ICRR 10708 Report Number : ICRR10708 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 08/07/2000 PROJ ID : P003294 Appraisal Actual Project Name : Second Urban Project Project Costs 580.0 161.05 US$M ) (US$M) Country : Zimbabwe Loan/ US$M ) 80 Loan /Credit (US$M) 75.1 Sector (s): Urban Housing Cofinancing 244.98 33.16 US$M ) (US$M) L/C Number : L3079 Board Approval 89 FY ) (FY) Partners involved : KfW, SIDA, Nordic Closing Date 12/31/1996 12/31/1999 Development Fund Prepared by : Reviewed by : Group Manager : Group : 2. Project Objectives and Components a. Objectives (a) Provide support to urban areas to supply the additional services required to cope with rapid population growth; (b) Strengthen the appraisal capacity of central and local government to determine the most rational and cost effective alternative investments in urban areas; (c) Ensure continued financial self-sufficiency of local authorities; (d) Improve maintenance to protect the capital assets of the local authorities; (e) Strengthen the human resource capacity of local authorities; (f) Maximize the role of private sector investors in urban housing: (g) Assist with development of regional programs focused on the smaller towns and rural growth points. [Objective (g) was revised at GOZ’s request to focus on development of demonstration industrial “incubator� sites for indigenous, small scale enterprises in four urban councils of different sizes (Bulawayo, Chitungwiza, Marondera and Rusape)] . b. Components The project was structured as a “sector� project with financing of the two main sub-components, primary infrastructure and urban housing and related infrastructure (about 86% of the project at appraisal), through two sub-sector loans to the General Development Loans Fund (GDLF) and the National Housing Fund (NHF), available for all urban councils that met basic financial and management eligibility criteria. The project had a total of four components namely: (i) Primary urban infrastructure (support for the next five-year capital investment plan); (ii) Infrastructure for servicing residential land (support for the next five-year capital investment plan); (iii) Regional development program (TA to prepare a strategic investment framework for secondary towns in the Bulawayo/Harare/Mutare corridor and assistance with promoting the growth of selected small towns and rural centers in two provinces); and (iv) Strengthening institutional capacity (inc. TA and training to central government line ministries and local authorities). c. Comments on Project Cost, Financing and Dates Final costs were only 28% of those estimated at appraisal . The shortfall came from a much lower level of financing by building societies and government counterpart than foreseen, as well as donor co -financing by SIDA and KfW that did not materialize. By completion, a Bank loan of US$75.1m. financed 47% of the project. Government counterpart of US$52.8m. financed 33% and the remainder was co-financed by the building societies together with an unexpected contribution by the Nordic Development Fund . The project was approved on 06/01/89. It was completed on 12/31/99, three years later than planned . 3. Achievement of Relevant Objectives: (a) 21 urban councils benefited from the development of primary infrastructure through more than 200 schemes for road rehabilitation/provision, water supply, sewerage and sewage treatment . Urban services stabilized and 30,000 stands for low and middle-income housing had been provided by completion; (b) Project appraisal processes and capacity, both in Local Government and Housing Ministry (MLGNH) and the 21 participating councils strengthened through the adoption of more rigorous appraisal procedures; (c) Financial and technical management processes strengthened and many urban councils are now planning strategically, linking urban council operational and financial performance plans and including statements of vision, mission and objectives. The financial viability of councils has been preserved, and in some cases improved, despite currency devaluation, high inflation, high interest rates and new unfunded mandates for primary health care and education handed to local authorities by central government in 1996; (d) Provision of plant and equipment has enhanced capital assets in the urban councils; (e) Human resource capacity of urban councils strengthened through a manpower development program that included technical assistance and training, supported by the active fora of Town Engineers and Town Treasurers; (f) Role of private sector investors in urban housing enhanced through (a) early support to building societies, (b) the support for expanding housing infrastructure and (c) support for the survey and registration of housing stands; (vii) Successful development of demonstration incubator industrial sites aimed at “indigenous� small-scale entrepreneurs in four towns of varying size . 4. Significant Outcomes/Impacts: Insistence on local councils preparing up -to-date audited accounts has now become routine . Local councils regularly agree on five -year financial performance plans (FPPs). Most urban councils now have greater ability to make effective use of available human and financial resources. Local councils' acceptance of rigorous and standardized procedures for project proposals and appraisals that help ensure that such proposals are cost -effective. Introduction of local strategic planning in 1997-98. 5. Significant Shortcomings (including non-compliance with safeguard policies): Considerable shortfall also of project funding by building societies --actual US$26.1m. versus appraisal estimate US$242.0m, inevitably undermining physical targets and diminishing the scale of project impact upon private sector participation in urban housing, as intended under objective (f). Failure to secure the collaboration (and co-financing) of intended partners (KfW and SIDA in an amount of US$26m) especially since actual government counterpart funding --US$52.8m. by completion, was only a fraction of the appraisal target of US$ 234.0m [high local currency inflation during project implementation reduced the US dollar costs of project investments, but probably not to the extent of the above shortfalls reported by the ICR ] Frequent changes of Bank procurement staff, excessive time needed by the Bank to approve tender and contract documents, and poor functioning of the central filing system led to confusion and project delays and caused frustration among local project staff . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: The appropriate implementation arrangements for supporting local authorities depends on the long -term policy for the accountability and autonomy of local governments . For a policy of continuing central control over local governments, project management functions need to be consolidated within central government civil service of central government. For a policy of increasing accountability and autonomy of local governments, a special project management unit outside of the civil service system, is justified . Professional networking for dissemination of lessons learned is important, reinforcing similar findings of OED's impact evaluation of local government projects in Brazil and the Philippines . As far as local government budgeting, financing, reporting and auditing standards are concerned, it is important that they should be consistent with the central government's due diligence requirements, as well as those of potential private sector partners in the provision of local infrastructure and services . The Bank needs to establish fundamental procurement “rules of the game�--involving standardized bidding documents and procedures that are not overly bureaucratic, time consuming and costly --that may be sustained over full project implementation, without disruptions in project implementation arrangements . 8. Assessment Recommended? Yes No Why? As well as the very first urban audit in Zimbabwe, it would be the first in the sector in Southern Africa for many years. Such an audit would provide an opportunity to clarify the severe shortfall of funding and the full extent of its impact upon project performance; issues that have arisen with urban projects in other regions . 9. Comments on Quality of ICR: This is a good ICR that consistently and candidly reviews the performance of the project, presents convincing evidence of the achievement of its intended development impact . The borrower section of the ICR brings additional material of good quality to the assessment . This ICR would have been even stronger if it had addressed the major shortfall of project funding, its causes and its consequences for project performance .