Document of The World Bank FOR OFFICIAL USEONLY b Report No: 43 112-BW PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHEAMOUNT OF US$50 MILLION TO THE REPUBLICOF BOTSWANA FORA NATIONALHIV/AIDS PREVENTIONSUPPORT PROJECT June 13,2008 HumanDevelopment 1 CountryDepartmentSouthernAfrica 1 Africa Region This document has a restricteddistribution and may be usedbyrecipients only inthe performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS (ExchangeRateEffective: May2,2008) CurrencyUnit = BotswanaPula(BWP) 6.49BW = U S 1 FISCAZ, YEAR April 1 - March31 ABBREVIATIONS AND ACRONYMS ACHAP African Comprehensive HIV/AIDS Partnership AIDS Acquired ImmuneDeficiency Syndrome ART Anti-Retroviral Therapy BAIS Botswana AIDS Impact Survey BCC Behavior Change Communication BHRIMS Botswana HIV/AIDS Response InformationManagement System BNAPS Botswana NationalHN/AIDS Prevention Support Project BOCAIP Botswana Christian AIDS Intervention Program BONASO Botswana National HIV/AIDS Service Organization BONELA Botswana Network on Ethics, Law and HIV/AIDS BONEPWA Botswana Network o f People Living With AIDS BOTUSA Botswana -USA Project (U.S. Government Centers for Disease Control) CBO Community BasedOrganization CDC U.S. Government Centers for Disease Control CFP Calls for Proposal cso Civil Society Organization D A C District AIDS Coordinator DMSAC District Multi-sectoral AIDS Committee DSS Department o f Social Services EC EuropeanCommission EDF Economic Development Framework (of the European Commission) ESW Economic and Sector Work FBO Faith-Based Organizations FM Financial Management FMU Financial Management Unit GDP Gross Domestic Product GFATM GlobalFundagainst AIDS, Tuberculosis, and Malaria GIPA Greater Involvement o fPeople Living with HIV/AIDS GOB Government o fBotswana HAART Highly Active Anti-Retroviral Therapy HIV HumanImmunodeficiency Virus IBRD InternationalBank for Reconstruction and Development IEC Information, Education and Communication M&E Monitoring and Evaluation MAP Multi-Country HIV/AIDS Program(of the World Bank) 11 * . FOR OFFICIAL USEONLY MFDP MinistryofFinance andDevelopment Planning MLG MinistryofLocalGovernment MLHA MinistryofLabour andHomeAffairs MOE MinistryofEducation MOH MinistryofHealth MWT MinistryofWorks andTransport MYSC MinistryofYouth, Sports, andCulture N A C A National AIDS Coordinating Agency NGO Nongovernmental Organizations NSF ovc National Strategic Framework for HIV/AIDS Orphans and Vulnerable Children PEPFAR President's Emergency Planfor AIDS Relief(US. Government) PHC (Department of) Primary Health Care PLWHA People living withHIV/AIDS PMTCT Preventiono fMother to Child Transmission PSC Project Steering Committee RHT Routine HIVTesting SIL Sector Investment Loan STI Sexually Transmitted Infection SWAP Sector Wide Approach TI3 Tuberculosis TSC Technical Sub-committee UNAIDS Joint UnitedNations HIV/AIDS Program UNDP UnitedNations Development Program VCT Voluntary Counseling and Testing Vice President: Obiageli Ezekwezili (Acting) Country Director: DirkReinemann Sector Manager: ChristopherThomas Task Team Leader: Sheila Dutta This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. BOTSWANA NationalHn7IAIDSPreventionSupportProject CONTENTS Page I STRATEGICCONTEXTANDRATIONALE . ................................................................. 1 A. Country and sector issues .................................................................................................... 1 B. Rationale for Bankinvolvement ......................................................................................... 7 C. Higherlevel objectives to which the project contributes.................................................... 8 D IBRD"buy down" mechanism........................................................................................... . 9 I1 . PROJECTDESCRIPTION ............................................................................................. 9 A. Lendinginstrument ............................................................................................................. 9 B. Project development objective andkey indicators............................................................ 10 C. Project components ........................................................................................................... 11 D. Lessons learned and reflected inthe project design .......................................................... 13 E. Alternatives considered and reasons for rejection ............................................................ 14 I11 . IMPLEMENTATION .................................................................................................... 14 A. Partnership arrangements., ................................................................................................ 14 B. Institutional and implementation arrangements ................................................................ 14 C. Monitoring and evaluation o f outcomes/results ................................................................ 16 D. Sustainability..................................................................................................................... . . I 16 E. Critical risks andpossible controversial aspects............................................................... 17 F. Loanconditions andcovenants. ........................................................................................ 18 IV. APPRAISAL SUMMARY ........................ ..................................................................... 20 A. Economic andfinancial analyses...................................................................................... 20 B. Technical.. ......................................................................................................................... 21 C. Fiduciary........................................................................................................................... 21 D Social . ................................................................................................................................. 23 E. Environment ...................................................................................................................... 24 F. Safeguard policies............................................................................................................. 24 G. Policy Exceptions andReadiness ...................................................................................... 24 iv Annex 1:Country and Sector or ProgramBackground ......................................................... 25 Annex 2: Major RelatedProjectsFinancedby theBankand/or other Agencies .................29 Annex 3: ResultsFrameworkandMonitoring ........................................................................ 31 Annex 4: DetailedProjectDescription ...................................................................................... 40 Annex 5: ProjectCosts ............................................................................................................... 47 Annex 6: ImplementationArrangements ................................................................................. 48 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 54 Annex 8: ProcurementArrangements ...................................................................................... 68 Annex 9: Economicand FinancialAnalysis ............................................................................. 80 Annex 10: SafeguardPolicyIssues ............................................................................................ 90 Annex 11:ProjectPreparationand Supervision ..................................................................... 91 Annex 12: IBRDBuy-DownSummary ..................................................................................... 94 Annex 13: Summaryof SocialAnalysis .................................................................................... 97 Annex 14: Documentsinthe ProjectFile ................................................................................. 99 Annex 15: Statement of Loansand Credits ............................................................................ 100 Annex 16: Countryat a Glance ............................................................................................... 101 Annex 17: Map .......................................................................................................................... 103 V BOTSWANA BOTSWANA NATIONAL HIV/AIDSPREVENTION SUPPORT PROJECT PROJECT APPRAISAL DOCUMENT AFRICA AFTH1 Date: June 10,2008 TeamLeader: SheilaDutta Country Director: DirkReinermann Sectors: Health (100%) Sector ManagerDirector: Christopher J. Themes: HIV/AIDS (P) Thomas Project ID: P102299 Environmental screening category: Not Required LendingInstrument: Specific Investment Loan ProjectFinancingData ~ [XILoan [ ]Credit [ ]Grant [ ]Guarantee [ ]Other: For Loans/Credits/Others: Total Bank financing: US$50.00million Proposedterms: VSL with atotal repaymentterm (including grace period) o f 25 years; level amortization pattern; Borrower will pay front-end fee andcap/collar premiumup-front from InternationalBank for Reconstruction and 50.00 0.00 50.00 Development BilateralAgencies 0.00 0.00 0.00 Total: 50.00 0.00 50.00 Borrower: MinistryofFinanceandDevelopmentPlanning Gaborone Botswana Tel: 011-267-395-0100 Fax: 011-267-395-6086 www.gov.bw ResponsibleAgency: NationalAIDS CoordinatingAgency Estimateddisbursements(BankFY/US$m) FY 2009 2010 2011 2012 2013 2014 Annual 5.00 8.00 13.00 13.00 7.50 3.50 Cumulative 5.00 13.00 26.00 39.00 46.50 50.00 Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Re$ PAD IILE. [XIYes [ ] N o Does the project meet the Regional criteria for readiness for implementation? Re$ PAD IKG. [XIYes [ ] N o Project development objective Re$ PAD ILC., TechnicalAnnex 3 The project development objective is to assist the Government o fBotswana to increase the coverage, efficiency, and sustainability o f targeted and evidence-based H N / A I D S interventions through (i) strengthening the National A I D S Coordinating Agency's institutional management and coordinationcapacity; and(ii) financing strategic and innovative HIV/AIDS-related prevention andmitigation activities. It is envisionedthat this project development objective would be measured byutilizingindicators addressing the longer-tern planning, implementation, andeffectiveness o fnational anddecentralized coordinationefforts. Project description [one-sentence summary of each component] Re$ PAD ILD., Technical Annex 4 Component 1: Support to the AIDS Coordinating Agency (NACA): The N A C A component will provide very focused and strategic attention to buildinteinal capacity to coordinate H N / A I D S activities effectively, both for the Project andthe program more generally. Component 2: Public Sector Ministries: This component will support public sector line ministries focusing on prioritized public sector mainstreaminginitiatives inline with the National Strategic Framework. Component 3: Civil Society Organizations Private Sector: This component has been allocated themajority o fthe Project funds, reflectingthe importance o fthe civil society organizations in the achievement o f Project activities. Which safeguard policies are triggered, ifany? Re$ PAD IKF., TechnicalAnnex 10 N o safeguard policies are triggered. The proposedproject has received a C classificationbythe Africa Regional Environmental Safeguards Unit. Significant, non-standard conditions, if any, for: Re$ PAD IILF. Boardpresentation: There are no Boardconditions. Loadcredit effectiveness: Standard conditions inaddition to: NACAhas recruitedthe followingtechnical specialists for the Project: (i)management and a implementation senior specialist; (ii)financial management specialist; (iii)procurement a a specialist; and (iv) a District-level grant officer ineach o fthe following Districts: South East District, Kweneng East District, FrancistownDistrict, Selebi-Phikwe District, and Goodhope Sub-District, all with terms o freference, qualifications and experience satisfactory to the Bank. Disbursement Condition: N o withdrawals shall be made with respect to the Civil SocietyRrivate Sector Component o f the project until: (a) Government has furnished evidence to the Bank for its approval that the first 20 grants under this component have beenmade inaccordance with the criteria, terms and conditions set forth or referred to inthe Operational Manual; and (b) with respect to any Phase I1HealthDistrict, untilthe Financial Management Assessment has been completed andthe Bankhas determined that the relevant Phase I1Health District financial management arrangements are acceptable. Covenants applicable to project implementation: Dated covenants (a) N o later than three months after the Effective Date, the Borrower shall have ensured that N A C A has recruitedthe following long-term senior technical specialists for the Project (in addition to those recruitedprior to effectiveness):(i) a second financial management consultant; (ii)secondprocurementconsultant,eachwithtermsofreference,qualificationsandexperience a satisfactory to the Bank. (b) The Borrower shall ensure that its Office o f the Auditor Generalhas cleared all o f the audit backlogs: (i) later than eight months after the Effective Date for Phase IHealth no Districts; and (ii) byinceptiono fPhaseI1HealthDistricts, to the Bank's satisfaction. (c) No later than one year after the Effective Date, the Borrower shall have ensured that a detailed social analysis for the Project has been carried out, as satisfactory to the Bank. (d) N o later than six months after the Effective Date, the Borrower shall have ensured that all finance and accounting staff inthe Public Sector Ministries andNACA necessary for Project implementationhave been recruited, all with terms o f reference, qualifications and experience satisfactory to the Bank. Other covenants (a) Within the context o fthe overall nationalprogram, hold ajoint annual partner: (a) retrospective review o fprogram and project progress; and (b) prospective review o fprogram and project plans for the coming year. (b) Holda project mid-term review. (c) Maintain the Project Steering Committee throughout project implementation. (d) Quarterly financial reports be prepared and submitted to the Bankno later than45 days from the end o f each quarter. (e) Annual audit reports will be submitted to the Bankby September 30 each year. I. STRATEGICCONTEXTANDRATIONALE A. Country andsector issues Epidemic Status 1. The first case of HIV infection inBotswana was diagnosed in 1985. Today, Botswana faces the second most severe HIV/AIDS epidemic inthe world (after Swaziland). It i s estimated that in 2008, 283,000 adults (over 15 years of age) were living with HIV/AIDS in Botswana. This indicates a national adult (15-49 years) prevalence of approximately 23.8 percent'. Rising mortality rates have paralleled the maturing epidemic over the past decade (Table 1). AIDS- attributed mortality in Botswana increased from 4 percent to 27 percent o f all reported deaths between 1992 and 2003. The principal mode of epidemic transmission in Botswana i s heterosexual. Key factors fueling the HIV/AIDS epidemic include the incidence of multiple concurrent sexual partnerships, the incidence of unprotected sex and intergenerational sexual relationships, the vulnerability o f women, persistent inequality and poverty, and high levels of population mobility, including cross-border challenges. Given a total population o f 1.8 million people (2006), the impact o f the HIV/AIDSepidemic inBotswana has already partly undermined the very significant socioeconomic development achievements realized over the past three decades. 2. The Botswana HIV/AIDS epidemic is diverse, with the highest infection rates consistently reported from the northern areas of the country, compared with those found in the southern and western regions. The 2004 Botswana AIDS Impact Survey (BAIS 11) reported highest population-based, district-specific prevalence in the northeastern district o f Chobe (29.4 percent), with Francistown recordingthe second highest rate (24.6 percent). The 2004 Botswana AIDS Impact Survey (BAIS II) found prevalence to be highest among women 30-34 years age and estimated that nearly half (44 percent) o f this cohort i s living with HIV-infection. The 2006 Botswana HIV/AIDS Sentinel Surveillance Technical Report also found that almost half of women aged 25-34 years were infected(Annex 1). 3. Figure 1illustrates the epidemic dynamics over the past 25 years. The numbero fnew infections rose rapidly duringthe early 199Os, peaking inthe mid-1990s. The number of AIDS deaths started to grow rapidly about 10years subsequent to this rise innew infections, peaking in 2003, just before the emergency expansion o f the national A I D S treatment program. By 2003, 'Currentstatusof the HIVIAIDS epidemic in Botswana (Draft, March2008). NACA. 1 the number o f new infections, with respect to the adult population of Botswana, was approximately equal to the number o fA I D S deaths, Figure1: New adult HIVinfectionsand AIDS deaths (Source: NACA, 2008) 1980 1886 1088 1696 eo00 eo05 4. The successful expansion o f the treatment program has reduced the number of AIDS deaths by half. According to recent estimates, the national treatment program had averted about 52,000 adults deaths by end-2007. The most significant challenge for the national response to HIV/AIDS, currently, is to strengthen efforts to reduce the number of new infections still occurring each year. During2008, it i s projected that there will be 14,100 new adult infections and 690 new child infections inBotswana. 5. The significant decline in incidence over the past decade, as i s shown in Figure 1 (above), i s highly encouraging -although it should be noted that surveillance and survey data assessing prevalence do not allow for a determination o f what proportion o f this decline might be due to the natural dynamics of a highly generalized epidemic and what proportion might result from behavior change. However, irrespective o f causality, national HIV prevalence inBotswana has shown a steady decline, most prominently among the most vulnerable age groups. 6. For example, prevalence among 15-19 year olds reduced from 22.8 percent in2003 to 17.5 percent in 2006. Such encouraging epidemic trends are likely attributable to a variety of factors, such as the noted increase inreportedcondom use with non-regular partners inthe last 12 months among young people (15-24 years) from 82 percent in2001 to 87.5 percent in2005. The noted increase in the proportion of pregnant women attending antenatal clinics accepting HIV testing (from 71 percent in early-2004 to 80 percent in early- 2007) has been paralleled by a decrease inthe proportion o f infants born to HIV-positive women who are infected at 18 months (from 40 percent in 2001 to about 7 percent in 2007). The estimated decline in AIDS-related mortality similarly stems from the expansion o f the national treatment program which has enabled an increase in the proportion o f HIV-positive patients initiating prophylaxis/treatment: from 34.3 percent in2001/2002 to 89 percent in2006l2007. 2 7. These figures are indicative of the extent to which the prevention messages and, especially, the national treatment program have proven effective. However, such data should not be regarded as ground for complacency. Figure 2 (below) illustrates the continued dramatically and unacceptably highHIV prevalence rates in Botswana. Additionally, it should be noted that these improvementsare far fkom alignedto the amount o fresources committed to the response, as detailed inthe economic analysis prepared for this proposed operation (Annex 9). Figure 2: HIV prevalence (percentage) by sex & age cohorts (Source: BAIS, 2004) Challengesof theNational PreventionResponse 8. Prevention i s achowledged by Government to be the weakest element o f the national response to HIV/AIDS. Challenges with regard to changing high-risk behavior need to be urgently and consistently addressed as part of a comprehensive prevention strategy. Botswana has adopted a multi-sectoral strategy to HIV/AIDS interventions, the National Strategic Framework (NSF) for HIV/AIDS (2003-2009). This framework articulates multi-level interventions that prioritize prevention, treatment, care and support, creation o f an enabling environment, psychosocial support and impact mitigation in addition to strengthening the coordination and management of the National Response. The NSF i s informed by the National HIV/AIDSPolicy and is alignedto the National Development Plan 9. A mid-termreview of the NSF was recently completed. This review identified specific gaps that need to be addressed for the NSF to achieve its target results, including the need for enhanced public-private-civil society partnerships and greater synergy and alignment o f HIV/AIDS coordinating structures and their functions within andbetween levels of the nationalresponse. 9. The design o f the proposed Botswana National HN/AIDS Prevention Support (BNAPS) Project has been designed to address some of the strategic and implementation gaps identified in the mid-termreview o f the NSF, including its focus on prevention as a national "survival strategy". The BNAPSProject additionally has been developed to support and catalyze the implementation of the new National Operational Plan for Scaling Up HIV Prevention (2008) 3 inBotswana. This plan focuses on the prioritization of interventions with the greatest potential impact for preventing new HIV infections and enables a corresponding prioritization regarding national resource allocation. The goal of this initiative i s to achieve significant and measurable progress in prevention within the broader context of the National Strategic Framework. The BNAPS Project's explicit emphasis on enhancing the technical and financial efficiency of the national response fully complements this approach. 10. A critical challenge to enabling a more technically and financially efficient responseto HIV/AIDS, involves the current limited capacity of the National AIDS Coordinating Agency (NACA). Three separate recent assessments of NACA, including a Government report, provide similar findings on NACA's institutional capacity. These assessments emphasize the fact that that NACA does not possess the requisite internal capacity and processes to effectively and efficiently carry out its assigned function, a challenge which was demonstrated by the recent cancellation o f the Global Fund (Round 2) HIV/AIDS grant. These capacity constraints impact the overall effectiveness ofNACAinthe coordinationo f its implementingpartners (public sector ministries, civil society, private sector, and development partners), allowing for a relatively non- aligned and non-harmonized response. The proposed Project will be addressing these jointly identifiedcapacity constraints withinNACA. National prevention and treatment efforts 11. Botswana was the first African country to provide no-cost, antiretroviral therapy (ART) to its citizens, capitalizing on both its strong health system and strong government commitment to rapidly expand access to these critical services. In 2002, Botswana initiated its national treatment program in Gaborone, Francistown, Serowe and Maun and by 2005, over 32 sites across the country were providing antiretroviral therapy (ART). By September 2005, Botswana had already surpassed the World Health Organization's "3 by 5" target of 50,000 people on treatment by end-2005 (based on 50 percent coverage of estimated national treatment need). By March 2008, an estimated 88.4 percent of individuals with advanced HIV infection were receiving antiretroviral therapy. Through triangulation of data, it appearsthat overall AIDS- specific mortality in Botswana may be declining as a result of the expanding coverage o f the national treatment program. At end-2005, the 12-month survival rate for adults and children who had initiatedantiretroviral therapy was an estimated 92 percent. 12. The heavily treatment-oriented national program has, however, resulted in somewhat lesser focus on prevention priorities and outcomes. Despite continued efforts, prevention gaps related to HIV/AIDS, sexually transmitted infections (STIs), and reproductive health remain an obstacle to reducing epidemic growth. As noted earlier, although there has been a reduction in prevalence among specific population sub-groups since 2003, overall prevalence rates still remain unacceptably high. With respect to knowledge levels, a 2004 national survey found that although 93 percent of the respondents had heard o f HIV/AIDS,the proportion of respondents 15-24 years who both correctly identify ways o f preventing the sexual transmission of HIV and who reject major misconceptions about HIV transmission or prevention increased merely from 36 percent in 2001 to 38 percent in2004. The Government's target for this critical knowledge indicator was 90 percent by 2005. It i s unfortunately clear that this, and several other key prevention targets outlined inthe National HIV/AIDS Strategic Framework (2003-2009), will not bemet. 13. Withrespect to behavioralrisk, the BAISI1Survey (2004) indicated that 76 percent o f young people (15-24 years) have had sex with a non-marital, non-cohabiting sexual partner inthe aged 15-24 years reporting unprotected sex inthe past month (after consuming alcohol) - from 5 last 12 months. Additionally, this assessment indicated an increase in the proportion of people 4 young people 15-19 who had sex withmore than one partner duringthe last 12 months - from 0.3 percent in 2002 to 14.7 percent in 2007. There was also a noted increased inthe percentage of percent in2001to 17.1percent in2005. 14. Recent analyses regarding major drivers of the Botswana epidemic particularly implicate the role o f multiple concurrent sexual partners in increasing risk o f HIV infection and transmission. Multiple, concurrent partnerships accelerate HIV transmission because during the early, acute stage of infection the virus may be passedon to several people over a short period of time. Whde limited, data on partnershippatterns inBotswana raise concern. In2003, 24 percent o f sexually active men (age 15-24) reported having sex with someone outside their primary relationship inthe last yea?. Moreover, acceptanceo fmultiplepartnerships appearedwidespread from results o f the BAIS I1survey, with 38 percent of respondents disagreeing with the statement "Most people you care about stay faithful to a singlepartner at a time3." 15. With respect to clinical managementof STIs, in2005, an estimated 85 percent of STIs were properly diagnosed, counseled, and treated at healthcare facilities. A relatively low modem contraceptive prevalence rate (39 percent) remains a critical issue for young people -- during 2005, the rate o f unintended adolescent pregnancy was estimated at 50 percent. Approximately 15 percent o f primary and secondary schoolgirls leave school because they are pregnant and less than 20 percent re-enroll at a later date. 16. Despite the presence o f a highly generalized epidemic, stigmatization of infected individuals remains a widespread problem. Highlevels o f stigma served to constrain expansion of the national treatment program, particularly during its initial years, as willingness to acknowledge one's serostatus was a major obstacle. In response to this challenge, in January 2004, the Government launched a Routine HIV Testing (RHT) policy at all health facilities, following an explicit opt-out principle. The goal of this approach was to "normalize" HIV/AIDS- relateddiseaseperceptions and expand access to all available (and appropriate) services ina more timely manner. Impacts on the Health System 17. As demonstrated inthe economic analysis, the HIV/AIDS epidemic has had a severe effect on the health system, both inthe skewed nature o fresource allocation towards HIV, as well as the effect on other disease control efforts. With respect to tuberculosis (TB), directly-observed therapy (DOTS) coverage inBotswana i s 100 percent. While the TB case detection rate remained highat 80 percent in2006, it dropped from the 88 percent level achieved in2000. TB treatment success has also declined from 77 percent in 2000 to 70 percent in 2005, raising concerns regardingTB treatment resistance. An estimated 54 percent o f new TB patients are HIV-positive and 38 percent o f AIDS deaths are due to TB. TB mortality has increased from 236.2 (per 100,000) in 1990 to 670.2 (per 100,000) in 2005. Compared to the national A I D S treatment program, and despite of the high co-prevalence, the national health system has not been able to implement an equally strong response to TB. Implementation of the joint TB/HIV/AIDS strategy needs to be strengthened, particularly at community level where TB and HIV/AIDS programs continue to operate largely along parallel lines. The proposed Project will address strategic gaps supportingjoint TB and HIVprevention efforts. 18. The HIV/AIDS-related burden o f disease has had the result o f consigning most health care workers to focus on various medical and, to a lesser degree, preventive aspects of the Makgabaneng Survey (2003). BAISI1(2004). 5 national response. The magnitude o f these demands have placed a substantial strain on the health sector humanresource base central to more general health sector activities. Similarly, the Central Medical Stores (CMS) system has been largely consumed by the procurement and distribution of ARVs, resulting in cases of drug stock-outs for other supplies, as well as unavailability of condoms at some healthcenters, particularlyinmore remote districts. Other key epidemicimpacts 19. Gender and age diferentials. HIV/AIDSdoes not affect all people equally. Risk and vulnerability to HIV/AIDSare substantially different for menand women inBotswana, as is clear inthe age- andsex-differentiated prevalence rates. The impactofHIV/AIDSdiffers markedlyby gender, reflecting traditional roles and responsibilities in both household and market activities. Gender inequality, and the role of power in sexual relations, especially women's lack o f economic empowerment, are important factors in the spread of HIV/AIDS, as are gender-based socio-cultural, legal, and physiological factors. 20. Gender-based vulnerability to HIV infection is clearly demonstrated in population- based serosurveys in Botswana, with prevalence rates consistently ranging up to three times higher among young women (15-19 years) than young men o f the same age group. Epidemiologic data illustrate a clear pattern of gender disparity, with women generally exhibiting higher HIV prevalence rates than men, particularly in the 15-39 year age cohort. Within these age groups, HIV prevalence remains at least 17 percentage points higher for women than for men. Conversely, there are more men who are HIV positive at older ages. This overall epidemiologic patterni s strongly suggestive o f substantial intergenerational HIV transmission. 21. Demographic impact: The epidemic already has exerted a substantial negative impact on fundamental human development indicators, including life expectancy at birth, infant mortality, and child mortality. For instance, by 2004, the Central Statistics Office estimates that life expectancy had decreased to 56 years. It i s estimated that life expectancy would have increased to 70 years by 2000, inthe absence of the HIV/AIDS epidemic. The impact of AIDS- related morbidity and mortality have resulted in Botswana's decline in the UNDP Human Development Index internationalrankings (a measureheavily impactedby life expectancy), from 71 in 1996 to 124 in2005. 22. HIV/AIDS has distortedthe population structure o f Botswana. The magnitude of the epidemic tripled crude mortality rates (deaths per 100,000 population) in Botswana between 1991-2003, Although different demographic projection models vary in predicting the specific degree o f epidemic impact, all concur that the population structure o f Botswana will be radically altered, given unprecedented death rates among young adults across all social strata over the past two decades years. 23. Orphans and vulnerable children: As a cause o f orphanhood, A I D S i s exceptional in that if one parent i s HIV-positive, there exists a high probability that the other parent i s also infected. This increases the risk that a child could lose both parents within a relatively short period. There were an estimated 131,000 AIDS orphans (0-17 years) in Botswana in 2007, with over half of these children already having lost both parents to the disease (double orphans). There are projections indicating that, by 2010, more than 20 percent o f all children inBotswana will have lost one or bothparents to AIDS, resultingin an increasingpopulation o f orphans and vulnerable children. 6 24. Consequently, the existing stresses on traditional social safety nets, and particularly on family elders, will continue to worsen. The implications for dependency ratios, alone, are dramatic, as a smaller number o f adults will have to support large numbers o f the young and elderly. The age distribution o f orphans is fairly consistent across Southern Africa, including Botswana, with the proportion of children who are double orphans increasing with age. Almost half o f all orphans and two-thirds o f double orphans are adolescents (12-17 years), which has implications for specific services needed within this highly vulnerable population, including targeted prevention and reproductive health. In 2004, an estimated 34 percent o f Botswana households caring for orphan received some degree of social support (e.g. food baskets, education support, psycho-social support). In2005, the ratio of orphaned to non-orphaned children (10-14 years) who are currently attending school was 87:100. 25. Development impact: The epidemic continues to pose a substantial impediment to achieving the Government's objectives of poverty reduction, economic diversification, and growth. The National HN/AIDS Strategic Framework (2003-2009) i s integrally linked with Government's 9' National Development Plan (2003-2009), which emphasizes the long-term development implications of the epidemic including the likely non-attainment of the health-sector Millennium Development Goals. The National Strategy for Poverty Reduction also emphasizes the role of HIV/AIDS as botha cause and consequence of poverty, unemployment, and inequality and seeks to integrate poverty reduction strategies into the medium-tern expenditure framework. 26. The cost of these critical development programs, in parallel with increasing macroeconomic diversification efforts, pose a particular challenge to Botswana, given the scale o f the financial outlays required to support the national HIV/AIDS prevention, care, treatment, and mitigation programs. Iti s of significant concern to the Ministry o f Finance and Development Planning that national HIV/AIDS-related investments have displaced other budget priorities, especially given the paucity o f donors active in Botswana. It should be noted that the Government o f Botswana finances over 90 percent of the national HIV/AIDSprogram. The cost o f this disease-specific government allocation has increased dramatically from US$69.8 million in2000-2001, to US$165millionin2006-2007. B. Rationalefor Bankinvolvement 27. Economic growth and governance: Botswana's post-independence history has been characterized by good governance, democracy, strong macroeconomic policies, an open economy, relatively strong institutions and highpublic revenues from diamond-mining industries. With a gross national income per capita of US$5,950 (2006 estimate, Atlas method), Botswana i s classified as an upper middle-income country. The government has managed the country's resources prudently and has kept its recurrent expenditure within its revenue, allowing for investment inhuman and physical capital. With its provenrecord of good governance, Botswana was ranked as Africa's least corrupt country by Transparency International in 2007, and also was ranked above o fmany European andAsian countries on this internationalscale. 28. The national challenge i s to move forward with further development, particularly with respect to: (a) safeguarding and strengthening its human capital base; and (b) achieving economic diversification through strengthening growth and competitiveness of the non-mining sectors. The continued spread of HIV, and the costs of preventing and treating the disease, are among the key issues the government i s addressing. The Government asked the IBRD to assist in streamlining and strengthening its national response so as to help prevent a potentially debilitating economic as well as humanitarian disaster due to HIV/AIDS. Importantly, the 7 Government's investments in HIV/AIDS prevention, care, treatment, and mitigation impact not only the population of Botswana, but also the sub-regional spread of the epidemic, given high levels of migrant workers and the increasing economic refugee population (primarily from Zimbabwe). 29. In recent years, Botswana's HIV/AIDS program has been supported by a few international donors, including the Global Fund Against AIDS, Tuberculosis, and Malaria (GFATM), the U.S. Government (PEPFAR), other selectedbilaterals, the Gates Foundation, and Merck, an internationalpharmaceutical company (Annex 2). However, even the combined levels o f donor and government spendinghave not kept pace with the rising cost of the response to the epidemic. The Government o f Botswana requestedthe proposed concessional IBRDoperation in anticipation that these additional financial and technical resources would play a strategically significant role insupporting a more efficient and evidence-basedresponseto the epidemic. This was particularly so given the Bank's comparative advantage in the areas o f strategic planning, knowledge-sharing, implementation support, and the leveraging of additional resources. Given the magnitude and long-term impact of the epidemic, another focus o f the proposed qperation would be to enable a transition from an "emergency" response to a broader, more strategic, and more sustainable approach. Additionally, inpartnership with Government, the World Bank will seek to institutionalize collaborative development partner forums towards facilitating a more synchronized, complementary and effective response. 30. A successful project could also create opportunities for the World Bank to expand its engagement within the Southern Africa sub-region. The BNAPS Project is designed to strengthen and support the national strategic frameworks and plans (National HIVIAIDSStrategic Framework, National Development Plan 9, Poverty Policy), in addition to the "Three Ones" and Greater Involvement of People Living with HIV/AIDS (GIPA) principles. Within the National HIV/AIDS Strategic Framework, the prioritized goals of prevention of HIV infection, provision of care and support, and strengthened management o f the national response to HIV/AIDS will be the project focus. As far as World Bank policy is concerned, the Project i s fully in line with the Global Health, Nutrition, and Population Strategy (2007), the Africa Regional Health Policy (2006), and the Africa HIV/AIDS Strategy (2008). The Project i s also fully aligned with the draft Interim Strategy Note for Botswana which is expected to be presented to the Board in late-2008. The Interim Strategy Note, which i s the first-ever Bank strategy for Botswana, includes HIV/AIDSas among its three strategic priorities. C. Higher levelobjectives to which the project contributes 31. The Millennium Development Goals envision that, by 2015, the world would have halted and begun to reverse the HIV/AIDS epidemic. These goals include a set of comprehensive, time-bound targets to elicit effective global, regional, and national responses to the HIV/AIDS epidemic. Globally, as a result o f its direct and indirect impact, the HIV/AIDS epidemic has significantly slowed or even reversed progress towards achieving other critical MillenniumDevelopmentGoals, by increasing poverty and hunger, increasinggender inequality, reversing gains in child and infant mortality, and weakening maternal health indicators. With Southern Africa being the epicenter of the epidemic, progress in Southern Afiica i s essential if regional and global goals are to be met and sustained. 32. Ironically, however, the HN/AIDS epidemic may actually have assisted in positive movement towards one other MillenniumDevelopment Goal - improving global partnerships. The magnitude and evolving nature of the epidemic have caused multilateral, bilateral, and other 8 development partners to view the need for strategic partnerships and harmonization in a new innovatively. light, with a particular focus on how to address both resource and implementation gaps 33. The inclusion o f a strong gender focus and greater emphasis on vulnerable groups in this proposed Project provides the opportunity to address two additional Millennium Development Goal: Goal 4 (promote gender equality and empowerment of women) and Goal 6 (improve maternal health, particularly with respect to reducing the risk o f mother-to-child transmission). Also, given the strong links between health, poverty and economic development, the BNAPS Project would ultimately contribute toward achieving Botswana's higher level poverty alleviation and economic growth objectives. D. IBRD"buy down"mechanism 34. Buy-down mechanism: The IBRD loan buy-down mechanisms was developed to increase the flexibility and concessionality o f hnding for projects where it i s justified by global public good or cross-border externalities. To date, the buy-down mechanism has been piloted on one IBRD project to support tuberculosis control in China. This instrument relies on donor resources to lower the cost of an IBRDloan targeted at a priority healthintervention. The release o f the donor finds are dependent on project performance, as measured against jointly agreed indicators and targets that are consistent with the measurable objectives and reflective o f actions bythe government within the project time frame (Annex 12). Given that its upper middle-income status excludes Botswana from the World Bank's highly concessional IDA resources, the Government o f Botswana (GOB) requested that the proposed operation be financed utilizing an IBRD"buy-down." 35. The European Commission (EC) has agreed to support the buy-down o f this project. The EC has approved an additional a 14 (-USD 20 million4)in its next four year Economic Development Framework (EDF-10, 2010-2014) to finance the buy-down o f this IBRDloan. An important structural distinction in this buy-down from the ones in other countries i s that the EC and the GOB have agreed that the EC will provide the finds for the buy-down directly to the MinistryofFinance and Development Planning (MFDP), once performance targets are achieved. Because these payments are handled bilaterally between the Government o f Botswana and the EC, they would be governed by a bilateral agreement between the EC and Government. The Bank will be consulted, but ultimately can only recommend a financing structure for the EC and Government o f Botswana to adopt. It has been agreed that the buy-down contribution from the EC will be released based on a select subset o f performance indicators derivedfrom the Project's monitoring and evaluation framework. The decision to release the first tranche will be based on the results of the mid-term review. The decision to release the last tranche will be based on the results as the project closing i s approached. 11. PROJECTDESCRIPTION A. Lendinginstrument 36. The proposed project lending instrument i s a Sector Investment Loan (SIL) and the proposed terms involve a Variable Spread Loan (VSL). The project implementation period for thisUS$50 millionIBRDloanis five years (Annex 5). Basedonthe FX Forward rate E W S D (5 year) 9 B. Projectdevelopmentobjectiveandkey indicators 37. The project development objective i s to assist the Government of Botswana to increase the coverage, efficiency, and sustainability of targeted and evidence-based HIV/AIDS interventions through: (a) strengthening NACA's institutional management and coordination capacity; and (b) financing strategic and innovative HIV/AIDS-related prevention and mitigation activities. It i s envisioned that this project development objective would be measuredbyutilizing indicators addressing the longer-termplanning, implementation, and effectiveness o f national and decentralized coordinationefforts. 38. The Botswana HIV/AIDS Response Information Management System (BHRIMS) i s the national multi-sectoral response monitoring and evaluation (M&E) system. The BNAPS Project's support to M&E would be guided by the following criteria: (a) support for the NSF and the development of a single national M&E system, under the rubric o f the "Three C.nes"; (b) support for an M&E system, that enables districts to monitor and improve their performance, as well as allowing for monitoringo fcommunity, district andnational activities at the national level; (c) support for institutional, human resource and systems development; (d) support for activities which are not beingfinanced by other development partners; and (e) support to the NACA in its function as the lead coordinatingagency for M&E activities between all agencies and donors. 39. While data collection and reporting at national, aggregate level i s already well advanced in Botswana, monitoring of activities and results at local level is, as in most countries, less well established. However, changes at local and community level are critical to significantly change the course o f the epidemic. The Project, through a results-based design of the civil society and private sector component, has built in the measuring and reporting o f baseline, progress and project completion data. This design also permits assessing the effectiveness of specific Calls for Proposals to bringabout change through social mobilization of civil society and private sector organizations. These changes at community level are captured through the same indicators as those used inthe BAIS (Annex 3). 40. Key indicators used to monitor the project, with a special focus on the institutional capacity of NACA and on the performance o f the civil society and private sector component, include the following: 0 Performance o f NACA assessed by NACA's beneficiaries and of the Technical Advisors withinNACA twice duringthe project (year 2 and4); 0 Proportion of sexually active males and females who report having had sex with more than one partner in the past 12 months by age group: (a) 15 to 19 years; (b) 20 to 24 years; and (c) 25 to 49 years; 0 Proportion of youths aged 15 to 19 years and 20 to 24 years who both correctly identify ways of preventingthe sexual transmission of HIV and who reject major misconceptions about HIV transmission; 0 Proportionof youth aged 15 to 19 years and 20 to 24 years reporting either (a) no sexual activity; or (b) condom use during the last sexual encounter with a non- regularpartner inthe past 12months; and 0 Proportion o f people 15 to 19 years and 20 to 24 years who report a sexual partner with more than 10years age difference duringthe last 12months. 10 C. Projectcomponents 41. Giventhat the national HIV/AIDSprogramhas emphasizedtreatment-related issuesto date, the proposed Project is designed to enhance overall program efficiency while re- emphasizing prevention and the balanced response envisaged in the National Strategic Framework. The Government of Botswana requested the Bank's support in anticipation that these additional resources would play a strategically significant role in supporting a more efficient and evidence-based response to the epidemic. The Bank's comparative advantage i s particularly in the areas o f strategic planning, knowledge-sharing, implementation support, and the leveragingof financial and technical resources. 42. With respect to the project's geographic focus, activities for the first two years would focus intensively on the eastern border of the country, between Gaborone and Francistown. This decision was basedon the fact that the vast majority of the national population (about 80 percent) resides along this corridor, which also includes the country's highest prevalence districts. This phased-approach would enable the rapid expansion and coverage o f high-impact interventions among vulnerable and high-riskpopulations inBotswana. It i s planned that the final three years o f the project would be nationwide in scope, following an intensive evidence-based learning and capacity development over the first two years of the project. The locations selected by Government for the first phase of the project include South East District, KwenengEast District, Francistown District, Selebi-Phikwe Districts and Goodhope Sub-District. 43. The framework for the project design i s comprehensive and seeks to achieve prioritized andphased implementation. The proposedproject components include: (a) support to the National AIDS Coordinating Agency (15 percent ofproject financing); (b) support to public sector ministries (40 percent of project financing); and (c) and support to civil society and private sector (45 percent of project financing). These components follow from the key program coordination and implementation areas and are based on the analysis o f identified key challenges inthe national responsepresented earlier. It should be emphasized that these financing figures are indicative allocations (excluding contingencies) and that re-allocation of resources between components i s expected during project implementation, based on implementation performance, regular assessments, and on changing circumstances. The project components are summarized in Annex 4, and further detailed inthe Operations Manual. Estimatedproject costs are presented in Annex 5. ComponentOne: Support to NACA (US$7.2 million) 44. The discussion above noted weaknesses in NACA's coordination o f the national response in Botswana. Similar weaknesses are found in many sub-Saharan African countries' national HIV/AIDS coordinating bodies. But the solutions need to be tailored to the circumstances of each country. For Botswana, with NACA as the institutional home of the Project, the NACA component will provide focused inputsto buildinternal capacity to coordinate HIV/AIDS activities effectively, both for the Project and the program more generally. Based on recommendations from institutional assessments carried out, especially by the Government in its NACA joint planning report (Operations and Management Report), and the NACA Mid-Term Review, and also by the WorldBankteam, the Government at very senior levels hasreviewedthe organization of NACA. Some decisions remain pending, but the revised structure o f NACA i s approved. This will permitthe recruitment o f a significant number o f staff including the filling of some long-standing vacancies. This recruitment process has already begun. Thus, for the first time for some years, withinthe next 6-9 months, NACA will have a clear organizational structure which is reasonably staffed. The focus o f the Project inputswill therefore be on capacity building within NACA in key areas that are not being supported by other partners - combined with 11 systems building - to ultimately ensure that NACA is a viable, credible and efficient organization. 45. The role o f NACA as primarily a program coordinator would continue to be emphasized. This includes the decentralized program, which would continue to be implemented through the Ministry o f Local Government, the district administrations, NGOs, etc. Importantly, this component would also provide support complementingother inputsfor the improved design and strengthening o f the National M&E Framework both centrally and in the districts. This includes technical assistance, and support for database development and surveys. 46. A central part of the Project is long-term technical support for NACA. These would be senior experienced consultants working inNACA Headquarters. Terms of reference (TORs) for all positions are agreed. These TORs focus on achieving results in capacitating NACA combined with strict progress reviews, rather than simply providing technical inputs. There are eight positions, which are planned to phase out over the Project, as follows: (a) a Senior Management and Implementation Specialist; (b) two Senior Financial Management Specialists; (c) two Senior Procurement Specialists; (d) a Senior Monitoring and Evaluation specialist; (e) a Senior Capacity Building Specialist; and (f) a Senior Strategic Planning and Partnerships Specialist. 47. Recruitment for these positions has started and the Government has agreed, if necessary, to finance these positions initially from its own resources. Upon effectiveness, Government would seek reimbursement under the retroactive financing provision o f the Loan. Technical assistance at the district level will be available through a variety o f arrangements including volunteers from the UN, JICA and the US Peace Corps. The above assumes that financing will continue to be from the Ministry o f Finance and Development Planning to NACA and then on. BothNACA and the Bank team would prefer not to have NACA as an intermediary, butthisremains under discussion withinthe Government andthe status quoprevails (see Annex 4 below for more details). 48. As an important part o fNACA's systems strengthening, both the external and internal coordinating structures were reviewedby the Government and partners. The resulting revised arrangements, and particularly the coordinating committee structures, have been implemented including their use for Project implementation. Training, particularly long-term training, and development for NACA's own staff is already well planned and financed through existing Government programs. But the Project will finance capacity training, to be implemented by NACA, for CSOs at the national and district levels and associated annual CSO capacity assessments. NACA will also contract an important series o f studies focusing on the social aspects o f the HIV/AIDS epidemic. ComponentTwo: PublicSector Ministries(US$19.2 million) 49. This component will support public sector line ministries focusing on initiatives supporting the three priority areas o f the National Strategic Framework (NSF). In consultation with partners, and as indicated in the NSF, the Project will commence with the following ministries: (a) Health; (b) Works and Transport; (c) Labour and Home Affairs; (d) Education; (e) Local Government; and (f) Youth, Sports and Culture. Annual work plans for funding under the project will be submitted for the Project Steering Committee as well as the HIV/AIDS Technical Sub-Committee's review. Upon approval, funding will be channeled through NACA for further disbursement to ministries. However, as mentioned above, the financial disbursement architecture i s under review. Monitoring and evaluation o f activities will be coordinated by 12 NACA. Public sector support will emphasize external and internal mainstreaming and indicative activities under this component include the following: a) Ministry of Education (MOE): Priority areas include enabling comprehensive in-school and teacher training, in addition to strengthening IEC/BCC activities to better reach children and youth inand out of school, address guidance and counseling procedures for HIV infected and affected children, and conduct special studies to identify the needs and possible behavioral change strategiesfor HIV positive children and teachers. b) Ministry of Labour and Home Affairs (MLHA): Priorities for the Department of Prisons, which i s a Department of the MLHA, focus on providing mobile antiretroviral clinics for the largest prisons to complement weekly VCT service availability, as well as in-service training for its staff on HIV prevention methods and training on knowledge and dissemination to Prisons staff. c) Ministry of Local Government (MLG): Priority areas for the Department of Social Services include educational and rehabilitation efforts for orphans and other vulnerable children, the development of exit strategies social services, where appropriate, as well increasing the concentration of social workers inhighprevalence school districts. d) Ministry of Worksand Transport (MWQ: Priorities for this ministry focus on strengthening existing district programs that focus on mobile populations, including truck drivers and women involved intransactional sex. e) Ministry of Youth, Sports, and Culture (MYSC): Priorities for the MYSC focus on strengthening existing ministerial programs that target youth, including outreach activities usingsport facilities andsporting events as IECplatforms. f ) Ministry of Health (MOH)):The health sector activities have been developed around an already strong national treatment and care program. It was agreed that, within the context o f the proposed operation, efforts would be focused on providing technical assistance to the prevention activities of the civil society and non-health public components, as well as increasingthe technical and financial efficiencies o f the PMTCT andART programs. Component Three: CivilSociety OrganizationsPrivateSector (US$21.6 million) 50. This component has been allocated the majority of the Project funds, reflecting the importance o f the civil society organizations (CSOs) in the achievement o f Project objectives. This component would make financial resources available to civil society, including the private sector, focusing on initiatives in line with the NSF. In terms o f implementation o f this component, the process will follow four interlinked processes: developing calls for proposals; receiving, evaluating, and awardingproposals; financial flows; andmonitoring outputs. 51. The project design emphasized results-based support and targeted community level activities. This component will focus on proposals and activities that prioritize specific HIV/AIDS prevention results and target vulnerable populations. Vulnerable population groups eligible for BNAPS financing will be decided through the agreed processes involving both the HIV/ADS Technical Sub-committee and Project Steering Committee, as outlined in the Operations Manual. It is expected that this process will streamline funding procedures while focusing on specific thematic areas based on comparative strengths andregionalneeds. D. Lessonslearnedandreflectedinthe project design 52. The findings o f the October 2004 regional review o f the Multi-Country HIV/AIDS Program (MAP) have been reflected inthe project design. The major lessons were, first, greater strategic planning i s needed in terms o f supporting specific activities and interventions which 13 have the greatest impact, based on analyses of current epidemiological and behavioral data. Second, there is needfor an evidence-based approach that strikes a balance between broad-based general public intervention and the targeting of vulnerable groups. Third, more performance- based disbursement systems should be introduced to encourage strong performers. Fourth, civil society should be fully involved in the design of materials and procedures for grant making, application and reporting. Fifth, adequate resources should be set aside to develop operational M&E systems which can provide adequate biological, behavioral and routine program activity monitoring information. And sixth, that there is need for an intensified effort addressing prevention efforts inSouthern Africa. 53. Inrecent years, the World Bank also has carried out several studies of its HIV/AIDS- related lending and non-lending operations at the global-level. The following key lessons have emerged from these reviews: (a) the Bank, by its acts and its omissions, influences both developed and developing countries in their actions on HN/AIDS; (b) country ownership, leadership, and capacity are crucial to successful action; (c) the Bank's policy advice and country-led approach are important assets to countries in pursuing their goals; (d) HN/AIDS needs to be better integrated into development policy and planning, and the Bank i s uniquely positionedto assist countries withthis; (e) HN/AIDS strategies, policies and programs shouldbe evidence-based, with priorities based on local epidemic conditions; and (f) monitoring and evaluation are essential, and consistently neglected. To the extent possible and in so far as these lessonsare directly relevant for Botswana, these lessons have beenincorporated inthe design and planned supervision strategy of the proposed project (Annex 11). E. Alternativesconsideredandreasonsfor rejection 54. The major alternative design considered for this operation was a Sector Wide Approach (SWAP) framework. However, it was determined that the current donor and macro- economic environment would not be conducive for an overall SWAP for the national HIV/AIDS response at this stage. As a result, although the BNAPS Project would support the comprehensive NSF, it would not function as a SWAPat its inception. Efforts would be made in the areas o fplanning, financing andbudgeting, implementationandM&Eto prepare a foundation on which future joint operations can be developed. The potential transition to a SWAP-like approach will be explored duringthe Project Mid-Term Review. 111. IMPLEMENTATION A. Partnershiparrangements 55. The Bank i s working closely with other key development partners, includingPEPFAR (CDCKJSAID), ACHAP, European Commission, and the UNfamily, insupportingNACA's goal o f establishing a stronger and more coordinated responseto HIV/AIDS inBotswana. The Project will support Joint Annual NationalProgramreviews with all keypartners. B. Institutionalandimplementationarrangements 56. Implementation of the BNAPS Project will be by the existing institutions for implementingand overseeing the national response to HN/AIDS, and use existing systems and 14 processes. However, where needed, the project will help ensure that the existing institutions, systems and processes are strengthened to help ensure improvements in the implementation efficiency and effectiveness of the overall national response. Detailed impleinentation arrangements arepresented inAnnex 6, and are briefly summarized below. 57. The project design calls for a detailed work program for the first year, which has been agreed upon, and broad parameters for the remaining four years in order to retain flexibility for adjusting the program for subsequent years taking into account implementation experience gained in the previous year(s), and evolving priorities of the NACA. Therefore, the project design includes annual implementation performance reviews of the BNAPS based on the progress reports prepared by NACA, and discussions and an agreement among the partners on the work program for the subsequent year(s). NACA will coordinate and lead the overall implementation of the BNAPS. The Project will be implemented mainly by the civil society organizations and the private sector, and selectedpublic sector ministries. A strengthened NACA, staffed with the requisitequalitative and quantitative capacity, will facilitate the implementation o fthe project. 58. At the strategic level, the existingProject Steering Committee (PSC) isresponsible for providing strategic direction and oversight for the BNAPS project and approving the annual work plans/ budgets for all BNAPS implementing partners. As a high level body, the PSC will hold implementers accountable for results. Representation i s at the level o f Permanent Secretaries, UN Agency Heads, and head o f major civil society organizations. The PSC i s chaired by the NACA National Coordinator, and includes key implementing partners at the national level, specifically from the MFDP, MOH, MLG, NACA, MOE, the UNtechnical agencies and CSOPrivate Sector. Membershipwill vary dependinguponthe evolvingneeds ofthe Project. 59. The existing HIV/AIDS Technical Sub-committee (TSC) is chaired by the NACA National Coordinator, and will review indetail plans and activities of implementingpartners and address strategic implementation and coordination issues under the Project. More specifically, this committee will review all CSO proposals over BWP30,OOO and all public sector work plans to ensure consistency with the strategic thematic and geographical areas definedby the PSC, as well as with the goals and objectives o f the NSF. It will assess and ensure the technical and financial plausibility o f the proposals as well as emphasize the results-based focus of all project activities. TSC's members at the national level may vary depending on the specific needs o f the project, but will include membership from the MOH, MLG, NACA, MOE (at the ministerial Director level), the UNtechnical agencies and CSO/Private Sector. 60. NACA will have three main committees for facilitating the implementation o f BNAPS. The Programs Committee will review, assess, and make recommendations on project plans submitted to the TSC. The Finance, Administration and Audit Committee will include the two Project Financial Management Specialists, as well as the relevant NACA Staff. This committee will: (a) review and recommend to NACA on expenditure estimates and budgeting activities for the project; (b) ensure that management o f financial resources i s well coordinated at both the national and district levels; (c) facilitate quarterly disbursements to individual CSOs based on satisfactory performance as provided by specific tracking measures; (d) provide a forum for private and direct communication between committee members and the external auditors, internal auditors, and senior stafc (e) ensure timely submission of the project audit reports; and (f) establish procedures to receive retain and treat complaints received by the PSC regarding accounting, internal accounting controls, or audit matters and for handlingconfidential matters regardingquestionable accounting or audit matters. 15 61. The Procurement Committee will primarily consist of members of NACA's procurement team as well as selected district and national level representatives of the procurement teams of the implementing partners, and representatives from civil society and private sector. This committee will: (a) undertake procurement activities for activities implemented under the NACA component; (b) support other implementing partners in the Ministries in carrying out procurement or undertake procurement for them as necessary; and (c) review and verify that all procurement activities under the project have been undertaken in accordance with establishedpolicies and procedures, as agreedwith the World Bank. 62. The public sector ministries will focus their activities on their behavioral change activities targeting their staff and clients (MLG will focus on community level clientele and OVCs/out o f school youths, MLHA on Prisons staff and prisoners, MOE on teachers and in- school youths, MYSC on ministerial staff and out o f school youths, MWT on staff, the mobile populations at high-risk, and M O H on HIV-positive patients receiving ART, as well as on providing technical assistance as needed to the participating ministries). Ministerial work plans will be reviewed and approved by the PSC annually to ensure complementarities and synergies. To improve program management, implementers within the Ministries will be primarily responsible but will be able to access capacity building support for results based management, andmonitoring and evaluation fromNACA. 63. Botswana has been effective in decentralizing HIV/AIDS coordination and implementation, with District Multi-Sectoral AIDS Committees (DMSACs) playing an important role in the coordination o f HIV/AIDS activities by public sector, CSOs, and partner activities at the district and community level. Technical and fiduciary support is provided by the national level counterparts. DACs are multisectoral with representation from all the public sector ministries and the local CSOs that are implementers of HIV/AIDS activities. They will coordinate Project activities through the District A I D S Coordinator's (DAC) office, for technical matters, and the District Council, for fiduciary matters. 64. The DACs will design district plans based on inputs on implementation priorities o f the target groups for the various stakeholders, and the public sector ministerialplans and facilitate implementation where necessary, primarily through technical reviews of the proposed activities, and implementation support to the implementation partners. Inaddition, DACs will: (a) review and approve CSO proposals below the Pula 30,000 thresholds (approximately US$5,000); (b) disburse the grants to the NGOs; and (c) monitor implementation progress. Where needed, programmatic, procurement, and financial management support will be sourced from NACA. C. Monitoring and evaluation of outcomedresults 65. The Project's monitoring and evaluation framework derives fully from the national HIV/AIDS monitoring and evaluation framework, the Botswana HIV/AIDS Response InformationManagement System(BHRIMS). The BNAPSProject will be supportingthe further strengthening o f this system, with a focus on monitoring and evaluation at decentralized levels o f the response(Annex 3). D. Sustainability 66. Institutional sustainability. The Government, with support o f IBRD and other development partners, has mobilized different sectors, mass organizations and communities to 16 increase their capacity to respond to the demands of the HN/AIDS epidemic. Although the Project i s a modest contribution to the overall nationalresponse, it provides focused assistance of institutional strengthening especially in key areas such as fiduciary management and results reporting among NGOs and CSOs, strategic planning and M&E in NACA, managing targeted technical interventions in participating Ministries and other government agencies, and evidence- based policymaking in the health sector through a modest agenda of research and evaluation at the Ministry of Health. Much of the institutional strengthening activities involve nationals who are likely to continue working locally. Thus, it is expected that the social, sectoral and community capacity built within the different components of the BNAPS Project would be sustained after project closure. 67. Technicalsustainability. The BNAPS Project aims to support well-established, proven technical interventions whose operational implications have been well-documented in other countries. In service delivery, the Project will endeavor to support existing technical programs, but will work with government and other partners to introduce needed changes (e.g., strengthening counseling under VCT; providing a sharper focus on youth interventions; providing an evidence-base for more extensive use o f generic drugs; and greater integration o f services). In project management, the Project will introduce a results-based grants approach that has been demonstrated to work well in other Afiican countries in strengthening local responses to the epidemic. The Project will work at different levels (project implementation, strategic andprogram planning, and policy formulation) to ensurethat technical interventions are sustained. 68. Financial sustainability. The prevention and mitigation o fHIV/AIDS i s a public good which would support efforts towards improved economic growth and poverty alleviation. The economic analysis has clearly argued that Botswananeeds a balanced approach of prevention and treatment to ensure that HIV/AIDS expenditures do not unduly crowd out other budgetary priorities, and do not endanger the government's strong fiscal position achieved through past prudent macroeconomic management. The economic analysis has also identified specific approaches and interventions that Botswana should seriously consider to achieve a more cost- effective HIV/AIDS control program. The Project will serve as a platform for further discussions on these programmatic and policy areas. Finally, although the national AIDS response comes with ahighprice tag, macromodelingwork has shownthat, through the positive demographic and macroeconomic effects of a large-scale AIDS response, it will help to contain even larger future expenditures by mitigating the disease's adverse effects on the tax base and the fiscal burden of caring for a sicker population. E. Criticalrisksandpossiblecontroversialaspects: 69. The overall project risk i s considered to be moderate. Potential project risks include the following: ProjectRisks Risk Proposedmitigation Residual Rating Risk Rating Magnitude o fthe BotswanaHIV/AIDS H M epidemic may limit the measureable Comprehensive and evidence-based effectiveness of intervention inthe short- prevention project beingprepared term. Coordination, accountability, and capacity H Detailed examination o f institutional M limitations withinN A C A could lead to design options; development o fa 17 implementation delays capacity development plan, inclose consultation with the Ministryo f Finance and other development agencies supporting N A C A Limitedgovernment experience in H Preparation o f detailed Civil M collaborating directly and channeling SocietyPrivate Sector Operations (significant) resources to civil society and Manual (sub-section o f overall the private sector. Project Operations Manual) Continued denial and stigma issues, and M Use o f analytic work on the drivers limited government experience inenabling o fthe epidemic as an advocacy tool; service delivery to highlyvulnerable sharing o f experience and/or populations, such as commercial sex approaches from other national workers and migrant workers programs, particularly with respect to ensuring balance between program spending and the needs o fpopulation subgroups at highest risk o f infection Overly participatory approachhadition M Development o f a detailed timeline could lead to delays and accountability o f incremental steps that are the challenges inproject implementation responsibility o f counterparts for each stage o f implementation Very limitedexperience o fBotswana M Conduct o f extended missions to L working withthe World Bank, and vice enable greater sharing o f World Bank versa principles andprocedures, and vice versa; development o f a training program for key counterparts focusing on the basics o fBank operations Audit o fthe project financial statements may M The project financial statements will L be delayed beyond six months after the end be prepared and audited as a special o fthe government financial year fundand submittedto the Bank by September 30th each year Delay inthe preparation o f financial M The Office o fthe Auditor General L statementsat the District Council level will clear all o fthe audit backlogs: (i) no later than eight months after the Effective Date for Phase IHealth Districts ;and (ii) by inception of Phase I1HealthDistricts Delay inaccounting for utilization o f funds S Simplified accounting forms have M at the CSO and CBO levels been designed as part o f the Operations Manual, plus training on effective utilization Overall RiskRating: M Risk Rating- H (High Risk), S (Substantial Risk), M (Modest Risk), L (Low Risk) N (Negligible Risk) F. Loanconditions andcovenants 70. Prior to Negotiations, Government confirmed the finalization and adoption o f the: (a) the Operational Manual; (b) the Civil Society Grant Guidelines; (c) the plans andbudgets for the first year work program; (d) the TORSfor the long term technical assistance; and (e) the formats of the un-audited Interim Financial Reports. All these documents are available infinal form and have beenproducedjointly by the Government and the World Bank. Board Conditions 18 71. There are no Boardconditions. Effectiveness Condition 72. Standard effectiveness conditions, in addition to the following: NACA has recruited the following technical specialists for the Project: (a) a management and implementation senior specialist; (b) a financial management specialist; (c) a procurement specialist; and (d) a District- level grant officer in each of the following Districts: South East District, Kweneng East District, Francistown District, Selebi-Phikwe District, and Goodhope Sub-District, all with terms of reference, qualifications and experience satisfactory to the Bank. Disbursement Condition 73. N o withdrawals shall be made with respect to the Civil SocietyPrivate Sector Component o f the Project until: (a) Government has furnished evidence to the Bank for its approval that the first 20 grants under this component have been made in accordance with the criteria, terms and conditions set forth or referred to in the Operational Manual; and (b) with respect to any Phase I1Health District, until the Financial Management Assessment has been completed and the Bank has determined that the relevant Phase 11Health District financial management arrangements are acceptable. Covenants 74. Dated covenants i) N o later than three months after the Effective Date, the Borrower shall have ensured that NACA has recruited the following long-term senior technical specialists for the Project (in addition to those recruited prior to effectiveness): (i) second financial a management consultant; (ii) a second procurement consultant, each with terms of reference, qualifications and experience satisfactory to the Bank. ii) The Borrower shall ensurethat its Office o f the Auditor General has cleared all o f the audit backlogs: (i) no later than eight months after the Effective Date for Phase I Health Districts; and (ii)by inception of Phase I1Health Districts, to the Bank's satisfaction. iii) NolaterthanoneyearaftertheEffectiveDate,theBorrowershallhaveensuredthat a detailed social analysis for the Project has been carried out, as satisfactory to the Bank. iv) N o later than six months after the Effective Date, the Borrower shall have ensured that all finance and accounting staff in the Public Sector Ministries and NACA necessary for Project implementationhave beenrecruited, all with terms of reference, qualifications andexperience satisfactory to the Bank. Other covenants Within the context o f the overall national program, hold a joint annual partner: (a) retrospective review o f program and project progress; and (b) prospective review o f program and projectplans for the coming year. Holda project mid-termreview. Maintainthe Project Steering Committee throughout project implementation. Quarterly financial reports be prepared and submitted to the Bank no later than 45 days from the end o f eachquarter. 19 e) Annual audit reports will be submittedto the Bank by September 30 eachyear. IV. APPRAISAL SUMMARY A. Economic and financialanalyses 76. Project preparation involved the completion of a detailed report on the "Financing and Delivery of HIV/AIDS Prevention, Treatment, and Social Support Services in Botswana: An Economic Analysis." The report summary i s attached as Annex 9. The report findings informed project preparation and formed much of the basis of the Bank's policy dialogue. The key messages of the report revolved around four areas, as follows: 77. Thefinancing gapfor the HIV/ADS response will increase Mappingo f the available - resources for HIV/AIDS response against the requirements as defined in the National Strategic Framework (NSF) indicates a significant gap, even if NSF resource requirements are revised downwards by 15 percent. By 2008/09, it i s estimated that this gap would reach US$221 million. Indeed, bythenifNSFwere fully funded, it would account for about 5 percent of GDP and about 15 percent of government spending, a significant expenditure program that would require serious fiscal space implications. The report analyses various alternatives to increase fiscal space for the scaled-up HIV/AIDSresponse and new borrowings - - including improved revenue effort, increased external grant aid, and concluded that improved expenditure efficiency would be the best approach. Towards this end, the report focused on identifyingmeans to increase the allocative and implementationefficiency o f the HIV/AIDS response. 78. A thorough understanding of the nature of the epidemic should inform and define the appropriate response - Unlike the HIV/AIDS epidemics in other parts of the world which are largely concentrated and have seen falling prevalence, the southern Africa HIV/AIDSepidemic i s unique in that it is generalized, Le., it i s driven primarily by the sexual behavior in the general population. A marked characteristic of the southern Africa epidemic is the high prevalence of multiple concurrent sexual partnerships which, in turn, i s fueled by high population and labor mobility, highincome inequality, and gender dynamics that often sees the exploitation ocwomen. Increasingresearch about this type of epidemic indicates that it requires large-scale fundamental changes in social norms and sexual values and practices. Interms of appropriate interventions, such an epidemic underscores the importance of social and community change processes through more aggressive and widespread local responses. Narrow, highly medicalized technical interventions are not adequate to deal with the generalized epidemic that i s now ravaging Botswana. 79. Allocative and technical eficiency of the response should be improved Government - spending on HIV/AIDS prevention i s only 7 percent, compared to the 35 percent UNAIDS "norm" as gathered from various African countries. In contrast, Government spending on treatment and care is a hefty 59 percent, compared to a 38 percent UNAIDS "norm". Optimal allocation, as demonstrated in Africa-wide HIV/AIDS modeling (Annex 9), shows that a combined response of prevention and treatment would result in the highest proportion of infections and deaths averted. For this reason, the report proposed that the Bank project be heavily oriented on prevention activities, and specifically through the local community-level response. The report also identifies several measures to improve "value-for-money" in spending, including changes in drug procurement, e.g., greater use of generics, use o f fixed dose combinations, and timely payment o f suppliers to prevent expensive emergency procurement; labor-saving mechanisms inantiretroviral treatment; andbetter integration o f HIV/AIDS services 20 with family planning and maternal and child health, and tuberculosis control; and greater emphasis on new interventions including male circumcision and a revived family planning program. 80. Stronger focus on cost-efective prevention and improved treatment adherence are required to contain the epidemic - As the HIV/AIDSepidemic matures, and as the ART program reaches full coverage, Botswana needs to face new challenges in prevention occasioned by disinhibition behavior, Le., the false sense o f security that patients on treatment feel, leading them to resume risky sexual behavior. Thus, Botswana needs to deal with prevention for uninfectedas well as infected individuals, including those on antiretroviral treatment. For those on treatment, Botswana also has to deal with the challenge of making sure that they adhere to their drug regimen; failure to do so engenders drug resistance with serious fiscal implications due to the need to provide much more expensive second-line drugs. B. Technical 81. The BNAPS Project i s built on the principles of internationally-accepted best practices for HIV/AIDS programs, taking into account the country's socioeconomic circumstances and reliable the emerging body o f detailed epidemiological data becoming available. It i s also built upon the experiences of the MAP program. The comparative advantage of different sectors and the community inthe national responseto HIV/ADS is well established. The project also places strong emphasis on strengthening institutions, learning and innovation, and an overall performance-based approach. C. Fiduciary Financial Management 82. NACA will be strengthened to meet the challenges of the multi-level coordination demands o f the Project. Key staff at NACA, line ministries and District Councils will be trained in World Bank financial management and disbursement procedures. The Operational Manual outlines, inter alia, the implementation, organizational, administrative, monitoring and evaluation, financial management, disbursement, and procurement arrangements for purposes of implementation o f the Project and Subprojects, including the eligibility criteria and procedures for extending Subproject Grants. 83. The Project will hire two financial management specialists for a maximum period o f two years at the program and project levels. Their responsibilities will include: production of financial management guidelines for donor funded project implementation; training of program and project staff in financial management, monitoring o f utilization of funds and other responsibilities as provided intheir terms o freference. 84. NACA's proposed financial management arrangements, as well as the arrangements at MFDP which will have the responsibility o f managing the loan funds and authorizing disbursements in form o f finance warrants to NACA, were reviewed in accordance with the Financial Management Practices Manual dated November 3,2005. The overall conclusion of the financial management risk assessment i s "moderate." The Project will use the Government's financial management system which was assessed to have met the minimumrequirements of the Bank's OPBP 10.02 (Annex 7). 21 Procurement 85. The Bank has carried out a cursory assessment o f the country procurement environment in October, 2007. Botswana has a Procurement Act and Regulations (2006) to regulate the procurement practice in the country. The Botswana Public Procurement and Asset Disposal Board (PPDAB) i s a statutory body with functions defined in the Act. This body combines both regulatory function and operational functions (the latter by reviewing all procurement transactions above a set threshold). Standard biddingdocuments have beenprepared and distributed electronically to user agencies in July, 2007. The Bank's assessment suggested areas for improvement in the procurement systems and shared the same with PPADB and concerned stakeholders. Procurement under the Project would be carried out inaccordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers' dated May 2004 revised October 2006, and the provisions stipulated in the Legal Agreement. The Bank's standardbiddingdocuments shall be used for procurement of goods under International Competitive Bidding and the Bank's standard Request for Proposal (RFP) shall be usedfor selection o f large value consultants involving internationalconsultants. 86. National Competitive Bidding shall follow the Government of Botswana's procurement procedures, provided that the following provisions shall apply for the use o f the National Competitive Bidding documents: (i) foreign bidders shall be allowed to participate in National Competitive Bidding; (ii) registration / classification o f bidders shall not be used as a condition for bidding; (iii) use of preference system based on citizen degree of ownership shall not be used; (iv) use o f point system and bracketing inthe evaluation o f bids for goods shall not be used; (v) negotiations shall not be heldwith successful bidder for procurement of goods; (vi) publication o f invitation to bid in a national newspaper o f wide circulation; (vii) bidding documents shall clearly specify bidevaluation and post qualification criteria; (viii)biddingperiod shall not be less than four (4) weeks and bids shall be opened publicly; and (ix) contract awards shall bepublished. Alternatively the Bank's standardbiddingdocuments may be usedand adapted for Nationalcompetitive bidding. 87. Procurement activities under the Project will be carried out by NACA, line ministries o f Education, Labour and Home Affairs, Local Government, Works and Transport, Youth, Sports and Culture and Healthat central government level. At decentralized level, procurement activities will be undertaken by district councils and civil society organizations (CSOs). NACA, line Ministries and District Councils all have established Supplies Units or Divisions which are responsible for the procurement and stores function. The supplies units are managed by technicians to middleprofessional staff. Staff inthe Supplies Units,have adequate experience in procurement through shopping procedures but have little experience in large value tendering o f goods and selection of consultants. For large value goods contracts, the Supplies Units are assisted by sector specialists to prepare tender documents. Protracted delays are experienced in the adjudication of quotations and tenders above US$l,OOO because of many committees that have to reviewthe recommendations and these committees do not meet regularly. 88. At community level, procurement will be undertaken by CSO networks and grass root CSOs. CSO networks have adequate capacity to undertake procurement through shopping procedures and recruitment o f individual consultants and small value consultancies for firms. The capacity o f grassroot CSOs i s considered weak in both project and fiduciary management of 22 project activities. Overall, the capacity of the implementing agenciesto undertake procurement i s considered average and the riski s moderate. The mainrisks envisaged include: (a) uncompetitive procedures and provisions in the Procurement Act and bidding documents; (b) lengthy and delayed approvals due to several approval thresholds and by several committees which do not meet regularly; (c) staff not familiar with procurement under World Bank procedures in general and selection and employment o f consultants in particular; (d) delays in start up activities because staff do not have experience in large value procurement and procurement under World Bankprocedures; and (e) weak civil society capacity at grassroot level. 89. To mitigate against these risks, the Project will put in place the following measures: (a) have arrangements in place to streamline internal procurement review process; (b) apply exclusions to National Bidding documents to remove uncompetitive provisions, or alternatively adapt Bank bidding documents for NCB; (c) train staff in World Bank procurement procedures and selection o f consultants; (d) engage and maintain procurement specialists for first 2 years o f the Project; (e) engage Grant officers with prerequisite knowledge in fiduciary management to supplement the capacity of District Aids Coordinators; (f) train CSOs inprocurement prior and support CSO networks to assist their affiliates in fiduciary management; and (g) prepare procurement documents for key start up activities (Annex 8). D. Social 90. The HIV/AIDS epidemic will continue to exert severe social and economic consequences in Botswana over the coming years with increasing rates o f morbidity and mortality, and increasing numbers o f orphans. The BNAPS Project will pay close attention to social issues with a renewed focus on expanding coverage o f HIV/AIDS-related services to vulnerable populations. 91. A major gap identified by many stakeholders, with respect to the previous national strategy, was the need to target interventions more effectively on vulnerable groups. Vulnerable groups in Botswana include, but are not limitedto, adolescent women, serodiscordant couples, orphans and other vulnerable children, migrant workers, and commercial sex workers. With a growing recognitionof the need to focus on vulnerability and concurrency o f sexual partnerships, it was agreedthat all priority areas of the NSF would explicitly address the needs of groups that are especially vulnerable to infection, or whose quality o f life or social and economic well-being i s most severely affected by the epidemic. The BNAPS Project would support this approach through its targeted and results-based interventions, and would additionally ensure that the results o fplanned additional social assessment work are reflected inthe evolving program design. 92. One o f the key reasons that a broader, multi-partner, multi-level response to HIV/AIDS is required is the influence of socio-cultural norms and values on the spread of the disease. Through the BNAPS Project, concerted efforts would be made to promote socio-cultural norms, values, and beliefs that are consistent with the reduction of HIV transmission, and to protect the human rights o f those infected or affected by the disease. NACA-coordinated activities are expected to pursue this objective through behavior change communication campaigns, advocacy, counseling, consultation, and intensified enforcement o f both customary and written laws, particularly with respect to gender-specific issues. A detailed social analysis i s planned for Year One of the Project (Annex 13). 23 E. Environment 93. The Projecthas beenclassifiedas "Category C" for environmental screening purposes, which precludes the requirement for the World Bank to conduct a project-specific health sector waste management assessment. The Government's national medical waste management plan has been included in the project file, as per agreement with the World Bank's Africa Regional Safeguardsunit. F. Safeguardpolicies 94. No safeguard policies have been triggered by the BNAPS Project (as noted below and also inAnnex 10). Safeguard Policies Triggered by the Project Yes No EnvironmentalAssessment (OPBP 4.0 1) [I [XI NaturalHabitats(OPBP 4.04) [I [XI Pest Management(OP 4.09) [I [XI Physical Cultural Resources (OPBP 4.11) [I [XI Involuntary Resettlement(OPBP 4.12) [I [XI IndigenousPeoples(OPBP 4.10) [I [XI Forests (OPBP 4.36) [I [XI Safety ofDams (OPiBP 4.37) [I [XI Projects inDisputedAreas (OPBP 7.60) [I [XI Projects onInternationalWaterways (OPBP 7.50) [I [XI G. PolicyExceptionsandReadiness 95. The BNAPS Project does not require exceptions from Bank policies. The Project meets the Regional criteria for readiness for implementation. The Operations Manual has been approved. 96. NACA has indicated its willingness to pre-finance a number of key activities. As per World Bank operations policy [OP 6.0, para.2(e)], retroactive financing is permitted under the following conditions: (a) the activities financed are included in the project description; (b) the payments are for items procured in accordance with applicable Bank procurement procedures; (c) such payments do not exceed 20 percent of the loan amount; and (d) the payments were made by the borrower notmore than 12monthsbefore the expecteddate o f LoanAgreement signing. 97. The date after which payments may be made was agreed at appraisal, confirmed duringnegotiations, and recorded in the Loan Agreement which provides that payments may be made up to an amount o f US$500,000 from July 1, 2008 onwards. It was agreed that the Loan would allow for retroactive financing o f the consultancy services associated with Component 1 (technical and fiduciary consultancy services for NACA). 24 Annex 1:Countryand Sector or ProgramBackground BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupportProject BriefCountryProfile 1. Botswana i s a small land-locked country in Southern Africa, bordered by Zambia and Angola to the north, Namibia to the west, and Zimbabwe and South Africa to the east and south respectively. The administrative structure is composed of 9 districts (Central, Ghanzi, Kgalagadi, Kgatleng, Kweneng, NorthEast, NorthWest, South East and Southern), 5 urban districts, 28 sub- districts, and 24 healthdistricts. 2. Since independence from the United Kingdom in 1966, its economic indices have appreciated significantly. Its GDP per capita has risen from US$304 at independence in 1966 to US$4,423 in 2006 (measured in constant 2000 US$). Diamond mining, which has been the largest GDP contributor for the past thirty years accounts for 38 percent of GDP and for 70-80 percent of export earnings. Tourism, financial services, subsistence farming, and cattle farming are other key economic sub-sectors. Incontrast to these indicators, the country continues to face significant development challenges including high inequality (as measured by the Gini coefficient), highunemployment at an estimated 20 percent (unofficial estimates place this figure closer to 40 percent) and limited economic diversification, and the world's second most severe HIV/AIDSepidemic. DemomauhicandHealthProfile 3. Botswana has a population of 1.8 million with an annual growth rate o f 1.5 percent. It has a contraceptive prevalence rate of 40.4 percent, a total fertility rate of 3.1 children per woman and a crude death rate o f 27.7 percent. About 50 percent of its population lives inthe rural areas with sparsepopulation settlements inthe villages alongthe westward locatedKalahari Desert. Its education indicators are impressive with an adult literacy rate o f 81.2 percent and a female primary school enrolment rate o f 83 percent. 4. However, some social indicators are weaker than those of other middle income economies. In 2006 Botswana ranked 131 out of 177 countries on the Human Development Indexas the HIV/AIDS pandemic continues tojeopardize the social gains of recent decades with key health indicators on decline. Life expectancy has quickly fallen from 60 to 35 years. Infant mortality is up from 45 (per 1,000 births) in 1990 to 85 in 2005. Tuberculosis i s up from 236.2 (per 100,000) in 1990 to 670.2 in 2005 and made up approximately 38 percent of AIDS deaths. Malaria is not endemic in Botswana, with seasonal occurrences during the rains in the northern districts o f Central, Chobe, Ghanzi, Ngamiland, andthe Okavango Delta area. 5. Botswana has 24 health districts, each with a health team. It has 3 referral hospitals, 12 district hospitals, 17 primary hospitals, 222 clinics, 220 health posts and 740 mobile stops. Towards strengthening its HAART delivery system, the Ministry o f Health is constructing 250 additional clinics so as to increase access to ARVs. Total expenditure on health is 5.6 percent o f GDP, with general government spending making up 58.2 percent and private spending making up 41.2 percent. It has 0.4 physicians, 2.65 nurses, and 0.19 pharmacists per 1000. 25 HIVMDS 6. It is estimated that in 2008, 283,000 adults (over 15 years of age) were living with HIV/AIDS in Botswana. This indicates a national adult (15-49 years) prevalence of approximately 23.8 percent'. As noted earlier, key factors fueling the HIV/AIDS epidemic include the incidence o f multiple concurrent sexual partnerships, the incidence o f unprotected sex, the vulnerability of women, persistent inequality and poverty, and high levels o f population mobility, including cross-border challenges. 7. The number of new infections rose rapidly during the early 199Os, peaking in the mid- 1990s. The number o f AIDS deaths started to grow rapidly about 10 years later than the rise in new infections, peaking in 2003, just before the expansion of the national AIDS treatment program. Around 2003, the number o f new infection was approximately equal to the number of AIDS deaths, with respect to the adult population of Botswana. The successful expansion of the treatment program has reduced the number o f AIDS deaths by half. The most significant challenge for the national program, currently, i s to strengthen efforts to reduce the number o f new infections still occurring each year. During2008, it i s projected that there will be 14,100 new adult infections, 690 new child infections, and 7,700 AIDS deaths in Botswana. Despite continued challenges in expanding prevention efforts, some pockets o f improvement have become evident. Prevalence National HIV prevalence in Botswana has shown a steady decline fallen, most prominently amongst the most vulnerable age groups; 15-19 year olds (22.8 percent in2003 to 17.5 percent in 2006) as well as the 20-24 year olds (38.6 percent to 29.4 percent in2006)6, as is demonstrated in Figure 1. There has been a increase inthe reported condom use with non-regular partners inthe last 12 months among ages 15-24, from 82 percent in 2001 to 87.5 percent in 2005. Other positive responses include that fact that testing increased to 25.4 percent o f 10-64 year olds in 2004 from 8.9 percent in 20017. There also has been an increase in the proportion of pregnant women attending antenatal clinics accepting HIV testing, from 71 percent in early-2004 to 80 percent inearly- 2007. Inparallel, there has been an increase inthe number of HIV-seropositive pregnant women receiving a complete course of antiretroviral prophylaxis to reduce the risk o f mother-to-childtransmission, from 34.3 percent in2001 to 89 percent in2007. This has yielded a dramatic decline in the proportion of infants born to HIV+ mothers who are infected at 18 months, from 40 percent in2001 to 7 percent (at 6 weeks) in2007. Current status of the HIV/AIDS epidemic in Botswana (Draft). NACA, March2008. 'MidTermReview ofthe BotswanaNSFfor HIV/AIDS2003-2009. BAIS11, 2005. 26 Figure 1: :Trends in age-specific HIV prevalence rate among pregnant women 1992-2006, Sentinel Surveillance. Rntswana Incidence 8. HIV incidence increasedfrom 6 percent to 8.7 percent between 2001/2002 and 2006, for pregnant women attending ANC. This can be partially explained by the following data: 0 An increase inproportion of males between 15 and 24 years old who have ever had sex from 39 percent (2001) to 56.1 percent (2005), and females in the same age group increased from 42.2 percent to 57.9 percent inthe same time frame'. 0 An increase inthe proportion of people aged 15-24 years oldreporting unprotected sex in the last month after consuming alcohol, from 5 percent in2001/2 to 14.7 percent in2007' (a 200 percent increase). e Increase in the percentage of young people 15-19 who had sex with more than one partner during the last 12 months from 0.3 percent in 2001(BAIS I) to 17.1 percent in 2005 (BAIS II). 0 A reductionof 15 percent inthe proportionofpeople agedbetween 15 and 24 who know all three ways of preventing sexual transmission, from 36.3 percent in 2001/2 to 17.35 percent in 2005. Further segregated, only 15.5 percent o f 15-19 year olds and 19.2 percent o f 20-24 year olds know all three ways o f preventing HIV transmission. 10.65 percent of 15-24 year olds didn't know any way o fpreventing HIVtransmission. 9. The effect o f HIV/AIDS has been nothing short o f devastating and threatens the long- term socio-economic development of Botswana. In 2002, the Government of Botswana commenced its national treatment program, via which it offered free ART treatment to all infected Botswana citizens with CD4 levels<200, presence o f an AIDS defining illness or any child under the age o f 13 years. Followingthis, ART sites were rolled out ina phased manner and by December 2005, 32 ART sites covered all 24 districts in the country. As of March 2008, national treatment coverage i s estimated to be 88.4 percent. Patient follow-up and adherence to treatment has been estimated at over 90 percent. 'BAIS (2001) andPopulation Services International, TRAC l(2005). BAIS I1(2005) 27 10. It is of significant economic concern that national HIV/AIDS-related investments have displaced other budget priorities, especially given the paucity o f donors active in Botswana. It should be noted that the Government o f Botswana finances over 90 percent o f the national HIV/AIDS program. The cost of this disease-specific government allocation has increased dramatically from US$69.8 million in2000-2001,to US$165 million in2004-2005. 11. The government agency in charge of coordinating the national response i s the National AIDS Coordinating Agency (NACA), which serves as the secretariat of the National AIDS Council (NAC) which up March 31,2008 chaired by the President o f the country, now chaired by the former President. NACA has the primary responsibility o f overseeing the multi-sectoral implementation o f the national response as stipulated in the National Strategic Framework (NSF). However its efforts have yet to realize their full potential due to weak operating systems and inadequate human resources. International donors have also played a significant part in the response to HIV/AIDS in Botswana, though compared to other high prevalence countries, they are few in number. Notable among these are the U S government (CDC, PEPFAR, and BOTUSA), ACHAP (partnership between the Bill and Melinda Gates foundation, Merck and the Government o f Botswana) as well as the key UNagencies. 12. The Civil Society Organizations (NGOs, FBOs, PLWHA Groups, and the Private Sector) response i s quite extensive inBotswana. They are the primary implementersof HIV/AIDS related activities at the community level. Majority of them are local, while only a few international NGOs (e.g. Population Services International) are represented. They are primarily funded by the Government o f Botswana, but also receive funding from the International donors. However poor coordination, inconsistent finding and weak implementation and monitoring capacity have blunted the potential effect of the CSOs. 28 Annex 2: Major Related Projects Financedby the Bank and/or other Agencies BOTSWANA: Botswana NationalHIV/AIDS PreventionSupport Project 1. The proposed project would be the first lending operation in Botswana since its graduation to middle-income status. However, since the request for the HIV/AIDS operation, IBRD support has also beenrequestedinthe transport and energy sectors. 2. Key health sector partners include the USGPEPFAR, ACHAP, the Global Fund, and the European Commission, as indicatedinthe Table below Sources 2006 2001 2008 2009 U.S. Government/ 76.000 93.000 -90.000 -90.000 BOTUSA ACHAP 13.000 26.000 -56.500 -5 6.500 Global Fund, 9.561'' 0 0 0 Harvard Project EC 1.300 1.300 1.300 World Bank loan 0.000 0.000 0.000 -10.000 Population 3.500 3.500 3.500 3.500 Services International l1 Total External 104.671 131.684 154.387 161.070 Government of 175.970 150.000 150.000 150.000 (based on P899 (based on P896 (based on P896 (based on P896 million) million) million) million) Grand Total 1 280.641 281.684 326.993 311.070 . The Botswana-USA (BOTUSA) Project, mainly funded by PEPFAR, spent US$76 million in 2006/07, and has committed to spend US$93 million fiom October 1, 2007 to September 2008. According to program managers, it i s likely that the project will commit at the level of FY07 over the medium term. Moreover, although PEPFAR ends in FY09, Congressional support has been obtained for US$30 billion for PEPFAR 11, focusing on 15 countries including Botswana. lo This grant was cancelled. l1 Population Services International has an annualbudget of US$3 to 4 million. However, ofthis total amount, a fraction needs to be nettedout representing the amount received from BOTUSA. 29 .ACHAP spent US$13 million in2006 and US$26 million in2007, according to program .managers. US$113 million remains from the original grant which, if divided equally to be spent in2008 and 2009 will yieldan annual figure o fUS$56.5 million. The Global Fund's Round 11grant to Botswana was cancelled. Government's application .for Round VI1was not approved. (The total request for five years i s US$36.912 million, which would have providedresources of an average o fUS$7.382 million a year.) The UNagencies are active in various areas of HIV/AIDS activities, but their financial .commitments are relatively small. The World Bank currently i s not involved in the HIV/AIDS sector, but if the project .under preparation is approved, it should be able to commit about US$10 million a year over the mediumterm. Population Services International has an annual budget o f US$3 to 4 million a year. In addition, donated commodities procured abroad are around US$500,000 to US$750,000 per year. 30 Annex 3: ResultsFrameworkandMonitoring BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupportProject 1. Botswana i s committed to rapidly strengthening its capacity in monitoring and evaluation. The BNAPS's support to M&E would be guidedby the following criteria: (i) support for the NSF and the development of a single national M&E system, under the principle of the "Three Ones"; (ii) for an M&E system, that enables DMSACs to monitor and improve support their performance as well as allowing for monitoring of community, district and national activities; (iii)support for institutional, human resource and systems development; and (iv) support for activities which are notbeingfinanced by other development partners; and (v) support to the NACA in its function as the lead coordinating agency for the sharing and coordinating of M&Eactivities between all agencies and donors. Improvements inthe indicators as reflected in the HIV/AIDS Score Card(Annex 14) wouldbemeasuredthroughthis approach. 2. The Botswana HIV/AIDS Response Information Management System (BHRIMS) i s the national multi-sectoral response monitoring system. Accompanying and supporting documents are the BHRIMS plan 2003-2009, BHRIMS costing (2002), inventory of stakeholders and baseline for indicators (2003). Management and support bodies have been established as the BHRIMSTechnical Working Group, the BHRIMSsecretariat inNACA, and the BHRIMSfocal points at sector, programand district levels. 3. The information management has been decentralized under BHRIMSto the district level underthe District MultisectoralAIDS Committees. The District AIDS Coordinators (DACs) who also serve as secretaries to the DMSACs, act as focal persons indata management at district level. Implementing partners and other stakeholders submit reports to the DMSACs. Data collection and analysis at district level has also been facilitated by the introduction in all districts o f a computerized systembased on the UNAIDS' Country ResponseInformation System. 4. The performance by BHRIMS has been demonstrated by the regular and timely production o f reports for the United Nation General Assembly Special Session on HIV/AIDS (UNGASS), Millennium Development Goal and for national level bodies. Capacity i s however a constraint and considerable effort has beenput into training of key stakeholders and supply o f IT material and software. Through BHRIMS a national M&E curriculum has been developed and training o f stakeholders has been initiated and i s ongoing at the Institute of Development Management. Through support from development partners (Le. ACHAP and BOTUSA), M&E personnel have either been placed at the sectoral and district levels or plans are underway to have themplacedat these levels. 5. While data collection and reporting at national, aggregate level i s already well advanced inBotswana, monitoring of activities and results at local level is, as inmost countries, less well established. However, changes at local and community level are critical to significantly change the course o f the epidemic. The project, through a results-based design o f the civil society and private sector component, has built in the measuring and reporting o f baseline, progress and project completion data. This design also permits assessingthe effectiveness of specific Calls for Proposals to bring about change through social mobilization of civil society and private sector organizations. These changes at community level are captured through the same indicators as those used in the BAIS. They also contribute to changes at aggregate level as reflected in the BAISreports butcannot be compared as suchsince the denominators are different. 31 6. The following table reflects some of the indicators used to monitor the project, with a special focus on the institutional capacity of NACA and on the performance of the civil society and private sector component. ResultsFramework ProjectDevelopment ProjectOutcomeIndicators Objectives The project development Increased efficiency inBotswana's Assesses overall N A C A objective is to assist the HIVIAIDS program through performance and identify needs for Government o f Botswana improved coordination and increased M e r institutional strengthening to increase the coverage, focus on, and better targeting of, andtechnical support. efficiency, and prevention activities. sustainability o f targeted Assesses the impact o fNACA's and evidence-based performance incoordinating the HIVIAIDS interventions implementation o f the NSF(in line through: with the World Bank HIV/AIDS Scorecard). (i) strengthening NACA's institutional management Joint Annual Program Reviews Assesses the progress and obstacles and coordination capacity; conducted over the period2009-2014 inthe implementationoftheNSF, and with participation fromprincipal guides priority setting and the development partners, implementing formulation o f CfPs. (ii)financing strategic and partners from civil society, private innovative HIV/AIDS- sector and public sector. relatedprevention and mitigationactivities". Project Mid-TermReview conducted. Assesses implementation efficiency (both technical and financial) o fpublic, civil society, andprivate sector programs and identifyneeds for additional support and technical assistance Perfonnance o fN A C A assessedby Assesses impact o fNACti's NACA's beneficiaries and of TA performance inimplementing the within N A C A twice during project NSF, particularly with respect to (year 2 and4). prevention and mitigation efforts. Proportion o f sexually active ME Assessesproject effectiveness with who report having had sex with more regard to specific CfP. than one partner inthe past 12 months. Per age group: 15-19 20-24 25-49 Number o f Male Circumcision Assessesproject effectiveness with proceduresperformed inselected regard to specific CfP. health facilities. '*These outcomes, related to specific CfP, are based on Cfps that have been agreed at project appraisal. Duringimplementation more anddifferent CfPs I outcomes couldbe added as needed. 32 Proportion o f youths aged 15 to 19 Assesses project effectiveness with and20 to 24 who both correctly regardto specific CfP. identify ways o f preventing the sexual transmission o fHIV and who reject major misconceptions about HIVtransmission Proportion o fyouth aged 15 to 19 and Assesses project effectiveness with 20 to 24 years reporting either a) no regardto specific CfP. sexual activity or b) condom use during the last sexual encounter with a non-regular partner inthe past 12 months. Percentageo fpeople 15 to 19 and 20 Assesses project effectiveness with to 24 who report a sexual partner with regard to specific CfP. more than 10 years age difference during the last 12 months Intermediate Outcomes Intermediate Outcome and Output UseofIntermediate Outcome Iodicators Monitoring Component 1- National Coordination Outcome 1: Intermediate Outcomes: FullyoperationalNACA Annual audit report for N A C A Assesses capacity and performance effectively coordinating program demonstrating transparent and o fNACA's financial management. implementation, including at accountable financial decentralized levels and also management. including strengthened accountability and financial management. Numberofproposals originating Assesses efficiency and from CfP processed within effectiveness o fprogram standard timeframe: implementation and coordination a) rejected o fNACA, including at b) approvedand funded decentralized levels. The proportiono fDMSACs that Assesses needs for DMSAC submitquarterly reports on training and supervision. project-supported community projects to NACA. Independent Results Verification Assesses needs for improving o f grantees conducted ina grantee reporting andDMSAC representative sample o f grants. supervision o f grantees. Disbursements from N A C A to Assesses capacity andperformance beneficiaries, public sector as infinancial management and well as CfP grantees. accountability. 33 outputs: Targets met withrespect to Assesses perceivedeffectiveness o f holding stakeholder and donor N A C A among key program coordination meetings. beneficiaries and implementation partners. Follow-up onN A C A O&M Assesses needs for strengthening of Review implementation, for the coordination mechanisms MidTermReview, completed. Outcome 2: Intermediate Outcomes: Operational national M&E M&ETechnical Adviser Assesses staffing levels for M&E system inuse for planning, (Consultant) recruited at NACA, at NACA. project designand perfonningaccordingto Terms implementation o fReference. At least 80 percent o f all N A C A Assesses needs for training and grantees provide quarterly support to NACA grantees program activity monitoring reports. Quarterly service coverage Assessesneeds for strengthening reports produced and programactivity M&Esystem disseminated Annual NationalM&Ereport Assessesperformance o f M&Eunit produced NationalHIV/AIDS M&E Assesses geographical and CBO/NGO/FBO database programmatic gaps insocial established andpopulated with mobilization, avoid duplicate priority data fields. fundingo fCBOs/NGOs/FBOs National M&EDatabase fully Tracks the performance o f the functional to track achievement national response to achieve the ofresults inthe NSF results included inthe NSF 3utcome 1: Intermediate Outcomes: Strategic and targeted multi- All priority sectors entities Assesses needs for fiuther iectoralprograms implemented (ministries, ministry divisions, technical and financial support to :ffectively inthe public sector etc.) have developed annual sectors as well as capacity building strategic costed workplans. andadvocacy byNACA. 34 All priority sectorsentities Assesses needs for further monitor andreport on technical, financial andor M&E HIV/AIDS related activities and support to sectors. expenditures. Increased collaboration between Assesses the level o f efficiency in HIV/AIDS and TB control dealing with the two related programs diseases. outputs: At least 75 percent o ffinancial Assesses the demand and support to line ministries absorptive capacity o f line disbursedbythe endo fyear 4. ministries as well as NACA's responseinterms o f financial management. Regional TB/HIV coordinators Assesses staff availability for active intwo regions advancing TB-HIVcollaboration. Three hospitals equippedwith Assesses the access to referral, isolation wards and functional as quality assurance and MDIUXDR TB referral centers. TE3 preparednessfunctions. Twenty-six primary health Assesses progress indecentralizing clinics upgradedand HAART the ART program to include more compliant rural areas. Component 3 - Civil Societyh'rivate Sector Outcome 1: Intermediate Outcomes: Strategic and targeted programs Increased involvement o f civil Assesses level o f social implementedefficiently through society and private sector mobilizationfor results-based civil society andprivate sector organizations to address the interventions inpriority areas. partnerships prioritizedresults as indicated in the Cfps. outputs: At least 20 organizations per Assesses demand from civil society district fundedthrough the CfP andprivate sector andresponseby mechanism per year. NACA. Increasing percentage o f Assesses needs for further M&E organizations that report: -- support to civil society andprivate baseline data sector organizations by DMSACs end-of-project data andfor NACA. - both baseline and end- 35 of-project data Increasingpercentage o f civil Assesses overall effectiveness o f society and private sector the civil society andprivate sector organizations that make progress response component o fthe project. inreachingthe targets specified intheir proposals. Increasingpercentage o f funded Assesses overall effectiveness o f civil society andprivate sector the civil society andprivate sector organizations that reachtheir response component of the project. targets specified intheir proposals. 36 c e Ic ! e ! 6i Iz c E m a L Ii C n b u- U E 24 24 t h 0 0 3 0 vl 00 z z 0 0 00 E vl m 0 m m 0 0 10 0 0 0 0 8 uU 2 d H 1 3 E 0 2 0 2 8 8 % 0 3 b w r - m 9 0 d 3n E E .. W N r) r 4 \ 3 3 0 3 0 4 Annex 4: DetailedProjectDescription BOTSWANA: BotswanaNationalHIV/AIDS PreventionSupportProject Comuonent1:SuuuorttoNACA: 1. With NACA as the institutional home of the Project, the NACA component will provide very focused and strategic attention to build internal capacity to coordinate HIV/AIDS activities effectively, both for the Project and the program more generally. This i s in line with the third goal o f the Botswana National Strategic Framework (NSF) for the National Response to HIV/AIDS, which i s "Strengthening the Management of the Response". 2. NACA was established by a Presidential decree on December 8, 1999 and went through a major reorganization in the early 2000s. More recently, based on recommendations from institutional assessments carried out especially by the Government inits NACAjoint planning report, the O&M study, the NACA Mid-Tern Review, and the World Bank team, the Government at very senior levels has recently concluded a review o f the organization of NACA. Some decisions remain pending, but the revised structure of NACA was approved. NACA will continue to have a National Coordinator (at Permanent Secretary level), but with a new structure comprising four Departments - (a) Program Planning, Coordination and Support; (b) Policy, Strategy, Research, Monitoring and Evaluation; (c) Education, Communication and Advocacy; and (d) Corporate Services. Each Department i s headedby a Director. This structure i s based on a thematic allocation of responsibilities - and then within each Department functional responsibilitieshave been allocated. For a small organization such as NACA, this i s a complex matrix management system - but this i s unavoidable given the range and deptho f the multi- sectoral issues that NACA i s requiredto address. 3. The agreement on this new structure will inturnpermit the recruitment o f a significant number of additional staff including the filling o f some long-standing vacancies particularly at the middle management levels. This recruitment processhas already begun. Thus, within the next 6-9 months these positions will be filled and for the first time for some years, NACA will have a clear organizational structure which i s adequately staffed. 4. To complement these Government's initiatives in reorganizing and re-building NACA, one important focus of the Project inputs will therefore be on capacity building within NACA, in key areas that complement support being provided by other partners. Particular attention will be paid to systems building. The ultimate aim is to ensure that NACA evolves into a viable, credible and efficient organization. 5. The role o f NACA as primarily a program coordinator would continue to be emphasized. In addition to its program coordination responsibilities at the central level, it also has decentralized responsibilities especially at the district level. The Project will support central and district activities, with the district activities implemented through a combination o f the Ministry o f Local Government (the DACs office and the District Council) and the CSOs. 6. With the results focus of the Project, importantly, this component would also provide support for the improved design and strengthening of the National M&E Framework. This would complement other partner inputs, both centrally and in the districts, and would include technical assistance, efforts to improve data use by management, and support for database development and surveys. 40 7. As part of the building o f capacity inNACA, a central part o f the Project is long-termtechnical support for NACA. There are 8 positions planned, which would be senior experienced consultants working in NACA Headquarters. Terms of reference (TORS)for all positions are agreed. These TORS focus on achieving results in capacitating NACA and skills transfer, combined with strict progress reviews, rather than only providing technical inputs. These positions will phase out over the Project and are as follows: (a) Management andplanning - Senior Management and Implementation Specialist (and de facto technical assistance team -- leader) Senior Capacity BuildingSpecialist Senior Strategic Planningand Partnerships Specialist (b)Fiduciary --- Two Senior Financial Management specialists Two Senior Procurement specialists Senior Monitoringand Evaluation specialist 8. Recruitment for these positions has started and the Government has agreed, if necessary, to finance these positions initially from its own resources until Project finds are available. To complement these inputs which will be centrally based (but not solely centrally focused), technical assistance at the district level will be available through a variety o f arrangements with partners including volunteers from the UN,JICA and the US Peace Corps. Specifically, NACA has agreed to pre-finance the recruitment of mid-level TA (Grant officers), that would primarily be responsible for strengthening the DACs office to implementProject, as well as programactivities. Recruitmentofthese hasalso commenced. 9. The above assumes that this will continue to be from the Ministryo f Finance to NACA and then on. Both NACA and the Bank team would prefer not to have NACA as an intermediary, but this issue remains under discussion, and the status quo prevails. 10. As an important part of NACA's systems strengthening, both the external and internal coordinating structures were reviewed by the Government and partners. The resulting revised arrangements, and particularly the coordinating committee structures, have recently been implemented. The Project implementationarrangementsare designedto fit withinthese structures (see Annex 6). 11. Training, particularly long-term training, and development for NACA's own staff is already well planned and generously financed through existing Government programs. But the Project will finance capacity training, to be implementedbyNACA, for CSOs at the national and district levels and associated annual CSO capacity assessments. NACA will also contract an important series o f studies focusing on the social aspects o f the HIV/AIDSepidemic. Internal Streamlining of activities: 12. Inorder to suitably tailor its internal processesto adequately addressthe demands of the national response, NACA will re-calibrate these three existing committees which will expectedly become more potent with the additional human resourcesmentionedabove: a) Programs Committee:Maintasks will include: Reviewing, assessing and recommending all the programs, projects and plans submitted to the Technical and Policy Steering Committees; Promote Programs coordination and collaboration between the appropriate organizations, agenciesand individuals; 41 Monitor and evaluate all Programactivities andeffect dissemination of information. b) Finance, Administration andAudit Committee: Main tasks will include: Preparation o f estimates of expenditure and prospective budgets; Administer and keep under review the rules and regulations governing financial management o fNACA's funds; Ensureprudentmanagement ofFinancialresources; Provide a framework for coordination, disbursements, review and advice accordingly of manpower requirements of the committee; Liaise andcoordinate all matters relatedto internal and external funding; Serve as staff appointments and review committee for NACA; Function as a disciplinary committee for the staff of NACA. The Committee is tasked with oversight, governance, accountability, and transparency at NACA. The committee shall provide a forum for private and direct communication between committee members and the external auditors, internal auditors, and senior staff. Inaddition, thecommittee will establishprocedurestoreceiveretainandtreat complaints received by NACA regarding accounting, internal accounting controls, or audit matters and for the confidential, anonymous submissions by NACA staff of concerns regarding questionable accounting or audit matters. c) Procurement Committee:Maintasks will include: Review and verify that all the procurement procedures and processes including tender opening, and Ensure that technical and commercial evaluations have been undertaken in accordance with the Government ofBotswanaandthe World Bank's procurement guidelines. Externalstreamlining of activities: 13. These processes will govern how NACA coordinates Project specific activities with its other development partners. These are pertinent, especially towards further defining NACA's deliverables. Project Steering Committee(PSC): 14. This committee with broad based and multi-sectoral membership will ensure that the Calls for Proposals (CFP), and public sector ministerial annual HIV-specific work plans are in-line with the priority areas o f the NSF and address the most needed areas o f deficiency. Membership will be at Permanent Secretary level for public sector ministries, and director level for the other development partners. The PSC will include key implementing partners at the national level, specifically from the MFDP, MOH, MLG, NACA, MOE, the UNtechnical agencies and CSO/private sector. Under BNAPS, the PSC will be strengthened in its oversight role, and in holding implementers accountable to work programs that are integrated and targeted towards results. To this end, the type and quality o f reporting to the PSC will need to be standardized and with an emphasis on performance. The PSC will meet at least twice a year and share the minutes o fkey issues discussedand agreedto all implementers and IBRD. 15. The committee will agree on the annual scope of the Project activities, based on the CFP taking into account priorities and gaps identified in the annual review process and will forward their recommendations to the NACA. Once these recommendations have been agreed on, the secretariat proceeds to make the CFP for CSOs, as well as approve or amend the work plans for the public sector ministries. Detailed terms of reference for the ad-hoc committee are to be found in the annex to the manual. 42 HIV/AIDS TechnicalSub-Committee (TSC): 16. The committee i s already in existence and was usedfor GFATMreviews as well as the PEPFAR programs. It will be tasked with reviewing, assessing, and awarding proposals developed by CSOs and the Private Sector at the Nationallevel (proposals ranging from 30,000-600,000BWP) as well as technical reviews for the public sector ministerial HIV/AIDS specific work-plans. Apart from the technical and financial viability o f the proposals and work-plans the committee will also look for areas of synergy as well as maximize any imminent complementarities. 17. The members of the committee will be appointed by NACA and will then be vetted by the PSC. Under BNAPS, the Technical Steering Committee (TSC) will include key implementingpartners at the national level, specifically from the MOH, MLG, NACA, MOE, the UN technical agencies and CSO/private sector. Representatives to the TSC from the Public Sector Ministries will be at least at Director- level. The TSC will meet at least twice a year and share the minutes o f key issues discussedand agreedto all implementers and TSRD. 18. Members will have technical expertise in the issue proposed by the CFP and will have no conflict of interest with institutions or organizations submitting proposals. Membership will be multi- sectoral. Comvonent 2: Public Sector Ministries: 19. This component will support public sector line ministries focusing on initiatives in line with the National Strategic Framework (NSF). In consultation with partners and as indicated in the NSF, the Project will commence with the following ministries: (i)Health; (ii)Works and Transport; (iii) Labour and Home Affairs; (iv) Education; (v) Local Government; and (vi) Youth, Sports and Culture. 20. Annual work plans for funding underthe project will be submittedfor the Project Steering as well as the HIV/AIDSTechnical Sub-Committee's review. Upon approval, finding will be channeled through NACA for further disbursement to the relevant ministries. Monitoringand evaluation o f activities will be coordinated by NACA. The key thematic areas o f support would focus on programs and activities inthe three priority areas reflected in the NSF. The public sector support will emphasize external and internal mainstreaming and indicative activities underthis component include the following: a) Ministry of Education (MOE): MOE activities will seek to prioritize prevention for in and out of school programs. Research: (a) A survey will be carried out ("Voice of the affected and infected") in partnership with Baylor Universityusingan amalgam o f standard survey tools to extract and clearly identify the effects o f HIV/AIDS on infected and affected children. The cohorts will be children aged 6-18 years of age who either attend or are registered at a health facility. The objective of this will be to utilize the realized information to modify training instruments geared towards children and their guardians; influence the design of IECiBCC materials and activities; and to influence policy formulation regarding school curricula, social worker services etc.; and @) A cost-effectiveness study to critically assess the cost- effectiveness of all internal MOE programmatic activities focused on primary and secondary learners and recommend more efficient and strategic mechanisms. Training: (a) inpartnership with Baylor University, the MOE will organize a phased Training of Trainers program aimed at increasing and updating the knowledge o f primary and secondary school teachers. The team will have 11 regional sessions with 20 teachers per team. The overarching target i s to reach the 23,300 primary and secondary school teachers @) 6 Training o f Trainers workshops per annum for the 43 regional Guidance and Counseling teams attached to school districts. The aim will be to streamline the ways to effectively pass impart HIV/AIDSprevention messages to learners who are affected, infected or neither.Initialplansareto commence withteams inthree regions, with25 teachers perregion. Program Implementation: (a) development of HIV/AIDS guidelines for the MOE. This will involve streamlining the individual guidelines for each of the 9 departments into a coherent and comprehensive and well articulatedministerial guideline which is aligned to the NSF, national HIV/AIDS policy, public service code of conduct on HIV/AIDS on worlcplace and the DPSM wellness policy, primarily for the purposes of effective intra-ministerial planning; @) Establishment of multi-disciplinary counseling centers, which will act as one-stop shops for learner support. It will cater to inand out o f school learners and will be staffed by psychologists, social workers and nurses serving school clusters. It will serve as a referral center for learners who have HIV/AIDSrelated psychosocial needs as well as a resource center for inand out o f school learners as well as teachers. This initiative i s clearly inline with the multi-sectoral thrust of the MOE-MOH school health policy; and (c) The Project will support a consultancy aimed at updating and strengthening the pre-service and teaching curricula by inhsing relevant HIV/AIDS materials. Program Support: (a) Support for the "Silent Shout" programwhich i s a television periodicalthat focuses on youth discussing HIV related issues with their peers and professionals. The Project will support transport, room and board for children who live inthe rural areas as they have been logistically excluded from previous editions; (b) Purchase of airtime on regional radio stations towards providing a forum for youth and teachers to discuss HIV/AIDS related issues The aim i s to weaken stigma and increase knowledge o f HIV/AIDS; and (c) other programs include: support for youth outreach forums, toll-free counseling facility to ensure a safe and private environment to seek and receive counseling, and strengthening the HIV/AIDSresource centers inthe 47 vocational colleges nationwide. b) Ministry of Labour andHomeAffairs (MLHA): Priorities for the Department ofPrisons focused on providing mobile antiretroviral clinics for the largest prisons (4 inGaborone and 1inFrancistown) to complement the weekly VCT services, as well as in-service training for its staff on HIV prevention methods. Specific activities for the first year will include complementing the VCT and antiretroviral administration capacities at two of the biggest prisons, and training on IEC knowledge and dissemination methods to prisons staff as well as the dissemination o f educational materials to in- mates. c) Ministry of Local Government(MLG): Department of Social Services (DSS): The DSS will focus on rehabilitating street childrenby facilitating vocational training as well as educating them on HIV/AIDS.Also specialty training on HIV/AIDSwill be given to social workers posted to hospitals, specifically focusing on the psychosocial complications o f HIV/AIDSas they affect maritalrelationships. Department of Primary Health Care (PHC): (a) The Project will support the conversion of 7 recently acquired warehouses to regional medical stores to complement the activities of the central medical store and the pharmaceutical supply chain with the overall objective o f reducing stock-outs and re-stocking times o f satellite clinics; and @) the Project will support the upgrades o f 26 clinics to become HAART compliant in line with the new government's policy o f dispensing HAART in the ART and PMTCT program. d) Ministry of Works and Transport (MWT): Priorities focused on strengthening existing district programs that focus on mobile populations. Palapye, Selebi-Phikwe, and Francistown were some o f the areas highlighted. 44 Mobile Stag Outreach and educational activities will focus on the ministry staff that are mobile and rotate between construction and repair sites as well as transporterdtruck drivers across the border. Activities here will also focus on increasing STI diagnostic and treatment facilities at the border areas usingmobile clinics and IEC/BCC outreach activities. Stationary Stag: Training activities will be strengthened for the ministerialpeer educators who will focus primarily on the stationary ministerial staff. Commercial Sex Workers: This sub-component will focus on educating and rehabilitatingcommercial sex workers by engaging them in income generating activities as their predominant clientele are the mobile population at the border regions. e) Ministry of Youth, Sports, and Culture (MYSC): Priorities are focused on strengthening existing ministerial programs that target youth. Interventions will be nationwide, with the first year focusing on sport facilities along the eastern corridor. Specific activities outlined for the first year will include outreach activities that will target youth, using sport facilities and sporting events as IEC platforms. This sub-component will also focus on Sexual and Reproductive rights as they affect preventative behaviors in youth by preparing an information package on sexual and reproductive health and HIV/AIDSintegration. Focuswill be onlegislation, policy implications. f ) Ministry of Health (MOH): The Health Sector component is being developed around an already strong national treatment and care program. It was agreed that, within the context o f the proposed operation, efforts would be focused on providing technical assistance to the prevention activities o f the civil society and the public sector components, as well as increasing the technical and financial efficiencies o f the PMTCT and ART program. TB/HIV activities: (a) The Project will support the conversion o f wards in three hospitals to regional TB/HIV isolation and referral centers. This will serve to contain the proliferation of the dual epidemic; and @) Recruitment o f two regional TB/HIV coordinators (North and South). These will be charged with coordinating the planning, implementation and evaluation activities of the regional TB and HIV coordinators to promote synergies. Treatment Program: (a) In partnership with the Botswana Harvardpartnership, the Project will support a cost-effectiveness study to review the current treatment program. This i s in line with one of the Projects core objectives of increasing the technical and financial efficiency of the treatment program. Currently, treatment commences at CD4 levels of 250 and below. The study will observe two-three cohorts o f different higher ranges of CD4 cell counts, observing for the duration and frequency o f hospitalizations, occurrence o f opportunistic infections and conversion o f primary to second-line drugs. This study i s currently under-going review by the research and ethics committee and i s tentatively planned for the second year o f the Project; and @) The Project will also train pharmacists and pharmacy technicians to strengthen the HR capacity neededto effectively implement the new HAARTregimen. Comuonent3: CivilSocietv Organizations (CSOUPrivate Sector: 21. This component has been allocated the majority of the Project funds, reflecting the importance o f the civil society organizations (CSOs) in the achievement o f Project activities. CSO activities will be focused at both the district and national levels and will operate via the call for proposal mechanism. Disbursements will be quarterly andperformance based. 22. Thiscomponent wouldmake financial resourcesavailable to civil society, private sector, focusing on initiatives in line with the NSF. Interms of implementation of this component, the process could be described in four interlinked processes: developing calls for proposals; receiving, evaluating, and 45 awarding proposals; financial flows monitoring outputs. Awarding proposals to civil society and private sector agencies i s proposed to be done at two levels: (i)DAC-level (awarding proposals below 30,000BWP); (ii) National-level (awarding proposals in a range o f 30,OO 1-600,000BWP) and proposals over 600,000 BWPper year requiring aprior review by the BRD. 23. The Project preparation team interviewed relevant players in the CSO component as well as collateral counterparts within NACA, the public and private sector as well as other development partners. Findings revealed that CSO dysfunction gravitated around inadequate and inconsistent funding, low capacity and weak capacity development planning strategies, and organizational misalignments within the CSO sub-sector. Project design has emphasized results-based support and targeted community level activities. 24. This sub-component will focus on proposals and activities that prioritize specific HIV/AIDS prevention results and target vulnerable populations including: commercial sex workers, orphans and vulnerable children, migrant workers, women (including widows), youth, workers in small and medium- sized enterprises, micro-enterprises, and the informal sector, and people living with HIV/AIDS. Vulnerable population groups eligible for BNAPS financing will be decided through the agreedprocesses involving both the HIV/AIDSTechnical Sub-committee and Project Steering Committee, as outlined in the draft Operations Manual. It is expected that this process will streamline funding procedures, agreeable to all stakeholders while focusing on specific thematic areas based on comparative strengths and regionalneeds. 46 Annex 5: Project Costs BOTSWANA: BotswanaNationalHIV/AIDS PreventionSupport Project Project Cost By Component and/or Activity Local Foreign Total US $million US $million US $million Component 1:Supportto NACA 2.20 5.00 7.20 Component2: Public Sector Ministries 9.20 10.00 19.20 Component 3: Civil SocietyOrganizationdPrivate Sector 10.80 10.80 21.60 Total Baseline Cost 22.20 25.80 48.0 Physical Contingencies 1-00 1.oo 2.0 Price Contingencies Estimatedtaxes Total Project Costs' 23.20 26.80 50.0 Interestduring construction 0 0 0 Front-endFee Total Financing Required 23.20 26.80 50.0 'Including estimated taxes of US$3.0 million (6.Opercent of totalfinancina) 47 Annex 6: ImplementationArrangements BOTSWANA: BotswanaNationalIV/AIDSPreventionSupportProject 1. Implementation o f the BNAPS project will be by the existing institutions for implementingand overseeing the national response to HIV/AKDS, and use existingsystems and processes. However, where needed, the project will help ensure that the existing institutions, systems and processes are strengthened under the project to help ensure improvements inthe implementation efficiency and effectiveness of the overall national response. Detailed implementation arrangementsare inAnnex 4, and briefly summarized below. 2. The project design calls for a detailed work program for the first year and broad parameters for the remaining four years in order to retain flexibility for adjusting the program for subsequent years taking into account implementation experience gained in the previous year(s), and evolving priorities of the NACA. Therefore, the project design includes annual implementation performance reviews of the BNAPS based on the progress reports prepared by NACA, and discussions and an agreement among the partners on the work program for the subsequentyear(s). 3. NACA will coordinate implementation o f the BNAPS. The project will be implemented mainly by the civil society organizations and the private sector, and selected public sector ministries. A strengthened NACA, staffed with the requisite qualitative and quantitative capacity, will facilitate the implementation o f the project. 4. At the strategic level, the Project Steering Committee (PSC), which has already been established and functioning, i s responsible for providing strategic direction and oversight of the BNAPS project, approving the annual work plans and budgets for all the BNAPS implementing partners As a high level body, the PSC will hold implementers accountable for results. The PSC is chaired by the NACA National Coordinator, and includes key implementing partners at the national level, specifically from the MFDP, MOH, MLG, NACA, MOE, the UNtechnical agencies and CSOPrivate Sector. 5. The HIV/AIDS Technical Sub-committee (TSC), which already exists and i s chaired by the NACA National Coordinator, will review plans and activities of implementing partners and address strategic implementation and coordination issues under the project. More specifically, this committee will review all CSO proposals over BWP30,OOO and all public sector work plans to ensure consistency with the strategic thematic and geographical areas defined by the PSC, as well as with the goals and objectives o f the NSF. It will assess and ensure the technical and financial plausibility o f the proposals as well as emphasize the results-based focus o f all project activities. TSC's members at the national level include specifically from the MOH, MLG, NACA, MOE (at the Director level), the UNtechnical agencies and CSOPrivate Sector. 6. NACA will have three main committees for facilitating the implementation o f BNAPS. The Programs Committee will review, assess, and recommend for projects and plans submitted to the TSC, technical steering committee. The Finance, Administration and Audit Committee will include staff of NACA's Financial Management Unit. This committee will (i)review and recommend to NACA on expenditure estimates and budgeting activities for the project, (ii) ensure that management o f financial resources are well coordinated at both the national and district levels, (iii) facilitate disbursements to individual NGOs based on specific tracking measures for follow-up purposes which will trigger the quarterly disbursements, (iv) provide a forum for private and direct communication between committee members and the external auditors, internal auditors, and senior staff, and (v) establish procedures to receive retain and treat complaints received by the PSC regarding accounting, internal accounting 48 controls, or audit matters and for the confidential, anonymous submissions by staff o f concerns regarding questionable accounting or audit matters. 7. The Procurement Committee will primarily consist of members of NACA's procurement team as well as selected district and national level representatives o f the procurement teams o f the implementing partners; in addition, it may be useful to also consider inclusion of representatives from civil society and private sector. This committee will (i) undertake procurement activities for activities implementedunder the NACA component, (ii)support other implementing partners in the Ministries in carrying out procurement or undertake procurement for them as necessary, and (iii)review and verify that all procurement activities under the project have been undertaken inaccordance with the agreedpolicies and procedures agreedwith the World Bank. 8. The Public Sector Ministries will focus their activities on their behavioral change activities targeting their staff and clients (MLG will focus on community level clientele and OVCs /out o f school youths, MLHA on Prisons staff and Prisoners, MOE on teachers and in-school youths, MYSC on ministerial staff and out of school youths, MWT on staff, mobile population and CSWs, and MOH on HIV+ patients on ARVs as well as on providing technical assistance as needed to the participating ministries). Ministerial work plans will be reviewed and approved by the PSC annually to ensure complementarities and synergies where available. To improve program management, implementers within the Ministries will be primarily responsible butwill be able to access capacity buildingsupport for results basedmanagement, and monitoring and evaluation from NACA. ProPrammaticFI'echnical: 9. BNAPSProject scope of activities willbe agreed to bythe PSC annually andreviewedmid-year. The specific CSO proposals and ministerial work-plans will be appraised and approved by the HIV- Technical Steering Committee at the National level and by the DAC's office at the selected Project Districts. As mentioned above the PSC will decide on the thematic and geographical scope o f activities for the Project as well as ensure complementarities between other development partners. The TSC will ensure the financial and technical viability of work-plans and proposals and design the M&E framework. The TSC will also agree with NACA on specific coordination mechanisms and procedures that will be designed to facilitate implementationo f Project activities. 10. At the District level, Botswana has beenvery effective indecentralizing project implementation- with the District Multi-Sectoral AIDS Committees (DMSACs) playing an important role in the implementation of HIV/AIDS activities by coordinating public sector, CSOs, FBOs, and partner activities at the community level with technical and fiduciary support from their national level counterparts as and when needed. DACs are the primary units that coordinate and facilitate implementation of HIV/AIDS activities at the district level. Technical Coordination will be managed by the DAC's office which will be fortified with TA as part of this Project. These activities will include (i) designing district plans based on inputs on implementation priorities o f the target groups for the various stakeholders, and the public sector ministerial plans; (ii)facilitate implementation where necessary, primarily through technical reviews o f the proposed activities, and implementation support to the implementation partners, where needed; (iii) and approve CSO proposals below the 30,000BWP review progress. threshold; (iv) recommend disbursement o f quarterly grants to the NGOs, and (v) monitor implementation 49 Fiduciarv: Financial Management: 11. The project will be coordinated by NACA through six line ministries, CSOs and the private sector. NACA i s a department inthe Ministryof State President. It is headedby the Nationai Coordinator who i s responsible to the Permanent Secretary, Ministry of State President. NACA has a constituted council. It consists of 4 departments, which are Behavior Change Interactions and Communications; ProgramPlanning; Monitoring and Evaluation; and Ministry Management. These departments, including the Finance and Accounts Units will be strengthened and their responsibilities will be more effectively defined to meet the challenges of the multi-level coordination demands of the project. This will also ensure clarity o froles at all levels o f management. The project staff at NACA, line ministries and District Councils will be trained in World Bank financial management and disbursement procedures. Grant Guidelines and operational manual will be produced, and simple financial reporting forms designed for use by the implementing organizations to ensure understanding and accountability. 12. The project will hire 2 financial management specialists for a maximum period of 2 years at the program and project levels. Their responsibilities will include: production of financial management guidelines for donor funded project implementation; training of program and project staff in financial management, monitoring of utilization of funds and other responsibilities as will be provided in their "Terms o f Reference" 13. NACA's proposed financial management arrangements, as well as the arrangements at MFDP, which will have the responsibility of managing the loan funds and authorizing disbursements in form of finance warrants to NACA, were reviewed in accordance with the Financial Management Practices Manual datedNovember 3,2005. 14. Project funds will be channeled through NACA. Ministerial and National level disbursements will be carriedout directly by NACA, while district level allocations, based on approvedproposals, will be disbursed by the Treasury o f the District Council inthe respective Project districts. disbursements to Districts will be quarterly. The first advance upon effectiveness will be for 6 months estimated expenditure, and thereafter on quarterly basis. This applies to CSOs/CBOs as well. Critical risks and possiblecontroversialaspects: 15. The following table identifies the key risks that the project management may face, and provides the measuresto be takento mitigate them: R i S k S RiskMitigationMeasures Audit o fthe project financial statementsmay The project financial statements will bepreparedand audited as be delayed beyond 6 months o fthe a special fund and submitted to the Bank by 30* September each govemment financial year. year. Delay inthe preparationo f financial The external audit backlog at the District level will be cleared statementsat the District Council within the f i s t six months o f the project implementation, and level. the Auditor General will audit and submit audit reports by September 30 each year. IDelay inaccounting for utilization o ffhds at Simplified accounting forms will be designed as part 3fthe the CSO and CBO levels. IIIOperational manual &h training on effective utilization. 50 16. Loan conditionsand covenants (a) Effectiveness Condition Standard effectiveness conditions, in addition to the following: NACA has recruited the following technical specialists for the Project: (i)amanagementand implementationsenior specialist; (ii)a financial management specialist; (iii) a procurement specialist; and (iv) a District-level grant officer in each of the following Districts: South East District, Kweneng East District, Francistown District, Selebi- Phikwe District, and Goodhope Sub-District, all with terms o f reference, qualifications and experience satisfactory to the Bank. @) Disbursement Condition N o withdrawals shall be made with respect to the Civil SocietyPrivate Sector Component of the Project until: (i) Government has furnished evidence to the Bank for its approval that the first 20 grants under this component have beenmade inaccordancewith the criteria, terms and conditions set forth or referred to in the Operational Manual; and (ii) with respect to any Phase I1Health District, until the Financial Management Assessment has been completed and the Bank has determined that the relevant Phase 11 Health District financial management arrangementsare acceptable. fc) Covenants 17. Datedcovenants: 1) No later than three months after the Effective Date, the Borrower shall have ensured that NACA has recruited the following long-term senior technical specialists for the Project (in addition to those recruited prior to effectiveness): (i) secondfinancial management a consultant; (ii) a secondprocurement consultant, each with terms o f reference, qualifications and experience satisfactory to the Bank. ii) The Borrower shall ensure that its Office o f the Auditor General has cleared all of the audit backlogs: (i) no later than eight months after the Effective Date for Phase IHealth Districts ; and (ii) inception of Phase I1HealthDistricts, to the Bank's satisfaction. by iii) Nolaterthan oneyear after the EffectiveDate, theBorrower shallhaveensuredthat a detailed social analysis for the Project has been carriedout, as satisfactory to the Bank. iv) N o later than six months after the Effective Date, the Borrower shall have ensured that all finance and accounting staff inthe Public Sector Ministries and NACA necessary for Project implementationhave beenrecruited, all with terms o freference, qualifications and experience satisfactory to the Bank. 18. Un-datedcovenants i) Within the context of the overall national program, hold a joint annual partner: (a) retrospective review of program and project progress; and (b) prospective review o f program and project plans for the comingyear. ii) Holda project mid-termreview. iii) MaintaintheProjectSteeringCommitteethroughoutprojectimplementation. iv) Quarterly financial reports be prepared and submittedto the Bank no later than 45 days from the end o f each quarter. v) Annual audit reports will be submittedto the Bank by September 30 eachyear. 19. Procurement activities will be coordinated by NACA at the national level. Botswana's PPADB (Public Procurement and Asset Disposal Board) has a very comprehensive but tortuous process. Hence a waiver had been obtained to enable more time efficient procurement activities for HIV related goods. Based on this, it i s envisaged that the majority of procurement activities will be coordinated nationally to maximize the efficiencies inherent inbulkprocurement processesas well as for easier coordination. 51 20. Strategy and Oversight: Two high-level institutions (PSC and TSC), as mentioned earlier, will be charged withthe strategic and oversight functions ofthe BNAPSProject. Procurement 21. Procurement under the Project would be carried out in accordance with the World Bank's "Guidelines: Procurement under BRDLoans and IDA Credits" dated May 2004, revised October 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers' dated May 2004 revised October 2006, and the provisions stipulated in the Legal Agreement. Bank standard bidding documents shall be used for procurement of goods under International Competitive Bidding and Bank standard Request for Proposal (RFP) shall be used for selection of large value consultants involving international consultants. For National Competitive Bidding (NCB), Government of Botswana standard biddingdocuments maybeusedsubject to Bank's reviewandNo Objection. 22. The particular provisions that would require review and No objection for procurement under the project include: (i) Foreignbidders shall be allowed to participate in National Competitive Bidding; (ii) Registration/ classificationo f bidders may be used for establishing bidder qualification or preparing a list for use under price comparison procedure but not as criteria for bidding; (iii) o f preference based on use citizen degree o f ownership shall not be used; (iv) use o f point system and bracketinginthe evaluation o f bids for goods shall not be used; (v) Price negotiations shall not be held with successful bidder for procurement of goods; and (vi) selection of consultants will be preceded by shortlist process in response to an expression of interest. Alternatively Bank's standard bidding documents may be used and adapted for National Competitive Bidding. The general descriptions of various items under different expenditure category are described below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and timeframe would be agreed between the Borrower and the Bank in the Procurement Plan. The prior review and procurement method threshold indicated below are intended for the initial Procurement plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementationneeds and improvements ininstitutionalcapacity. 23. Procurement activities under the Project will be carried out by NACA, line ministries o f Education, Labour and Home Affairs, Local Government, Works and Transport, Youth, Sports and Culture and Health at central government level. At decentralized level, procurement activities will be undertaken by district councils and Civil Society organizations (CSO). NACA, line Ministries and District Councils have established Supplies Unit or Division which are responsible for procurement and stores function. The supplies unitsare managedby technician to middleprofessional staff. The staff inthe Supplies Unitadequateexperience inprocurement through shopping procedures buthave little experience in large value tendering of goods and selection of consultants. For large value goods contracts, the Supplies Unit i s assisted by sectors specialists to prepare tender documents. Protracted delays are experienced in the adjudication of quotations and tenders above US$l,OOO because o f many committees that have to review the recommendations andthese committees do not meet regularly 24. At community level, procurement will be undertakenby CSO networks and grass root CSOs. CSO networks have adequate capacity to undertake procurement through shopping procedures ad recruitment o f individual consultants and small value consultancies for firms. The capacity o f grass root CSOsi s considered weak inbothproject and fiduciary management o fproject activities 25. Overall, the capacity of the implementing agencies to undertake procurement i s considered AVERAGE and the risk is MODERATE. The main risks envisaged include: (i)uncompetitive procedures and provisions in the Act and bidding documents; (ii) lengthy and delayed approvals due to several approval thresholds and by several committees which do not meet regularly; (iii) staff not familiar 52 with procurement under World Bank procedures in general and selection and employment o f consultants in particular; (iv) delays in start up activities because staff do not have experience in large value procurement and procurement under World Bank procedures; and (v) weak CSO capacity at grass root level. 26. To mitigate against these risks, the project will put in place the following measures: (i)request for waivers to streamline procurement adjudication process; (ii) apply exclusions to national Bidding documents to remove uncompetitive provisions. Alternatively adapt Bank bidding documents for NCB; (iii)Train staffinWorldBankprocurement proceduresandselection ofconsultants; (iv) engage and maintain procurement specialists for first 2 years of the project; (v) engage Grant officers with prerequisite knowledge in fiduciary management to supplement the capacity o f District Aids Coordinators; (vi) Train CSOs inprocurement prior to disbursement o f funds and require CSO networks to assist their affiliates in fiduciary management; and (vii) procurement documents for key start up activities to be prepared prior to effectiveness and PPADB to assist NACA, the principal implementing agency inpreparingthe documents. 53 Annex 7: FinancialManagementandDisbursementArrangements BOTSWANA: BotswanaNationalHIV/AIDS PreventionSupport Project Executive Summary 1. A financial management assessment of the National Aids Coordination Agency (NACA) was carried out in accordance with the World Bank-Financed Investment Operations Financial Management Practices Manual dated November 3, 2005. The objective of the assessment was to determine whether NACA has acceptable financial management arrangements, which will ensure that: (a) Proceedsof the loan are usedfor the purposes intended, inan efficient and economical way; (b) Theproceedsare properly accountedfor; (c) The periodic financial reports are accurate, reliable, and timely; (d) Arrangements exist for an independent audit ofthe sourcesanduses ofthe loanproceeds; and (e) The assets of the entity and the sub-implementing agencies are safeguarded. 2. The Bank's policy on Financial Management (FM), OP/BP 10.02, requires the borrower and the project implementing agencies to maintain financial management systems, including budgeting, accounting, financial reporting, internal controls, funds flow arrangements, and auditing adequate to ensure that they can provide the Bank with accurate and timely information regarding project resources and expenditures. The FM systems are expected to be in place at the commencement of the project implementation. 3. NACA i s the main implementing agency responsible for the coordination o f the implementation activities of the implementing line ministries, the civil society organizations and the private sector. The project will use the Botswana country financial management system, assessed to have met the requirements o f Bank's OP/BP 10.02. There i s however, the needto buildcapacity inNACA, the District Administration, and generally at the level of the civil society and private implementingorganizations. 4. The overall risk rating for the project is moderate. Table1 below shows the key financial management risks and mitigating measures against these risks, which NACA's management may face in achievingthe development objectives of the project. Summary ProjectDescription 5. The main objective o f the project is to assist the Government o f Botswana (GOB) in increasing the coverage, efficiency, and sustainability o f targeted and evidence-based HIV/AIDS interventions by strengthening NACA's institutional and coordination capacity and financing strategic and innovative HIV/AIDS-related prevention and mitigation activities. 6. The project activities for the first two years will focus on the easternborder of the country, which includes the highestprevalence health districts, specifically, the South East, Kweneng East, Francistown, Selebi-Phikwe districts and the Goodhope sub-district. These are the five health districts that will be involved inPhase Io f the project (Years One and Two). It shouldbe noted that all 24 health districts will be covered inthe secondphase o fthe project, beginninginthe thirdyear o fthe project life. The fiduciary assessment o f the Phase I1 districts will be conducted as part of the project supervision using an appropriate sample during Year Two of the project. N o project finds will be advanced to the Phase 11 districts untilthis assessment has been completed and the District financial management arrangementsare acceptable to the Bank, as reflected inthe LoanAgreement. Six line ministries will also benefit under the project over the first year, after which the specific ministries involved may vary. These ministries, which 54 are: i)Health; ii)Works and Transport; iii)Labour and Home Affairs; iv) Education; v) Local Government; and vi) Youth, Sports and Culture will focus on initiatives inline with the National Strategic Framework (NSF), which include: reduction of infection; provision of treatment care and support; strengthening o f the management of the national response to HIV/AIDS; mitigation of the Psych-social and economic impact; andprovision of a strengthenedlegal and ethical environment. 7. Inaddition, theprojectwillmake45% ofthe loanfunds available to Civil Society Organizations (CSOs) andthe Private Sector. The project consists ofthree components: i)Support to NACA; ii)Support to Public Sector Ministries; and iii)Support to Civil Society Organizations and the Private Sector. CountryIssues 8. Botswanais a middleincome country with a Country Policy and InstitutionalAssessment (CPIA) rating o f 4.5 inQuality of Budgetary and Financial Management. It i s one of the few Sub-SaharanAfrican countries to have reached the upper middle income band. Botswana has sustainedhigheconomic growth over a number o f decades. It has not taken loans from the Bank inthe last two decades. As a result of the fact that no country level analytic work has been carried out by the Bank inthe recent past, the financial management assessment did not report on the impact of the country level issues on the proposed project financial management systems. These issues would have been documented inthe country analyhc work, which include the: Public Expenditure Financial Accountability-Performance Measurement Framework (PEFA-PMF); Country FinancialManagement Accountability Assessment (CFAA) and others. 9. However, the Report on Observance o f Standards and Codes- Accounting and Auditing (A & A ROSC) for Botswana was carried out in 2006. The ROSC highlighted that Botswana had made considerable efforts in aligning its accounting and auditing practices with internationally accepted standards and codes; corporate accounting and disclosure practices had improved considerably over the last 5 years; monitoring and enforcement of financial reporting requirements in the banking sector had contributed to improved transparency o f the financial sector. The report also indicated some of the areas that needed to be strengthened including: legal mandate for corporate entities to follow the international financial reporting standards (IFRS) in the preparation of financial statements; inadequate technical capacities of the regulators of the national accounting profession; shortcomings inprofessional education and training. The World Bank inthis respect, has approved an Institutional Development Fund grant of about $486,000 to implement the recommendations of the ROSC. This will assist the Botswana Institute of Accountants to strengthen its institutional capacity to function as a modern and effective professional accountancy body inline with the improved approaches recommended by the International Federation of Accountants andrecent global developments inthe regulatory framework o f accounting and auditing. Conditions of Risk Risk RiskMitigatingMeasure Residual Negotiation Rating Risk /Board/ Effectiveness (Yes/No) Inherent Risk Country Level 1. Use ofthe outdated M Government i s inthe process of awarding a L NO consultancy contract for the revisiono f the Finance andAudit Act. Finance andAccounting staff inthe line ministries and departments,including N A C A I 55 2. Audit o fthe project andBudgeting System (GABS).The staff financial statements also use the GABS Manual. may be delayed beyond 6 months o f The project's financial statements will be the government prepared and audited as a special fund and financial year. submittedto the Bank by September 30 each year. This has beendone for some donor funded projects inthe past. Entity Level S The Finance and accounting units are staffed M One FMS will be LimitedFMcapacity with qualified accounting personnel. Two onplace by inprojectfinancial Financial Management Specialists (FMSs) Effectiveness and a management. will be hiredand retained for a maximum second FMSby no periodo f 2 years, to among other later than 3 months responsibilities, produce FM after Effectiveness guidelines/procedures for the program as a Date whole, includingDonor funded projects; establish resource mobilizationand disbursement mechanisms; train at least 15 identified staff o fN A C A and the implementing line ministries inDonor fundedproject financial management and implementation; conduct 10 site visits on monthly basis. The duties o f the FMSs will be detailedintheir TORS Project Level S Organization o f training sessionsbyN A C A 1.Communities may Financial Management Specialists (FMS) to not have the capacity strengthen the basic accounting capacity at to implement the CBO level. subprojects. The District Aid Coordinator (DAC) will 2. Procedures provide assistance instrengthening the described inthe capacity o fthe communities to manage project operational subprojects and funds. A technical assistant manual may not be willbe appointed for eachparticipating DAC followed properly by to assist inCBO capacity development. communities and grants may not be used A Technical Assistant will be recruited for for the purposes each DA to further strengthen their FM intended. capacity. There will be monthly site visits by the N A C A FMS and regular audit bythe internal auditors. The Principal Internal Auditor will include the project site visits inhis annual workplan. Banksupervisionmissions will include review o fuse o fIBRDfunds. 3. Disbursemento f M Disbursement of funds to the CSOs and L funds through the DA communities will be through the with weak FM District Councils, which have proven records capacity and little o fhaving successfully managed knowledge inproject disbursement o f donor funds. 56 financial management. ControlRisk Budgeting Budgeting and financial management L NO 4. Weak budgeting M capacity will be strengthened at NACA, DA capacity at the CBO and CSO levels to train the CBOs inbasic levelresultingin bookkeeping. inability to successfully The Private Sector Network currently implement subprojects provides assistanceto other CSOs and the Accounting S Simplifiedaccounting forms will be M No-Operations 5. Delay inaccounting designed withtraining on effective Mancal completed for utilization o f hnds utilization. These forms will formpart o f the during project at the CSO and CBO Annexes to the OperationalManual. preparation levels. Internal Control 6. Fixedassets register M GOB expenses assets inthe year o fpurchase L NO may not be maintained and fixed assets register is not maintained for the assets o f the centrally but by individual spending project. ministries. The project will maintain a fixed assets register to recordpurchases and disposals o f its assets. FundsFlow Use o f the DA for disbursement purposes L NO 7. Funds may not M underthe Globalfundwas reported reachthe intended unsatisfactory. implementing Disbursementthrough the District Councils organizations, will be more effective, as they are familiar especially at the with donor fhded project disbursement community level. procedures. The District Aids Coordinator is not necessarily an accountant or has accounting background. The District Treasurer inthe D C has accounting background with staff inthe D C Accounting Unit. FinancialReporting Financial statementso fthe districts L NO 8. Delay inthe M ?articipatinginthe project will be prepared preparation o f mdauditedbefore September 30 eachyear. financial statements at I'he FSs for the districts are preparedon the District Councils ime, ready for annual audit by the Auditor level. 3eneral. Auditing M ?inancia1statements(FS) at the Central and L NO Local Authority levels are auditedby the 9. Audit reports may 4uditor General. The FS will be audited and not be issuedon time. iuditreports issuedby30" September each fear. The Finance and Audit Act allows 12 57 months for the Auditor Generalto submitthe annual report. The project will be treated as a "special fund" for audit purposes. Overall FMRisk M The overall FMrisk is assessed as moderate. Rating The inherent risks at the Country, Entity, and Project levels are mitigated by the use o fthe Country's FMsystems with which the accounting staff are familiar; timely preparationand submission o f interim financial reports; provision o f targeted technical assistance for identifiedskills gaps; training staffinworld bank financial management and disbursement procedures; and subjecting the activities o f the project to internal and independent external audit. Risk Rating -H (High Risk), S (Su Strength 10. The project's finances will be disbursed through the government's tried and tested financial management system. With oversight by the PSC, NACA council, periodic external audit physical verification, the finance, administrationand audit Committee, the Public Accounts Committee both at the Central and Local Government level, and the design of reporting forms for the CSO and CBO components, BNAPSwill start from a position o frelative strength. Weakness 11. Dueto the weak capacity inDonor fundedprojectfinancial management,monitoringoffinancial reporting at NACA i s not effective. The identified inadequate monitoring andreporting, poor design of guidelines for effective reporting and limitedcapacity at NACA are some o f the major obstacles to the successful implementation o f the Global FundRound2 project. 12. The following financial managementactionplanis recommended. Table 2: FinancialManagementActionPlan Action I Responsible I DueDate Entity Hire 2 Financial Management Specialists N A C A for a maximumperiod o f 2 years to among project effectiveness and the second financial other responsibilities: specialist no later than 3 months after project effectiveness. - produce FMguidelines for Donor - fundedprojects; establish resource mobilizationand - disbursement mechanisms, train at least 15 identified staff o f N A C A and the implementing line ministries inDonor fundedproject financial management and - implementation conduct at least 10 site visits on a monthly basis. 58 Agree the Unaudited InterimFinancial MFDP CompletedbyNegotiations Reports (IFRs) format Training inBank financial management World Bank Between June-September 2008 and disbursementprocedures. Produce Grant Guidelines and Operational NACA Completed Manual Replace the Finance, Accounting, staff N o later than 6 months after the Effective date ~~ MFDP transferred insome o f the BNAPS implementing line ministries andNACA, to strkngthcapacity of existing units Clear audit backlogs at the District Office o f the Borrower shall ensure that its Office o fthe Councils level Auditor General Auditor General has cleared all o f the audit backlogs: (i)no later than eight (8) rilonths after the Effective Date for PhaseIHealthDistricts ; and (ii) inception o f PhaseI1Health Districts, by to the Bank's satisfaction. Local Authority Public Accounts Local Authority Withinthe first year o f the Committee to update its review of the Public Project implementation participating districts audit reports to the Accounts end o f FY07, and o f all the District Committee Councils within the second year o f the project implementation. ImplementingEntity 13. NACA will coordinate implementation o f the project through six line ministries, Civil Society Organizations and the Private Sector. NACA i s a department in the Ministry of State President. It is composed of 4 Departments (Behavior Change Interactions and Communications; Program Planning; Monitoring and Evaluation; and Ministry Management). The Finance and Accounts units are in the MinistryManagement Department. NACA has total staff strength of 91, with 6 staff inthe Finance and Accounts Units. Two of the Units' (one in each Unit) staff transferred to other establishments are yet to be replaced by MFDP. 14. The entity i s headedby the National Coordinator who is a Permanent Secretary andresponsible to the Permanent Secretary to the President. NACA is familiar with the implementation of donor funded projects. There is however the need to build capacity at NACA for improved efficiency and effective project coordination. This will be addressed under BNAPS by establishing the Finance, Administration and Audit committee, designing reporting forms at all level, training o f identified NACA staff and of the implementing ministries in donor funded project financial management and implementation, clear definition o froles and responsibilities at all the levels of management. 15. BNAPS monitoring and evaluation will be as provided in the Botswana's National Monitoring and Evaluation Framework. Budgeting 16. The budgetingarrangementsfor the project will follow GOB'Sbudgetingsystem. Expecteddonor funds with firm commitments are included in the annual national budget. Each donor funded project is allocated a code. Budgets for HIV/AIDS related activities form part o f NACA's annual Budget. The 59 BNAF'S loan will accordingly be provided for in NACA's annual Budget over the life of the project. Budget discussions are held annually with individual ministries and departments. The Budget Review Committee submits the Budget to the Estimate Committee, and thereafter to the Cabinet. The Finance and Estimate (a committee o f Parliamentarians) reviews the Budget before it i s presented to Parliament in February eachyear. The Government's financial year i s April to March. Accounting Central Government 17. The Government Accounting and BudgetingSystem (GABS), a module of the "Oracle" is used for budgeting and accounting. It has been rolled out to all the Government ministriesand departments, including NACA. The financial statements (FS) are generatedby the system on a monthly basis. NACA will review and ensure accuraterecording of its transactions on a monthly basis. Adjustmentjournals will be raised, as appropriate and submitted to the office of the Accountant General for posting. 18. The Finance Unit in NACA i s headed by a Senior Finance Officer (SFO), acting as the Principal Finance Officer (PFO). The PFO was yet to be replaced. The SFO i s a holder o f a Masters degree in Accounting and Finance. She is assisted by an Assistant Finance Officer with a Bachelors degree in accounting. The Unit is responsible for issuance o f letters of authority to spending units, including the ministries and other entities budgeted for under NACA. It also produces and reviews the entity's monthly financial report. 19. The Accounting Unit i s headed by an Assistant Accountant with accounting technician qualifications. The other 3 staff in the Unit hold Diploma in Accounts and Business Studies, and the Accounting Technician (foundation) qualifications. The Unit i s responsible for recording transactions in GABS, andreconcilingthe general ledger. 20. Each ministry and parastatal has an accounting unit as well as a finance unit. Payment vouchers are prepared by spending line ministries and parastatals. The Finance and Accounts units verify and record inthe system and thereafter forward the payment vouchers to the Accountant General for payment. The system and operations are the same in each ministry. From the assessment o f the finance and accounting system in operation in the three ministries (MOH, MWT, MLG) visited, the financial managementriskthat the project may face by the implementationo f Component 2 i s moderate. LocalAuthorities 21. The Districts on the other hand use the "Great Plains" accounting software. The financial statements are however prepared manually using excel spreadsheet, but on timely basis. The Districts have selected a committee o f some of their Treasurers to work on the creation o f a chart of accounts, which they believe will enable the system to produce the financial statements. The target date for completion o f the exercise i s December 2008. The GABS and the Districts accounting systems are not interfaced. The districts prepare their financial statements (FS) within the eighth-monthperiod stipulated in the Finance and Audit Act. The audit as stipulated in the Act is supposed to be carried out by the Auditor General within four months of the preparation o f the FS. Also, from record available inthe office of the Auditor General, the districts maintain adequate accounting books and records. The bank reconciliation statements were up to date. Each local Authority has an Accounts Committee. The committee reviews the annual audited financial statements. The FMassessment noted however that some years audited financial statements had not been reviewed by the committee. This will be covered in the audit terms o f reference, in addition to clearing o f the accounting backlog. The FM risk rating o f the 60 implementation of the project by the districts i s moderate. There will however, be need to strengthen the staffing capacity o f the districts when the remaining 19projects become beneficiaries under the project. 22. Duringthe project appraisal, it was notedthat the annual audit of3 ofthe districts participatingin the first phase for FY06/07 was still outstanding. These districts are: Francistown; Kweneng; and the South East. For effective monitoring and audit of the financial statement o f the project, the outstanding audit should be completed along with the FY 07/08 audit o f the five districts duringthe first eight months of the project implementation. 23. A Local Authority (LA) is headed by a District Commissioner with the District Administration (DA) and District Council (DC) units. The DC is headed by the Council Secretary and the Council Treasurer i s directly responsible to him. The District Aids Coordinator i s in the DA arm o f the Local authority establishment. 24. The International Public Sector Accounting Standards (IPSAS) form the basis of the preparation o f the FS. InternalControlsandInternalAuditing 25. Internal control comprises the whole system o f control, financial or otherwise, established by the implementing agencies inorder to achieve accountability at all levels; carry out the project activities inan orderly and efficient manner; ensure adherence to policies and procedures; safeguard the assets of the project; and secure the reliability and integrity of the accounting records and information. The key elements that ensure sound management and effective internal control systems include: (i)organizational structures, systems and procedures; (ii) segregation of functions to initiate, authorize, execute and record; (iii)physical control over assets; (iv) clear description o f duties and responsibilities; (v) preparation o f reconciliation statements; (vi) internal audit; (vii)integrity andperformance of staff at all levels; and (viii) supervision by management. 26. Under BNAPS, the institutional structure will be aligned to be more efficient and effective in resource mobilization, training o f project implementation entities as appropriate, establishment of financial guidelines, framework for budget allocation. There i s segregation o f FM duties. The financial management assessment didnot record internal control issuesthat require special attention. 27. NACA's internal audit unit i s headed by a principal internal auditor and assisted by an audit clerk. The unit's capacity will be strengthened to effectively cover review o f the financial activities o f the projectby focusing onrisks as well as systems improvements besidescompliance. CustomsDuties andTaxes 28. The BNAPSproject will be finance project taxes (other than exempted taxes), as per theproposed Country FinancingParametersfor Botswana. Assessmentof CivilSociety Network 29. The risklevel of the fiduciary systems of three o f the five GOB registeredCivil Society Network organizations were assessed and found to be moderate. The three Network organizations that were assessed were: i)BONASO; ii)BONELA; and iii)BOCAIP. Each of these three network organizations has adequately staffed finance department, in terms o f qualifications and number. Their financial statements are prepared timely and they operate financial management and supplies manual approved by their respective governing boards. Their individual annual budgets are reviewed and approved by their 61 respective boards. Each of the organizations maintains adequate accounting records. Their bank reconciliation statements were up to date as at the time o f the appraisal. Two of these three network organizations were audited by PriceWaterhouseCoopers. All the civil society and private sector organizations are free to submit proposals under Component 3 in their respective capacities. BONASO has 160 affiliates. The organization has managed several donor funded projects, including Global Fund and ACHAP. BOCAIP, a faith based organization with eleven decentralized centers also has affiliates outside its eleven centers. It provides training services to government ministries in counseling with respect to HlV/AIDS.Each organization has established organizational structure. The risk of monitoring accountability by affiliates is greatly reduced by allowing each organization, including their affiliates to submit grant proposals in their respective capacities. Based on the risk assessment and review of the arrangement o f the global HIV/AIDSGrant management, the riskrating for the project with respect to the implementation o f the project by these organizations i s moderate. It should be noted that all civil society networks, private sector organizations, and other registerednon-governmental organizations are eligible to submit proposals under Project Component 3. Flow of FundsandDisbursementArrangements 30. The loan proceeds will be disbursed over a period o f five years. Table 3 below provides the allocation o f the loan proceeds into the agreed disbursement expenditure categories. BNAPS will use the Reimbursement method. Funds will flow from the Bank into the Government Remittance Account through GOB'Sdepository account with the Federal ReserveBank, New York. 31. Disbursements to NACA, the line ministries and the Districts will follow the Government's accounting and flow of funds procedures. The activities to be implementedby the line ministries, CSOs and the private sector will form part o f NACA's annual budget. NACA's Project Steering Committee (PSC), already in existence, will approve the project annual workplan. Disbursements to the CSOs and private sector will flow from NACA through the Ministry o f Local Government (MLG). MLG will issue sub-warrants to the benefitingDistrict Councils. 32. Upon the effectiveness of the loan agreement, NACA will submit cashrequest (Project Memo) to MFDP for the estimated expenditure for the first six months of the project life based on the approved annual workplan. Subsequent requests will be on quarterly basis supported with invoices and receipts, using the GOB existing procedure, and must be within 20 days of the end of each quarter. MFDP will review the project Memo and verify the invoices before issuingfinance warrant for the cashrequests. 33. GOB, through MFDP will submit on quarterly basis, withdrawal applications supported by IFRs for reimbursement of eligible expenditures incurredand paid under the project. The Applications together with the IFRs will be submitted to the Bank within 45 days of the end of the quarter to which the reports relate. Disbursementto the CSOandPrivateSector 34. Based on the finance warrant, NACA will issue Letter of Authority to the Ministry o f Local Government for disbursement o f funds to the respective District Councils to meet the cost o f the approved proposals submitted by these organizations. The authority to spend will be issued on quarterly basis. MLGwill inturn issue sub-warrants to the District Councils. The District Aids Coordinator will monitor utilization o f the Grant at the District level. Cheques for payment to CSOs and PSOs will be issuedby the District Councils (Council Treasurers). District councils will use their existing bank accounts for the implementation o f the project. MLG will however allocate an accounts code to the Project at the local authority level. The initial release of funds to each implementingentity will be for half of the estimated annual expenditure basedon the annual approved work plan and the amount o f the finance warrant. 62 Accountability. 35. Each sub-implementing entity or establishment will submit quarterly financial returns (using GOB'S procedures) to NACA within 15 days of the end of each quarter. To be eligible for quarterly funding each CSO or private sector will account for at least 75% of amounts received in the previous quarter. NACA will consolidate the financial returns and submit to MFDP with IFRs and Project Memo. within20 days ofthe endof eachquarter. 36. All supporting documents (invoices, payment vouchers, goods received notes etc.) will be retained by NACA and made available for review by periodic Bank supervision missions, internal and external auditors. The originals of these documents are however retainedby the office o f thz Accountant General. Table3: Allocation ofLoanProceeds Category Amount of the Loan PercentageofExpendituresto be Allocated financed (expressedinUSD) (inclusiveof Taxes) (1)Goods and non-consultants' 6,600,000 100% services (2) Consultants' services 7,400,000 100% (3) Training 3,600,000 100% (4) Goods, Non-Consultants' 22,300,000 100% Services and Consultants Services under Subproject Grants (5) Operating Costs 8,100,000 100% (6) Unallocated 2,000,000 TOTAL AMOUNT 50,000,000 63 Flow of FundsDiagram IBRD 4 MFDP . 4 2 NACA L (Request I Memo) 1 M o L G v - r Public Sector 3 Ministries HealthDistricts (Phase IandPhase I1 districts); Via grants implemented by civil society andprivate sector organizations 1-NACA submits request for quarterly release of funds (for six months as initialrequest) 2 - MFDP issues Finance Warrant to NACA 3 -NACA issues Letter o fAuthority to MoLG and the line ministries. MoLG issues sub warrants to District Councils for payments to implementing organizations. 4 -MFDP submits reimbursement applicationtogether with IFRsto the Bank. The Bank disburses funds into GOB'Saccount. Note: Lines with circular tips indicate informationflows, whereas lines with arrow tips indicalejhancial flows. 64 External Auditing I Audit Report DueDate Project specific financial statements Within six months after the endo feach fiscal year -bySeptember30eachyear. 38. Conditionality (a)Negotiations Conditions The conditions identifed as part o f the Financial Management Assessment were met in advance of Negotiations and were: (i) agree Unaudited Interim Financial Report format; and (ii)produce the OperationalManual and Grant Guidelines. (6,Effectiveness Condition Standard effectiveness conditions, in addition to the following: NACA has recruited the following technical specialists for the Project: (i)managementandimplementationsenior specialist; (ii)a a financial management specialist; (iii) a procurement specialist; and (iv) a District-level grant officer in each o f the following Districts: South East District, Kweneng East District, Francistown District, Selebi- Phikwe District, and Goodhope Sub-District, all with terms o f reference, qualifications and experience satisfactory to the Bank. (c) Disbursement Condition N o withdrawals shall be made with respect to the Civil SocietyPrivate Sector Component o f the Project until: (i) Government has furnished evidence to the Bank for its approval that the first 20 grants under this component have beenmade inaccordancewith the criteria, terms and conditions set forth or referred to in the Operational Manual; and (ii) with respect to any Phase I1Health District, until the Financial Management Assessment has been completed and the Bank has determined that the relevant Phase 11 HealthDistrict financial management arrangements are acceptable. {d) Covenants Datedcovenants: i) No later than three months after the Effective Date, the Borrower shall have ensured that NACA has recruited the following long-term senior technical specialists for the Project (in addition to those recruited prior to effectiveness): (i)a second financial management consultant; (ii)a second procurement consultant, each with terms o f reference, qualifications and experience satisfactory to the Bank. 65 ii) The Borrower shall ensure that its Office of the Auditor General has cleared all of the audit backlogs: (i) no later than eight months after the Effective Date for Phase IHealth Districts; and (ii) inception o f Phase I1Health Districts, to the Bank's satisfaction. by iii) Nolaterthanoneyear after theEffectiveDate, theBorrower shall have ensured that a detailed social analysis for the Project has beencarriedout, as satisfactory to the Bank. iv) No later than six months after the Effective Date, the Borrower shall have ensured that all finance and accounting staff inthe Public Sector Ministries and NACA necessary for Project implementationhave beenrecruited, all with terms o freference, qualifications and experience satisfactory to the Bank. Un-datedcovenants: i) Within the context o f the overall national program, hold a joint annual partner: (a) retrospective review of program and project progress; and (b) prospective review of program and project plans for the coming year. ii) Holda project mid-termreview. iii) MaintaintheProjectSteeringCommitteethroughoutprojectimplementation. iv) Quarterly financial reports be prepared and submitted to the Bank no later than 45 days from the endofeachquarter. v) Annual audit reports will be submitted to the Bank by September 30 eachyear. SupervisionPlan 39. The project residual risk rating i s "Low". However, two supervision missions will be conducted inthe first year of implementationto ensure that the project's proposed FMarrangements are operating effectively given that the project would be the first Bank financed project after two decades. The Bank FMSwill also: 0 Review the quarterly IFRs as soon as they are submittedto the Bank. Review the annual audit reports and management letters with management response from the external auditors and follow-up on material accountability issues by engaging with the Task Team Leader, and/or the borrower. Governance andAccountability 40. No issues o f governance and accountability came to light during the assessment. The GOB Directorate of Corruption and Crime appears effective from the information gathered. The Directorate trains staff and also involves internal auditors in other establishments to conduct investigations. The principal internal auditor at NACA was so involved. To strengthen governance inthe project, a Finance, Administration and Audit (FAA) Committee will be established. The committee will be responsible for oversight, governance, accountability and transparency at NACA. The Audit committee will develop procedures for receiving, retaining and treating complaints received by NACA council regarding accounting, internal controls and audit matters. The duties and responsibilities o f the FAA committee and others are described inthe Operational Manual. Retroactivefinancing 41. Duringproject appraisal, NACA has indicated its willingness to pre-finance a number of key activities. This potential for retroactive financing has been reflected in the legal documents. As per World Bank operations policy [OP 6.0, para.2(e)], retroactive financing is permitted under the following conditions: (a) the activities financed are included in the project description; (b) the payments are for items procured in accordance with applicable Bank procurement procedures; (c) such payments do not 66 exceed 20 percent o f the loan amount; and (d) the payments were made by the borrower not more than 12 months before the expected date of Loan Agreement signing. 42. Following these guidelines, it was agreed at appraisal that the project loan would allow for retroactive financing of the consultancy services associated with Component 1 (technical and fiduciary consultancy services for NACA, including the recruitment of the consultants required to be in place by Project Effectiveness). This proposed retroactive financing would be quite modest in size (less than one percent of the loan amount) given that these activities would take place during the few months between project approval and effectiveness. The date after which payments may be made was agreed at appraisal, confirmed during negotiations, and recorded in the Loan Agreement which provides that payments may be made up to an amount ofUS$500,000 from July 1,2008 onwards. 67 Annex 8: ProcurementArrangements BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupport Project A. General 1. Procurement under the Project would be carried out in accordance with the World Bank`s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 2006 (referred to herein as the Procurement Guidelines) and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 revised October 2006 (referred to herein as the Consultant Guidelines) and the provisions stipulated in the Legal Agreement. Bank's Standard Bidding Documents (SDB) shall be used for procurement of goods under International Competitive Bidding and Bank's Standard Request for Proposal (RFP) shall be used for selection of consultants. For National Competitive Bidding (NCB), Government of Botswana SDB which have been reviewed and generally found acceptable may be used. 2. The followingprovisions shall apply for use of GOBNCB biddingdocuments under this project: (i) biddersshallbeallowedtoparticipateinNCB;(ii) foreign registration/ classification o f bidders shall not be used as a condition for bidding; (iii) use o f preference system based on citizen degree of ownership shall not be used; (iv) use o f point system and bracketing inthe evaluation o f bids for goods shall not be used; (v) negotiations shall not be held with successful bidder for procurement of goods; (vi) publication of invitation to bid ina national newspaper of wide circulation; (vii) NCB biddingdocuments shall clearly specify bid evaluation and post qualification criteria; (viii) bidding period shall not be less than four weeks and bids shall be opened publicly; and (ix) contract awards shall be published. Alternatively Bank's SDB may be used and adapted for NCB. The general descriptions o f various items under different expenditure category are described below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and timeframe would be agreedbetween the Borrower and the Bank inthe Procurement Plan. The prior review andprocurementmethodthresholds indicatedbelow are intendedfor the initialProcurementPlan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 3. Procurementof CivilWorks.No civil works are envisagedunderthe BNAPSProject. 4. Procurementof Goods.(Estimated to cost US$6.6 MEquivalent).Goods procuredunder this Project will include motor vehicles, portable cabins, medical equipment and ICT equipment. Goods estimated to cost US$ 250,000 equivalent or more per contract shall be procured under International Competitive Bidding(ICB) procurement method. Goods estimated to cost less than US$ 250,000 will be procured on the basis o f NCB. Goods that are estimated to cost less than US$ 50,000 equivalent per contract may be procured through shopping procedures as set forth in the Procurement Guidelines and described above. Where practical, the goods to be purchased will be grouped and be procured in one contract. Common capital goods required by several implementing entities such as vehicles and ICT equipment will be consolidated and procured under one contract. Capital goods for the demand-driven component under Civil Society Response may be consolidated with other capital goods where practical. However to enhance efficiency inthe implementationprocess, such goods may be procured separately for each grant recipients. 5. Direct contracting for goods: Direct contracting is contracting without competition (single source) and may be an appropriate method under the following circumstances: 68 An existingcontract for goods, awardedinaccordancewithproceduresacceptableto the Bank, may be extended for additional goods of a similar nature. The Bank shall be satisfied insuch cases that no advantage could be obtained by further competition and that the prices on the extended contract are reasonable. Provisions for such an extension, if considered likely in advance, shall be included inthe original contract. Standardization of equipment or spare parts, to be compatible with existing equipment, mayjustify additional purchases from the original Supplier. For such purchases to be justified, the original equipment shall be suitable, the number of new items shall generally be less than the existing number, the price shall be reasonable, and the advantages o f another make or source o f equipment shall have been considered and rejected on grounds acceptableto the Bank. The requiredequipment i s proprietary and obtainable only from one source. The Contractor responsible for a process design requires the purchase of critical items from a particular Supplier as a condition of a performance guarantee. Inexceptional cases, suchasinresponsetonaturaldisaster. Procurement of non-consulting services. Non-consulting services are services that are not of intellectual or advisory in nature. Non-consulting services under this projectwill include distribution of stocks from central-level procurement to the districts, workshops logistics and internet services. The procurement of non-consulting services shall be as per provisions specified above for the procurement of goods. An example o f such services would relate to the costs incurred for the distribution o f medical supplies which were procuredusingnon-projectresources. 7. Selection of Consultants (Estimated to cost US$7.4 Mequivalent). Consulting services under the project will include behavioural surveys, technical assistants in various fields, monitoring and evaluation studies and compliance verification monitoring. Except as detailed below, consulting services will be selectedthrough competition among qualified short-listed firms based on Quality and Cost-Based Selection (QCBS). Consultants for financial audits and other repetitive services estimated to cost less than US$50,000 equivalent per contract may be selected through Least-Cost Selection (LCS) method. Consulting services by firms estimated to cost less than US$ 100,000 equivalent may be selected on the basis o f Selection Based on the Consultant Qualifications (CQS). As appropriate, other selection methods such as Fixed Budget (FBS), Quality-Based Selection (QBS) may be used for selection of consulting firms. Individual consultants shall be selectedon the basis o f Individual Consultant Selection method (IC) as per Section V ofthe Consultant Guidelines. 8. Single-Source Selection of Consultants (SSS): Single-Source Selection may be appropriate only if it presents a clear advantage over competition: (a) for tasks that represent a natural continuation of previous work carried out by the firm, (b) in emergency cases, such as in response to disasters and for consulting services required duringthe period of time immediately following the emergency, (c) for very small assignments, or (d) when only one firm is qualified or has experience o f exceptional worth for the assignment. 9. Training (Estimated to cost US$ 3.6 M equivalent). Training services estimated to cost US$ 100,000 equivalent or more shall be procured on the basis o f QCBS or QBS as appropriate. Training services estimated to cost less than US$ 100,000 equivalent per contract may be procured through CQS method. When appropriate, training may also be procured on the basis o f Direct Contracting subject to review and approval by the Bank. The project will formulate an annual training plan and budget which 69 will be submittedto the Bank for its prior review and approval. The annual training plan will, inter alia, identify: (a) the training envisaged, (b) the justification for the training, how it will lead to effective performance and implementation of the project and or sector, (c) the personnel to be trained, (d) the selection methods o f institutions or individuals conducting such training, (e) the institutions which will conduct training, if already selected; (0 the duration of proposed training, and (g) the cost estimate o f the training. Report by the trainee upon completion of training would be mandatory. 10. Short Lists of Consultants. Short List of consultants for services estimated to cost less than US$ 100,000 equivalent per contract may be comprised entirely o f national consultants inaccordancewith the provisions of paragraph 2.7 of the Consultant Guidelines. 11. Operating Costs (Estimated to cost US$ 8.1 M equivalent). Operating costs will be procured using the Borrower's administrative procedures and or the administrative procedures of the component implementing agency's administrative procedures, which were reviewed and found acceptable to the Bank. 12. Special Arrangements: Ministryof Education (MoE) has an ongoing arrangement with Baylor Centre of Excellence on Paediatrics to monitor social behaviour and HIV Aids prevalence among children. Subject to satisfactory justification of the contract which. shall include: nature of the contract, selection process undertaken prior to the project, advantages o f continuing with the arrangement, uniqueness o f the contract and justified cost breakdown o f the proposed contract, the contract may be procured on single source selection. This case will be thoroughly reviewed by the Bank, based on the provisions for single source selection in the Consultant Guidelines, upon submission o f request from the Government. If the single sourcing i s found to be notjustifiable, the services will be sought on the basis o f open competition. 13. Priorreview by the Bank.The Borrower shall seek World Bankpriorreview inaccordancewith Appendix 1o f both Procurement and Consultant Guidelines for contracts above the thresholds as agreed inthe ProcurementPlan. For purposesofthe initialProcurementPlan, theBorrower shall seek Bankprior review for (i) all goods contract estimated to cost US$ 250,000 equivalent or more, (ii) consultancy all contracts with firms estimated to cost US$200,000 equivalent or more, (iii) all contracts with individual consultants estimated to cost US$ 50,000 equivalent or more, (iv) all direct contracting and single source selection estimated to cost US$ 1,000 equivalent and above, and (v) annual training plan. These prior review thresholds will be reviewed annually and any revisions based on reassessmentofthe implementing agencies capacity will be agreed with the Borrower inan updated Procurement Plan. All other contracts will be post reviewed during annual procurement post review missions and compliance verification monitoring. 14. Procurement under Civil Society Response (CSO) Component (US$ 22.3 million). Implementation o f the Civil Society Response Component will require the engagement of CSOs in the implementation of the interventions. CSOs will be engaged based on detailed criteria provided in the Operations Manual for the Project. The institutional, procedural, and safeguard requirements o f the engagement o f CSOs as detailed inthe Operations Manual include: 0 Institutional: The institutional arrangementsto administer the CSO component include: . StrengthenedNational Aids Coordinating Agency (NACA) through engagement o f eight technical assistants in the areas o f procurement, financial management, monitoring and evaluation and implementation 70 Project Steering Committee (PSC) at NACA with multisectoral membership to ensure that call for proposals are in line with priority areas as described in the National Strategic Framework Technical subcommittee at NACA to review, assess and award proposals developed by CSOs exceeding threshold ofUS$5,000 equivalent Proposal coordinating office at NACA to provide administrative support, coordinate proposal submission, evaluation and awardprocess Strengthened District Aids Coordinator (DAC) through the engagement of Grant Officers to communicate call for proposals with their districts, review proposals lessthan US$5,000 equivalent and submit quarterly reports to NACA CSO networks to facilitate proposal preparation process by their members and preparation of quarterly reports Programtechnical audit at NACA 0 Procedural: Detailedprocedures have been outlined inthe Operations Manual that include: Capacity assessment checklist for CSOs and annual CSO capacity assessment by geographical locationandthematic areas . .. Explicit eligibility and qualification requirements for CSOs applying for ...proposals Detailedform for proposalsubmission Call for proposal to be advertised innational media with a submission period of four weeks Explicit criteria onproposal evaluation andrequirement for disclosure o f award DAC reviews and approves proposals below US$ 5,000 equivalent whilst . proposals above US$ 5,000 up to the ceiling of US$ 50,000 will be reviewed by NACA Clear business standards (response time) for proposal reviews and disbursement o f funds .. 0 Safeguards: A number of safeguards have been built into the process as detailed in the Operations Manual to ensuretransparency, fairness and economy including: Clear delineation o f the roles andresponsibilitiesof all stakeholders Strengthenedmonitoringand evaluation function at NACA = .. Open invitation for proposals, pre-disclosed selection criteria, grant agreement forms, evaluation procedures and disclosure of award to the public Annual independent compliance verification Conflict of interest, fraud and corruption, and misprocurement provisions includedinthe Operations Manual 15. Goods and services under Civil Society Response component will be procured by Civil Society Organizations utilizing methods below with details as provided inthe Operations Manual: 16. Local Shopping for Goods or Services-Under this method, CSO will solicit quotations from at least three qualified suppliers within the project area or district based on simplified quotation forms that include a description of the goods or materials, detailed specifications, delivery period and payment terms. All quotations shallbe made inwriting and signed but may be submittedby fax, post or electronic mail As a general rule, a qualified supplier who offers goods or materials that meet the specifications at the lowest price shall be recommended for award o f the contract. Local shopping i s limited for goods and services estimated to cost less thanUS$ 1,000 per contract or order. 71 17. National Shopping for goods or services: Goods or services estimated to cost US$l,OOO equivalent or more but less than US$ 50,000 may be procured using national shopping procedures. The CSO will obtain at least three quotations from qualified suppliers not necessarily restrictedto the district. The request for quotation shall include a description of the goods or materials, detailed specifications, delivery period and payment terms. All quotations shall be made in writing and signed but may be submitted by fax, post or electronic mail. As a general rule, a qualified supplier who offers goods or materials that meet the specifications at the lowest price shall berecommended for award of the contract. 18. Direct Contractingby CSOs: CSOs may procure goods through direct contracting where (i) goods are proprietary innature, (ii) continuation of a previous contract awarded through a competitive as process, (iii) where there i s one supplier and the cost of obtaining quotation may not be cost effective as would be the case for remote districts such as Ghanzi, Kgalagadi, Ngamiland and Chobe. CSOs may procure goods or services through direct contracting estimated to cost US$200 equivalent or less. 19. Alternative procurement arrangement for CSOs: CSOs may procure simple off-the shelf goods contained in their proposal and approved by NACNDAC through annual contracts made by Councils with suppliers. The CSOs may use this method where (i) council procures usiilg acceptable competitive process, (ii) the quantity o f goods requiredby the CSO would not increase quantities by more than 20% what the council would procure on annual basis, and (iii) distances to markets where quotations may be obtained are long andwould notjustify use of quotations. 20. Procurement Plan: The Borrower, at appraisal, developed a Procurement Plan for project implementation, which provides the basis for the procurement and selection methods. The plan has been discussed in detail during appraisal and has been agreed between the Borrower and the Project Team on June 3, 2008. This plan will form the basis o f procurement for the first 18 months. The plan will be available at NACA offices and also be available in the Project's database and in the Bank's external website. The Procurement Plan will be updated in agreement with the Bank annually or as required to reflect the actual project implementationneeds and improvements ininstitutionalcapacity. 21. Assessment of the capacity of agencies to implement procurement: Procurement activities under the Project will be carried out by National Aids Coordinating Agency (NACA) and line ministries of Education, Labour and Home Affairs, Local Government and Transport, Youth, Sports andCulture and Health at central government level. At decentralized level, procurement activities will be undertaken by district councils, Civil Society networks (NGO networks) and grass root Civil Society Organizations (CSOs). Capacity o f implementing agencies was assessedby a World Bank procurement team October 2007 and April 2008. District councils, Civil Society Networks and line ministries were assessed on sample basis. The results o f the assessment and key findings are as follows: (a) NationalAids CoordinatingAgency (NACA): NACA will be the principal implementing and coordinating agency for the project. NACA will undertake procurement of common capital equipment such as ICT Equipment and furniture for all implementing agencies. NACA has a Supplies Unitwhich is responsible for procurement of office supplies. The Uniti s headedby a Principal Supplies Officer who holds a middle-management position and i s qualified to diploma level. The overall staff strength of the unit i s five officers. Inaddition the Program Managers, who have sufficient qualifications, support the procurement function to procure and implement contracts. NACA has established committees and procedures to undertake procurement. NACA has the experience in procurement in accordance with PPADB Act. Staff in NACA does not have adequate experience inprocurement of large-value contracts and consultancies and are not 72 familiar with World Bank Procurement Procedures. The capacity of NACA to undertake procurementwas considered AVERAGE. (b) LineMinistries:Line ministriesofWorks and Transport, and Healthwere assessed. Ministries will responsible for procurement of goods and services for operational expenses and training . workshops andrecruitmentof consultants. Ministry of Works and Transport has a Supplies Unit which is responsible for procurement o f office supplies and logistics and coordinate requests from all other departments. The unit has a staff compliment of four, of which two are graduates with professional training in purchasing. Departments within the Ministry lead in the procurement of consultancy services and procurement o f large-value contracts. The departments have well qualified staff with experience in procurement of large-value contracts. The Ministry through its Central Transport Organization (CTO) i s also responsible for procurement o f vehicles for all Government organizations. The CTO was . assessedand was found to have adequatecapacity. Overall the capacity o f the Ministryto undertake procurement was HIGH. Ministry of Health The Ministry does not have a Supplies Unit but has a Ministerial Tender Committee with an established qualified secretary who i s a pharmacist with procurement training and experience. The Supplies officers are embedded with the departments and are qualified to school- certificate level. Procurement i s therefore undertaken within departments but procurement above departmental thresholds i s referred to the Ministerial Tender Committee. The secretary o f the Ministerial Tender Committee reviews procurement documents andpreparesrecommendations for award for Tender Committee consideration. The Ministry is supported by PPADB with a Technical Advisor under the devolvement o f procurement function by PPADB.The organization o f the procurement function in the Ministry o f Health i s weak with over reliance on the secretary to the Ministerial Tender Committee. The appraisal team recommended the establishment o f a SuppliesProcurement Unit within the Ministry. This recommendation was also made by the Technical Assistance working with the Ministry. The capacity o f the Ministrywas consideredLOW. (c) DistrictCouncils: Typical district inBotswana comprise of several scatteredvillages with one of the larger villages as administrative centre. The physical sizes of the districts vary but in general cover large areas spanning from 100 km to over 500 km across. The capacity o f the councils also varies with councils near the capital, Gaborone being better staffed than those remote from the capital. Procurement under the councils is governed by the "Supplies and Stores Regulations and procedures under Local Authorities in Botswana" and related circulars. Under the project very little procurement is envisaged to be undertaken under the councils. Such procurement mayrelate to recruitment o findividual consultants and procurement o f office supplies. However the District Councils through the Office of District Aids Coordinator will reviewproposals for funding from grass root CSOs, review expenses justification reports from .grassroots CSOs and provide advisory services to CSOs. Two sample districts o f South East and Kgalagadiwere assessed on sample basis: South East district has a Supplies Unit headed by a Principal Supplies Officer who is qualified to diploma level and reports to the Council Treasurer. The staff strengtho f the unit was four, with two of thembeing clerks. The SuppliesUnitundertakes procurement of office supplies and does not have experience in tendering. The capacity o f the district to undertake procurement under the project was considered adequate. However the main risks associated 73 with procurement at district council are delays inapproval processeswhich has several layers and could take up to 2 months for quotations of less than US$ 5,000. The District has a District Aids Coordinator who i s aretirednurse. The DAC does not have prerequisite skills in review of proposals and experience to supervise CSOs infiduciary and project management. The capacity of the DAC was therefore considered weak and would require strengthening. The capacity of the district council was consideredAVERAGE Kgalagadidistrict i s 550 kmfrom Gaborone. Kgalagadi is a phase I1project district. It has a Supplies Unit which i s currently staffed by clerks. The substantive posts in the unit are vacant. The post of the District Aids Coordinator was also vacant which should be filled prior to the initiation of activities in the district inphase II. The overall capacity of the district i s LOW (d) Civil Society Networks(CSN): There are five civil society networks implementingHIV/AIDS activities in various thematic areas. The procurement requirements o f the CSN will be determined through their approved proposals. Three CSN were assessed and these were BONASO, BONELAand BOCAIP. BONASO is a network o f CSOs and has 160 affiliate members. It acts as coordinator and grants manager for its affiliates. BONASO i s an established organization with a corporate structure and i s audited annually. It has experience as grants manager under several donor funded projects that included Global Fund, Forum Swede and ACHAP, among others. The procurement function in BONASO is undertaken within the Finance Department which has adequate capacity and is assisted by program officers. The organization has a financial management and supplies procedures manual. The capacity of BONASO to undertake procurement was considered AVERAGE. The mainrisk emanates from the accountability of the grants disbursedto its affiliates. BONELA is a human rights advocacy organization and is both an organization and individual membership based. It also works outside its affiliated partners. BONELA i s audited annually. Its procurement function i s embedded within the financial management function and it has a financial management and supplies manual. The capacity o f BONELA to undertakeprocurement was considered HIGH. BOCAIP is a faith-based organization with eleven decentralized centers. Its centers are affiliated to BONASO. It also has affiliates outside its eleven centers from support groups. B O O has a corporate management structure, i s audited annually and has a financial and supplies procedures manual. Its procurement function i s embedded in the financial management function. BOCAIP also provides training services to government ministries in counseling services. Apart from undertaking procurement for its secretariat, BOCAIP also undertakes procurement for its centers and supervises the work o f its centers which may obtain funding from BONASO directly. The capacity o f BOCAIP to undertake procurement was considered HIGH. (e) PrivateSector perception: As part o f the assessment, the Bank also assessedthe perceptiono f the private sector on public procurement in general and NACA in particular through meetings with suppliers and consultants. In general the perception was positive with some areas of improvement required in definition o f scope o f work for consultancy service, costing for services, publicationo fresults, complaintshandling systems and delays inpayment. 74 22. Based on the above and taking into consideration (i) assessed country procurement environment, (ii)the magnitude ofprocurement tobeundertakenbyeachoftheagenciesmentioned above, (iii) safeguards inplace in NACA as discussed earlier, the overall capacity of the implementing agencies to undertake procurement i s considered AVERAGE and the riskis AVERAGE. The followingriskmitigationmeasures areproposed for the Project: Descriptionof risk Mitigationmeasure Responsible Dateof organization completion N A C A and line ministries do not Engage two senior procurement N A C A One by have adequate capacity to specialists who will be responsible Effectiveness; undertake Bank's procurement for actual procurement and second within 3 especially involving tendering capacity building to relevant months after procedures. implementing entities effectiveness Use o f provisions inbidding Modify national standardbidding All Prior to carrying documents for NCB that do not documents (for NCB purposes o f implementing out any NCB enhance competition. the Project only) to fit the Bank's entities procurement requirements. Alternatively, adapt Bankstandardbiddingdocuments for NCB. For all other procurement, Bank's standard bidding documents and Bank's standard Request for proposals shall be used. Delays inprocurement Obtain waiver fromPPADB to N A C A PPADB hasin adjudication and approval have processes streamlined for principle agreed process. project purposes. during appraisal NACA and other key Undertake procurement NACA/World September 30, implementing agencies not sensitization workshop for key Bank 2008 familiar withBankprocurement agencies inBank procedures and procedures trainkey implementing agencies' staff Delays instart-up activities Terms o f reference for stated TAs N A C A June 1,2008 especially recruitment o f to be finalized by May 15,2008 technical assistantsin and advert placed by June 1,2008. procurement, financial management and Grants Officers for districts. Office o f the District Aids Engage Grant Officer with N A C A June 1,2008 Coordinator does not have prerequisite knowledge in adequatecapacity to review fiduciary management. proposals and assist CSO in procurement and expenditure iustification. Grass root CSOs do not have Provide basic training for one NACA/DAC Prior to adequate capacity to undertake week prior to disbursemento f disbursement o f procurement, financial funds to grass root NGOs and funds management and record-keeping. require NGOnetworks to continuously support their affiliates. [nadequatesupervision byNGO Undertake independent compliance N A C N Annually letworks, procurement not verification on sample basis Independent mdertaken inaccordance with annually andtake appropriate Agent greedprocedures inthe OM. actions on the findings. 75 ImplementationReadiness 23. The following actions have been initiated during appraisal in preparation for implementation of theprocurement function andimplementation: 0 Draft Procurement Plan was reviewed and discussed with the Borrower and input provided for further refinement 0 Bankprovided guidance to NACA inBank procurement procedures and sourcesof information 0 Provided and discussed with Borrower start-up documents for procurement. Formats for terms of reference were also discussed and specific terms o f reference for technical assistance in procurement were reviewed 0 Discussions were held with Public Procurement and Asset Disposal Board (PPADB) and the Board in principle agreed assist NACA in preparation o f procurement documents for start up activities subject to NACA requesting for the assistance 0 PPADB have agreed to a streamlined internal approval process to facilitate implementation. PPADB further advised inprinciple that its review will not be required but inview of the weak capacity at NACA they would provide assistanceto check the documents prior to submission to the Bank. FrequencyofProcurement Supervision 24. Inadditionto thepriorreviewsupervision, the capacityassessment ofthe ImplementingAgencies has recommended supervision missions to visit the field twice a year in the first year and once a year thereafter to carry out post review of procurement actions. Annual compliance verification monitoring will also be carriedout by independentconsultants andwould aimto: 0 verify that the procurement and contracting procedures and processes followed for the projects were inaccordancewith the LoanAgreement 0 verify technical compliance, physical completion and price competitiveness of each contract inthe selectedrepresentative sample 0 review and comment on contract administration and management issues as dealt with by participatingagencies 0 review capacity o fparticipating agencies inhandlingprocurement efficiently 0 identifyimprovements inthe procurement processinthe lightof any identified deficiencies. GeneralProcurement Notice (GPN) and Contract award DisclosureRequirements 25. The Borrower will prepare a General Procurement Notice based on the formats discussed during appraisal mission and the GPN will be advertised in dgMarket and UNDB online in addition to local papers of wide national circulation prior to project effectiveness. For each contract procuredthrough ICB and large-value consultant assignments above the defined thresholds a specific procurement notice will be placedindgMarket, UNDBOnline and local papers o fwide national circulation. 26. Contract awards done through ICB procurement method shall be consistent with Paragraph 2.60 o f the Guidelines: Procurement under IBRD Loans and IDA Credits, May 2004 revised October 2006. Withintwo weeks o freceivingthe World Bank's "no objection" to the recommendation of contract award, the Borrower shall publishin WDBonline and indgMarket the results identifying the bid and lot numbers and the following information: 0 name o f eachbidderwho submitted a bid 0 bidprices as readout at bidopening 76 name and evaluated prices o f eachbidthat was evaluated name of bidderswhose bids were rejected andthe reasons for their rejectiona name o f the winning bidder, and the price it offered, as well as the duration and summary scope o f the contract awarded. 27. Contract Awards done through Direct Contractingprocurement method shall he consistent will Paragraph 3.7 of the Guidelines: Procurement under IBRD Loans and IDA Credits, May 2004. After the contract signature, the Borrower shall publishin W D B online and in dgMarket the: name o f the contractor price duration summary scope of the contract 28. This publication may be done quarterly and in the format of a summarized table covering the previous period. 29. Contract Awards for Consultanciesshall be consistent with Paragraph 2.28 of the Guidelines: Selection and Employment of Consultants by World Bank Borrowers, May 2004 revised October 2006. After the award of contract, the borrower shall publishin UNDB online and in dgMarket the following information: names o f all consultants who submittedproposals technical points assignedto each consultant evaluated prices of each consultant final point ranking of the consultants name o f the winning consultant and the price, duration, and summary scope of the contract 30. The same information shall be sent to all consultants who have submitted proposals. name o f the consultant to whichthe contract was awarded theprice duration scopeo f the contract 31. This publication may be done quarterly and in the format of a summarized table covering the previous period. 77 Details ofthe Procurement ArrangementsInvolvingInternationalCompetition 32. Goods and Non ConsultingServices (a) List o f contract Packageswhich will be procuredfollowing ICB and Direct contracting: 4 ( 5 1 6 1 7 1 8 9 Ref. Contract Estimated Procurement P-Q Domestic Review Expected Comments No. (Description) Cost (in Method Preference by Bid- US%) (yedno) Bank Opening (Prior/ Date I I Post) 1. ICTEquipment 990,000 ICB II No No Prior July 31 2. MedicalEquipment 770,000 ICB No No Prior August31 3. Vocational Equipment 400,000 ICB No No Prior October 31 for Street Children 4. Furniture 1,000,000 ICB No No Prior January 31, To be 2009 procuredby lots 5. FurnishedPorta- 500,000 ICB No No Prior September cabins 30 2,200,000 ICB No No Prior August 15 Tobe procuredby lots (b) ICB Contracts estimated to cost aboveUS$250,000 for goodsper contract and direct contracting estimated to cost US$ 1,000 will be subject to prior review by the Bank. 33. ConsultingServices. (a) List o f Consulting Assignments with short-list of internationalf m s . 1 1 2 3 4 5 6 7 Ref. Descriptionof Assignment Estimated Selection Review Expected No. Cost (in Method byBank Proposals Comments US%) (Prior/ Submission post) Date 1. IntegrateHIV/AIDSinto 130,000 I C Prior September30 curriculum 2. Behavioral Survey 700,000 SS/QCBS Prior Continuation 3. ProcurementSpecialists(2) 240,000 IC Prior June 30 Cost estimatedonper annum 4. Financial Management(2) 240,000 IC Prior June 30 Cost estimatedon per annum 5. Monitoring& Evaluation 120,000 IC Prior June 30 Cost estimatedonper annum Snecialistf 1) Ca aci Bld S ecialist 1 120,000 IC Prior June 30 Cost estimatedonper annum 120,000 IC Prior June 30 Cost estimatedonper annum Strate Partnershi Advisor 120,000 IC Prior June 30 Cost estimatedonper annum (b) Consultancy services for firms estimated to cost above US$ 200,000 per contract and for individual consultants to cost above US$50,000 and Single Source selection of consultants (firms 78 or individuals) for assignments estimated to cost above US$ 1,000 will be subject to prior review bythe Bank. All other contracts willbe subject to postreview. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$ 100,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 79 Annex 9: Economic and FinancialAnalysis BOTSWANA: BotswanaNationalHIV/AIDS PreventionSupport Project 1. Annex 9 summarizesthe key findings ofthe full-blown economic sector work, "The Financing and Delivery of HIV/AIDSPrevention, Treatment, and Social Support Services inBotswana," which underpinned the preparation o f the Botswana HIV/AIDSProject. This analysis reviewed 119 studies, of which 62 are Botswana-specific documents, 7 documents pertained to southern Africa, 14documents pertained to sub-SaharanAfrica, and 36 others were o f global application. Inaddition, interviewswere heldwith 57 officials, specialists and donor representatives, and a few site visits were made. The reference list i s inthe original paper. 2. ThisAnnex underlines keymessagesthat capture the major economic issues onHIV/AIDS financing and service deliveryinBotswana: (a) The financing gap for HIV/AIDSresponsewill increase; (b)Allocative andtechnical efficiencyinservice delivery shouldbe improvedto saveresourcesand reduce the fiscal burden; (c) A stronger focus onprevention among uninfectedand infectedi:idividuals, combinedwith improvedART adherence, i s necessaryto containthe epidemic. The issue of "disinhibition behavior" inbothtesting and treatment needsto be addressedmore seriously; (d) As the HIV/AIDSepidemic matures, the needfor social assistancewill increase, necessitating better targeting and administration of these programs; (e) Aid utilization and absorptive capacity at bothcentral and peripheral levels, including civil society organizations, mustbe increasedto make the responsetruly national inscope, and to make a real dent on prevention through local efforts; and (f) Macroeconomic risks of a much-larger fundingfor HIV/AIDSmust be identifiedand risk-mitigating measuresput in place. A. Narrow the FinancingGap for HIVIAIDSResponse 3. Actual HWAIDSspending andforecasts of available resources are increasing, but stillfall short of the estimated required resources The recently completed National AIDS Spending Account (NASA) - exercise for 2003/04 upto 2005/06 shows that actual spendingover the past three years was a little more than half o fthe estimated resource requirements (Figure 1).Forecastso f available resources over the medium-term show that although there i s a consistent uptrend, these "commitments" will continue to fall short o f about halfo fthe requirements as defined inthe National Strategic Framework (NSF). The financing gap i s estimated to reach US$340 million in2007/08 and US$317millionthe following fiscal year. (Even ifrequired spending i s reducedby 15 percent, as some claim it i s "over-costed" by that magnitude, this would only reduce the gap to US$245 million in2007/08, a considerable amount.) Actual HIV/AIDSspendingfor the period2003/04-2005/06 already represent 2-3 percent ofGDP. Ifthe NSF were fully funded, itwouldrepresent about 5 percent o fGDP, a major spendingprogramindeed. 80 Figure 2. NSFRequired Spending Compared to NASA Actual Spending and Forecast ofAvailable Resources, 2002103-2008109 (InMillionPula) 4000 3500 3000 2500 2000 1500 1000 500 0 I 2002103 2003104 2004105 2005106 2006107 2007108 2008109 I 1Source: his paper. 4. The official estimate of the required resources as reflected in the NSF need to be updated Some - - much of the documentation i s gone, except the few providedby C. Sharp (2007) - more than four years informants view the NSF as ''over-costed". While this study didnot analyze the costing basis of the NSF have passed since these cost estimates were made, and there have been dramatic changes in prices especially of drugs. New epidemiological forecasts o f prevalence and its changing nature are also available. Moreover, new challenges have emerged that could inflate costs, e.g., the persistence of concurrent sexual relationships and the broader social interventions needed to address this problem, "disinhibition" behavior o f patients testing HIV-negative, "disinhibition" behavior o f patients on ART, and the prospect o f drug resistance. If a new costing exercise would be undertaken, it should build scenariosthat take account o f these realities, as well as new technologies (e.g., use o f generic ARVs) and practices (e.g., male circumcision) that could be cost-saving. 5. GOB needs to createjiscal spacefor the scaled-up HIV7"DS spending - This could be done in the following ways, or a combination of them: Improve revenue effort - Estimates of revenue effort worldwide conducted by the World Bank's Poverty Reduction and Economic Management (PREM, 2006) group suggests that for a typical country, an additional 4 percent o f GDP could be raised through domestic revenue measures, part o f which could be usedto finance HIV/AIDS activities. However, an analysis over the long-term o f Botswana's tax revenue as percent of GDP shows that the trend is declining (see Chapter VI). Moreover, the recent Investment Climate Assessment (ICA) report indicates that Botswana's corporate tax compliance rate i s low - about 15 percent - and indeed the lowest among comparator ICA countries such as Malaysia, Namibia, South Afkica, Swaziland, and Thailand with well over 30 percent (World Bank, 2007). Although the Botswana economy is expected to continue growing robustly, the declining tax revenue/GDP rate and low corporate tax compliance cast doubt on the easy assumption that fiscal space for HIV/AIDS spending inBotswana couldbe . financed out o f a more aggressivetax revenue effort: itwould be feasible, but challenging. Improve expenditure efficiency - Public expenditure reviews (PER) worldwide h w e identified areas o f rationalization that could release 3 percent o f GDP in resources for budgetary reallocation (PREM, 2006), including for HIV/AIDS programs. A full-blown PER i s needed to 81 identifythese areas o frationalizationinBotswana; inthe absence o f suchPER, this study focused only on areas within the compass of HIV/AIDS spending that could be made more efficient. Squeezing government programs (e.g., orphan support) i s difficult, especially if they reduce poverty, as shown in Chapter V. Reducing other forms o f social assistance (e.g., Destitute Allowance, Community Home Based Care or CHBC program for HN+ people) need to be adequately informed by a thorough analysis of undercoverage and leakage13. Moreover, the provision o f CHBC has implications on drug adherence, as discussed in Chapter V. Finally, while the,budget for social assistance programs i s indeed increasing in absolute terms - and the Destitute Allowance has problems o f targeting - overall, the social assistancebudget as percent of GDP i s still modest compared to other countries. Indeed, significant amounts of these resources are "off-budget" (financed andor provided by NGOs and CSOs). Improving expenditure . efficiency inthe delivery o f HIV/AIDSservices couldpotentially bringfar more savings, and this i s the focus o f Chapter N. Increase external grant aid - The PREM report (2006) also indicated that negotiations with development partners may elicit indications of an additional 3 percent o f GDP in grant aid in a typical country. Botswana, however, i s not typical in this regard, since net ODA as percent of GDP has dramatically declined over the years, as discussedinChapter VIII. While Botswana has the secondhighestHIV/AIDSprevalence rate, the number o f donors inthis upper-middle-income country i s extremely limited.The World Bank is currently working on a "buy-down" arrangement with a third-party donor to reduce the interest rate o f the IBRDloan for HIV/AIDS that the GOB . i s contemplatingto obtain. Obtain new borrowings - Botswana's good macroeconomic performance and fiscal management makes it highly qualified to borrow externally to fund HIV/AIDS programs. However, prudent macroeconomic and debt management suggests that a country's new borrowing should be limited to 2 percent o f GDP (PREM, 2006). Recall that the HIV/AIDS National Strategic Framework, if fully funded, would account for 5 percent of GDP. Ifall expected resources flow into the country (ACHAP and BOTUSMEPFAR commitments, the World Bank Project, and others) and the GOB sticks to its HIV/AIDS budgetary commitments, these combined resources would account for about half (48 percent) o f the NSF, meaning that the remaining half would be u n b d e d (equivalent roughly to 2.5 percent o f GDP). Following the PREM "back-of-the-envelop" norm that only 2 percent o f GDP should be funded by new borrowings, it i s clear that even under the most optimistic scenario, the unfunded portion o f the NSF could not be fully funded by new borrowings. Moreover, there are other sectors that also require external debt financing (e.g., energy, roads). 6. Given the rather limited headroom for creatingfiscal spacefor scaled up HIV/MDS response, Botswana should focus on increasing program eficiency of HIV/MDS and health services, and containing the infection to arrest the number of patients and reduce thefiscal burden of the disease - Short of succeeding in these two crucial fronts, GOB may be forced to dip into the country's "diamond savings" (US$lO billionreserves) which the country has accumulated inover a generation. l3"Undercoverage" refers to people who should be receiving social assistancebenefits but who currently do not while "leakage" refers to those who are indeedreceiving such benefits but who should not. While much anecdotal evidence were shared orally for this report, the authors were unable to locate empirical (quantitative) evidence o f undercoverage and leakage. 82 B. Improve Allocative and Technical Efficiency 7. Botswana's HIV/MDS responsesuflers from problems of allocative eficiency - The Government's allocation to HIV/AIDSprevention i s far below internationalnorm. According to UNAIDS, sub-Saharan African countries need to spend 38 percent for care and treatment, 35 percent for prevention, and 22 percent for social risk mitigation and orphan support. In Botswana, the government budget share o f prevention programs i s small and stagnant (6-7 percent between 2003 and 2005, according to NASA figures). Moreover, Government has focused largely on treatment, and GOB'S share to prevention spending actually declined from 58.2 percent in 2003 to 38.8 percent in 2005. Finally, prevention activities focusing on socially-sanctioned concurrent relationships as well as highly vulnerable groups (youth, mobile/transient workers, and women and men involved intransactional sex) have notreceived as much attention as they should have. Until the issue of concurrent sexual relations i s addressed, the HIV infectioncannot be expected to stabilize for these relations are deemedthe "superhighway to HIV/AIDS". 8. Analysis of both HIV prevention and treatment programs strongly indicates that prevention activities are much more cost-efective than treatment activities - Table 1 shows the results of a typical cost-effectiveness analysis of various HIV/AIDS prevention and treatment interventions in sub-Saharan Africa. Though already dated, the orders o f magnitude in cost-per-life-year-saved between the range of prevention versus treatment interventions show clearly the economic wisdom of investinginthe former. Table I. Cost-Efectiveness of HIV Prevention and Antiretroviral TreatmentInterventionsMeasured in Cost Per Source: Masaki, et al. 9. There is a need to understand better the HIV epidemic in Botswana (and southern Africa more broadly), and what factors are driving it -An increasing number o f reviews (Epstein, 2007; Halperin, 2007; Wilson, 2007); Potts, et al. (n-d.))have shown that the southern Africa HIV epidemic i s different from those o f East Africa, West Africa, Asia, and the rest of the world. While much of the epidemic in the rest of the world are either concentrated (West Africa), or have witnessed declining prevalence (e.g., Thailand, East Africa), the southern African epidemic i s generalized, i.e., prevalence remains high. According to these reviews,HIVprevalence i s so muchhigher inthe hyper-epidemics o f southern Africa, l4By the mid-2000s, the annual averagecost oftreatment per patient inBotswanahas declined to around US$690- 760, as explained inthis study. Evenwith these much lower figures, however, it is clear fromthe table that preventionactivities are still far more cost-effective. Moatti (ad.) speculatesthat as antiretroviral drug prices decline further, cost-effectiveness ratios o ftreatment could intersect those o fprevention, but his hypothesis is based only on the cost o f first-line drugs and he assumesaway drug resistance and "disinhibition" behavior. 83 including Botswana, for three major reasons: multiple concurrent partnerships, lack of male circumcision, and related factors including highly mobile societies, high income ineq~ality'~,and gender dynamics (Halperin, 2007). These elements combine to produce a "lethal cocktail" that may increaseHIV transmission 30-fold (Wilson, 2007). 10. Under-emphasized interventions need to be given greater prominence in prevention programs - Ina recent global review of HIV prevention approaches by Potts, Halperin, Walsh, Kirby, Klausner, Mareille, Swidler, Wamai, Kahn, Hearst, et al. (n.d.), the authors concluded that "The largest investments inHIVprevention for generalized epidemics are beingmade into those interventions where evidence for large-scale impact i s increasinglyuncertain. Resources needto be shifted to those approacheswhere the evidence o f impact i s greatest, namely male circumcision, family planning for HIV positive women, and decreasing concurrent partnerships". . Broad social interventions, especially at the local level, are needed to change norms away from . concurrent sexual partnerships. Successful practices, such as the "zero grazing" and partner reduction campaigns inEast Africa inthe 1990s, should bereplicatedinthe country. Male circumcision has been shown in meta-analyses o f global research to have a highly . protective effect o f 50-70 percent. It i s highly acceptable among Botswana men, and i s highly cost-effective (as will be shown infurther discussions below). Family planning should be expanded, especially among HIV+women who no longer want to get pregnant. FP shouldbe integrated with existing HIVprevention and treatment programs. 11. Heavy investments in voluntary and routine counseling and testing (VCT an RHT) need to be re- examined in light of the increasing doubts about their ability to actually prevent infection, unless combined with other interventions - While counseling and testing does get HIV+people into treatment, these interventions' role in actually averting infection i s being increasingly doubted in international fora (Halperin, 2007). People testing negative do not necessarily change their behavior towards safe sex. Indeed, some of them engage in "disinhibition behavior," i.e., the negative result gives them a false sense o f security and "license" to resume unsafe sexual practices, thus "wasting" the personal and government investments made in testing. Some have even argued that there are documented cases of countries and localities where the rates of HIV infection have declined without massive investments incounseling and testing. Unless counseling and testing i s closely linkedwith interventions to change sexual behavior (e.g., reduction in the number o f sexual partners), VCT and RHT will not realize their potential to avert HIV infections. 12. The country's HIV/MDS treatment response suflers from technical eficiency issues that are reflected in higher costs - Botswana's annual per-patient cost of the first-line antiretroFira1 drugs i s relatively high.De Korte, Mazonde and Darkoh(2004) estimated the per-patient cost inthe early phase of the treatment program to be around US$690. On the other hand, using the spending figures from the NASA exercise and the actual number of patients on ART for the year, the average per patient cost is about US$760 per year. Back-of-the-envelop estimates made by Mapiki (2007) based on September 2006 patient and drug use data o f PEPFAR show that the cost-per-patient o f antiretroviral drugs alone i s US$839. Compared to these three cost estimates, the Thai MOPH antiretroviral cost for first line drugs i s about US$502, or about two-thirds of the Botswana cost. (Note, however, that Thailand's GPO produces a first-line fixed dose combination of AZT+3TC+NVP, which could explain the lower cost). Certain drug 15All countries insouthern Africa suffer from highGini coefficients, indicating highincome inequality. Botswana has succeededinreducing poverty, although the poverty decline has beenuneven across regions. Income inequality remains one o f the highest inthe world, however. 84 regimens in Nigeria, South Africa, and Zambia are also less expensive than Botswana's. Simple combination therapies now available have been reported to cost anywhere from US$200 to US$360 per patient per year for the poorest countries. More importantly, Botswana's annual per-patient projected cost o f antiretrovirals and lab tests (calculated around 2005) show a disturbing increasing trend, which could be due to more patients movingon to more expensive second-line antiretroviral drugs, or diseconomies of scale o f the ART roll-out, or both. More updated cost data are needed to analyze these distwbingtrends, identifycost drivers, and to offer solutions. 13. A plethora of treatment measures could be adopted to enhance program efticiency - These . include: Getting the best prices available for patent and "off-patent" (generic) drugs inthe global market. Table 2 shows that Botswana can save up to US$77.67 million for the period July 2007 to March 2010 (or US$2.35 million savings per month) ifit purchased all its ARVs as generics. Regimen Non-generic Generic Difference Adult first line 123.97 55.66 68.3 1 Adult secondline 8.16 6.82 1.34 Pediatricfirst line 17.01 9.30 7.71 Pediatricsecondline 1.31 0.99 0.32 Grandtotal 150.35 72.78 77.67 Using fixed-dose drug (FDC) combinations of ARVs, since FDCs greatly simplifies drug dispensingand saves onlogistics costs and doctor's time. Alternative options for antiretroviral drug and commodity security, e.g., internationtl, regional or bilateralpartnerships injoint drugprocurement. Revising clinical guidelines and protocols, e.g., for new drug regimens, less expensive testing methods, laboratory support, and a realistic frequency o f patient monitoring. For instance, current Botswana clinical guideline requires 5 viral load and 5 CD4 count tests per patient per year, while South Africa only requires 3 o f each (Cleary, et al., 2007). Strengthening the supply chain management to reduce fkequency of drug and supply stockouts, e.g., improving storage, ordering, and payment practices; and eliminating costly emergency procurements. Improving staff efficiency by usinglabor-saving practices to ease the human resource shortage, including task shifting, use o f alternative manpower, use o f paraprofessionals in treatment programs; and mobilizing traditional healers and communities to increase adherence among HIV+patients under ART. Usingelectronic communicationtools. Greater integration of services, e.g., PMTCT and maternal and child health; TB and HIV/AIDS; and family planninglsexualand reproductive health andHIVPMTCT. Exploring the feasibility of earlier treatment initiation to increase cost-effectiveness. Providingbetter patient monitoringto enhancedrug adherence anddelay drugresistance, 85 . Providingprevention support among patients on ART to minimize "disinhibition" behavior. 14. Botswana needs to more aggressively explore alternative financing and provision of antiretroviral treatment - These include outsourcing, off-loading treatment to the private sector, and exploring alternative domestic financing mechanisms, e.g., Thailand and Mexicols use o f their social security systems to cover ART costs of members. C. FocusonPrimaryandSecondaryPreventionandImproveTreatment Adherence 15, Complacency about prevention from the success of antiretroviral drug therapy rollout would make future costs of HIV/AIDS control rise substantially due to "disinhibition" behavior of patients - "Disinhibition" is the false sense of security that patients on ART feel, leading them to go back to risky sexual behaviors. InThailand, the authorities recognized this phenomenon early, which led them to more aggressively pushfor prevention among both infected and uninfected individuals. The cost-effectiveness of ART therapy in Thailand (US$ per life-year saved), with and without disinhibition behavior, is US$2,145 and US$6,243, respectively. Botswana should draw upon the Thai experience o f a successful HIVpreventionprogramwhich dramaticallyreducedthe cost oftreatment, yielding abenefidcost ratio of US$43:US$l. 16. Combining treatment with effective prevention could reduce the resource needs for treatment dramatically in the long term - For sub-Saharan African countries, Salomon, et a1 (2005) showed that - assuming away the negative impact o f drug resistance - a combined response of treatment and prevention minimizes the most number of new adult infections, averts the largest proportion o f infections, results in the least number of adult deaths, and prevents the largest proportion of adult deaths. For the forecast period 2004 to 2020, Table 3 shows the effects of alternative intervention approaches: a baseline, a treatment-centered response, a prevention-centered response, and the best strategy - a combined response of treatment andprevention. Table 3. Total New Adult Infections and Deaths in Sub-Saharan Africa, 2004-2020 Under Diferent Intervention Interventions Total New Infections TotalAdult Deaths Adult Averted Deaths, Averted Infection Comparedto Millions Comparedto Mi11ions Baseline Baseline (percent) (percent) Baseline 52.3 37.4 Treatment-centered (optimal 49.2 6 percent 32.4 13 percent effects) Treatment-centered (mixedeffects) 57.4 -10 percent 33.9 9 perceat Prevention-centered 33.2 36 percent 32.6 13 percent Combined response (optimistic) 23.4 55 percent 27.3 27 percent Combined response (pessimistic) 43.6 17percent 31.6 16percent 17. Drug resistance would steeply increase the cost of treatment and, therefore, it must be delayed for as long asfeasible through betterpatient drug adherence Unless new antiretroviral drugs are found, - in the long-run, drug resistance will be generalized in Botswana (as elsewhere) and the epidemic will continue unabated unless the treatment program i s combined with a vigorous and all-out prevention effort. The painful paradox i s that the more extensive the treatment program, the more likely that drug resistance will emerge. And as drug resistance becomes more extensive, the cost o f treating each patient on second-line drugs becomes prohibitive: in the case o f Thailand, the cost of second line drugs is 13 times more than that of the first-line drugs. 86 18. Disincentives to drug adherence in Botswana must be addressed - In the early stages of the treatment program, Weiser, et a1 (2003) identified the factors contributing to drug adherence in the country as follows: treatment accessibility/transport, hunger, stigma, financial constraints, interruptions of drug supply, andtoxicities. To delay drugresistance, patient adherence shouldbe kept as highas possible, and any disincentive to drug adherence should be minimized. Inthe context of Botswana, she following issues are relevant: (a) assurance of a reliable supply of drugs and reagents; (b) review o f the CD4 count as a criterion for patients on ART to access the food-basket benefit of CHBC; (c) social support systemto improve patient adherence; (d) consideration o f a transport allowance to poor patients infar-flung areas to encouragetesting, continued antiretroviral use, and monitoring. 19. The long-term fiscal impact of an evolving drug resistance and patient "disinhibition" behavior should be analyzed now - Existingmodels on the macroeconomic impact of HIV/AIDSin Botswana as well as the NSF are incomplete in that they omit these two important factors. Therefore, the financial requirements o f the HIV/AIDS response could be underestimated to the degree that these two critical factors are ignored or playeddown. D. ImproveEfficiencyWhile Expanding Coverageof SocialAssistance Grants to OVCs and HIV+ People 20. GOB authorities shouldface thefact that the number of P L W A is still likely to increase, given the trajectory of the epidemic Thus, the program covering orphans and vulnerable children (OVCs) and - food basket program for patients on treatment (Community Home Based Care or CHBC) may need to expand. The OVC program has been shown to reduce overall poverty, so it needs to be protected. The CHBC programk current use of CD4 count as basis o f a patient's continued receipt o f a food basket may needto be revisited as it has counter-productive effect on drug adherence. 21. Program eficiency across all social assistanceprograms should be improved - These programs continue to suffer from weahesses associatedwith targeting, undercoverage, and leakage. The Destitute Allowance seems to be particularly prone to abuse. The fragmented nature of social assistance (some are funded out o f DSS, others through NACA, still others through "off-budget" arrangements, plus liberal food allowances insome ministries) inhibitscomprehensive management and policy reform. 22. Models from abroad exist that Botswana could draw upon to improve its social assistance programs - Botswana could heed the approaches and principles of successful conditional cash transfer programs in Mexico, Brazil, Turkey, and other countries. These are comprehensive programs that have proved able to reduce poverty and graduate certain groups into productive employment. E. IncreaseAid UtilizationandAbsorptive Capacity 23. While Botswana certainly needs additional resources to meet the challenge of HIV/MDS, a bigger challenge is absorption and utilization of the resources that are already available - Existing institutions, processes, and instruments appear to be unable to absorb larger amounts of resources. Ministries including MOH and MLG experience underspending o f their budgets, while donors like PEPFAWBOTUSA report large pipelines. The recent cancellation o f Round IIgrant o f the Global Fund i s a painful reminder that absorptive capacity and fimd utilization are major risks inBotswana. The return to the direct disbursement path from the Ministry o f Finance to the line ministries, instead of through NACA, i s expected to increase budget absorption, as this system worked quite well in the past. Further coordination among planning and finance units of different agencies is called for. 24. A more ambitious pe$ormance-based local response program could quickly increase the utilization of resources while involving grassroots organizations - Parto f the weak prevention effort in 87 Botswana can be traced to the very limited involvement of civil society organizations and local governments. Examples in Uganda, Zambia and Kenya show that HIV/AIDS can be reversed with a stronger focus on local response, which also has the advantage of disbursingfunds quickly. Performance- based grants and contracts to civil society organizations, local government units, and private sector players shouldgradually replace the time-intensive input-based system. F. Identify andAddress MacroeconomicRisks 25. Thepotential adverse eflects of scaled-up aid on macroeconomic stability, though small, should not be ignored - Those risks can be mitigated by appropriate coordination between monetary, fiscal and exchange rate policies in the country to ensure that the spending o f aid inflows is consistent with the exchangerate policy and monetary management of inflows. 26. The mismatch between the maturity of foreign aid and domestic requirements for HIV/AIDS which are mostly recurrent in nature should be given more attention - There i s a mismatch between the maturity of foreign aid resources available and domestic requirements, which are mostly recurrent in nature. Inaddition, the size o f fiscal burden associatedwith the disease is not yet resolved given the costs of second line therapy. GOB could attempt to form partnerships and negotiate a more predictable and stable flow o f foreign resources with donors. 27. HIVIAIDS spending could be made more eflective with increasedfocus on expenditure tracking, service performance, and evaluation There i s an almost-universal opinion inBotswana that the level of - HIV/AIDS resources itself is not the primary problem (it is relatively high compared to other African countries). What seems problematic is the allocation, use, and impact o f these resources in terms o f service coverage. Part of the problem is that while much attention has been given to epidemiology and roll-out of services especially on treatment, there has been less attention given to financial systems, alternative ways o f channeling resources, and expenditure tracking. Thus, while the country can justifiably take pride in service expansion especially on treatment, care and support, few questions have been raised until recently on the amount o f resources incurred in achieving these. In some quarters, "sustainability" and "effectiveness" continue to be taboo issues, under the mistaken notion that such discussions would lead to withholding of treatment to HIV+ patients, rather than leading to the correct direction of looking for ways to improve and expand services within a finite level o f resources. To instill greater interest inprogram effectiveness, several actions shouldbe started. Public finance management, which is quite strong at the centralMinistry level, shouldbe brought . down to local and peripherallevels where management and systems are weak. Expenditure tracking exercises such as the NASA and National Health Accounts (NHA) should . beinstitutionalized. Rigorous impact evaluation, cost-effectiveness analysis, benefit-incidence analysis, and epidemiological and service modeling should be undertaken periodically to assess alternative options on service delivery and financing that can inform the adoption of a new policy, or a change inan old policy. 28. The potential for real exchange rate appreciation should be recognized - While the flow of foreign aid is small in absolute and relative terms in Botswana, it does already have considerable international reserves and strong currency position and therefore even a small, incremental increase in inflows could have significant effect on the exchange rate. To mitigate those risks associated with an increase ininternational capital inflows, the Botswana authorities shouldmonitor closely the performance of the export sector (in particular non-traditional exports), identify early warning signs of loss of 88 competitiveness and choose appropriate mitigating policies in case a persistent appreciation i s identified, e.g., interventions in foreign exchange markets by the Bank of Botswana, and temporary taxes on capital inflows, among others. 89 Annex 10: SafeguardPolicyIssues BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupport Project 1. The BNAPSProject has been classified as "Category C" for environmental screening purposes, which precludes the requirement for the World Bankto conduct a project-specific health sector waste management assessment. The Government's national medical waste management planhas been included inthe project files, as per agreement with the World Bank's Africa Regional Safeguards unit. 90 Annex 11:ProjectPreparationand Supervision BOTSWANA: BotswanaNationalHIV/AIDS PreventionSupport Project Planned Actual PCNreview November 9,2006 November 9,2006 InitialPID to PIC November 9,2006 November 9,2006 InitialISDS to PIC November 9,2006 November 9,2006 Appraisal April 21-May 2,2008 April 21-May 2,2008 Negotiations May 28-30,2008 June 3-4,2008 BoardRVP approval July 10,2008 Planneddate o f effectiveness October 10, 2008 Planneddate o fmid-termreview Februaryhlarch 2011 Plannedclosing date September 30,2013 Key institutionsresponsiblefor preparationofthe project: National A I D S Coordinating Agency Ministry of Finance and Development Planning The Bankstaff and consultantswho worked onthe projectincluded% Name Title Unit Sheila Dutta Task Team LeaderEenior HealthSpecialist AFTH1 Peter Obaseki Health Specialist (Consultant) AFTH1 Oscar Picazo Senior HealthEconomist AFTH1 Christopher Walker Lead Specialist & HealthCluster Leader AFTH1 Albertus Voetberg LeadHealth Specialist AFTHV Amie Batson Senior Health Specialist HDNHE B a c k Souhlal Lead Social Development Specialist MNSSD Luigide Felice Implementation Specialist (Consultant) AFTH1 Surendra Aganval Adviser AFTQK Tesfeaalem Iyesus Senior Procurement Specialist AFTPC Simon Chirwa Procurement Specialist AFTPC Modupe Adebowale Senior Financial Management Specialist AFTFM DirkReinemnn (Acting) Country Director AFCS 1 Ritva Reinikka Sector Director MNSED EugeniaMarinova Country Officer AFCZA Anna van der Wouden Country Officer AFCZA LuzMeza-Batrina Senior Counsel LEGAF Suzanne Morris Senior Finance Officer LOAFC KeithHansen Sector Manager & Peer Reviewer LCSHH Elizabeth Lule Manager AFTHV Warren Waters Regional Environmental & Safeguards Coordinator AFTQK Mary Green Program Assistant AFTH1 Adriana Florez Procurement Analyst AFTPC Bank funds expended to date on project preparation: 1. Bankresources: $278,000 2. Trust funds: $44,500 3. Total: $322,500 l6 Other staffwho participatedinearly stagesof preparationincludedOkPannenborg,JonathanNyamukapa, Henri Aka, Donald Bundy, StellaManda. 91 EstimatedApproval and Supervision costs: 1. Remaining costs to approval: $0 2. Estimatedannual supervision cost: $120,000 ImplementationSupportPlan 2. The proposed project will receive implementation support from a team based variously in Headquarters, Pretoria, Lilongwe and Nairobi. The supervision team will also include representatives and contributions from development partners involved in the fight against HIV/AIDS in Botswana and thereby also help to ensure the complementarity of partner interventions and generally strengthen partnerships. Importantly, the Government also wishes to be involved constructively inthis area. While it is an important part of NACA's and e.g. the Ministry of Finance's roles to coordinate and supervise implementation, in addition they wish to contribute to and learn from supervision visits as much as possible (without o f course compromising the independence o f such visits). They would for example be prepared to finance a technical consultant to join the missions from time to time, who would focus on an aspect of special interest to the Government and their implementingpartners. 3. With the Bank's portfolio inBotswana likely to expandrapidly into such infrastructure areas as transport and power, the implementation o f these projects will present additional supervision challenges especially through e.g. the need for HIV/AIDS prevention programs at construction sites. But these new projects also offer the opportunity for using their Bank staff, for example those working in fiduciary areas, to contribute to the supervision of this HIV/AIDSproject. 4. The supervision of this project presents special challenges over and above those that would be expected with any Bank project. The project design took account o f the likely supervision implications. Butit is the nature of the disease and the epidemic, the gaps inthe present program, and the areas where the Bank has a comparative advantage, that are much more influential in determiningthe overall design. The implications o f the design for supervision were also assessed drawing on the Bank's experience with similar projects inother countries. These special challenges include: (a) no World Bank office in Botswana and therefore limitations to the task team's ability to stay in touch withday-to-day project issues and to suggest solutions; (b) the multi-sectoral multi-agencynature ofthe project; (c) most o f the implementation will require small inputs scattered over wide geographical areas and spread throughout the project period, especially for the civil society activities which comprise the bulkofthe project; and (d) particular attentioninthe early years to operational fiduciary aspects, where capacity presently is limited; Conversely, on the positive side, factors include: (a) a committed government, with its own resources, which i s prepared to contribute to the technical aspects o f supervision; (b) the EU has agreed to provide support to project monitoring and evaluation, at least annually, through a consultant who will participate inBank supervisionmissions; (c) x partners with very substantial technical presences inBotswana, who have agreed to assist with e.g. project special studies, technical inputsand evaluations; (d) the project will be instrumental in introducing better development partner coordination through, inter alia, starting annualjoint programreviews; and (e) with Botswana's excellent probity record, inputsinthe governance area will be very limited. 92 5. Technical support, over the first half of project implementation, i s likely to be required in such areas as: (a) tuberculosis and HIV interactions; (b) the social aspects of HIV related interventions; (c) capacity building for civil society; (d) macro and micro planning related to HIV interventions; (e) increasing the effectiveness of workplace programs; and (f) the changing economic implications and sustainabilityo f the HIVprogram as it evolves. 6. It is envisaged that, following usual Bank practice, there will be two supervision missions annually, timed to coincide with the budget cycle and the plannedjoint annual reviews. Independent ad hoc technical visits will be made from time-to-time depending on requirements and the Government's requests. A core team has been established comprising: (a) task team leader; (b)HIVIAIDSspecialist; (c) implementation specialist; (d) community response and social specialist; (e) monitoring and evaluation specialist (EU funded); (f) health economist; and (g) fiduciary -procurement and financial management - specialists. Non-core team members include: (a) a tuberculosis specialist; (b) a special surveys and evaluation expert; and (c) a communications andbehavior change specialist. 7. For the reasons outlined above, supervision costs will be above average. Some o f this will be off- set by contributions frompartners, and maybe the government. Nonetheless, the actual cost to the Bank i s likely to remain above average. Givenbelow are some indicative estimates of the expected supervision time and cost. -Other Technical Total: 14 staff Experts weeks Tuberculosis (Partners) 4 M&Especial surveys (HQ+Partners) 4 Communications and Behavior Change (Partners) 6 EstimatedAnnual Total Staff Weeks per Year, o f whichpart will be financed bypartners =49, EstimatedAnnual Supervision Cost to the Bank = $120,000. 93 Annex 12: IBRDBuy-DownSummary BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupport Project 1. The IBRD loan and IDA credit buy-down mechanisms were developed to increase the flexibility and concessionality o f funding for projects where justified by global public good or cross-border results. A project with an IBRDbuy-down is developed as anormal loanbutincludingmechanisms for triggering the release o f buy-down tranches. One possible mechanism i s the elaboration o f a separate set of indicators for the buy-down donor, another possibility i s a jointly agreed set of indicators, the performance of which will informthe decision to release buy-down funds. The release o f the donor funds are dependent on performance, as measured against the jointly agreed indicators and targets that are consistent with the project objectives, measurable and reflective o f actions by the government within the project time frame. Botswanai s a pathfinder on the innovative performance-based buy-down mechanism. It is providing useful learningto other IBRDcountries inthe region. The Government of Swazilandhas already expressedinterest inexploring a similar financing mechanism for an HIV/AIDSproject. Buy-downofBotswanaNationalAIDS PreventionSupport 2. The IBRD loan for HN/AIDSprevention to Botswana will be for $50 million for 5 years. The BotswanaMinistry o f Finance and Development Planninghas indicatedthat its preference i s for an IBRD buy-down that reduces the effective interest rate" down to 0 percent. The European Commission has agreed to support the buy-down o f this project. The EC has already indicatively approved an additional EURO 14million (-USD 20 million") inits next 4 year Economic Development Framework (EDF10 for 2010-2014) to finance the buy-down o f the IBRDHIV/AIDSloan. 3. An important structural distinction inthis buy-down from ones inother countries is that the EC and Government o f Botswana have agreedthat the EC will provide the funds for the buy-down directly to the MFDP once performance targets are achieved. Because the performance payments are handled bilaterally between the Government o f Botswana and the EC, they must be governed by a bilateral Agreement between the EC and Governments o f Botswana. The Bank can only recommend a financing structure for the EC and Government o fBotswana to adopt. 4. While the Bank loan i s expected to be signed and made effective in the coming few months, the European Commission's final official sign-off for the detailed fundingplan for EDFlOwill only occur in late 2009/early 2010. The probability o f the EC funding i s extremely high as the EDFlO envelop has already been agreed and the Botswana EC team is completely committed to supporting this buy-down. Nonetheless, the Government o f Botswana will face a small risk about the financing of the buy-down due to the different financing timetables. To ensure transparency and minimize any potential misunderstandings, the Bank has recommended that the MFDPand EC prepare a separate Agreement that shouldclearly outline: Agreement on financial triggers identified in Bank project that will trigger the buy-down payments Agreement onperformance amount committedby EC Agreement on structure o fperformance payments (timing) Agreement on graceperiod (ifappropriate) Agreement on weighted paymenutarget achieved (ifappropriate) Agreement on structure o f independent performance assessment '*The l7 estimated interest rate is based onthe forward LIBORrate. Based on the FX Forwardrate EUR/USD(5 year) 94 Agreement on timingand process for final confirmation of EC financing 5. A separate agreement between the EC and Government of Botswana formally guaranteeing the buy-down funds will be finalized inlate 2009/2010 when the EC's EDFlOcomes into effect. Recommendedstructure of buy-downfinancing 6. As the project loan size will be $50 million, the EC funds of -$20 million will have the financial impact o f buying-down the interest rate effectively to 0 percent and also contributing roughly $3 milli~n'~ toward the principle repayment. The Bank suggests the EC performance payments be structured for release in two tranches of approximately $10 million each. The first tranche would be released upon achievement o f interim targets at the end o f year two of the project (early-201 l), and the second linkedto progress against the completion targets at the close of the project (2013). The mid-termreview will generate the information based on which the EC will take its decision to release the first tranche. EC participationwith an independent consultant inthe mid-termreview together with GOB,World Bank, and other partners will provide for the desiredfocus on the requirements of the EC with effective articulation and communication o f results achieved to the Commission. The results of a supervision visit inyear 4 of the project will generate information for the EC to decide on releasing the last tranche duringthe last year o f the project. The EC's participation in the World Bank supervision at a technical level will have the same advantages as mentionedunder the mid-term review. Verifying Performancetargets 7. The Government of Botswana, the EC and the Bank have agreed to a joint mechanism for performance assessment based on which the EC will decide on the release o f the buy-down funds. The specific subset o f indicators, from the overall project monitoring and evaluation framework, which will trigger the release o f EC funds will be finalized following bilateral discussions between the Government and the EC, with the World Bank providing technical inputs into this discussion, as appropriate. The Government o f Botswana, the EC and the Bank would be responsible for preparing TORSand defining the methodology to assess the targets. In practical term the Bank with provide a draft and will invite comments and suggestions from other partners. There is potential for an additional assessment following project closing, ifit i s determined that a grace period i s required. Ifperformancetargetsare not achieved 8. The Government o f Botswana, EC and the Bank have agreedthat performance payments are only disbursed if the project has performed satisfactorily according to the defined indicators and targets as jointly established. There should be no "surprises" in the mid-term review nor in the assessment for releasing the second tranche since problems and issues will be identified during annual supervision visits bythe Bankandremedial actionput inplace. 9. While the performance targets will be tracked throughout project implementation, progress against the CompletionTargets shouldbeverified within 6 months o fproject closing. The EC will commit inEURO'Sso the final USD amount available for the buy-down will depend onUSD/EURO exchange rates. 95 PerformanceIndicators and Targets for Buy-down 10. The Government o f Botswana and the EC have agreed to utilize a subset of the Project's overall M&E indicators for performance assessment. These specific subset of indicators will be agreed to bilaterally between the EC and the Government, with the Bank providing technical input into the finalization o fthe targets, as appropriate. 11. The "Results Framework" spells out the indicators and parameters, which will be used for monitoring progress. The World Bank will carry out supervisory visits annually in which problems will be spotted andremedial action taken, and support the conduct o f a detailedMid-Term Review. As far as the role o f the EC as a "buy-down" partner i s concerned, there will be a briefing and debriefing session withthe ECDelegationwhenever the WorldBankcarries out supervisory visits to the project. Issues will bepresented, discussedand agreementreached as far as possible remedial actions to be taken. EC will be part o f the mid-term review through an independent consultant to be hired according to EC procedures. As mentioned earlier, there should be no surprises inthe mid-term review but problems arid issues will inevitably emerge and have to be dealt with. 12. The Mid-Term review will constitute the occasion for generating the assessment based on which the EC will release the first tranche of disbursement. It should be mentioned that BAIS I11results are expected to be available for the mid-term review. For the release of the second tranche o f the "buy- down," following the last year of the project, the results of BAIS IV, inall likelihood, will be available in addition to the assessment o f the final annual supervision. The EC has indicated its support o f recruiting an independent consultant to take part in the annual supervision mission prior to the EC decision to release the secondtranche. 96 Annex 13: Summaryof Social Analysis BOTSWANA: BotswanaNationalHTv/AIDS PreventionSupportProject 1. Botswana has one o f the smallest population sizes in the continent, and i s one o f the most sparsely populated with a majority o f its population settled along the country's eastern corridor. The major economic driver i s its diamond miningconcerns. Cattle farming and high-endtourism are also classified as relatively significant commercial activities. Botswana faces the second most severe HIV/AIDS epidemic in the world, with infection rates highest among young people and particularly young women. The principal mode o f epidemic transmission in Botswana is heterosexual. Key factors fueling the HIV/AIDS epidemic include stigma and denial, the vulnerability o f women, the incidence of unprotected sex, persistent inequality and poverty, cultural attitudes regarding sexuality, and highlevels of population mobility, including cross-border challenges. 2. The effects o f the HIV/AIDS epidemic differs significantly along gender lines, with women and young girls beingmore significantly affected than their male counterparts insimilar age groups. The 2005 HIV Sentinel Surveillance data estimates prevalence rates consistently ranging up to three times higher among young women (9.8) than young men (3.1) of the same age cohort (15-19). A clear pattern of gender disparity i s also evident with women generally exhibiting higher HIV prevalence rates than men, particularly in the 15-39 year age cohort. Within these age groups, HIV prevalence remains at least 17 percentage points higher for women than for men. Conversely, there are more menwho are HIVpositive at older ages. This overall epidemiologic pattern i s suggestive o f substantial intergenerational HIV transmission. Economic, socio-cultural, and biological differences respectively account for the disproportionate gender vulnerability patterns seen inBotswana. 3. A major gap identifiedby many stakeholders, with respect to the previous national strategy, was the need to target interventions more effectively on vulnerable groups. Vulnerable groups in Botswana include, but are not limitedto, adolescent women, serodiscordant couples, orphans, and other vulnerable children,migrant workers, and commercial sex workers. With a growingrecognition of the needto focus on vulnerability, it has been agreedthat all priority areas of the NSF would explicitly address the needs of groups that are especially vulnerable to infection, or whose quality of life or social and economic well beingis most severely affected by the epidemic. 4. One o f the key reasons that a broader, multi-partner, multi-level response to HIV/AIDS i s required i s the influence of socio-cultural norms and values on the spread o f the disease. NACA- coordinated activities are expected to pursue this objective through behavior change communication campaigns, advocacy, counseling, consultation, and intensified enforcement o f both customary and written laws, particularly with respect to gender-specific issues. 5. Gender: Socio-cultural and socio-economic norms inBotswana are predominant factors inthe relatively high risk o f HIV-infection women and young girls. Cultural norms accord men the rights to have multiple sexual partners. Conversely, economic pressures constrain women to have multiple sexual partners, each assuming responsibility for a specific economic need. Also, due to the pre-eminent importance of procreation in society, young women are put under pressure to have children. Stigma, social ostracism, and legal issues make HIV/AIDS-related interventions addressing commercial sex worker few and far between in Botswana, despite the obvious risks to women engaging in transactional sex. 6. Mobile communities: External and internal migration patterns are critical considerations in developing an effective national prevention strategy. 97 0 External Migration: Due to Botswana's economic growth, it has become a melting pot for economic migrants from neighboring countries (e.g. Zimbabwe, Lesotho, and Swaziland) as well as long distance truck drivers plying the commercial routes across these neighboring countries. This traffic predisposes men to engage in casual sex with local women and commercial sex workers at various stops along their routes. 0 Internal Migration: Within the civil service and the mining industry, it is common for citizens to be posted to areas that are distant to their family households for employment reasons. Also it i s normal in Botswana, for a family to maintain four homes; in the city, farm, cattle post, and in the village, which has significant implications for the social context of the epidemic inBotswana. 7. Civil Society OrganizationsLPrivate Sector: CSO/private sector organizations that address HIV/AIDS in Botswana suffer from weak coordination and inconsistent funding. These factors, among others, have contributed to the weak impact o f the civil society sector in the response to HIVIAIDS, especially when compared to the same sector in less economically wealthy countries (e.g. Kenya and Uganda). Key issues include the "top-down" institutionalization o f NGOs, drawing from the dual factors o f strong governance and economic, and, in some cases, the artificial formation of these NGOs in response to the heavily government funded national response to HIV/AIDS. This i s in stark contrasts to the ground-swell and community basedmobilization o fNGOs inUganda. Project response to social issues: 8. As previously noted, one of the key reasons that a broader, multi-partner, multi-level responseto HIV/AIDS is required is the influence of socio-cultural norms and values on the spread of the disease. Through the BNAPS Project, concerted efforts would be made to promote socio-cultural norms, values, and beliefs that are consistent with the reduction o f HIV transmission, and to protect the human rights of those infected or affected by the disease. The project would address these issues through supporting the GOB and the CSOs to increase its knowledgebase oftraditionalbeliefs, behaviors and circumstances that make target populations vulnerable (i.e. women, mobile populations), and refine BCC and interventions to be sensitive to cultural issues and ensure that messages and interventions are culturally relevant. A detailed social analysis i s plannedfor Year One o f the project. 98 Annex 14: Documentsinthe ProjectFile BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupportProject WorldBankDocuments Project Concept Note Minutes from Project Concept Note ReviewMeeting Aide-Memoire from Identification Mission (September 2006) Aide Memoires from Preparation Support Missions (June 2007, September 2007, December 2007) Aide Memoire fromPre-Appraisal Mission (February 2008) Minutesfrom Quality EnhancementReview(April 3,2008) DecisionMeeting Minutes (April 17,2008) Aide-Memoire from Appraisal Mission (April 17-30,2008) GovernmentDocuments Project Operations Manual and Community Grants Guidelines (May 2008) Project Procurement Plan (May 2008) National Operational Plan for Scaling Up HIV PreventioninBotswana (2008) Current status of the HIV/AIDS epidemic in Botswana (Draft). National AIDS Coordinating Agency (March 2008). BIASI1Report (2004) Macroeconomic Impactso fHIV/AIDS(2007) Demographic Impacts of HIV/AIDS (2007) BotswanaUNGASSReport (2005) National Strategic Framework on HIV/AIDS and its MidTerm Review (2007) Report o fthe National Conference on Prevention (2006) Sentinel Surveillance Report (2006) MinistryofHealthWaste ManagementPlan NDP 10 Key IssuesPaper The National Strategy for PovertyReduction 99 Annex 15: StatementofLoansand Credits BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupport Project Differencebetween expected andactual OriginalAmount inUS$ Millions disbursements ProjectID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm.Rev'd Total: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BOTSWANA STATEMENT OF IFC's HeldandDisbursedPortfolio InMillionsofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2001 AfrbnkCorp 0.00 0.00 1.40 0.00 0.00 0.00 1.40 0.00 2003 KalahariDiamond 0.00 1.75 0.00 0.00 0.00 1.75 0.00 0.00 2005 Letshego 0.00 3.97 0.00 0.00 0.00 3.91 0.00 0.00 Total portfolio: 0.00 5.12 1.40 0.00 0.00 5.12 1.40 0.00 ~ ~ ~~ ~ Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. Total pendingcommitment: 0.00 0.00 0.00 0.00 100 Annex 16: Country at a Glance BOTSWANA: BotswanaNationalHIV/AIDSPreventionSupport Project Sub- Upper- I POVERTY and SOCIAL Saharan middie- Botswana Africa income 3eveiopment diamond. 2006 Population,mid-par (millions) 18 770 8 0 GNIpercapita(Atlas method,US$) 5,953 842 5,90 Lifeeqectancy GNI(Aflasmefhod,US$ billions) 0 5 848 4,790 Average annual growth, 200046 Population(Sy 00 2.4 08 Laborforce (O%) -03 2.8 13 "1capita l+LnroL: ;? primary $:; M o s t recent estimate (latest year available, 2000-06) capita enrollment Poverty(%ofpopulafionbelownatlonaipovertyline) Urbanpopulation(%oftotelpopulation) 58 36 75 Lifee-tancyat birth(pars) 35 47 70 Infant mortality(per lOOOlivebirths) 87 96 26 Chiidmalnutrition(%of childrenunder5) Q 30 Access to impmvedwatersource I Access to animpmvedwtersourca(%ofpopulation) 95 58 93 Literacy(%ofpopuiabonega ?5+ 81 59 93 Grosspnmaryenmllment(%of school-agepopulation) M) 92 1P -Bofswna Maie 0 7 98 m Upper-middieincomegmup Female 0 5 86 E4 KEY ECONOMIC RATIOS and LONG-TERM TRENDS IS66 1996 ZOO5 2006 Economic ratios' I GDP (US$ billions) 14 48 0.5 0 8 I Gross capitalformatiodGDP 215 250 30.7 25 9 Exportsof goods andSeNiceSlGDP 883 542 52.8 552 Trade GrossdomesticsavingslGDP 407 414 516 52 5 Grossnationalsavings/GDP 363 399 513 52 8 CurrentaccountbalancdGDP 7 8 0 3 14.4 8 3 interestpa)rmentslGDP 2 0 16 0.1 Domestic Capital ' Total debtlGDP 292 Q O 4.5 savings formation Total debtservicdexports 4 3 5 2 0.9 I Presentvalueof debt/GDP 3 9 I Presentvalueof debtlexports 7.0 indebtedness indebtedness 1966-96 l996-06 2006 2006 2006-9 (averageannualgmuth) I GDP 7 0 85 4 0 2.1 3.8 -Bo tswna GDP percapita 42 59 42 2.6 3.8 i&per-middle-incomegroup W r t S Of goodsandSeNiC0S 3 0 44 218 8.0 0.0 STRUCTURE o f the ECONOMY 1966 1996 2005 2006 (%of GDP) Growth of capital and GDP (K) Agriculture 5.7 4.0 2.0 2.0 Industry 62.3 53.1 53.5 53.1 Manufacturing 6.0 5.4 3.7 3.6 Services 32.0 42.8 44.5 4 . 9 Householdfinalconsumptioneqenditure 35.3 313 27.0 27.6 20 Generalgov't final consumptionexpenditure 24.0 27.3 212 8.7 importsof goodsandservices 49.1 37.8 317 28.8 1966-96 l996-06 2005 2006 (averageannualgrouth) Growth of exports and Imports (%) Agriculture 2.8 -15 -7.5 0.7 30 Industry 4.0 7.3 4.9 0.6 Manufacturing 7.2 2.4 19 12 Services 113 6.0 3.6 5.2 Householdfinalconsumptionexpenditure 6.9 3.8 3.1 3.7 Generalgov'tfinal consumptionexpenditure 8.9 3.5 7.7 2.9 -*) Gmsscapitalformation 0.4 7.9 -15.7 -14.7 I importsof goodsandServices 3.9 2.4 -2.9 -4.4 -Exports -0-lrrPOrtS I Note:2006 dataareprellmlnaryestimates. This tablews producedfmm the DevelopmentEconomicsLDB database. 'Thediamonds showfourkeyindicators inthecountry(in bo1d)comparedwithitsincome-gmupaverage.Rdataaremissing,thediamondv4ll 101 Botswana PRICES and GOVERNM EN1 FINANCE 1986 ISS6 2005 2006 Domestlc prlcer (%change) Consumer prices 0.0 0.1 8.6 116 ImplicitGDP deflator 14.1 14.3 114 Q.5 Government finance (%of GDP, includescurrentgrants) Current revenue 55.2 42.8 39.4 414 Current budget balance 34.4 8.5 Q.0 8.5 Overallsurplus/deficit 8,4 6.2 6.5 0.6 TRADE 1966 IS06 2005 2006 (US$ mi///ons) Export and Import levels (US$ mill ) Total exports (fob) 2 2 8 4,472 4,567 Diamonds 1441 2.802 3,355 5.000 T Copperand nickel P6 8 5 8 9 Manufactures 299 8 5 8 9 Total imports (cif) 1468 2,853 2,603 Food 292 440 413 Fuelandenergy 111 426 566 Capitaigoods 521 923 963 Exportprice index(2000=WO) 16 13 It? W 01 02 03 M 05 W Importpriceindex(2000=30) 115 10 It? Exports Imports Terms of trade (2000=30) M) 0 0 30 BALANCE of PAYMENTS i,..a IS66 1996 2005 2006 (US$ rniilions) Current account balance to GDP (K) Exports of goods andservices 952 2,381 5,380 5,345 Imports of goods andservices 763 18P 3,709 3276 25 T Resourcebalance 8 9 569 1652 2,070 Net income -P9 -253 -820 -666 Net currenttransfers 49 I79 685 647 5 0 Currentaccount balance 0 9 495 1577 2,051 Financingitems (net) 8 8 -83 -P7 -267 Changesinnet reserves -307 -331 -1390 -1764 I 00 01 02 03 M 05 OSI Memo: Reserves includinggold (US$ millions) 188 5,028 6278 7,954 Conversionrate(DEC,local/US$) 19 3.3 5.1 5.8 EXTERNAL DEBT and RESOURCE FLOWS 1966 IS96 2005 2006 (US$ millions) :omporltlon of 2005 debt (US$ m'll.) Total debtoutstandinganddisbursed 407 627 473 IBRD n8 89 2 1 A: 2 G:35 B : 7 IDA 15 I1 7 8 Totaldebt salvice 45 6 1 51 IBRD 20 27 1 1 IDA 0 1 1 1 Compositionof net resourceflows Official grants 62 30 34 Official creditors 8 -37 1 Private creditom 6 -9 -2 Foreigndirectinvestment (netinflows) 70 71 279 Portfolio equity(net inflows) 0 29 62 World Bank program Commitments 26 0 0 3 . Disbursements 6 0 0 0 , IBRD E- Bilaerd #-IDA D-Otlwrrmllllaterd F-pllvate Principalrepayments 6 21 2 2 :-IMF G- Short-leu Net flows -1 -21 -2 -2 hterest payments Q 6 0 0 Net transfers -n -28 -2 -2 Note This tableras producedfrom the Development Economics LDB database 9/28/07 102 Map Section IBRD 36044 BOTSWANA HIV PREVALENCE AMONG PREGNANT WOMEN (15-49 YEARS) PER HEALTH DISTRICT HIV PREVALENCE (%) CATEGORIES: MAIN ROADS < 25 SUB DISTRICT CAPITALS* RAILROADS 25.1 - 30 NATIONAL CAPITAL SUB DISTRICT BOUNDARIES 30.1 - 35 RIVERS INTERNATIONAL BOUNDARIES 35.1 - 40 > 40.1 Source: Botswana Second Generation HIV/AIDS * The town councils of Francistown, Gaborone, Jwaneng, Lobatse, Orapa, Selebi-Pikwe and Surveillance (2006). Ministry of Health. Sowa have status equal to Districts or Sub Districts. Lusaka 20°E 25°E A N G O L A Z A M B I A KasaneKasane 0 50 100 150 Kilometers To Menongue Ngamaseri Okavango Linyanti 0 25 50 75 100 Miles CHOBECHOBE Xaudum OKAVANGOOKA ANGO Z I M B A B W E Okavango NokenengNokeneng Swamps To MaunMaun NGAMINGAMI Gweru 20°S Tsau sau Nata Nata 20°S Eiseb Sehithwa Sehithwa TUTUMETUTUME Lake Ngami Makgadikgadi Sowa Town Sowa own Salt Pans NORTH-NORTH- Rakops Rakops N A M I B I A Boteti EASTEAST To Orapa Orapa Francistown Francistown Messina Lake Xau Letlhakane Letlhakane Shashe GhanziGhanzi BOTETIBOTETI Motloutse Seruli Seruli Selebi-Phikwe Selebi-Phikwe Okwa SEROWE-PALAPYESEROWE-PALAPYE BOBIRWA BOBIR Mamuno Mamuno Sefophe Sefophe SeroweSerowe Palapye Palapye GHANZI GHANZI Limpopo Lotsane Mahalapye Mahalapye MAHALAPYEMAHALAPYE HUKUNTSIHUKUNTSI Kang Kang KWENENG WEST KWENENG WEST KWENENGKWENENG Hukuntsi Hukuntsi Tshane shane EAST EAST KGATLENGKGATLENG Mabutsane Mabutsane Molepolole Molepolole Mochudi Mochudi Jwaneng Jwaneng GABORONEGABORONE Khakhea Khakhea MABUTSANEMABUTSANE 25°S Nossob KanyeKanye SOUTH-SOUTH- 25°S Werda erda Lobatse Lobatse Moselebe EASTEAST KGALAGADIKGALAGADI Molopo Good Hope Good Hope To Pretoria GOOD HOPE GOOD HOPE Tshabong shabong S O U T H A F R I C A Molopo To Kimberley This map was produced by the Map Design Unit of The World Bank. Bokspits Bokspits The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 20°E 25°E MARCH 2008