AFRICAN DEVELOPMENT BANK GROUP

NAIROBI RIVERS BASIN REHABILITATION AND RESTORATION PROGRAM: SEWERAGE IMPROVEMENT PROJECT PHASE II COUNTRY: REPUBLIC OF KENYA PROJECT APPRAISAL REPORT

November 2018

RDGE/AHWS/AWF

Public Disclosure A

uthorized

Public D

isclosure Authorized

TABLE OF CONTENTS

I – STRATEGIC THRUST & RATIONALE..................................................................... 1

1.1 PROJECT LINKAGES WITH COUNTRY STRATEGY AND OBJECTIVES ........................................ 1 1.2 RATIONALE FOR BANK’S INVOLVEMENT ................................................................................ 2 1.3 DEVELOPMENT PARTNER COORDINATION .............................................................................. 3

II – PROJECT DESCRIPTION ............................................................................................ 5

2.1 PROJECT OBJECTIVE ................................................................................................................ 5 2.2 PROJECT COMPONENTS ........................................................................................................... 5 2.3 TECHNICAL SOLUTION RETAINED AND OTHER ALTERNATIVES ........................................ 6 2.4 PROJECT TYPE ......................................................................................................................... 7 2.5 PROJECT COST AND FINANCING ARRANGEMENTS .................................................................. 7 2.6 PROJECT TARGET AREA AND POPULATION ............................................................................. 8 2.7 PARTICIPATORY PROCESS FOR PROJECT IDENTIFICATION, DESIGN AND IMPLEMENTATION .. 9 2.8 BANK GROUP EXPERIENCE, LESSONS REFLECTED IN PROJECT DESIGN ............................... 10 2.9 KEY PERFORMANCE INDICATORS .......................................................................................... 11

III – PROJECT FEASIBILITY ............................................................................................ 11

3.1 ECONOMIC AND FINANCIAL PERFORMANCE ......................................................................... 11 3.2 ENVIRONMENTAL AND SOCIAL IMPACTS .............................................................................. 12

IV – IMPLEMENTATION ................................................................................................... 15

4.1 IMPLEMENTATION ARRANGEMENTS ..................................................................................... 15 4.2 MONITORING AND EVALUATION (M&E) .............................................................................. 17 4.3 GOVERNANCE ........................................................................................................................ 17 4.4 SUSTAINABILITY .................................................................................................................... 18 4.5 RISK MANAGEMENT .............................................................................................................. 19 4.6 KNOWLEDGE BUILDING ......................................................................................................... 19

V – LEGAL INSTRUMENTS AND AUTHORITY ......................................................... 20

5.1 LEGAL INSTRUMENT .............................................................................................................. 20 5.2 CONDITIONS ASSOCIATED WITH BANK’S INTERVENTION ..................................................... 20 5.3 COMPLIANCE WITH BANK POLICIES ...................................................................................... 21

VI – RECOMMENDATION ................................................................................................ 21

APPENDIX 1: KENYA’S COMPARATIVE SOCIO-ECONOMIC INDICATORS ............................................. I APPENDIX 2: TABLE OF AFDB’S PORTFOLIO IN THE COUNTRY ........................................................ II APPENDIX 3: KEY RELATED PROJECTS FINANCED BY THE DPS NAIROBI ........................................ IV APPENDIX 4: MAP OF SEWERAGE INFRASTRUCTURE IN NAIROBI ..................................................... V APPENDIX 5: JUSTIFICATION FOR FINANCING MORE THAN 50% OF THE PROJECT COST THROUGH AN

ADB LOAN .................................................................................................................. VI APPENDIX 6: CLIMATE SCREENING – FULL RESULTS .................................................................... VIII APPENDIX 7: PROGRESS MADE UNDER NARSIP I ............................................................................. IX

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Currency Equivalents October 2018

UA 1 = KES 140.858 UA 1 = EUR 1.2053 UA 1 = USD 1.39525

FISCAL YEAR July 1 – June 30

Weights and Measures

1 metric ton = 2204 pounds (lbs) 1 kilogram (kg) = 2.200 pounds (lbs) 1 meter (m) = 3.28 feet (ft) 1 millimeter (mm) = 0.03937 inch (“) 1 kilometer (km) = 0.62 mile 1 hectare (ha) = 2.471 acres

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ACRONYMS AND ABBREVIATIONS ADB African Development Bank MIS Management Information System AfDB African Development Bank Group MTP-II Medium Term Plan II ADF African Development Fund MoWS Ministry of Water and Sanitation AEG Aid Effectiveness Group NaRSIP Nairobi Rivers Basin Rehabilitation and

Restoration Program: Sewerage Improvement Project.

AES Aid Effectiveness Secretariat NCCRS National Climate Change Response Strategy AFD Agence Française de Développement NCWSC Nairobi City Water and Sewerage Company AREP Adaptation Review and Evaluation

Procedures NEMA National Environment Management

Authority AWSB Athi Water Services Board NPV Net Present Value CCAP Climate Change Action Plan NRW Non-Revenue Water CPPR Country Portfolio Performance Review NWSS National Water Services Strategy 2007-2015 CSP Country Strategy Paper O&M Operation & Maintenance DESTP Dandora Estate Sewerage Treatment Plant OAG Office of the Auditor General

OBA Output Based Aid DO Development Objective PAP Project Affected Population DP Development Partner PCR Project/Program Completion Report DPF Development Partnership Forum PIT Program Implementation Team DPG Development Partners Consultative Group PPG Public and Publicly Guaranteed DSA Debt Sustainability Analysis RAP Resettlement Action Plan EIA Environmental Impact Assessment RBLF Result Based Logical Framework EIRR Economic Internal Rate of Return RMC Regional Member Country ENPV Economic Net Present Value SC Steering Committee ECPF Engineering Construction Procurement and

Finance SDG Sustainable Development Goal

ESAP Environmental and Social Assessment Procedure

SIDA Swedish International Development Cooperation Agency

ESIA Environmental and Social Impact Assessment SWG Sector Working Group

ESMF Environmental and Social Management Framework

UA Unit of Account

ESMP Environmental and Social Management Plan WRA Water Resources Authority EU European Union WASREB Water Services Regulatory Board FIRR Financial Internal Rate of Return WB The World Bank FM Financial Management WSB Water Services Board FNPV Financial Net Present Value WSP Water Service Provider FSM Faecal Sludge Management WSTG Water Sector Technical Group GCG GoK Coordinating Group GDP Gross Domestic Product GoK Government of Kenya HDI Human Development Index IFAD International Fund for Agricultural

Development

IFMIS Integrated Financial Management Information System

IP Implementation Progress IPR Implementation Progress Report IPSAS International Public Sector Accounting

Standards

IWRM Integrated Water Resources Management JICA Japan International Cooperation Agency KES Kenyan Shillings KfW Kreditanstalt fur Wiederaufbau KPI Key Performance Indicator M&E Monitoring & Evaluation

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LOAN INFORMATION

Client’s information Recipient: Republic of Kenya Executing Agency: Athi Water Services Board (AWSB)

Financing plan Source Amount (EUR million) Instrument ADB 59.407 Loan ADF (UA 2.910 m) 3.507 Loan AFD 20.000 Parallel co-financing Loan GoK 7.927 Counterpart (AfDB )

Total Cost 90.841

ADB’s key financing information Loan Currency EUR Loan Type Fully Flexible Loan Tenor 25 years inclusive of grace period Grace period 8 years Repayments Consecutive semi-annual payments after grace period Interest Rate Base Rate +Funding Cost Margin+ Lending Margin + Maturity Premium Base Rate Floating Base Rate (6-month EURIBOR reset each 1st February and 1st

August). A free option to fix the Base Rate is available. Funding Cost Margin The Bank funding cost margin as determined each 1st January and 1st July

and applied to the Base Rate each 1st February and 1st August Lending Margin 80 basis points (0.8%) Maturity Premium 0.20% if Average Loan Maturity >15 years Front-end fees 0.25% of the loan amount payable at latest at signature of the loan

agreement Commitment fees 0.25% of the undisbursed amount. Commitment fees start accruing 60

days after signature of the loan agreement and are payable on Payment dates

Option to convert the Base Rate In addition to the free option to fix the floating Base Rate, the borrower may reconvert the fix rate to floating or refix it on part or full disbursed amount. Transaction fees are payable.

Option to cap or collar the Base Rate

The borrower may cap or set both cap and floor on the Base Rate to be applied on part or full disbursed amount. Transaction fees are payable.

Option to convert loan currency The borrower may convert the loan currency for both undisbursed and/or disbursed amounts in full or part to another approved lending currency of the Bank. Transaction fees are payable.

ADF loan key financing information

Currency Unit of Account Interest rate spread 1% Commitment fee 0.5% per annum on the undisbursed loan amount Service charge 0.75% per annum on amount disbursed and outstanding Duration 30 years Grace period 5 years

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Key financial and economic analysis information FNPV (at 10% base case) KES 757,85 million FIRR (at 10% base case) 11.820 % ENPV (at 10% base case) KES 9,272.09 million EIRR (at 10% base case) 26.33%

Timeframe - Main Milestones (expected) Concept Note Approval March 2018 Project Approval November 2018 Effectiveness February 2019 Completion February 2023 Last Disbursement May 2023

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Project Summary

Project Overview

The objective of the Nairobi Rivers Rehabilitation and Restoration Program: Sewerage Improvement Project phase II is to improve the access, quality, availability and sustainability of wastewater services in Nairobi City with a view to contribute to the restoration of Nairobi Rivers Basin. The proposed project (which is co-financed by AFD), targets prioritized sanitation investments in Nairobi City contributing to improved health and living conditions in the national capital. The AfDB supported activities of the project will benefit an estimated 500,000 people through (i) rehabilitation and construction of wastewater treatment facilities at Dandora, (ii) construction of 220km of sewer reticulation network including faecal sludge management infrastructure, and (iii) construction of 50 ablution blocks and rehabilitation of 50 ablution blocks in Nairobi informal settlements. The project will also directly support Athi Water Services Board (AWSB) and Nairobi City Water and Sewerage Company (NCWSC) to offer improved sanitation services through institutional strengthening. The total cost of the AfDB supported activities is EUR 70.841 million and will be financed through an ADB Loan of EUR 59.407million (83.9%) and ADF Loan of EUR 3.507million (4.9%) with the Government of Kenya (GoK) contributing EUR 7.927 million. The project will improve access to improved sanitation services from 48% to 70% and the implementation period is 48 months. The planned investments will enhance the provision of reliable safe urban sanitation services, which will contribute to better health and increase economic opportunities. In addition, the project will contribute to reducing faecal contamination of Nairobi rivers’.

Needs Assessment

Nairobi is Kenya’s capital city with an estimated population of 4.4 million people, which is about 9% of the country’s total population of 48.5 million. Nairobi has emerged as an important economic hub in the region and the highest contributor to Kenya's GDP. Kenya each year loses an estimated 0.9% of the country’s GDP due to poor sanitation. Urban services have not kept pace with the rapid expansion and in Nairobi city; the existing sewerage infrastructure serves only 48% of the city. Delayed and inadequate investments in wastewater management have resulted in poor wastewater services in the city and the disposal of raw sewage in rivers continues to affect the quality of surface and ground water and increases diseases incidence, health risks, and associated economic burdens. The resulting environmental degradation and public health impacts due to poor sanitation lead to high child mortality and morbidity, poor school attendance and performance, especially for the girl child, and low productivity. Delivery of safe, adequate and reliable sanitation services in Nairobi is hence a high GoK priority.

Bank’s Added Value

The project aligns with the Bank’s Country Strategy Paper (CSP) 2014–20181, and directly contributes to the first pillar by supporting investments that would have positive effects on the health of Nairobi residents and indirectly to the second pillar by imparting construction related skills through provision of infrastructure. The CSP has a strong feature on the contributory role of water supply and sanitation to the “High 5s” development agenda and the “Deliverables and Targets” section of the CSP identifies the proposed investment for funding. The project supports the Kenya’s Vision 2030 by constructing comprehensive infrastructure systems as a basis of balanced, sustainable and inclusive growth. The project also contributes towards attainment of the Sustainable Development Goals (SDGs’) No 6 on universal access to water and sanitation. The Bank Group should continue to support the water and sanitation sector of the country, stemming from its long-term engagement and experience. Aligning with the 2008 eThekwini Declaration and the Ngor Declaration on Sanitation and Hygiene Adopted on 27 May 2015 at AfricaSan4, the Bank is committed to supporting its member countries’ efforts to deliver adequate sanitation services to millions of Africans.

Knowledge Management

The project will generate knowledge on how to improve sanitation service in urban centres, and will provide best practice on integrated systems approach along the sanitation value chain. Studies on the potential for energy generation and resource recovery and re-use could help offset the electricity consumption of the wastewater facilities and represent possible areas for sustainable energy policy implementation. Studies for future investments will build on global best practices and success cases in the country.

1 The CSP has two pillars: (i) enhancing physical infrastructure to unleash inclusive growth; and (ii) developing skills for an emerging labour market of a transforming economy improving competitiveness and infrastructure for growth and employment

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Results Based Logical Framework Country and Project Name: Kenya/ Nairobi Rivers Rehabilitation and Restoration Program: Sewerage Improvement Project Phase II Project Objective: To improve the access, quality, availability and sustainability of wastewater services in Nairobi City with a view to contribute to the restoration of Nairobi Rivers Basin

RESULTS CHAIN PERFORMANCE INDICATORS MEANS OF

VERIFICATION RISKS/ MITIGATION MEASURES Indicator Baseline Target (2022)

IMPA

CT

Contribute to improved health and quality of life through provision of safe and sustainable water and sewerage services.

1. Reduced under-5 mortality 49.2/1000 (2016) 24/1000 (2030)

KIBHS, KDHS SDG Reports, National Development reports Risk: Conflict between Nairobi County

and AWSB on provision of services and infrastructure development. Mitigation: NCWSC has been involved from the onset of project design. Coordination will continue throughout project duration.

2. GDP growth rate 4.9% (2017) 10%(2022)

OU

TC

OM

ES2 1. Improved access to sanitation

services 1.1 % & No. of people in Nairobi with access to improved sanitation services

48%, (2.1million-50% female)

70% (3.1million- 50% female)

KIBHS, KDHS CIDP for Nairobi County and County Disease Surveillance Report Final Evaluation Report, Waris-Wasreb information system

1.2 Incidence of water borne diseases (diarrhoea) 20% (2018) 15% (2030)

2. Improved efficiency of the wastewater management system

2.1 BOD5 of wastewater discharged into Nairobi Rivers

89 mg/l <30mg/l

OU

TPU

TS3

1. Sewerage construction 1.1 Length of Reticulation sewers installed 43 km 220 km Project progress report Risk: Insufficient capacity of NCWSC to operate and manage sewerage services. Mitigation: Capacity building for NCWSC is embedded in the project. In addition, the contractor will be retained for a period of time to build O&M capacity of NCWSC on specialized equipment at sewage treatment sites and on early detection of blockages along the sewer network. Risk: Delays caused due to the resettlements. Mitigation: The process of PAPs engagement has been initiated and there is High level GoK commitment to avail counterpart funds for compensation in good time.

1.2 No of new sewer connections 10,000 22,000 1.3 Wastewater treatment capacity added 72,000 m3/day 160,000 m3/day

2. Public ablution blocks constructed and well managed

2.1 No of gender sensitive ablution blocks constructed/rehabilitated (50% managed by women )

100 200

3. Climate Change mainstreamed 3.1 Tree planted in schools and along rivers 25,000 35,000 3.2 Studies on energy recovery and for future investments

- 3

3.3 Rainwater harvesting systems - 100

4. Institutional support offered 4.1 No of Laboratories Constructed and equipped - 1 4.2 No. of Business Plans updated - 2 4.3 No. staff trained 150 350 (50% female)

5. Health & hygiene sensitization campaigns undertaken

5.1 No of people reached with messages on health and hygiene practices

25,000 65,000(50% female)

COMPONENTS INPUTS I. Sanitation Infrastructure including associated ancillary infrastructure and tree planting II. Institutional Development Support: Assist in updating Business Plans for AWSB and NCWSC; and undertake capacity building for AWSB &

NCWSC staff; improve the billing and revenue collection systems; provide laboratory equipment III. Project Management: support to the daily operation of the program, implementation of environmental and social management plans (ESMPs) and program financial and technical audits

Source Cost (m EUR) % of Total

ADB 59.407 83.9 ADF 3.507 4.9 GOK 7.927 11.2 70.841 100.0

2 Improved access to sanitation services target of 70% at outcomes level includes AFD contribution 3 Baseline outputs indicators are from NaRSIP I

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PROJECT IMPLEMENTATION SCHEDULE

Q3 Q4 Q2

Component 1: Sanitation Infrastructure

Component 2: Institutional Development Support

Component 3: Program Management

Project Disbursment Deadline - May 2023

3-1 Project Audit

2-6 Training of AWSB and NCWSC on operation and maintenance of sanitation infrastructure

2-1 Institutional Development

2-5 Support to WASREB

2-4 Capacity building on Feacal sludge management

2-3 Studies for Future Investments

Q3 Q4

Mid-term Review

Project Completion

1-1 Design Review and Supervision of Works

Q4 Q3Q1 Q2 Q3Q2

Project Approval

2-2 Study on Energy generation and Climate Change Adaptation

3-3 Land Compensation

3-2 Project Operation

First Disbursment

1-4 Works: Ablution blocks

1-3 Supervision of ablution blocks

1-2 Works: Sanitation Infrastructure

Advance Procurment Activities

Activity

Loan Signature

Loan Effectiveness

2018 2019 2023Q1

2022Q1 Q2

20212020Q4 Q1 Q2 Q3 Q4Q2Q1

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REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE AFDB GROUP TO THE BOARD OF DIRECTORS ON THE PROPOSED ADB AND ADF LOANS TO THE GOVERNMENT OF THE REPUBLIC OF KENYA FOR THE NAIROBI RIVERS REHABILITATION AND RESTORATION PROGRAM: SEWERAGE IMPROVEMENT PROJECT PHASE II

Management submits the following report and recommendation on the proposed ADB loan of EUR 59.407 million and ADF loan of UA 2.910 million (EUR 3.507 million) to finance the Nairobi Rivers Rehabilitation and Restoration Program: Sewerage Improvement Project Phase II.

I – STRATEGIC THRUST & RATIONALE 1.1 Project Linkages with Country Strategy and Objectives 1.1.1 The Government of Kenya’s (GoK’s) Vision 2030 and its five years Medium Term Plans (MTPs) form the development blue print for the country with the three key development areas of: (i) economic growth; (ii) social investment and poverty reduction; and (iii) institutional strengthening and improvement in governance. The Vision 2030 pillars focus on infrastructure development, public sector reform and macroeconomic stability. Kenya’s economic and social developments, as stated in the Vision 2030, are heavily dependent on adequate and sustainable provision of water supply and sanitation services with the country aiming for gradual realization of universal access by 2030 in line with the Sustainable Development Goals (SDGs). Mainstreaming of SDGs in the MTPs provides new impetus in among others, ensuring access to sustainable water and sanitation services and enhancing citizens’ health and well-being.

1.1.2 Since the launch of Vision 2030 in June 2008, Kenya’s economy has experienced a decade of stable macroeconomic environment with single-digit inflation. Kenya’s growth slowed down to 4.9% in 2017 (compared to a revised growth of 5.9 per cent in 2016) because of drought, weak credit growth, security concerns, and a rise in oil prices. However, medium-term GDP growth should rebound to 5.8% in 2018 and 6.1% in 2019 respectively. Moving forward growth will largely be supported by increased infrastructure investments that will be undertaken in the government’s 'Big Four' priority areas — universal healthcare, affordable housing, manufacturing and food security4. Rapid urbanization has accompanied economic growth in Kenya. However, service provision has not kept pace with the growth leading to increasing gaps in access to public services across socioeconomic groups.

1.1.3 Cognizant of the role water and sanitation plays in the performance of key sectors of the economy and the livelihoods of Kenyans, the GoK, since 2003, has been implementing reforms in the water and sanitation sector5. Following promulgation of the new constitution for Kenya (CoK 2010)6, water and sanitation services are now a devolved function of the 47 county governments and the Water Act 2002 amended to be in line with the new constitution under the Water Act 2016. Access to safely managed water increased from 43% in 2000 to 63% in 2015 and while good progress was made towards meeting the Millennium Development Goal (MDG) for water, the progress in access to improved sanitation was marginal; increasing by only 5% from 25% in 1990 to 30% in 20157. Investments in sanitation have lagged behind especially in informal settlements, where the population density is high. The sanitation crisis in these settlements is exacerbated by lack of physical space for infrastructure, and resources constraints forcing the residents to rely on

4 Economic Survey, GoK 2018 5 Within the legal framework provided for in the Water Act, 2002 and policy direction through Sessional Paper no 1 of 1999 6 With the adoption of the new constitution (CoK,2010), a devolved system of governance has been in place with the transfer of some Government functions, employees and funding from the national Government to 47 counties 7 UNICEF and World Health Organization, Progress on Sanitation and DrinkingWater 2015 Update and MDG Assessment (2015). Figures for improved sanitation by the GoK are different from those in the UNICEF JMP report for Kenya due to the different definition of improved sanitation facilities. The JMP does not consider shared facilities in the definition of improved sanitation. The GoK figures for access to on-site sanitation is 67% for 2015.

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unhygienic and undignified sanitation solutions, which also cause immense environmental pollution.

1.1.4 The proposed investment targets improvements in sanitation infrastructure in Nairobi City and includes institutional capacity strengthening especially for the Nairobi City Water and Sewerage Company (NCWSC), which is the institution responsible for water supply and sanitation service provision for the city including informal settlements.

1.2 Rationale for Bank’s Involvement 1.2.1 Nairobi is Kenya’s capital city with an estimated population of 4.4 million, which is 9 percent of the country’s total population of 48.5 million and makes up more than 45% of the country’s urban population. Nairobi is a major economic hub in the East Africa Region and is the sixth fastest growing city in Africa with its population projected to reach 5.2 million by 2030. The city is also the highest contributor to Kenya's GDP8. However, urban services have not kept pace with the rapid expansion of Nairobi city with existing sewerage and sewage infrastructure serving only 48%9 of the city. The majority of the people in the city (51.3%) rely on poorly managed on-site sanitation and 0.7% practise open defecation (MoH, WSP 2014). Inadequate investments in wastewater management have resulted in poor sanitation services in the city and the disposal of raw sewage directly into drains and rivers continues to affect the quality of surface and ground water degrading the environment and increasing risks of water borne diseases (especially cholera and diarrhea) and associated economic burdens. The rapid urbanization and expansion of economic activities in Nairobi calls for more effective and efficient water and sanitation services in order for the city to maintain its status as the regional hub for East Africa. The MTP-III (under the economic and social pillars) prioritizes water and sanitation infrastructural investments and targets expansion of sanitation and sewerage services in Nairobi and other major and medium towns. Inadequate and unhygienic sanitation is the second largest cause of disease in Kenya and each year the country loses an estimated 0.9% of its GDP due to poor sanitation (World Bank, 2012). This includes time losses to access clean water and sanitation facilities, premature death, health care costs and reduced productivity due to illness. This estimate does not include some costs such as environmental degradation, impact of poor sanitation to businesses and tourism, therefore, could be significantly lower than the true cost of poor sanitation.

1.2.2 The Nairobi Sanitation Management plan (currently under revision) provides a comprehensive strategy for full coverage of sanitation by 2040. The management plan calls for significant investments and reforms to reach the target of 100% sanitation coverage (onsite and off-site), and the proposed project is identified as among priority activities in implementing the plan. Other development partners (DP’s) such as Agence Française de Développement (AFD), the World Bank (WB) and Kreditanstalt fuer Wiederaufbau (KfW) have shown interest and will finance, in parallel, part of the prioritized sanitation infrastructure in the sanitation management plan.

1.2.3 The project is anchored in the Bank’s Country Strategy Paper (CSP) 2014–2018, which has two pillars: (i) enhancing physical infrastructure to unleash inclusive growth; and (ii) developing skills for an emerging labor market of a transforming economy improving competitiveness and infrastructure for growth and employment. The project directly contributes to the first pillar by supporting investments that would have positive effects on the health of Nairobi residents and indirectly to the second pillar through imparting skills through provision of improved infrastructure. The project also contributes to Outcome 3 under pillar 1 of the CSP: Enhanced access to more reliable water supply and improved sanitation. The content of the current CSP is a result of discussions held with the GoK, DP’s and other stakeholders, and aligns to the second MTP. The CSP has a strong feature on the contributory role of water supply and sanitation to the Bank’s “High 5s” development agenda and in addition, the “Deliverables and Targets” section of

8 Nairobi accounts for an estimated 13% of Kenya's GDP(World Bank, 2016) 9 Water coverage in Nairobi is 81% while sewerage coverage is only 48%.

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the CSP identifies the proposed investment for funding. The project supports Kenya’s Vision 2030 and its five - year plans by constructing comprehensive infrastructure systems as a basis of balanced, sustainable and inclusive growth. The project contributes towards attainment of the Sustainable Development Goals (SDGs’) No 6 on universal access to water and sanitation.in Kenya.

1.2.4 The project aligns with the Bank’s Integrated Water Resource Management Policy (2000) and the Bank’s Ten Year Strategy for 2013-2022, which recognizes development and management of water resources including sanitation services as central to Africa’s sustainable growth. The project also aligns with the Urban Development Strategy (2011); by providing strategic infrastructure for economic growth. In line with Knowledge Management Strategy (2015-2020), lessons from this intervention will help improve the quality of the Bank’s involvements in the urban water and sanitation sub-sector. By providing sustainable sanitation services, the project will further enhance the attractiveness of Nairobi for industrialization and other economic activities - contributing to (i) improved quality of life for the people which is in line with the one of the five (5) priority areas of Bank focus (High Five (5)) and (ii) the government’s 'Big Four' priority areas.

1.2.5 The Bank Group should support the water and sanitation sector in Kenya, stemming from its long-term engagement and experience. Bank support to the project further demonstrates its commitment to supporting its member countries’ efforts to deliver adequate sanitation services to millions of Africans, which is in line with the 2008 eThekwini Declaration, and the Ngor Declaration on Sanitation and Hygiene10.

1.2.6 The GoK has requested the Bank to support the project underscoring that the delivery of safe, adequate and reliable water and sanitation services in Nairobi is a high priority. Through the provision of adequate sanitation services, the project will improve Nairobi’s public health and business environment and reduce pollution of rivers in Nairobi. Given that health outcomes predominantly affect the urban poor, the project will significantly benefit poor households in Nairobi contributing to inclusive development. The Bank supported the Nairobi Rivers Sewerage Improvement Project (NaRSIP I) between 2010 and 2017 and together with support from other DP’s, sewerage coverage in Nairobi improved from 40% to 48%. The project is the follow on phase of NaRSIP I which achieved (Appendix 7) among others; (i) additional 63.3 km trunk and 43 km reticulation sewers; (ii) additional treatment capacity of 72,000m3/ day and (iii) generation of 2,000 jobs during implementation and 200 jobs post construction.

1.2.7 The project further complements the ongoing Kenya Towns Sustainable Water Supply and Sanitation Program, which entails provision of water supply and sewerage systems in Nairobi metropolitan area (Kikuyu, Limuru, Kiambu and Gatundu towns).

1.3 Development Partner Coordination 1.3.1 The Development Partnership Forum (DPF) established in 2011 is the apex, aid coordination body in Kenya. Heads of diplomatic missions and aid agencies, and heads of government departments attend the DPF. The DPF meets twice a year to discuss key policy issues, and agrees on a set of deliverables over the subsequent six (6) months. Other groups include the DPs Consultative Group (DPG), the GoK Coordinating Group (GCG), the Aid Effectiveness Group (AEG), the Aid Effectiveness Secretariat (AES) and the Sector Working Groups (SWGs).

10 The Ngor Declaration on Sanitation and Hygiene was adopted by the African Ministers responsible for sanitation and hygiene on 27 May 2015 at AfricaSan4.

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Table 1: DP Coordination Groups Coordination Group Membership and Role

DPs Consultative Group (DPG) Heads of diplomatic mission and aid agency GoK Coordinating Group (GCG) Heads of government department meeting every month Aid Effectiveness Group (AEG) Coordinates the dialogue between the DPG and the GCG; Monitors

and reports on the progress of agreed deliverables and the global aid effectiveness objectives; and provides advisory support to the SWGs

Aid Effectiveness Secretariat (AES)

The AES established at the National Treasury is the secretariat to the AEG.

1.3.2 The water and sanitation sector coordination platforms include: (i) Water SWG meetings; (ii) The annual water sector conference; (iii) the Sector Wide Approach (SWAp) committee meetings; (iv) Water Sector Technical Group (WSTG) meetings; (v) Medium Term Expenditure Framework planning process; and (v) Thematic working groups.

1.3.3 DPs active in the water sector currently have a commitment of about USD 3 Billion towards water and sanitation projects including institutional support. Most of these come from the AfDB, the WB, KfW, AFD, Government of China, Government of Belgium and the government of Italy. A number of donors support water supply and sanitation projects in Kenya and the government coordinates the allocation of towns and activities. Collaboration between donors has scaled up with the establishment of the WSTG, which meets once every two (2) months. The WSTG currently chaired by the United States Agency for International Development (USAID).

1.3.4 The financing arrangements of infrastructure development in the sector leans towards division of labor between DPs and the government, with the GoK coordinating and allocating DPs areas and activities of focus.. For this particular project, coordination led to allocation of sewerage infrastructure between AfDB and AFD as in Table 2. Appendix 3 lists other donor funded sanitation projects in Nairobi.

Table 2: Summary of the Sector Financing

Sector or subsector Size GDP Budget Labor Force

Water and Sanitation NA 4.2% NA Players – Water and Sanitation Public Annual Expenditure (ave. 2015 / 2016)

Government DPs

KES Billion 13.5 44.9

% 23 76

Level of Donor Coordination Existence of Thematic Working Groups Y Existence of SWAps or Integrated Sector Approaches Y AfDB's Involvement in DPs coordination Y

Table 3: Allocation of Sewerage Infrastructure under Sewerage Improvement Project Phase II

Financier Infrastructure

AfDB

1. Reticulation Sewer (sewerage catchments: Karen; Westlands, Mountain View and Uthiru; Kileleshwa; Kilimani; Ngara; Eastleigh; Huruma & Mathare North; Kahawa West, Githurai 44&45 and Kahawa Sukari; and Mwiki & Clay works)

2. Construction of 4 feacal sludge disposal facilities 3. Rehabilitation/ upgrade of Dandora Estate Sewerage Treatment Plant (DESTP)

AFD

1. Reticulation Sewer (sewerage catchments: Dagoretti; Riruta Satellite; Kangemi; Upper hill; Baba dogo, Lucky Summer; Thome and Garden Estate; Marurui; Kariobangi North and Marura; Kariobangi South and Umoja III/River Bank; Maili Saba; Umoja Innercore; Embakasi and Plot 10; and Zimmerman, Kasarani & Roysambu)

World Bank 21% AfDB 14% Italy 10% China 19.4% AFD 16.4% (KfW, Belgium, 19.2% Sida, EU, KOICA etc)

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II – PROJECT DESCRIPTION 2.1 Project Objective 2.1.1 The water and sanitation sector goal is to contribute to the health and quality of life and reduce poverty levels of the population of Kenya through provision of water and sanitation services on a sustainable basis.

2.1.2 The project objective is to improve the access, quality, availability and sustainability of wastewater services in Nairobi City with a view to contribute to the restoration of Nairobi Rivers Basin.

2.2 Project Components 2.2.1 The project will comprise three components: a) Sanitation Infrastructure, b) Institutional Development Support, and c) Project Management. Table 4 shows the components and outputs of the proposed Bank support.

Table 4: Project Components Component & Outputs Est. cost

(million EUR) 1. Sanitation Infrastructure 1-1 Construction of sewerage and sewage infrastructure

1-1-1 Rehabilitation of Dandora Estate Sewage Treatment Plant (DESTP) 1-1-2 Construction of secondary reticulation sewers and fecal sludge treatment and

disposal facilities including last mile connectivity support 1-2 Construction of gender sensitive ablution blocks in informal settlements

50.100

2. Institutional Development Support 2-1 Faecal sludge management enhancement consultancy 2-2 Support to NCWSC

2-2-1 Short term technical courses 2-2-2 Laboratory equipment and software 2-2-3 Supply and delivery of office equipment and software 2-2-4 Supply and delivery of Sewer flushing vehicles 2-2-5 Exhausters (2 big and 2 small) 2-2-6 Duty and standby generators for Kariobangi Sewerage Treatment Plant 2-2-7 Trucks ( 4 Ton & 7 ton) 2-2-8 Double cabin operational vehicles

2-3 Communication consultancy including hygiene and sanitation promotion 2-4 Consultancy on monitoring of the Nairobi rivers quality 2-5 Support to WASREB 2-6 Studies for future investments

2-6-1 Studies for West Nairobi Water and Sanitation Project 2-6-2 Studies on upgrading of Kahawa west Wastewater treatment

2-7 Climate change mitigation and adaptation 2-7-1 Study on energy generation and wastewater reuse in sewerage treatment plants 2-7-2 Rainwater harvesting using 100 tanks and rain water harvesting saucers 2-7-3 Tree Planting of 10,000 trees in partnership with schools and communities

6.731

3. Project Management 3-1 Project management activities (M&E, staff salaries, office spaces, project audit,

vehicle O&M, SC etc.) 3-2 Environmental safeguards

3-2-1 Compensation for wayleaves 3-2-2 ESMP implementation activities

4.770

Total Base Cost 61.601 Contingencies (Physical & Price) 9.240

Total Cost 70.841

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2.3 Technical Solution Retained and Other Alternatives 2.3.1 Technical solutions retained are based on feasibility studies and detailed designs conducted by both AWSB and NCWSC in 2017. The detailed designs for the proposed project are based on the Nairobi sanitation management plan. The sanitation management plan identifies a phased investment program in a 5- year interval for prioritization and improvement.

2.3.2 Enhanced capacity of the NCWSC and AWSB is an integral part of the project to ensure efficient delivery of sanitation services and sustainability of the investments.

2.3.3 Various technical solutions were explored (Table 5) for the project taking into account already existing infrastructure, operation and maintenance costs and capacity in the NCWSC. Relatively simple wastewater treatment technologies have been adopted to provide low cost sewage treatment and environmental protection with the potential of providing additional benefits from the reuse of wastewater and resource recovery. It is noted that existing wastewater treatment facilities are operating at 50% capacity and hence priority is on maximizing/optimizing the use of these facilities.

Table 5: Analysis of the Various Alternatives considered Alternative Brief Description Selected Option / Reasons for Rejection

Mechanical Waste water Treatment Technologies

Mechanical treatment technologies use a series of tanks, along with pumps, blowers, screens, grinders, and other mechanical components, to treat wastewater.

Mechanical systems can be costly to build and operate, as they require specialized personnel. Furthermore, the existing wastewater stabilization ponds are operating at 60% capacity.

Membrane technologies to treat wastewater

Membrane technologies use pressure driven physical processes to separate material mixtures in which the membrane functions as a filter. The technology combined with biological procedures results in better quality of wastewater. The high purification efficiency makes the technology attractive where water reuse is a priority.

High equipment costs and energy demands including regular membrane cleaning and skilled man - power requirements for operation and maintenance makes membrane technology expensive.

Decentralized wastewater treatment system

There are several wastewater treatment systems serving different areas in the city and this minimizes material and energy requirements through reduced wastewater infrastructure and transport distances, and allows adaptability to local conditions.

Centralized treatment plants at Kariobangi and Ruai is the selected solution as the existing capacity at both plants is underutilized (both plants are currently operating at less than 60% capacity). Furthermore, availability of land in Nairobi for decentralized waste water systems has proved to be a challenge with massive/illegal encroachment of public land reserved for public utilities.

On-site waste water sanitation system

The city sanitation services are through a combination of flush toilets connected to septic tanks and pit latrines.

In urban areas, on-site systems will require periodic exhaustion of the fecal sludge and septage from pits, tanks, and vaults. Consistent with the draft Sanitation management plan water borne sewerage reticulation will be introduced to business center districts and areas with high population density where the option could be economically justified and continuous use of on-site sanitation could pose health and environmental threats. The options of small-bore sewers and shallow sewers (condominal sewers) in informal settlement will be explored in addition to the provision of ablution blocks. For other areas, focus will be on priority peri-urban areas that will not be sewered in the medium- to long-term due to technical and financial considerations as septic tanks will continue to be the most viable option, and the project will provide exhausters and equipment for the improved

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Alternative Brief Description Selected Option / Reasons for Rejection management of these facilities. Promotion of environmental health and hygiene is incorporated in the interventions and capacity of NCWSC for faecal sludge management will be enhanced. The design of the sewerage network will ensure low maintenance requirement as the sewers are designed to provide an adequate self-cleansing velocity to avoid accumulation of any deposits during low flow conditions. Ablution blocks supported under the project will be connected/provided with adequate water supply by NCWSC.

2.4 Project Type 2.4.1 The proposed project supports sanitation infrastructure investments including institutional capacity development funded through a combination of an ADB loan and GoK counterpart contribution11. The funding instrument for the proposed intervention is sector investment and the project investments are to be complemented by AFD through parallel financing amounting to EUR 20 million (USD 24.645 million). AFD support (Table 3) focuses on reticulation sewers including last mile connections.

2.5 Project Cost and Financing Arrangements 2.5.1 The total cost of the Bank supported project components defined in Table 4 is estimated at EUR 70.841 million, net of taxes and duties. Of this, EUR 51.806 million or 73.1% is in foreign currency and EUR 19.035 million is in local currency. The tables below provide the summary of the Bank component costs.

2.5.2 The GoK counterpart - funding requirement for the project is 11.2%. Taking into account the country’s budget situation and debt level including justification provided in Appendix 5, it is concluded that this amount will ensure requisite ownership by the authorities and help expedite the project’s implementation.

Table 6: Project Cost Estimates by component

Component

EUR million UA million Foreign Currency

% % Total Foreign

Currency Cost

Local Currency

Cost Total

Foreign Currency

Cost

Local Currency

Cost Total

1. Sanitation Infrastructure 44.200 13.415 57.615 36.672 11.130 47.802 76.72% 81.33%

2. Institutional Development Support

7.360 0.380 7.740 6.107 0.315 6.422 95.09% 10.93%

3. Project Management - 5.486 5.486 - 4.551 4.551 0.00% 7.74%

Total 51.806 19.035 70.841 42.982 15.793 58.775 73.13% 100.00%

Table 7: Sources of Financing

Source

EUR million UA million

% Foreign Currency

Cost

Local Currency

Cost Total

Foreign Currency

Cost

Local Currency

Cost Total

ADB 48.558 10.849 59.407 40.287 9.001 49.288 83.86% ADF 3.248 0.259 3.507 2.695 0.215 2.910 4.95% GoK - 7.927 7.927 - 6.577 6.577 11.19% Total 51.806 19.035 70.841 42.982 15.793 58.775 100.00%

11 Appendix 5 provides justification for the Bank’s financing of more than 50%, in line with the requirement under the Bank’s policy on Expenditure Eligible for Bank Financing

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Table 8: Project Cost by Category of Expenditure

Category of Expenditure

EUR million UA million %

Foreign Foreign

Currency Cost

Local Currency

Cost Total

Foreign Currency

Cost

Local Currency

Cost Total

A. Works 39.536 13.535 53.071 32.801 11.231 44.032 74.50% B. Services 7.853 0.259 8.112 6.515 0.215 6.730 96.80% C. Goods 4.172 - 4.172 3.462 - 3.462 100.00% D. Operating Cost - 5.486 5.486 - 4.551 4.551 0.00%

Total 51.561 19.280 70.841 42.778 15.9967 58.775 72.78%

Table 9: Expenditure by Component and Source Component EUR million UA million

ADB ADF GoK Total ADB ADF GoK Total 1. Sanitation

Infrastructure 55.174 - 2.441 57.615 45.776 - 2.025 47.801

2. Institutional Development Support

4.233 3.507 - 7.740 3.512 2.910 - 6.422

3. Project Management - - 5.486 5.486 - - 4.551 4.551 Total 59.407 3.507 7.927 70.841 49.288 2.910 6.576 58.775

Table 10: Category of Expenditure by Funding Source Component EUR million UA million

ADB ADF GoK Total ADB ADF GoK Total A. Works 50.630 - 2.441 53.071 42.006 - 2.025 44.032 B. Services 5.408 2.704 - 8.112 4.487 2.243 - 6.730 C. Goods 3.369 0.803 - 4.172 2.795 0.667 - 3.462 D. Operating Cost - - 5.486 5.486 - - 4.551 4.551

Total 59.407 3.507 7.927 70.841 49.288 2.910 6.576 58.775

Table 11: Expenditure Schedule by Component in EUR million Component 2019 2020 2021 2022 2023 Total

1.SanitationInfrastructure 0.268 11.978 22.712 21.854 0.803 57.615 (0.222) (9.938) (18.844) (18.131) (0.667) (47.801)

2. Institutional Development Support

0.019 4.072 1.315 0.980 1.354 7.740 (0.016) (3.378) (1.091) (0.813) (1.123) (6.422)

3. Project Management 0.110 1.344 1.344 1.344 1.344 5.486 (0.092) (1.115) (1.115) (1.115) (1.115) (4.551)

Total Costs 0.397 17.394 25.371 24.178 3.501 70.841 (0.330) (14.431) (21.050) (20.060) (2.905) (58.775)

( ) is in million UA

2.6 Project Target Area and Population 2.6.1 The proposed project covers part of Nairobi City, which has a present population of 4.4 million. The proposed project supported by AfDB and AFD construct approximately 440 km of sewer reticulation network including last mile connections with a view to provide sewer connection to approximately 1,000,000 people. Out of these, the Bank financed activities will support 220km of sewer reticulation network and provide sewer connection to approximately 460,000 people. Additional 40,000 people will benefit from 100 new and rehabilitated ablution blocks. Rehabilitation and upgrade Dandora Estate Sewage Treatment Plant (DESTP) will significantly improve effluent discharge from the largest wastewater treatment plant in Nairobi. As part of the effort to deliver inclusive sanitation service, feacal sludge discharge points will be constructed within the sewerage network and 100 ablution blocks will be constructed in informal settlements. In addition, four (4) no. faecal sludge treatment facilities will be constructed within Nairobi city. AWSB and NCWSC will benefit from capacity development support to strengthen the institution for the better planning, operational and management of sanitation services.

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2.6.2 The support to the Water Services Regulatory Board (WASREB), expected to result in enhanced performance of water service providers (WSPs) in the country, will indirectly deliver wider benefits to the population.

2.6.3 In addition to access to improved sanitation services, community members in project areas will benefit from hygiene and sanitation promotion with emphasis on collaboration/integration of water, sanitation and hygiene (WASH) and nutrition programs in schools and informal settlements. Hygiene promotion activities will also include physical cleaning of the Nairobi rivers in collaboration with on-going initiative of Nairobi rivers regeneration program planned by the Nairobi City county.

2.6.4 Improved effluent quality from DESTP and reduced direct sewage discharge will improve quality and availability of water in the Nairobi rivers and reduce contamination of groundwater. This will indirectly benefit population downstream of Nairobi City, as water resources from Nairobi rivers basin are utilized for domestic and agriculture purposes. Other benefits include: direct jobs created by project implementation including skills to interns attached to contractors; job created for the management of public ablution blocks; reduced water-borne disease outbreaks, likely to impact the population well beyond the project geographical areas of coverage; improved business environment for industries that rely on dependable water and sanitation services; and positive impact on Nairobi city’s competitiveness as a result of improved urban services.

2.7 Participatory Process for Project Identification, Design and Implementation 2.7.1 The project has been prepared through an extensive participatory approach involving stakeholders, including relevant Government agencies and Nairobi County, NGOs, the private sector, schools, Community Based Organizations (CBOs), donors and local representatives. Consultation meetings focused, among others, on the selection and design of sanitation and sewerage systems, environmental management plan and socioeconomic considerations. The outcomes of the consultations with stakeholders are integrated in the project as follows: (i) more public ablution blocks (100 no new and rehabilitated) are provided in the low income areas/informal settlements and these should have an adequate supply of water; (ii) women to operate and maintain at least 50% of ablution kiosks in informal settlements; (iii) through training by NCWSC, communities should be sensitized on how to better manage toilets and keep them clean; (iii) households in the middle and high income areas should be encouraged to connect to the sewer lines, (iv) employment of local youths including fair and transparent compensation process. Also, sensitization and health education were seen as important base for effective and continuous dialogue with beneficiaries and stakeholders to motivate local communities to get engaged in the process to improve environmental sanitation. The participatory process will be continued during implementation through joint cleaning activities of the Nairobi rivers with the community, conducting awareness campaigns and media enlightenment programs. In addition, capacity building of staff of AWSB and NCWSC on Faecal Sludge Management (FSM) best practices will provide guidance on how to plan city- wide FSM projects with the involvement of all stakeholders.

2.7.2 Public consultations for the Project started during the pre-feasibility studies stage and continued with the ESIA studies. The Ministry of Water and Sanitation has discussed the project with Nairobi County Government, AWSB, and NCWSC. The Environmental and Social Impact Assessment was in consultation with the communities living in Nairobi. Consultations with other relevant ministries and institutions were undertaken to ensure coordination and cooperation. The Bank has also consulted with AWSB, County Government and visited the project sites to ensure suitable project sites for proposed interventions. Briefing of the DPs on the project was done during the Donors Sector Coordination meetings.

2.7.3 Considering that stakeholder participation and engagement is expected to continue into the implementation phase, the stakeholder engagement plan (SEP) which was developed under NaRSIP I has been updated and will support further stakeholder participation and engagement going forward.

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2.8 Bank Group Experience, Lessons Reflected in Project Design 2.8.1 The Bank Group operations in Kenya commenced in 1967 and since then, the Bank Group has committed up to UA 3.55 billion covering investments, knowledge and policy dialogue, and technical assistance. As of October 2018, the Bank’s portfolio in Kenya consists of 36 operations - 26 public sector projects and 10 private sector operations, with a total commitment of UA 2.2bn. The transport sector constitutes 34% of the portfolio, followed by Energy at 28%, Water Supply and Sanitation (16%), Finance (13%), Agriculture (5%) and Social (4%). Current (2017) preliminary CPPR assessment ratings returned satisfactory overall portfolio performance of 3.19, with the Implementation Progress (IP) and Development Objectives (DO) ratings of 3.17 and 3.21 respectively on a scale of 0 - 4. The Bank has since 1978 financed 14 operations in the water and sanitation sector, which have been largely satisfactory and 2 are ongoing. The support targets achieving national goals for water and sanitation as articulated in the relevant national policy documents; namely the Constitution of Kenya (2010), the Vision 2030 document, and the National Water Services Strategy (NWSS). All projects in the water sector in Kenya have met the conditions precedent to first disbursement and all instruments have disbursed. The Bank has stepped-up follow up and close supervision of the project in the water and sanitation sector. There is no pending Project Completion Report and no outstanding conditions precedent for first disbursements for the active projects. The most recent projects with sanitation components and in which AWSB has been involved are (i) the NaRSIP I which closed in 2016 and (ii) the on-going Kenya Towns Sustainable Water Supply and Sanitation Program.

2.8.2 Some of the key lessons learnt from on-going and past interventions in the country by the Bank and other DPs taken into account in the design of the project are:

Improved Quality at Entry: To ensure timely implementation of the project, technical designs were prepared in September 2017 with advance procurement activities for the recruitment of design review and supervision consultancies scheduled to commence in November 2018. Further, in compliance with the Bank’s Presidential Directive (PD) 02/2105, the Project Implementing Team (PIT) is already appointed and their profiles submitted to the Bank for review and concurrence during appraisal. The steering committee (SC) for the project is established.

Comprehensive approach to sanitation: In addition to investments in sewerage infrastructure and sewage treatment, the project provides public ablution blocks, faecal sludge treatment and disposal facilities, as well as enhancing the capacity of NCWSC in addressing challenges of FSM. The project interventions incorporate promotion of environmental health and hygiene practices and all ablution blocks in informal settlements will connect to reliable water supply. The project will enhance capacity of both AWSB and NCWSC to operate, monitor and deliver improved services. Support to the WASREB will contribute to improved performance of WSPs and sustainable service delivery.

Last mile connectivity: Previous investments in sewerage infrastructure in Nairobi mainly covered first mile of sanitation services and customers have been slow to connect to the main sewer line due to affordability or other constraints. There is hence the need for last mile investments to ensure uptake. The project has included last mile investments and campaigns to ensure effective demand for connections.

Public Private Partnership: Small - scale private sanitation service providers play a critical role in the expansion of on- site sanitation services to informal settlements and hence filling the gap where public service providers have failed. However, the low knowledge/capacity on FSM including weak regulatory framework limits private sector participation despite opportunities to commercialize toilets, technologies and pit latrine services in urban areas. The strengthening of the AWSB and NCWSC by the project in the area of FSM will expose the institutions to best FSM practices including integrated sanitation value chain business models such as those by

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SANERGY12 where low-cost high-quality sanitation facilities have been designed and are providing sustainable sanitation services in some informal settlements in Nairobi. The appropriate and adequate management of faecal sludge deriving from onsite technologies is imperative for the protection of human and environmental health taking into account that the Faecal Sludge Diagram for Nairobi (Technical Annex A2) indicates that only 34 % of generated human waste is safely disposed to the environment.

Enhanced M&E framework at IA level: AWSB has put together a monitoring framework to enable regular monitoring and reporting on the logical framework in order to ensure that the project objectives are met as planned. The project logical framework will be used to monitor project activities to ensure compliance with timelines, objectives and identify any challenges.

RAP Implementation: In order to avoid delays during project implementation, RAP review and updating will be done before project implementation and adequate funds provided for compensation. AWSB will therefore procure an independent consultant to implement the already prepared RAP prior to commencement of works. The amounts of money for compensation will be prioritized from GoK counterpart allocations received from MoWS.

2.9 Key Performance Indicators 2.9.1 The key performance indicators for monitoring of the projects achievements are identified and captured in the result based logical framework (RBLF). In line with the objective of the project, outcome indicators include those that capture improved quality of life of people in Nairobi such as health, service coverage and employment opportunities, and enhanced capacity of NCWSC. Output indicators were selected to capture implementation progress of major infrastructure investments and institutional capacity development activities under the project.

2.9.2 AWSB signs a performance contract annually with MoWS outlining key targets to be achieved, which will include the proposed project. AWSB will submit Quarterly Progress Reports (QPR) to provide an overview of progress made and highlight issues that require attention. AWSB will also ensure that the database of Nairobi Rivers water quality is regularly maintained and related information on all progress data under the project is captured in order to facilitate assessment of progress.

III – PROJECT FEASIBILITY 3.1 Economic and Financial Performance

Table 12: Key Economic and Financial Figures FIRR 11.82% and FNPV KES 757.85 million (at 10% base case)

EIRR 26.33% and ENPV KES 9,272.09 million (at 10% base case) FIRR: Financial Internal Rate of Return, FNPV: Financial Net Present Value EIRR: Economic Internal Rate of Return, ENPV: Economic Net Present Value

3.1.1 The project will be implemented over an estimated 4 year period and will have a life span of 20 years from completion of implementation in 2022;

3.1.2 The estimated base population in the project zones with potential to connect to the sewer network by 2022 is projected to be 460,000 people. Of this population, it is assumed that 70% will be connected to the network at project completion, rising to 90% by 2025 and 100% by 2030. The population is expected to grow at 2.5% per annum. An additional 40,000 people will benefit from the ablution blocks under the project.

12 The model take a systems-based approach to solve the sanitation crisis sustainably through provision of sanitation facilities, provision of waste removal and transport and converting the waste at a centralized facility into useful end-products such as organic fertilizer, insect-based animal feed, and renewable energy.

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3.1.3 For purposes of this analysis, it has been assumed that the sewerage levy amounts to 75% of the consumed water bill in line with the WASREB approved tariff for Nairobi. The tariff currently does not recover the full cost of the interventions and the analysis assumes a gradual progression from O&M cost recovery, subsequently reaching full cost recovery to cover investments.

3.1.4 Operating and maintenance costs, including administration overheads, are estimated to average 50% of the revenue generated in the first 8 years. As the infrastructure begins to wear out, this will rise to around 65%, this requiring additional reinvestment in network rehabilitation and expansion. The analysis, therefore, assumes that there will be need for capital reinvestment, amounting to 5% of the capital expenditure after 10 years of operation to cater for major refurbishments and efficiency enhancements. The sewer system is fully gravity fed, hence reducing the increased costs that come with pumping.

3.1.5 The EIRR considers the incremental benefits arising from lower health costs due to reduction in waterborne infections and the time saving benefit. Improvements in health outcomes will allow household members to invest in income generating activities, thus improving the livelihoods of the communities. Furthermore, improved sanitation will result improve school enrolment, especially for the girl child.

3.1.6 Sensitivity analysis undertaken to assess the impact on the FIRR and EIRR of increases in the capital costs and revenue collections concluded that the lower revenue collection has a more accelerated impact on the viability project than the measured increases in capital costs. The sensitivity analysis’, however, concluded that both increases in capital costs and reduction in revenue of up to 20% will not result in the viability of the interventions being lower than the assumed cost of funding of 10%.

3.2 Environmental and Social Impacts Environmental Impacts 3.2.1 The project falls within category 1 and in compliance with AfDB’s Integrated Safeguards System (ISS), the AWSB and Nairobi City Water and Sewerage Company have undertaken the Environmental and Social Impact Assessment (ESIA) for the project components. In addition, a RAP covering project interventions has been finalized and given the sensitivity of the issue, there is need for continuous extensive consultations between the Government and all stakeholders impacted by the project. Taking lessons from the completed phase 1 of the project, a phased implementation of the RAP with assured funding by the Government and linked to the physical implementation of individual works contracts is proposed as the way forward. Summaries of the ESIA and RAP have been prepared and published on the Banks website on 26th February 2018 for disclosure for 120 days period before Board submission.

3.2.2 Main environmental and social benefits: The project will significantly improve the current environmental situation in Nairobi city through collection and treatment of wastewater, which is currently discharged directly into the Nairobi Rivers. This will result in improved surface water quality in the Nairobi Rivers, and contribute to improved public health of the surrounding population particularly those in the neighborhoods of the rivers and those that use the water for agricultural and other economic purposes. The provision of ablution blocks will improve water supply and sanitation conditions of communities in the riparian zone

3.2.3 Potential adverse environmental and social impacts: The potential adverse environmental and social impacts of the project include land acquisition for sewer pipeline transmission routes and siting of new facilities, poor location of sewerage facilities that may result in public nuisance, as well as risk of HIV/AIDs spread due to influx of construction workers in sub-project areas, among others.

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3.2.4 Mitigation: In line with the already prepared ESIA and RAP, Environmental and Social Management Plans (ESMPs) have been prepared.

Climate Change 3.2.5 According to the Bank’s Climate Safeguards Screening, the project was classified Category II, indicating the project interventions may be vulnerable to climate risks and require the application of the Bank’s Adaptation Review and Evaluation Procedures (AREP) tool to manage those risks. The project is a strategic response to the impacts of climate change and designed to reflect projected climate change risks, which is consistent with the Banks Second Climate Change Action Plan. To contribute towards mitigation of climate change impacts, the project has made provision for financing a tree planting program including rainwater harvesting systems in selected schools and along the riparian zone of the Nairobi rivers basin which will serve the purpose of carbon sequestration and contributes to the bigger picture of making Nairobi the Green City in the Sun,". A study on methane capture and utilization (to mitigate the impacts of GHG emissions) at the sewerage treatment plants is included in the project.

3.2.6 The GoK has shown proactive commitment to tackling the challenges of climate change and environmental degradation plaguing the water and sanitation sector. The National Climate Change Response Strategy (NCCRS) was prepared to focus on developing robust adaptation and mitigation interventions to address the impacts of climate change in country while the Climate Change Action Plan (CCAP) 2013-2017 was developed as the government’s instrument to effectively implement and operationalize the NCCRS for building climate resilience in all sectors, including water and sanitation. Consistent with this plan, the project proposes to strengthen the climate resilience of the sanitation systems in Nairobi through ensuring technical designs for the proposed infrastructures reflect the projected climatic changes in Nairobi city. In addition, the project will reduce carbon emissions. The living conditions of the beneficiaries and overall urban environment are expected to improve with Nairobi becoming more climate resilient. The cleaning up of surface water pollution will directly reduce flies and mice, eliminate foul odors and risk of water-borne diseases to residents.

Gender 3.2.7 It is recognized that the direct employment rates of women in the water and sanitation sector is lower than their male counterparts. Therefore, priority in the management and maintenance of ablution blocks in informal settlements through community-based organisations will be given to women, youth and special needs groups. The project will ensure that at least 50% of the operators of ablution blocks are women and they will receive training in the management operation and maintenance of the facilities, including basic book keeping from NCWSC. The design of the ablution blocks will take into account innovations from phase one where the facilities provided additional sources of income to the communities. Additionally, the project will contribute to reducing absenteeism of girls in schools through provision of gender sensitive ablution blocks and improvement of other sanitation facilities such as disposal of sanitary towels. Security and privacy is a key factor for women and girls when using sanitation facilities. The ablution blocks will be sited close to the households and fitted with lighting facilities to provide women and girls with safe areas where their safety and privacy is not compromised. The project will include collection of gender dis-aggregated data within the broader M&E framework to demonstrate the effect of NaRSIP II on girls’ retention in schools served by the ablution blocks. The project will measure the provision of improved sanitation on girls’ retention in schools, and gender-based violence. The national procurement laws allow at least thirty percent of procurement value in every financial year to be allocated to enterprises owned by the youth, women and persons with disabilities. The project shall take into account this policy as part of the evaluation and/or qualification criteria for contracts for goods and small works procured under Open Competitive Bidding (with national advertising) method.

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3.2.8 AWSB will appoint a Gender Focal Point to design, undertake and monitor all gender equality outcomes in NaRSIP II, in consultation with the Ministry of Water and Sanitation Gender Officer. Knowledge and sensitization on gender mainstreaming and gender specific needs will be provided to the Project Management Team as part of the institutional capacity building.

Social 3.2.9 The project aims to increase coverage of sewerage from 48% to 70% in Nairobi with a long-term view of contributing to the restoration of Nairobi Rivers Basin. Increased access to sanitation will impact positively on the health outcomes of the population, especially in reducing diarrheal diseases and related mortality. Increasing access to sanitation facilities will also prevent toilet sharing among households and thereby reduce the risk of disease transmission. An estimated 65.9% of households in urban areas share toilets with other households. Child mortality in Kenya has considerably reduced from 115/1,000 live births in 2003 to 49.2/1,000 in 2016. Nairobi however has the second highest under five mortality of 72/1000 live births after Nyanza region. Diarrhea prevalence among children is 9.2%. According to the KIHBS 2015/2016, the prevalence of diarrheal diseases nationally is highest among children aged 12 -24 years at 14.4%. Diarrheal diseases are more prevalent in urban areas and estimated at 9.4% in Nairobi. Kenya has had prolonged cholera outbreaks between 2014 and 2017, affecting most counties including Nairobi.

3.2.10 The project will promote awareness of household and community hygiene and sanitation through health education campaigns. The association between better sanitation and improved nutritional status of households will be emphasized in health promotion messages. Nearly 80% of the population nationally have no place to wash hands either within or near toilets. Lack of compliance with regular handwashing practices is a key factor contributing to the high prevalence of infectious diseases. The project will use the Trainer of Trainer model to build capacity of the water company staff and community-based organizations on hygiene promotion to conduct awareness campaigns in the communities. The awareness campaigns will also include management of solid waste. At least 16.3% of the population in Nairobi dump solid waste in the streets or open fields. Some of this waste eventually finds itself in the rivers. The project will promote ownership of the Nairobi Rivers by the communities living along the rivers and engage the residents in regular clean-up of the rivers. This will be done in close collaboration with the County Government and community groups. HIV&AIDS awareness and broader sensitization on reproductive health will be integrated into the behavior change campaign messages targeting staff and workers under civil works contracts as well as communities in the riparian zones.

3.2.11 The project will also improve access to more hygienic public sanitation facilities for populations in the informal settlements. At the institutional level, AWSB and NCWSC have developed the “Pro-poor strategy for informal settlements” which will be used in the implementation and monitoring of this project. The project will consult the “Strategic Guidelines for Improving Water & Sanitation in Informal Settlements”, when setting up ablution blocks in informal settlements.

3.2.12 Once implemented, the project will impact positively on the sanitation and health conditions of the target population. In addition, it will improve access to more hygienic public sanitation facilities, contribute to the restoration of surface water resources and awareness raising and capacity building in the fields of sanitation-related diseases, HIV/AIDS and hygiene, which is in line with the GoK Big Four Agenda and contribute to realization of SDG6 and SDG3.

Involuntary Resettlement 3.2.13 The laying/installation of sewers may require land access and/or land acquisition for pipeline transmission routes and construction of new infrastructures. RAPs are based on detailed designs of the interventions. However, due to possibility of changes in alignment in some sections, the RAP will be updated to accommodate any new Project Affected Populations (PAPs) that could arise as a consequence, in addition RAP update will also be informed by the design review phase.

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IV – IMPLEMENTATION 4.1 Implementation Arrangements 4.1.1 The Executing Agency (EA) for the project is the AWSB, while the MoWS will have a coordinating role. The AWSB will undertake the actual implementation and will ensure involvement of Nairobi City Water and Sewerage Company (NCWSC) through a cooperative framework agreement. A Project Implementation Team (PIT) will coordinate project implementation with additional support provided by engineering consultants who will review the detailed designs, prepare tender documents, and supervise the works under this project. Project funds will flow from the National Treasury to AWSB through the MoWS and the Loan will be on lent to AWSB through a subsidiary financing agreement with the National Treasury.

4.1.2 AWSB has formed a PIT that will manage the project including the AFD financed component and the structure of the PIT includes staff from NCWSC and has been agreed with the Bank. Key staff of the PIT include: Project Coordinator, Project Accountant, Project Procurement Officer, Project Environmental Officer, Project Monitoring and Evaluation Specialist, Project Engineer, and Project Community Development specialist. AWSB has recently implemented a number of AfDB, WB, AFD and KfW financed projects and is familiar with Banks’ procedures, which will facilitate implementation. The PIT has retained most of the staff that were active in the implementation of NaRSIP I, which closed in 2016.

4.1.3 The project will have a Steering Committee (SC) to provide oversight and guidance on project implementation. The steering committee membership will include AWSB, NCWSC, Nairobi County Government, The National Treasury and Planing and Ministry of Environment and Forestry and will be chaired by the Principal Secretary MoWS. The steering committee will co-opt other members as necessary and facilitate collaboration and coordination with Nairobi river regeneration initiatives by the Nairobi City County Government and other stakeholders.

Implementation Schedule 4.1.4 The project will be implemented over a period of 48 months following fulfilment of conditions for first disbursement expected by February 2019. Procurement processes of design review and supervision consultancy will commence in November 2018, while major works are scheduled to commence in the fourth quarter of 2019. Project completion is set for February 2023 and the deadline for last disbursement will be 31 May 2023. Procurement Arrangements

4.1.5 Procurement of goods (including non-consultancy services), works and the acquisition of consulting services, financed by the Bank for the project, will be carried out in accordance with the Procurement Framework for Bank Group Funded Operations, dated October 2015 as may be amended from time to time (the “Procurement Framework”) and the provisions of the Borrower’s procurement plan for the Project. Specifically, procurement shall be carried out following Bank’s Procurement Methods and Procedures, using the relevant Bank Standard or Model Solicitation Documents, for all contracts since the Borrower Procurement System under the Public Procurement and Asset Disposal Act of 2015 shall not relied upon for any category of procurement under the program. Third Party Procurement Methods and Procedures shall not be used. For contracts procured using Open Competitive Bidding (OCB) with international advertising, the Borrower may grant a margin of preference to domestic contractors of up to a maximum of ten per cent (10%) in the evaluation of bids for works. Goods and non-consulting services produced in the Borrower’s country will receive a margin of preference of up to a maximum of fifteen per cent (15%).

16

4.1.6 The various items under different expenditure categories and related procurement arrangements to be financed by the Bank and the respective procurement methods and procedures, estimated costs, Bank-review arrangements, and schedule, as agreed between the Borrower and the Bank, are detailed in the Technical Annex B.5. To fast track project implementation, Advance Contracting has been recommended for procurement of goods required for Institutional Support and consultancy services for design review and construction supervision.

4.1.7 The assessment of procurement risks at the country, sector, and program levels and of procurement capacity at the executing agency, were undertaken for the project and are detailed in the Technical Annex B.5, the output of which have informed the decisions on the procurement regimes being used under the project. The appropriate mitigation measures and costs have been included in the procurement capacity development action plan under the project.

Financial Management and Audit Arrangements 4.1.8 The financial management (FM) of the project will be carried out by the AWSB, in line with the agreed implementation arrangements and it is observed that AWSB has proper structures in place. The Bank has conducted an assessment on the adequacy of the financial management (FM) system of the Athi Water Services Board (AWSB) based on the Bank’s FM Implementation Guidelines-2014. The assessment concluded that the Financial Management capacity is adequate and the overall risk as moderate. The AWSB has proper structures in place as well as adequate staff to carry out the FM responsibilities of the project.

4.1.9 The overall responsibility for financial management will rest within the existing structures of the AWSB. The board’s budgeting processes has been found to be adequate. Budgets are approved by Board of Directors, then submitted to the National Treasury through the Ministry of Water and Sanitation for inclusion into the National budget. Budget monitoring is done monthly and quarterly and variance reports produced. The annual project financial statements will be prepared in accordance with the International Public Sector Accounting Standards (IPSAS) annually by 30th September. The annual financial statements should include: (i) a Balance sheet that shows assets and liabilities; (ii) a statement of Receipts and Expenditures showing separately Bank’s funding, those of counterpart and co-financiers if applicable, and cash balances; (iii) Notes to the Financial Statements describing the applicable accounting principles in place and a detailed analysis of the main accounts.

4.1.10 In addition, the Project will provide an update on financial performance of the project as part of the quarterly progress report (QPR) as required by the Bank not later than 45 days after the end of the quarter.

4.1.11 The project financial statements will be audited by the Kenya’s Office of the Auditor General (OAG) or his appointee using the bank’s audit terms of reference. The audited project financial statements will be submitted to the Bank within six months after the close of the financial year.

Disbursement Arrangements 4.1.12 The Project will use both the special account and the direct payment methods. The Special account in Euros will be opened at the Central Bank of Kenya while the Project account in Kenya Shillings will be opened at a Commercial Bank acceptable to AfDB and with the approval of the National Treasury. The project account will be used to pay for training expenses only. The direct payment method will be used to pay contractors, consultants and suppliers. The details of these disbursement methods are provided in the Bank’s disbursement Handbook. The Bank will issue a disbursement letter, which will provide specific guidelines on key disbursement procedures and practices. The content of the disbursement letter will be discussed during negotiations.

4.1.13 The project funds will be tax exempt and the AWSB will ensure that they have sought and obtained the necessary tax exemptions in time, in order to minimize delays in payments, and hence project implementation.

17

4.2 Monitoring and Evaluation (M&E) 4.2.1 The Bank will follow up the implementation of the project through active participation in the periodic technical and sector reviews, regular joint supervision missions with AFD during project implementation, and ex-post evaluations. The project will make use of the IMPACT report from WASREB and existing MoWS monitoring and evaluation (M&E) system (WARIS) which will be linked with the results-based logical framework with an emphasis on outcomes and impacts. In addition, AWSB will provide regular monitoring of inputs and outputs covering the 3 main components. As part of the project, AWSB will submit Quarterly Progress Reports (QPR) to provide an overview of progress made and highlight issues that require attention. The AWSB will include a dedicated monitoring and evaluation specialist to ensure all project monitoring and evaluation is done. MoWS will have the overall responsibility for monitoring the implementation of the project as well as supervising implementation of the ESMP in each project site. MoWS will also ensure that the database of Nairobi Rivers water quality is regularly maintained and related information on all progress data under the project is captured in order to facilitate assessment of progress. AWSB will work with the County government, ministry of health and education to track data on health and education outcomes as well as gender-based violence. Routine data on health and education will be generated from the health information system and the national education management information system. Impact data will be tracked through national surveys such as the Kenya Demographic Health Survey and Kenya Integrated Budget and Household surveys. AWSB will also collect qualitative data through periodic focus group discussions with project beneficiaries to assess non-quantitative results of the project.

Table 13: Key Project Milestones Timeframe Milestone Monitoring Process/feedback loop

November 2018

Start of advance procurement of a consulting firms for design reviews and supervision of works

Request for expression of interest and request for proposals published

February 2019 Signing and effectiveness Loan agreements signed and declared effective by the Bank

March 2019 Launching Launching workshop organized June 2019 Start of procurement of a

contractors for works November 2019 Start of works Works contract signed October2020 Mid-term review Mid-term review undertaken February 2023 Completion of project Project completion report

4.3 Governance 4.3.1 The 2010 Constitution of Kenya ushered in a devolved government structure, which will facilitate wider consultation on developmental and governance issues going forward. In the 2017 Mo Ibrahim Index of African Governance, Kenya scored 59.3 out of 100, and was ranked 13th out of the 54 countries on overall governance. The country showed increased improvements in the areas of “participation and human rights”, “sustainable economic opportunity” “human development” and “safety and rule of law”. The government continues to fight corruption and since 2015, the Government adopted the e-procurement system to ensure procurement processes are transparent, more predictable, and less prone to manipulation. The use of Integrated Financial Management Information System (IFMIS) is mandatory for all government and donor funded projects to enhance accountability and ensure project funds are used for intended purposes. Kenya’s new Pubic Procurement and Asset Disposal Act was signed into law in December 2015 but the supporting Regulations are currently under preparation. In order to strengthen the national Procurement System for future use under Bank-financed projects, the project will support development of capacity for procurement oversight by providing training to the Public Procurement Regulatory Authority and the Directorate of Public Procurement at the National Treasury in procurement policy management and audit.

18

4.3.2 At sector level, the new Water Act 2016 provides guidance on sector regulation and governance going forwards. With water services being a devolved function of government, decisions on service provision will be made at the county level with guidelines provided by WASREB facilitating service delivery and increased participation of beneficiaries in decision making. The role of WASREB in the regulation of the sector, provides check and balances on sector players, brings uniformity and ensures the protection of consumers through ensuring the levying of fair tariffs for fair services. Existing pro-poor mechanisms in tariff setting will continue to ensure that the poor and vulnerable members of society also benefit from water supply, and sanitation services, which is enshrined in the Kenyan Constitution as a human right. WASREB has developed governance indicators aimed at improving the performance of water utilities.

4.3.3 The project will adopt all current and future governance and anti-corruption policies and guidelines of the country. The proposed support to WASREB, and the technical and financial audits embedded in the program will also ensure that funds are used for intended purposes, and with due regard to economy and efficiency. Other measures shall include the Bank’s prior review and clearance of most project procurement activities, and continuous program supervisions to follow up closely on implementation progress on site.

4.4 Sustainability 4.4.1 The institutional sustainability of the project is underpinned by government commitment to the water sector reforms and establishment of a regulator. The WASREB has shown commitment to the project by drafting regulations for the efficient delivery of not only sewerage services but also on-site sanitation services. Regular performance monitoring of the NCWSC and tariff reviews are undertaken by the regulator (WASREB) in line with the Water Act 2016, which also provides for a sanitation levy to enhance sanitation services. A revised tariff13 was granted in 2016, which took into account the sewerage infrastructure under the NaRSIP I project providing the basis for sustainable provision of water and services by the NCWSC. Furthermore, operations and maintenance after the completion of the infrastructure are assured through the mechanism of tariffs and affordability studies provided through AFD support to NCWSC. The project includes institutional strengthening, which, among others will enhance AWSB and NCWSC technical and managerial skills in the provision of improved sanitation services. NCWSC will also be responsible for training of CBO’s who will be delegated the responsibility of managing ablution blocks in the informal settlements. The technical sustainability of the project is ensured by the simple technology of the waste stabilization ponds treatment system and recent GoK enforcement of plastic paper ban and plans by the Nairobi City County to improve solid waste management will reduce blockages of the sewer system. The physical cleaning of the Nairobi rivers will be undertaken within the Hygiene and promotion activity and as part of the civil works contract and this will contribute to contributing to the restoration of the Nairobi rivers basin and reduced blockages of the sewer system.

4.4.2 The Kenya Government has raised the profile of sanitation through increased budgetary allocation to the sector and by being a signatory to the 2015 Ngor Declaration on sanitation and hygiene for African countries. The declaration includes a target for allocating 0.5 percent of GDP to sanitation and hygiene by 2020 and increased financing allocation and emphasis on sanitation attests to this commitment. This demonstrates commitment to mobilize domestic public finance to address the financing gap and accelerate the growth in sanitation investments.

13 Sewerage is charged at 75% of the water billed for all customers with a sewer connection

19

4.5 Risk Management 4.5.1 Table 14 presents the main risks and mitigation measures.

Table 14: Risks and Mitigation Measures Risk Probability/

Impact Mitigation measures

Occasional conflict between Nairobi County and AWSB on provision of water and sanitation services and infrastructure development

Low probability/ high impact

The Water Act 2016 provides for a transition period of 3 years during which the WSB’s will be re-organized. NCWSC has been involved from the onset of project design and their needs incorporated. This coordination mechanism will continue throughout the lifetime of the project. In addition, regular GoK/ DP discussions will be held aimed at consensus building among stakeholders.

Insufficient skills transfer to NCWSC to operate and manage specialized sewerage services equipment

Medium probability/ high impact

The contractor for the specialized works at the inlet for the wastewater treatment plant will train NCWSC staff and will also be retained for a period of time to operate and maintain the infrastructure installed to build capacity of NCWSC.

Delays caused due to the resettlements and compensation not being handled timely or properly

Medium probability/ high impact

The risk will be mitigated through awareness exercises directed at the identified PAPs of the proposed project and, sensitization on positive impacts. The process of PAPs engagement has been initiated. In addition, there is high-level commitment from the MoWS in availing counterpart funds for compensation in good time.

Acquisition of land for the construction of ablution blocks

Medium probability/ high impact

Identification of land for ablution blocks will involve community, planning department of Nairobi City County, local administration and construction engineer. Searches will also be undertaken to ascertain the legal ownership of the land.

4.6 Knowledge Building 4.6.1 The project will generate knowledge on how to improve sanitation services in Nairobi, especially in the rapidly evolving field of FSM. This will provide best practice on integrated sanitation systems approach contributing towards achievement of inclusive sanitation. The low knowledge/capacity on FSM including weak regulatory framework limits private sector participation and yet there is a role for the private sector and entrepreneurs at the bottom of the sanitation pyramid market in urban areas. Studies on potential for energy generation and resource recovery and re-use will analyze the potential for energy recovery from wastewater treatment plants via anaerobic digestion with biogas utilization and electricity generation. The study could also help offset the electricity consumption of the wastewater facilities and represent possible areas for sustainable energy policy implementation. This will further contribute knowledge to the broader nexus between energy and water. The study for future investments will build on global best practices and success cases in the country, and ensure climate change, gender and any other cross-cutting issues are mainstreamed in projects. The knowledge obtained will be captured, documented and shared within the Bank and with other DPs and RMCs.

4.6.2 The IPR, quarterly progress reports, audit, and completion reports will also provide information on various aspects of the project for further diagnosis.

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V – LEGAL INSTRUMENTS AND AUTHORITY 5.1 Legal Instrument 5.1.1 The financing instrument will be an ADB and ADF loans governed by loan agreements between the Republic of Kenya (the “Borrower”) and the AfDB.

5.2 Conditions Associated with Bank’s Intervention A. Condition Precedent to Entry into Force of the ADB Loan Agreement:

(i) The loan agreements shall enter into force subject to fulfilment by the Borrower of the provisions of Section 12.01 of the General Conditions Applicable to Loan Agreements and Guarantee Agreements of the African Development Bank (Sovereign Entities).

B. Condition Precedent to First Disbursement of the Loans The obligations of the Bank to make the first disbursement of the Loans shall be conditional upon the entry into force of the loan agreements and fulfilment in form and substance acceptable to the Bank of the conditions set out below:

(i) Submission by the Borrower, of a Works and Compensation Schedule (the “Works and Compensation Schedule”) detailing (A) each section of civil works under the Project and (B) the time frame for compensation and resettlement of all Project Affected Persons) in respect of each section, in accordance with the Resettlement Action Plan (“RAP”) or an updated RAP.

(ii) Having signed subsidiary financing agreements between the GoK and AWSB for the on-lending of the loans on terms and conditions acceptable to the Bank.

(iii) Evidence of AWSB having signed a cooperative framework agreement with NCWSC.

C. Condition in respect of Works related Disbursements: (i) Subject to (B) above, prior to commencement of civil works on any section, the

Borrower shall provide evidence that, all PAPs in respect of such section of civil works have been compensated and/or resettled in accordance with the RAP, any update to the RAP, and the works compensation schedule.

D. Other Conditions The borrower shall provide evidence, in form and substance satisfactory to the Bank:

(i) Having opened a special account at the Central Bank to receive the proceeds of the ADF loan and a project account in a commercial Bank.

E. Undertakings The Borrower undertakes to: (i) Ensure that counterpart funds will be availed as needed during project implementation; (ii) Carry out the project in accordance with: (a) Bank’s rules and procedures; (b) national

legislation; and (c) the recommendations, requirements and procedures set forth in the ESMP;

(iii) Submit quarterly progress reports, financial and technical audit reports in form and substance acceptable to the Bank; and

(iv) Comprehensively report on the implementation of the ESMP and RAP on a quarterly basis.

21

5.3 Compliance with Bank Policies 5.3.1 This project complies with applicable Bank policies except the 50% cost sharing principle laid down in the Policy on Expenditure Eligible for Bank Group Financing. However, through the justification contained in Appendix 5, management supports the view that the country has exhibited strong ownership and commitment to the water sector as a whole and to the project specifically.

VI – RECOMMENDATION Management recommends that the Boards of Directors approve the proposed ADB loan of EUR 59.407 million and ADF loan of UA 2.910 million (EUR 3.507 million) to the Republic of Kenya for the purposes and subject to the conditions stipulated in this report.

I

Appendix 1: Kenya’s Comparative Socio-Economic Indicators

Year Kenya AfricaDevelo-

ping Countries

Develo- ped

CountriesBasic IndicatorsArea ( '000 Km²) 2017 580 30,067 80,386 53,939Total Population (millions) 2017 48.5 1,184.5 5,945.0 1,401.5Urban Population (% of Total) 2017 26.9 39.7 47.0 80.7Population Density (per Km²) 2017 85.2 40.3 78.5 25.4GNI per Capita (US $) 2016 1 380 2 045 4 226 38 317Labor Force Participation *- Total (%) 2017 67.1 66.3 67.7 72.0Labor Force Participation **- Female (%) 2017 62.4 56.5 53.0 64.5Sex Ratio (per 100 female) 2017 99.9 0.801 0.506 0.792Human Dev elop. Index (Rank among 187 countries) 2015 146 ... ... ...Popul. Liv ing Below $ 1.90 a Day (% of Population) 2005 33.6 39.6 17.0 ...

Demographic IndicatorsPopulation Grow th Rate - Total (%) 2017 2.6 2.6 1.3 0.6Population Grow th Rate - Urban (%) 2017 4.3 3.6 2.6 0.8Population < 15 y ears (%) 2017 41.4 41.0 28.3 17.3Population 15-24 y ears (%) 2017 19.4 3.5 6.2 16.0Population >= 65 y ears (%) 2017 2.9 80.1 54.6 50.5Dependency Ratio (%) 2017 79.5 100.1 102.8 97.4Female Population 15-49 y ears (% of total population) 2017 24.5 24.0 25.8 23.0Life Ex pectancy at Birth - Total (y ears) 2017 63.1 61.2 68.9 79.1Life Ex pectancy at Birth - Female (y ears) 2017 65.2 62.6 70.8 82.1Crude Birth Rate (per 1,000) 2017 33.0 34.8 21.0 11.6Crude Death Rate (per 1,000) 2017 7.6 9.3 7.7 8.8Infant Mortality Rate (per 1,000) 2016 35.6 52.2 35.2 5.8Child Mortality Rate (per 1,000) 2016 49.2 75.5 47.3 6.8Total Fertility Rate (per w oman) 2017 4.1 4.6 2.6 1.7Maternal Mortality Rate (per 100,000) 2015 510.0 411.3 230.0 22.0Women Using Contraception (%) 2017 63.7 35.3 62.1 ...

Health & Nutrition IndicatorsPhy sicians (per 100,000 people) 2014 20.4 46.9 118.1 308.0Nurses and midw iv es (per 100,000 people) 2014 158.2 133.4 202.9 857.4Births attended by Trained Health Personnel (%) 2014 61.8 50.6 67.7 ...Access to Safe Water (% of Population) 2015 63.2 71.6 89.1 99.0Access to Sanitation (% of Population) 2015 30.1 51.3 57 69Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2016 5.4 39.4 60.8 96.3Incidence of Tuberculosis (per 100,000) 2016 348.0 3.8 1.2 ...Child Immunization Against Tuberculosis (%) 2016 99.0 245.9 149.0 22.0Child Immunization Against Measles (%) 2016 75.0 84.1 90.0 ...Underw eight Children (% of children under 5 y ears) 2014 11.0 76.0 82.7 93.9Prev alence of stunding 2014 26.0 20.8 17.0 0.9Prev alence of undernourishment (% of pop.) 2015 19.1 2 621 2 335 3 416Public Ex penditure on Health (as % of GDP) 2014 3.5 2.7 3.1 7.3

Education Indicators Gross Enrolment Ratio (%) Primary School - Total 2016 105.3 106.4 109.4 101.3 Primary School - Female 2016 105.5 102.6 107.6 101.1 Secondary School - Total 2009 57.8 54.6 69.0 100.2 Secondary School - Female 2009 54.9 51.4 67.7 99.9Primary School Female Teaching Staff (% of Total) 2015 50.2 45.1 58.1 81.6Adult literacy Rate - Total (%) 2014 78.7 61.8 80.4 99.2Adult literacy Rate - Male (%) 2014 83.8 70.7 85.9 99.3Adult literacy Rate - Female (%) 2014 74.0 53.4 75.2 99.0Percentage of GDP Spent on Education 2015 5.3 5.3 4.3 5.5

Environmental IndicatorsLand Use (Arable Land as % of Total Land Area) 2015 10.2 8.6 11.9 9.4Agricultural Land (as % of land area) 2015 48.5 43.2 43.4 30.0Forest (As % of Land Area) 2015 7.8 23.3 28.0 34.5Per Capita CO2 Emissions (metric tons) 2014 0.3 1.1 3.0 11.6

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update :UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports.

Note : n.a. : Not Applicable ; … : Data Not Available. * Labor force participation rate, total (% of total population ages 15+)** Labor force participation rate, female (% of female population ages 15+)

May 2018

0102030405060708090

100

2000

2005

2010

2011

2012

2013

2014

2015

2016

Infant Mortality Rate( Per 1000 )

Kenya Africa

0

500

1000

1500

2000

25002000

2005

2010

2011

2012

2013

2014

2015

2016

GNI Per Capita US $

Kenya Africa

2.32.42.42.52.52.62.62.72.72.8

2000

2005

2010

2012

2013

2014

2015

2016

2017

Population Growth Rate (%)

Kenya Africa

01020304050607080

2000

2005

2010

2012

2013

2014

2015

2016

2017

Life Expectancy at Birth (years)

Kenya Africa

II

Appendix 2: Table of AfDB’s Portfolio in the Country

The status and performance of the Bank’s project portfolio in Kenya as at October 2018 is summarized in the Table below.

Sector Name

Long name Loan Number Funding Source

Approval Date

Date Entry Into

Force

Completion Date

Loan Amount

(UA Million)

Disb. Ratio

(%) /1

a. Public Sector Operations

Agriculture KENYA EMERGENCY HUMANITARIAN ASSISTANCE FOR PERSONS AFFECTED

5000199004918 SRF 07/03/2017 12/29/2018 0.7 100.0%

SMALLSCALE IRRIGATION & AGRICULTURE VALUE CHAIN DEVELOPMENT

2000130014530 ADB 11/18/2015 6/15/2016 06/30/2022 28.4 13.2%

5570155000751 GAFSP TF

11/18/2015 2/4/2016 06/30/2022 16.4 4.7%

KENYA-DROUGHT RESILIENCE & SUSTAINABLE LIVELIHOOD PROGRAM IN

2100150028345 ADF 12/19/2012 5/5/2013 12/31/2019 37.4 30.0%

MULTINATIONAL-GEF RURAL LIVELIHOODS ADAPTATION TO CLIMATE CH

5550155001201 GEF 12/15/2016 5/19/2017 05/31/2021 2.0 2.7%

ENABLE YOUTH KENYA 2100150038895 ADF 01/11/2018 06/30/2022 21.3 0.0% Agriculture Total

106.2 15.6%

Power ADF PRG MENENGAI 2100140000151 ADF 10/22/2014 12/31/2020 9.1 n.a. ADF - PRG FOR TURKANA T-

LINE 2100140000101 ADF 10/02/2013 12/8/2014 03/15/2019 16.5 0.0%

KENYA - LAST MILE CONNECTIVITY PROJECT

2100150032195 ADF 11/19/2014 10/2/2015 12/31/2019 90.0 74.1%

LAST MILE CONNECTIVITY PROJECT - 2

2000200000152 ADB 06/27/2016 5/5/2017 12/31/2022 96.9 18.7%

MENENGAI GEOTHERMAL DEVELOPMENT PROJECT

2100150026101 ADF 12/14/2011 7/10/2012 12/31/2018 80.0 95.6%

5565130000101 SCF 12/14/2011 7/10/2012 12/31/2018 5.4 71.2% 5565155000401 SCF 12/14/2011 3/12/2012 12/31/2018 12.6 64.8% ETHIOPIA-KENYA

ELECTRICITY HIGHWAY(KENYA)

2100150027845 ADF 09/19/2012 3/1/2013 12/31/2018 75.0 61.5%

KENYA - TANZANIA INTERCONNECTION (KENYA)

2100150032846 ADF 02/18/2015 11/13/2015 12/31/2019 27.5 17.4%

Power Total

413.0 55.5%

Social SUPPORT TO HIGHER EDUCATION SCIENCE AND TECHNOLOGY TO ENHANC

2100150027993 ADF 11/14/2012 2/19/2013 06/30/2019 28.0 84.8%

SUPPORT TO TVET AND TRAINING FOR RELEVANT SKILLS DEVELOPMENT

2100150033295 ADF 07/01/2015 12/10/2015 06/30/2021 41.0 21.1%

EAST AFRICA CENTERS OF EXCELLENCE KENYA

2100150031997 ADF 10/03/2014 7/7/2015 12/31/2019 25.0 7.8%

Social Total

94.0 36.5%

Transport NAIROBI OUTER RING ROAD PROJECT IMPROVEMENT PROJECT

2100150030144 ADF 11/13/2013 5/8/2014 12/31/2018 77.0 76.4%

2100155026117 ADF 11/13/2013 9/26/2014 12/31/2018 0.6 64.1% MOMBASA-MARIAKANI ROAD

HIGHWAY PROJECT 2100150032743 ADF 03/11/2015 10/29/2015 06/30/2021 80.0 17.0%

SIRARI CORRIDOR ACCESSIBILITY & ROAD SAFETY IMPROVEMENT PROJ

2000130015238 ADB 03/30/2016 8/18/2016 12/31/2021 164.0 20.2%

5580155000451 EU AITF

03/30/2016 5/13/2016 12/31/2021 8.3 6.9%

MULTINATIONAL: ARUSHA-HOLILI/TAVETA-VOI ROAD (KENYA)

2100150028894 ADF 04/16/2013 10/18/2013 12/31/2018 75.0 72.5%

III

MOMBASA -NAIROBI-ADDIS ABABA CORRIDOR PHASE III - KENYA

2100150025546 ADF 11/30/2011 6/29/2012 12/31/2018 120.0 75.9%

KAPCHORWA - SUAM - KITALE AND ELDORET BYPASS ROADS PROJECT (

2000200001052 ADB 03/29/2017 8/22/2017 12/31/2022 59.0 13.0%

2100150037300 ADF 03/29/2017 8/22/2017 12/31/2022 35.1 11.5% KENYA - LAKE VICTORIA

MARITIME COMMUNICATIONS AND TRANSPORT

2100150036247 ADF 10/24/2016 3/23/2017 04/30/2021 3.8 0.4%

JOMO KENYATTA INTERNATIONAL AIRPORT AIRFIELD EXPANSION PROJE

2000200001901 ADB 11/28/2017 12/31/2022 115.1 0.0%

Transport Total

737.9 35.7%

Water Sup/Sanit

KENYA TOWNS SUSTAINABLE WATER SUPPLY AND SANITATION PROGRAM

2000200000501 ADB 11/09/2016 4/4/2017 12/31/2021 274.2 1.0%

2100150036294 ADF 11/09/2016 4/4/2017 12/31/2021 5.1 4.5% 2100155033467 ADF 11/09/2016 1/9/2017 12/31/2021 0.5 20.8% 5500155011104 MIC TF 11/09/2016 3/3/2017 12/31/2021 1.2 8.7% THWAKE MULTIPURPOSE

WATER DEVELOPMENT PROGRAM

2100150029993 ADF 10/30/2013 5/28/2014 12/31/2019 61.7 40.1%

2100155025973 ADF 10/30/2013 1/27/2014 12/31/2019 1.2 58.9% Water Sup/Sanit Total

343.7 8.3%

Multi-Sector MIC-TAF-TECHNICAL

ASSISTANCE TO THE PRESIDENT DELIVERY UNIT

5500155012902 MIC 07/18/2018 12/31/2020 1.2 16.1%

Total Public Sector Operations 1,695.5 33.3% b. Private Sector Operations Finance EQUITY BANK (KENYA)

LIMITED 2000130013731 ADB 11/05/2014 07/03/2015 12/31/2024 106.5 100.0%

COMMERCIAL BANK OF AFRICA LIMITED

2000130017482 ADB 01/25/2017 12/31/2019 36.0 0.0%

DIAMOND TRUST BANK LOC I

2000130016784 ADB 11/18/2016 05/20/2020 36.0 0.0%

2000130016785 ADB 11/18/2016 09/28/2018 05/20/2020 18.0 100.0% COMMERCIAL BANK OF

AFRICA - TFLOC 2000130019630 ADB 01/25/2017 10/06/2019 28.8 0.0%

KENYA COMMERCIAL BANK LIMITED

2000130018280 ADB 10/25/2017 03/23/2018 02/01/2025 71.9 80.0%

Finance Total 297.1 61.3% Power LAKE TURKANA WIND

POWER EKF 2000130011534 ADB 04/26/2013 3/24/2014 01/19/2028 16.5 100.0%

LAKE TURKANA WIND POWER PROJECT

2000130011533 ADB 04/26/2013 3/24/2014 03/23/2029 95.0 100.0%

5060140000063 PSCEF 11/04/2015 03/23/2029 29.0 0.0% LAKE TURKANA WIND

POWER PROJECT - SUB DEBT TRANCHE

2000130010533 ADB 04/26/2013 3/24/2014 01/19/2028 4.1 100.0%

THIKA THERMAL POWER PROJECT

2000130008130 ADB 12/07/2011 10/19/2012 05/30/2027 23.2 100.0%

5060140000062 PSCEF 11/04/2015 05/30/2027 4.8 0.0% QUANTUM POWER MENENGAI 35 MW GEOTHERMAL IPP

2000130019431 ADB 06/06/2018

04/27/2023 21.1 n.a.

5560130000951 CTF 06/06/2018 04/27/2023 14.3 n.a. Power Total 208.0 80.4% Total Private Sector Operations 505.2 68.3% Grand Total 2,201.4 41.2%

IV

Appendix 3: Key Related Projects Financed by the DPs Nairobi

Donor Facility/ Funding Source Project Name

Government of Germany ¾ Water Sector Development (Support to Water Services Trust Fund) ¾ Nairobi City Water Distribution Network ¾ Nairobi Satellite Towns and Sanitation Program

Government of France ¾ Complementary Funding for Nairobi Water and Sewage ¾ Extension of Nairobi Water Supply (Northern Collector)

Government of Japan ¾ The Project for Management of Non-Revenue Water in Kenya ¾ The Project on Capacity Development for Effective Management of

Floods

International Development Association (IDA)

¾ Water & Sanitation Services & Improvement Project (WaSSIP) ¾ Water Security and Climate Resilience ¾ Nairobi Sanitation OBA Project ¾ Kenya Urban Water & Sanitation OBA Fund for Low Income Areas

Project

African Development Bank/ Fund

¾ Nairobi Rivers Basin Restoration Programme: Sewerage improvement project

¾ Kenya Towns Sustainable Water Supply and Sanitation Program ¾ Water Services Support Project

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Appendix 4: Map of Sewerage Infrastructure in Nairobi

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Appendix 5: Justification for financing more than 50% of the Project Cost through an ADB Loan

Out of the estimated project total cost of EUR 70.841 million, the GoK will contribute EUR 7.927 million representing 11.2% of the total costs net of taxes. This is less than the recommended 50% minimum counterpart contribution as per the Bank’s 2008 Policy on Expenditure Eligible for Bank Group Financing. Further, the Policy states that the ADB may finance more than 50% of the total project costs on a case-by-case basis and up to a limit that does not exceed 100%.

In line with the transition framework that stipulates a definite period for countries graduating from ADF only to ADB only described under the ADF Resource Allocation Guidelines, the GoK would qualify for a waiver on the 50% requirement criterion. However, pursuant to the ‘Guidance on implementing the policy on expenditures eligible for Bank Group financing with regards to counterpart funding’ issued on 10 December 2014, no policy waiver is required, ‘but rather a justification for Bank financing of a higher proportion of project costs...’

The justification for the reduced Government contribution is qualified on the following considerations:

Country Commitment to implement its Overall Development Program: The justification sought in this case is premised on the fact that, when the GoK qualified for Blend status from 1st September 2015, the Medium Term Expenditure Framework (MTEF) for 2015/16 – 2017/18 had already been adopted. Although the MTEF has been revised annually, significant investments in the water infrastructure sector have not allowed for reallocation of resources to the Nairobi Rivers Rehabilitation Program: Sewerage Improvement project phase II, where it was hoped the Bank Group could put in significant resources.

Kenya’s development strategy is the MTP-II (2013-2017) and draft MTP –II (2018-2022). The government is committed to implementing the MTP-III and continues to both mobilize resources for the purpose and to strengthen the linkage between the plan and the national budget. The government is also under obligation to provide 15% of its resources to 47 county governments while also providing for all other sectoral investments. This is provided for in the 2010 constitution, which, in its Fourth Schedule, lists provision of water and sanitation as a function of county governments, with the policy support from the national government. In which case, NaRSIP II, originally designed as a national investment is not possible to fit within the meagre resources of the county governments.

Financing Allocated by the Country to Sectors Targeted by Bank Assistance: Government continues to prioritize Environment protection, Water and Natural Resources - EWNR in its annual budget allocations as indicated in Table A.1. This is national budget for the sector and does not include county budget allocations for the sector.

Table A.1: Budget allocation

Description Budget year

2016/17 2017/18 Financing allocated to Environment protection, Water and Natural Resources - EWNR (billion KES) 92.9 73.6

Share of EWNR in the total budget (%) 3.7% 4.5

Country Budget Situation and Debt Level: The current budget situation is summarized in Table A.2. Less than 5% of government spending is dependent on foreign aid. Kenya’s gross domestic public debt was 27.8 percent of GDP at end-December 2017. Domestic debt is issued mostly in the form of Treasury bonds (75 percent of domestic debt) and Treasury bills (19 percent). Commercial banks hold 55% of the domestic debt, with nonbanks holding another 42 percent and the central bank holding most of the remainder. The domestic debt is of relatively large size by regional standards. Rollover risks appear moderate. The average maturity of Kenya’s domestic debt shortened, from about 11 years to 6 years since 2016.

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According to the recent debt sustainable analysis (DSA), under the DSA baseline scenario, all external debt indicators remain well below the policy dependent debt burden thresholds. In this scenario, the debt burden increases over the next 10 years but remains within sustainable bounds. The NPV of external public and publicly guaranteed (PPG) debt would peak at 23 percent of GDP in 2017 and remain around this level through 2018, falling gradually thereafter. This trajectory remains well below the 50-percent indicative threshold. The NPV of the debt-to-exports ratio would reach 138 percent in 2017 and ease gradually in following years, remaining well under an indicative threshold of 200 percent.

Table A.2: Budget situation

Description Budget year

2016/17 2017/18 budgeted

Total Expenditure as % of GDP 27.6 26.8 Domestic Revenues as % of GDP 18.3 19 Share of Foreign Loans and Grants in total Budget 18.3 13.9 Share of General Budget Support in total Budget 0 0 Foreign Loans and Grants as % of GDP 30 30.2

In light of the above considerations, there is therefore a case for the Bank to limit the government’s counterpart funding requirement for this very important and urgent project to the proposed 11.2%. It is expected that this amount will ensure requisite ownership by the authorities and help expedite the project’s implementation process.

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Appendix 6: Climate Screening – Full Results

CLIMATE SCREENING REPORT

Scorecard Water - Supply and Sanitation Officer Responsible for Screening

Hikaru Shoji SAP ID P-KE-EB0-010 Project Title Nairobi Rivers Rehabilitation and

Restoration Program: Sewerage Improvement Project Phase II

Task Manager John Sifuma

Sector Water Division RDGE2 Location Kenya Screening Date 19/02/2018 Status of Feasibility Studies

Concluded Project budget EUR 70.8 million

Duration 4 years Project Activities Sewerage network expansion and rehabilitation of treatment plant

System Assigned Category Paragraph for PCN

Table 1 – SCORES The table below shows your answers to the questions in the scorecard, and the scores associated with each answer.

Topic Selected Option Score Asset lifetime The project includes significant assets which require replacement at intervals of 10 to

30 years 15

Service continuity 3 criteria included 5 Water resources Water resources is not relevant to this project 0 Risk Management Risk management is not relevant to the project 0 Resource variability Resource variability is not relevant to this project 0 Competing uses Competing use is not relevant to this project 0

Total Score 20

Table 2 – JUSTIFICATIONS The justifications provided for each question are provided in the following table.

Topic Justification for Selected Option Asset lifetime Expected lifetime of sewerage infrastructure is more than 20 years with proper maintenance. Service continuity While the capacity of Nairobi City Water and Sewerage Company could be improved, they have

been operating sewerage system. The company has staff to operate and maintain the system and has shown their commitment to improve and sustain sanitation services for the city of Nairobi.

Water resources The proposed intervention is sewerage program, which will only improve water quality of the Nairobi Rivers as well as water resources availability downstream.

Risk Management The proposed intervention is sewerage project. Pipes will be laid underground with limited flood risks and treatment plant is located above flood level.

Resource variability Drought might reduce flow of wastewater in sewerage system, which is not a significant risk. Competing uses The project will reduce discharge of untreated wastewater into the river system and improve quality

of river water.

Table 3 - CLIMATE RISKS The Climate Risks are provided in the following table. Climate Risks Not Relevant

Reduced rainfall that causes prolonged dry season/drought and/or depletion of ground water reserves Reduced rainfall that causes drought and/ or increased rainfall that causes fluvial flood

Comments

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Appendix 7: Progress made under NaRSIP I

The Nairobi Rivers Basin Rehabilitation and Restoration Program: Sewerage Improvement project (NaRSIP I) was approved approved by AfDB on 6 December 2010. The ADF Loan (UA 35 Million) became disbursement effective on 22 February 2012 and closed on 31 December 2016 with the Project completion report prepared in December 2016.

The Development Objective (DO) of the Project was to improve the access, quality, availability, capacity and sustainability of wastewater services in Nairobi for a sustainable environment through the rehabilitation and extension of sewerage services and wastewater treatment facilities.

The Project made good progress towards meeting the Development Objective as follows: a. The main waste water treatment plant for Nairobi (Dandora) is complete and has an

additional treatment capacity of 40,000m3/ day; b. Kariobangi wastewater treatment plant was rehabilitated and capacity enhanced from

11,000m3/day to 32,000m3/day. c. Additional 63.3 Km Trunk Sewers and 43 Km reticulation lines are complete and

commissioned; d. There is an improvement in the quality of river water with an average five days

effluent Biochemical Oxygen Demand (BOD5) of 67.5 mg/l attained for Nairobi River, 48 mg/l for Ngong’ River and 39 mg/l for Mathare River compared with the average 300 mg/l baseline value.

e. Planting of 25,000 trees along riparian zones is complete; f. Construction of 100 ablution blocks in informal settlements is complete; g. Training of AWSC/NWSC staff on management of sewerage systems was conducted

and essential equipment purchased; h. Training and dissemination on health and hygiene targeting 25,000 people. i. The project has contributed to an increase in the percentage of the population

connected to the sewerage system in Nairobi which currently is 48% as additional 10,000 connections have been made and still ongoing.

j. In terms of health outcomes, the incidence rates of new cases of typical water borne diseases has decreased by 45.5%.

k. The project generated 2,000 jobs during implementation and 200 jobs post construction. Construction skills obtained on sewerage infrastructure are transferable to other parts of the country.

The NaRSIP I was part of the Nairobi Rivers Rehabilitation and Restoration Program and focused on the sewerage infrastructure in Nairobi so that the wastewater generated is directed to treatment facilities without being an environmental hazard.

The NaRSIP II follows completion of phase I, which contributed to improvement of sanitation services in Nairobi. Through phase 1 of the program, AfDB investments helped the government take the necessary steps toward improving and expanding the sewerage coverage in Nairobi from 40% to 48%. The NaRSIP II will build on the investments under NaRSIP I, through constructing more reticulation network including last mile and enhancing capacity of the NCWSC in FSM management. Under the GoK “Big Four” agenda, one of the priority activities is investment in continued expansion of sanitation infrastructure in the urban areas by connecting more households with sewerage and establishing proper waste management systems.