Document of The World Bank FOR OFFICIAL USE ONLY Report No: 88869-NE INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR 9.0 MILLION (US$13.80 MILLION EQUIVALENT) TO THE REPUBLIC OF NIGER FOR AN AGRO-SYLVO-PASTORAL EXPORTS AND MARKETS DEVELOPMENT PROJECT July 11, 2014 Agriculture Global Practice (GAGDR) Country Department AFCW3 Africa Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. i CURRENCY EQUIVALENTS (Exchange Rate Effective May 31, 2014) Currency Unit = Franc CFA (CFAF) CFAF xxx = US$1 US$1 = SDR 0.64915253 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AF Additional Financing AFD Agence Française pour le Développement (French Development Agency) AGEX Agence d’Exécution (Implementing Agency) BCEAO Banque Centrale des Etats de l’Afrique de l’Ouest (Central Bank of West African States) BE Bureau d’Etudes (Consultancy Firm) BEEEI Bureau d’Evaluations Environnementales et d’Etudes d’Impact (Office of Environmental Assessment and Impact Studies) BOA Bank Of Africa BVCP Bétail, Viande, Cuirs et Peaux (Livestock, Meat, Skins and Hides) CNSEE Centre National de Suivi Économique et Environnemental (National Center for Economic and Environmental Monitoring) CPS Country Partnership Strategy DA Designated Account DANIDA Danish International Development Agency DAO Documents D’Appel d’Offres (Bidding Documents) DGA Direction Générale de l’Agriculture (National Directorate of Agriculture) DGGR Direction Générale du Génie Rural (National Directorate of Rural Engineering) DGPIA Direction Générale de la Production et des Industries Animales (Directorate General for Animal Production and Industries) DGRR Direction Générale des Routes Rurales (National Directorate of Rural Roads) EOP End Of Project ERR Economic Rate of Return ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan EU European Union FM Financial Management FOB Free on Board FY Fiscal Year GDP Gross Domestic Product GIE Groupement d’Intérêt Economique (Economic Interest Group) GoN Government of Niger GPN General Procurement Notice ii GSC Groupements de Services Conseils (Advisory Services Groupings) HC/I3N High Commission of I3N I3N Initiative 3N (Les Nigériens Nourrissent les Nigériens) (The 3N Initiative : Nigeriens Feed Nigeriens) IBRD International Bank for reconstruction and Development IDA International Development Association IFR Interim Financial Report ILO International Labor Organization INRAN Institut National de la Recherche Agronomique du Niger (The Niger National Institute of Agronomic Research) IP Inter-professions IPO Inter-professional organizations IRR Internal Rate of Return MDCP Ministère Délégué Chargé du Plan (Delegated Ministry for Planning) ME Micro-Enterprise MEMA Ministère d’Etat, Ministère de l’Agriculture ( Ministry of Agriculture) MFI Micro-Finance Institution MG Matching Grants MGM Matching Grants Mechanism MIS Market Information System MoP Manual of Procedures MSME Micro, Small and Medium size Enterprise NCB National Competitive Bidding NPV Net Present Value NGO Non-Governmental Organization BD Bidding Documents OP/BP Operational Policy/Bank Procedure OPCS Operations Policy and Country Services ORAF Operational Risk Assessment Framework PCU Project Coordination Unit PDO Project Development Objective PIM Project Implementation Manual PMP Pest Management Plan PO Producers Organization PPP Public-Private Partnership PRODEX Agro-Sylvo-Pastoral Exports And Markets Development Project PSR Plan Succinct de Recasement (Succinct Resettlement Plan) RAP Resettlement Action Plan RPF Resettlement Policy Framework SC Steering Committee iii SDR Rural Development Strategy SDR Special Drawing Rights SIL Specific Investment Loan SME Small and Medium-sized Enterprise SP Sub-Project TA Technical Assistance TFCU Project Technical, Fiduciary and Coordinating Unit UEMOA Union Economique et Monétaire Ouest Africaine (WAEMU : West African Economic and Monetary Union) UNDB United Nations Development Business UNDP United Nations Development Program USAID United States Agency for International Development V/Cs Value Chains WB World Bank Regional Vice President: Makhtar Diop Country Director: Paul Noumba Um Senior Director: Juergen Voegele Practice Manager: Martien Van Nieuwkoop Task Team Leader: Yeyandé Kassé Sangho iv NIGER ADDITIONAL FINANCING TO THE AGRO-SYLVO-PASTORAL EXPORTS AND MARKETS DEVELOPMENT PROJECT ADDITIONAL FINANCING DATA SHEET Basic Information – Additional Financing (AF) Country Director: Paul Noumba Um Sector: Agricultural marketing and Sector Manager: Martien Van Nieuwkoop trade (40%); Animal production (20%); Team Leader: Yeyandé Kassé Sangho Agricultural extension and research Project ID: P148681 (20%); Crops (20%) Expected Effectiveness Date: 11/15/2014 Theme: 100% Rural markets (P); Rural Lending Instrument: Investment Project Financing services and infrastructure (S); Rural (IPF) policies and institutions (S) Additional Financing Type: Scale-Up Agribusiness Basic Information - Original Project Project ID P095210 Environmental category: B Project Name: Agro-Sylvo Pastoral Exports and Expected Closing Date: 4/30/2015 Markets Development Project Joint IFC: Lending Instrument: SIL Joint Level: [ ] Loan [ X ] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: 38 years maturity with 6 years grace period. AF Financing Plan (US$m) Source Total Amount (US$m) Total Project Cost 18.6 Co-financing by beneficiaries 4.8 Borrower - Total Bank Financing 13.8 IBRD - IDA: 13.8 New Recommitted Client Information Recipient: Republic of Niger Responsible Agency: Ministry of Agriculture/PRODEX Contact Person: M. BOLA Moussa, BP 507, Niamey, Republic of Niger. Tel : (227) 20 35 00 68; Email: ; website: www-niger.org AF Estimated Disbursements (Bank FY/US$ m) FY FY15 FY16 FY17 FY18 Annual 3 6 3 1.8 Cumulative 3 9 12 13.8 v Project Development Objective and Description Original Project Development Objective (PDO): The Project development objective is to increase the value of selected products marketed by Project-supported producers. Revised Project Development Objective (PDO): The project development objective and the main components of the Additional Financing (AF) will remain the same as the original project. The AF will build on past successes to ensure the consolidation and scaling-up of sub-projects implemented in the original project, the diversification into new value adding segments (storage, processing, and marketing), and the linkages with the commercial banking sector. An additional focus of the AF will be the enhanced support to the operational strengthening of established Inter- professions (IPs) or Inter-professional organizations (IPOs): livestock products, onion, cowpeas, sesame, tiger nuts, and gum Arabic). Project description: Component A: Improvements of Supply Chains Coordination and Marketing Conditions Component B: Development of Financing Instruments Component C: Securing Irrigation Potential Component D: Project Coordination, Management, Monitoring and Evaluation and Support to the 3N Initiative Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) [X]Yes [ ]No Natural Habitats (OP/BP 4.04) [X]Yes [ ]No Forests (OP/BP 4.36) [ ]Yes [X]No Pest Management (OP 4.09) [ ]Yes [X]No Physical Cultural Resources (OP/BP 4.11) [X]Yes [ ]No Indigenous Peoples (OP/BP 4.10) [X]Yes [ ]No Involuntary Resettlement (OP/BP 4.12) [X]Yes [ ]No Safety of Dams (OP/BP 4.37) [ ]Yes [X]No Projects on International Waterways (OP/BP 7.50) [X]Yes [ ]No Projects in Disputed Areas (OP/BP 7.60) [ ]Yes [X]No Is approval of any policy waiver sought from the Board (or MD if RETF [ ]Yes [X]No operation is RVP approved)? Has this been endorsed by Bank Management? (Only applies to Board [ ]Yes [ ]No approved operations) Does the project require any exception to Bank policy? [ ]Yes [X]No Has this been approved by Bank Management? [ ]Yes [ ] No vi Conditions and Legal Covenants Financing Agreement Reference Description of Date Due Condition/Covenant Section I.1(a) of Schedule 2 to the Recruitment of the following No later than four (4) Financing Agreement consultants to work in the months after the Technical and Fiduciary Effectiveness Date Coordination Unit: (i) one consultant in private sector development (ii) one agriculture-processing specialist Section I.1(b) of Schedule 2 to the Recruitment of two No later than four (4) Financing Agreement Implementing Agencies months after the (Operators) for the Effectiveness Date implementation of the project in the field and one service provider for the conception of business plan and the monitoring of the Sub- projects Section I.1(d) of Schedule 2 to the Submission to the Recurrent at the start of Financing Agreement Association for review and each activity. no-objection of safeguard documents (ESMP, RAP) prepared and locally disclosed in accordance with the Environmental and Social Management Framework and Resettlement Policy Framework. Section I.1(e) of Schedule 2 to the Update of the Project No later than 2 (two) Financing Agreement Implementation Manual and months after the the Project Manual of Effective Date. Financial, Accounting and Administrative Procedures for the Project Section I.1(f) of Schedule 2 to the Submission to the No later than one Financing Agreement Association of the draft month after the annual work plans and Effective Date, and no budgets approved by the later than November 30 Steering Committee for of each year (for each review and no-objection. following year) Section II.1(b) of Schedule 2 to the Setting up of a multi-project No later than two (2) Financing Agreement and multisite accounting months after the software (or upgrade its Effectiveness Date existing mono-project accounting software) acceptable to the Association for the Project vii Section II.1(c) of Schedule 2 to the Recruitment of an external No later than six (6) Financing Agreement independent auditor, (or months after the amendment of the contract of Effectiveness Date the auditor for the Original Financing). viii NIGER ADDITIONAL FINANCING FOR THE AGRO-SYLVO PASTORAL EXPORTS AND MARKETS DEVELOPMENT PROJECT PROJECT PAPER CONTENTS I. INTRODUCTION..................................................................................................................................... 1 II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING ........................................... 1 III. PROPOSED CHANGES .......................................................................................................................... 5 IV. APPRAISAL SUMMARY ..................................................................................................................... 11 Annex 1 : Revised Results Framework and Monitoring Indicators............................................................. 15 Annex 2: AF Revised Estimate of Project Costs ......................................................................................... 19 Annex 3: Operational Risk Assessment Framework (ORAF) ...................................................................... 20 Annex 4: Detailed description of AF Project Modified Activities and Implementation .............................. 24 Annex 5: Economic and Financial Analysis ................................................................................................. 31 Annex 6: Triggered Safeguards Policies ...................................................................................................... 38 Annex 7: Financial Management Arrangements .......................................................................................... 40 Annex 8: Procurement Arrangements........................................................................................................... 41 ix I. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide Additional Financing (AF) to the Republic of Niger (GoN) in the amount of US$13.8 million for the Niger Agro-Sylvo-Pastoral Exports and Markets Development Project (PRODEX). 2. The PRODEX aims at adequately addressing the numerous constraints that continue to hinder the competitiveness of supply chains and the development of agriculture and livestock in Niger. 3. The proposed Additional Financing (AF) would help finance the costs associated with the scaling up of PRODEX activities, with a view to securing a higher level of Development Objective (DO) achievements over an additional two-year project implementation period. The AF will enhance the project impact by expanding its coverage to a larger group of emerging market-oriented small and medium enterprises (SMEs) in project-targeted agriculture and livestock Value Chains (V/Cs). Project impact will also be enhanced by laying the groundwork for a sound exit strategy and strong sustainability. 4. The Association has received a letter from the GoN requesting this AF. In the letter dated June 11, 2014, the GoN requested the Association to allocate US$13.8 million in IDA resources for PRODEX. II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING Country Context 5. Niger is a large (1.267 million square kilometers), landlocked country in the arid Sahel-Saharan region with a population of about 16 million people who are primarily engaged in semi-subsistence agriculture. Most of the population is concentrated in the areas around the Niger River in the southwestern corner of the country and along its long southern border with Nigeria. Niger’s economic activity is concentrated on traditional activities, primarily agriculture, livestock, forestry and fishery, but also informal trade and production. From the employment perspective, this concentration is even more striking, with about 80 percent of Niger’s population employed in the rural sector and only a small share of the population in formal employment. 6. Niger’s economic growth has accelerated from an annual average of 4.4 percent during the period 2002-2007 to 5.5 percent during the period 2007-2012. This was achieved despite profound political disturbances, two severe droughts in 2009 and 2011, and an increasingly adverse external environment. Inflation has been below four percent in most years since 2000, due to both the impact of more efficient food safety nets and the lack of purchasing power of vulnerable households. 7. Agricultural risks, primarily droughts in Niger, have severe economic consequences with wide repercussions. Drought reduces crop production and increases livestock morbidity and mortality, aggravation of conflicts, and price spikes of food commodities. This results in a decrease in farming household incomes, reduced consumption, higher food insecurity, and lower agricultural revenues, and consequently a lower Gross Domestic Product (GDP) growth rate in Niger. The security situation in many parts of the country is fragile. Conditions of insecurity persist in the northern and western portions of the country, particularly along the porous border with Mali, as well as eastern parts along the border with Nigeria around Diffa. The Bank is closely monitoring the security situation with the assistance of United Nations agencies and bilateral partners. However, this is likely to be a long-term and recurrent risk which can only be mitigated with the implementation of a strong economic 1 development program. The Bank will continue to closely monitor developments in the economy, through its macro-monitoring activities notably its PRSC series and the outcome indicators of its investment operations in the country, liaising closely with the International Monetary Fund (IMF). Recognizing the adverse impact of agricultural risks, increased attention is being paid to building the resilience of agricultural systems. A new operation is being identified to help support Niger’s High Commission for the 3N Initiative to implement risk management action plans and better coordinate efforts to build resilience in Niger. Strategic Alignment 8. The AF is fully aligned with the Bank’s Country Partnership Strategy for Niger (FY13-FY16). PRODEX is helping foster competitiveness in the supply chains and support both the investment climate and enterpreunership (see Annex 4 for more details). As a result, PRODEX is well-aligned with Niger’s past and more recent development strategies, including strong alignment with the Rural Development Strategy (SDR), the strategic framework which has been governing the initial project, as well as being fully aligned with strategic pillar 2 of the initiative “Les Nigériens Nourrissent les Nigériens” or 3Ns Initiative (I3N). During the May, 2012 Midterm Review, the project was adjusted to the I3N, which is the country's Initiative for Sustainable Agricultural Development for Food Security and Nutrition. Objective, Design and Scope of the Original Project 9. The development objective of the original Project is to increase the value of selected products marketed by project-supported producers. The original Project was approved by the World Bank Board on March 26, 2009. The corresponding IDA Financing Agreement for a Credit of US$40 million became effective on December 17, 2009. Following the November 2013 implementation support mission, it was jointly agreed that the project activities would be restructured, including an extension of the closing date and a reallocation of Credit proceeds. The Credit closing date was extended from April 30, 2014 up to April 30, 2015 to allow sufficient time to help bridge a successful closing of the projet with development of a sector-wide approach to assist the country in moving from emergency interventions to building long- term resilience of the agriculture and livestock systems. The original Project comprises the following four components: 10. Component A. Improvement of Supply Chain Coordination and Marketing Conditions (US$10.0 million). This component aims at building public-private partnerships to structure and invigorate coordination among the principal links in the selected supply chains (livestock products, onion, cowpeas, sesame, tiger nuts, and gum Arabic), strengthen existing producers’ organizations and facilitate the emergence of new ones, so that together they will compete effectively in national and international markets. 11. Component B. Development of Financing Instruments (US$17.0 million). This component aims at addressing funding needs of businesses that are active in the selected supply chains for business expansion in the short term, while building foundations for access to sustainable financial services. The Project Technical, Fiduciary and Coordinating Unit (TFCU) is supported by consultants for technical audits and financial monitoring and evaluation, as required. The participating financial institutions receive technical assistance to develop financial products directed towards agricultural sector development. 12. Component C. Securing Irrigation Potential (US$9.2 million). This component aims to develop the potential for irrigated onion production and connects selected production sites to the market. 2 13. Component D. Project Coordination, Management, Monitoring, Evaluation and Support to the I3N (US$3.8 million). The Project will support incremental costs associated with TFCU staff, equipment, and operating costs, including costs associated with the Project's financial management system, external audits, periodic activity planning and budgeting at regional and national levels, the establishment and implementation of a project monitoring and evaluation system, the functioning of the Steering Committee and support to the N3 Initiative. Project Implementation Performance to Date 14. Overall, the project is successfully achieving its development objectives. The project is currently rated satisfactory in terms of progress towards achieving its PDO and also satisfactory in the overall Implementation Progress. The Project disbursement profile is on track. As of July 10, 2014, SDR 25.40 million (or 95.84 percent of total) out of the total credit amount of SDR 26.5 million have been disbursed. 15. Results. PRODEX achieved its outcomes in terms of increasing the marketed production value, number of beneficiaries and number of sub-projects implemented, as evidenced by key performance indicators that are all currently met or even exceeded. As of March 31, 2014, the project had reached 559,516 beneficiaries (of which 150,000 women), including 112,000 direct (of which 34,651 women) and 450,000 indirect beneficiaries. Achievement of a 25 percent increase in the value of marketed production in the primary targeted value chains by project-supported producers, the second PDO indicator, was exceeded as follows: (i) onions: 59.8 percent increase; (ii) cowpeas: 60 percent increase; and (iii) livestock products: 41 percent increase. 16. Implementation. The initial project is on track and is likely to achieve its development objectives. All its component’s performances are satisfactory. Project risks are considered moderate. The unit managing the project works well. It executes the action plan in a participatory manner with stakeholders and in accordance with the recommendations in support of implementation tasks and regularly prepares quarterly reports. The system of monitoring and evaluation of the project is operational, knowledgeable and includes a detailed estimate of the direct and indirect beneficiaries disaggregated by sex. 17. The original project is performing well: (a) it supported more than 3,000 Sous-Projets (SPs), 800 of which are ready to become effective Medium Enterprises (MEs)/Small and Medium Enterprises (SMEs); of which are ready to become effective MEs/SMEs; (b) in addition, 40 out of these 800 S/P can easily be brought to the status of autonomous SMEs; (c) Project will be able to assist, on a competitive selection basis and quite minimal funding, 10 more autonomous SMEs. These are high- caliber SMEs the investment needs of which are exceeding CFAF 50 million and that will benefit from project technical assistance (business plan, management training and KIT); (d) Project performance ratings are showing that the project is right on track as evidenced by substantive comments provided in ISR N°10 –i.e. PDO rated (S), IP is rated (S), the higher disbursement of more than 95.83 percent was achieved one-year before closing date. 18. M&E system of the original project: Overall, the M&E system is working well. In addition, impact studies are already underway under original project funding. The extensions of these studies will be further supported by the AF to fully inform future performance reviews and the ICR. 19. Financial Management. The financial management performance for the original project has been rated Satisfactory and the risk as Moderate during implementation. There are no fiduciary issues pending (i.e. no outstanding audit reports and/or to-be-settled procurement or legal covenants issues). The Project M&E system remains strong. 3 20. Procurement: The procurement performance for the original project has been rated Satisfactory and the risk as Moderate during implementation thus far. Therefore, the AF procurement arrangements remain the same as the original project adjusted with some mitigation measures such as the update of the Manual of Administrative, Financial and Accounting procedures of the initial project to take into account the additional financing activities to clarify the role of each team member involved in the procurement process of the project and to cap the maximum delay for each procurement stage, specifically with regards to review, approval system and signature of contracts. 21. Safeguards. The project is classified as an environmental Category B partial assessment because no activity funded under the project is expected to have a significant negative environmental or social impact. Overall safeguard compliance was rated Satisfactory at the last implementation support mission. 22. Lessons learned. The key lessons drawn from project implementation are being reflected in the design of activities to be included for the Additional Financing are as follow: 23. The majority of the funded sub-projects are dealing with production. While the expected increase of the production was attained, there were challenges concerning post-harvest management due to the very perishable nature of the products resulting in large supplies coming to the market shortly after harvest, thereby depressing prices. Consequently, the AF plans to invest in more sub-projects dealing with storage and transformation. It will complement present sub-projects and accompany new ones through conservation technologies already developed by the project (Rudu). Regarding transformation, it will import agro-processing technologies (ATESTA, South African Dryer) and food transformation and safety improvement techniques already experimented by similar World Bank supported projects in Mali and Burkina Faso 24. Many sub-projects are facing funding constraints in trying to develop their business because of the financing weakness of the promoter and little access to commercial bank credit. Therefore the AF aims to set up a new mechanism including commercial banks and consolidation of the sub-projects by management tools. The new mechanism will permit to train the commercial banks on rural risk and develop new more adapted financial products. It also includes the hiring of an experienced financial training institute to prepare the business plans and install management tools for the microprojects and the SMEs. Rationale for the Additional Financing 25. The project will build on successes of the original project to ensure the consolidation and scaling-up of sub-projects implemented in the initial project, diversification into new value-adding segments/links (storage, processing, marketing), and stronger linkages with the commercial banking sector. Through the AF, the Project will strongly support the functioning of the established Inter-professions/inter- professional organizations (IPs/IPOs: Onion, On-Hoof Animals/Meat/Livestock Products and Cowpeas). 26. Aligned with the above, the AF will focus on: (i) the consolidation and expansion of the portfolio of sub-projects funded under the Matching Grant Mechanism, particularly in supporting of more women during the AF phase, promoting value-adding linkages, ensuring efficient access to commercial credit financing and supporting the transformation of sub-projects into profitable and efficient micro- enterprises (ME) and SMEs; (ii) efficient support to the IPs allowing them to play a leading role in increasing the competitiveness in the supply chains; and (iii) the integration of high potential enterprises into the supply chains and facilitation of their relationships with the financial systems, thus helping to launch a financing approach around business models and/or structuring transactions that will provide both the aggregation of individual funding under contract farming and/or position the project’s 4 priority sectors so that they can be easily considered for strategic funding that would render them eligible for Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) preferential financing. 27. Implementation risks: The overall risk for this Additional Financing has been assessed as moderate (M). The project coordination unit staff is experienced and will remain the same. The same Execution Agencies will be recruited on a single source basis because of the satisfactory results delivered and the short time planned to implement the project. It is understood that the two-year implementation period is tight. The project team is preparing procurement documents. For example, under irrigation and feeder roads activities, only the sites for which studies have already been completed are retained. 28. Exit and sustainability risks: In term of reducing risks at the end of the project, the main thrust of the project itself, i.e. the transformation of micro-projects into MEs and SMEs, will lead to more sustainability as these enterprises are more likely to be able to stand on their own feet, including with their connections to commercial banks. Also, efforts will be made to link these enterprises to IFC, which is an additional means for an improved exit strategy III. PROPOSED CHANGES Project Development Objective (PDO) 29. The project development objective and the main components will remain the same during the Additional Financing (AF). The AF will build on past successes to ensure the consolidation and scaling-up of sub-projects implemented in the original project, diversification into new value-adding segments (storage, processing, and marketing) and linkages with the commercial banking sector. The new orientations of the project under the AF will also support the operational strengthening of established Inter-professions or inter-professional organizations (Onion, On-Hoof Animals, Meat, Livestock Products and Cowpeas). These IPs are expected to play a leading role in increasing the competitiveness of these sectors through the implementation of value chain training tools, market development activities – Implementation of strategic plans, market studies, and commercial missions - and exchange visits with a view to reducing supply chain dysfunctions. Project Results Indicators 30. The summary results indicators (original and revised targets) are presented in Table 1 below. The full description of the results framework is in Annex 1. AF implementation is expected to result in major increases of the overall project benefits, as measured by the PDO indicators: (i) additional direct beneficiaries will reach about 34,221 of which 35 percent women; and (ii) the value of the marketed production of targeted value chains by project-supported producers will be respectively 65 percent for Onions, 70 percent for Cowpeas, and 50 percent for on-hoof animals. 31. Under Component A, the increases in the volume of marketed production of targeted value chains will reach 25 percent for Onions, 35 percent for cowpeas, and 20 percent for on-hoof animals. 32. Under Component B, in line with the thrust on private sector development, 800 first generation sub- projects and 397 additional ones will be supported under the AF, of which 40 with high potential will be upgraded to agricultural SMEs. In addition, 10 bigger and more autonomous SMEs (showing investment needs greater than CFAF 50 million) will receive specific support as business drivers. This will help to structure and stimulate the Inter-professional Organizations (IPOs) and enhance coordination between the main links in the selected supply chains. In addition, 2,500 members of IPOs (of which 30 percent women) will get capacity building support. 5 33. Under Component C, at least 1,904 ha of irrigated land will receive protection by weirs and catchment constructions, and 30 km additional feeder roads will be constructed or rehabilitated to ensure better connections to markets. 34. Under Component D, the AF will help support the same objective as the original project (as evidenced through reports on the progress achieved by project implementation, improvements in financial management and accounting). The AF will help deepen the TFCU’s own work program and address challenges resulting from intensive and complex TA activities, capacity building and private sector support. The AF will develop strong mechanisms for efficient control, coordination of project activities and will ensure effective administrative and financial management, as well as adequate support to private initiatives. Finally, the AF will support the necessary results and impacts monitoring and evaluation activities. Table 1: Changes in project outcome and results indicators Original AF Indicator Unit Revised Targets Targets Targets OUTCOME INDICATORS Project direct Beneficiaries Number 111 779 34 221 146 000 (of which % women) (%) (31%) (35%) (35%) Percent increase of the Onions 59.8% 65% 65% value of selected Cowpeas 60% 70% 70% production marketed On-hoof animals Percent by project-supported 41% 50% 50% Value Chains RESULTS INDICATORS Component A : Improvement of the supply chains coordination and marketing conditions Percent increase of the Onions 20% 25% 25% volume of selected Cowpeas 30% 35% 35% production marketed On-hoof animals Percent by project- supported 15% 20% 20% Value Chains Component B : Development of financial instruments 2300 sub-projects Micro- Number 3 565 397 3 962 implemented under the projects/MEs Matching Grant SMEs-type1 Number 0 40 40 Mechanism. SMEs-type2 Number 0 10 10 Amount of commercial loans distributed to CFAF 0 1 000 1 000 SMEs type1 & type 2 million Component C. Securing Irrigation Potential At least 2000 ha irrigated land are ha protected by weirs and catchment 5 646 1 904 7 550 constructions During the FA at least 30 km additional km feeder roads have been constructed or 35.9 30 65.9 rehabilitated Component D. Project Coordination, Management, Monitoring, and Evaluation and Support to the I3N Number of periodically produced Number 20 8 28 implementation and financial reports Number of annual audit reports submitted on Number 4 2 6 time with no major qualifications 6 Project Design 35. The Project will support the transformation of sub-projects (SP) into profitable and efficient micro- enterprises (MEs), and small and medium size enterprises (SMEs) by setting up the conditions for their viability and sustainability as follows: (i) a portion of the established SP (800) will be supported through technical oversight, financial and business management actions to improve their profitability and enhance their linkages with the banking sector; (ii) AF-funded new micro-enterprises (397) will be set up in a similar fashion to the old SP, and in addition will be equipped with a basic business management kit; (iii) medium-sized enterprises/ME (40) for which new investment needs could amount to CFAF 50 million or less, will be established; (iv) a grant of up to about 20 percent of their investment needs will be awarded to them; and technical feasibility study, business plan preparation and facilitation for bank financing and upgrading of their accounting and financial information systems will be provided; and (v) support to the preparation of business plans and facilitation of access to commercial credit for 10 SMEs -with estimated investment needs exceeding CFAF 50 million- will be provided by the project on a competitive basis. In short, MEs and SMEs eligible for PRODEX support are those with high potential and real ability to integrate well-defined business models (contract farming, buyer/seller arrangements, strong refinancing arrangements, etc.) in the targeted supply chains. 36. PRODEX will support the creation and strengthening of an enabling environment through: (i) the fostering of agriculture supply chain finance through technical assistance to Bank of Africa (BOA), training of partnering financial institutions in value chain finance, and the preparation of business plans centered on agricultural business models, and (ii) the dialogue between GoN and the private sector on positioning the priority value chains targeted by PRODEX as strategic export activities eligible to BCEAO preferential financing (rules similar to those governing the cotton and rice cash crops in neighboring Sahel countries of the Union Economique et Monétaire Ouest Africaine (UEMOA). Institutional arrangements 37. The institutional arrangements for the implementation activities will remain unchanged during the AF phase, with staffing funded at both central and regional levels. The Project Technical, Fiduciary and Coordinating Unit (TFCU) will continue to oversee and coordinate project implementation, supported by competitively-recruited field-based international/national Technical Assistance (TA) teams. The TFCU will continue to be under the oversight of a Steering Committee (ST) chaired by the ministry of agriculture (MEMA) to which the project is attached. The role of the ST remains unchanged as specified in the updated Project Implementation Manual (PIM). PRODEX will provide specific TA and follow-up services to each type of SME. The “Agences d’Exécution” (AGEX) are operational agencies implementing the project on the ground. They will provide technical advisory services to targeted micro-enterprises (ME) whereas the secondary services providers (GIE, GSC, NGOs, BE, etc.), trained by SAHFI/TANYO for the use of the International Labor Organization (ILO) kit, will provide the necessary accounting and financial support services to type 1 SME 1 with SAHFI/TANYO ensuring the related quality control duties. Type 2 SMEs will be supported with the view to leveraging commercial resources to finance the needed technical assistance. Procurement arrangements 38. The institutional procurement arrangements for the Additional Financing will remain the same as the original financing (see Annex 8). The TFCU will continue to manage procurement activities according to the approved procurement plan. The TFCU procurement activities will cover the renewal of the previous Implementing Agencies (“Operators”) contracts on a single source basis because of their 1 The type 2 sub-projects comprise SMEs of type 1 and 2. The SMEs of type 1 will receive PRODEX-funded technical assistance (business plan, mobilization of funding etc.), and fund for around 20 % of their investment needs. For SMEs of type 2, PRODEX will conduct technical assessments of their operations and if necessary, link them to appropriate development partners for their upgrading. 7 performance and the lack of added value for a new competitive recruitment and the provisions of other consultant services, works, goods and equipment. The Niger SAHFI/TANYO 2, a recognized Financial Institution for the facilitation of access to finance through the preparation of SME business plans and the provision of loan guarantee facility, will be contracted on a sole source selection basis given its exceptional worth for the assignment. The AF will also provide incremental funding for the Private Sector Development consultant attached to the TFCU and the contract of the international operator hired by the original project to support the BOA in funding SMEs. 39. Procurement for the proposed AF will be carried out in accordance with general World Bank guidelines for procurement, and the provisions stipulated in the Legal Agreement. The Borrower will prepare and submit to the Bank a General Procurement Notice (GPN) which will be in addition to the GPN of Niger Agro-pastoral Export and Market Development Project. The Borrower will publish this additional GPN in United Nations Development Business (UNDB) online and in local newspapers of wide national circulation. The Bank will arrange for its publication in UNDB online and on the Bank’s external website. Financing arrangements 40. The Project Coordination Unit (PCU) will continue to handle project financial management activities. The same Financial Management (FM) institutional arrangements used for the ongoing project would apply to the AF. The overall risk for the AF is deemed moderate and the financial management arrangement of the ongoing project that would apply to the AF satisfies the Bank’s minimum requirements under OP/BP 10.00, and therefore is adequate to provide, with reasonable assurance, accurate and timely financial management information on the status of the project as required by the World Bank. However, the project will have to take two additional measures to ensure effective implementation, namely: (i) the payment of a new license of the mono-project multi-sites version of the accounting software in use to allow the recording of the transactions of this AF; and (ii) minor updates of the existing FM procedures manual - acceptable to IDA- for the purpose of this AF and to reflect the new activities. Closing Date 41. The expected closing date of the AF is October 31, 2017. The results framework has been updated to capture the new level of outputs and outcomes expected to be generated during the AF period. Project Description 42. A brief description of project activities is provided below. The cost comparison of project components under the initial and AF phases is in Table 2 below. The AF revised estimates of project costs are provided in Annex 2. The detailed project description of the AF project modified activities and implementation arrangements are in Annex 4. 2 The SAHFI/TANYO group was selected given its experience capitalized in the preparation of business plan and monitoring MSME type 1 and 2 in Niger. The group is ruled by the Nigerian private law and is to date the only structure that has a guarantee fund of the European Investment Fund placed with Ecobank, the SONIBANK and structure Microfinance ASSUSSU. It also has a guarantee fund USAID for funding of small farms. 8 Table 2: Changes in project costs by components AF Components Original Costs (US$ `000)* Changes with AF Total project AF (US$ `000) AF as revised costs % of (US$ `000) IDA Beneficiaries Total IDA Beneficiaries Total AF Original Amount (IDA) Component A: Improvement of 10,000.0 0 10,000.0 1,989.3 0 1,989.30 19.89 11,989.3 Supply Chain Coordination and Marketing Conditions Component B: Development of 17,000.0 3,250.0 20,250.0 4,630.8 4,680.0 9,310.8 27.24 29,560.8 Financial Instruments Component C: Securing Irrigation 9,200.0 0 9,200.0 4,315.9 119.8 4,435.70 46.91 13,635.7 Potential Component D: Project 3,800.0 0 3,800.0 2,864.0 0 2,864.00 75.36 6,664.0 Coordination, Management, Monitoring and Evaluation and Support to the I3N Initiative Total Program Costs 40,000.0 3,250.0 43,250.0 13,800.0 4,799.8 18,599.8 34.50 61,849.8 * Source: PAD N° 47032-NE dated March 2, 2009. 9 43. Component A: Improvement of Supply Chain Coordination and Marketing Conditions. Of the total IDA funding under the AF, US$2.0 million is earmarked for Component A, representing 19.9 percent of the initial funding for that component. This component aims at building sound public-private partnerships in order to structure and enhance the coordination between the principal links in the priority supply chains. For this component, the Additional Financing (AF) will be used to: (i) adjust the configuration of storage and food processing models; (ii) improve the packaging and the individual or collective marketing techniques; (iii) support the existing market information systems; and (iv) provide institutional support to national and regional Inter-professional bodies/ Associations leading to their adoption of marketing and advocacy of best practices. 44. Component B: Development of financial instruments. IDA funding for Component B amounts to US$4.6 million representing 27.2 percent of the initial funding. This component aims to address financing needs for the development of micro-enterprises (MEs), and small and medium enterprises (SMEs) and cooperatives for business expansion in the short term, while fostering access to sustainable financial services. Tables 3 and 4 (Annex 4, p. 27) are respectively showing the distribution of sub- projects currently in the pipeline and those to be upgraded as SMEs. 45. The sub-projects cover a spectrum of private sector enterprises ranging from micro-enterprises that are typically informal, rely on family labor and are directed to the local market, to SME-type enterprises that operate at a much larger scale, are typically in the formal sector and cater to the demand of the national, regional and international markets. Matching grants are expected to lessen the promoters’ financial risks, and hence increase their incentive to invest, in the initial stage of sub-project implementation. Since the 397 micro-enterprises to be funded as part of the matching grant portfolio under the AF are similar to the original project sub-projects size, 40 SMEs and 10 MEs of larger size will be set up as formal enterprises. 46. The component will finance: (i) provision of matching grants for 397 micro-enterprises and 40 SMEs- Type 1; (ii) facilitation of access to commercial credit financing for 40 SMEs-Type 1 and 10 SMEs- Type 2 through existing instruments in the financial sector (ex. the BOA/ARIZ, SAHFI/TANYO group etc.); and (iii) technical assistance and monitoring tailored to the specific needs of each type of businesses (800 previous SPs, new 397 MEs, 40 SMEs-Type 1 and 10 SMEs-Type 2). These services will be provided through a partnership with AGEX and the SAHFI/TANYO group. 47. Component C: Securing Irrigation Potential. IDA funding for Component C amounts to US$4.3 million representing 46.9 percent of the initial funding. The objective is to increase the agro-sylvo- pastoral production systems’ capacity by securing the potential of the irrigated areas and strengthening the environmental monitoring. The latter will be implemented through a partnership agreement between the Project and the Office of Environmental Assessment and Impact Studies (BEEEI). The targeted actions include: (i) the implementation of three (3) weirs and catchment constructions about 1,050 ha to be secured for extension of irrigation; (ii) the implementation of site protection systems (854 ha); (iii) the construction of three weirs for water table recharge; and iv) the construction of feeder roads connecting the selected production sites to the markets (30 km). 48. Component D: Project Management, Monitoring and Evaluation and Support to the I3N. IDA funding for Component D amounts to US$2.9 million representing 75.4 percent of the initial funding. This component will pursue the same objective ensuring effective implementation of the Project through: (i) a mechanism for efficient control; (ii) coordination of activities; (iii) effective administrative and financial management; and (iv) monitoring and evaluation of results and impacts. The Project will finance the following activities: (a) setting up of a participatory monitoring and evaluation of results and impacts through an effective stakeholders’ involvement; (b) development of institutional and agricultural capacity, and promotion of communication channels; (c) achievement of 10 intermediate and impact studies; and (d) strengthening of the collection and dissemination of results through an effective involvement of all parties the elaboration and validation of a national resilience program. 49. Subcomponent D1. Coordination and management: The objective of the administrative and financial management is to provide the different project actors with the resources (human, equipment and financial) necessary for the implementation of the project activities. The Project will support incremental costs associated with TFCU staff, equipment, and operating costs, including cost incurred by the functioning of the regional focal points. This subcomponent will also support operating and training costs associated with the Project's financial management system, including external audits, as well the periodic activity planning and budgeting at regional and national levels. PRODEX’s current institutional setting will be amended to add one technology expert who will be in charge of every aspect of technology issues. 50. Subcomponent D2. Monitoring and evaluation (M&E): The objective of this subcomponent is to help carry out the implementation of M&E activities. The Project will finance the establishment and implementation of a project monitoring and evaluation system. The AF will specifically finance: (i) the consulting services; (ii) the development of monitoring and evaluation capacity; (iii) the preparation and conduct of internal and/or joint implementation support missions; and (iv) the production, printing and publishing of project oversight and follow-up documentation. 51. Subcomponent D3. Institutional Support (I3N): The objective of this subcomponent is to assist the HC- 3N for: (i) the preparation of a National Resilience Program; (ii) the coordination of agricultural risks management in food security and nutrition programs; and (iii) the participation in implementation support missions of components A, B, and C of PRODEX dealing with food security and agricultural risks management. This subcomponent will also support the functioning and the project oversight duties of the Steering Committee. IV. APPRAISAL SUMMARY Design and implementation 52. The Project will facilitate the transformation of sub-projects (SP) into profitable and efficient micro- enterprises (MEs), and small and medium size enterprises (SMEs) by setting up the conditions for their viability and sustainability. PRODEX will support the creation and strengthening of an enabling environment fostering long term financing of the agriculture supply chain and the dialogue between GoN and private sectors on positioning the priority supply chains targeted by PRODEX as strategic export activities (advocating that they should be eligible to BCEAO preferential financing, rules similar to those governing the cotton and rice cash crops in neighboring Sahel UEMOA countries). 53. The AF will have the same implementation arrangements as the original Project with a stronger role of the TFCU which will be supported by seasoned technical assistance specialists and a monitoring system tailored to the specific needs of each type of business. These services will be provided through a partnership with the AGEXes and the SAHFI / TANYO group. During the implementation, the Bank team intends to prepare with the International Finance Corporation (IFC) a joint business plan as it was done in Mali and Burkina Faso (pilot countries) to set up a program complementing the planned mechanism that supports both the Small and Medium size Enterprises (SMEs) and the commercial banks in order to improve access to credit for rural enterprises. 11 Economic and financial analysis 54. The promotion of private entrepreneurship and expansion of business opportunities would be achieved through: (i) the effective participation of the private sector through a large number of small entrepreneurs that are critical for this kind of project; (ii) targeted public involvement and funding -- that still remains important and fully justified; (iii) provision of diverse public goods ranging from marketing investments, feeder roads and weirs, for which public contributions to the capital investments are usually important, benefiting a significant number of people; (iv) effective improvements in the policy and regulatory environment; and (v) effective revenue increases and better livelihoods for all actors in the value-chains, with particular attention to smallholders, youth and women. 55. The value addition by the World Bank will be achieved through: (i) its assistance to improvements in the business environment; and (ii) its efficient promotion of rural entrepreneurship and the successes of the mushrooming micro-enterprises. The World Bank has a comparative advantage through its expertise and financial support to this project that would be based on its solid and international experience as well as proven successes in agriculture, rural development, as well as efficient development of micro-projects and value chains. The project will combine and apply these experiences, providing a unique window of opportunity for a strategic approach to productivity enhancement, diversification, and value chain development. This includes experience gained in developing efficient business and regulatory environments, in supporting community development projects as well as the construction of key marketing infrastructure, in ensuring specific financing mechanisms such as matching grant programs and in disseminating achievements and lessons learned from past projects (including through the original project). 56. The development impact of the full project would be the result of an increased volume of public investment in agro-forestry-pastoral sectors targeted by the project leading to poverty reduction and higher rural incomes and job opportunities. This has been – and will continue to be -- achieved through: (i) the development of profitable, competitive economic activities for active populations including youth and women; (ii) the strengthening of the institutional settings for competition and emerge actors of V/Cs such as producers’ professional organizations, Public Private Partnership (PPP arrangements, enhanced access to seasoned technical assistance and financial services; (iii) a reduction of unemployment and underemployment, especially for youth and women; (iv) substantial transformation of production systems underpinned by the development of irrigated agriculture and the creation and/ or upgrade of marketing infrastructure; and (v) a further increase of the volume of exports of Niger agro-forestry-pastoral products towards national, regional and international markets. 57. An analysis of the different investments anticipated under the AF phase was performed to assess their economic and financial impacts for the beneficiaries, individually and for the country as a whole. The results were compared with those of the initial phase. Details of the methodology used and the results obtained are in Annex 5. The results of the financial analysis of enterprise-level investments are encouraging. 58. The cost-benefit analysis has been carried out for eight types of enterprises: model-1: 0.4 ha of onions; model-2: onions, 3T Rudu conservation; model-3: onions, 12T Reseda conservation; model-4: marketing and storage infrastructure for onions & cowpeas; model-5: production of animal feeding/animal fattening; model-6: agricultural, inputs shops and warehouses, model-7: animal collection market; and model-8: meat processing/kilichi. 59. The profitability of the different types of AF-funded enterprises, as measured through their respective Economic Rate of Return (ERR), is satisfactory (see Table 5 below): 32 percent for irrigated onions production, 38 percent for animal fattening, 46 percent for onions storage/conservation in Reseda 12T - and even, as high as 66 percent for onions storage/ conservation in Rudu 3T- as well as for dry meat 12 (Kilichi), 50 percent for the on-hoof animal markets, 61 percent for inputs storage for veterinarian and other needs for animals, and 66 percent for onions and cowpeas marketing infrastructure. 60. The selected indicator for country-level analysis is the Net Present Value (NPV) computed on the basis of a 12 percent interest rate, reflecting the opportunity cost of cash borrowing in Niger. The NPV for the whole AF project amounts to US$13.03 million (to be compared to US$8.4 million 3 project economic costs at Y-0). In economic terms, the total profitability of the AF project, as measured by its ERR, is at 16.9 percent. These high levels of profitability can be explained by the combined key success factors provided by the AF project, such as the enhancements of production techniques and technology, the availability of irrigation infrastructure and the improved marketing techniques and marketing processes. These results (see Table 6 below) are still very conservative since they are taking into account only the benefits generated by component B-1 (benefits from all the other components are not accounted for). Annex 5 provides the details on the full economic and financial analysis of the AF. Safeguards policies triggered 61. The project is classified as environmental Category B because no activity funded under the project is expected to have a significant negative environmental or social impact. Overall safeguard compliance was rated “satisfactory” at the last implementation support mission. During project implementation, sub-projects have been subject to environmental and social screening and categorization process to minimize the potential negative impacts of these activities. The ESMF ensures sustainability through the identification of mitigation measures. Where applicable, a simplified ESIA (including an ESMP) and/or a RAP will be prepared and consulted upon. Work contracts and bidding documents included environmental and social clauses, in order to enable contractors to follow up on environmental and social due diligence and to mitigate the anticipated negative impacts under the control of the supervising engineers. Annex 6 provides the details on the triggered safeguards policies, and agreed mitigation measures and necessary institutional settings. All the safeguards documents were cleared and disclosed within country on May 20, 2014, and at the InfoShop on May 29, 2014. Financial management 1. 62. The same FM institutional arrangements used for the ongoing project would apply to the AF. The current FM staff will be responsible for the day-to-day FM management of the AF activities. The last FM supervision mission found the project FM performance satisfactory, and its current arrangements acceptable (books and supporting documents are properly kept, audit for the year ending December 2012 was submitted on time and was unqualified. A new designated account (DA) will be opened in a commercial bank acceptable to IDA. The current overall residual FM risk is Moderate. Annex 7 provides the details on the FM requirements of the AF. Procurement 63. Procurement activities for this AF will be carried out by the TFCU in close collaboration with the respective beneficiaries. The institutional procurement arrangements for the Additional Financing will remain the same as the initial financing. Procurement for the proposed AF would be carried out in accordance with the World Bank’s Guidelines Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers’ dated January 2011 and the ‘Guidelines Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers, dated January 2011, and the ‘Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants’ dated October 15, 2006 and as revised and the provisions stipulated in the Legal Agreement. The 3 Project’s Y-0 present economic costs $8.4m = $8.1m + $0. 35m/1.1 13 Borrower has developed a procurement plan for project implementation which provides the basis for the procurement methods. Annex 8 provides the details on AF procurement requirements. Policy exceptions and readiness 64. No exceptions are envisaged. The Project is fully operational so that the proposed activities can start being implemented as soon as the Credit is effective. Effectiveness conditions 65. There are no conditions of effectiveness. 14 ANNEXES Annex 1 : Revised Results Framework and Monitoring Indicators Revisions to the Results Framework Comments / Rationale for Change PDO Indicators Current (PAD) Proposed change PDO1 Project direct beneficiaries (number), No change of which women (%) PDO2 Project-supported producers have increased No change However, this indicator will be their marketed products value by 25%. disaggregated to allow a better data gathering and close monitoring of the targeted Supply Chains (onions, cowpeas, on-hoof animals, meat, skins and hides, etc.). Intermediate Results Indicators Current (PAD) Proposed change Intermediate Result 1: Improvement of Supply Chains coordination and Marketing conditions. Intermediate Result Indicator R1.1: No Change Annual operational plans for at least three targeted supply chains are implemented on a regular basis. Intermediate Result Indicator R1.2: No Change However, this indicator will be Volume of products exported by project- disaggregated to allow a better supported producers has increased by 15%. data gathering and close monitoring of the targeted Supply Chains (onions, cowpeas, on-hoof animals, meat, skins and hides, etc.). Data will be collected at the level of the constructed marketing infrastructure for onions, cowpeas and on-hoof animals, meat, skins and hides to ensure a better assessment of project’s contribution to the targeted Supply Chains’ exportations. Intermediate Result 2: Preparation of the financing instruments Intermediate Result Indicator R2.1: 2300 No Change Data taken from Project M&E data sub-projects implemented under the collection Matching Grant Mechanism Intermediate Result Indicator R.2.2 : 80% No Change However, the word «successfully» of the sub-projects are implemented is no more mentioned due to the complexity/difficulty to measure “success” Intermediate Result Indicator R2.6: Number New High potential SMEs of the of type1 and 2 SMEs that have access to targeted Supply Chains in Niger commercial bank financing that have not been supported yet by the initial project will be supported and monitored. 15 Revisions to the Results Framework Comments / Rationale for Change Intermediate Result Indicator R2.7: Amount New Commercial credit in an amount of commercial bank credits granted to type-1 up to CFAF 1000 million will be and type-2 SMEs. granted to support sub-projects that have been upgraded into SMEs. Intermediate Result 3: Securing the irrigation potential Intermediate Result Indicator R3.1: At least No Change However, the target will be 2000 irrigated ha are secured through increased to 7550 ha (up from protection works. 2000 ha) taking into account the cumulative results of the initial project and the 1904 additional ha planned during the AF. Intermediate Result Indicator R3.2 : At least No Change However, the target value will be 105 Km feeder roads constructed or brought to 65.9 km (down from rehabilitated 105 km) to take into account the higher construction costs of the feeder roads. Intermediate Result 4: Project Coordination, Management, Monitoring and Evaluation; and Support to the I3N Intermediate Result Indicator R4.1 : Number No Change of periodically produced implementation and financial reports Intermediate Result Indicator R4.2 : Number No Change of annual audit reports submitted on time with no major qualifications 16 REVISED PROJECT RESULTS FRAMEWORK Target values Baseline Project Results Indicators Progress Data of FA FA Responsible Unit of to date Parent Year-1 Year-2 Frequency Source/Methodology for Data Measure (March Project 2015 2016 Collection 2014) 2009 Project Development Objective (PDO) is to increase the value of a few products marketed by project-supported producers. Project direct Beneficiaries (number), Number 111 779 131 000 146 000 Annual Project M&E data AGEX, of which women (%) 31% 33% 35% UCTF Project-supported onions producers have % 59.8% 62% 65% Annual Project M&E data AGEX, increased the value of their marketed UCTF products by 25%. Project-supported cowpea producers have % 60% 65% 70% Annual Project M&E data AGEX, increased the value of their marketed UCTF products by 25%. Project-supported on-hoof animals, meat, % 41% 45% 50% Annual Project M&E data AGEX, skins and hides producers have increased UCTF their marketed products by 25%. COMPONENT A : IMPROVEMENT OF SUPPLY CHAIN COORDINATION AND MARKETING CONDITIONS Operational annual plans for at least three Number 3 3 3 Annual Project M&E data AGEX targeted supply chains implemented on a regular basis. Volume of marketed onions products Tons 134 508 20% 22% 25% Annual National statistical SSE UCTF exported by project-supported producers data has increased by 15%. Volume of marketed cowpeas products Tons 70 809 30% 32% 35% Annual National statistical SSE UCTF exported by project-supported producers data has increased by 15%. Volume of marketed on-hoof animal Headcount 316 944 15% 17% 20% Annual National statistical SSE UCTF products exported by project-supported (Number) data producers has increased by 15%. 17 Target values Baseline Project Results Indicators Progress Data of FA FA Responsible Unit of to date Parent Year-1 Year-2 Frequency Source/Methodology for Data Measure (March Project 2015 2016 Collection 2014) 2009 COMPONENT B : DEVELOPMENT OF FINANCING INSTRUMENTS 2300 sub-projects implemented under the Number Project M&E data TFCU SSE Matching Grant Mechanism 3 565 3 765 3 962 Quarterly 80% of the sub-projects are implemented % 0 - 75% 80% Annual Field surveys Consultant Number of type-1 SMEs that have - - 20 40 access to commercial banks financing Number of type-2 SMEs that have - - 5 10 access to commercial banks financing Amount of commercial bank credits CFAF 04 0 400 1 000 Annual Project M&E data Commercial granted to type-1 and type-2 SMEs. million banks, TFCU COMPONENT C : SECURING IRRIGATION POTENTIAL At least irrigated 2000 ha are secured Ha 0 Project M&E data through weirs and catchment 5 646 7 146 7 550 Quarterly UCTF constructions. At least 60 Km feeder roads 5 constructed Km 0 35.9 6 65.9 65.9 Project M&E data or rehabilitated Quarterly UCTF COMPONENT D: PROJECT MANAGEMENT, MONITORING AND EVALUATION; AND SUPPORT TO THE I3N Number of periodically produced Number 0 20 24 28 Project M&E data implementation and financial reports Annually UCTF Number of annual audit reports number 0 4 5 6 Project management submitted on time with no major Annually data UCTF qualifications 4 New indicator 5 Initially, the target value of this results indicator was 105 km. However, this had to be adjusted due to changes in the component overall costs. 6 At this time 18.6 km are implemented; it is planned to implement the remaining at the end of 2014. 18 Annex 2: AF Revised Estimate of Project Costs REPUBLIQUE DU NIGER PROJET DE DEVELOPPEMENT DES EXPORTATIONS ET DES MARCHES AGRO-SYLVO-PASTORAUX (PRODEX) Components by Financiers (FCFA Million) (US$ '000) Local Local The Government IDA Bénéficiaires Total (Excl. Duties & The Government IDA Bénéficiaires Total (Excl. Duties & Amount % Amount % Amount % Amount % For. Exch. Taxes) Taxes Amount % Amount % Amount % Amount % For. Exch. Taxes) Taxes . Amélioration de la coordination des chaînes d'approvisionnement et des conditions de mise en marché Appui à la coordination des chaînes d'approvisionnement - - 778,2 100,0 - - 778,2 8,6 232,6 545,7 - 0,0 - 1 604,6 100,0 - - 1 604,6 8,6 479,5 1 125,1 - Appui à la commercialisation et à la compétitivité - - 186,6 100,0 - - 186,6 2,1 55,7 130,9 - - - 384,7 100,0 - - 384,7 2,1 114,9 269,8 - ubtotal - - 964,8 100,0 - - 964,8 10,7 288,3 676,5 - 0,0 - 1 989,3 100,0 - - 1 989,3 10,7 594,4 1 394,9 - . Mise au point d'instruments de financement Mécanisme des Dons de contrepartie 0,0 - 1 741,7 87,3 253,0 12,7 1 994,7 22,1 596,0 1 398,6 - 0,0 - 3 591,1 87,3 521,6 12,7 4 112,7 22,1 1 228,9 2 883,8 - Facilitation de l'accès au crédit -0,0 - 504,3 20,0 2 017,0 80,0 2 521,3 27,9 753,8 1 767,5 - -0,0 - 1 039,7 20,0 4 158,8 80,0 5 198,5 27,9 1 554,1 3 644,3 - ubtotal -0,0 - 2 246,0 49,7 2 270,0 50,3 4 515,9 50,1 1 349,8 3 166,1 - -0,0 - 4 630,8 49,7 4 680,3 50,3 9 311,2 50,1 2 783,0 6 528,1 - . Sécurisation du potentiel d'irrigation Construction, réhabilitation et protection des sites 0,0 - 728,9 92,6 58,1 7,4 787,1 8,7 235,3 551,8 - 0,0 - 1 503,0 92,6 119,8 7,4 1 622,8 8,7 485,2 1 137,7 - Accès aux marchés - - 1 210,2 100,0 - - 1 210,2 13,4 361,8 848,4 - 0,0 - 2 495,3 100,0 - - 2 495,3 13,4 746,0 1 749,3 - Suivi environnemental - - 154,0 100,0 - - 154,0 1,7 46,1 108,0 - 0,0 - 317,6 100,0 - - 317,6 1,7 95,0 222,7 - ubtotal 0,0 - 2 093,2 97,3 58,1 2,7 2 151,3 23,8 643,2 1 508,2 - 0,0 - 4 315,9 97,3 119,8 2,7 4 435,7 23,8 1 326,1 3 109,6 - . Coordination, gestion, suivi et évaluation Cellule de coordination technique et fiduciaire -0,0 - 716,1 100,0 - - 716,1 7,9 213,5 502,7 - 0,0 - 1 476,5 100,0 - - 1 476,5 7,9 440,1 1 036,4 - Suivi et évaluation - - 167,6 100,0 - - 167,6 1,9 49,9 117,7 - 0,0 - 345,5 100,0 - - 345,5 1,9 102,8 242,7 - Appui institutionnel - - 505,3 100,0 - - 505,3 5,6 150,9 354,4 - 0,0 - 1 042,0 100,0 - - 1 042,0 5,6 311,2 730,7 - ubtotal -0,0 - 1 389,0 100,0 - - 1 389,0 15,4 414,3 974,8 - 0,0 - 2 864,0 100,0 - - 2 864,0 15,4 854,2 2 009,8 - otal PROJECT COSTS -0,0 - 6 693,0 74,2 2 328,1 25,8 9 021,1 100,0 2 695,5 6 325,6 - -0,0 - 13 800,0 74,2 4 800,2 25,8 18 600,2 100,0 5 557,7 13 042,4 - 19 Annex 3: Operational Risk Assessment Framework (ORAF) Project Stakeholder Risks Rating: Low Description: Risk Management: No major issues are anticipated from The Project will further continue to operate strictly by rules under the MG scheme and will stakeholders. However, there might be communicate through the Executing Agencies (AGEX) and Regional Focal Points on the revised grievances from communes and/or individual, eligibility criteria as in the updated Project Implementation Manual (PIM) associations or SMEs who have submitted Responsibility: Stage: Recurrent: Due Date: Frequency: Status: proposals and will not receive funding as Client Implementation √ limited number of sub-projects (about 400) will be funded under the Matching Grant Mechanism Implementing Agency Risks (including Fiduciary) Capacity Rating: Moderate Description: Risk Management: Arrangements for implementing PRODEX has accrued experience and project staff and focal points, both at national and regional levels, PRODEX has operated quite well, with have benefited extensively from capacity building support, and most of the activities to be funded under the a small TFCU at the national level AF are at advance preparation stage, and fall under the Project routine activities. Nonetheless, Project will assisted by an international firm and hire local and international consultants on critical areas to ensure business continuity. An in-depth analysis coordinating a limited number of of a sustainable institutional set up will be undertaken by the High Commission for I3N as part of the Executing Agencies (consortia of NGOs preparation of the sector wide operation anticipated in the CPS and funded from the Additional Financing. for each of the main selected value Responsible: Stage: Recurrent: Due Date: Frequency: Status: chain) and local services providers. Client Implementation June 30, 2015 Recent debarment of the international technical assistance firm (ATI), and downscaling technical assistance and scope of work of Executing Agencies (AGEX) might hinder Project capacity to implement activities on the ground. 20 Governance Rating: Moderate Description: Risk Management: Niger was ranked 134th out of 182 The Government has created the national Agency of Public Procurement which is functioning well and is countries in 2011 by Transparency taking good decisions during procurement processes including for donor projects. International. The country is not listed in the Bank’s OPCS short list of Responsible: Stage: Recurrent: Due Date: Frequency: Status: countries with high systemic corruption.  Description: Risk Management: Political interference in selection of PRODEX succeeded in managing this risk both at national and local levels, through a full delegation of beneficiaries of contracts, beneficiary selection task to regional and national technical selection committees, and ensuring that those strictly abide organizations or groups, and service by the selection procedures set forth in the project implementation manuals. Grievances and complaints are providers. systematically dealt with and the Bank team informed at earlier stage. Responsible: Stage: Recurrent: Due Date: Frequency: Status: Client Implementation √ Project Risks Design Risks: Rating: Substantial Description: Risk Management: Project design remains relevant in term There will be no major changes in Project approach for implementation activities, though scope and depth of of activities and the way they are work of AGEX will be revised for cost control and efficiency in service delivery. PRODEX implementation packaged into components under the arrangement, with clear roles assignment between public administration and private service providers has initial project. As PRODEX institutional been proven to be effective and will be further studied by HC/I3N under the AF, adjusted as required, and set up will be downscaled to lighter adopted as Government approach for implementing the sector wide operation. However, specific TA and implementation arrangement, line follow-up services will be provided to each type of SMEs. While AGEX will provide technical advisory ministries would claim more services to targeted micro-enterprises, the secondary services providers (GIE, GSC, NGOs, BE, etc.), trained responsibility in project, though by SAHFI/TANYO for the use of ILO kit, will provide the necessary accounting and financial support capacity is very limited at regional and services to type-1 SMEs with SAHFI/TANYO ensuring the related quality control duties. Type-2 SMEs will local level. In addition, some gender be supported with the view to leveraging commercial resources to finance the needed technical assistance. sensitivity issues may also pop up. The AF includes a three-prong approach adequately addressing gender sensitivity: (i) close attention to sub- projects composition and how women can have a fair and equitable access to them; (ii) a gender-sensitive selection of all capacity building actions; and (iii) effective tracking of all relevant indicators on gender, particularly at PDO level while securing that at least 35% of the achieved results are benefitting to women. Responsible: Stage: Recurrent: Due Date: Frequency: Status: Client Implementation Twice yearly Social and Environmental Risks: Rating: Moderate 21 Description: Risk Management: Increase in Project activities will Implementation, monitoring and reporting of PRODEX Safeguards have been satisfactory so far, and increase risks associated with the use of safeguards instruments (ESMF, PMP, and RPF) that have been prepared for the Project have proven to be chemicals to intensify agricultural effective. There will be no new activities that have not been taken care of under those frameworks, which production, increased irrigation have been updated to take into account institutional changes since approval of the initial project, reviewed activities might involve depletion of and cleared by the Bank for disclosure in-country and at Bank InfoShop. natural base. Furthermore, implementation of the feeder roads and The project has also developed a simplified environment and social safeguards guideline for screening of construction of irrigation and marketing sub-projects under the Matching grants mechanism, being widely used by project partners which have been infrastructure might imply acquisition of trained on. land, displacement or restriction of The technical selection committees, as well as the Bureau of Environmental and Social Impact studies access to source of livelihood in some (BEEEI) have been supervising of implementation of mitigation measures for relevant sub-project locations. Finally, there is risk of investments, and more than 80 - percent of completed sub-projects reportedly have complied with widening gender gaps as women are environmental safeguards requirements and 100 percent with social safeguards. usually disadvantaged in accessing development programs in Niger. Responsible: Stage: Recurrent: Due Date: Frequency: Status: Client Implementation Twice yearly Program and Donor Risk: Rating: Low Description: Risk Management: Dependency on other projects/activities The Project is a stand-alone operation and is not contingent on other co-financing sources, including or other development partners funding, commercial banks. The Matching Grant Mechanism is co-funded by contribution from the beneficiaries, and hampering project results if not no default was recorded from beneficiaries so far. Furthermore, the additional financing will support HC/I3N materialized. to lead and coordinate the preparation of the sector-wide, multicolor project identified in the CPS (deliverable for FY16) and geared to fostering agriculture risk management and long-term resilience in Niger. However, there will be a few strong co-financing arrangements aiming at facilitating the access to bank financing. These will be organized through existing instruments in the financial sector (i.e., BOA for its Loan Portfolio Guarantee facility (ARIZ) financed by the Agence Française de Développement (AFD), SAHFI / TANYO group offer of a credit guarantee product, Asusu Microfinance SA’s set up of a Loan Portfolio Guarantee Mechanism funded by USAID to encourage SMEs, Ecobank-Niger’s Loan Portfolio Guarantee Mechanism to agricultural SME; and Microfinance Institutions (MFIs) operating in 12 municipalities, etc.). These instruments will rather be risks mitigation tools for PRODEX. Responsible: Stage: Recurrent: Due Date: Frequency: Status: Bank and Implementation Client Delivery Monitoring and Rating: Low 22 Sustainability Risk: Description: Risk Management: Weak monitoring and evaluation PRODEX has been successful in implementing activities, and monitoring and evaluating project performance. A baseline survey for a rigorous impact evaluation has been already completed and follow-up capacity to track project progress and impact surveys are being designed including eventually for the Additional Financing. While institutional set up helped lessen risk of delivery, associated cost might be high in some cases and pose question of sustainability. The issue is being dealt with under the leadership of HC/I3N as part government effort to scale up successful activities under I3N, and which the additional financing will be supporting. Responsible: Stage Recurrent: Due Date: Frequency: Status: Client Implementation Annual reports, MTR Overall Preparation and Implementation Risk: Moderate The overall risk is due to issues related to governance, project design and capacity of the implementation agency. 23 Annex 4: Detailed description of AF Project Modified Activities and Implementation 1. Project development objectives, concept and additional financing orientations. The project development objective will remain the same during the Additional Financing (AF) as well as the main components. The project will build on successes of the first phase to ensure consolidation, scaling-up of sub-projects implemented in the initial project and the diversification into new value adding segments (storage, processing, and marketing) and the linkages with the commercial banking sector. The new orientations of the project through AF are supporting the operationalization of established Inter-professions/Inter-professional organizations (IPs/IPOs: Onion, on- hoof animals/meat/livestock products, Cowpeas). These IPOs must play a leading role in increasing the competitiveness of these sectors through the implementation of value chain training tools, market development activities (strategic plan, market studies, commercial missions), and exchange visits with a view to reducing value chain dysfunctions. 2. The Project will engage the transformation of sub-projects (SP) into profitable and efficient micro-enterprises (MEs) by setting up the conditions for their viability and sustainability, so that: (i) a portion of the established SP (800) will be supported through financial and business management tools to help improve their profitability and enhance their linkages with the banking sector; (ii) new micro-enterprises (397) will be set up following a process similar to the one of the old SPs, with an additional provision of basic business management kit (the ILO tool); (iii) 40 small and medium- sized enterprises (SMEs) with investment needs equal to or less than CFAF 50 million will be established and they will be awarded a grant corresponding to about 50 percent not exceeding FCFA 15 million of their investments, as well as a project assistance for the technical feasibility study, business plan preparation and facilitation for bank financing and upgrading of their accounting systems; and (iv) the AF project will provide, on a competitive basis support for the preparation of business plans and facilitation of access to commercial bank credit for 10 SMEs with investment needs exceeding CFAF 50 million. MEs and SMEs eligible to PRODEX support are those with high potential and the ability to integrate well-defined business models (contract farming, buyer/seller arrangement, etc.) in the selected value chains. 3. The PRODEX project will seek to create an efficient enabling environment through: (i) the fostering of agriculture value chain finance (technical assistance to BOA, training of partnering financial institutions in value chain finance, and the preparation of business plans centered on agricultural business models); and (ii) the dialogue between public and private sectors leading to the positioning of priority value chains targeted by the PRODEX as strategic sectors eligible to BCEAO preferential financing. Project implementation arrangements. The component-wise implementation arrangements for the AF project are as follow: 4. Component A: Improvement of Supply Chain Coordination and Marketing Conditions. This component aims at building sound public-private partnerships in order to structure and enhance the coordination between the principal links in the priority supply chains. For this component, the Additional Financing (AF) will be used to: (i) adjust the configuration of storage and food processing models; (ii) improve the 24 packaging and the individual or collective marketing techniques; (iii) support the existing market information systems; and (vi) provide institutional support to national and regional inter-professional bodies/Associations leading to their adoption of marketing and advocacy of best practices. 5. Subcomponent A1: Support to supply chain coordination. This subcomponent aims to structure and stimulate the coordination between the principal links in the selected supply chain (on-hoof animals/red meat/skins and hides, cowpeas, onion, sesame, Arabic gum, yellow grass nuts). This subcomponent includes two activities: i) Activity 1: Support the functioning of the IPOs. This activity implies the capacity building of IPOs established in the initial phase of the project so that they can operate adequately and provide value added services to their members and expand their social and professional basis. Specific actions include: (i) institutional support (contribution to operating support for the acquisition of office equipment); (ii) technical assistance and monitoring of IPOs; (iii) organization of 12 experience exchange trips for 350 producers organizations (POs) staffs; (iv) capacity building for 2500 PO staffs of which at least 35 percent women; and (v) support for the development of the IPOs agricultural law (the bill will be discussed and validated in a participatory manner at a national workshop). ii) Activity 2: Support IPOs for the implementation of their strategic plans. Specific actions include: (i) the conduct of market studies for the priority supply chains; (ii) the elaboration of the strategic development plans of the value chains; (iii) the hiring of two operators for the implementation of action plans supporting the strategic plans; (iv) the organization of annual inter-professional consultative groups to prepare agricultural campaigns and monitor performance; and (v) the organization of forums (value chain workshops) including the key players of the targeted value chains, commercial banks and financial institutions as well as the Central bank to address issues related to both the risks in the agricultural export sectors and the resulting high-level of the current agriculture loan guarantees and interest rates. 6. Subcomponent A2: Support to Marketing activities and competitiveness. This subcomponent will support knowledge development activities and the capacity building of key public and private actors in the targeted supply chains, thus leading to their adoption of the supply chains approach and a better understanding of market systems. The Additional Financing will support the following activities: i) Activity 1: Support to Marketing activities. Specific actions are (i) conducting market research to identify on the one hand, growth-led markets and clear understanding of related markets mechanisms and on the other hand, the development of strategies to position the processed products on niche markets, including the targeting of Nigerien diaspora (kilichi for meat, Gabou for onion, flour, couscous and cowpeas: béroua and sesame by-products); (ii) the labeling and promotion of Nigerien origin by supporting the Committee of IPOs; (iii) funding the participation of value chain actors in trade fairs; and (iv) support to existing market information systems. PRODEX will continue to support 3 existing market information systems/MIS (i.e. RECA) and the observatory (On-hoof animal/meat/skins & hides) to enable them to improve the quality of their services. 25 ii) Activity 2: Development of market knowledge and dissemination of innovation. This activity includes: (i) the support to contracting processes between actors in the value chains through the development of export contract templates and training of relevant firms for their adoption; (ii ) extension of export tests in the priority supply chains and livestock markets management tests as well as sales of livestock based on animal weight in at least 3 markets; (iii) trade missions facilitation under the coordination of IPOs; (iv) dissemination and promotion of sorted, weighted and packaged onions using mesh bags. The onion IPO will play a central role in this activity, including site identification and the involvement of key actors in the dissemination and the awareness-building of destination high end markets importers; (v) fostering the production of improved seeds in possibly partnership with INRAN for onion varietal purification; and (vi) taking into consideration health issues, modern techniques of preserving plant products and hides and skins tanning through partnerships with DGPIA and DGA. 7. Component B: Development of financial instruments. This component aims to address financing needs for the development of micro-enterprises and Small and Medium size Enterprises and cooperatives for business expansion in the short term, while fostering the access to sustainable financial services. 8. Subcomponent B1: Provision of Matching Grants. Activities under this subcomponent will target a minimum set of sub-projects in the production sector (particularly women-led SPs to improve their participation in the project), and most likely sub-projects in storage / preservation, processing and marketing links. The relevant sub-projects to be considered for selection under the AF project are from the onion industry and third window 7(245 sub-projects), cowpeas and the second window 8 (70 sub-projects) and BVCP (47 sub-projects), thus amounting to a total of 397 SPs. These SPs will benefit from the MG like the first generation SPs and project technical assistance (management kit for financial and commercial management) in order to ensure their profitability and attractiveness to financial institutions. 9. Subcomponent B2: Facilitation of access to credit. This subcomponent encompasses MEs and SMEs operating in PRODEX-supported value chains and aims at strengthening the sub-projects with high potential funded under the original project and the emergence of PRODEX-supported agricultural companies that can boost value chains and establish lasting business relationships with financial institutions. For that purpose, PRODEX will consider three types of enterprises: (i) Micro-enterprises include existing sub-projects whose performance is satisfactory and new sub-projects to be financed under the AF. The objective is to support 800 first generation SPs and 397 additional SPs under the AF; (ii) SMEs-Type 1 corresponds to high potential SPs or potential agricultural companies (40 SMEs) whose investment needs are less than or equal to CFAF 50 million; and (iii ) SMEs-Type 2 includes agricultural SMEs (10 SMEs) with investment needs greater than CFAF 50 million. 10. The sub-project typology is presented in Table 3 below. Sub-projects are distributed as follows: (i) 397 micro-projects (89 percent) with emphasis on those that have strong potential to grow and expand. These SPs will benefit from the matching grants like the first generation SPs as well as the project’s technical assistance (management kit for financial and commercial management) in order to ensure their profitability and attractiveness to financial institutions; (ii) 40 SMEs-type sub-projects (9 percent) that 7 The third window is relative to women sub-projects.(multicrops) 8 The second window is relative to sesame and sweet peas (“souchet”). 26 have proved successful during the initial phase and need additional funding to consolidate and scale up their activities to become SMEs. They will benefit from the matching grant for up to 50 percent of the cost; and (iii) 10 SMEs-type sub-projects (2 percent of total) that will be selected on competitive basis for commercial bank financing. They will benefit support for feasibility study and facilitation for access to commercial bank credit but not from the matching grant. 11. Table 3: Classification of Type 1 Sub-projects 9 (current pipeline of 397 SP) per supply chain/processing steps Priority/Targeted Supply chains Animals, meat, skins, Onions and Cowpeas and Processing steps hides 3rd window 2nd window Total Production 12 45 41 98 Processing 17 10 14 41 Storage/ marketing 22 220 16 258 Total 51 275 71 397 12. Table 4: Classification of Type 2 Sub-projects 10 (40 SP to-be-upgraded to SMEs) per value chain/processing steps Priority/Targeted Value chains Animals, meat, Processing steps skins, hides Onions Cowpeas Sesame Total Production 3 5 1 9 Processing 4 4 5 3 16 Storage/ marketing 4 6 5 15 Total 11 15 11 3 40 13. The PRODEX-supported MEs and SMEs will be selected on the basis of their potential (their assessments will be carried out using a diagnostic tool developed in a participative manner) and their ability to integrate a well-defined business model for the priority value chains. The selection criteria will be defined in the procedures manual of the project. i) Activity 1: Facilitation of access to finance for MEs and SMEs. Facilitation of the access to bank financing will be organized through existing instruments in the financial sector: (i) the BOA is the beneficiary of a Loan Portfolio Guarantee Facility (ARIZ) financed by AFD (€1.525 million); (ii) the SAHFI / TANYO group offers a credit guarantee product sponsored by three major banks and assists SMEs to access credit from these banks; (iii) Asusu Microfinance SA has set up a 9 These SPs will benefit from the MG and project technical assistance like the first generation SPs. 10 The sub-projects type 2 comprises SMEs of type 1 and 2. The SMEs OF TYPE 1 will receive PRODEX-funded technical assistance (business plan, mobilization of funding etc.), and partly fund for 50 % the investment need. For SMEs of type 2, PRODEX will conduct technical assessments of their operations and if necessary, link them to appropriate development partners for their upgrading. 27 Loan Portfolio Guarantee Mechanism (DCA Guarantee) of US$1 million funded by USAID to encourage the financing of small rural enterprises; (iv) Ecobank- Niger has also signed with USAID a Loan Portfolio Guarantee Mechanism covering loans to agricultural SME; and in addition (v) Microfinance Institutions (MFIs) operating in 12 municipalities in the regions of Zinder and Dosso have also set up a credit line of €1,5 million funded by the European Union (EU). These financial institutions will be offered specific training to reinforce their capacities in agriculture value chain financing. In addition to these instruments and to demonstrate that financing of agriculture can be in fact profitable, the project will provide a one-year resident technical assistance to BOA with the view to increasing its institutional capacity to develop financial products that are affordable for the specific needs of agricultural SMEs in Niger. ii) Activity 2: Technical assistance and monitoring of project supported MSME. The AF project will provide technical assistance and monitoring tailored to the specific needs of each type of businesses. These services will be provided through a partnership with AGEX and the SAHFI / TANYO group: (i) Microenterprises (ME) will be assisted by the AGEX in the technical field and by independent secondary providers to adopt basic management practices. The independent secondary providers will be initially trained by SAHFI / TANYO in the use of ILO kit. SAHFI / TANYO will ensure quality control; (ii) SMEs of type 1 will receive PRODEX-funded technical assistance for the structuring of their business (technical study and preparation of business plan), support for the mobilization of funding from partner institutions and the upgrading of their accounting and financial information system. PRODEX will partly fund the investments, provided that the total package does not exceed 50 percent of investment needs. They will mobilize bank loan to supplement the facility granted by the project. This funding will take place through sub-projects prepared by the SMEs in compliance with the project’s manual of procedures for financing sub-projects; (iii) to ensure their efficiency and competitiveness, a regular monitoring will be provided to these firms by experts (Technologist, Agronomist, Veterinarian, etc.) and business development services on demand as well. These services will be provided, on the one hand, by the AGEX and, on the other hand, by independent secondary providers. The independent secondary providers will be initially trained by SAHFI/TANYO in coaching these SMEs while SAHFI / TANYO will ensure the training related to quality control; and (iv) for SMEs of type 2, PRODEX will conduct technical assessments of their operations and if necessary, link them to appropriate development partners for their upgrading. The SMEs whose technical operations will be found satisfactory will receive a grant from the project for the preparation of their business plans and the mobilization of commercial bank credit. To improve their performance, this class of businesses should also benefit from regular monitoring by experts (Technologist, Agronomist, Veterinarian...) and coaching on demand. PRODEX will ensure that adequate provisions are made when assessing the investment needs during the business plans preparation. 14. Component C: Securing Irrigation Potential. The objective is to increase the capacity of the agro-sylvo-pastoral production systems by securing the potential of the irrigated areas. The targeted actions include: (i) the implementation of three (3) weirs and catchment dams (about 1050 ha to be secured for further irrigation), (ii) the implementation of site protection systems (854 ha); and (iii) the construction of feeder 28 roads for connecting the selected production sites to the markets (42.8km). With the implementation of the AF, the objectives are revised as follows: i) 3,750 ha of secured land of which 1,050 ha are additional; ii) 3,800 ha of protected land of which 854 ha are additional; iii) 65.9 km of access roads of which 30 km are additional. This component is structured in three subcomponents: 15. Subcomponent C1: Construction, or rehabilitation, and site protection. The weirs and catchment dams of Galma, Magaria and Tchidafawa are implemented. The project will support the rehabilitation or construction of community irrigation works (weirs and small catchment dams, irrigation sites protection) threatened by dune encroachment. The beneficiaries (communes and communities) are the owners and with the technical assistance of DGRR. TFCU and DGGR will determine the rules of operation and maintenance of such works. Three catchment dams will be implemented in the valleys of Galma, Magaria and Tchidafawa; the related BDs and technical studies for which should be performed or updated. The construction of these structures will secure additional irrigable area estimated at 1,050 ha. 16. Sub-projects to protect threatened priority sites will be implemented. The AF will fund the implementation of 8 protection sub-projects whose bid documents will be prepared and work implemented with the support of service providers (NGOs and GIE project partners). The implementation of these activities will enable the treatment of 318 ha and the protection of 854 ha. 17. Subcomponent C2: Facilitation of access to markets. The project will support the rehabilitation, treatment of critical points or the construction of feeder roads (segment less than 20km) that link production areas to markets. As part of the implementation of the original project, a study was carried out on 105 km of feeder roads (of which approximately 35.90 km were completed). The AF will enable the completion of about 30km. 18. Subcomponent C3: Environmental monitoring. Activities linked to the environmental and social surveillance of sub-projects will be implemented through a memorandum of understanding between the Project and the Office of Environmental Assessment and Impact Studies (BEEEI). The implementation of the partnership agreement between the BEEEI and PRODEX falls within the scope of the support to the implementation of the Environmental and Social Management Framework (ESMF) of the project. The support will enable the TFCU to review sub-project environmental and social impact reports (ESIA) submitted for funding to the project and environmental monitoring (audit of the implementation of mitigation measures under PRODEX-funded sub-projects). 19. The environmental monitoring of ground water in irrigation areas. The Project will support the monitoring of ground resources (fragile ground water) in sensitive project areas through a partnership with the CNSEE (“Centre National de Suivi Économique et Environmental”) and the University of Niamey. 20. Support to communities for the local monitoring of ground water in irrigated areas. The project will support the creation of water users’ associations in partnership with other actors to ensure improvement of irrigated areas and water catchments 29 management. So subsequent to information/awareness missions, the project intends to support the establishment of water users’ associations in some irrigation areas in partnership with other projects working in the field. Component D. Project Management and Support to the I3N Initiative 21. This component will pursue the same objective ensuring effective implementation of the Project through: (i) a mechanism for efficient control; (ii) coordination of activities; (iii) an effective administrative and financial management; (iv)adequate support to private initiatives of players on the field; and (v) monitoring and evaluation of results and impacts. The Project will finance the following activities: (a) setting up of a participatory monitoring and evaluation of results and impacts through a real stakeholder involvement; (b) development of institutional, agricultural and promotion of communication channels; (c) achievement of intermediate and impact studies; and (d) strengthening of the collection and dissemination of results through a real involvement of all parties. 22. Subcomponent D1: Project coordination and management and support to the I3N. The objective of the administrative and financial management is to provide the different project actors with the resources (human, equipment and financial) necessary for the implementation of the project activities. The Project will support incremental costs associated with TFCU and regional focal points staff, operating and training expenses, external audits, the communication and procurement as well as the periodic planning and budgeting activities at regional and national levels (but expressly excluding the salaries of officials and public servants of the Recipient’s civil service). 23. PRODEX’s current institutional setting will be amended to add: a) One agricultural processing specialist who will be in charge of every aspect of technology issues; and b) One value chain expert in charge of securing the value chain approach in the project. 24. Subcomponent D2: Monitoring and Evaluation (M&E). The objective of the subcomponent is to implement the monitoring and evaluation system of the project. The project will support the operationalization of the monitoring and evaluation system. In this respect, the FA will finance (i) consulting services; (ii) capacity building of Focal Points and their assistants (training related to the management of the sub-project database); (iii) the preparation and conduct of joint missions and internal supervision and; (iv)the production, printing and publishing of project documents. This will ensure continuous and close monitoring of performance and assessment of results at the end of the project. The final evaluation will be conducted independently by specialized service providers. The approach will be interactive and involve the various partners in the implementation of the Project. 25. Subcomponent D3: Project’s Institutional Support. The objective of this subcomponent is to assist the HC-3N for: (i) the implementation of components A, B, and C which include activities that integrate agricultural risks dimension (ii) the promotion of agricultural risks management in food security and nutrition programs; and (iii) the preparation of the Niger National Agricultural Resilience Program. This subcomponent will also support the functioning of the Ministry of Agriculture Steering Committee in charge of project oversight. 30 Annex 5: Economic and Financial Analysis A. Results: 1. PRODEX planned investments for the AF have been screened and their potential economic and financial impacts assessed for both the individual sub-projects/upgraded MEs and SMEs as well as for the full project. Then, the economic and financial results have been compared to those of the parent (original) project. This present Annex 5 provides details about the assessments methodology and the results. Each of the AF recommended technologies is requiring new skills and competencies, thus meaning additional costs. However, the resulting additional surpluses have been found much higher, particularly with regards to operations at MEs/SMEs level. 2. The two figures below are indicating that the selected types of enterprises (MEs and SMEs) are quite profitable, showing the following range Internal Rates of Return (IRR): 32 percent for irrigated onions production, 38 percent for animal fattening, 46 percent for onions, 12T Reseda storage/conservation - and even, as high as 66 percent for onions, 3T Rudu storage/conservation - as well as for dry meat (Kilichi), 50 percent for the on-hoof animal markets, 61 percent for inputs storage for veterinarian and other animal needs and 66 percent for onions and cowpeas marketing infrastructure. The figures are also showing interesting patterns, namely that the more the value addition takes place (i.e., through storage/delayed marketing and transformation), the more the positive links to V/Cs profitability are resulting in higher levels of ERRs. 3. The analysis is also evidencing that the PRODEX matching grants mechanism (MGM) is highly efficient. It has a critical and positive effect on Project’s cash flow and it is resulting in increased income levels for all the V/Cs actors (production/ processing/ marketing). This mechanism is quite efficient in helping bridge the gaps of high start-up cash needs within a context of limited commercial banks funding and limited microfinance funding support. Therefore, two actions will be carefully implemented: firstly, a few amendments to the Manual of Procedures of the MGM to better reflect the AF specifications and secondly, a strict application of the sub-projects’/MEs’/SMEs’ new selection criteria to ensure highest profitability. 4. Regarding PRODEX AF profitability: (i) its Net Present Value (NPV) computed on a basis of 12 percent interest rate - an estimation of the opportunity cost of cash borrowing in Niger - is amounting to US$13.03 million (to be compared to US$8.4 million 11 project economic costs at Y-0). The ERR for the full AF Project is estimated at 16.9 percent, a 11 Project’s Y-0 present economic costs $8.4m = $8.1m + $0. 35m/1.1 31 rate which reveals to be well-aligned to the IRR of the parent project. The conducted sensitivity analysis is showing that these results remain robust by high costs variations: (i) ERR will be brought down to 15.8 percent, 14.8 percent and 13.8 percent when the costs increase respectively by 10 percent, 20 percent and 30 percent; (ii) ERR will come down to 15.7 percent, 14.3 percent and 12.8 percent for gross margins reductions respectively by 10 percent, 20 percent, and 30 percent; and (iii) in case of a two-year delay of benefits generation by the project, the resulting IRR will still amount to 13.4 percent. B. Overview of the economic and financial analysis – a three-prong approach to this thematic: 5. The promotion of private entrepreneurship and expansion of business opportunities would be achieved through: (i) the effective participation of the private sector through a large number of small entrepreneurs that are critical for this kind of project; (ii) targeted public involvement and funding --that still remain important and fully justified; (iii) large offer of diverse public goods ranging from marketing investments, feeder roads and weirs --where public contributions to the capital investments are habitually important,- thus benefiting to a significant number of people; (iv) effective improvements in the policy and regulatory environment; and (v) effective revenue increases and better livelihoods for all the V/Cs actors, with particular attention to the smallholders, youth and women. 6. The value addition by the World Bank (WB) will be achieved through: (i) its assistance to improvements in the business environment; and (ii) its efficient promotion of rural entrepreneurship and the successes of the mushrooming micro-enterprises. The WB has a comparative advantage through its expertise and financial support to this project that would be based on its solid and international experience as well as proven successes in agriculture, rural development, as well as efficient development of micro-projects and value chains. The project would combine and apply these experiences, providing a unique window of opportunity to an effective integration of a strategic approach to productivity enhancement, diversification, and value chain development. This includes experience gained in developing efficient business and regulatory environments, in supporting community development projects as well as the construction of key marketing infrastructure, in ensuring specific financing mechanisms such as matching grant programs and in disseminating achievements and lessons learned from past projects (i.e. thru the parent project). 7. The development impact of the full project would be the result of an increased volume of public investment in agro-forestry-pastoral sectors targeted by the project as well as a high-level poverty reduction and higher rural incomes and job opportunities. This has been and will continue to be achieved through: (i) the development of profitable, competitive economic activities for active populations including youth and women; (ii) 32 the strengthening of the institutional settings for competition and V/Cs such as producers professional organizations, PPP arrangements, enhanced access to seasoned technical assistance and financial services; (iii) a sensible reduction of unemployment and underemployment, especially for youth and women; (iv) substantial transformation of production systems underpinned by the development of irrigated agriculture and the creation and/or upgrade of marketing infrastructure; and (v) a further increase of the volume of exports of Niger agro-forestry-pastoral products towards national, regional and international markets. 8. The Project is showing a reasonably high rate of economic return/ERR (16.9 percent), in comparison to the opportunity cost of cash borrowing, the sensitivity of which to investments costs variations does remain modest (a maximum range of only 4.1 percent). C. Assessments methodology: 9. PRODEX AF will remain a framework project for the promotion of specifically-targeted V/Cs (onions, cowpeas, on-hoof animals/meat/skins/hides) as well as a project deemed to reduce poverty. Therefore, the AF project focus will be: (i) the completion of the already- initiated key marketing infrastructure, such as irrigation infrastructure, weirs and water level protection works, mitigation works on climate change effects –inundations, water erosions, wind erosions resulting from frequent occurrences of droughts, higher temperatures and similar climatic factors; (ii) the capacity enhancement of all the targeted V/Cs actors, the producers organizations and the inter-professional organizations; (iii) the targeting of strategic V/Cs investments in production, processing and marketing; (iv) the support to the upgrading of sub-projects into high potential MEs and/or SMEs depending on their respective level of turnaround, likely access to competitive markets and skills/competencies of their promoters. These investments will be executed through the MG. 10. The AF project investments will generate financial and socioeconomic benefits both for the sub-projects promoters and the whole economy. These planned investments by the AF project have been screened and their potential economic and financial impact assessed for the individual sub-projects/upgraded MEs and SMEs as well as the full project. Then the economic and financial results have been compared to those of the parent (original) project. 11. The capacity development will be carried out through Component A (Improvement of Supply Chain Coordination and Marketing Conditions), the key investments of subcomponent B2 (Facilitation of access to credit), and Component C (Securing Irrigation Potential) that all have positive effects on the project beneficiaries and their activities. However, these benefits are difficult to quantify and/or clearly allocate, and therefore, they have not been assessed any further. The investments under subcomponent B1 (Provision of Matching Grants) will allow the dissemination and adoption of sub- project level technologies and techniques. These investments are generating direct measurable benefits that would serve as basis for the costs-benefits analysis. The access to MG resources will be on-demand and will be subject to the application of the “co- funding” principles. The type and/or size of the investments are not clearly known in advance. Therefore, the economic and financial analysis will be based on tangible results coming from the modeling of the sub-projects of the original project. While these operational modeling costs are provided as illustration only, the conducted analysis itself will strictly stick to real operating conditions and existing real data (the enterprise modeling is carried out through the AF project data only). 33 12. The AF Project reviewed eleven enterprise models. The costs-benefits analysis has been carried out for eight types of enterprises equipped for their modeling with all the necessary parameters for this kind of analysis. These are: for model-1: 0.4 ha of onions; for model-2: onions, 3T Rudu conservation; for model-3: onions, 12T Reseda conservation; for model- 4: marketing and storage infrastructure for onions & cowpeas; for model-5: production of animal feeding/animal fattening; for model-6: shops and agricultural inputs warehouse; for model-7: animal collection market; and for model-8: meat processing (kilichi). 13. The prices used for the modeling are market prices as of February 2014. The “economic” price has been calculated based on FOB (retail prices) after deduction of all intermediary costs. Input taxes are negligible in Niger, and therefore there are no real differences between economic and financial costs. A rate of 90 percent has been applied for the conversion of financial costs into economic costs. The unit operational lifetime is estimated at 20 years (for amortization purposes). It should be noticed that any dissemination and adoption of new technologies would be quite hard in Niger if the project is not supported by the MG: promoters are lacking access to commercial credit, particularly to long-term financing possibilities, and in addition, microfinance funding is also scarce. The economic analysis conducted at sub-project level is not considering any MG funding, and in general, no subsidy has been considered in this economic analysis. D. Enterprise-level analysis of the financial impact of the AF project’s planned investments. 14. The results of calculations based on firstly, investments levels with no MDCP and secondly, on the aforementioned hypothesis at sub-projects level are quite encouraging with regards to three aspects: • Through component B1, the AF project will support the adoption of new technologies resulting in the acquisition of new competencies. Such a process will inevitably result in higher costs (investments and operating costs) in comparison to the initial/basis situation. Despite higher operating costs, the analysis is showing, for the models of enterprises considered for the AF project funding, a substantial increase of the levels of enterprise turnaround and gross margins (see Table 6 below): Table 6: Average increases in operating costs and related benefits Baseline Situation Project Situation Variation (No project) (Increase in %) Average investment costs 580 000 4 799 256 728% (CFAF) Average operating costs 1 433 220 3 170 348 121% (CFAF) Average Turnaround 1 949 555 6 961 250 257% (CFAF) Average gross margin 461 405 3 790 903 722% (CFAF) • The profitability of the different types of AF project considered enterprises, as measured through their respective Internal Rate of Return (IRR), is satisfactory (see Table 7 below): 32 percent for irrigated onions production, 38 percent for animal 34 fattening, 46 percent for onions storage/conservation in Reseda 12T - and even as high as 66 percent for onions storage/conservation in Rudu 3T - as well as for dry meat (Kilichi), 50 percent for the on-hoof animal markets, 61 percent for inputs storage for veterinarian and other animal needs and 66 percent for onions and cowpeas marketing infrastructure. Table 7: Profitability of enterprise level investments Profitability Indicators Profitability Indicators (ERR (ERR and NPV): and NPV): Considered Levels reached through Considered Levels reached through enterprise enterprises capacity enterprise enterprises capacity models enhancements and models enhancements and innovations innovations (technology & (technology & best practices) best practices) Model-2: ERR = 32%; and Model-1: 0.4 ha onion (3T ERR = 66%; and NPV (at 10%) = CFAF of onions Rudu NPV = 1,630,365.2 4,117,120 conservation) Model-4: Model-3: marketing and onions, 12T ERR = 46% ; and storage ERR = 66% ; and Reseda NPV = CFAF 3,054,825 infrastructure NPV = CFAF 508,828,762 conservation for onions & cowpeas Model-5: Model-6: production of ERR = 38% ; and shops and ag. ERR = 61% ; and animal NPV = CFAF 27,192,665.4 inputs NPV = CFAF 20,251,618.2 feeding/animal warehouse fattening Model-7: Model-8: meat animal ERR = 50% ; and ERR = 46% ; and processing/ collection NPV = CFAF 451,125,416 NPV = CFAF 60,367,429.3 Kilichi market 15. Finally, this analysis gives also evidence that the PRODEX Matching Grants mechanism is highly efficient. It has a critical and positive effect on Project’s cash flow and it is resulting in increased income levels for all the V/Cs actors (production/ processing/ marketing). The MG screening process of projects submitting their requests to AF project funding will be critical in making sure that the selected sub-projects, MEs and SMEs are economically and financially viable. Therefore, the processes fixed by and the provisions of the Manual of Procedures (MoP) for the MG will be strictly followed. In addition, the MoP will be amended in order to better reflect all AF project specifications. E. Country-level analysis of the financial impact of the planned investments. 16. The selected indicator for country-level analysis is the Net Present Value (NPV) computed on the basis of a 12 percent interest rate, reflecting the opportunity cost of cash borrowing in Niger. The NPV for the whole AF project is amounting to US$13.03 million (to be compared to US$8.4 million12 project economic costs at Y-0). In economic terms, the total profitability of the AF project, as measured by its ERR, is at 16.9 percent which 12 Project’s Y-0 present economic costs $8.4m = $8.1m + $0. 35m/1.1 35 is quite high. These high levels of profitability can be explained by the combined key success factors provided by the AF project, such as the enhancements of production techniques and technology, the availability of irrigation infrastructure and the improved marketing techniques and marketing processes. These results (see Table 8) are still very conservative since they are taking into account only the benefits generated by component B-1 (benefits from all the other components are not accounted for). Table 8: AF project profitability (NPV in US$ million) Profitability as measured by ERR NPV Basis-case scenario 16.94% Profits generated by the AF project – NPV 13.03 computed at 12% interest rate ( US$ million) 17. The conducted sensitivity analysis is showing that these results remain robust even when there are high costs variations: (i) ERR will be brought down to 15.8 percent, 14.8 percent and 13.8 percent when the costs increase respectively by 10 percent, 20 percent and 30 percent; (ii) ERR will come down to 15.7 percent, 14.3 percent and 12.8 percent for gross margins reductions respectively by 10 percent, 20 percent, and 30 percent; and (iii) in case of a two-year delay of benefits generation by the project, the resulting ERR will still amount to 13.4 percent. These high levels ERR (see Table 9 below) are clearly showing that the calculated country-level ERR is robust enough and can withhold large variations of investment and operating costs and gross margins losses as well. 36 Table 9: AF project sensitivity analysis of profitability Economic analysis Underlying hypothesis 100% project costs funded through private initiatives and no subsidies 100% gross margins generated by AF-fundeted Amortization duration : 20 years Conversion factor of gross margin (from economic to financial) : 0,9 Results IRR NPV Base (NPV = 0) 16,94% NPV at 12% CFAF million 6 386,18 US$ million 13,03 If 10% losses of gross margins 15,7% If 20% losses of gross margins 14,3% If 30% losses of gross margins 12,8% If 10% costs increases 15,8% If 20% costs increases 14,8% If 30% costs increases 13,8% If projects profits are delayed by 2 years 13,4% 37 Annex 6: Triggered Safeguards Policies 1. The project is rated Category B, with minimal, site-specific and manageable environmental and social impacts. As no new type of activity will be implemented apart from those already planned under the PRODEX, the scaling up of activities will entail no change in environmental safeguards and will not raise the environmental safeguard category of the additional financing. In conformity with the World Bank OP/BP 4.01 and the Government Environmental impact assessment legislation, the updated Environmental and Social Management Framework (ESMF) were disclosed within country on May 20, 2014, and at InfoShop on May 29, 2014 along with the updated Resettlement Policy Framework (RPF) and Pest Management Plan (PMP). The environmental and social analysis carried out through the updated safeguard instruments revealed no potential large scale, significant or irreversible impact. However, in addition to the safeguards policies already triggered under the original phase (OP 4.01 on Environmental Assessment, OP 4.09 on Pest Management, and OP 4.12 on Involuntary Resettlement and OP 7.5 on International Waterways), and based on the lessons from the original project OP 4.11 should be triggered to reflect the possibility that artifacts can show up during earth work. The project will take a careful approach concerning cultural issues (“chance find” procedures) to address potential impacts on cultural resources at any time civil works sub-project is being implemented. 2. The potential environmental and social impacts of the project are mainly related to the implementation of Component C which is designed to support various small-scale activities in order to increase the agro-sylvo-pastoral production systems capacity (weirs for water table recharge, community works to protect land against erosion, construction/rehabilitation of feeder roads). Potential adverse impacts, if any, may relate to nuisance factors (noise and dusts) to surrounding settlements, sanitation risks due to inappropriate use or dumping of fertilizers in the natural environment, land acquisition due to construction/rehabilitation of feeder roads, weirs. However, as the ongoing project, the environmental and social analysis carried out through the updated safeguard instruments revealed that, the above potential adverse environmental and social impacts under the AF, are expected to remain minimal, site specific and manageable to an acceptable level, and not lead to any irreversible threat and risk to the receiving environment in the proposed project sites. 3. The updated ESMF and RPF, based on lessons learned from experience implementing these safeguard instruments, include sound institutional arrangements, outlining the roles and responsibilities of key various stakeholder groups involved, for screening, review and approval of sub-projects, as well as implementation and monitoring of their mitigation measures. Under the ongoing project, satisfactory results are achieved by building the capacity for the TFCU, the Regional Focal Points for the project, members of the Regional Technical sub-projects’ Selection Committees, and the various Implementing Agencies. The additional financing will build on these initial gains and the updated safeguards instruments include provisions to further strengthen the capacity of the various stakeholders. 4. The environmental and social safeguards specialist of the project’s TFCU is responsible for (i) ensuring that project financed activities are in compliance with 38 safeguards requirements, and (ii) reporting on environmental and social aspects. He will ensure that: • the sub-projects are duly screened for their environmental and social impacts, and where appropriate, an Environmental and Social Management Plan (ESMP) and/or a Resettlement Action Plan (RAP) are prepared, consulted upon, disclosed and executed in a timely manner (RAPs must be fully implemented prior to the starting of the civil works execution); • the bidding documents for the constructions include the relevant environmental and social aspects the contractors must consider in their proposals; • the building contracts include appropriate provisions of the implementation of the environmental and social aspects; • the contractors effectively implement the environmental and social diligences during construction under the control of the supervising engineers whose contracts must include supervision of the implementation of the environmental and social measures executed by the contractors. 5. The Bureau for Environmental Assessments and Impact Studies (BEEEI), attached to the Ministry of Environment, is responsible of ensuring that the project complies with its ESMP. 39 Annex 7: Financial Management Arrangements 1. The same FM institutional arrangements used for the ongoing project would apply to the AF. The current FM staff will be responsible of the day-to-day FM management of the AF activities. As substantiated by the last FM supervision mission of October 2013, the project FM performance is satisfactory, and current arrangements are acceptable: (i) books of accounts and supporting documents are properly kept in respect of all expenditures with a mono-project accounting software, (ii) the audit for the year ending December 2012 for the project was submitted on time, and was unqualified. (iii) the recommendations made to strengthen the internal control system are being implemented, (iv) there is no overdue unaudited interim financial reports (IFR) and no overdue audit report in the project and the sector at the time of preparation of this AF, (v) the IFRs are prepared every quarter and submitted to the Bank regularly on time (i.e., 45 days after the end of each calendar quarter) and are of acceptable quality. In addition, the project is endowed with an internal audit function in charge of ensuring the project is compliant with agreed implementation procedures. 2. As a result of the above mentioned strengths, the overall risk for the AF is deemed moderate. The financial management arrangement of the ongoing project that would apply to the AF satisfies the Bank’s minimum requirements under OP/BP 10.00, and therefore is adequate to provide, with reasonable assurance, accurate and timely financial management information on the status of the project as required by the Bank. 3. However, the project will need to take additional measures to ensure effective implementation of the AF. This includes (i) the payment of a new license of the mono- project multi-sites version of the accounting software in use for the parent project for the purpose of the AF along with its customization to allow the recording of the transactions of this AF and (ii) minor updates of the existing FM procedures manual that is acceptable to IDA and will be used for the purpose of this AF and to reflect its activities. Funds flow and disbursement arrangements 4. Upon Credit effectiveness, report-based disbursements in use with the initial project will apply to the AF. A new designated account (DA) will be opened in a commercial bank acceptable to IDA. An initial advance up to six months forecast expenditures will be made and subsequent disbursements will be made against submission of unaudited Interim Financial Report (IFR). The other methods of disbursing the funds (reimbursement, direct payment and special commitment) will also be available to the project. 5. Funds will flow from the DA to beneficiaries’ accounts including sub-projects, services providers and suppliers. Supervision 6. Based on the current overall residual FM risk which is moderate, the project will be supervised once a year to ensure that project FM arrangements still operate well and funds are used for the intended purposes and in an efficient way. 40 Annex 8: Procurement Arrangements Capacity assessment and remedial actions 1. An assessment has been carried out during February 2014 and finalized on May 2014. Procurement activities for this additional financing will be carried out by the Technical and Fiduciary Coordination Unit (TFCU) in close collaboration with the respective beneficiaries. The procurement performance for the original project has been rated as satisfactory during implementation thus far and the procurement risk for the project evaluated moderate. The institutional procurement arrangements for the additional financing remain the same as the original project. The manual of administrative, financial and accounting procedures of the initial project shall be updated as a mitigation measure. Management of procurement process for the AF Procurement arrangements 2. The institutional procurement arrangement for the Additional Financing will remain the same as the initial financing. The TFCU will continue to manage procurement activities according to the approved procurement plan. 3. Procurement for the proposed project will be carried out in accordance with general Bank guidelines for procurement 13, and the provisions stipulated in the Legal Agreement. The Borrower will prepare and submit to the Bank a General Procurement Notice (GPN) which will be in addition to the GPN of Niger Agro-pastoral Export and Market Development Project. The Borrower will publish this additional GPN in United Nations Development Business (UNDB) online and in local newspapers of wide national circulation. The Bank will arrange for its publication in UNDB online and on the Bank’s external website. 4. Shortlists for consultancy services for contracts estimated to cost less than US$200,000 for civil works supervision and less than US$100,000 for others, equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 5. Requirement for National Competitive Bidding: Works, goods and non-consulting services contracts will use NCB procurement methods in accordance with national procedures using Standard Bidding Documents acceptable to IDA and subject to these additional requirements: (a) Each bidding document and contract financed out of the proceeds of the Financing shall provide that: (a) the bidders, suppliers, contractors and their subcontractors, agents, personnel, consultants, service providers, or suppliers shall permit the Association, at its request, to inspect all accounts, records and other documents related to the submission of bids and contract performance, and to have said accounts and 13 ‘Guidelines Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers’ dated January 2011 and the ‘Guidelines Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers, dated January 2011, and the ‘Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants’ dated October 15, 2006 and revised in January’. 41 records audited by auditors appointed by the Association; and (b) the deliberate and material violation of such provision may amount to an obstructive practice as defined in paragraph 1.16 (a)(v) of the Procurement Guidelines; (b) Invitations to bid shall be advertised in national newspapers with wide circulation; (c) The bid evaluation, qualification of bidders and contract award criteria shall be clearly indicated in the bidding documents; (d) Bidders shall be given adequate response time (at least four weeks) to submit bids from the date of the invitation to bid or the date of availability of bidding documents, whichever is later; (e) Eligible bidders, including foreign bidders, shall be allowed to participate; (f) No domestic preference shall be given to domestic contractors and to domestically manufactured goods; (g) Bids are awarded to the bidder with the lowest bid evaluated proven this bidder is qualified; and (h) Fees charged for the bidding documents shall be reasonable and reflect only the cost of their printing and delivery to prospective bidders, and shall not be so high as to discourage qualified bidders. 6. Procurement Plan. The Borrower has developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan is reviewed by the Bank. After approval by the Bank, it will be available at the Project Technical and Fiduciary Coordination Unit (TFCU). It will also be available in the project database and in the Bank external website. The Procurement Plan will be updated in agreement with the TFCU annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. All subsequent updates will be disclosed once they are approved by the Bank. Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement / Contracts Subject to Category Threshold (US$) Selection Method Prior Review ≥5,000,000 ICB All None (Post review) unless specified in the <5,000,000 NCB Works PP <50 000 Shopping None ( Post review) All values Direct Contracting All ≥500,000 ICB All Goods and Non- <500,000 NCB None (Post review) unless specified in the Consulting PP Services <50,000 Shopping None (Post review) All values Direct Contracting All QCBS/ Other ≥ 200,000 All Consulting (QBS/FBS/LCS) Services - QCBSS/ Other 14 None (Post Review) unless specified in the < 200,000 Firms (CQS/QBS/FBS/LCS) PP All values SSS All Consulting ≥ 100,000 IC - Qualification All Services None (Post Review) unless specified in the <100 000 IC- Qualification Individual PP Consultants (IC) All Values IC - SSS All All TORs, regardless of the value of the contract and the selection method, are subject to prior review. 14 QBS, FBS, LCS, CQS for assignments meeting requirements of paragraphs 3.2, 3.5, and 3.6 respectively, of the Consultant Guidelines. 42 7. Operational costs. Operating Costs financed by the project are incremental expenses arising under the Project, and based on Annual Work Plans and Budgets approved by the Association. Such costs may include office rent and maintenance, utilities (including electricity, water and gas), communications (including telephone and internet charges), equipment rent, operation and maintenance; office materials and supplies (stationary and other consumables, but not the purchase of equipment), lease of vehicles, operation, maintenance and repair, and travel and transport cost of the staff associated with project implementation. These items will be procured by using the procedures detailed in the Manual of Procedures, which was reviewed and found acceptable to the Bank. 8. Frequency of procurement supervision. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agencies has recommended two field supervision missions and at least one post- procurement review per year. The standard post-procurement reviews by Bank staff should cover at least 10 percent of contracts subject to post-review. Post-reviews consist of reviewing technical, financial and procurement reports on Project procurement actions by Bank staff or consultants selected and hired by the Bank according to procedures acceptable to the Bank. Project supervision missions shall include a Bank Procurement Specialist or a specialized consultant. 9. Fraud, coercion and corruption. The implementing agencies as well as bidders and service providers (suppliers, contractors and consultants) shall observe the highest standard ethics during the procurement and execution of contracts financed under the project in accordance with paragraphs 1.16 and 1.17 of the Procurement Guidelines and paragraphs 1.23 and 1.24 of the Consultant Guidelines, in addition to the relevant articles of the Niger Public Procurement Code which refers to corrupt practices. Project’s procurement activities will be carried out in accordance with the ‘Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants’ dated 15 October 2006 and updated in January 2011. 43