1.2, while detailed activities, quantities and costs are given in
the Technical Annexes section A2 and B2.
Water Sector Development Financing from July 2007 - June 2014
Total Government Basket Donors Earmarked Donors 970 mill UA
(100%) 173 mill UA
(17%)
413 mill UA
(43%)
384 mill UA
(40%)
Level of Donor Coordination
Existence of Thematic Working Groups [Yes]
Existence of SWAPs or Integrated Sector Approaches [Yes]
ADB's Involvement in donors coordination [Member]
Key DPs
include:
WB
KfW
DfID
AFD
AfDB
MCC
JICA
4
2.1.3 Project Components
Table 2.1: Project Components (detailed activities, quantities and costs are given in Technical Annexes)
Component (UA)
mill
Component Description
Sanitation
Infrastructure
and Services
Improvement
74.1
(69.0)
This component focuses on rehabilitating and expanding the sewerage network and
sewerage treatment facilities and will support decentralized sanitation systems including
sanitation marketing for on-site sanitation technologies and gender sensitive community
sensitizations in order to address sanitation challenges in the areas not covered by the
sewerage system. Activities include:
Consultancy services for design review (including review of both technical aspects and
non-technical, covering financing, management and PPP options), preparation of tender
documentation and supervision of the works.
Construction of new sewerage treatment facilities, design of which takes into account
latest technology as well as financing and management options, including PPP options.
Expansion of the sewerage network (by 135 km) to improve coverage from 7.6% to
30%; and rehabilitating the existing network.
Construction of a workshop and installation of operational facilities/equipment;
together with supply of equipment and working tools to enhance smooth operations.
Carrying out measures to promote use of improved and environmentally safe on-site
sanitation facilities in areas not covered by the sewerage system including construction
of public sanitation facilities.
Construction of decentralized sanitation facilities.
Construction of sanitation blocks for schools.
Water Supply
Infrastructure
and Services
Improvement
79.65
(74.1)
This component focuses on increasing water production capacity and improving the
transmission and distribution network; and enhancing the Utility’s operational efficiency.
Due consideration will be given to water quality of sources as groundwater in the area
generally contains high fluoride from its geological content. Activities include:
Consultancy services for studies and review of water sources plus design, tender
documentation and supervision of works; to assure protection of sources, the
consultancy ToR will include provision to ensure that communities around water
sources have access to pipe-borne water. Peri-urban areas and adjacent rural
communities to be also addressed
Improving water operations and reducing NRW from 48% to 25%;
Increasing water production capacity from 40,000m3/d to 109,000 m3/d;
Construction of 3 new conventional water treatment plants (33,000 m3/d);
Rehabilitating and expanding the transmission and distribution network (about 355 km)
to improve water supply coverage from 44% to 100%;
Construction of 17 water storage tanks (19,045 m3),
Construction of a new water quality and testing laboratory;
Supply & installation of 5 new fluoride removal units, one nitrate removal unit and
chlorination units and refurbishment of chlorination units;
Water resources management including catchment and water sources conservation;
Installation of water kiosks;
Institutional
Support and
Project
Delivery
12.48
(6.6)
This component will enhance AUWSA institutional capacity in water and sanitation
services delivery and provide Project management support.
Activities include:
Implementation of environmental and social / gender management plans;
Institutional and organizational review study
Training and capacity building of AUWSA staff
Support to AUWSA Corporate Social Responsibility Program (CSR)
Support to AUWSA to adopt and implement the national gender strategy
Implementation of integrated financial management information system
Tariff and affordability study and awareness
Supply of Project equipment; construction of new office building;
Project management support; Project auditing; compensation,
Communication and media coverage;
Total 166.32
(150)
The amount in parenthesis ( ) is financed by ADB and AGTF. The amount not in parenthesis is the total. All are in UA
5
2.2 Technical solutions retained and other alternatives explored
Technical solutions retained are based on international best practice, while taking into
account appropriate technology, and lifetime cost consideration, including investment
needs and operation costs. Reduction of non-revenue water as well as refurbishment and
upgrading of the existing systems and improvement of the operational efficiency of the Utility
are major features of the proposed solutions in order to enhance service delivery and improve
revenue generation. Technical deficiencies in the existing system will be corrected, including
pressure and water balance zoning. District metering areas will be established to enable water
demand management based on reliable flow measurements. Due consideration will be given to
water quality of sources and treatment options, since water in the area has high fluoride levels.
Alternative Project systems considered are given below.
Table 2.2: Project Alternatives Considered
Alternative Brief Description Outcome/reason for rejection
Solar
powered
pumping
systems
Drilled production
boreholes using solar
powered
submersible pumps
Solar pumping is not considered cost effective for the proposed large
borehole systems in Arusha which will require high peak power
requirements.
Sewerage
treatment
options
Use of biological
treatment systems
involving
mechanical elements
(such as trickling
filters, activated
sludge, or aerated
lagoons) vs. waste
stabilization pond
systems.
Biological (mechanized options) such as trickling filters, will need
power for operation in addition to regular maintenance, unlike
biological (waste stabilization) options which do not require energy
for their operation. Based on the current status of Arusha and the
Projected situation over the planning period, the current Project
design has recommended use of waste stabilization ponds, as the
most cost effective solution, considering that sufficient uninhabited
land has been acquired by AUWSA for their construction at an
optimal location, based on gravity sewer flows. Waste stabilization
ponds are suitable in areas where the intensity of sunlight and
temperature are sufficient to facilitate the treatment process. They
are used for municipal sewage treatment in many tropical and sub-
tropical regions and are highly effective in the treatment of
pathogens. Nonetheless, technical options for the sewerage treatment
as well as financing and management including PPP options, will be
further re-examined as part of the engineering services prior to
construction of the infrastructure.
Recycling Reuse of sewage
effluent
Current Project studies consider this option to be limited however it
will be further explored under the Project engineering services.
2.3 Project type
The Project is part of the national Water Sector Development Program (WSDP) which the GoT
is implementing with the aim of improving water supply and sanitation services and
strengthening sector institutions throughout the country. It is one of the projects under the urban
water supply and sanitation component of the WSDP, which addresses management support for
utilities and investment for urban water supply and sanitation systems. The urban component
of the WSDP is being implemented in partnership with different DPs supporting urban water
supply Projects in different regions. Improvement of water supply and sanitation services in
Arusha city is urgently needed, and is one of the priority Projects in the GoT’s investment plan
of the sector. The Project will be financed through the earmarked window of WSDP, using Bank
disbursement modalities to transfer funds for Project activities.
2.4 Project cost and financing arrangements
2.4.1 Background: The GoT in partnership with Development Partners is implementing the
WSDP Phase II, covering the period 2014/15 to 2018/19, estimated to cost USD 3.27 billion,
6
of which the urban water and sanitation sub-sector would require an estimated budget of USD
1.32 billion. Table 2.3 below provides a summary of urban sub-sector financing needs.
Table 2.3: Cost Estimates for Urban Water and Sanitation Sub-sector/Component of the WSDP
Yearly Financing Requirement USD’ 000 Total
Urban area Intervention Area 2014/15 2015/16 2016/17 2017/18 2018/19 USD ‘000
DAWASA
Management Support 1,261 3,391 2,826 1,696 1,130 10,304.34
Priority Investments 56,340 168,520 114,601 68,760 47,545 455,766.00
Regional WSSAs
Management Support 1,925 2,902 2,419 1,451 967 9,664.00
Priority Investments 35,077 129,847 122,539 54,923 36,616 379,002.00
National Projects
and Small Towns
Management Support 1,449 3,673 3,065 1,837 1,334 11,358.00
Priority Investments 43,853 147,497 114,581 99,748 45,336 451,015.00
Ministry of Water Management Support 199 298 249 149 99 994.00
Total 140,104 456,128 360,280 228,564 133,027
1,318,103.
34
2.4.2 The urban sub-sector will be financed by GoT and
DPs, including the Bank, through a combination of
earmarked and basket funding modalities. Table 2.4
herewith presents an indicative summary of funds
mobilized to date by DPs and GoT for the period 2014/15
to 2018/19. The AfDB/AGTF, will support in financing
the Project as part of the urban subsector of the WSPD for
the period 2015-2019, through an earmarked allocation of
USD 211 million (UA 150 million).
2.4.3 The total cost of the Project is estimated at USD
233.92 million (equivalent to UA 166.32 million), net of taxes and duties, of which USD 163.3
million (69.8%) are foreign costs and USD 70.6 million (30.2%) are local costs. These cost
estimates are derived from the Rapid Study Update of Arusha Water and Sanitation Feasibility
Study of March 2015 and other studies on the Project with details of estimated unit rates
obtained from suppliers and contractors, as well as from experience with similar ongoing
Projects in the country and in the region. A physical contingency of 10% and a price
contingency of 3% per annum have been allowed. A summary of the Project cost estimates by
components and categories of expenditure is shown in the table 2.5 and 2.6 below, while details
are provided in the Technical Annexes section B.2
Table 2.5 : Project Cost by Component
COMPONENT USD’ 000 UA’ 000
Foreign Local Total Foreign Local Total %
1) Sanitation Services
Improvement
60,904 29,416 90,320 43,304 20,915 64,219 45%
2) Water Supply Improvement 74,993 21,944 96,938 53,322 15,603 68,925 48%
3) Institutional Capacity
Building and Project
Management Support
5,505 9,824 15,330 3,914 6,985 10,900 8%
Total Base Cost 141,402 61,184 202,587 100,540 43,504 144,04
4
100%
Physical Contingency (10%) 14,140 6,118 20,259 10,054 4,350 14,404
Price Contingency (3% annually) 7,727 3,343 11,070 5,494 2,377 7,871
Total 163,269 70,646 233,916 116,089 50,231 166,32
0
Table 2.4: Indicative WSDP 2
commitment
DP USD million %
World Bank 229.0 31.0
USAID 60.0 8.1
JICA 44.5 6.0
KfW 24.0 3.2
EU 45.6 6.2
Other DPs 50.0 6.8
ADB 211.0 28.6
GoT 75.0 10.1
Total 739.1 100
7
Table 2.6 : Project Cost by Category of Expenditure
CATEGORY OF
EXPENDITURE
USD’ 000 UA’ 000
Foreign Local Total Foreign Local Total %
1 A) Works 125,447 48,031 173,478 89,196 34,151 123,347 85.6%
2 B) Goods 3,864 1,041 4,905 2,747 740 3,487 2.4%
3 C) Services 9,632 3,493 13,125 6,848 2,484 9,332 6.5%
4 D) Operating Costs 784 3,136 3,920 557 2,230 2,787 1.9%
5 E) Miscellaneous 1,676 5,484 7,160 1,192 3,899 5,091 3.5%
Total Base Cost 141,402 61,184 202,587 100,540 43,504 144,044 100.0%
Physical Contingency 14,140 6,118 20,259 10,054 4,350 14,404
Price Contingency 7,727 3,343 11,070 5,494 2,377 7,871
Total Cost 163,269 70,646 233,916 116,089 50,231 166,320
2.4.4 The Project will be financed by AfDB, AGTF and GoT/AUWSA. The Bank Group will
provide an ADB loan of USD 143.65 million (equivalent to UA 102.14 million), an ADF loan
of USD 25.32 million (equivalent to UA 18.00 million), and an AGTF loan of USD 42 million
(equivalent to UA 29.863 million), representing 61%, 11% and 18%, respectively of the total
Project cost. GoT/AUWSA will fund the balance of USD 22.95 million, which represents 10%
of the total Project cost. The sources of financing and the expenditure schedule by component
are provided in table 2.7 and 2.8 below, while the Technical Annexes section B2 gives a
breakdown of Project cost components by source of funds as well as a breakdown of Project
cost by category of expenditure financed by different sources of funds.
Table 2.7 : Sources of financing
Sources of Finance USD’ 000 UA’000 %
ADB 143,647 102,137 61%
ADF1 25,316 18,000 11%
AGTF 42,000 29,863 18%
GoT/AUWSA 22,953 16,320 10%
Total 233,916 166,320 100% 1ADF will be used for part of component 3 and part of the sanitation activities in component 2 - component details are given
in the Annexes.
Table 2.8: Expenditure schedule by component
COMPONENT USD’000
2016 2017 2018 2019 Total
1) Sanitation Services Improvement 13,585 32,015 30,755 13,964 90,320
2) Water Supply Improvement 11,576 38,411 29,862 17,089 96,938
3) Institutional Capacity Building and
Project Management Support 6,307 5,163 2,410 1,450 15,330
Total Base Cost 31,468 75,589 63,027 32,502 202,587
Physical Contingencies (10%) 3,147 7,559 6,303 3,250 20,259
Price Contingencies (3%) 1,038 2,494 4,222 3,315 11,070
Total Costs 35,653 85,642 73,552 39,068 233,916
2.5 Project’s target area and population
The Project covers greater Arusha, comprising Arusha city and surrounding areas. Following the upgrading of Arusha from a municipality to a city in 2010, the service area of the
water Utility (i.e. AUWSA) has more than doubled from 93km2 to 208 km2. At completion, the
Project will benefit a resident population of more than 600,000 (288,000 male and 312,000
female) people in Arusha city and 250,000 additional people, who commute to the city for
business purposes, during daytime.
Over the Project horizon about one million people will benefit. The Project benefits include:
(a) improved reliability and sustainability of the water and sanitation services; (b) overall
improvement of the public health situation in the city as a result of a more reliable water supply
service and rehabilitation of waste water collection and treatment facilities (c) an increased
8
implementation capacity of water and sanitation Projects by AUWSA. Sanitation and hygiene
promotion, including sensitization and awareness raising on water borne diseases and
HIV/AIDS, using information and communication technology material and radio programs will
also benefit the population in Arusha city and neighbouring districts.
2.6 Participatory process for Project identification, design and implementation
2.6.1 Participatory process for Project identification and design: The Bank’s
identification, preparation and appraisal missions consulted with key stakeholders including
senior central and local government officials, development partners, representatives of public
and private sector institutions and the beneficiaries. The missions were accompanied by
officials from the Directorate of Urban Water Supply in charge of Projects under the urban
component of WSDP. Extensive consultations were held with the AUWSA Management team
who provided significant support and Project information.
2.6.2 During Project appraisal the Bank mission had discussions with the Minister and
Permanent Secretary of the Ministry of Water on the challenges of Arusha, urgent need for the
Project, status of Project preparation and design. The mission also met the AUWSA Board,
which includes key stakeholders from industry and business, institutions, women
representatives, and consumers. The mission further held consultations with the Director of
Environment who is also the GEF Country Focal point, and experts from the Pangani water
basin (which encompasses the Arusha area) and visited the de-fluoridation research centre in
Ngurdoto.
2.6.3 The beneficiary consultation process which was supplemented with field visits to
Project sites provided valuable feedback for the Project. Beneficiaries expressed the need to
urgently address the challenges of the current level of water and sanitation services and stressed
their willingness and ability to pay for improved services. Women expressed a strong desire for
the Project, as it will improve general livelihood and reduce health hazards among children.
2.6.4 Public consultations were carried out during the preparation of the environmental impact
assessment report (ESIA) as discussed in detail in the Technical Annexes section B8.4
(Stakeholders). In addition an ESMP summary was disclosed to the public by posting on the
Bank website on 6th August 2015. The public participatory process will continue during Project
implementation. The AUWSA Gender Focal Person and the Customer Care / Outreach Officer
will ensure participation of women during the implementation of the ESMP including
monitoring of gender-related issues.
2.6.5 Participatory process during implementation: AUWAS will conduct stakeholder
consultative meetings and workshops during Project implementation to update stakeholders on
the progress of the Project, including customers, the beneficiary communities, DPs, key
Government Ministries, Non-Governmental Organisations (NGOs), the media, the Energy
Water Utility Regulatory Authority (EWURA), and Quality assurance regulators including
Tanzania Bureau of Standards (TBS), the Tanzania Occupational Safety and Health Authority
(OSHA) and the National Environmental Management Council (NEMC). The outcomes and
feedback from the stakeholder consultations will be duly taken into account to improve project
performance throughout the project implementation, including the review and detailed design
stage prior to construction. In addition, community groups and other beneficiaries will be
engaged through advocacy and community awareness programs included in the Project design.
9
2.7 Bank Group experience and lessons reflected in Project design
2.7.1 The Bank Group’s active portfolio in Tanzania is rated as
satisfactory with a score of 2.38 (on a 0-3 scale). Water and sanitation
accounts for 12% of the portfolio value, as shown in the table 2.9. Details
of the portfolio and ratings are given in Appendix 2. The disbursement
rate for national public sector operations improved to 51.9% in 2014 from
47.3% in 2013 and 24.86% in 2011. The number of ageing projects
decreased from 6 projects in 2013 to 2 projects in 2014, with the average
age of the portfolio reducing from 4.1 years to 3.8 years. The average
national public sector project size has also increased from UA 32.4
million to UA 43.1 million. Over 96% of the projects have been supervised twice per year.
2.7.2 Lessons from Bank’s experience as reflected in Project Completion Reports
(PCRs), and IDEV post evaluation reports have been taken into account in the design and
formulation of the Project. Three Project Completion Reports (PCR) are available for the water
sector (Project details are given in the Annex 2) and there is no PCR backlog. Some key lessons
from Bank Group experience reflected in Project design are shown below, with detailed
information provided in Annex B1. These include:
(a) The need to adopt an integrated approach comprising water supply and sanitation, effective
community participation by involving the beneficiaries in Project design, Project
implementation using existing institutional arrangements, and the need to support the executing
agency. The Project design incorporates the integrated approach and has already taken into
consideration the views of beneficiaries.
(b) Integration of infrastructure improvements with capacity building and adequate strategic
planning enables Water Utilities to improve their performance and cost recovery and promotes
sustainability of water investments which depends on the strength of the institutions responsible
for their operations and maintenance. The Project will enhance AUWSA operational and
commercial efficiency, including water demand management and reduction of non-revenue
water to achieve higher cost recovery, above the current O&M recovery.
(c) Pro-poor service delivery and inclusive growth require adequate consideration; otherwise
poor communities may revert to unprotected water sources. The Project will support AUWSA
current efforts to ensure that, in addition to the target of achieving financial and economic
objectives, the urban poor are protected. Currently there are 138 vulnerable households which
are supported by AUWSA. Decentralized sanitation facilities catering for groups of households
will be implemented. Funds for social connections have been allocated, whereby AUWSA will
connect poor households, and will recover the cost in the long term from the water bills. This
arrangement will facilitate an affordable access to water and sanitation for poor households in
accordance with the pro-poor policy.
2.7.3 The project has also taken into account experiences gained under the WSDP plus sector
knowledge including case studies covering Tanzania, such as strengthening pro-poor targeting
of investments in urban water and sanitation utilities.
2.8 Key performance indicators and monitoring of targets
2.8.1 The Project will be monitored using Key Performance Indicators (KPIs) reflected
in the Project’s Results Based Matrix which are in-line with the Bank’s Core Sector
Indicators (CSIs). The Project’s Result Based Matrix reflects the KPI of the Project at input,
output, outcome and impact levels. At impact level these include the level of access to
sustainable water and sanitation services and the under-five mortality rate. The outcome
objectives will be measured through monitoring reliable and equitable water supply and
sanitation services. These include: water service coverage ratio, level of Non-Revenue Water,
and number of service connections within the Project area. For sanitation, this will be measured
Table 2.9: TZFO
Portfolio
Sector %
Transport 39
Multinational 16
Water 12
Social 12
Energy 8
Private
sector
7
Agriculture 5
Multi-sector 1
10
by sewerage services coverage, gradual reduction of sewage blockage incidents, and improved
quality of sewage effluent. The output of the Project will mainly be measured through
production capacity for treated water and volume of wastewater removed and treated as well as
the key facilities constructed.
2.8.2 At the commencement of Project implementation, for the purpose of post-
evaluation of the Project, the baselines for all the indicators will be re-validated and
disaggregated including gender. The ToR for the post evaluation study will be developed in
preparation for the post evaluation process, after some years from the end of the Project.
2.8.3 The Project implementation schedule and procurement plan which provide
milestones for monitoring implementation progress, will be updated with actual status for
evaluation against planned targets on a regular basis. AUWSA through the Project Management
Team (PMT) will monitor and report the Project’s achievements against the identified
performance indicators. AUWSA management will assess the Project’s achievements through
analysis and interpretation of data collected. During implementation, necessary corrective
adjustments will be made to ensure that the Project remains on course and achieves its outputs
as well as its outcomes.
III – PROJECT FEASIBILITY
3.1 Financial and Economic analysis
Table 3.1: Key Economic Figures
FIRR 6.11% and NPV TZS 117.7 billion (at 4% base case)
EIRR 17.6% and NPV TZS 287.1 billion (at 10% base case)
NB: Detailed calculations are available in Annex B7
3.1.1 The financial and economic analysis of the Project have been undertaken by
comparing “with Project” and “without Project” scenarios of the various costs and
benefits that will accrue to the beneficiaries of improved and extended water supply and
sanitation services for the residents in Arusha City and surrounding areas. The Project will
improve access to reliable and clean water supply and sanitation services which will promote
environmental health. These will result in reduced water borne diseases for the populations
living in the Project areas, especially those with limited service and residents in the peri-urban
areas of Arusha city. These will also enhance the quality of livelihood and well-being of the
beneficiary population, and boost economic activities in the Project area. The returns are
measured in terms of benefits which accrue to residents in the form of clean, regular and
adequate drinking water supply, improved sanitation services, improved health and living
conditions of the beneficiary population.
3.1.2 The main assumptions are:
Benefits stream: (i) the level of non-revenue water is projected to be reduced from 48%
to 25% as a result of the Project. The NRW reduction activities, comprising of leak detection
and prevention activities, rehabilitation and expansion of metering systems, and promotion of
water demand management, and rehabilitation of the water supply system will enhance
operating efficiency in the delivery of water services, which is a major Project benefit; (ii)
Another major benefit is the incremental revenue from water supply and sanitation services
from the expanded services reaching out to the suppressed demand within the city as well as
extension of water services to unserved areas, especially to the peri-urban; and communities
located around water sources (iii) In addition the Project has health benefits which account for
the reduction in water borne diseases of populations living in the Project areas, leading to
savings in health expenditures;
11
Costs stream: The costs side includes capital investments, periodic replacement costs,
and incremental operating and maintenance (O&M) costs, comprising of staff costs, energy,
chemicals and repairs and other overhead costs. The incremental O&M costs are estimated at
15% of incremental water and sanitation revenue. All costs and benefits are considered net of
duties and taxes. In addition, the economic life of the investment is estimated at 25 years.
3.1.3 The Project yields a financial internal rate of return (FIRR) of 6.11% and financial
NPV (at 4% discount rate) of TZS 117.7 billion. Sensitivity analysis to test the robustness of
the FIRR was carried out to determine the impact of adverse variations. The FIRR changes to
4.9% assuming that investment cost increases by 15%, and changes to 4.2% when the benefits
of the Project are decreased by 15%.
3.1.4 The Project’s rate of return is reasonable for water and sanitation sector operation,
especially taking into account the Project’s significant investment for sanitation, which
has major environmental and health benefits, and the social aspects of these services.
Furthermore, the Utility will be able to recover its incremental O & M costs from the revenues
generated over the Projection period. It would over time be able to fully recover its costs while
also contributing in expanding the population’s access to improved water supply and sanitation
services at affordable prices, thereby contributing towards achievement of the country water
sector goals.
3.1.5 The Project’s economic rate of return is estimated at 17.6%. The value is higher
than the opportunity cost of capital and thus the Project is considered economically viable.
Sensitivity analysis to test the robustness of the EIRR was carried out to determine the impact
of adverse variations. The EIRR changes to 15.6% assuming that investment cost increases by
15%, and changes to 15.1% when the benefits of the Project are decreased by 15%. The analysis
shows that the Project is economically viable and socially beneficial for Tanzania. Annex B7
shows the assumptions and the calculations of the Project cost benefit analysis.
3.2 Environmental impacts and social safeguards
3.2.1 The Arusha Sustainable Urban Water and Sanitation Delivery Project was
classified as a Category 2 Project – validated by ORQR on 19 February 2015 – in
accordance with the Bank’s Integrated Safeguards System (ISS) and Environmental and Social
Assessment Procedures (ESAP), mainly because impacts are site-specific, have no significant
and irreversible detrimental effects, and can be minimized by applying appropriate mitigation
measures. The Project’s environmental and social assessment process has been guided by the
policy and legal requirements of Tanzania in addition to the requirements of the African
Development Bank. National legislation in Tanzania does not have Project categorization
procedures but require that urban water supply and sanitation Projects undertake the ESIA
process and do not require stand-alone Environmental and Social Management Plans (ESMPs)
unless requested by lenders.
3.2.2 There are no significant negative environmental impacts anticipated for this
Project. The proposed works for pipe laying are along existing roads, the new boreholes are to
be drilled in specially selected areas, the existing Water Treatment Tanks and Lemara
Wastewater Treatment Ponds will undergo rehabilitation, and the new Wastewater Treatment
Ponds at Terrat will be on land that is purchased by AUWSA and currently uninhabited.
Potential adverse impacts are anticipated mainly during construction. Direct impacts such as
noise, dust, public safety, disruption of surface water drainage, interruption of utilities,
pollution, disposal of waste, and social impacts will be mitigated and generally eliminated.
Many of the impacts will only occur at active construction sites (trenching and pipe laying) and
therefore move with the works such that many locations will only be impacted for a couple of
weeks rather than the duration of the Project. At Lemara Wastewater Treatment Plant, de-
sludging will entail removal of silt and sludge and repairs to the WTP embankments. The site
for the WTP is fenced and there is a buffer zone, so limited social impacts may occur (if any).
Short-term impacts include disruption of road traffic and impaired access to property and
12
livelihood for those trading alongside roads. No businesses will be permanently impacted but
informal traders may temporally be prevented from trading for those sections where traders
have encroached on the road reserve.
3.2.3 In order to address the Project’s potential adverse environmental and social impacts an
Environmental and Social Management Plan (ESMP) was developed as part of the ESIA.
Among the main mitigation measures proposed are identifying pipeline routes along existing
roads to avoid resettlement (the Project’s current design avoids any resettlement impacts) and
making compensation payments to affected people for land property losses, ensure coordination
with proper authorities (e.g. TANROADS, TANESCO) to address possible damage to local
infrastructure and disruption of public service utilities, ensure proper planning and management
of construction works, and enhance control of industrial effluent discharges into the municipal
sewerage system. Additionally, enhancement measures for positive impacts were also proposed
and include maximizing employment creation for local people (men and women) during
construction and operation phases, intensifying awareness and education campaigns on hygiene
and sanitation practices among local residents, and intensifying effluent quality monitoring to
ensure discharges meet required standards particularly for use in irrigation. The cost of
implementing environmental mitigation measures, including supervision and monitoring is
estimated to be about TZS 4 billion. A stand-alone ESMP, including budget for plan
implementation (comprising costs associated with awareness campaigns and enhancement
measures) and reflecting the final Project scope, was submitted to the Bank. A summary has
been prepared and was posted at the Bank website on 6th August 2015.
3.2.4 The environmental and social benefits of the Project include: (i) improvement in
water supply systems and a healthy environment; (ii) improvement of sanitation and sewerage
disposal (iii) significant enhancement in quantity and quality of supplied water to water
deficient areas; and (iv) proper accounting of water by metering of connections. Specifically,
benefits include improved health conditions among the urban residents and the surrounding
areas, particularly reduction of water borne (e.g. diarrhea, dysentery, and cholera) and water
wash diseases (e.g. skin infections); improved ground and surface water quality and abatement
of nuisance from overflow of sewer pipes and reduction of public health hazards in the serviced
areas; improved access to reliable and sustainable water and sanitation services; as well as
creation of employment opportunities during construction.
3.3 Climate Change
The Project has been classified as Category 2 on Climate Risk in accordance with the
Bank’s Climate Safeguards System. On climate change, the Project will deliver adaptation
benefits in relation to water resources management that is sustainable in the face of projected
climate change. The city of Arusha has experienced water shortages due to drought conditions
which AUWSA has been managing through water rationing. The proposed Project will
diversify water sources which will improve resilience against climate vulnerability. Key
approaches to ensure sustainability are: provision of sustainable and climate resilient water
sources, climate resilient infrastructure and development and implementation of community
driven catchment management plans to protect the watershed. Water sources are located outside
of the city, therefore, communities in the vicinity of water sources are not necessarily
beneficiaries of the city water services. The Project will engage with these communities to raise
awareness on importance of catchment management. In addition, the Project will also support
livelihood improvement of these communities to build resilience of the communities as well as
to reduce root cause of catchment deterioration. A climate change mitigation plan is reflected
in the ESMP.
3.4 Gender and social
3.4.1 Socio-economic and gender assessment were conducted, which were based on
stakeholders’ consultation, reviews of the relevant policies, and discussions with AUWSA
13
management and staff, and the Ministry of Water. Socio-economic and gender information
which has been used in designing the Project interventions is given in Annex B9. The
information includes division of labor, women’s educational attainment, the health situation,
decision within households, income, policy governing gender empowerment and access to the
media. The water and sanitation situation in the city has resulted in a number of socio-economic
challenges affecting men and women differently. While women are found to be more active in
providing water and ensuring health and wellbeing for the households, competing demands
within the household makes hard for both men and women to agree on priority needs.
3.4.2 The National Gender Policy’s (2000) key objective is to provide guidelines that will
ensure that gender sensitive plans and strategies are developed in all sectors and institutions.
While the policy aims at establishing strategies to eradicate poverty, it puts emphasis on gender
quality and equal opportunity for both men and women to participate in development
undertakings and to value the role of each member in society. The WDSP has aligned its gender
consideration with the national policy. The Project shall support AUWSA to adopt and
implement the policy through providing equal opportunities to both men and women.
3.4.3 AUWSA will appoint a Gender Focal Point. He/she will be trained to design, undertake
and supervise all gender interventions in AUWSA, in consultation with the Ministry of Water
Gender Officer. Knowledge and sensitization on gender mainstreaming and gender specific
needs will be provided to the Project Management Team as part of the institutional capacity
building. Awareness raising of the Board members and communities on the importance of
gender mainstreaming is planned. Gender mainstreaming and gender informed interventions
for all activities will be observed. For instance, a gender sensitive hygiene promotion will be
developed and will benefit 50,000 people (24,000 / 26,000 male/female respectively).
Moreover, due to the low coverage of sanitation in schools, the Project will provide 100
sanitation blocks (segregated by gender and physically challenged users). A budget for gender
mainstreaming has been allocated under the institutional capacity building components.
3.4.4 Between January and March 2015, Arusha had 10697 (5208 female and 5489) cases of
water borne diseases based on the Arusha Health Data, details of which are given in Annex B9
including the types of diseases. The existing sanitation situation in schools is not adequate.
Over 50% of the primary schools have inadequate toilet facilities. The worst affected primary
schools have over 90 pupils sharing one toilet.
3.4.5 AUWSA has adopted a Pro-poor Policy in 2003. AUWSA is providing free water
service to 138 urban poor households in the city and the costs are subsidized by the Authority.
The total amount subsidized by AUWSA in 2013/2014 is Tshs 1,979,631.36. The provision of
water services to these households is part of the AUWSA Corporate Social Responsibility
(CSR) program started in the 2004.
3.4.6 AUWSA has developed a set of criteria for identification of urban poor households in
collaboration with the Arusha Regional Administration and the Arusha City Council, who
assisted in providing data on poverty status and level. Details are given in Annex B9. The
monitoring and evaluation (M&E) system will provide regular information of how many
vulnerable households benefited from the CRS (segregated by household profile). Gender and
social outputs indicators will be part of the consultants and contactors TORs as well as the
quarterly progress reports.
3.4.7 Overall Benefits: the Project will contribute to the regional and national effort for the
improvement of the wellbeing of the population. The Project will also contribute to the
enhancement of environmental public health, ensuring households have access to safe drinking
water, reducing household health expenditures, increasing productivity as result of reduction of
water borne diseases, which will lead to improvement of quality of life, hence poverty
alleviation among the urban and peri-urban population of Arusha. Furthermore, the Project will
14
lessen women’s burden and enhance productivity for both men and women. Detailed gender
and social analysis is given in annex B9.
3.4.8 Involuntary resettlement: There is no involuntary resettlement foreseen.
IV – IMPLEMENTATION
4.1 Implementation arrangements
4.1.1 The Project will be implemented using existing structures and institutional
arrangements, incorporating lessons and experience gained from similar operations. The United
Republic of Tanzania is the Borrower of the ADB/AGTF loan, while AUWSA, under the
Ministry of Water (MoW), will be the Executing Agency (EA) of the Project. The EA has
constituted a Project Management Team (PMT) from its own staff, comprising of a Project
Coordinator, Water Engineer, Sanitation Engineer, Procurement Expert, Social/Community
Mobilization Expert, Environmentalist and Project Accountant, to be in charge of the
implementation of the Project. The overall coordination of the Project and reporting obligations
to the Bank will be the responsibility of AUWSA.
4.1.2 Under existing institutional arrangements, the Project falls within the framework of the
National Water Sector Development Program; the Permanent Secretary Ministry of Water will
be responsible for overall implementation, while the Urban Water and Sanitation Department
(UWSD) within the Ministry of Water will be in charge of coordination and oversight. The EA
(AUWSA) will operate within this framework, and will be responsible for the procurement,
financial management, monitoring and reporting and overall project management functions.
The PMT jointly with Arusha City Council (ACC) will be responsible for the implementation
of Sanitation and Hygiene Education component, especially in the peri-urban areas, using
Community Based Organizations and NGOs. AUWSA will also ensure implementation,
supervision and reporting of the ESMP. In addition, the consultants and the contractors will
have Environmental and Social Experts on board who will be supervised by the AUWSA’s
Environmentalist, Social Expert and Community Liaison Officer.
4.1.3 The overall coordination of the Project and reporting obligations to GoT and the Bank
will be the responsibility of the EA (AUWSA). The dedicated PMT within AUWSA will
implement and deliver the Project outputs within the agreed timeframe. The PMT will
coordinate and supervise the implementation of the Project, maintain the Project accounts and
financial records, process disbursement requests, and reports in accordance with the
requirements of GoT and ADB. The PMT shall also coordinate implementation of the ESMP,
oversee the implementation of the gender strategy, implementation of the cross-cutting issues
and awareness raising, promotional sanitation, and Hygiene Education sub-components in the
peri-urban areas using the existing institutional structures.
4.2 Procurement arrangements
4.2.1 Procurement of ICB contracts and Consulting services for the proposed Project will be
carried out in accordance with the Bank’s Rules and Procedures: “Rules and Procedures for
Procurement of Goods and Works”, dated May 2008, revised July 2012 as amended from time
to time; and “Rules and Procedures for the Use of Consultants”, dated May 2008, revised July
2012 as amended from time to time using the relevant Bank Standard Bidding Documents, and
the provisions stipulated in the Financing Agreement. Procurement of contracts for goods and
works using national competitive bidding (NCB) procedures will be carried out in accordance
with the national procurement law, the Public Procurement Act, 2011 of the United Republic
of Tanzania and the relevant national Standard Bidding Documents.
4.2.2 Assessment of the National Procurement Law, Rules and Procedures was carried out
and findings are given in section B5.1 of the Technical Annexes. The overall Project risk for
procurement is moderate. The Procurement Plan has been discussed and finalized. Related
15
procurement documents have also been discussed. To expedite the smooth execution of the
Project, the government requested use of Advance Contracting (AC) procedures for the
following consultancy service contracts: Consultancy for Engineering Services for Review,
Preparation of Detailed Design, Tendering and Supervision of Work; Consultancy Services for
Additional Water Sources Investigation (including quantity, quality and treatment options) and
study on Lake Duluti and Consultancy Services for Demand and Non-Revenue Water
Management. Detailed procurement arrangements are provided in section B5 of the Technical
Annexes.
4.3 Financial management and disbursement arrangements
4.3.1 The Financial management Specialist conducted an assessment of the adequacy of the
AUWSA financial management system, based on the Bank’s financial management (FM)
Implementation Guidelines (2014) and concluded that the overall financial management risk is
“Substantial”. However if the Proposed mitigation measures as per the Risk table in Annex 1,
are implemented, the Project will be able to: (i) use the funds for the intended purposes in an
efficient and economical way; (ii) prepare accurate, reliable and timely periodic financial
reports, and (iii) safeguard the entities’ assets.
4.3.2 In line with the Paris Declaration on Aid Effectiveness and Accra Agenda for Action, the
Project will substantially make use of the AUWSA’s financial management system, for which
enhancement measures are included in the Project design. The day to day financial management
will be as per AUWSA Financial rules and procedures, which are being updated. AUWSA Finance
Manager will be responsible for the Financial Management function of the Project. A designated
Project Accountant (under the supervision of the Finance Manager) with relevant knowledge and
experience acceptable by the Bank will be part of the Project team. The Project will prepare
quarterly physical and financial reports, in line with AUWSA reporting requirements and submit
to the Bank within 45 days after the end of each quarter.
4.3.3 AUWSA Internal Audit Department will audit the Project at least once annually and share
internal audit reports with the Bank during supervision missions. To enhance the financial
management functions, AUWSA is in the process of upgrading the computerized accounting
system from PASTEL PARTNER to PASTEL EVOLUTION which is expected to integrate all systems
including billing and will be able to accommodate Project functions.
4.3.4 Although the Authority has no previous experience in managing Bank financed Projects, a
dedicated and experienced Project management team (PMT), supported by capacity building under
the Project, will enable AUWSA to execute the Project. The dedicated PMT will be constituted as
per the implementation arrangements in section 4.4 and the conditions in section 5.2 of this report.
Further support will also be provided by the Bank during Project launching and implementation
support / supervision missions. Detailed financial management and disbursement arrangements are
given in Annex B4. Analysis of the financial performance of AUWSA based on its previous
audited financial statements is given in section B7.2.4 of the Technical Annexes.
4.3.5 Audit arrangements: The Project financial statements will be prepared within three (3)
months after the closure of every financial year and presented to external auditors. The Project
audit will be conducted by the Controller and Auditor General (CAG) or a Private Audit firm
appointed by CAG and agreed with the Bank based on the Bank’s audit terms of reference. The
audit report, complete with a Management Letter, will be submitted to the Bank not later than
six months after the end of the financial year. The Project will also be subjected to a Value for
Money audit once at Mid Term or when substantial work has been done. The cost of the audit
will be borne by the Project if undertaken by the Private Audit Firm.
4.3.6 Disbursement arrangements: The Project will mainly use the Direct Payment method
to pay contractors/consultants/suppliers whereas the Special Account method will be used for
financing all eligible operation and capacity building costs. The Reimbursement methods can
16
be used where the need arises after consultation with Bank and obtaining prior approval. The
four disbursement methods are prescribed in the Disbursement Handbook available in the
Bank’s website. AUWSA will open two (2) Special Accounts (SAs), one denominated in
foreign currency at the Bank of Tanzania and the other in Tanzania Shillings (TZS) at a bank
acceptable to the Bank. The opening of the special accounts will be a condition to first
disbursement. The Bank will issue a disbursement letter, which will provide specific guidelines
on key disbursement procedures and practices. The content of the disbursement letter will be
discussed during negotiations.
4.4 Monitoring of Project implementation activities and progress
4.4.1 The Executing Agency (AUWSA) will be responsible for the overall monitoring
and supervision of the Project activities including ESMP implementation. It will produce
monthly, quarterly and annual progress reports on the status of the various Project activities,
financial and procurement status, asset management, stakeholder participation, safeguard, risks
and mitigation measures. Besides submission of the reports to the Bank, these will also be
shared with the relevant government’s bodies, especially the Ministry of Water, Ministry of
Finance, and Ministry of Planning so that the results can feed into the country’s National Data
System. The Project mid-term review will enable AUWSA, the Government and Bank to re-
examine the implementation arrangements and further strengthen the system if necessary. Once
the Project approaches substantial completion, a completion report will be prepared by AUWSA
that includes details of Project implementation, financial management, procurement, asset,
safeguard and measures of the achievements of the Project against the indicators in the log
frame. The Project completion report will also provide lessons learnt for future operations. All
reports will be prepared and submitted according to the Bank’s requirements. The data will be
entered into Implementation Progress and Results Report (IPR) in timely manner.
4.4.2 The Bank shall also conduct regular Project monitoring through supervision missions.
The Project implementation schedule is presented in Annex A1. A summary of the main
milestones is presented table 4.1 below:
Table 4.1 : Key Milestones
Timeframe Milestone Monitoring process / feedback loop
September 2015 Loan Approval Bank
October 2015 Procurement (Consultant) Procurement and contract documents; Bank’s “No objection”
November 2015 Loan Agreement Signed Sign Loan Agreement between the Bank and GoT
December 2015 Loan effectiveness Launching mission; Loan conditions fulfilled
February 2016 Procurement (Works) Procurement and contract documents; Bank’s “No objection”
June 2016 Construction Starts Supervision; progress monitoring and reporting
June 2017 Mid-term review Reporting informed by review of progress, supervision and
audit reports, and field visits
December 2019 Project completion All Project activities completed and Project Completion
Report prepared.
4.5 Governance
The design of the Project has taken into account the governance environment at Project level
and at country level, as discussed below.
Governance at Project level:
4.5.1 The overall Project risk for procurement is moderate. Mitigation measures to
address fiduciary risks, at Project level, including procurement and financial
management, are discussed in section 4.2 and 4.3 of this report and the Technical Annexes
sections B4 and B5. These will include using the standard Bank bidding/contracting procedures
and guidelines in addition to the Government’s systemized procurement procedure, which shall
reinforce transparency and accountability during tendering and award of contracts. In addition,
17
an internationally recognized engineering firm will be recruited to assist with review, detailed
design, procurement and supervision of major construction works.
4.5.2 The governance and organization structure of AUWSA (the Executing Agency) is
discussed in Annex B7.2. The Bank appraisal assessment concluded that AUWSA is well
managed. The Managing Director of AUWSA shall thus be the Principal Accounting Officer
for the resources entrusted to the Project and shall designate the Project Team to undertake the
day-to-day management of the Project. The Internal audit department of AUWSA and the
Ministry of Water will supplement oversight of Project Management. Robust governance
arrangements have been put in place to ensure successful implementation, monitoring and audit
of the Project, as highlighted in the procurement and financial management sections and the
Technical Annexes.
Governance at Country Level:
4.5.3 Tanzania has made progress in public accountability, particularly through the
strengthening of oversight institutions such as the Controller and Auditor General’s
(CAG) Office, the Prevention and Combating of Corruption Bureau (PCCB) and
Parliament. The autonomy of both the Combatting and Control of Corruption Bureau (PCCB)
and the office of the Control and Auditor General (CAG) has increased substantially. For
instance, the PCCB and CAG in 2014 led investigations into the allegations of irregularities in
payments to the Independent Power Tanzania Limited (IPTL). The independence of PCCB and
CAG were observed during the investigations which also included public disclosure of
information, parliamentary debates and subsequent Government follow up.
4.5.4 The GOT, in 2011, amended the Public Procurement Act of 2004, to strengthen the
Public Procurement Regulatory Authority’s functions. Tanzania is also implementing the
National Framework on Good Governance to improve the capacity of all representative bodies
and strengthening local level governance institutions, in addition to core reform programs in
financial management, public service, the legal sector and the local government sector. The
Government has prepared an Action Plan to implement the Open Government Partnerships
(OGP), from July 2012, starting with three sectors of water, health and education. OGP is a
global initiative to promote transparency, empower citizens, fight corruption and encourage use
of new technologies to improve governance. Government anti-corruption efforts are led by the
PCCB, which was set up in 1991. The Bank is currently supporting the Government’s
governance agenda through the Institutional Support for Good Governance Project.
4.5.5 Tanzania Governance and CPIA information: According to Transparency
International’s 2014 Corruption Perception Index, Tanzania ranked 119 out of 175 countries
compared to 111 out of 177 countries in 2013. Tanzania ranked 15 out of 52 countries in the
Mo-Ibrahim Index of African Governance with an overall score of 58.2 (out of 100) in 2014,
which is higher than the East Africa and sub-Saharan Africa averages of 48.5 and 51.7
respectively. The World Bank’s Worldwide Governance Indicators show that in all dimensions
of governance, Tanzania was between the 22 to 42 percentile rank amongst the 200 countries
surveyed in 2013. Tanzania had the best percentile rank in voice and accountability and political
stability and absence of violence (percentile rank 41) and the lowest score in control of
corruption (percentile rank 22).
4.6 Sustainability
4.6.1 The Government’s commitment to the development of the water and sanitation
sector in the country is demonstrated by the renewed commitment to continue to implement
the WSDP 2006-2025, which is currently under implementation. The Government encourages
full ownership and participation by the beneficiaries in the provision of water and sanitation
services, taking into account gender sensitivity and environmental & social safeguard in the
process, in order to ensure their effectiveness and sustainability. The Project will promote the
18
sustainability of the investment through appropriate cost recovery mechanisms from the
beneficiaries / customers, as discussed further in the sections below.
4.6.2 The Executing agency, AUWSA is a well-managed and functioning Utility with a
good performance, as reported by the national regulator (EWURA). The Utility has
policies, systems and procedures in place to ensure effective sustainability of the facilities
constructed under the Project. The design of the Project has taken into consideration the
technology used in the existing systems. Furthermore, the Project incorporates training and
capacity building of AUWSA staff to further enhance their capacity to plan, operate and
maintain the system effectively and efficiently. As part of the Project, the Utility will undertake
Institutional and Organizational study to reassess and adjust its structure to enable to provide
efficient water supply and sanitation services to the growing number of water supply and
sewerage consumers, including those in the greater Arusha area. The conduct of the institutional
and organization study and implementation of the recommendations is one of the conditions of
the loan.
4.6.3 Current AUWSA’ tariff for sewerage services is not fully reflective of economic
cost of service provision. There is need to review and update the tariff structure for both water
and sanitation services to reflect efficient cost of service and to take into account the proportion
of water supply and waste water services so that tariffs commensurate the cost of these services.
In this regard, the Project will finance a detailed tariff study which takes into account the social
nature of these services and affordability especially for the poor, and make recommendations.
This is one condition of ADB loan.
4.6.4 The current water supply and sanitation tariff enables the Utility to generate
adequate funds to operate and maintain the water supply and sewerage system. The
provision and enhancement of the water supply and sanitation infrastructure in Arusha and
surrounding areas will increase the water and sanitation revenue of AUWSA. The current tariff
level, average of TZS 831/m3 for water and TZS 450/m3 for sewer services is higher than the
operations and maintenance cost recovery, estimated average of TZS 600/m3 and TZS 330/m3
for water and sewer services, respectively. At completion of the Project, the incremental
revenue (TZS 38 billion) generated from the Project will more than offset the incremental
recurrent costs (TZS 13 billion). Consequently, there will not be any need for budgetary support
or subsidies from GOT for operations and maintenance of the Project.
4.7 Risk management
4.7.1 Payment for increased tariff: One of the challenges the Project may face is
unwillingness by the beneficiaries to pay increased tariff for services. This is particularly so for
the majority who hitherto have not been benefiting from any public water supply and sewerage
services. This risk will be mitigated by the tariff and affordability study and enhanced public
awareness campaign to be conducted as part of the Project. The tariff setting will take into
account affordability by different categories of beneficiaries, which will allow for social tariffs
affordable to the poor. In addition, the Project will include public awareness and extensive
sensitization campaigns to get beneficiaries on board.
4.7.2 Potential for delayed service connections: The Project could also run the risk of
delayed connections to the extended water supply and sewerage system. This is common with
new water and sewerage Projects which can take a long time before attaining a critical mass of
household/premises connections. To ensure that delays in house connections do not occur,
customers will be connected as the water supply and sewers are laid under the Project.
Connection works will be built into and carried out as part of the overall water supply and
sewerage laying contract, and connection charges gradually recovered from water and sanitation
bills. In addition well-targeted sensitization campaigns together with health and hygiene
education will be carried out to further minimize the risk.
19
4.7.3 Government contribution: The GoT has been implementing the WSDP to support
provision of water supply and sanitation services to the majority of its people. The target is to
reach the entire population by 2025. This calls for timely allocation of adequate resources for
the sector. There is therefore a risk of the Government failing to make this timely allocation of
enough resources especially taking into account the fact that some of the older systems also
require rehabilitation and upgrading. To minimize the risk, constant dialogue between the
government and development partners including the Bank will be maintained together with
efforts to mobilize adequate resources.
4.7.4 Fiduciary (financial management and procurement) assessment, including risk
mitigation measures are discussed in sections 4.2, 4.3 and 4.5.1 of this report and details are
given in the Technical Annexes sections B4 and B5.
4.8 Knowledge building
4.8.1 The Project is expected to generate considerable knowledge and experiences that
will add value and build up lessons for the design and management of similar Projects, to
be replicated throughout the country as well as to other RMC. The lessons learnt will be
documented including gender mainstreaming, as well as lessons in addressing fluoride content
in water sources. Bank supervision missions, quarterly and annual progress reports, mid-term
review, audit and completion reports will also provide an opportunity to capture knowledge on
relevant aspects of Project. This will include its design, implementation modalities,
procurement and disbursement processes, as well as Government response, which will be
available for internal analysis and sharing.
4.8.2 The Executing Agency will learn the Bank’s procedures and safeguards to ensure
adequate preparation and successful implementation of development Projects, and be able to
replicate the same in its future development work. The Bank will also share with other RMCs
as well as internally, the lessons learnt from the experience of implementing this Project in
Tanzania.
V – LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal instruments
5.1.1 The Project will be financed by an ADB Loan, ADF Loan and an Africa Growing
Together Fund Loan (AGTF). Hence, three loan agreements: ADB Loan Agreement, ADF Loan
Agreement and AGTF loan Agreement will be executed with the Borrower.
5.2 Conditions associated with Bank’s intervention
5.2.1 Conditions Precedent to Entry into Force of the Loan Agreements:
The Loan Agreements shall enter into force subject to the fulfilment by the Borrower of the
provisions of section12.01 of the General Conditions Applicable to Loan Agreements and
Guarantee Agreements of the African Development Bank. The Conditions for the AGTF loan
will be similar to those for the ADB loan.
5.2.2 Conditions Precedent to First Disbursement for the Loans: Evidence acceptable to
the Bank of:
(i) Having opened two special accounts, one denominated in foreign currency at the Bank
of Tanzania and the other in Tanzania Shillings at a bank acceptable to the ADB into
which Bank funds will be deposited; and
(ii) A Subsidiary Financing Agreement between the Government of the Republic of
Tanzania and AUWSA, prepared in due consultations with the AfDB, on the transfer of
the AfDB loan proceeds.
20
5.2.3 Undertakings that:
(i) Counterpart funds by GoT/AUWSA will be available during Project implementation;
(ii) AUWSA maintains a current ratio (current assets to current liabilities) of more than 1.5
by 2018 and decrease AUWSA’s debt to employed capital ratio to less than 50% by
2019;
(iii) AUWSA carries out by 30 December 2016, a detailed tariff and affordability study;
(iv) AUWSA in consultation with the Regulator (EWURA) implements the
recommendations of the tariff and affordability study by 30 June 2017; and
(v) AUWSA carries out by 30 December 2016, Institutional and Organizational Study; and
(vi) AUWSA implements the recommendations of the Institutional and organizational study,
by 30 June 2017.
5.3 Compliance with Bank Policies and Strategies
This Project complies with all applicable Bank policies and strategies including the Bank
Integrated Water Resources Management Policy (2000), the Bank Group Strategy (2013-2022),
the Bank Urban Development Strategy (2011), the Bank Gender Strategy (2014 – 2018), the
Bank Climate Risk Management and Adaptation Strategy (2009), the Bank Group Eligible
Expenditure Policy and the Bank Group Credit Policy.
VI – CONCLUSION AND RECOMMENDATION
6.1 Conclusion
The proposed Project is in line with the priorities of the Government of the United Republic of
Tanzania, the Bank’s CSP for Tanzania and sector priorities as per the WSDP. It will have a
positive impact to the country’s economy and to the health and well-being of the population and
will provide climate adaptation benefits in relation to water resources management.
The investment has high economic returns and reasonable commercial return and is primarily
geared towards improving the quality of services, with significant investment for sanitation, to
address environment and health standards. Furthermore, the project will enhance the financial
sustainability of the Utility, while ensuring social inclusiveness. Further justification of the
investment is given in Appendix V.
6.2 Recommendation
Management recommends that the Boards of Directors approve the proposed ADB loan of USD
143.647 million (equivalent to UA 102.14 million), an ADF loan of USD 25.316 million
(equivalent to UA 18.00 million) and an AGTF loan of USD 42 million (equivalent to UA
29.863 million) to the United Republic of Tanzania, for the purposes of the Project and subject
to the conditions stipulated in this report.
I
Appendix I: Tanzania - Comparative Socio-Economic Indicators – May 2015
II
Appendix II. Table of AfDB’s Country Portfolio
The overall performance of the national public sector portfolio is rated satisfactory with an assessment score
of 2.38 (on a scale of 0 to 3). Details for ongoing operations are given below. Closed operations in the water sector are Monduli
Water and Sanitation Project, Dar es Salaam Water Supply and Sanitation Project and the Rural Water Supply & Sanitation Program 1.
PROJECT/OPERATION
APPROVAL
DATE
CLOSING
DATE
APPROVED
(UA MIL)
DISBURSED
( UA
MIL)
DISBURSE
MENT
RATE (%)
OVERALL
ASSESSME
NT
IP
DO AGE
YRS
AGRICULTURE 104.7 10.98 27.45% 2.25 2
Marketing Infrastructure, Value Addition and Rural Finance Programme
29 June 2011 31 Dec 2016 40.0 10.98 27.45% NPPP 3.0 3.0 3.5
TRANSPORT 352 172.88 49.11% 2.63 5.0
Singida – Babati- Mijingu Road 17 Sep 2007 31 Dec 2014 60.0 55.34 92.23% 2.88 2.85 3.0 7.25 Road Sector Project I 2 Dec 2009 31 Dec 2015 152.0 92.94 61.14% 2.76 2.86 2.7
5 5.08
Road Sector Project II* 5 April 2012 30 Sep 2017 140.0 24.61 17.58% NPPP 3.0 3.0 2.67
ENERGY 75.86 24.32 32.1% 2.37 4.06
Electricity V Project - ADF Loan
14 Dec 2007 30 June 2015 28.68 14.1 49.18% 2.59 2.5 3.0 7.0
- ADF Grant 14 Dec 2007 30 June 2015 1.32 1.01 76.21% 2.59 2.5 3.0 7.0 Iringa-Shinyanga Transmission Line* 26 Oct 2010 31 Dec 2015 45.36 9.21 20.3% NPPP 2.71 3.0 4.17 Scaling up Renewable Energy 20 Dec 2013 0.5 0.0 0% na na na 1.0
WATER 106.59 86.05 80.73% 2.48 3.14
Zanzibar Water & Sanitation - ADF Loan 11 Nov 2008 30 June 2015 25.0 23.59 94.35% 2.48 2.43 2.7
5 6.70
AWF Grant 11 Nov 2008 30 June 2015 2.78 2.75 98.91% 2.48 2.43 2.75
6.70
Rural Water Supply and Sanitation II - ADF Loan 15 Sep 2010 31 Dec 2015 59.0 53.5 90.67% 2.72 2.71 3.0 4.33 AWF Grant 15 Sep 2010 31 Dec 2015 5.8 5.8 100% 2.72 2.71 3.0 4.33
Zanzibar Urban Water & Sanitation 19 Dec 2012 31 Dec 2017 14.0 0.41 2.9% NPPP 3.0 3.0 2.50
SOCIAL SECTOR 109.0 58.09 53.29% 2.34 4.25
Support to Maternal Mortality Reduction
11 Oct 2006 30 Apr 2015 40.0 37.72 94.3% 2.25 2.93 2.25
8.17
Small Entrepreneurs Loan Facility II 10 May 2010 31 Dec 2015 20.0 18.75 93.77% 2.52 2.5 3.0 4.58 Alternative Learning Skills and Development
29 June 2011 31 Dec 2016 15.0 1.62 10.79% NPPP 3.0 3.0 3.5
Support to Technical Vocational and Training and Teachers Education
2 April 2014 31 Dec 2019 34 0 0% na na na 0.75
MULTI SECTOR 5.82 5.12 88% 2.18 4.42
Institutional Support for Good Governance
20 Sep 2010 31 Dec 2014 5.2 4.7 90.41% 2.18 2.07 2.25
5.25
EFC- Tanzanie Fund for Africa Private Sector Assistance
1 June 2012 31 Mar 2016 0.62 0.42 68.26 na na na 2.58
PRIVATE SECTOR 66.09 1.37 2.07% na na na
Bagamoyo Sugar Project – ADB Loan
23 April 2014
32.35 0 0.0% na na na 0.75
CRDB SME Partial Credit Guarantee 22 Jul 2008 31 Mar 2016 1.39 1.37 98.6% na na na 6.42
MULTINATIONAL OPERATIONS
147.83 11.91 8.1% 2.37 4.08
Dsm-Isaka-Kigali/Keza-Musongati Railway
17 Nov 2009 31 Mar 2016 1.66 1.02 61.43 2.50 2.36 3.0 5.17
Arusha –Namanga ADF - Grant ADF- Loan
13 Dec 2006 28 Feb 2014 0.54 0.19 35.8% 8.0 13 Dec 2006 28 Feb 2014 3.5 2.07 59.1% 2.73 2.83 3.0 8.0
East Africa Transport & Trade 29 Nov 2009 30 Nov 2015 6.2 3.37 54.33% 2.27 2.08 3.0 8.17 Transit Transport Facilitation 22 Dec 2010 31 Dec 2015 0.32 0.19 58.96% na na na 4.0 Arusha-Holili/Taveta-Voi Road 16 April
2013 31 Dec 2018 79.9 0 0.0% NPPP 3.0 3.0 1.67
EAC Payments &Settlement System 5 Dec 2012 31 Jan 2017 15 0.89 5.96% NPPP 3.0 3.0 2.08 Lake Victoria Water & Sanitation 17 Dec 2010 31 Dec 2015 17.48 3.95 1.3% 2.22 1.71 3.0 4.0 Regional Rusumo Hydropower 27 Nov 2013 31 Aug 2019 22.41 0 0% na na na 1.08 EAC Railway Sector Enhancement 29 June 2012 31 Dec 2015 0.82 0.28 0% na na na 2.5
(a) Public Sector Only 689.27 357.44 51.9% 2.38 3.97 (b) Public + Private Sectors 755.36 358.81 47.5% 3.78 (c) Public + Private + MNO 903.19 368.63 44% 3.88
OTHER MULTINATIONAL OPERATIONS
33.59 26.26 78.18% 2.58 6.93
SADC: Shared Watercourses Support 31 May 2006 na 9.38 8.28 88.29% 2.47 2.46 3.0 9.16
III
PROJECT/OPERATION
APPROVAL
DATE
CLOSING
DATE
APPROVED
(UA MIL)
DISBURSED
( UA
MIL)
DISBURSE
MENT
RATE (%)
OVERALL
ASSESSME
NT
IP
DO AGE
YRS
SADC: Control of communicable diseases
31 may 2006
na 20.00 15.35 76.75% 2.69 2.73 3.0 8.83
Songwe River Basin AWF Development Programme AWF (Tanzania/Malawi) NEPAD-IPPF)
25 May 2010 an 0.49 0.26 51.83% na 4.83 25 May 2010 na 2.65 1.75 65.82% na 4.83
28 April 2010
na 1.07 0.62 57.92% na 4.92
(c) Public + Private + ROs+ other multinational Operations
936.78 385.07 41.1%
IV
Appendix III: Key Related Projects in the Country
COUNTRY / AGENCY
SECTOR PROJECT
French Development
Agency (AFD)
Small Towns WSS
Small Towns Water Supply and Sanitation (WSS)
Project
Word Bank
Urban, rural and
water resources
Water Sector Support Program
Zanzibar Urban Services Project
Marine and Coastal Environment Project
UK Department for
International Dvp (DFID)
Water resources Rufiji Basin Rural WSS
Rural Water Supply and Sanitation (RWSS) Program
European Union Small Towns WSS Water Supply Programme Regional Centres
German Dvp Agencies
(GTZ& GIZ)
Policy WSS Development Ass. Policy & planning
Japan
Rural WSS
Study WS improvement Coastal Region
RWS in Lindi & Mtwara
Study RWS Mwanza & Mtwara
Expert in groundwater dev RWS Urban WSS Zanzibar WS Dev. Project
German Development
Bank (KfW)
Urban WSS Urban Investment Program
Songea Water and Sanitation Project
Regional Centres
Rural WSS East Kilimanjaro Project
Moshi Rural District Projects Belgium Small Towns WSS Kigoma Water Supply and Sanitation Project China National Project Chalinze WSS UNICEF Water and
Sanitation Rural and urban water supply and sanitation
including school WASH and technical assistance India Urban WSS Dar es Salaam Water Supply – Upper Ruvu BADEA Rural/small towns Same – Mwanga – Korogwe Project
African Development
Bank
Rural /urban WSS Rural Water Supply and Sanitation Program
Zanzibar Water Supply and Sanitation Project Urban - Zanzibar Zanzibar Urban Water and Sanitation Project Multinational and
Water Resources Lake Victoria Water Supply and Sanitation Progr.
SADC Shared Water Basin
Songwe River Basin Dev. Program - Design Others including Ireland, S.Korea, Sweden,
Denmark, Norway, OPEC, Egypt, UNDP, UN
HABITAT, CIDA, DANIDA, Water Aid,
CARE, SNV, Plan.
Various earmarked Projects
V
Appendix IV. Map of the Project Area
VI
Appendix V: Justification for ADB financing of more than 50% of the Project cost.
1. Country context
1.1 Country Commitment to Implement its Overall Development Program:
Tanzania’s current development strategy, the “Five Year Development Plan” FYDP I (2011/12
– 2015/16), has the overarching theme of ‘Unleashing Tanzania’s Growth Potential’. The
Government is committed to implementing the FYDP and continues to mobilize domestic
resources for the purpose and to strengthen the linkage between the plan and the national
budget. The FYDP thus features fundable and implementable activities, which eventually
translate into annual development plans as part of the national budget implementation. The
Government has ensured alignment of policies, strategies and programs as well as plans of
Ministries, Departments and Agencies (MDAs), Regions and Local Government Authorities
(LGAs) with the FYDP, and harmonization with the national budget. The Government formally
launched the Big Results Now! (BRN) initiative in 2013, to establish a strong and effective
system to oversee, monitor, and evaluate the implementation of plans, policies and strategies.
The BRN priorities are: transport infrastructure in the central corridor; energy; agriculture;
water; education; domestic resource mobilization; and business environment. Under the BRN
initiative, a Presidential Delivery Bureau (PDB) has been established to assess implementation
progress of performance indicators for line Ministries.
1.2 Financing Allocated by the Country to Sectors Targeted by Bank Assistance: The
Government continues to prioritize water and sanitation in line with its poverty reduction
objectives. The share of water sector budget in the planned government spending has averaged
4% over the past three years. The share of Government funding in the water sector increased
from 51% in the 2013/14 budget to 66% in the 2014/15 budget. The Government has
consistently honoured its commitment in the funding of the Water Sector Development
Program by allocating requisite funding through annual budget allocations as indicated in Table
1 below:
TABLE 1: FINANCING OF WATER SECTOR IN TANZANIA
2013/2014 Budget 2014/15 Budget
Financing allocated to water sector UA 285 million UA 260 million Share of water sector in the budget 4% 4%
Source: Ministry of Finance
1.3 Country Budget Situation and Debt Level: The current budget situation is
summarized in Table 2 below, which portrays decline in the country’s dependence on external
financing of its budget. Over the past decade, about a third of the Government Budget was
dependent on foreign aid, in form of concessional loans and grants. However, the trend has
significantly reversed, and based on the recently released budget frame, concessional loans and
grants account for only about 12% of the total budget. Public debt stands at around 37% of
GDP and, based on the recent Debt Sustainability Analysis (DSA), both by the Government
and (Joint) IMF/World Bank, Tanzania’s debt remains sustainable, with low risk of debt
distress.
VII
TABLE 2: BUDGET SITUATION
2014/15
Budget 2014/15
Current/Likely 2015/16
Budget Total Expenditure as % of GDP 23.4% 21.5% 23.9% Domestic Revenues as % of GDP 14.4% 12.8% 14.1% Share of Foreign Loans and Grants in total Budget 21% 15% 12% Share of General Budget Support in total Budget 7% 4% 4% Foreign Loans and Grants as % of GDP 7% 7% 6%
Source: Ministry of Finance
1.4 Country Initiatives: Interventions in the water sector are carried out under the WSDP,
which is jointly funded by the Government and Development Partners. The Government has
demonstrated commitment by allocating about a quarter of the resources for implementation of
the interventions under WSDP. The Government has allocated about UA 167.3 million for the
Program, and demonstrated leadership in the implementation of the program by disbursing the
full committed amount (121% of the commitment) – which was higher than disbursement of
foreign funds for the program.
Table 3: Disbursement status of WSDP 1 as of June 2014
Source Original commitment
USD
Revised commitment
-USD
Disbursement -
USD %
Tanzania Government 251,000,000 251,000,000 304,017,973 121%
Basket DPs 330,000,000 612,379,117 593,450,525 97%
Earmarked Donors 370,000,000 569,849,433 340,436,905 60%
Own Source 0 5,385,324 5,385,324 100%
Total 951,000,000 1,438,613,874 1,243,290,727 86%
2. Justification and conclusion
The Country’s fiscal outlook and debt sustainability is stable. The GOT has demonstrated its
commitment through its national and sector development programs and spending in critical
sectors such as infrastructure development in water and sanitation. Despite progress made to
date in increasing access and use in water and sanitation, investment in physical infrastructure
is not at a level to guarantee reliable and efficient delivery of services to the population. As
highlighted in the “Policy on Expenditure for Bank Group Financing”, the country’s
commitment should not only be measured by Government’s counterpart contribution but also
by the ownership and commitment to the overall development program as presented above.
Therefore, it is reasonable and justifiable to raise the Bank financing up to 90% of the total
Project costs.
