Document of The World Bank FOR OFFICIAL USE ONLY ReportNo. 10723 PROJECT COMPLETION REPORT REPUBLIC OF ZAMBIA RURAL WATER SUPPLY PROJECT (CREDIT 1362-ZA AND SF2-ZA) JUNE 19, 1992 Infrastructure Operations Division Southern Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otberwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Kwacha (K) K1.00 = 100 mgwee US$1.00 = K 1.20 ZK 1.00 = US$0.833 (1983) ZK 1.00 = US$0.023 (November 1990) WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles (mi) 1 square kilometer (km ) = 0.386 square miles (sq mi) 1 liter (1) = 0.26 US gallons (US gal) 1 cubic meter per second (m /sec) = 260 US gallons per second 1 Imperial gallon (gal) = 1.2 US gallons (US gal) ABBREVIATIONS AND ACRONYMS BD = Building Department of the Ministry of Works of Works and Supply DC - District Council CEC = Commission of the European Communities DWA = Department of Water Affairs EEC = European Economic Community GDP = Gross Domestic Product GRZ or Government = Government of the Republic of Zambia GTZ = Deutsche Gesellschaft fur Technische Zusammenarbert GmbH IDA = International Development Association IDWSSD = International Drinking Water Supply and Sanitation Decade LDC = Local District Councila MAWD = Ministry of Agriculture and Water Development MOF = Ministry of Finance MOH = Ministry of Health NAC = National Action Committee NCDP = National Commission for Development Planning NORAD = Norwegian Agency for International Development PCW - Provincial Commissioner of Works PLGA = Provincial and Local Government Administration, office of the Prime Minister PMO = Provincial Medical Officer PWE = Provincial Water Engineer TNDP = Third National Development Plan WHO = World Health Organization FISCAL YEAR January 1 to December 31 1/ IDA, The Association and Bank signify the The World Bank in this report. FOR OFFICIAL USE ONLY THE WORLD BANK Washington. D.C. 20433 U.S.A. Office of Director-General Operations Evaluatwn June 19, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on the Republic of Zambia Rural Water SuPply Project (Credit 1362-ZA & SF2-ZA) Attached, for information, is a copy of a report entitled "Project Completion Report on the Republic of Zambia Rural Water Supply Project (Credit 1362-ZA & SF2-ZA)" prepared by the Africa Regional office with Part II contributed by the Borrower. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment r This docament has a restricted distribution and may be used by recipients only in the performance| of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT REPUBLIC OF ZAMBIA RURAL WATER SUPPLY PROJECT (CREDIT 1362-ZA & SF2-ZA) TABLE OF CONTESN Page No. PREFACE . .. .. ... ... ... . . . . . i. EVALUATION SUMLARY . . . . . . . . . . . . . e. . * * ii PART Is PROJECT REVIEW FROM THE BiANK'S PERSPECTIVE . . . . . . . . . . 1 A. Project Identity . . .. . .I. B. Background ..1 C. Project Objectives and Description . . . . . . . . . . . . . 2 D. Project Design and Organization . . . . . . . . . . . . . . . 5 E. Project Implementation . ..7 F. Project Results ... . . . . 8 0. Project Sustainability . . . . . . . . . . . . 9 H. Association Performanc ..10 I. Borrower Performance . . . . . . . . . . . . . . . . . . . . 10 J. Project Relationship . . . . . . . . . . . . . . . . . . . . 11 K. Consulting Services ..12 L. Project Documentation and Data . . . . . . . . . . . . . . . 12 PART II: PROJECT COMPLETION REPORT FROM BORROWER'S PERSPECTrVE . . . . . 13 BANK'S PERFORMANCE ....... . . ......... 13 A. During Project Implementation ...... . . . . . 13 B. Summary of Bank's Role . . . . . . . . . . . . . . . . . . . 14 BORROWER'S PERFORMANCE . . . . . . .. . . .15 C. Overall Project Summary ...15 D. Civil Works Contracts .. .16 B. Work on Force Account . . . . . . . . .. .16 F. General Procure ent... 16 G. Tariffs, Revenues and Operating Costs . . . . . . . . . . . . 17 H. Health Component . . . . . . . . .. . . . . . . . . . . . 17 1. Project Expenditure--Finance . . . . . . . . . . . . . . . . 17 J. Institutional Perfofoanee . . . . . . . . . . . . . . . . . 18 PART ISIt STATISTICAL INFORMATION . . . . . . . . . . . .. . 19 A. Related Bank Loans and/or Credits . . . . . . . . . . . . . . 19 B. Project Timetable ....... . . . . .19 C. Credit Disbursements . . . . . . . . . . . . . . . . . . . . 20 D. Project Implementation . ...... . . . . . . . . . . . . 21 S. Project Costs and Financing .d.l.c.q. . . . . . . ....... . 22 F. Project Results . . . . . . ... . 24 G. Status of Covenants . . . . . . . . . . . . . . . . . . . . . 25 H. Use of Bank Resources . . . . . . . . . . . . . ... . 27 This document has a restricted distribution and may be used by recipients only in the performance| of their official duties. Its contents may not otherwise be disclosed without World P.ank authorization. PROJECT COMPLETION REPORT REPUBLIC OF ZAMBIA RURAL WATER SUPPLY PROJECT (CREDIT 1362-ZA & SF2-ZA) PREFACE This is a report on the completion of a project to expand the water services in six largely rural districts in northern Zambia. A total credit of SDR 14.8 million, comprising SDR 9.2 milllon for Cr. 1562-ZA and SDR 5.6 million for 8F2-ZA, was approved in March 1983 for this project. The borrower was the Government of the Republic of Zambia (GRZ). The project was implemented by the Department of Water Affairs (DWA) in the Ministry of Agriculture and Water Development (MAWD) with assistance from a project coordinator financed by the projec,t. Project completion was delayed by some 15 months from April 1986 to June 1987 following the granting of a 12-month closing extension from the original closing date of April, 1986. However, in May 1987, disbursements to Zambia were suspended by the Association until March 13, 1991 when disbursements were resumed. At the time of the suspension, committed but undisbursed funds totalled SDR 0.93 million. In addition, there was an uncommitted credit balance of SDR 3.0 million which was sufficient to finance the construction of three additional piped water systems in Kaputa, Nchelenge and Mbereshi and for which the Association had given ;.ts approval. Claims by the principal contractor for unpaid works prior to May 1987 totalling the equivalent of SDR 1.98 nillion including interest charges were disbursed only in May 1991 after the lifting of the suspension. The closing date for the project is September 30, 1991. Parts I and III of the report were drafted by the Association and the Borrower prepared Part II. The draft report has been reviewed by the DWA on behalf of GRZ and their comments are reflected in this version of the PCR. - il - PROJECT COMPLETION REPORT REPUBLIC OF ZAMBIA RURAL WATER SUPPLY PROJECT (CREDIT 1362-ZA & SF2-ZA) EVALUATION SUMMARY 1.0 Objective. One of the objectives of the water and sanitation sector in Zambia is to provide safe water to all Zambian. A 1973/74 WHO/IBRD study identified serious imbalances in coverage and levels of water and sanitation service between urban and rural areas with the rural areas being much more poorly served. The principal objectives of the project were, therefore, to assist in correcting the imbalances bys 1) Providing piped water to an additional 29,000 people in 4 main towns gad point system water supply to an additional 110,000 people in six rural districts in northern Zambia by the construction of approximately 400 wells and 42 boreholes. 2) Strengthening the key sector institution, the Department of Water Affairs (DWA), to a stage where it would become the efficiently managed and viable arm of GRZ for development and implementation of sector policies. This involved addressing sector development constraints such as - manpower shortages, inadequate operation and maintenance, and inadequate cost recovery from consumers. 290 Implementation Experience Despite initial delays in tender award due to a lack of adherence by DW- to the Association's tendering requlrements and delays in project start-up attributed to the principal contractorls lack of previous Zambian exposure, physical implementation of the project, which lasted 15 months longer than envisaged, must be considered as relatively successful. The success of the physical implementation of the project would have been enhanced if the surplus funds available on the project due largely to exchange rate movements between the U.S. dollar and the Zambian kwacha could have been utilized for the construction of three additional piped water systems in Mbereshi, Nchelenge and Kaputa for which IDA had given its approval and desigrs had been approved, before disbursements to Zambia were suspended. implementation of improved financial systems and improved revenue performance was hampered by the actions of the GRZ. The necessary and agreed number of counterpart accountants was not provided, and the GRZ delayed implementation of requested tariff increases. The health education component was not implemented as no local funds were made available for it by MOH. - iii - 3.0 Results The project essentially achieved its physical objectives of four piped supply systems and 400 wells. It achieved only 30 boreholes out of 42, due to diversion of the drilling rig intended for this project to other projects in other parts of the country. A total of approximately 210,000 people are estimated to have benefitted. The project did not achieve its objectives of instituting improved revenue accounting systems and full recovery of operating and maintenance costs. There was an unused balance of approximately SDR 1.89 million out of the original credit of SDR 14.8 million due to significant devaluation of the Zambian kwacha, and the appreciation of the SDR relative to the US dollar, and the health component of the project not being implemented. Although the health education component was not implemented it is nevertheless reported that there has been a significant drop in the incidence of water-borne diseases in the project districts apparently due to the provision of better water service. The project accomplished its objective of training 10 Zambian graduate engineers. 4.0 S&atainability This project ir not likely to be sustainable because it is part of a system whose revenues do not even cover operation and maintenance expenses and GRZ resources are not sufficiezt to adequately make up the deficiency. A 1987/88 study indicated that an expenditure of approximately 17 million Kwachas/year was required to provide adequate operations and maintenance for the systems under DWA and the District Councils rompared with an annual revenues of 3 million Kwachas in 1988. In addition, there are not sufficient technically qualified personnel to maintain the systems in good order. Although engineers and technicians are being trained, the pubiic sector is continuously losing its better staff to higher paying positions in the private sector. 5.0 Findings and Lessons Learned The IDA performed well in the identification and appraisal phase of the project. The problems likely to be encountered - particularly DWA's organizational weaknesses, the need to determine least cost solutions for the individual piped water systems, and the need to strengthen revenue accounting and collection - were identified at the time of appraisal. The GRZ permitted the consultants, contractors and project coordinator to get on with the physical project. DWA performed very well in the drilling of wells by force account. The GRZ also deposited its share of local funding on a timely basis. However, the GRZ was in default with respect to many key covenants related to tariff levels and approvals, management staffing and accounting systems and controls. - iv - The lessons learnQd are: (a) project equipment and veh!cles should as much as possible be used first and foremost for the project; (b) pyrovision of accountant counterpart staff and counterpart funds whould have been made project conditionalities, rather than covenants; (c) the right of IDA to approve appointments to top management positions in DWA should have been included in the covenants; (d) familiarity with IDA's procurement procedures by GRZ could have eliminated Initial project implementation delays; (e) for ease of coordination and administration, supervision should be entrusted to a single agency; and (f) a progressive tariff structure could benefit DWA. PROJECT COMPLETION REPORT REPUBLIC OF ZAMBIA RURAL WATER SUPPLY PROJECT (CREDIT 1362-ZA & SF2-ZA) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE A. Proiect Identity - Project Name : Rural Water Supply Project - Credit Number: 1362-ZA and 8F2-ZA - RVP Unit s Africa Region, Southern Africa Department - Country : Zambia - Sector : Water Supply and Sanitation 3. Backgrunnud 1. Sector Development Objectives and Policy Context. One of limbia's objectives in the waeer and sanitation sector since the achievean'f.t of independence in 1964 has been the provision of safe water to all its people. in pursuit of this objective, the WHO/IBRD Cooperative Program was requested in 1973-74 to carry out a water supply and sanitation sector study which would also propose a long-term development program for the sector. 2. The study concluded thats urban areas were better served with water than rural areas; sewerage and sanitation were generally less extensive and served much smaller segments of the population than water supply; and rural sanitation was totally inadequate. Its recommendations were to correct these imbalances so that by 1990, about 90 percent of the urban and 40 percent of the rural population would have access to a pumped water supply; and 60 percert of the urban and 20 percent of the rural population would have access to waterborne sewerage. In addition, about 50 percent of the rural population would have access to safe water from wells and boreholes and have access to pit latrines. 3. Although the proposed program was accepted by the GRZ, very shortly thereafter in 1974, there was a drastic decline in copper prices and consequently in GRZ revenues which severely limited the implementation of the sectoral objectives. 4. At the time of appraisal, the legislative framework for the water sector in Zambia was considered to be adequate, not requiring any legislative changes. However, the legal relationships among the different institutions involved in the project were in need of clarification. -2- 5. The developmental and findacial policy framework was essentially unchanged through the coustruction period of the project and, along with tte organizational relationshlps in the sectors, proved to constitute a aignificant constraint as antictpated at the time of appraisal. 6. In the GRZ's 1978-83 National Development Plan, high priority was given to the development of services in rural administrative centers. Most of these were in the 42 poorer rural districts wnich generally lacked an adequate revenue base. The policy extant was that operation and maintenance costs of service facilities should be financed by the district councils. In 45 other districts, DWA operated and maintained from its budget 62 piped water systems on behalf of the councils. In both situations, the tariffs charged had no relationship to the costs of a particular undertaking. Indeed, the policy objective was that payment for water should not be related to the cost of the system, but rather to the income of the consumer, despite other policy statements extolling the principles and virtues of cost recovery. 7. The GRZ's policy of relating tariffs only to the income of the consumer rather than to the opsrating and maintenance costs of individual systems, exarerbated by poor revenue accounting and collection practices, resulted in the rural systems being dependent upon GRZ for up to 70 percent of operating costs. However, as G9Z finances became constrained by the depressed price of copper, the required funds were not forthcoming. Thus DWA was not able to carry out GRZ's objectives within the sector, to plan and implement required sector development programs and to adequately operate water sector facilities. The situation was identified at appraisal and persisted through the project period. 8. At the time of appraisal, IDA's strategy in Zambia had been to support GRZ's effort to: (i) diversify the economy and increase the role of agriculture; (ii) narrow the gap between rural and urban incomes; and (iii) develop a wide range of managerial and technical skills in order to reduce dependence on expatriate manpower and improve the operating efficiency of DWA, especially in the rural areas where the problems were greater. The project was IDA's first in Zambia's water supply sector. C. Project Objectives and Description 9. ProJect Objectives. The principal objectives of the project were to: (a) Expar3 the water services available in six largely rural districts in t!-e northern part of Zambia. This included piped water systems in the main towns of four of the districts, and point systems involving approximately 400 wells and 42 boreholes spread evenly over the six districts. As a result, an additional 29,000 people would receive piped water, and an additional 110,000 would be served by point systems by the year 1988 increasing the serviced population from about 45 percent in 1980 to 62 percent in 1988; and (b) Strengthen the key sector institution, DWA, to a stage where it would become the efficiently managed and viable arm of GRZ for development and implementation of sector policies. -3- 10. The project was also designed to address the other major constraints on ector development--manpower shortages, inadequate operation and maintenance, and i.aadequate cost recovery from consumers. 11. Project Components. The project consisted of the following components: (a) Construction of Four Piped Systems: The proposed project included improvement of existing or development of new water sources, provision of treatment and pumping facilities and reservoirs and expansion of distribution systems, including installation of public standpipes, plot connections and water meters in four northern Zambia district administrative centers (Isoka, Mpulungu, Kawambwa, and Samfya). It aleo included upgrading of existing facilities in Kasama and Samfyc improvement of access roads, fencing, housing for operators, water Lti,ters, standby equipment, spare parts and about 10 km of small diameter pipes for sufficient extension of distribution networks up to two years after completion of the proposed works; (b) Construction of Point Systems: The project included rehabilitation of existing wells and boreholes in villages in the project area and additional construction of about 70 wells and 7 boreholes in priority villages in each of six districts in northern Zambia namely, the districts of Isoka, Kaputa, Kawambwa, Mbala, Ndola Rural, and Samfya. District workshops were also to be provided with spare parts, mainly for handpumps, sufficient to maintain the installations for about two years after completion of the proposed works. DWA w.1s also to be provided with a drilling rig, vehicles and equipment to carry out these works by force account; (c) Upgrading of Operation and Maintenance: DWA's existing provincial workshop/store buildings in Kasama and the district workshop in Samfya were to be rehabilitated and the provincial workshops in Mansa and the district workshops in Isoka, Kaputa, Kawambwa, Mbala, and Ndola Rural to be replaced by completely new buildings. The workshops were to be provided with equipment, tools and spare parts for operation and ma. .'tenance of water supply systems under DWA's control required for about two years after completion of the project. Operation and maintenance capacity was also to be strengthened by provision of six lorries (7 to 8 tons), six four- -'heel drive vehicles and three pickups. Additional staff housing _ncluded six medium grade and four high grade houses at DWA's two provincial (Mansa and Kasama) and six district offices and 10 high grade houses in Lusaka to be used by DWA's headquarters professional staff; (d) Technical Assistance and Consulting Services and Training: DWA was required to appoint and retain suitable consultants and experts on terms and conditions satisfactory to IDA to provide: -4- (i) engineering consulting servicoes which would comprise supervLsLon of construction of the four plped systems, and preparation of detailed design for additlonal four-pLped schemes and approximately 450 wells and boreholes in villages to be included in the next follow-up projectg (LL) tralnlng for professional level candidates by provisJon of ten overseas scholarships; (ili) technlcal assLstance whlch would comprlse: a. one engLneer to assiet DWA ln coordinating the project actiLvtLes; b. one accounting specialLst (cost and management accountant) to assist DWA in improving management Lnformation systems; c. two maLntenance (water) engineers for DWA's provincial offices in Mansa and Kasama for improving maintenance of the water supply systems and for training purposes; and d. four pickups, spare parts and operating cost for the project duration. (e) Health Components Health centers ln the six districto were to be provided with wells (or boreholes) and proper pit latrines. Provincial health offlces were also to be provided wLth equlpment for simple chemical and bacteriologLcal laboratory analyses for drinking water (to be inetalled ln provincial hoepitals and to be used by health inspectors), staff houses and vehicles. The major elements of this component were as described below: -5- (i) wells and pit latriness Repair of defective wells, pumps (hand- New pit pump, diesel-pump New hand pumps latrines District systems) required required Mbala 3 3 24 :.soka 5 4 21 Kawambwa 3 5 9 Kaputa - 4 6 Samfya 2 11 13 Ndola Rural 11 11 Total 24 27 84 (Li) housing: The MOH requested 5 new houses in the health centers of Mpulungu, Sumbu, Mbereshi, Kawimbe and Masaiti; and (iii) tiansport: For supervisory duties in district headquarters the project was to provide six pickups, one four-wheel drive station wagon and spare parts for two years. D. Proect Desian and OrEanization 12. The Sectoral Context. There is an adequate legal framework governing Zambia's water resources. However, the organization of the sector has evolved on an "ad hoc" basis, with District Councils, the DWA, the Ministry of Health and the Buildings Department as well as parastatal institutions having overlapping responsibilities. This is clearly inconsistent with the local Adm.nistration Act No. 15/1981 which gives responsibility for water supplies to the Provincial Councils (FZ) and to the Local District Councils (LDC). 13. A further pattern has also developed in which various aid donors have undertaken the supply of water systems on a regional basis with sponsorship from local institutions in clear conflict with the local Administration Act. 14. The only apparent common purpose among this multiplicity of actors in the sector has been the objective of providing water supplies to as many urban and rural communities as posslble. 15. There is no national Master Plan for the water sector, no well-conceived financial or economic policies for the sector, and no organizational framework throagh which coherent policy can be achieved. -6- 16. While these limitations were recognized at the time of project identification, it would appear that IDA also acted as a "regional" donor while seeking long-term organizational improvements in DWA itself. In 1986- 87, with IDA's involvement, a major reorganization study for the Zambia Water Supply Sector was initiated. 17. The absence of a Water Master Plan and an economic policy framework indicates that there is no means of determining whether this project was the most appropriate to be undertaken at the time for the country as a whole in the context of limited resources. 18. Additionally, whereas systems financed by donor grants can be operated without regard to capital repayment, it is highly questionable whether systems which recover only 40 percent of operation and maintenance costs can be expected to be sustainable. 19. The DWA Organizational Context. In the project identification and preparation process, many weaknesses were recognized in the organization of DWA--for example, the filling of the Director's position by expatriates historically; the need for a technically qualified project coordinator and additional water engineers, and ti-e need for a cost and management accountar.t and additional accountants. However, there was no requirement specified ixA the Credit Agreement for IDA to approve the individual appointed as directc_ of DWA prior to such appointment. 20. Framework for Project Conceptualization. As referred to above, there was no planning framework and no readily available data with which to rationally determine whether this project represented at the time the most effective contribution within the water sector to improving the welfare of the population as a whole given the scarcity of resources. 21. In this connection, a sound tariff policy and revenue accounting system were vital. At the time of negotiations, in 1982-83, with revenues from consumers meeting only 10 percent of operation and maintenance costs, a tariff study was undertaken by consultants. If implementation of the tariff study recommendations had been made a condition of effectiveness of the credit, the subsequent need in June 1985 to threaten suspension of disbursements in order to secure the belated introduction of revised tariffs could have been avoided. 22. Technical Design. At the technical design level, the project was more soundly conceived, with IDA's appraisal mission contributing to this result. Deficiencies in the feasibility studies and the preparation work were diecussed during appraisal--particularly the need to ensure that the proposed designs represented the least cost solution--and further work was required of the consultants. 23. The resulting design included the use of gravity feed at Kawambwa and Isoka thus reducing the need for pumps, electric motors, etc. and minimizing field maintenance and skill level requiroments. 24. Standard building designs were utilized for the district workshops, resulting in significant cost savings. -7- 25. The hand pumps for the rural well program were selected after a field trial. The India Mark II hand pumps have proved to be very reliable. 26. The use of slow-sand filters at Samfya was appropriate, although the filters had problems of premature clogging after only 8 to 10 days of operation. A number of studies was conducted to identify the cause of the problem and its solution. The report of the studies had not been released when project activities were suspended in May 1987. E. Project Implementation 27. Physical Project. Relative to the original physical project objectives, this project is considered to be relatively successful. Initial delays in tender award for the piped water systems resulted from lack of adherence by the DWA to IDA's requirements for review of tender documents. Delays in project start-up by the principal contractor, together with the contractor's lack of prior Zambian exposure resulted in a delay of approximately 15 months in completion of the four piped-water supply systems. The original completion date was April 17, 1986; an extension of time to April 15, 1987 was granted; the four systems were essentially completed in June 1987. 28. With respect to the boreholes, only 30 out of 42 boreholes were completed. This was due to the drilling rig intended for this project's boreholes being devoted to projects in other parts of the country; 396 out of 400 wells were completed. 29. The success of the physical aspect of the project would have been enhanced if the policies of the GRZ had not led to the suspension of disbursements by IDA in May 1987 and to the cessation of project activities. As a result of the significant devaluation of the Zambian kwacha, and the appreciation of the SDR relative to the US dollar and the health component not being implemented, there was a surplus of funds sufficient to finance the construction of an additional three piped water systems in the towns of Mbereshi, Nchelenge, and Kaputa, for which IDA had given approval and preliminary designs had been prepared prior to May, 1987. 30. Health Education. This component, which was under the MOH was not implemented as the MOH did not make provision for its counterpart funds in its budgets. 31. Finaticial Management. One of the project's objectives was to implement improved revenue collection and accounting. This was to be accomplished through engaging ar. expatriate cost and management accountant who could in turn train and deploy 11 accountants to be provided by the GRZ. Although GRZ covenanted to employ these accountants, they were never provided; the cost and management accountant was provided through NORAD (1985-87) and later through GTZ (1987-88). However, no counterpart was provided. The first management accountant from Norway had no water sector experience, and the most senior Zambian accountant was transferried out of DWA just before he arrived. Such improvement as did occur in billing and collections from 1986 onwards was largely the result of the second management accountant working with existing staff in the various districts. Some improvement in record keeping and billing procedures was introduced; but, without the necessary counterpart staff, it was not possible to introduce an appropriate customer ledger system. 32. With hindoight, it is apparent that the GRZ covenanted to provide accounting staff personnel which it was eLther incapable of providing or never entinded to provide. 33. Proiect and Operations Management. The need for a full-time project coordlnator was identified at the time of project preparatirn. An expatriate was provlded under IDA financing. ThLs undoubtedly contributed to the project's physlcal achievement. 34. Provision was made in the project to train 10 Zambian water engineers so as to offset the shortage of qualified ZambLan engineers. Candidates were selected and academic courses were successfully completed wLthin budget at the S.J. College of Engineering, Mysore, India. However, lt is not clear whether the graduates did receive satisfactory practical graduate training. Also, the acute shortage of qualified personnel led to their rapidly being placed in adminlstrative positions thereby negating much of their usefulness as engineers. 35. The need for strengthening of management and technical capability in the DWA and the adverse impact of this situation on project implementation with respect to relations with IDA, contractor and consultant, as well as financial viability of the sector have been referred to in para. 19. F. Project Results 36. In summary, it can be stated thats (a) The project essentially achieved its physical objectives of increasing water production capacity in rural areas of Zambia. A total of approximately 210,000 people are estimated to have benefitted. As a result of devaluation of the Zambian kwacha and appreciation of the SDR, relatlve to the US dollar and the health component being belng implemented, it accomplished this result with an unused balance of SDR 1.89 million out of the original credit of SDR 14.8 million; (b) No appraisal economic or financial rate of return was computed because the project'. revenues were forecast only to meet operational and maintenance costs. ThL target was not met for reasons outlined below; (c) The project did not achieve the objective of an improvement in revenue accounting systems because the GRZ did not fulfill its covenant to provide 11 accountants; (d) The project did not meet it. objective of full recovery of DWA's operating and maintenance costs by 1985. Although there was a significant increase in tariff levels and collections, revenues were still only at a level of about 40 percent of operation and malntenance costs in 1988; ie) Revenue accounting systems still need further strengthening (not possible without the required accounting personnel). In 1988, it was reported that at least 90 percent of government departments -9- were not paying their water b.lls--however, the system did not provide information on which departments and locations were delinquents (f) In addition, there is no incentive for individual districts to improve their revenue collection because all revenues are credited to GRZ, and costs are met by central budget allocation; (g) The project did not meet its objectives in health education because the MOH did not provide local funding in its budgets. However, it is reported that there has been a significant drop in the actual incidence of waterborne diseases in the project districts apparently as a result oZ improved water service. (h) The project accomplished its objective of training 10 Zambian graduate engineers. However, it is too early to determine whether DWA is actually benefitting at the technical level as a result; and (i) Although not an objective of the project, the project enabled IDA to assist in an institutional study for reorganization of the water sector in 1987-88 which was funded by GTZ. The study recommended structuring the sector into two organizations, namely: (i) Zambia Water Resources Board, a statutory body responsible for master planning and regulation of water resources, as well as eetting water quality standards and monitoring compliance; and (ii) Zambia Water and Sewerage Company (divided into four regional subsidiary companies) responsible for providing water supply and sanitation services. 0. Proiect Sustainability 37. Clearly, this pro;ect is not sustainable because it was part of a system whose revenues do not even meet operation and maintenance expense, while GRZ resources are not sufficient to adequately meet the deficiency. 38. The Water Sector study conducted by consultants in 1987-88 suggested that approximately ZK 17 million per year was required to provide adequate operation and maintenance for the systems under DWA and the District Councils versus annual revenues of approximately ZK 3 million in 1988. 39. In addition to the lack of availability of financial resources, there are not sufflcient technically qualified personnel to maintain the systems in good order. In 1983, the President's Report, para 59 stated: "Water supply systems constructed by DWA under the project would be hnanded over to the district councils for operation. However, since there are few trained Zambians available in the districts to operate the piped systems, these would be operated by DWA on behalf of the district councils for at least 5 years after project completion. District personnel would be trained tc take over - 10 - these systems after this period. The district councils would remain responsible for the operation and maintenance of the point systems". 40. Although engineers and technicians are being trained, the public sector is continuously losing its better trained personnel to higher paying positions in the private sector. H. Association Performance 41. IDA performed well in the identification and appraisal phases of the project in terms of identifying the likely problems to be encountered, particularly in terms of DWA's organizational weakness, the need to determine least cost solutions for the piped water systems, and the need to strengthen revenue accounting and collection. 42. However, at the policy level it gravely overestimated the willingness of the GRZ to honor commitments. Consequently items were included as covenants which arguably should have been included as conditions of effectiveness--for example, adoption of revised tariffs and adequate staffing of the financial function and the hiring of properly qualified senior management at whatever remuneration was required to attract the right person who should have been subject to IDA approval. 43. Once the project commenced, regular IDA supervision missions visited Zambia and assisted with the design review process, tender award and sector development. 44. IDA was obliged to formally advise the GRZ in June 1985 that it would suspend disbursement on the project if GRZ did not fulfill its covenant to approve tariff increases. 45. In May 1987, IDA suspended all disbursements to Zambia. Arising from this action, certified invoices to the principal civil works contractor for work done prior to the suspension, were not honoured until after the lifting of the suspension in March 1991. I. Borrower Performance 46. As indicated in Part III, Section G "Status of Covenants", the Borrower is in default with respect to many key covenants. 47. There appeared to be resistance to efficient resource allocation as shown in continuing failure to set realistic tariffs or to charge government departments for water consumption. 48. The management of DWA resisted award of drilling equipment contract to be financed from the credit to the lowest evaluated bidder. 49. The Bank of Zambia converted into kwachas the initial foreign exchange deposited with it in the Special Account and refused to reconvert to the currency of deposit. The Special Account was therefore used for local payments only. - 11 - 50. In 1986, the HOF refused to process certified withdrawals in favor of some contractors until pressure was brought to bear by a supervision mission. 51. There were instances of diversion of project vehicles to unauthorized use, as well as reallocation of drilling equipment required for timely completion of the project to other uses. 52. GRZ failed to pay its major project contractor the sums due to the contractor following suspension of disbursement by IDA. DWA performed very well in the drilling of wells by force account. GRZ deposited, as agreed, at the start of each quarter, its share of local funding to the accounts established for this purpose. 53. The principal lesson for the GRZ is that it requires a reorganization of the sector as a parastatal under competent, commercially oriented management with a strong emphasis upon cost recovery. J. Proiect Relationshii 54. Disbursements were suspended on all credits to Zambia in May 1987; prior to that time several covenants under this credit agreement had either not been complied with or pending. 55. The project was accomplished physically just prior to suspension of disbursements. In the absence of suspension, the three additional piped water systems could have been completed. 56. Over the life of the project, IDA cooperated with three other donors which had been involved in Zambia's water sector--namely, the European Development Fund (EDF) which financed the initial feasibility study; Norway (NORAD) which financed the 1982-83 tariff study and the two management accountants (1983-87); Germany (GTZ) which financed a contract extension fo. the management accountant as well as the Water Sector Institutional Reorganization Study. Relationships appeared to have been positive. However, it appeared that the lack of sector management resulted in each donor establishing its own sphere of influence and regional agenda. 57. Suspension of disbursements led to the major civil works contractor bringing suit against the Bank in the Paris Commercial Court, claiming the amount owed to it by GRZ should be paid by IDA under the undisbursed portion of the credit. With the lifting of suspension in March 1991, GRZ submitted a request to IDA to settle its outstanding accounts with the principal contractor. The amount, equivalent to US$1.976 million including interest, was settled in May 1991. 58. The appointment of a full-time project coordinator (financed by IDA initially from other funds and later from the Credit) was a very positive step in terms of the GRZ's relationships with other parties. 59. In other respects GRZ's relationships with other parties appeared to have been difficult. On May 8, 1985 IDA stated in a letter to the Minister of Agriculture and Water Development: - 12 - "There is an apparent lack of cooperation and positive attitudes between DWA, the consultants and the contractor towards solving the problems and accelerating progress of the physical implementation of the project.... We understand that the situation has not improved materially and, as an example, the contractor has still not received the advanced payment to which he is entitled". 60. Evidence of poor management relationships is that the first Norwegian management accountant reported having only one meeting with his superior in hle first 10 months on the job and being utilized to only 50 percent of his capaclty due to lack of direction. (This appears also to reflect the accountant's lack of experience, as a stronger person would likely have developed his own program given the magnitude of DWA's accounting and financial management problems). To neglect the resources provided by donor agencLes li not likely to encourage their future support. R. Con_ultiLnaServices 61. The consultants to the project performed the feasibility study and prellminary and detailed design in addition to supervision of construction. Their overall performance is considered to have been acceptable. 62. The major contractor for the piped-water systems appeared initially to be unfamiliar with Zambia. They were slow in mobilizing, and their segment of the project suffered delays in completion as a result. They encountered difficulties and lack of support in their early dealings wlth DWA. As a result of the delays in completion, the payment of some of their certified invoLces was not effected prior to the suspension of disbursements. L. Proiect Documentation and Data 63. It has been suggested that a number of items included as covenants should have been included as conditions of credit effectiveness (for example, implementation of the 1982-83 tariff study recommendations; provision of accounting personnel) and that the covenants should have included the right of IDA to approve appointment to top management positions in DWA. 64. The Staff Appraisal Report provided a reasonable financial evaluation framework from extremely limited available data. The quality of data in the Project Completion Report has improved somewhat, as the result of the presence of the coet and management accountant, but has to still be viewed as tentative due to inadequate revenues and cost accounting systems in place in the Zambian Water Sector. - 13 - PROJECT COMPLETION REPORT REPUBLIC OF ZAMBIA RURAL WATER SUPPLY PROJECT (CREDIT 1362-ZA & SF2-ZA) PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE I. BANK' PIRFORMANCI A. Durina ProJect Implementation 65. Civil Works Contract--Four Township Water Supplies. The World Bank appraisal mission suggested among other things review of the design of six township water supplies on the basis of least cost solution. The tender documents, specifications and cost estimates were prepared accordingly. After approval of the revised design and tender documents, the four twonships water supply scheme was selected on the basis of priority and with due regard to insufficiency of funds to accommodate all six schemes leaving Kaputa and Ndola for the next stage development. 66. Due to the suspension of disbursements under the credit in May 1987, some certified Lnvoices due the principal civil works contractor could not be honored. 67. DWA estimated the outstanding certificates totalled ZK 714,542.97 and DM 1,796,546.40, while the contractor claimed ZK 72,453.77 and DM 3,064,544.18. The contractor did not submit evidence for his claim. 68. After May 1987 only a few works were carried out from the available local funds. In these circumstances, it is encouraging to note that the targets for new wells were more or less achieved and substantial progress made on rehabilitation but the boreholes program was not completed. This was due to the fact that the drilling rig purchased under the project was delayed for more than 18 months in Lusaka for other national emergency works. 69. Institutional Support and Reorganization of Water Sector. One of the objectives of the Third National Development Plan (1976-80) was to establish a National Water Authority and thereafter regional water authorities. Since the year 1979 a number of reports has been prepared supporting some sort of strong central organization dealing with water and sanitation instead of the present multiplicity of organizations involved in the sector. These organizations are facing the following problems: (a) Organizational constraints; (b) Financial constraints; (c) Manpower constraints; and (d) Lack of coordination. 70. To streamline activities and reduce duplication, the National Action Committee (NAC) of the International Drinking Water Supply and Sanitation Decade (IDWSSD) in 1986 recommended the need for a study for reorganization of the sector. IDA and GTZ expressed interest in assisting with this study. - 14 - 71. The main objective of the study was to recommend an effective and efficient organization structure for the water and sanitation sector in Zambia which can: (e) Ensure that all part. of the country are supplied with water of good quality and in sufficient quantity; (f) Ensure maximum conservation and utilizacion of all water resources in the country; and (g) Ensure that proper sanitation facilities are provided. 72. The study was carried out by consultants with assistance from DWA, Ministry of Decentralization and other organizations. The final report of the study was available in February 1988 and its recommendation may be implemented in the near future. B. Sumary of Bank's Role 73. Role of External Aid Agencies. The project was financed by IDA and since the start regular visits were made by IDA missions for supervision purposes. During the visits, each component of the project was discussed in detail--bottlenecks, constraints, and measures to be taken to sort out difficulties in implementation -- and site visits taken as necessary. The missions were very helpful. They assisted the project coordinator giving him guidance for the smooth implementation of the project. 74. Aide m4moires were prepared at the end of each mission summarizing the progress of the project and actions needed to be taken together with timetables. 75. Comments and Recommendations. The project fulfilled most of its objectives as evidenced by the results. The project was well planned, implemented, and supervised. However, the health component was not implemented as local counterpart funds were not provided for it and the boreholes program not completed because of the delayed availability of the drilling rig. Further, implementation of three other water supply schemes, for Kaputa, Nchelenge, and Mbereshi for which tenders had been received and approved by the Central Tender Board was not carried out due to the unavailability of IDA funds after May 1987. 76. It is unfort siate that this important project was caught in the crossfire with the result that the people who were waiting for improvements of water supply services were denied. 77. It is therefore hoped that in the future, projects which are in advanced stages of implementation, as the above one was in May 1987, would not be affected by disputes which arise between the borrower and aid agency and would continue to completion. - 15 - II. BORROWR' S PERFORMANCE C. Overall Project Summary 78. The project agreement was signed on July 13, 1983 for a total amount of SDR 14.8 million, CR1362-ZA (SDR 9.2 million) and SF2-ZA (SDR 5.6 million). The project actually started in early 1984 due to delays by GRZ in making the initial deposit of ZK 600,000 and the opening of the accounts with Bank of Zambia. However, more than 90 percent of the planned works were completed as follows: - piped water supply at Kawambwa, Samfya, Isoka, and Mpulungu; - 396 new wells; - 30 new boreholes; - 223 rehabilitated boreholes and wells; - 19 three bedroom houses; - 1 four bedroom house; - 1 no. provincial workshop; - F District workshops; - 4 officers obtained degrees in civil engineering; - 6 post-graduate diplomas in water engineering; - 13 trucks; - 12 four-by-four pickups; - spare parts for vehicles and water supply schemes; - 380 handpumps; - tools and equipment for 2 provincial and 6 district workshops; - other miscellaneous items. 79. The total expenditure on the project reached SDR 10.936 million together with a GRZ contribution of ZK 7.187 million as of the end of May 1987. There was about SDR 1.0 million in outstanding payments at the time. Thus the net undisbursed under the credit was about SDR 3.0 million which would have been sufficient to implement the piped water supply schemes at Kaputa, Mbereshi, and Nchelenge. 80. Civil Works Contract--Four Township Water Supplies. Four township water supplies: Kawambwa and Samfya--Luapula Province, Isoka and Mpulunqu--Northern Province. 81. The IDA appraisal mission suggested, among other things, review of the design of six township water supplies on the basis of least cost solution and thereafter the tender document, specifications and cost estimates were prepared. 82. After the approval of the revised design and tender documents, the four tows-ships water supply scheme was selected due to insufficient funds to accommodate all the six schemes; leaving Kaputa and Ndola for the next stage. 83. A prequalification notice for civil works was published and 12 firms responded to the notice. Out of these 12 firms, 10 were prequalified. However, only four firms bid and the least priced bid was for ZK 10,787,650. - 16 _ 84. Further, the change from groundwater to surface water as the supply source for the schemes and the installation of two observation boreholes in the Samfya water supply system to monitor groundwater movement in the formation increased the total cost of the four township water supply scheme by ZK 1,270,020 to ZK 12,057,670. 85. The contract agreement was signed on September 17, 1984. Construction was for a period of 18 months plus one month mobilization, or a completion date of April 16, 1986. Construction supervision was by the design consultant. There were several problems during construction including delayed start, cash flow and lack of cooperation and coordination between the contractor and consultant. Construction was comple.ted at the end of August 1987 about 15 months behind schedule. D. Other Civil Works Contracts 86. The construction of additional clvil works including one provincial workshop at Mansa and five district workshops at Masaiti Bona, Kawambwa, Isoka, Mbala, and Kaputa together with about 7 houses was carried out by a different contractor. This work was finished close to schedule and under budget. Ten other houses were constructed in Lusaka under the project by separate contract. These were completed behind program and at a final cost which was about 60 percent higher than the bid price. Tenders for the buildings were prepared and executed under the Buildings Department. Lack of communication and coordination with DWA, the executing agency, contributed to the delays and the resultant increased costs. 3. Work on Force Account 87. Point System Water Supply. A program was prepared to carry out point source water supply work by force account. Various forms were designed for the control of materials such as cement, stones, steel, pipes etc and well diameter was standardized at 1.2 meters for all tha provinces. A trial mould for the manufacture of well liners was designed and the manufacture of top covers for wells started. The program went very well as 396 out of 400 wel i and 30 of 42 boreholes were constructed, and 223 boreholes and wells out of a total of 269 were successfully rehabilitated. 88. It can be seen that the target for new wells was more or less achieved. The rehabilitation program was not completed part'.y because of the suspension of IDA funds in mid-1987 and the fact that the drilling rig purchased under the program was delayed for more than 18 months in Lusaka for other national emergency works. However, the results achieved were satisfactory. Force account was also used for the construction of three houses in Hansa and Kasamba. F. General Procurement 89. IDA guidelines and the special arrangements under the Special Fund were followed in the procurement of goods and services. There were no major procurement problems. - 17 - S. Tariffs. Revenues and Operat Ln Cost 90. DWA has responsibility for operation and malntenance of 47 township water supply systems in additlon to a oonaiderable number of wells and boreholes ln the rural areas. The responsLbility for bllling and collectlon for these schemes was turned over from the DLitrict Counclls to DWA only in October 1984. 91. DWA lmplemented a uniform water tariffs policy. The tariffs were adjusted regularly, usually once a year effectLve January 1. In 1985 two adjustments were made on January 1 and July 1. Revenues, however, contlnued to be only a fraction, less than 40 peroont, of operating costs and the project objective of full recovery of operatlon and maintenance costs by 1985 was not achleved. In 1985, Cabinet approved legislation empowerlng HAWD to review and glve final approval annually to tariff adjustment requests by the DWA wlthout further ratiLfcatlon by the cabinet. 92. GRZR' accountlng procedures are prepared on a cash basLs and cannot be regarded as fully adequate for a complete evaluation of DWA's financlal performance. Revenues bllled are not ledgered--only actual collectlons are reported regularly to DWA-Headquarters. Full cost accountlng does not take place. B. Health Component 93. Provision was made in the project for the improvement of lnfrastructure at rural health centers in six dLstrLcts. The provlsion included constructlon of 24 new wells/boreholes and 84 proper pit latrines. Provinclal health offices were also to be provided wlth water testlng kits/equlpment for simple chemical and bacterlological analyses for drinking water; the project also provided staff houses and vehicles. 94. The above program was prepared in consultation with the MOH. However, desplto varlous meetings with the officials, the project could not take off due to the fallure of the MOH to provide the necessary counterpart funds in the yearly ministry budget during the project implementation period. Provisions were made in the budget, however, for the procurement of equipment for the laboratory. I. Proiect Zxpenditure--Finance 95. Under Credit Agreements signed between GRZ and IDA on July 13, 1983, the following credits were availablet (h) IDA credit CR-1362-ZA - SDR 9,200,000 (i) IDA special credit SF2-ZA - SDR 5,600,000 Total SDRl4!800,000 - 18 - 96. As of the end of May 1991 the total project disbursements had reached SDR 12.912 mLllion from credit funds, that is, SDR 7.821 million from 1362-ZA and SDR 5.091 million from SF2-ZA including SDR 1.976 million released to the principal civil works contractor in May 1991, together with ZK 7.187 million contributed by GRZ. 97. The remaining undisbursed amount totaled SDR 1.888 million; that is, SDR 0.509 million on Credit SF2-ZA and SDR 1.379 million on Credit 1362-ZA. 98. Financial Statements/Audit. Financial statements for the projects were prepared every 6 months. The financial statements showed accumulated figures for each credit. The project accounts were fully audited up to December 31, 1987 by the Auditor General of Zambia. There were a number of problems with the operation and administration of the Special Account which never operated as intended. The initial deposit into this account was exchanged into Zambian kwacha by the Bank of Zambia and efforts to change the amount back into US dollars were unsuccessful. The Special Account was therefore used for local payments only. J. Institutional Performance 99. Management and Organizational Effectiveness. There was no change in the organization of the DWA but administration was strengthened by opening new district offices manned by tech;ical staff. 100. Staff development and training programs were instituted including a two- year operators' course financed by the EEC and a one-year maintenance course run by NORAD. In addition, 10 DWA staff were sent to various overseas universities to pursue degree courses in engineering. 101 DWA's ability to recruit and retain qualified and capable staff was a constant problem due to the lower salaries and poorer conditions of service in the public sector compared with the private sector. High inflation coupled with foreign exchange difficulties also made working in Zambia less attractive to expatriates. - 19 - PROJECT COMPLETION REPORT REPUBLIC OF ZAMBIA RURAL WATER SUPPLY PROJECT (CREDIT 1362-ZA & SF2-ZA) PAR' III: STATISTICAL INFORMATION A. Related Bank Loans and/or Credits This was the first Bank-group credit to the Zambian water sector. 102. A project identification mission visited Zambia in December 1987 to identify further requirements in the sector. However, further activity was discontinued while IDA's operations in Zambia. remained suspended. B. Proiect Timetable Date Date Date It4 Planned Revised Actual Identification (Executive July 1976 Project Summary) Preparation Jan-Oct 1977-' November 19802/ Nov-Jan 1981 Appraisal Mission December 19771/ January 19812/ February 1981 Loan/Credit Negotiations March 1988 Board Approval February 1982 ' May 12, 1983 Credit Signature July 13, 1983 Credit Effectiveness September 1988 Nov 4, 1988 Project Completion Apr 17, 1986 April, 1986 December 1987 Credit Closing October, 1988 May 16, 1991 Sept. 80, 1991" I At tim of Project Identification, July 1976. 2/ At time of updated Project Brief, July 1980. 2 Following the lifting of the suspeinlon In March 1991, the closing dates of the credits were extended to September B0, 1991 to allow for settlement of outstanding claims. - 20 - C. CredLt DLabursements Disbursements CUSs'000) Credit 1362-ZA and SF2-ZA Actual as percentage Bank Appraisal President's of Estimate Fiscal Year Estimate Resort Actual (President's Report) FY 1984 5,100 5,100 1,400 27.5 FY 1385 10,200 11,100 3,400 30.6 FY 1986 12,600 14,600 6,500 44.5 FY 1987 13,960 15,960 11,100 69.5 FY 1988 14,000 16,000 12,462 77.9 FY 1989 -- -- 12,518 78.2 FY 1991 -- -- 14,000 87.5 The status of Project Financing is as follows: Credit Credit 1362-ZA 8F2-ZA Total (SDR Millions) Total Credit 9.200 5.600 14.800 Disbursed 7.821 S.091 12.912 Undisbursed 1.379 0.509 1.888 - 21 - D. Proiect implementation Indicators 103. No financial rate of return or economic rate of return was computed for this project, at appraisal. 104. Most of the monitoring indicators proposed in Annex 21, of the Staff Appraisal Report have not been reported, primarily as the result of the 11 management accountants to be provided by GRZ not being made available to assist the cost and management accountant, who was provided under NORAD and GTZ technical assistance. 105. For the 47 town piped-water supply systems reporting to DWA, and which are subject to a uniform tariff system, a covendnted objective was to ensure full cost recovery of operation and maintenance costs by the end of 1985 and thereafter. 106. As a result an effort has been made to record revenues by district, and to determine the aggregate operation and maintenance costs for the 47 systems. Performance of these indicators against the Appraisal forecast (Annex 17) is shown belows Comparison of Revenues and Recurrent Expenditures K 000 Per A2pnrcIal Reggrt Per Pro1ect Completion X PCR X PCR Revenues/ D&J Surplus CAM Surplus Revenues Appraisal Revenuesol ExpenJ (Deficit) RevenuesV Expendl/ (Deficit) OhM Revenues 1902 678.6 1167.4 (408.8) 1068 P40.0 1487.6 (697.6) 277.0 33.0 1934 1065.8 1780.9 264.4 226.0 11.5 19865 2679.6 2058.0 628.6 698.7 22.8 1986 8404.9 2419.5 986.4 1842.9 4712.0 (8869.1) 28.5 39.4 1907 4264.6 28650.2 1484.4 266.5 7086.0 (4469.6) 86.6 69.9 1908 4991.6 8819.9 1671.7 8800.0 6870.0 (6570.0) 87.2 66.1 1J Appraisal Revenueo--represent theoretical revenues assuming correct application of tariffs for single taps (Appraisal Report, Annex 17). V Appraisal OhM Expend--represents an estimate basd on revenues (Appraisal Report, Annex 17). IV PCR Revenues--actual revenues. V PCR OhM Expend--manually calculated cost for 47 townshipe. There Is no cost accounting system (sw Draft Project Completion Report, Department of Water Affairs, page 101). - 22 U. Project Costs and Financing Project Cost,u (In MliIons) Appraisal Actual Difference Loco Forie n Local Foreign Local Foreian -ZR- SSDR -2-- W Construction of Piped Water Supply Systems - Kawambwa 1.17 0.88 0.92 1.76 0.26 (1.08) - Mpulungu 1.29 0.64 0.86 1.40 0.44 (0.76) - lcoka 0.96 0.48 0.71 1.06 0.24 (0.69) - Samfys 1.18 0.70 1.10 1.76 0.03 (1.06) Construction of Point Water Systems in six Districts - Wells (400) and boreholes (42) 1.77 0.93 2.63 - (0.62) 1.00 - Rehabilitation of systes 0.84 0.07 Engineering - Supervision of construction of 4 piped systems 0.10 0.45 0.84 0.62 (0.74) (0.17) - Final design and tender document. for follow-up project 0.20 0.62 0.42 1.02 (0.22) (0.40) Workshop, and Housing - Provincial (2) and district (4) workshops 0.53 0.19 0.62 0.08 (0.09) 0.11 - Staff housing (20 units) 0.67 0.28 2.16 0.08 (1.49) 0.15 Tools and Equipment for 8 Workshops and Spare Parts for all DWA Systems 0.10 0.97 - 0.43 0.10 0.64 Vehicles including spare parts for workshops 0.05 0.48 0.18 0.78 (0.08) (0.a2) Overas Assistance (including transport) 0.04 0.41 0.01 0.24 0.03 0.17 Technical Assistance (ncl. transport) - 1 proJect coordinator (2 yrs), 1 accounting advisor (2 yrs), 2 water (ma intenance) engineors (4 yro) 0.45 0.68 0.38 0.45 0.07 0.28 Health Education 0.19 0.81 - - 0.19 0.31 Bass Cost Estimte 9.08 7.80 10.78 9.67 (1.68) (1.87) Contingencies2' - Physical 0.91 0.78 - - 0.91 0.78 - Pr!ce 8.26 1.87 .00 .00 8.26 1.37 Total Cost of the Project - Including Taxes 18.25 9.96 10.76 9.67 2.49 0.28 - Not of Taxes 11.26 9.95 10.76 9.67 0.50 0.28 11 January 1988 price level: ZK 1.00 e US8o.68; US81.00 * SOR 0.9376 21 Physical contingencies have been taken as 10 percent of base cost. Foreign prico contingencies have been assumed at 7.6 percent and 7 percent In 1988 and 1984-87 respectively and local price contingencies at 14 percent and 12 percent. - 23 - Project Financing Planned (Credit 1362-ZA Source and SF2-ZA) (USS '000) Firal (SDR '000) IDA 10,000 7,821 IDA Special Fund 6,000 5.091 Government of Zambia 5,640 700w (of which taxes) (1,640) TOTAL 21,640 13,612 I GRZ contribution of ZK 7.187 million converted at 1987 exchange rate of US$1.00 = ZK 8.00; and US$1.00 - SDR 0.779 at June 30, 1987. Comments 1. As a result of the GRZ making a greater contribution in ZK than planned at appraisal (ZK 7.187 million versus ZK 6.768 million), the saving of ZK 2.49 million in local costs of the project (see Table E) was realized as a saving in foreign exchange (that is, reduced withdrawals from IDA credits), in addition to the SDR 0.28 million saving in foreign costs. - 24 - P. Project Results Direct Benefits Appraisal Estimated at Indicators Estimate Closing Date Water Supply at 4 Towns Population to be served in 1988 57,000 57,300 Percentage of population served 100 100 Total production--m /d 5,400 5,410 Losses as percentage 20 20 Population served by New Connections Multiple Tap 1,740 2,145 Single Tap 3,606 3,205 Stand Pipe 23,634 23,635 28,980 28,985 Water Supply to 6 Districts Wells constructed 400 396 Population served 95,000 164,230 Boreholes constructed 42 30 Population served 15,000 15,865 Economic Impact 107. No appraisal financial rate of return, or economic rate of return was developed for the project as the financial data were insufficient. Insofar as many, if not most, DWA systems did not and still do not cover operation and maintenance expense, the return would likely be negative. G. Status of Covenants Brief Description Selection Cor lience of Covnentns Applicable met Ponding Not Mot Remarks (Credit 1382-ZA) Maintain speci7l account at Contral 2.02(B) XXX Deposits into 2 special accounts originally Bank In USS. converted to kwacha. Two now accounts opened, situation regularized. Procuremant as per Schedulo 4. 2.08 XXX Closing Dato April 30, 1988. 2.04 XXX Credit was closed In January 1989. Open and maintain Project Advance S.01(B) XXX Account No. 846 (QBlance of ZK 267,731 as at Account with dep40it of ZK 50,000 and November 30, 1987). quarterly replenishmnt. Strengthen operations by employment 3.02 of: (7) Consulting Engineers XXX (ii) Cost and managem t Accountant XXX (to March 19898 (111) Water Supply Maintenance XXX (to October 1988) Engineers (iV) Project Coordinator XXX (to January 1989) Insurance of Project Goods. 3.03(A) XXX CIF only. Government provides funds for replacement if damaged after installation. Exclusive Project Use of Goods. 3.03(5) XXX Provide plans, contract, documents, 8.04(A) XX etc. (i) Maintain records 3.04(B) XXX (ii) Allow staff to review records XXX and visit sites (ii) Provide project report XXX Prepare Project Completion Report 8.04(C) XX% Draft PCR prepared in November 1988 and (PCR). provided to Bank in January 1989. Acquire necessary land. 3.06 XXX Certificates of occupancy available for project housing but not for waterworke. Assign 11 account. to the Dopartment 8.06 xxx CMA (Sec. 8.02(i)) has had 2 counterparts-- none since. Adoptlon of new revenue collection 8.07 xxx Appile only to DC. within DWA water area, and accounting system by DC. but DWA oporates contral oystem. Brief Description Selection Compl iance of Covenants Applicable Met P nding Not met Remarks Maintain s*part accounts for each 4.01(A) XXX Only the Project accounts are kept separate: District Administratih' center for DWA experiences difficulty In obtaining data DWA from scheme managers. (i) Maintain SOE eparate accounts 4.01(B) XXX (;I) Retain sit records until one XXX year after Closing Date (iii) Enable staff to see records XXX (;) DWA to have its accounts 4.01(C) XXX DWA accounts are audited by Auditor-General. independently audited. Project accounts not independently audited. (ii) Provide certified audited XXX accounts within six months. (ili) Provide Supplementary XXX information. DWA to operate piped system for 5 4.02(A) XXX years after completion DC. to be responsible for maintwence 4.02(B) XXX Some VLOM. of villago borehole, and wells. DIA to assist DCs with training of 4.02(C) XXX villagers. Make tariff structure quitable 4.0B(A) XXX Some Improvements made, but government improve collection and accounting departmente are estimated to pay only 10 percent of water bill. Meets all operating costs and DWA to 4.08(B) XXX Jn 1988, Revenues met only 40 percent of maintain accounts for them by end of operation and maintenance costs. 1985. Prompt reittance of collections and 4.04 XXX Revenues handed over to government DWA to maintain accouAts for them, treasury--system provides no incentive to DWA to improve. Provide adquate funds to DIA for 4.06(A) XXX Funding Is inadequate. proper operation and maintenance of water facilities Costa of operating and maintaining 4.06(6) XXX DWA only provides training. wells and boreboles be borne by users. - 27 - H. Use of Bank Resources Staff Inputs (Staff Weeks) Stage of Planned Revised Final Project Cycle HQ Field HQ Field HQ Field Comments Through Appraisal - 14.9 - - Appraisal through Board Approval - - - - 17.7 - - Board Approval Through Effectiveness - - - - 2.9 - - Supervision - - - - 42.4 - - TOTAL 77.9 MTSSIONS Stage of Month/ Number of Days in Specialization Performance Types of Prolect Cycle Year Persons Field Represented Ratina Status Problems Through Appraisal Appraisel through Board Approval Board Approval 10/88 2 7 Sanitary Eng. 2 U Through Effoectiveness Fin. Analyst Supervision 08/84 1 5 Sanitary Eng. 2 U Supervision 09/64 Supervision 08/86 2 9 Sanitary Eng. 8 U Fin. Analyst Supervision 10/86 2 8 Sanitary Eng. 2 m Fin. Analyst Supervision 06/86 2 8 Sanitary Eng. 2 Fin. Analyst Supervision 12/88 1 9 Sanitary Eng. 2 Supervision 12/87 8 11 Sanitary Eng. 2 Fin. Analyst Economist M a Management.