document of the world bank for official use onlydocuments.worldbank.org/curated/en/...date: february...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 66198-GH

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 19.4 MILLION

(US$30 MILLION EQUIVALENT)

TO THE

REPUBLIC OF GHANA

FOR THE

PUBLIC PRIVATE PARTNERSHIP (PPP) PROJECT

(PHASE I)

ADAPTABLE PROGRAM LENDING (APL)

February 28, 2012

Financial and Private Sector Development

Western and Central Africa

Africa Region

This document is being made publicly available prior to Board consideration. This does not

imply a presumed outcome. This document may be updated following Board consideration and

the updated document will be made publicly available in accordance with the Bank‘s policy on

Access to Information.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective January 31, 2012)

Currency Unit = Ghana Cedi

0.64471207 SDR = US$1

US$1.55108 = SDR 1

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

Regional Vice President: Obiageli Katryn Ezekwesili

Acting Country Director: Sergiy Kulyk

Sector Director: Gaiv Tata

Sector Manager: Paul Noumba Um

Task Team Leader:

Program Assistant:

Peter Mousley \ Riham Shendy

Ndeye Anna Ba

Abbreviations and Acronyms

ADB Agricultural Development Bank

AFC Africa Finance Corporation

AFTFW Financial and Private Sector Development Department- West Africa

AICD Africa Infrastructure Country Diagnostic

APL Adaptable Program Loan/Lending

BOG Bank of Ghana

BOO Build-Operate-Own

BOOT Build-Operate-Own-Transfer

BOT Build-Operate-Transfer

CAGD Controller and Accountant General Department

CAS Country Assistance Strategy

CFA Consolidated Funds Account

CL Contingent Liability

CS Country Systems

CSO Civil Society Organization

DFID Department for International Development (UKAid)

DMD Debt Management Division

EA Environmental Assessment

ECF Extended Credit Facility

EMCB Economic Management and Capacity Building Project

EOI Expression of Interests

EPA Environmental Protection Agency

ERFD Economic Research and Forecasting Division

ESIA Environmental and Social Impact Assessment

ESMF Environmental and Social Management Framework

ESMP Environmental and Social Management Plan

ESW Economic and Sector Work

FA Financing Agreement

FAO Food and Agricultural Organization

FBS Fixed Budget Selection

FC Fiscal Commitment

FFS Full Feasibility Study

FIL Financial Intermediary Loan

FM Financial Management

FMC Financial Management Consultant

FSAP Financial Sector Assessment Program

GACL Ghana Airports Company Limited

GAS Ghana Audit Service

GCB Ghana Commercial Bank

GCI Global Competitiveness Index

GDI Global Development Indicators

GET Global Expert Team

GIFMIS Government Integrated Financial Management Information System

GoG Government of Ghana

GPHA Ghana Ports & Harbors Authority

GPRS II Growth & Poverty Reduction Strategy

GSGDA Ghana Shared Growth and Development Agenda

HDN Human Development Network

IBRD International Bank for Reconstruction and Development

ICR Implementation Completion and Results Report

IDA International Development Association

IDP Institutional Development Plan

IFC International Finance Corporation

IFF Infrastructure Finance Facility

IFR Interim Financial Reports

IIFCL India Infrastructure Finance Company Ltd.

IIFF Indonesia Infrastructure Finance Facility

IMF International Monetary Fund

IRR Internal Rate of Return

LCS Least Cost Selection

M&E Monitoring and Evaluation

MDA Ministries, Departments and Agencies

MIGA Multilateral Investment Guarantee Agency

MMDA Metropolitan, Municipal & District Assemblies

MoFEP Ministry of Finance and Economic Planning

MTEF Medium Term Expenditure Framework

MTR Mid-Term Review

NDC National Democratic Congress

NDPC National Development Planning Commission

NGO Non Governmental Organization

NPP New Patriotic Party

ORAF Operational Risk Assessment Framework

PAP Project Affected Persons

PAU PPP Advisory Unit

PC Procurement Consultant

PCEAO Project Administrator External Facilities Office

PCN Project Concept Note

PDF Project Development Facility

PDMS Public Debt Management Strategy

PDO Project Development Objective

PDT Project Development Team

PFA Project and Financial Analysis Unit

PFI Participating Financial Institutions

PFS Pre-Feasibility Study

PID Public Investment Division

PIM Project Implementation Manual

PIU Project Implementation Unit

PMU Project Management Unit

PPA Public Procurement Authority

PPI Private Participation in Infrastructure

PPIAF Public-Private Infrastructure Advisory Facility

PPP Public Private Partnership

PRC PPP Resource Center

PREM Poverty Reduction and Economic Management Network

QBS Quality Based Selection

QCBS Quality and Cost Based Selection

RAP Resettlement Action Plan

RFP Request for Proposal

RFQ Request for Qualification

RPF Resettlement Policy Framework

SCFA Sub Consolidated Fund Account

SDN Sustainable Development Network

SEA Strategic Environmental Assessments

SECO Swiss State Secretariat for Economic Affairs

SMTDP Sector Medium Term Development Plans

SPN Specific Procurement Notice

SSA Sub Saharan Africa

SSNIT Social Security and National Insurance Trust

SSS Single Source Selection

TA Technical Assistance

VfM Value for Money

VGS Viability Gap Scheme

WHO World Health Organization

REPUBLIC OF GHANA

Public Private Partnership Program (PPP) Project

(Phase I)

Adaptable Program Lending

TABLE OF CONTENTS

I. STRATEGIC CONTEXT .................................................................................................1

A. Country Context ............................................................................................................ 1

B. Sectoral and Institutional Context ................................................................................. 2

C. Higher Level Objectives to which the Project Contributes .......................................... 6

II. PROJECT DEVELOPMENT OBJECTIVES (PDO) ....................................................6

III. PROJECT DESCRIPTION ..............................................................................................7

A. Project Components ...................................................................................................... 9

B. Project Financing ........................................................................................................ 12

C. Program Objective and Phases.................................................................................... 12

D. Lessons Learned and Reflected in the Project Design ................................................ 13

IV. IMPLEMENTATION .....................................................................................................13

A. Institutional and Implementation Arrangements ........................................................ 13

B. Results Monitoring and Evaluation ............................................................................ 14

C. Sustainability............................................................................................................... 15

V. KEY RISKS AND MITIGATION MEASURES ..........................................................16

A. Risk Ratings ................................................................................................................ 16

B. Overall Risk Rating Explanation ................................................................................ 17

VI. APPRAISAL SUMMARY ..............................................................................................17

A. Economic and Financial Analyses .............................................................................. 17

B. Technical ..................................................................................................................... 18

C. Financial Management ................................................................................................ 18

D. Procurement ................................................................................................................ 19

E. Social (including Safeguards) ..................................................................................... 19

F. Environment (including Safeguards) .......................................................................... 20

Annex 1: Results Framework and Monitoring .........................................................................23

Annex 2: Detailed Project Description .......................................................................................28

Annex 3: Implementation Arrangements ..................................................................................41

Annex 4: Operational Risk Assessment Framework (ORAF) .................................................71

Annex 5: Implementation Support Plan ....................................................................................75

Annex 6: Sector Policy Letter provided by the GoG (includes The National Policy on PPP)77

Annex 7: Detailed Outline of APL II..........................................................................................94

Annex 8: Statement of Loans and Credits ...............................................................................110

Annex 9: Letter of PPP Transactions from MoFEP ...............................................................111

Table 1: Project Cost and Financing ..........................................................................................12

Table 2: Risk Ratings Summary table .......................................................................................16

Table 3: Action Plan ....................................................................................................................18

Figure 1: Infrastructure Inefficiency Waste...............................................................................2

Figure 2 : Infrastructure Funding Gap ......................................................................................2

Figure 3: Numerous African Countries capture more private investment than Ghana ........2

Figure 4: Private Participation in Infrastructure - by Sector....................................................3

Figure 5: Private Participation in Infrastructure - by PPP Type .............................................3

.

PAD DATA SHEET

Republic of Ghana

Ghana - PPP Adaptable Lending Program Project (Phase I)

PROJECT APPRAISAL DOCUMENT .

AFRICA

AFTFW

.

Basic Information

Date: February 29, 2012 Sectors: General finance sector (80%), General industry and trade sector (20%)

Country Director: Sergiy V. Kulyk Themes: Infrastructure services for private sector development (100%)

Sector Manager/Director: Paul Noumba Um/Gaiv M. Tata

Project ID: P125595 EA Category: A - Full Assessment

Lending Instrument: Adaptable Program Loan Team Leader(s): Peter J. Mousley/Riham Shendy

Does the project include any CDD component? No

Joint IFC: No .

Borrower: Republic of Ghana

Responsible Agency: MoFEP Public Investment Division

Contact: Mr Enoch Hemans Cobbinah Title: Chief Director of MoFEP

Telephone No.: 665310 Ext 436 Email: [email protected] .

Project Implementation Period: Start Date: 27-Mar-2012 End Date: 31-Aug-2016

Expected Effectiveness Date: 31-Aug-2012

Expected Closing Date: 31-Aug-2016 .

Project Financing Data(US$M)

[ ] Loan [ ] Grant Proposed Terms: The credit has a final maturity of 40 years including a grace period of 10 years.

[ X ] Credit [ ] Guarantee

For Loans/Credits/Others

Total Project Cost (US$M): 30.00

Total Bank Financing (US$M): 30.00 .

Financing Source Amount(US$M)

BORROWER/RECIPIENT 0.00

International Development Association (IDA) 30.00

Total 30.00 .

Expected Disbursements (in USD Million)

Fiscal Year 2012 2013 2014 2015 2016 2017

Annual 2.00 4.00 8.00 10.00 6.00 0

Cumulative 2.00 6.00 14.00 24.00 30.00 30

mailto:[email protected]

Project Development Objective(s)

The objective of Adaptable Lending Program (APL) phase I project is to improve the legislative, institutional, financial,

fiduciary and technical framework to generate a pipeline of bankable Public Private Partnership projects.

.

Components

Component Name Cost (USD Millions)

Institutional, Fiduciary, Legislative and Financial Capacity Building 10.00

PPP Pipeline Preparation and Transaction Advisory Support 18.50

Project Management and Monitoring & Evaluation 1.50 .

Compliance

Policy

Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] .

Does the project require any exceptions from Bank policies? Yes [ ] No [ X ]

Have these been approved by Bank management? Yes [ ] No [ ]

Is approval for any policy exception sought from the Board? Yes [ ] No [ X ]

Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 X

Natural Habitats OP/BP 4.04 X

Forests OP/BP 4.36 X

Pest Management OP 4.09 X

Physical Cultural Resources OP/BP 4.11 X

Indigenous Peoples OP/BP 4.10 X

Involuntary Resettlement OP/BP 4.12 X

Safety of Dams OP/BP 4.37 X

Projects on International Waterways OP/BP 7.50 X

Projects in Disputed Areas OP/BP 7.60 X

.

Legal Covenants/Effectiveness Conditions

Name Recurrent Due Date Frequency

Effectiveness Condition (1) - Project Implementation

Manual (PIM) Effective Date

Description of Covenant

The Republic of Ghana has prepared and adopted, or caused to be prepared and adopted, a Project Implementation Manual (PIM), in form and substance, satisfactory to the International Development Association (IDA).


Effectiveness Condition (2) - Subsidiary Agreement Effective Date


The Republic of Ghana and the Bank of Ghana (BOG) have entered into a Subsidiary Agreement detailing the BOG roles and responsibilities under the

project.


Covenant (1) - Establishment of a PIU Thirty (30) days after the

Effective Date


The Republic of Ghana shall, not later than thirty (30) days after the Effective Date, establish within Public Investment Division (PID), and thereafter

maintain throughout the implementation of the Project, a Project implementation unit (PIU), with a composition, mandate and resources satisfactory to the

Association.


Covenant (2) - Establishment of Accounting and Financial

Management System Six (6) months after the

Effective Date


The Republic of Ghana shall, not later than six months after the Effective Date, install or cause to be installed a computerized accounting and financial

management system for the Project, satisfactory to the Association.


Covenant (3) - Appointment of External Auditor Three (3) months after the

Effective Date


The Republic of Ghana shall appoint, not later than three months after the Effective Date, an external auditor for the Project, with qualifications, experience

and terms of reference, satisfactory to the Association.


Covenant (4) - Appointment of Financial Management

Specialist Thirty (30) days after the

Effective Date


The Republic of Ghana shall appoint, not later than thirty (30) days after the Effective Date, a financial management consultant.


Covenant (5) - Appointment of a Procurement Specialist Thirty (30) days after the

Effective Date


The Republic of Ghana shall appoint, not later than thirty (30) days after the Effective Date, appoint a procurement consultant.


Covenant (6) - Establishment of Procurement Complaints

Database Twelve (12) months after

the Effective Date


The Republic of Ghana shall, not later than twelve months after Effectiveness, establish or cause to be established a centralized procurement complaints

online database for the Project, satisfactory to the Association.


Covenant (7) – Establishment of Procurement Filing

System Three (3) months after the

Effective Date


The recipient not later than three (3) months after the Effective Date, establish or cause to be established a procurement structured filing and identification system, all satisfactory to the International Development Association.


Withdrawal Condition

Description

No withdrawal shall be made for payments made prior to the date of this Agreement, except that withdrawals up to an aggregate amount not to exceed three

million United States Dollars $3,000,000 equivalent may be made for payments made within one year prior to this date, but in no case prior to September 1, 2011, for Eligible Expenditures as outlined in the Financing Agreement (FA).

Additional Events of Suspension

Description At any time before the Closing Date, the Republic of Ghana has not, in the opinion of the International Development Association, applied standards and

measures consistent with the ESMF and the RPF (including any instruments adopted by the Recipient in accordance with the ESMF and the RPF) to ensure

the environmentally and socially sustainable management of PPP infrastructure projects in its jurisdiction that have commenced or been materially revised subsequent to the date of this Agreement.

A situation has arisen which shall make it improbable that the PPP Program, or a significant part of it, will be carried out.

APL II Triggers


Trigger-PPP Law Trigger for APLII

Description of Trigger

PPP Law, acceptable to the Association, enacted.


Trigger- PPP Regulations Trigger for APLII


The passing of associated regulations in accordance with the PPP Law, acceptable to the Association


Trigger- Pre Feasibility Studies Trigger for APLII


Completion of at least 5 Pre Feasibility Studies (PFSs) by contracting authorities and submitted to the respective sector Minister, acceptable to the

Association.


Trigger- EOI Trigger for APLII


One first-mover transaction for which an EOI for the procurement of the project sponsors/concessionaires has been issued, acceptable to the Association.


Trigger- PFI Eligibility Trigger for APL II


Selection of at least two PFIs, acceptable to the Association, after undertaking the relevant due diligence on their appropriateness. .

Team Composition

Bank Staff

Name Title Specialization Unit

Peter J. Mousley Lead PSD Specialist Co-Team Lead AFTFW

Riham M. E. Shendy Economist Co-Team Lead AFTFW

Zachary Kaplan ET Consultant PPP Economist AFTFW

Victoria Hilda Rigby Delmon Senior Counsel Senior Counsel LEGPS

Edith Ruguru Mwenda Senior Counsel Senior Counsel LEGAF

Nevena Ilieva Senior Operations Officer Senior Operations Officer AFTDE

Allan Rotman Lead Procurement Specialist Lead Procurement Specialist AFTPC

Joseph Ese Akpokodje Senior Environmental Institutions

Specialist

Senior Environmental Institutions

Specialist

AFTEN

Chaogang Wang Senior Social Development Specialist Senior Social Development Specialist SDV

Pierre A. Pozzo di Borgo Lead Transport Specialist Lead Transport Specialist TWITR

Robert Wallace DeGraft-Hanson Financial Management Specialist FM Specialist AFTFM

John Kobina Richardson Transport Specialist Transport Specialist AFTTR

Adu-Gyamfi Abunyewa Senior Procurement Specialist Senior Procurement Specialist AFTPC

Luis M. Schwarz Senior Finance Officer Senior Finance Officer CTRLA

Anders Jensen Monitoring & Evaluation Specialist Monitoring and Evaluation Specialist AFTDE

Reynaldo Bench Senior Port Spec. Sr Port Spec. TWITR

Clive Harris Practice Manager PPP Capacity Building WBI

Ndeye Anna Ba Program Assistant Administrative Support AFTFW

Alexandra Bezeredi Regional Safeguards Advisor Safeguards AFTSG

Cary Anne Cadman Deputy Regional Safeguards Advisor Safeguards AFTSG

Xavier Cledan Mandri-Perrott Senior Infrastructure Specialist Senior Infrastructure Specialist FEUFS

Jeffrey John Delmon Senior Infrastructure Specialist Senior Infrastructure Specialist FEUFS

Clemente Luis Del Valle Lead Financial Specialist Lead Financial Specialist FCMSM

Evans Makini Osano Senior Operations Officer Senior Operations Officer FCMSM

Lydia Sam Procurement Assistant Procurement Assistant AFCW1

Aristeidis I. Panou E T Consultant Legal Consultant LEGAF

Paul Murgatroyd FIL/Apex Consultant Financial Sector AFTFW

Eric Haythorne PPP Legal Consultant PPP Legislation LEGPS

Nana Asiedu Kotwi Procurement Consultant Procurement AFTPC

Khalid Siraj OP 8.30 Consultant Financial Sector FFIMS

1

REPUBLIC OF GHANA

PUBLIC PRIVATE PARTNERSHIP PROGRAM (PPP) PROJECT

(PHASE I)

ADAPTABLE PROGRAM LENDING

I. STRATEGIC CONTEXT

A. Country Context

1. Macro, Socio Economic and Political Background1. Ghana has a population size of 24.3 million

(GDI, 2010). On rebased national accounts data,2 the economy is estimated to have expanded by 5½– 6

percent in 2010 from 4.7 percent in 2009. Growth has been driven by increases in commodity exports

with cocoa and gold exports benefiting from high global commodity prices, and increased construction

and service activities. The rebased accounts reflect better sectoral composition of the economic activity,

and capture more effectively service sector and informal activities. The start of oil production is projected

to underpin 13 percent real GDP growth in 2011. Strong non-oil activity would contribute to 6–7 percent

growth in 2012 and beyond. On the rebased data the gross national income per capital is estimated to have

reached US$1,240 in 2010 (using Atlas method) making Ghana a lower middle income country. Over the

coming years as this new income level consolidates and debt overhang is reduced, the Bank will look to

extend the International Bank for Reconstruction and Development (IBRD) lending, although this is

likely to take place only over the medium term. During this transition period, Ghana will remain

International Development Association (IDA) only borrower. Based on most recent data, poverty

headcount ratio3 marks 28.5 percent (GDI 2006) down from 39.5 percent in 1998. Ghana enjoys one of

the more robust democracies in Sub-Saharan Africa (SSA) as witnessed in the 2008 elections where

power was peacefully transferred across parties, from New Patriotic Party (NPP) to National Democratic

Congress (NDC). The next presidential and legislative elections are scheduled in December 2012.

2. Ghana has shown impressive progress in infrastructure services provision in recent years. 4

One

consistent pattern that emerges across sectors is that household access to services in Ghana is much

ahead of the low income peer group whether one looks at power (44 versus 15 percent), mobile

telephones (32 versus 15 percent), or utility water (36 versus 26 percent). The country‘s road sector is

also well developed, with an impressive 95 percent of the paved and 81 percent of the unpaved networks

in good or fair condition. While Ghana may stand out as having a fairly advanced infrastructure platform

when compared with other low-income countries in Africa, ranking 106 out of 139 countries on the

infrastructure pillar under the Global Competitiveness Index (GCI) (higher than Nigeria, Zambia,

Mozambique, Tanzania), Ghana‘s infrastructure indicators still remain far below the levels found in

Africa‘s middle-income countries. Key constraints still exist, for example the Ghana enterprise survey

data show access to electricity as the highest business environment constraints as reported by 49 percent

of the sampled firms compared to 11percent in Mauritius.

1 IMF Article IV June 2011. 2 Rebased national accounts for 2006-2009 were adopted in November, 2010. The revisions included improved data sources, a

change in the base year from 1993 to 2006, and an updated compilation methodology (the 1993 system of national accounts, and

the latest version of industrial classification standard, ISIC version 4). 3 National poverty rate is the percentage of the population living below the national poverty line. National estimates are based on

population-weighted subgroup estimates from household surveys. 4 Ghana AICD Report (2010)

2

B. Sectoral and Institutional Context

3. The Ghana ―Africa Infrastructure Country Diagnostic‖ Report AICD (2010) estimates that raising

the country‘s infrastructure endowment to that of the region‘s middle-income countries requires

addressing both efficiency and a funding gap of US$1.5 billion per annum, highlighting the potential role

of private sector participation. In recent years, infrastructure has made a net contribution of just over one

percentage point to the country‘s per capita growth. Estimates suggest that raising Ghana‘s infrastructure

endowment to the level of the region‘s middle-income countries such as Mauritius will boost annual

growth by more than 2.7 percentage points. Ghana already spends around US$1.2 billion per year on

infrastructure (7.5 percent of GDP). An additional US$1.05 billion could be recovered each year through

improved efficiency. Having accounted for the latter, these figures suggest a yearly funding gap of

US$0.4 billion (1.3 percent of GDP) for 10 years required to take Ghana‘s infrastructure to the level of

Africa‘s middle income countries within a decade (Figures 1 & 2). In this respect, budgetary and

efficiency constraints mandate that Ghana further develop public PPP schemes to meet these investment

needs.

Figure 1: Infrastructure Inefficiency Waste Figure 2 : Infrastructure Funding Gap

Source: World Bank Study (2011) ―Towards Better Infrastructure: Conditions, Constraints, and Opportunities in

Financing PPPs in Select African Countries‖ and based on AICD data.

4. Ghana is significantly lagging behind its Sub-Saharan African peers in terms of private sector

investment in infrastructure. Ghana has not attracted much private finance of infrastructure as other

African peers (Figure 3). Countries such as Benin, DRC, Kenya, Nigeria, Senegal, Tanzania and Uganda

all captured between 1.0 and 1.6 percent of GDP for infrastructure investment, while the most success

country in this regard has been Mozambique which captured in excess of 3.5 percent of GDP.

Figure 3: Numerous African Countries capture more private investment than Ghana

Source: Ghana AICD Report (2010)

471

1,059

230

2,386

312

2.0%

3.7%

0.8%1.2%

2.4%

0%

1%

1%

2%

2%

3%

3%

4%

4%

0

500

1000

1500

2000

2500

3000

Cote d’Ivoire Ghana Kenya Nigeria Senegal

%GDPUS$ mn Inefficiency Waste

Inefficiency Waste (US$ mn) Ineffiency Waste /GDP (%)

1,048 357

2,094

3,368

576

4.5%

1.3%

7.0%

1.6%

4.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Cote d’Ivoire Ghana Kenya Nigeria Senegal

% GDPUS$ mn Funding Gap

Funding Gap (US$ mn) Funding Gap/GDP (%)

3

5. Private Sector Participation in Infrastructure (PPI) in Ghana has been mainly in the form of

divestures and concentrated in the telecom sector. Based on the PPI database total Private Participation in

Infrastructure (PPI) amounted to $2.1 billion of which five percent are concessions, 30 percent

Greenfield, and 65 percent have been divestures. With regards to the sectoral breakdown telecom

accounts for 67 percent of the value of projects and energy for 32 percent. As a percentage of GDP, PPI

accounts for 15 percent, less than Nigeria (21 percent) and higher than other neighboring countries

(Kenya six percent and Senegal nine Percent). Excluding the telecom sector, PPI in Ghana and Nigeria

constitute five percent of GDP, slightly less than Senegal of six percent (see figures 4 & 5).

Figure 4: Private Participation in Infrastructure

- by Sector

Figure 5: Private Participation in Infrastructure

- by PPP Type

World Bank Study (2011) ―Towards Better Infrastructure: Conditions, Constraints, and Opportunities in Financing

PPPs in Select African Countries‖ and based on PPI data.

6. There are three constraints to the demand for PPP projects which are common to most countries

in Sub Saharan Africa (SSA). First, there is no clear legislative and policy environment in which Public

Private Partnership (PPP) projects are developed. The lack of transparency, predictability, and coherence

deters private investors. Secondly, while there is no shortage of prospective infrastructure projects

envisaged to be PPPs, very few, if any, have undergone proper upstream due diligence and analysis to

determine their cost benefit rates of return, commercial viability and what role, if any, the private sector

should play in these transactions. Similarly, there is little collaboration across Ministries, Departments

and Agencies (MDA) to ensure that the PPP projects fit into the larger sector strategies and development

plans. A third component is the ineffective risk allocation and sector-specific policy constraints that also

contribute to the current hesitancy for the private sector to invest. The key program elements for the start-

up development of an effective PPP market include the following: (1) The enabling environment, namely

the Legislative, Regulatory, Fiduciary and Institutional Arrangements; (2) The presence of a PPP pipeline

and project development support; and (3) PPP Long-Term Financing support.

7. Government of Ghana (GoG) is undertaking an impressive set of legislative, policy and

institutional reforms to address many of the identified enabling environment weaknesses. Building on a

diagnostic study finalized in April 2010 ―Ghana PPP Diagnostic Study: Establishment of a PPP Resource

Center (PRC) and PPP Capacity Building in Ghana‖ supported by the World Bank and the Public-Private

Infrastructure Advisory Facility (PPIAF), the Government proceeded to establish the Public Investment

Division (PID) within the Ministry of Finance and Economic Planning (MoFEP) to take a lead role over

the PPP Program in Ghana. The Public Investment Division (PID), led by a Director, is comprised of four

units including a Project and Financial Analysis (PFA Unit) with gate-keeping and upstream investment

appraisal responsibilities and a PPP Advisory Unit (PAU) that will house technical specialists to support

line ministries and agencies in the development and management of prospective PPP transactions that

satisfy GoG public investment priorities.

8%

1%

15%

6%

21%

9%

0%

5%

10%

15%

20%

25%

0

5,000

10,000

15,000

20,000

25,000

Cameroon Cote D'Iv Ghana Kenya Nigeria Senegal

% GDP$mnPPI (2000-09) - By Sector

Energy Telecom Transport

Water & Sewage Total/GDP (%)

7

15

18

19

51

12

0

10

20

30

40

50

60

0

5,000

10,000

15,000

20,000

25,000

Cameroon Cote D'Ivoire

Ghana Kenya Nigeria Senegal

# Projects$mn

PPI (2000-09) - By PPP Type

Mangement Concession Greenfield

Divesture Number of projects

4

8. The GoG, under the leadership of the Chairman of the National Development Planning

Commission (NDPC) and the PID team, prepared a National Policy on PPP that has been widely

discussed with public and private sector stakeholders and the international donor community. The policy

was approved by the Cabinet in June 2011 and launched in October 2011 and comprises, together with a

copy of the approved National Policy on PPP, the Letter of Sector Policy from GoG (refer to Annex 6).

This effort signals the Government‘s solid commitment to developing its PPP Program. The policy caters

to the various challenges that face the private sector in approaching PPPs. For instance, the policy

addresses key issues such as: (i) the critical role of the various MDAs to be involved in the approval

process of PPP project; (ii) a clear separation of the roles of PPP advisory and PPP Monitoring within the

PID; the need for Government support for upstream PPP project development (as noted in the Policy

proposal via the planned establishment of a Project Development Facility (PDF); (iii) supporting PPP

projects that fall within the Government‘s national development agenda and are economically justified

but not financially viable (as noted by the Viability Gap Scheme); and (iv) recognizing the need for

supporting commercial long term financing in local currency to the private sector partners of PPPs (noted

by the Infrastructure Financing Facility - IFF).

9. Key additional initiatives will be required to complement the National Policy on PPP and

consolidate and give effect to the PPP Program in Ghana. This includes support to the preparation of the

PPP Law to ensure that it addresses the gaps in the Public Procurement Act in relation to PPP

procurement practices and processes; capacity building of participating sector MDAs; and collaboration

with other donor partners. As will be discussed in the Project Description section of the PAD, the design

of this proposed PPP Project is tailored to support most of these issues. Furthermore and in line with the

Cabinet recommendations, the PID has hired the consultants to draft the PPP legislation.

10. Ghana will need to build its capacity to manage fiscal commitments and contingent liabilities

from PPPs. Under a PPP, the Government almost always bears some risk or provides some support that

gives rise to an ongoing fiscal commitment. These government contributions are needed to mobilize

private investment in a way that achieves Value for Money (VfM) by ensuring that projects are

financially viable and by allocating risks well between public and private parties. Offering the private

investors an attractive risk-sharing contract proposal while balancing out the need to minimize public

fiscal liabilities, is the cornerstones of successful PPPs.

11. Currently, there are no systems in place specifically for managing ongoing fiscal commitments

for PPPs in Ghana. So far, those commitments have been limited, since the country has had a negligible

number of PPP projects. However, as Ghana ramps up its PPP program to provide more infrastructure

services, it will be important to fill existing gaps in managing fiscal commitments to those projects.

Noteworthy that the approved National Policy on PPP notes efficient risk allocation as one of the guiding

principles for PPPs. Furthermore, policy highlights the role of the Debt Management Division (DMD)

within MoFEP in ensuring the fiscal sustainability of PPP Projects. The policy assigns DMD the

responsibility of: (a) assessing and managing the long-term fiscal risks and impact of PPP project and

determining whether it is acceptable given other priority nation needs; and (b) confirming the

appropriateness of the project for guarantees or other kinds of government support.

12. As in most other African countries, the supply of well structured PPP transactions in Ghana is one

of the most overriding limitations preventing the private sector from entering the infrastructure market.

Three key related factors currently impede this partnership between the public and private sectors: (a) the

public sector generally lacks coordinated sector strategies that guide the prioritization of projects and

prevent confusion over where and when investments occur; (b) the public sector does not systematically

perform upstream project analysis/pre-feasibility studies to assess the project‘s socio-economic

investment merits and affordability, its pros and cons as a public or PPP procurement (i.e. its Value for

Money - VfM - objective), and the extent to which it has commercial viability, prior to engaging with the

5

private sector; and (c) weak competitive standardized competitive bidding procedures that allow space for

unsolicited bids to prevail which can result in higher cost deals that spoil the market for future prospective

deals done on competitive basis.

13. To date, most PPP projects in Ghana have emerged from unsolicited proposals, thus preventing

private sector competition and transparency, however the recently approved National Policy on PPP,

encourages competitive and transparent processes. The GoG selected the First Mover projects to be

implemented in line with the National Policy on PPP framework in a letter dated December 14, 2011, as

set out in Annex 9.

14. There are a number of key challenges to term financing in local currency, in the banking sector

and in capital markets that have to be addressed. There is an overall shortage of long-term locally

denominated debt financing. Examining potential sources for PPP financing in the financial and capital

markets suggests the underdeveloped financing environment in Ghana. The size of local commercial

banks is small relative to the significant funding required for infrastructure projects. Based on data for

2008, private credit totaled to US$4.5 billion, 16 percent of GDP.5 Additionally banks have a limited

capacity to provide long-term infrastructure financing as a result of the asset-liability mismatch between

long-term financing required for infrastructure and short-term deposits. The longest loan tenors reach

five years; the majority of loans being shorter. The lack of experience of local commercial banks in

project financing also contributes to the low capacity of local banks to support projects with long-term

financing.

15. The capital market in Ghana, particularly the bond market, is fairly underdeveloped. While the

government bond market has registered appreciable growth over the last several years (outstanding stock

rose from US$163 million in 2003 to US$1,985 million in June 2010), Ghana has recorded mixed results

extending the maturity profile of its domestic debt and creating a liquid benchmark yield curve. The

longest tenor for government securities is five years through only three issues: in 2007 and recently in

July and December 2011. Issuance of three-year tenors has been more regular, on a quarterly basis, since

2010. Noteworthy that the underdeveloped government bond market is a key obstacle for developing

yield curve risk free benchmarks necessary to price long-term debt in local currency. However, it should

be noted that the latest five-year issue in July 2011 was significantly oversubscribed (the issue was for

GH¢ 300 million with bids amounting to GH¢ 840 million). Additionally for the December 2011 issue,

GH¢ 196 million were accepted of offers for GH¢ 217 million submitted. This indicates a high level of

investor confidence despite the tenor crossing the upcoming presidential elections end of 2012.

16. The corporate bond market in Ghana is at a nascent stage. There is a single outstanding issue with

the size of about US$3.9 million by HFC Housing bonds. There have been a few privately placed bond

issues including ―My Joy Online Media‖ which raised GH¢ 9 million in a seven-year issue in 2009, albeit

at an excessive yield. Other past issuers include Prudential Bank and Standard Chartered Bank.

Noteworthy that capital market development is a key priority for Ghana as a strategy to improve long-

term resource mobilization. This is well articulated in various reports and plans including the FINSSP III

(draft of April 2011), action plan for National Bond Market Committee (October 2002). The Financial

Sector Assessment Program (FSAP) in 2010 also listed a number of priorities for the development of the

capital markets, particularly in the bond markets in Ghana.

17. Institutional investors also have a role to play in PPP financing. While banks play a key role in

financing a PPP during the construction phase, as the PPP project becomes operational and the risks

become more limited to events that may affect cash flows, long-term bonds substitute for bank loans, and

5 Private credit data is computed as the deposit money banks’ or institiutions’ claims on private sector; from the IFS December 2010

Country Reports; GDP of the corresponding year from the WDI.

6

the sponsor often seeks to be bought out by a facilities operator, or even by third-party passive investors,

usually institutional investors. For Ghana, while the life insurance market is small (investments of life

insurance companies totaled to US$124 million, 0.4 percent of GDP, in 2008), public pensions can

potentially be a source of PPP financing. Total pension assets of Social Security and National Insurance

Trust (SSNIT) under management is US$2.04 billion – 7.02 percent of GDP. However, relevant

investment guidelines reforms and also a significant level of capital market development are needed

before such funds can be used.

C. Higher Level Objectives to which the Project Contributes

18. The Ghana Country Assistance Strategy (CAS) for 2008-2011 identifies support that is geared

towards three pillars of the Growth & Poverty Reduction Strategy II (GPRS II); this project directly

addresses Pillar I. The three pillars are: (1) raising private sector competitiveness, (2) improving human

development outcomes; and (3) strengthening governance. Under Pillar I the support focuses on ensuring

solid macroeconomic performance; enacting energy sector reforms; improving financing for

development; eliminating barriers to private sector development and trade; and encouraging rural

development and natural resource management. More specifically, the project aims to improve financing

for development and eliminating barriers to private sector development and trade by mobilizing funding

from the private sector in core infrastructure provision development projects.

19. The March 2010 CAS Progress Report which, inter alia, noted the very constrained fiscal space

available to the Government in the wake of a substantial budget deficit that arose during 2008, further

highlighted the need to mobilize private sector financing and expertise if targeted reductions in the

infrastructure gap were to be realized. This focus was further re-enforced during an October Global

Expert Team (GET) Mission to advise the Presidency on options for increasing public program

expenditure impact on the Government‘s Growth and Employment Agenda. Moving forward with a

comprehensive PPP Program was one of the recommendations of this mission.

20. Current government policy documents outline the commitment of the GoG to developing its PPP

agenda. In the document, The Coordinated Program of Economic and Social Development Policies

(2010-2016): An Agenda for Shared Growth and Accelerated Development for a Better Ghana, presented

to the 5th Parliament of the 4

th Republic by the President of Ghana in December 2010, Professor John

Evans Atta Mills, outlines ‗Financial Mobilization including PPPs‘ as one of the eight strategic elements

to drive the transformation Agenda for Change for a ―Better Ghana‖. The document acknowledges that

Ghana‘s infrastructure modernization and expansion requires innovation to mobilize the huge amounts of

capital necessary to close the infrastructure gap and position the country for economic take off. PPPs will

therefore be actively encouraged in areas of the economy where private investment will make the most

impact in partnership with the Government. Additionally the Medium-Term National Development Policy

Framework: Ghana Shared Growth and Development Agenda (GSGDA), 2010-2013 confirms the

importance of developing a PPP program in Ghana. The GSGDA states that the GoG is often constrained

in mobilizing the required financial and technical resources to cope with the rising cost of financing the

infrastructure deficit. It is thus noted that it is the objective of the GSGDA to actively promote PPP to

address the financing and capacity issues in infrastructure and service development.

II. PROJECT DEVELOPMENT OBJECTIVES (PDO)

21. The objective of this Adaptable Program Lending (APL) Phase I Project is to improve the

legislative, institutional, financial, fiduciary and technical framework to generate a pipeline of bankable

Public Private Partnership (PPP) projects. (see section III for project description)

7

Project Beneficiaries

22. There are three main stakeholders for this project:

(a) MDAs and Metropolitan, Municipal, District Assemblies (MMDAs) and the Bank of Ghana (BOG):

PPPs involve contractual commitments that can extend to in excess of 20 years. The buy-in and

sustained support of the different Line and Central Ministries and other relevant departments and

agencies to operate within the framework of a PPP selection, procurement and management process

and their willingness to collaborate will be key to the success of the Policy.

(b) Private Sector: The project has an important role reaching out to the private sector – both financial

institutions and prospective PPP sponsor companies (for instance construction companies). (c) Non Governmental Organizations (NGOs) and Citizens: The Ghanaian population is the ultimate

beneficiary of this project through the provision of increased and improved infrastructure services

resulting in economic growth and employment creation.

Consultations with these stakeholders will take place during implementation as an essential part of the

process by which to ensure that environmental and social safeguards are met.

PDO Level Results Indicators

23. The specific development objective indicators for the APL Phase I project are:

Indicator (1): Expression of Interests (EOIs) issued to prospective sponsors for three transactions. Expression of Interests (EOIs) are issued after the relevant due diligence takes place, namely pre and full feasibility studies that

are approved by the relevant authorities as per the PPP Policy. Thus the EOIs are issued following appropriate approval

procedures, fiscal risk assessment, procurement guidelines and specifically competitive treatment of unsolicited bids.

Indicator (2): PPP Law enacted.

Indicator (3): Associated PPP Regulations approved in accordance with PPP Law.

24. Further details on PDO level and key intermediate result indicators are provided in Annex I.

III. PROJECT DESCRIPTION

25. The overall objective of this Adaptable Program Lending (APL) two-phased initiative is to assist

the GoG to increase targeted infrastructure and other social service levels and quality by mobilizing

private sector participation through a public-private partnership (PPP) model. Leveraging greater volumes

of private sector investment in infrastructure provision is a critical Program end-objective. The two-

phased APL is designed to promote the creation of a sustainable and cost-effective PPP market in Ghana.

26. To this end, the APL Phase I project focuses on increasing capacity to facilitate the private sector

participation through legal, regulatory and institutional developments and financing of appraisal and

transactions advisory services. Establishing a credible and reliable enabling environment and developing

a soundly-appraised pipeline of robust projects for PPP financing lays the foundation for the APL Phase

II.

27. This second phase will build on the Phase I outcomes by providing, in addition to any ongoing

technical assistance required, catalytic financing through innovative Financial Intermediary Loan (FIL)

and Viability Gap Scheme (VGS) mechanisms to assist in bringing bankable transactions with high public

8

priority to financial close (see Annex 7 for a more detailed description of APL II). Below is a description

of the components pertaining to APL Phase I.

9

A. Project Components

Component 1: Institutional, Fiduciary, Legislative, and Financing Capacity Building - (US$10

million):

28. PPP Capacity Building: This component is focused on developing the in-house capacity within

the Government of Ghana, beginning with MoFEP, to identify, assess, develop, implement and manage

PPP transactions. The support provided under this component will be deployed through four instruments:

(i) Technical assistance for activities such as policy work, sector analyses, embedded consultancy

services, investment planning and analysis (both public and PPP) work, and other PPP-related

advisory support. This will include a senior PPP Specialist within the PID as well as other

specialized expertise – such as financial modelers, PPP procurement specialist and sector-specific

expertise - as approved through annual work planning exercises;

(ii) Systems and equipment to enable both central and line MDAs to manage and monitor PPP

concessions, make available relevant information for specific PPP transactions (i.e. data rooms),

develop a GoG PPP website where policies, laws, regulations, guidelines and other related

information will be shared with the public, and other ICT equipment necessary to implement a

modern PPP communications platform;

(iii) PPP-specific training for key GoG stakeholders on both broad and sector specific topics. This

includes resources for in-house training, workshops, study tours, and courses. Additionally

capacity building will be provided to the Project and Financial Analysis (PFA) Unit and Strategic

Projects team under the PID to enhance their capacity to undertake the general economic and cost

benefit assessments of all Public Investment Projects in advance of a decision as to whether

justifiable investments are best served by public or PPP procurement methods and

(iv) Outreach support and capacity building to private sector for PPP engagement.

29. The resources made available under this component will be targeted at the key central and line

ministries leading the PPP work in Ghana. Primarily, support will be given to PID in MoFEP and its -

units including the PFA and the PPP Advisory (PAU) Units; other key divisions (budget, debt, research,

legal etc) as well as other key agencies and MDAs including, the Ministry of Justice and Attorney

General‘s Department, the Public Procurement Authority (PPA), Ministry of Environment Science and

Technology and the Environmental Protection Agency (EPA). The Bank of Ghana is also a critical

partner and project beneficiary whose role as an executing agent will commence under APL Phase I as it

undertakes due diligence on potential Participating Financial Institutions (PFI) for the Financial

Intermediary Loan (FIL) to be introduced under the planned APL Phase II operation. This role would

expand under the APL Phase II project, as the BOG takes on the Apex role in managing the FIL funds

(see Annex 7 for further details).

30. The resources for the line ministries will be provided in parallel as they proceed with the

development of PPP transactions. As such, initial resources will be mobilized for the Ministry of Health

(to support Korle Bu transaction), Ministry of Transport for the Ghana Ports and Harbors Authority (for

ports) and the Ghana Airports Company Limited (GACL), and Ministry of Roads and Highways (for

roads). This support will be targeted to the PPP Project Management Units (PMUs) that, as stipulated in

the National Policy on PPP, will be set up in each Ministry developing a PPP transaction. Additionally

support will be provided to the Ministry of Environment, Science and Technology and EPA to ensure that

as PPP projects develop, the relevant safeguard mitigations are in place and are streamlined in

government systems.

10

31. Legislative, Regulatory, Policy and Guidelines Development Technical Assistance: In line with

the GoG efforts to strengthen its PPP legal framework, the GoG is now developing a PPP Act. This Act

will provide legal authority to the key elements of the recently passed PPP Policy. The GoG has

requested technical assistance to draft the PPP Law as well as associated regulations and guidelines,

including those critical for the management and procurement of unsolicited bid and other complementary

laws or policies to achieve a robust legislative and regulatory enabling environment. To ensure that this

legal and regulatory work is enacted, the component will also support outreach activities such as

stakeholder consultations and sensitization workshops across the Government MDAs and MMDAs and

the private and financial sectors both domestically and internationally to build understanding and

awareness around the reform actions that the GoG is undertaking. Annex 2 provides more detail on the

legislation/policies that may require revisions.

32. PPP Fiscal Commitments: The component will provide resources for the development of a

Framework for Managing Fiscal Commitments (FC) and Contingent Liabilities (CL) associated with

PPPs and this will include, in line with agreements MoFEP has reached with the International Monetary

Fund (IMF) under the recently concluded Fifth Review of the Extended Credit Facility (ECF), operational

support to improve coordination between core investment planning agencies of MoFEP, including the

Public Investment Division, the Debt Management Division and the Economic Research and Forecasting

Division, in line with policy guidelines to be prepared in first half of 2012.

33. Developing the Institutional Capacities for PPP Financing Instruments to be supported under the

APL Phase II program: Key to the successful implementation of the National Policy on PPP will be the

availability of suitable sources of project finance. The APL Program is seeking to support the

Government in the establishment of three key financial services as set out in the National Policy. This

includes a Financial Intermediary Loan (FIL), a Viability Gap Scheme (VGS) and a Project Development

Facility (PDF) which are summarized below and explained more fully in Annex 7.

34. Support for the VGS framework: The VGS envisaged in the National Policy on PPP is designed

to facilitate private sector investment in those PPP projects that – while having commercial potential –

have substantial initial capital expenditure outlays that require additional public sector support in order for

them to be effectively structured for market. The project will provide support to the Budget Division in

MoFEP to establish the capacity and operating procedures to ensure effective implementation of the VGS.

35. Developing FIL Guidelines/Operational Manual: The FIL which would be designed in line with

OP8.30 guidelines – is a mechanism through which the Bank can assist to introduce long-term local

currency to help facilitate financial structuring, particularly for PPP projects lacking a foreign currency

revenue flow. FIL funding would be deployed through qualifying ―Participating Financial Institutions‖

(PFIs) via arrangements with the Bank of Ghana, to meet priority project financing needs. Over the longer

term, once in place, the Bank FIL support could be directed, should it prove to be a sustainable and cost-

effective approach, through the Infrastructure Financing Facility the government is considering to

establish, as is the case in countries such as India and Indonesia. The FIL which is an option being

prepared under the APL Phase II could be financed via IDA or potentially IBRD or a blend, depending on

ongoing current graduation discussions between the Government of Ghana and the World Bank. In

preparation for the advent of this financing instrument, the APL Phase I will assist the Bank of Ghana

(BOG), which is the Government recommended entity to serve as the FIL Apex, to develop the required

fiduciary and other capacities and operating procedures to manage the FIL. The project will also assist the

BOG to undertake the due diligence required – compliant with OP8.30 – to select PFIs.

36. Framework for Long Term Financing for Infrastructure: There is a need to also address

weaknesses in the capital markets given its significance to financing PPP transactions. Phase I will do so

by making resources available for Government bond market development; in addition to supporting the

11

Nongovernment Bond markets; Transparency and Market Infrastructure; Capacity Building and the

development of equity markets. One of the main objectives is to extend the risk free local currency

benchmark by supporting the extension of the Government yield curve to seven years (which is currently

at five years). This bond tenor can be seen as a conservative expectation in light of the recently twice

oversubscribed five years bond (in June 2011 and in December 2011). The support under this component

is in line with the Capital Market support outlined in the recently approved Financial Sector Strategic

Plan- FINSSP II. Additionally, this component will assist the GoG to undertake the relevant analysis to

determine the appropriateness and modalities of a potential infrastructure financing facility. This will

entail assessment of market demand and cost effectiveness considerations relative to other long-term

financing options.

Component 2: PPP Pipeline Preparation and Transaction Advisory Support (US$18.5 million):

37. This component supports the GoG to develop a commercially viable and a Government-backed

pipeline of competitively-bid PPP projects to financial close. (i) Project Concept Notes (PCN),

Investment Appraisal, PPP Pre-Feasibility Studies (PFS), Full Feasibility Studies (FS) including

investment appraisal and Value for Money; (ii) Transactions Advisory Services; (iii) safeguards

preparation work for ―First Mover‖ transactions determined to be potentially economically and financially

viable based on Pre-Feasibility Assessment Studies; and (iv) transaction-specific market outreach

activities (i.e. road shows, investor promotion conferences, etc); (v) other specialized technical diagnostic

work deemed necessary in the assessment\development of the transactions (e.g. tolling and

ability\willingness to pay assessments).

38. The GoG has a number of projects already under development through unsolicited bids. For

these, the Project will support the provision of upstream sector and technical advisory services to

government MDAs. This support can come in the form of specialized consultancies for particular

technical issues or for longer-term embedded consultants to support the Government in its analysis of

these proposals and in negotiating with sponsors to ensure the best Value for Money outcomes in line

with public interest.

39. Finally, this component of the project will assist the PID to develop the Project Development

Facility (PDF) mechanism which will, over the long run, be the official government vehicle through

which financing will be provided for project preparation and transaction advisory work. It is the

Government‘s intention to design this instrument, as will also be the case for the FIL and VGS, with

robust governance framework, operating procedures and reporting requirements. This will also assist in

government efforts to mobilize other domestic and donor funding to complement any available

government contributions for project development activities.

Component 3: Project Management and Monitoring & Evaluation (US$1.5 million)

40. This component will finance specialized consultant services to assist MoFEP-PID in project

implementation and to develop a comprehensive monitoring and evaluation system to track cost

effectiveness and development impact of PPPs that are supported under the GoG PPP Program. The

project implementation unit is expected to comprise of seven positions: Project/Outreach Coordinator;

Financial Management Specialist, Procurement Specialist, M&E Specialist, Safeguard Specialist;

Capacity Building Specialist, and Internal Auditor (the latter has been assigned by the GoG). Over time,

as the PID becomes more experienced with PPPs and IDA operations, the PIU functions may devolve to

PID staff and requirement for specialized expertise will be scaled back.

41. Under this component, an Impact Evaluation design and implementation plan will be prepared.

This will include commencement of the systematic compilation of any of the associated baseline data

12

requirements that are likely to be generated under this APL Phase I project. Actual financing of the

impact evaluation would be supported under the APL Phase II initiative. This Impact Evaluation

initiative is part of the wider obligation under the IDA XVI Report of the Executive Directors to

strengthen the program of impact evaluations undertaken on IDA-financed operations.

B. Project Financing

42. The proposed operation will use an IDA Adaptable Program Loan (APL) instrument with two

phases that also incorporates a Financial Intermediary Loan (FIL) sub-component in the second phase. An

APL is best placed to suit the Government‘s ongoing efforts to expand its ability to develop and manage

PPPs while providing funding at a later stage once the projects are ready for concessioning. The total

estimated size of the program is US$225 million, with APL I amounting to US$30 million.

Table 1: Project Cost and Financing

Project Components Project cost IDA Financing % Financing

(1) PPP Institutional, Fiduciary and

Legislative Capacity Building

(2) PPP Pipeline Preparation and Transaction

Advisory Support

(3) Project Management and Monitoring &

Evaluation

Total Baseline Costs

Physical contingencies

Price contingencies

$10,000,000

$18,500,000

$1,500,000

$10,000,000

$18,500,000

$1,500,000

100%

100%

100%

Total Project Costs

Interest During Implementation

Front-End Fees

Total Financing Required

$30,000,000

$30,000,000

100%

C. Program Objective and Phases

43. As previously noted, the program is a two phase Adaptable Program Lending (APL) initiative.

There are five triggers closely aligned with the Cabinet-approved National Policy on PPP that was

officially launched in October 2011 - that will need to be met for the activation of Phase II. The Phase I

project will be supporting the upstream institutional and pipeline development activities and the

intermediate outcomes objectives necessary to facilitate the realization of these triggers, detailed below:

a) PPP Law, acceptable to the Association, enacted;

b) The passing of associated regulations in accordance with the PPP Law, acceptable to the

Association;

c) Completion of at least 5 Pre Feasibility Studies (PFSs) by contracting authorities and submitted to

the respective sector Minister, acceptable to the Association;

d) One first-mover transaction for which an EOI for the procurement of the project

sponsors/concessionaires has been issued, acceptable to the Association;

e) Selection of at least two PFIs, acceptable to the Association, after undertaking the relevant due

diligence on their appropriateness.

13

D. Lessons Learned and Reflected in the Project Design

44. Ghana‘s National Policy on PPP builds on lessons learned both from its own experience to date

with PPP transactions and those of other emerging market and industrialized countries. The most

significant relate to: (i) implementation coordination across the different Ministries, Departments and

Agencies (MDAs) responsible for PPP transactions; (ii) the critical role played by a transparent legal and

regulatory enabling environment and clear guidelines for each step in the PPP process through to closure;

(iii) thorough project origination and development, building on sound public investment appraisal and

Value for Money (VfM) assessment work; and (iv) critical importance to policy credibility of the prompt

preparation of policy-compliant ―First Mover‖ transactions which can be taken to market within a 12-18

month timeframe from policy approval. The Ghana National Policy on PPP and this World Bank project

pay particular attention to these factors.

45. The Government of Ghana has promulgated a PPP Policy that provides a detailed institutional

framework and sets out the different roles and responsibilities across the MDAs. Of particular note is the

key role assigned to MoFEP which, in this start-up phase of the Policy implementation will retain both

gatekeeper and advisory roles. The potential conflict of interest is deemed manageable over the short to

medium term against the perceived greater risk of insufficient coordination across the MDAs and lack of

investment prioritization decision-making that could arise if MoFEP does not play this leadership role. It

is also important to recognize lessons learned from other emerging market efforts to develop a PPP

market, of the need for centralized leadership in order to address policy credibility concerns and be able to

show bankable projects being taken to market within politically acceptable timeframes.

46. This credit has also been designed with due consideration of other PPP market developments and

the relative experiences of other World Bank-funded projects in support of PPP transactions, notably

recent operations approved in India, Indonesia, Nigeria and Bangladesh. Of particular note are the lessons

learned to date in India and Indonesia. In the case of India where the World Bank provided a line of credit

to a specialized Infrastructure Financing Facility (the India Infrastructure Finance Company Ltd – IIFCL),

challenges have arisen identifying suitable projects eligible for IDA funding. One key constraint in this

case has been the fact that the IIFCL does not originate projects and, as a result, projects under

consideration for financing do not always satisfy World Bank procurement and safeguards guidelines.

Conversely, whereas the Indonesia Infrastructure Finance Facility (IIFF) is mandated to originate, there is

currently an absence of a viable pipeline to which the line of credit provided to the IIFF can be deployed.

47. Taking this into account, this APL project has been designed to provide the financing and support

necessary to generate the upstream robust pipeline of bankable projects, including preparation of the

necessary safeguards and fiduciary due diligence. This then gives confidence that the financing the Bank

is prepared to provide is drawn down in a more predictable and cost-effective manner. The APL structure

is of particular note in this regard. The Phase I project allows for this early support while not creating the

costs and commitment exposure risks that would be associated with the early approval of a FIL. Phase II

financing only comes on stream when the enabling environment is strengthened and the pipeline is

primed, in line with the trigger conditions. This provides an incentive for the public sector to take well

prepared ―Policy-compliant‖ projects to market. It also signals to private sector the World Bank

commitment to provide financing, provided the project supply and the private sector demand is evident.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

48. The lead implementing agency will be the Public Investment Division (PID) within MoFEP. The

project will be implemented with support of a Project Implementation Unit (PIU) within the division that

14

will be composed of seven positions: Project Coordinator (covering also Outreach and Communication),

Financial Management specialist, Procurement specialist, Internal Auditor, Monitoring and Evaluation

(M&E) specialist, Capacity Building Specialist and Safeguard specialist. With respect to PPP

transactions, the PPP Project Management Units (PMU) to be established in the MDAs will have a key

role implementing their respective PPP projects in coordination with PID.

49. The BOG will play a key role - both as a beneficiary and as one of the agencies facilitating the

implementation of the project. During this APL Phase I project this role will be relatively limited,

focusing on due diligence assessments of prospective PFIs for the FIL as well as its own capacity building

for what would be the larger FIL Apex role it is to play under the planned APL Phase II project. In light

of this and the specific autonomous status of the BOG vis-à-vis the Government of Ghana, a Subsidiary

Credit Agreement will be signed between the Republic of Ghana, through MoFEP, and BOG detailing the

roles and responsibilities of BOG under (initially) the APL I project. The contractual arrangements

between the Republic of Ghana and BOG are expected to be different under APL II.

50. The Bank team providing Implementation Support to this project will be multi-sectoral, reflecting

the range of key budget, legal and institutional and multiple sector issues that will need to be addressed

during the course of project implementation. In addition, the World Bank Institute (WBI) will play a key

role assisting the Government of Ghana to develop and implement the capacity building component of

this project. The project will also entail close collaboration with other key World Bank agencies –

namely the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency

(MIGA) - to facilitate their advisory and investment service engagement in the GoG PPP Program.

Cooperation with IFC and MIGA has been ongoing throughout the project preparation where MIGA

contributed to a workshop in December 2010 outlining their various areas of support. The IFC has been

working in tandem with the World Bank in a number of transactions particularly pertaining to the Water

and Health sectors. As the IDA project moves into implementation phase and the pipeline of targeted

transactions are confirmed, MIGA and IFC investment teams will be invited to engage further to identify

potential investment and guarantee financing opportunities.

51. In addition to the involvement of WBI, IFC and MIGA, the GoG with the active support of the

World Bank, will seek other prospective sources of investment and financing for the PPP Program from

the wider international development finance community.

B. Results Monitoring and Evaluation

52. The PIU M&E Function: Specialists in the PIU will coordinate with the PFA and PAU of the PID

as well as other project implementing MDAs and MMDAs to ensure that coherent and standard M&E

data gathering and reporting system are in line with the Project Development Objective (PDO) and PDO

level and intermediate results indicators established for the project and further explained in the Project

Performance Framework in Annex 1. The scope of the work of that unit will cover both phases of the

APL. The function also includes coordination with participating line ministries and agencies, and

ensuring adequate reporting to the National Development Planning Commission.

53. Reviews during implementation support missions by IDA will include formal Annual and Semi-

Annual Work program consultations at which time annual procurement and capacity building plans will

be subjected to detailed review and approval actions by the PID and the World Bank. The PPP PIU will

be required to prepare information necessary to inform these implementation review exercises and to

ensure that all indicators in the results framework of Annex 1 are reported on with recent progress data.

54. A Mid-Term Review (MTR) will take place 24 months after the APL Phase I Credit effectiveness

in accordance with the terms of reference agreed upon by Government/PID, the PPP PIU, IDA and other

15

donors involved in the Government‘s PPP program and will include an assessment of the five triggers

identified and clarify whether conditions to move to the second phase are fulfilled. The PPP PIU will

prepare the mid-term report detailing implementation progress under all Program components and

identifying implementation issues. This report will be submitted to PID, IDA and the other donors

involved in the project not later than two months prior to the mid-term review. During the mid-term

review, implementation progress and solutions to identified implementation issues will be discussed and

agreed on and, if required, project redesign will be undertaken. An Implementation Completion and

Results Report (ICR) will also be jointly prepared by the PPP PIU, PID, and IDA within six months after

the closing date of Phase I and Phase II credits.

55. M&E Framework Systems and Reporting: Establish the M&E framework, systems, and

operations of the PPP PIU in accordance with the Project‘s objectives and strategy. Relevant tasks will

include (a) Preparing quarterly, half yearly and annual project monitoring reports, containing summary

data on overall performance against targets; and (b) Coordinating the organization of annual and semi-

annual M&E reviews and lessons-learned workshops to ensure the M&E function enhances the ability to

increase project outcomes; (c) development of the Impact Evaluation Design and Implementation Plan

and compilation of baseline data requirements as determined in the design framework.

56. M&E Participatory Mechanisms: Ensure that an effective and participatory M&E system and

methodology are established consistent with a robust M&E function – this includes: (a) the establishment

of ―third party‖ demand-based feedback arrangements (at policy, program and project levels) with civil

society and other community interests in line with commitments made during the October\November

2011 Project Stakeholder Meetings for the disclosure of the ESMF and RPF; (b) feedback from wider

private sector with a stake in development of the PPP market; and (c) ensure that the diversity in the

participatory mechanism is respected by allowing space for women, the poorest, and marginalized

social/ethnic groups to participate.

57. Staff and Consultant Management: Depending on workload and resource requirements as

approved under the M&E Annual Plan, additional specialized M&E skills will be identified and recruited

when/as needed.

C. Sustainability

58. Key strategic goals for this project are not just to finance specific PPP transactions but also help

to establish a robust and sustainable PPP market. It is anticipated that this will entail: (i) ongoing

financial sector reforms coupled with the technical assistance and capacity building supported by this

program to foster the deepening of the capital, particularly bond, market; (ii) enhancement of the

Government‘s project development capacity; (iii) momentum to push forward ongoing legal, regulatory

and fiduciary reforms at the sector level; and (iv) over time, the establishment of a track record and

reputation for well-developed and implemented PPP transactions. Furthermore, the GoG has showed

strong commitment and ownership for the PPP Program as represented by the recent passing of the

National Policy on PPP and the establishment of the PID and its key PPP units (PAU and PFA).

Notwithstanding this strong commitment, certain risks still exists. The critical factors associated with this

project and how this program addresses these are detailed in the following section.

16

V. KEY RISKS AND MITIGATION MEASURES

A. Risk Ratings

Table 2: Risk Ratings Summary table Risk Rating

Stakeholder Risk Substantial

Implementing Agency Risk

- Capacity Substantial

- Governance Moderate

Project Risk

- Design Moderate

- Social and Environmental High

- Program and Donor Low

- Delivery Monitoring and Sustainability Moderate

Overall Implementation Risk Substantial

Outline of Some Key Risks (More details provided in the ORAF in Annex 4)

59. Political commitment: The strong political will and commitment to develop the country‘s

infrastructure under a PPP program and a well-structured PPP institutional arrangement is critical. High-

level sustained and consistent championing of the PPP Program will be a key pre-requisite for its success

in managing inter-governmental coordination challenges and establishing credibility with prospective

private sector sponsors and investors.

60. Legal and Regulatory Framework: A number of challenges are likely to confront the GoG as it

seeks to design its PPP Law. For instance, it will be critical that the PPP legislation is aligned with current

procurement laws and sector specific laws. The project will directly address this issue by supporting the

preparation of the PPP law and associated regulations and facilitating consultations and cooperation with

other key MDAs to identify where alignments and possible amendments to other laws and regulations are

required.

61. Capacity of Government: It will be critical to augment the capacities of the MDAs that will be

leading the PPP transactions, in addition to the PID which will anchor the PPP initiative. The project will

finance specialized expertise over the short to medium term while the Government train and equip key

staff to take on some of these key technical roles within the participating MDAs. It will also need to be

recognized that some of this expertise – which is highly valued in the private sector - is unlikely to be

attracted to civil service pay scales. The project will continue to support the contracting of this high cost

expertise on an as required basis.

62. Buy-in from different line MDAs: A PPP program is multi-sectoral and requires a high level of

collaboration between the various MDAs. Commitment and buy-in of key agencies is essential for the

program‘s success. This concern will be partially tackled with the new PPP legislation that is currently

underway and will clarify the relationship between the PID and the line ministries. At an institutional

level, ―Letters of Commitment‖ will also be exchanged between MoFEP and the PPP sponsoring line

ministries to provide an official basis for this ongoing cooperation. On this basis, the project will provide

the capacity building support to line MDAs to reinforce and enable their role and ownership in the PPP

process.

63. Viable- and Safeguards-Compliant PPP Pipeline Risk: There is the possibility that, after the

completion of the preparation work, it may be determined that the targeted projects are not viable for PPP

17

procurement. Alternatively, the private sector may decide against investing. Given the importance in this

initial period after the Policy approval of taking projects to market that would have a strong private sector

―demonstration effect‖, the Government has been encouraged to ensure that projects – such as Ports and

Airports – which have internationally proven to be good candidates for private investment are included in

the Government‘s ―First Mover‖ pipeline. A further consideration will be the thoroughness of the

preparatory safeguards work on the prospective transactions and compliance with World Bank Guidelines

to ensure downstream eligibility for IDA financing. To this end, the project will support the Government

to finance all the required safeguards assessments for those targeted transactions for which pre-feasibility

economic and financial viability has been confirmed.

64. Deployment of APL Phase II: Commencement of Phase II will depend on the findings of the

feasibility studies that will be undertaken during Phase I. Some relevant risks related to the deployment of

Phase II are: (i) the studies do not determine that enough projects are appropriate candidates for the PPP

model; or (ii) if there are no suitable PFIs to deploy the funds.

B. Overall Risk Rating Explanation

65. Based on the risks outlined above and in consideration of the larger APL program that this Phase

I project supports the risk of project implementation is Substantial. Please refer to Annex 4 for risk

mitigation measures. (Refer to Annex 4 for description of the various risks and the proposed mitigations).

VI. APPRAISAL SUMMARY

A. Economic and Financial Analyses

66. The economic and financial analysis for this APL Program will comprise of two phases. For

Phase I, which is a capacity building and technical assistance set of activities, the appraisal is based on

institutional and qualitative analysis. Phase II will be based on detailed economic and financial analysis

drawn from the Pre-Feasibility Study (PFS) work which will provide the basis for one of the key Phase II

triggers noted above.

67. Phase I: Given the capacity building and technical assistance character of activities to be

supported under component 1, a quantitative economic and financial analysis would not be the

appropriate tool to assess their significance. However improved MDA coordination, strengthened

institutional capacities within key MDAs and augmented PPP legal and regulatory environment is

essential to any long term sustainable development of a PPP market. Similarly the preparation and

transactions advisory work financed under component 2 is not conducive to quantitative analysis.

However, it provides the solid economic, financial and safeguards assessment platform on which to

generate the quantitative analysis that will be essential in order to proceed with Phase II.

68. Phase II: The economic and financial appraisal for Phase II will be based on the Pre Feasibility

Study work to be undertaken on the potential PPPs under consideration for support through the project.

This analysis will focus on the following project appraisal factors: (i) technical cost estimation (capital,

maintenance, operating); (ii) social and environmental impact costs and benefits; and (iii) traffic and

revenue projections. Financial appraisals will be carried out to determine which projects can support a

tariff and which cannot. The methodology will differentiate fully self-supporting tariff projects from those

likely to require subsidy (capital grant and/or availability payment/revenue guarantees) and those likely to

be fully publicly financed. The financial model will evaluate full project life costs, affordability limits,

risks and their costs and optimal value-for-money methods of delivery, and include, at minimum, the

following inputs: (i) cost of year expenditure; (ii) construction costs; (iii) annual routine maintenance

18

(where relevant); (iv) periodic major maintenance by annual drawdown amount; (v) toll station operating

costs (where relevant); (vi) security and safety; (vii) other ancillary operating costs; (viii) tariff revenue

income based on proposed tariff structure (or tariff structure options); (ix) other sources of funds such as

VGS, debt financing, and concessionaire equity; and (x) affordability, meaning an assessment of Fiscal

Commitments from the project. Based on this analysis, the overall pipeline of potential PPP projects will

be aggregated to produce an overall sector Internal Rate of Return (IRR) estimates.

B. Technical

69. The technical design of the project has benefited from two Economic and Sector Work (ESW)

products funded by PPIAF and delivered in 2010 and 2011 and a series of technical notes prepared in

collaboration with the Department for International Development (DFID). The two principal reports

―Ghana PPP Diagnostic Study: Establishment of a PPP Resource Center (PRC) and PPP Capacity

Building in Ghana‖ and ―Towards Better Infrastructure: Conditions, Constraints, and Opportunities in

Financing PPPs‖ entailed, in the former case, a diagnostic study of institutional, governance, legal and

regulatory and project pipeline and infrastructure financing issues. The latter report scopes out the factors

affecting sources of long term financing for PPPs in Ghana in comparison to a number of neighboring

countries, namely: Cameroon, Cote d‘Ivoire, Kenya, Nigeria, and Senegal. The study further describes the

current PPP initiatives in the same countries and highlights the obstacles that prevent the enabling

environment required for PPP Programs to grow. This work has been fundamental in determining the

design, not just of the project (and particularly the proposed VGS and FIL instruments), but also the

institutional reforms (including in particular the specific design of the PID) and the structure of the

recently approved National Policy on PPP.

C. Financial Management

70. Financial Management (FM): A description of the project‘s overall financial management

arrangements in Annex 3 indicates that they satisfy the Bank‘s minimum requirements under

OP/BP10.02. The assessment of the financial management arrangements at the PID and MoFEP

concludes that there are adequate systems in place that satisfy the Bank‘s minimum requirements under

OP/BP10.02. However due to the lack of prior experience of PID in implementing IDA projects and also

it being a newly created division, yet to have its full complement of fiduciary and technical staff, the

overall FM risk is substantial. The Table below indicates the actions to be taken for the project to address

the weaknesses that have been identified in Annex 3 to ensure the FM system is robust and strengthened.

Table 3: Action Plan Action Date due by Responsible

i. Recruit a Financial Management Consultant No later than 30 days after

the Effectiveness Date.

PID/MoFEP

ii. Assign a Project Accountant from CAGD Completed PID/CAGD

iii. Assign a Project Internal Auditor from CAGD Completed

iv. Prepare a comprehensive initial eighteen months budget

on the use of funds

Completed PID/MoFEP

v. Preparation of a Project Implementation Manual Effectiveness Condition PID/MoFEP

vi. Installed a computerized accounting and financial

management system for the Project

No later than six months

after the Effective Date

PID/MoFEP

vii. Conduct financial management and procurement training At the start of the project IDA

71. Based on the risk rating of the project and the current FM arrangement, it is expected that, in the

first year of implementation, there will be two onsite visits to ascertain adequacy of systems and how

effective the country systems are being used to support implementation.

19

D. Procurement

72. The PID of the Ministry of Finance and Economic Planning (MoFEP) will be responsible for all

procurement activities under the Project. Procurement will be carried out in accordance with the World

Bank‘s documents "Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD

Loans and IDA Credits & Grants by World Bank Borrowers" dated January 2011; (ii) "Guidelines:

Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank

Borrowers‖ dated January 2011, and the provisions stipulated in the Legal Agreement; and (iii)

―Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans

and IDA Credits and Grants‖, dated October 15, 2006, as revised in January 2011; and the provisions

stipulated in the Legal Agreement. The procurement under the project components are expected to

comprise of: (i) the selection of consultants (Transaction Advisory services, Sector Specialists etc); (ii)

Pre Feasibility Study and other preparatory work; (iii) safeguards due diligence work; (iv) training; and

(v) the acquisition of ICT-related goods and other goods and equipment that will help MDAs manage and

track PPP projects and perform PPP-related activities.

73. An assessment of the capacity of MoFEP/PID to implement procurement for the Project observed

that the PID has no procurement experience of IDA/World Bank funded projects. Furthermore, there may

be serious procurement risks for the large number of consultants‘ contracts the PID will supervise

simultaneously, and consequently the overall Project procurement risk for procurement is rated as

Substantial, prior to mitigation measures. A Procurement Specialist experienced on both IDA/World

Bank and consultant procurement process will be recruited for the Project Implementation Unit (PIU) to

strengthen the division. To enhance project implementation, the PID will also organize regular training

for PIU staff in contract monitoring and administration. Furthermore, a dedicated procurement unit will

be established to coordinate Project procurement activities. It is to be noted that, while the BOG is a key

partner with MOFEP, it does not have any fiduciary accountability in this APL Phase I project. The

detailed procurement arrangements are given in Annex 3.

E. Social (including Safeguards)

74. The project will have positive social impacts and benefit Ghanaian people through improvement

of infrastructures and service delivery in relevant areas through support of PPP transactions in core

infrastructure sectors. However, the project might also have some social risks and adverse social impacts

on different social groups. Some potential examples of negative social impacts are: land acquisition might

be needed for construction and rehabilitation of infrastructures and some people might be displaced; the

construction phase of the large scale of infrastructure projects requires a relatively large number of

construction workers, and with the influx of a number of migrant laborers, conflict might arise between

construction camps and local communities. Other social problems such as crime, prostitution, and erosion

of traditional authority are well known risks associated with influx of migrant laborers and so are health

risks from increased communicable and non-communicable diseases and HIV/AIDS. Additionally,

improved service may result in tariff increases and poor people might not find such tariffs affordable.

While better roads can improve people‘s access to market and other economic activities, it may also

increase the risks of accident and sexually transmitted diseases.

75. The proposed operation will use an APL instrument with two phases. All these social impacts and

risks are associated with infrastructure development in support of PPP transactions that are to be

implemented in Phase II. An Environmental and Social Management Framework (ESMF) and

Resettlement Policy Framework (RPF) have been prepared in compliance with relevant Bank safeguard

policies and laws and regulations of the Government of Ghana to mitigate these adverse impacts and

manage these social risks. The RPF contains details of the principles and objectives governing the

preparation and implementation of Resettlement Action Plans (RAPs), including review, approval and

20

disclosure of RAPs, screening for Involuntary Resettlement, establishment of baseline and socioeconomic

data, and the likely categories of project affected persons. Compensation arrangements for those being

involuntarily resettled, including possibilities for land exchange, are outlined in the RPF. In particular, the

RPF also contains a mechanism for resolving disputes that may arise. Both documents have been

disclosed within country and at the World Bank InfoShop on November 22, 2011.

76. The grievance redress procedure will ensure that any grievance and/or complaints of Project

Affected Persons (PAPs) on any aspects of land acquisition, compensation and livelihood rehabilitation

are dealt with in a timely, adequate and transparent manner. To ensure that all PAPs as well as Civil

Society Organization (CSOs) are aware of the procedures of grievance redress. These procedures will be

disseminated through a public information campaign.

77. Other social impacts and risks besides resettlement will be addressed through the ESMF. It

establishes a process of environmental and social screening which will permit the institutions in charge of

the implementation of the project to identify, assess and mitigate the environmental and social impacts of

the proposed intervention. According to the ESMF, Environmental and Social Impact Assessments

(ESIAs) and Environment and Social Management Plans (ESMPs) will also be prepared and implemented

during project implementation. In addition, the ESMF also determines the institutional measures to be

taken during the program implementations, including those relating to capacity building.

78. The PIU will include an environmental and social safeguards specialist with specific

responsibilities to oversee all safeguards work to be undertaken through the project in support of PPP

transactions. GoG is committed to ensuring that each PPP project shall have positive impact upon the

public interest. The following principles shall be addressed in PPP transactions: (i) safeguards to users

particularly vulnerable groups; and (ii) setting affordable user charges and tariff structures.

F. Environment (including Safeguards)

79. The project is a Category A (Full Assessment) for safeguards because, although many of the

transactions in the overall program are likely to have moderate environmental and social impacts, some of

the candidate projects in the future may have significant adverse environmental impacts that are sensitive,

diverse, cumulative, irreversible or unprecedented. During project preparation, the exact locations and

potential impacts have not yet been determined in sufficient detail. The GoG thus prepared and disclosed

on November 22, 2011 an ESMF and RPF (cited above). The ESMF outlines the process and procedure to

be followed when a PPP transaction has the potential to trigger any of the World Bank safeguard policies.

It includes details of the existing environmental laws and regulatory framework in the country; World

Bank safeguard policies, analysis of environmental and social impacts including alternatives; institutional

arrangements for implementing the ESMF, capacity building needs; and public consultation carried out

during project preparation. In addition, the ESMF contains a detailed checklist for screening all potential

PPP transactions for their potential environmental and social impacts to determine: (i) Environmental

Assessment (EA) category; (ii) applicable World Bank environmental and social safeguards policy

triggers; (iii) potential for environmental and social impacts liability; (iv) cultural or other sensitivities;

(v) relevant stakeholders; and (vi) the nature and extent of engagement for each stakeholder category.

Finally, the ESMF contains an annex with TORs for conducting an ESIA if and when required.

80. The project includes support for the preparation of PPP transactions, some of which may be co-

financed or financed by the Bank as part of Phase II of the APL. The project ESMF and RPF will guide

the preparation of ESIAs and ESMPs, Resettlement Action Plans (RAPs), and/or other safeguards

instruments that will be prepared for these PPP transactions, some of which will be financed by the Bank

Phase II of the APL. The project will limit its support to the financing of the relevant safeguards studies

required by the World Bank guidelines for the anticipated first mover PPP transactions that are scheduled

21

to receive IDA funding under APL Phase II. For those transactions financed by the Bank, the

Environmental and Social Safeguards Specialist at the PID will then submit the report of the screening

exercise with its recommendations for clearance to the World Bank to proceed with the detailed ESMP

and ESIA, RAP and any other safeguards instrument. Some specific considerations for Bank-financed

transactions are as follows:

(a) Environmental and Social Management Plans: Based on the ESIAs, the Program and all sub-projects

will include the preparation of ESMPs to address health, safety, and environmental regulatory

compliance objectives, institutional responsibilities (e.g. World Bank), and other related

commitments. During the proposal stage, each intending concessionaire will as part of its proposal,

submit an overview of how environmental issues of the project will be addressed on a continuous

basis. The plans will also specify standards proposed for the sub-project to ensure environmental

sustainability. Standards and plans proposed to address social issues including labor relations will be

particularly important. This could include, inter alia, structures to handle retrenchment, special

packages for workers that have attained retirement age, retraining of staff to acquire the needed skills.

(b) Capacity building and training requirements: The capacity of the Borrower to carry out its design,

planning, approval, permitting, monitoring and implementation roles will, to a large extent, determine

the success and sustainability of the PPP program in addressing environmental and social issues. The

first step in pursuing capacity building will be to identify the capacity building needs of the various

stakeholders. Given the nature of the environmental and social management requirements and

provisions outlined in this ESMF, competencies and capacity building will be required in the

following areas: (i) Environmental Impact Assessment Process, (ii) Environmental Due Diligence,

and (iii) Monitoring and Evaluation.

(c) ESIAs: The PPP Program is financing Environmental and Social Impact Assessments (ESIAs) for all

prospective PPP projects that it is anticipated might be financed by the Bank.

81. Stakeholder Engagement: In tandem with World Bank safeguards policy 4.01 governing EA

Category A projects, the PIU recognizes that stakeholder involvement is an important element of the PPP

Program and the EA process and that stakeholder identification and analysis at an early stage of a project

is critical in the assessment of interests, concerns, relationships, assumptions, their level of influence and

the ways in which they affect project risks. To this end, the preparation of the ESMF and RPF drew on

input by three stakeholder consultations in Accra, Takoradi and Tamale. This consultation which started

early during the project preparation phase will continue during project implementation.

82. The table below identifies the different safeguard policies that could be triggered by this APL

Program, covering both Phase I and II:

22

83. Environmental Assessment (OP/BP 4.01): Safeguards policy 4.01 could be triggered, as

components of the PPP include civil works including the rehabilitation and refurbishment of existing

infrastructure, as well as the construction of new infrastructure. The exact locations and impacts of the

sub-projects have not yet been identified, though the pipeline includes possible first movers for Phase II.

The ESMF was prepared and disclosed in November 22, 2011 to address the mitigation of adverse

impacts. The ESMF also includes an indicative budget for such mitigation activities.

84. Involuntary Resettlement (OP/BP 4.12): Many of the transactions in the PPP program could

involve minimal or moderate land acquisition and or restriction of access to usual means of livelihood as

most of the transactions will largely be rehabilitation of existing infrastructure. However, some of the

transactions may involve significant land acquisition. As part of safeguards due diligence, an RPF was

prepared and disclosed in November 22, 2011.

85. During Phase II, other Safeguard Policies may also be triggered, such as Natural Habitats (OP/BP

4.04), Pest Management (OP/BP 4.09), Physical Cultural Resources (OP/BP 4.11), Safety of Dams

(OP/BP 4.37) and Projects on International Waterways (OP/BP 7.50).

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties'

claims on the disputed areas

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment (OP/BP 4.01) [x] [ ]

Natural Habitats (OP/BP 4.04) [ ] [x]

Pest Management (OP 4.09) [ ] [x]

Physical Cultural Resources (OP/BP 4.11) [ ] [x]

Involuntary Resettlement (OP/BP 4.12) [x] [ ]

Indigenous Peoples (OP/BP 4.10) [ ] [x]

Forests (OP/BP 4.36) [ ] [x]

Safety of Dams (OP/BP 4.37) [ ] [x]

Projects in Disputed Areas (OP/BP 7.60)* [ ] [x]

Projects on International Waterways (OP/BP 7.50) [ ] [x]

http://www.worldbank.org/environmentalassessment

http://intranet.worldbank.org/WBSITE/INTRANET/OPSMANUAL/0,,contentMDK:20064724~pagePK:60001255~piPK:60000911~theSitePK:210385,00.html


















23

Annex 1: Results Framework and Monitoring

Ghana: Public Private Partnership (PPP) Project

Results Framework .

Project Development Objectives .

PDO Statement

Improve the legislative, institutional, financial, fiduciary and technical framework to generate a pipeline of bankable Public Private Partnership (PPP) projects. .

Project Development Objective Indicators

Cumulative Target Values Data Source/ Responsibility for

Indicator Name6 Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection

Expression of Interests

(EOIs) issued to prospective sponsors for

three PPP transactions

(please refer to Box in the body of the PAD for what

an EOI entails)

Number 0 0 1 2 3 3 Annual Quarterly Progress Reports

MoFEP

PPP Law enacted

Yes/No No Yes Yes By due date Government

Gazette MoFEP

Associated PPP

Regulations approved in accordance with PPP

Law

Yes/No No Yes Yes By due date Regulations Gazetted MoFEP

Intermediate Results Indicators

Cumulative Target Values Data Source/ Responsibility for

Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection

Component One

PPP Bill submitted to

Cabinet Yes/No No Yes Yes By due date Letter of

notification from MoFEP

MoFEP

6 This core indicator ―Direct Project Beneficiaries (number) of which female (percentage)‖ is not applicable to this APL Phase I Technical Assistance (TA)

project. However, it will be incorporated in the APL Phase II project.

24

PPP Regulations

submitted to Cabinet Yes/No No Yes Yes By due date Letter of

notification from MoFEP

MoFEP

Guidelines for Unsolicited Bid for

inclusion in PPP

Regulations approved by PPP Approval Committee

Yes/No No Yes Yes By due date

Letter of

notification from MoFEP including

the final guidelines

MoFEP

PPP Fiscal Commitment

and Contingent Liability

Framework approved by PPP Approval Committee


Letter of

notification from MoFEP including

the final

framework

MoFEP

Signed Letters of

Commitment from MDAs to MoFEP

committing projects to

follow PPP policy

Number 0 1 2 2 2 2 By due date

Copies of letters submitted by

MoFEP MoFEP

PPP Approval Committee established

Yes/No No Yes Yes By due date Copy of letter of

invitation and

attendance sheet MoFEP

Seven year bond issued by Government of Ghana

Yes/No No Yes Yes By due date Bond prospectus MoFEP/BOG

VGS framework established

Yes/No No Yes By due date

Letter of

notification from

MoFEP/BoG

including the final framework

MoFEP/BOG

FIL including a unit to

provide the Apex role in

the BOG established


Letter of notification from

MoFEP including

the final framework.

MoFEP

Participating Financial

Institutions (PFI) selected after due diligence has

been carried out

Number 0 1 2 2 3 3 By due date

Report from the

World Bank ensuring eligibility

and letter from

MoFEP confirming the

PFIs

MoFEP

Component 2

Pre-feasibility studies

completed Number 0 2 4 5 5 5 On completion Quarterly progress

reports MoFEP

25

Full Feasibility studies completed

Number 0 0 2 3 4 4 On completion Quarterly progress reports MoFEP

Line MDA PMUs for

First Mover Transactions established

Number 0 1 2 2 2 2 On completion

Copies Letters from line MDAs

to MoFEP

outlining the teams

MoFEP

First mover transactions

meet phase II criteria for funding

Number 0 0 0 1 1 1 On completion World Bank

assessment MoFEP

Complete Relevant

Safeguards Government

Reports for PPP Projects

as outlined in the PPP

policy

Number 0 0 2 3 4 4 On completion

Relevant

Safeguards

Government Reports

MoFEP

.

26

Annex 1: Results Framework and Monitoring (Continued)


Results Framework

.

Project Development Objective Indicators

Indicator Name Description (indicator definition etc.)

Expression of Interests (EOIs) issued to prospective sponsors for three PPP

transactions (please refer to Box on page 7 in the body of the PAD for what an EOI entails)

EOI are issued after the relevant due diligence takes place, namely pre and full feasibility strides that are approved by the relevant

authorities as per the PPP Policy. Thus the EOIs are issued following appropriate approval procedures, fiscal risk assessment, procurement guidelines and specifically competitive treatment of unsolicited bids.

PPP Law enacted

Associated PPP Regulations approved in accordance with PPP Law

Intermediate Results Indicators

Indicator Name Description (indicator definition etc.)

Component 1

PPP Bill submitted to Cabinet

The PPP Bill will address key issues of approval procedures, institutional arrangements, fiscal risk, and procurement guidelines

(including specifically competitive treatment of unsolicited bids).

PPP Regulations submitted to Cabinet

Guidelines for Unsolicited Bid for inclusion in PPP Regulations approved by PPP Approval Committee

The guidelines will provide the framework or PPP Procurement in general and dealing with unsolicited bids in particular.

PPP Fiscal Commitment and Contingent Liability Framework approved by PPP

Approval Committee

Signed Letters of Commitment from MDAs to MoFEP committing projects to follow

PPP policy

The letter will cover expected collaboration across ministries as needed, with regards to PPP projects subjected to the National Policy

on PPP or any sector specific legislation that may need revision to enable a conducive PPP environment.

PPP Approval Committee established This is an inter-ministerial committee to steer the PPP process outlined in the National Policy on PPP.

Seven year bond issued by Government of Ghana

VGS framework established This will include developing the implementation and operational manual for the VGS and stipulating and capacity building the unit

within government that will undertake this role (expected to be the Budget Division in MoFEP).

FIL including a unit to provide the Apex role in the BOG established This will include developing the implementation and operational manual for the FIL.

Participating Financial Institutions (PFI) selected after due diligence has been carried out

PFIs will have to conform to OP 8.30

27

Component 2

Pre-feasibility studies completed

Full Feasibility studies completed

Line MDA PMUs for First Mover Transactions established

First mover transactions meet phase II criteria for funding This will be for one of the projects for which the government issued an EOI (first Indicator).

Complete Relevant Safeguards Government Reports for PPP Projects as outlined in the

PPP policy

This work will be undertaken as part of the pre and full feasibility studies.

28

Annex 2: Detailed Project Description


A. APL Program Background

1. The first Phase of this APL addresses the technical and institutional capacities to develop and

manage properly structured PPP transactions over a four year period. This includes focused technical

assistance in key MDAs, resources to support project preparation, ongoing legal and regulatory

reform, support for outline business cases, transaction advisory services, and state-level PPP support.

The Phase I activities will run for four years while APL II is expected to run for six years. It is

expected that both APLs will run concurrently during an overlapping period once APL II becomes

effective.

B. APL Design

2. This APL is structured with a first phase of US$30 million focused on institutional capacity

building and PPP project preparation activities. A detailed APL 1 budget breakdown is provided

below.

Component Amount

(1) PPP Institutional, Legislative and Fiduciary Capacity

Building for PPPs

$10,000,000

1.1: On Institutional Capacity Building of MDAs $5,000,000

1.2: On Capacity Building for PFIs $1,000,000

1.3: On the Legislative, Regulatory and Policy TA $1,500,000

1.4: On TA support for Fiduciary Requirements $500,000

1.5: On Supporting Long Term Financing for Infrastructure $2,000,000

(2): PPP Pipeline Preparation and Transaction Advisory Support $18,500,000

2.1: Support to First Mover Tier I & II PPP Pipeline $17,000,000

2.2: Support to Tier III PPP Projects $1,500,000

(3): Project Management and Monitoring & Evaluation $1,500,000

Total $30,000,000

Component 1: PPP Institutional, Legislative, Fiduciary and Financing Capacity Building for

PPPs (US$10 million)

3. This component will provide capacity building and technical assistance support to the various

MDAs that will have critical roles to play in the implementation of a PPP program and preparation of

lead transactions for market and support the continuing evolution of the legal and regulatory

framework for PPPs.

Sub-Component 1.1: On Institutional Capacity Building of MDAs and MMDAs (US$5

million):

4. The component aims at enhancing MDAs‘ and MMDAs‘ ability to manage transaction and

technical advisors of PPPs, oversee project feasibility work, negotiate with the private sector, in

addition to building government capacity to monitor and evaluate PPP projects after financial closure

and project start-up. Building on the challenges identified in the Ghana PPP Diagnostic Study (2010)7

the component will comprise of four support instruments namely: (i) technical assistance; such as to

support advisory services to assist in the development of policy work and project preparation, (ii)

7 (PPIAF & World Bank 2010) Ghana PPP Diagnostic Study: Establishment of a PPP Resource Center (PRC) and PPP

Capacity Building in Ghana

29

support for systems and equipment: this will include support for ICT system that will help MDAs

manage and track PPP projects and performance and interface with other PPP units within the

government, and (iii) training which includes general PPP training for key staff and ―subject-specific‖

courses, seminars and workshops. Specific support will be provided to the PID team, both the PAU

and PFA, being the drivers of the PPP Process.

5. Additionally capacity building will also be provided to the PFA and the Strategic Projects

team under the PID to enhance their capacity for general assessment of Public Investment Projects

and coordination across other key MoFEP divisions in accordance with agreements reached with the

IMF under the Fifth Review of the Extended Credit Facility (ECF). This is critically needed in light

of the numerous public infrastructure projects currently under consideration for funding. Also to be

supported would be some of the other specialized divisions of MoFEP and other key central players

including, e.g., the Environmental Protection Agency/EPA and the Ministry of Environment and the

Public Procurement Agency (PPA); and finally outreach and capacity building to private sector for

PPP engagement.

6. Annex 3 Section I outlines the various MDAs and MMDAs that will be involved in the PPP

process and highlights their respective roles. The final determination of principal MDAs and the key

central agencies to be supported will depend on the priority transactions that the GoG direct the World

Bank to support under this proposed credit. Capacity building will focus on the PPP Project

Management Units (PMUs) within the MDAs, as stipulated in the National Policy on PPP, would be

set up in each Ministry leading PPP transactions (see Box below for the early efforts in following this

aspect of the PPP Policy, as being undertaken by the Accra Plains Irrigation PPP Project currently

being led by the World Bank Agriculture Department and supported by FPD). Based on the

preparation missions and potential PPP projects, potential MDAs that will receive this initial capacity

building support under the project are: for the Ministry of Health (to support Korle Bu transaction),

Ministry of Transport for Ghana Ports and Harbor Authority (for ports) and Ghana Airport Company

Limited (for airports), and Ministry of Roads and Highways (for roads). Additionally support will be

provided to the Debt Management Division, the Economic Research and Forecast Division, and Legal

Division under MoFEP; the Budget Division of MoFEP for their role on the VGS under APL II; Bank

of Ghana for their APEX role for the FIL in APL II; and the Ministry of Justice and Attorney General

which will play a key role in the development of the PPP legislation. Additionally support will be

provided to build capacity for PPP procurement within MoFEP which is a task that is not currently

foreseen to be undertaken by the Public Procurement Authority (PPA).

Box: Accra Plains Irrigation PPP

In line with the GoG‘s efforts to catalyze infrastructure services through PPPs, the GoG has undertaken the

development of the Accra Plains irrigation system through a PPP scheme. Accra Plain is located on the lower

Right Bank of the Volta River in Ghana‘s Volta Region. The entire Accra Plain consists of about 200,000

hectares much of which remains under-cultivated due to lack of proper irrigation infrastructure and services. An

initial area of about 3,000 hectares benefitted from the Kpong Right Bank Irrigation Project. Rehabilitation to

the irrigation infrastructure was completed in 2003 after years of poor maintenance. Ghana Irrigation

Development Authority (GIDA) assumed responsibility over the operation and maintenance of the irrigation

infrastructure. However, to date, the irrigation infrastructure for the Kpong Right Bank Irrigation Project

remains in poor condition and in need of upgrade and rehabilitation work.

A new irrigation development plan for select areas of the Accra Plain, including the rehabilitation of the former

Kpong Right Bank Irrigation Project areas, has been initiated following a new commitment from the

Government of Ghana to improve Ghana‘s agricultural production. This new initiative is being led by the

Ministry of Food and Agriculture (MOFA) and GIDA. The objective of this development scheme is to

rehabilitate the existing Kpong Irrigation Scheme (KIS) and extend new irrigation infrastructure and services to

a proposed additional 8,000 hectares under the New Development Irrigation Scheme (NDIS).

The Accra Plains Irrigation PPP is the first PPP transaction to follow the new National Policy on PPPs. This

included the formation of the Project Management Unit (PMU) to oversee the development of the transaction.

The PDT is being led by the Ministry of Food and Agriculture and includes representatives from MOFEP and

GIDA. To enhance the capacity of the PDT and development process, the GoG undertook a South-South

30

Exchange Study Tour to Brazil to learn about the Brazil experience in PPPs in irrigation. The result of this Tour

helped shape the way by which the transaction is being modeled.

This transaction is serving as a model for PPP development in Ghana. It is piloting the use of the PMU as the

organization method to move forward a PPP and also relying on the PPP Policy as the legal framework.

Likewise, the transaction is undergoing the proper Pre-Feasibility Analysis to determine the best way to bring

this PPP to market.

Sub-Component 1.2: On Capacity Building for PFIs (US$1 million):

7. The other principal beneficiaries receiving support under this component are prospective

Participating Financial Institutions (PFIs) that are seeking to access the APL Phase II FIL resources.

For PFI to be eligible to access the FIL, they will need to meet certain eligibility criteria related to

governance, financial and portfolio management, staffing and expertise (particularly project finance,

procurement and safeguards). Where the FI is not fully compliant, there will be a need to implement

an agreed-upon Institutional Development Plan (IDP). While the expectation is that a significant

portion of the costs of the IDP will be borne by the PFI, there are other more public good costs which

the PFI would not invest in, except to access the FIL. This is an area where the project would consider

providing capacity building assistance from the IDA credit, based on an overall IDP cost-sharing

agreement. Over time, as the FIL generates its own revenue flow back to GoG, this income can be

deployed in support of the IDP activities. However, in the short-term any GoG funding would need to

come from the IDA credit. A budget of US$1 million has been allocated for this FI capacity-building.

Cost Unit TOTAL

PFI IDP Capacity Building $330,000 3 PFIs $1,000,000

TOTAL $1,000,000

Sub-Component 1.3: On the Legislative, Regulatory and Policy TA (US$1.5 million):

8. As previously noted, following on from the recently approved PPP National Policy, the

development of a PPP Act is currently in process. Further support will be required to draft the

associated regulations and guidelines, in addition other complementary laws or policies such as:

procurement or financial management legislation or sector specific policies, such as toll and tariff

policies and regulations. Furthermore, the component will support the implementation of this

legislation including vital outreach and dialogue across the Government MDAs and private and

financial sector actors on key features of the law, its goals and implications for PPP market

development and project delivery.

9. The priority transactions will be the important determinant of the key sector legislation and

policies that will be supported. Where necessary and feasible, these laws will need to be amended or

new laws enacted in order to:

(a) ensure that public authorities are empowered to enter into agreements for the implementation

of privately financed infrastructure projects and can delegate their statutory functions to

private companies;

(b) ensure that the regulation and licensing of public service operators and operations is

transparent, timely and effective;

(c) ensure that there are no distortions created by existing tax, banking, company or any other

laws that would bias the investment decisions of public authorities for or against PPP as a

procurement option, or would distort the commercial decisions of PPP investors, contractors,

or operators;

(d) provide for transparent, efficient and competitive procurement procedures for PPP-type

contracts that encourage innovation from bidders, and allow dialogue to optimize the

allocation of risks between the contracting parties;

31

(e) ensure that there is an effective dispute resolution process which can operate independently

and in a timely manner to provide alternative procedures such as arbitration and expert

determination; and

(f) Ensure that the proposed institutional and financial framework for PPP projects and the

issuance of guarantees, partial risk insurance or other financial instruments by, or through,

the GoG is consistent with the good fiscal management.

10. An early assessment of key sector policies relating to the first mover PPP transactions

outlined in component 2 suggests the following:

The Ports Sector: The Ghana Ports & Harbors Authority (GPHA) is responsible for

planning, building, developing, managing, maintaining, operating and controlling all of

Ghana‘s ports. And, as a result, the GPHA is entitled to enter into agreements with the

private sector for: (i) the supply, construction, manufacture, maintenance, or repair of

property as the GPHA may require for the efficient performance of one or more of GPHA

functions, and; (ii) the operation or provision of port facilitates which the GPHA is

empowered to provide.8 To enhance potential for PPPs in Ghana‘s ports, consideration could

also be given to the appropriateness of moving more systematically to a Landlord model.

These are issue to address in a more in-depth review of relevant port legislation.

The Airport Sector: The Ghana Civil Aviation Authority (GCAA), established by the Ghana

Civil Aviation Authority Act, 2004 (Act 678), exists to provide safe and secure air navigation

and regulatory service. Although the GCAA originally also had a profit making mandate, this

mandate was transferred to the Ghana Airports Company Limited (GACL) in 2006 on the

incorporation of GACL the same year. The role of GACL is to own, operate, manage and

maintain all airports within Ghana. Within certain limits9, there is nothing in Act 678 or the

statutes of GACL to prevent PPP‘s in respect of building, owning, operating, and maintaining

airport facilities, depending on the nature of any airport-related PPP that might be envisaged,

One critical issue will be to determine the extent to which tariffs collected are required, as is

the current practice, to go directly into the Government‘s Consolidated Fund.

The Roads Sector: The Ghana Highway Authority (GHA) was established by the Ghana

Highways Authority Act, (Act 540) for the purpose of controlling, developing and

maintaining trunk roads and related facilities. It is important to note that, by Section 3 of this

Act, the GHA is empowered, among other things, to tender, let and administer contracts for

trunk road improvement and rehabilitation projects, as well as trunk road maintenance, and to

negotiate concession agreements with the private sector so as to enable the private sector to

finance, build and operate selected trunk roads as toll roads under conditions agreed with the

Ministry of Roads and Highways. Query therefore whether Act 540 limits potential PPP

arrangements to BOT (Build-Operate-Transfer) concessions. In addition, the Road Fund Act,

1997 (Act 536) established the Road Fund so as, among other things, to finance routine,

periodic maintenance and rehabilitation of public roads throughout Ghana. The sources of the

fund include bridge, ferry and road tolls collected by the GHA. The question arises as to

which entity is responsible for collecting tolls when a PPP involves a toll road. While Section

3(k) of Act 540 empowers the GHA to negotiate concession agreements with private sector

entities to finance, build and operate toll roads, Section 3 (b) of Act 536 lists the sources of

finances of the Fund as including ―Road Tolls collected by GHA‖. This uncertainty needs to

be addressed in any forthcoming PPP law. Further challenges arise regarding the adjustment

of tolls. Whilst the Road Fund Act established a so-called Road Fund Management Board for

the purpose of setting tolls and provided for the membership of this Board, the Board‘s

powers in these respects are simply to recommend appropriate tariff levels to Cabinet,

following consultation with the Minister of Finance. Cabinet is called upon to approve any

changes in road tolls.

8 See the Ghana Ports & Harbours Authority of 1986 (Act 160)

9 There can, for instance, be no PPP activity regarding matters of air navigation and civil aviation safety and the

certification of airports.

32

Sub-Component 1.4: On TA support for Fiduciary Requirements (US$0.5 million):

11. This sub-component will also support the development of a Framework for Managing Fiscal

Commitments (FC) and Contingent Liabilities (CL) for PPPs. This work will potentially be led by the

Research and Risk Management Unit under the Debt Management Division (DMD) of MoFEP.

Currently the DMD produces a debt management strategy which assesses the risks of the debt

portfolio; the report is expected to also disclose PPP FC and CL. Additionally, this work will also

involve the Budget Division of MoFEP to assess PPP FC and CL against the Medium Term

Expenditure Framework (MTEF); and the Sector Medium Term Development Plans (SMTDP).

Furthermore this framework may expand to assess FC and CL against any another long term

investment planning vehicle (such as an infrastructure plan that may be developed under National

Development Planning Commission-NDPC. The work will additionally review and address the

legislative structure for reviewing FC and CL in general and for PPPs in particular, whether powers

are provided under current laws (such as under Debt management or Financial Administration

legislation) or will have to be stipulated under new PPP legislation.

12. Support to MoFEP to operationalise the Intra-Ministerial Policy Guideline that is to be drawn

up as in fulfillment of the new structural benchmark agreed under the current Extended Credit Facility

agreement with the ECF will be provided under this sub-component of the project. The guidelines

will cover coordination between the PID, the Debt Management Division and the Economic Research

and Forecasting Division in respect of: (i) debt sustainability and risk analyses, including risks

associated with explicit contingent liabilities such as guarantees on, inter alia, PPPs; (ii) establishment

of multi-year investment plans consistent with the Medium-Term Expenditure Framework (MTEF)

and the Public Debt Management Strategy (PDMS).

Sub-Component 1.5: On Supporting Long Term Financing for Infrastructure

(US$2 million):

13. This subcomponent will address capital markets development through providing Capacity

Building, TA and Equipment support to the following areas: (1) Government bond market

development with the main focus to build a liquid benchmark yield curve for government securities as

a basis for pricing nongovernment securities and mobilizing long-term savings; (2) Nongovernment

Bond markets - Legal and Regulatory Assistance: The main focus of this component will be to

recommend specific improvements to the regulatory frameworks for issuing and investing in non-

government bonds; (3) Transparency and Market Infrastructure: this component will address specific

improvements on the secondary trading of bonds; (4) Capacity Building: this component will entail

working closely with regulators and industry participants to increase their knowledge about fixed

income markets generally and to ensure their buy-in and commitment to implement the recommended

reforms; (5) Support to the Equity Markets. This component is complimentary to the efforts to

develop debt instruments to finance key sectors in the economy. The equity component (usually

private) is a key component of any infrastructure financing structure and work in this area will focus

on related PPP infrastructure aspects of equity markets. The proposed activities are in line with

FINSSP II and supported by the newly established Capital Market Development Committee

(composed of SEC, GSE, FSD of MoFEP, Legal of MoFEP, the CSD of BOG, and BOG Treasury

Department). The Box below provides more details on the proposed activities to be supported under

this work:

33

Box: Support to Capital Markets Development

(1) Government Bonds Markets

Development of roadmap for the development of both government and nongovernment securities. This will include

support to benchmark bond building and associated liability management.

Capacity building at the Debt Management Division, in particular in building a front and middle office functions,

essential for implementing a market driven debt strategy in the country.

(2) Nongovernment Bond markets - Legal and Regulatory Assistance

Evaluate the primary market issuance regime and recommend appropriate amendments to improve the overall issuance

regime. This will include new regulations to introduce a separate and more flexible framework for the issuance of

nongovernment bonds, particularly those targeting institutional investors. Additional there will be the need to improve

approval process through the capacity building of SEC.

Review the investment frameworks and investment guidelines which currently govern different institutional investor

segments (pensions and insurance) and propose recommendations that are more conducive to non-government bond

market development. Specific intervention will target the pensions sector.

Develop guidelines to regulate the commercial paper market given its significant potential as attested by volumes

outstanding, in the unregulated environment. The reason that the SEC banned the holding by intermediaries of

commercial paper is that commercial paper is not s defined security under the Securities Law. The SEC cannot

therefore issue guidelines or regulations. Relevant amendments are thus required.

(3) Transparency and Market Infrastructure

Advise on appropriate bond trading and settlement mechanism.

Advise on pre and post trade transparency for bonds and help develop trade reporting guidelines.

Support the inter-face between the CSD and National Payments System to facilitate Delivery versus Payments for

bonds.

(4) Capacity Building

General Public education and awareness programs – targeting policy markers, trade associations, financial journalists

and students

Build capacity and professionalize the local insdustry (brokers, dealers and fund managers) and of institutional investors

(pension funds, insurance companies and asset managers). This can involve supporting the implementation of

certification program for market participants, as a means of professionalizing the market. A project to do this has been

running for some time. The SEC is in the process of establishing a Securities and Investment Institute. The envisaged

Institute and its associated Resource Centre and Library will be positioned as a centre of excellence in Africa.

Build capacity of the key goverenment agencies involved (MoFEP including the Financial Sector Division & the Debt

Management Dffice, SEC , the BOG (Treasury department), GSE, NPRA and NIC ).

(5) Equity Market

Support the development of a private equity industry and promote financial innovation and creation of new products,

attracting new companies to list on the GSE and broadening the range of domestic and regional products and services

with a strong focus on equity, small cap, ―Collective Investment Scheme‖ (CIS), bond and commodity market

development. There are a range of initiatives (some 21) set out in the Capital Market Strategic Plan: from the

development of the GSE Index to promoting good corporate governance.

Support the SEC in developing a proper framework to guide the demutualization process given the significant public

interest the GSE represents in the economy.

Support SEC and GSE identify and implement an optimal solution that would increase access by SMEs to the market. A

second board would be an option. However, given the limited success this model has had globally, there would be need

to study other options.

Source: Background Technical Note on Capital Market Development in Ghana (2011)

14. Furthermore, and depending on the evolution of the PPP market in Ghana, particularly the

value of the project pipeline that develops and the lessons learned from the deployment of the FIL, the

GoG is also interested in assessing the merits of establishing an institution for Infrastructure

financing, as noted in the National Policy on PPP. In support of this policy objective, this component

will assist the GoG to undertake the relevant diagnostics to examine the modalities of potential

statutory long-term PPP infrastructure financing facility in line with the National Policy on PPP

objectives and international best practice, with due attention to the need for an appropriate pricing of

long-term credit, the potential crowding out private financiers, and governance concerns.

34

Component 2: PPP Pipeline Preparation and Transaction Advisory Support (US$18.5 million)

Sub Component 2.1: Support to First Mover PPP Pipeline (US$17 million)

15. This project component will support the development of an official pipeline of PPP projects,

with a subset of first mover transactions confirmed by the GoG. Consequently, the component will

provide resources for conducting detailed due diligence for particular PPP pipeline transactions to

ensure a market-credible project pipeline. This will include financing: (i) Investment Appraisal, VfM

and Pre and Full Feasibility Studies (PFS & FFS) preparatory work; (ii) Transactions Advisory

Services including related embedded specialist consultant services to assist MDAs and MMDAs to

manage and assess transaction advisory services; (iii) safeguards due diligence work; and (iv) market

outreach resources.

16. Following the approval of the National Policy on PPP, the PID with the relevant key

ministries outlined a list of potential first mover PPP transactions on which IDA could support the

GoG to undertake upstream investment appraisal and Value for Money (VfM) assessments. This

work will be undertaken in accordance with the National Policy on PPP for Pre Feasibility Study

(PFS) assessments which provide the basis for progressing PPP projects. Subsequent to satisfactory

outcome of the PFSs, transaction advisors will be retained to assist the MDAs in successfully bringing

the transactions to market and reaching commercial and financial close.

17. Only PPP projects that have been developed and competitively procured in compliance with

the National Policy on PPP and the Bank‘s Procurement Guidelines will qualify for World Bank

support under this project. The PID organized consultations with the key line ministries that were

prepared to collaborate with the PID to develop PPP initiatives meeting this eligibility criterion. As a

result of these consultations, a potential pipeline comprising six transactions has been identified, for

possible World Bank support under APL Phase I and Phase II. The total estimated investment value of

these projects is US$900 million. Noteworthy that the projects are divided into two tiers: Tier I

Projects: are first mover projects with high commercial viability to be supported under the PPP

Project. These will be pilot demonstration projects to showcase successful PPP transactions.

Structuring these deals well should attract enormous attention from world-class advisors, investors,

financiers, and other private sector participants for the pipeline of transactions to follow. Tier II

Projects: are projects requested by government to be considered for PPPs. They have potentially high

economic benefit but are not considered viable PPPs without significant government support. It is yet

to be assessed if the government support needed is above 50 percent of the project value, it such case

they may not be viable as PPPs. Noteworthy the IFC PPP Advisory team have conducted initial due

diligence on the potential of employing PPPs for transactions 6 and 7 below. The estimated cost of

this component is based on projects 1 to 7. (Annex 9 includes a copy of the letter from MoFEP outline

first mover PPP projects which are a subset of the projects below. However the Accra-Tema motor

way included in the letter should be excluded as per advice from government during the Appraisal

mission.)

35

Box: Summary of Possible PPP Transactions

The Oil and Dry Build Terminals: The inefficient methods of handling of manganese, bauxite and clinker in

the Port of Takoradi are expected to change substantially into modern and cost-effective methods and systems

after the construction of the bulk ore terminal. A berth water depth of 16m would facilitate larger sizes of dry

bulk vessels carrying higher volumes to and from the Port of Takoradi. For such kind of ships, port

infrastructure requires to be adapted, as well as the corresponding cargo handling equipment. It is expected that

companies involved in the trade of manganese, bauxite and cement (clinker) would participate in investing in

modern and state of the art equipment for loading and discharging, as well as for horizontal transportation. The

extent of expected investments and management adaptation could be achieved in an optimized manner recurring

to PPP instruments and is therefore recommended that the feasibility of such a venture should be studied into

details in the light of PPP options that may be available. It is also emphasized that the main operators and bulk

handling companies should be involved in this investigation. The Port Authority must ensure that these

operators understand the need to improve their ship/cargo operations and delivery levels. Operational data and

mines‘ prospects for future cargoes would also play important roles in the determination of the specific areas of

investment. Ultimately, the PPP ventures are expected to optimize the operations of the dry bulk operators for

the Port of Takoradi. The relevant studies would therefore explore the required framework - financial,

economic, institutional, physical, etc. – to ensure the feasibility of the venture(s).

The Container\Multipurpose Terminals: As part of the developments, there will be the need for a container or

multipurpose terminal for handling of containers and general cargo, increasingly expected in the context of oil

and gas related cargo shipped via the Port of Takoradi. The development of this terminal should be studied

regarding its viability as a PPP, and any additional capital cost requirements for the effective operation of the

port services. Preliminary estimates are in excess of US$200 million for physical structures including berthing

furniture, storage yards, utilities, but excluding cargo handling equipment and terminal management offices /

systems and other anticipated capital investments, including construction of a breakwater.

The Transit Cargo Sheds: The development of container and other general cargo terminals would require

Transit Cargo Sheds in economic proximity within the Port area. Such facilities provide the optimum buffer for

the discharge and temporary storage of cargo which enhances effective handling system and also facilitates the

turn-around times of vessels for improved port performance. A detailed study will identify optimized design

capacity and final location and accordingly, options of PPP structured business implementation shall be

designed upon.

Sector Name of Project Project Description Investment Cost ($) Studies &Transaction Advisory

Tier I Projects Tier I Projects

Port-Takoradi (1) Oil and Dry Bulk Terminals - Takoradi Greenfield 150,000,000 5,000,000

Port-Takoradi (2) Container\Multi-Purpose Terminals -Takoradi Greenfield 200,000,000 3,000,000

Port-Takoradi (3) Transit Cargo Sheds Greenfield 15,000,000 1,000,000

Airport (4) Kotoko-Accra Airport Rehabilitation &

Expansion 160,000,000 3,000,000

Tier II Projects Tier II Projects

Road (5) Accra-Takoradi Motorway Rehabilitation &

Expansion 340,000,000 3,000,000

Health (6) Tema Maternity Ward Rehabilitation &

Expansion 17,000,000 1,000,000

Health (7) Lab/Imaging for Kore Bu Hospital Greenfield 12,000,000 1,000,000

Health (8) Korle Bu Hospital Development Rehabilitation &

Expansion 500,000,000 To Be Determined

TOTAL 894,000,000 17,000,000

36

Kotoka-Accra Airport: The estimated cost of US$160 million amount would presumably suffice to build a

new terminal facility at Kotoka with a total annual capacity of approximately 2.5 million passengers/year.10

Financial and operational information provided by the Ghana Airports Company revealed that the Company,

which is relatively new (created in 2006) has benefited from the impact of increasing passenger traffic whose

volume at Accra Kotoka International Airport (i.e., in excess of 1.4 million passengers in 2010). GAC revenue

base, however, remains constrained by the current sharing arrangement of its main revenue source (i.e.,

Passenger Facility Charge - PFC) with Government. The latter receives 60 percent of PFC which, in 2009,

represented nearly 50 percent of all GAC revenues, or US$14 out of US$28 million. GAC current revenue base

cannot support the financing by a private operator of a major infrastructure investment at Kotoka International

Airport. This analysis would be reversed however if the Government were to decide that, as part of a PPP

scheme, 100 percent of PFC generated revenues at Kotoka International Airport would be made available to a

private operator. Taking such decision could require significant political leadership,

Accra/Takoradi Highway: the goal of the Ghana Highway Authority is to toll this road which, through tolling

revenues, would be dualized over its entire length. Right now, a small 10 km stretch outside Accra offers a

double lanes service in all directions (to Kasoa).11

Documentation presented by the Ghana Highway Authority

suggests that the current overall traffic along the road averages around 8,000 vehicles per day. This level of

traffic would imply a first year revenue base from tolling of approximately US$11 million and cumulative

revenue over ten years, assuming constant real term tariffs and a 10% traffic growth per year, of US$175

million. 12

This figure would need to be compared with an estimated cost of dualization and rehabilitation cost of

the road of US$340 million. This would infer a need for significant upfront financial support from the

Government to attract a private operator that would stand ready to upgrade the entire road length to a double

lane standard. Currently the team is awaiting new traffic data for the various segments of the road to review

these initial estimates of the project‘s viability.

Tema Maternity Ward: A PPP for the construction, equipping, capital financing and operation of a new 80-

bed maternity wing to replace the existing maternity facilities at Tema District Hospital in metropolitan Accra.

The project is expected to have several positive features: (a) there is an obvious need, the current facility is very

inadequate and demand is high; (b) maternal health is a high priority for the Government; (c) since Tema

already has a budget and National Health Insurance Agency (NHIA) reimbursements, a replacement wing would

be more fiscally affordable than a new district or regional hospital; and (d) while other regions are in greater

need than Greater Accra, we are more likely to attract bidders for a Tema transaction.

Korle Bu Hospital lab and diagnostic imaging services: The facility is expected to cover 150,000 lab tests

and 50,000 imaging tests annually and US$12 million in private investment mobilized (construction plus

equipment) impact indicators will be higher if Tema Hospital is added). These impacts will materialize three

years after project completion. Given that this hospital is the most important tertiary referral hospital in the

country, modern lab /imaging services are essential. We will also consider including lab/imaging services for

Tema, Accra University, and Kumasi in this transaction, if there is market interest and if it is logistically and

financially feasible.

18. Pre feasibility Studies will focus on: (a) Definition of project concept - a clear description of the project concept, including description

of policy context;

(b) Technical scope- description of the key technical parameters envisioned for the project;

(c) Needs analysis- high-level review of the project‘s commercial rationale, and analysis of the

demand for and desirability of the project;

(d) Cost estimation- preliminary project costing, including expected capital outlays,

environmental and social safeguards, and ongoing maintenance costs, as well as a discussion

of non-quantifiable costs;

(e) Preliminary assessment of social and environmental impacts of the project; and

10

The cost estimate of the new 1.5 million passengers/year terminal at Bamako is around US$100 million.

11 There is currently a government-run toll station in Kasoa. 12

Toll rate is assumed to be US$1.6 cents/km per car and US$4.8 cents/km for all other vehicles based on

current toll rate used for the Accra/Tema toll road with a traffic distribution of 70 percent for cars and 30

percent for other vehicles.

37

(f) Project traffic and revenue forecasting.

19. Development of a preliminary financial model to carry out the initial PPP screening to

determine which projects can support a tariff and which cannot (and capital grant and/or availability

payment/revenue guarantees options), and ultimately suitability for PPP execution. The financial

model will evaluate full project life costs, affordability limits, risks and their costs and optimal value-

for-money methods of delivery.

(a) The economic and financial conclusions deriving from the financial model, including

sensitivity analysis and reporting of standard financial and economic evaluation parameters

including post-tax Financial Internal Rate of Return (FIRR)

(b) Affordability analysis: Where a PPP concession scheme is found to be viable, including

indications of minimum Viability Gap Funding and/or operating subsidies, if appropriate,

required to attract private sector participation, along with justifications for such indications;

(c) Risk analysis: Preparation of risk register identifying all the reasonably foreseeable risks and

possible mitigation measures, and preliminary risk allocation among the public and private

sectors;

(d) Options analysis: If the project is found to be suitable for a PPP, presentation of the range of

technical, legal and financial options for structuring a PPP transaction for the project(s),

including key contract terms for the recommended option. If it is found to be not suitable,

evaluation of alternative options for meeting project objectives; and

(e) Implementation recommendations: If applicable, preliminary recommendations on proposed

approach to PPP tendering process, timetable, etc.

20. In order for the MDA Project Teams to effectively support the line ministries and other PPP

sponsoring MDAs within the GoG, embedded consultant expertise has been assessed to be required

for project preparation for a period of up to five years each. These embedded consultant experts will

assist the Project Delivery Teams to prepare the pre-feasibility work and ready the PPP transaction.

21. Full Feasibility Studies and Transaction Advisory Work: This will entail a range of due

diligence, building on the PFS preparatory work, and take a given PPP initiative to Full Feasibility

Study at which point the project will be submitted to the Steering Committee for its approval. The

transaction advisory team would then be expected to work with the GoG Project Management Units

(PMU) to take the project to market and complete actions necessary to bring the project to

commercial and financial closure. This will entail the following range of services:

(a) Project Management: Design of project workplan and timetable. Management of advisory

inputs, and overall management of the advisory team;

(b) PPP Structuring: Advisory on key issues, including concession term, payment mechanism and

tariff strategy, provision of passenger services, number of concessions and unprofitable assets,

risk allocation, labor issues, termination provisions, etc.

(c) Readiness for Market Assessment: Assessment of when the project is ready to be taken to

market.

(d) Market Sounding: Interaction with the local and international market to confirm decisions on

scope, timing and structure of the transaction, marketing the project broadly to the investor

and financier communities, interaction with potential private sector partners (possibly

including domestic and international road shows).

(e) Procurement: The Transaction Advisor is to provide all necessary support to the PMU for the

efficient and professional management of the bidding process.

22. Pre-qualification: The Transaction Advisor must design and administer a pre-qualification

Request For Qualification (RFQ) process with the intention of (i) ensuring that the GoG's exact

interest is communicated clearly to the market; (ii) determining the extent and nature of interest of the

private sector, and (iii) pre-qualifying a competitive number of qualified consortia in an equitable and

transparent way. The Transaction Advisor must prepare all the necessary RFQ documentation,

38

including advertising material, and set up and administer the process by which the PDT can pre-

qualify the parties.

23. Evaluation Plans: Preparation of RFQ and Request for Proposal (RFP) evaluation plans,

assistance with evaluation and preparation of evaluation reports. The Transaction Advisor must set up

a bid evaluation system and criteria; design a suitable bid process that will ensure comparable bids;

devise effective systems for communicating with bidders; inspire market confidence. If appropriate, a

system that allows for variant bids may be required.

24. RFP: The Transaction Advisor must prepare an RFP document in accordance with best

practices. The RFP must concisely set out, at minimum: output specifications; requirements for

compliant bids; the payment mechanism; the bid process; evaluation criteria; bidder communication

systems.

25. Negotiations with Preferred Bidder: Assistance in negotiations with one or more parties prior

to contract award. The Transaction Advisor must assist the PDT in final negotiations with the

preferred bidder. This will involve support in preparing suitable negotiations teams, categorizing

issues appropriately, developing timelines for completion, and planning negotiation tactics and

processes for reaching agreement. The Transaction Advisor must ensure that all commercial

agreements reached are incorporated into the financial, commercial and legal documentation.

26. Finance: The Transaction Advisors should provide financial advice both with respect to

financial markets as well as financial analysis and modeling. Specific tasks may include:

(a) Assistance with preparation of revenue/business cases and/or investment appraisal;

(b) Assistance on risk analysis and quantification of risk;

(c) Ensuring that the selected payment structure offers the optimum risk/reward balance;

(d) Development and management of financial model;

(e) Recommendations with respect to relevant procurement terms in light of current financial

market conditions;

(f) Providing detailed financial evaluation criteria;

(g) Assistance with reviewing financial proposals, including advising on the deliverability of

funding structures and review of bidders' financial models; and

(h) Providing advice on financial issues during negotiations with preferred bidder.

27. Legal: Review and analysis of existing legal and regulatory framework; preparation of project

Information Memorandum, Request for Proposals, Concession Agreement. Drafting and settling of

final contracts with Preferred Bidder; other more general advice, as required, for example, on issues

taxation, property, planning, environmental law, banking, competition law and intellectual property;

verification of bidder performance against any conditions precedent to financial close.

28. Technical: Provision of technical advice required for a successful procurement. Specific

tasks may include:

Review of technical due diligence and assessment of investments to be undertaken on track

rehabilitation, port extensions, locomotives, and rolling stock;

(a) Review of future investment and maintenance cost estimates;

(b) Advise on technical aspects of risk assessment;

(c) Assistance in the definition of output specifications and specific services to be provided under

the proposed concessions;

(d) Provision of technical assumptions to be used in financial analyses;

(e) Technical input for drafting of tender documentation; and

(f) Technical evaluation of bids, including capability of bidding parties.

29. Safeguard Work: In addition to the completed ESMF and RPF documents, Strategic

Environmental Assessment (SEA) will be prepared in the key sectors where there is a high probability

that the World Bank will be pursuing further investment support. Given existing sectoral

39

environmental work done to date in the transport and oil & gas sectors, it is anticipated that the SEAs

will initially focus on agriculture. Decisions on which SEA to take up will be made based on the long-

list of potential PPP projects to be supported under the project.

30. Market Outreach: This involves domestic, regional and international roundtable and road trip

events to engage with prospective private sector PPP investors and financiers related to sectors where

the government is prioritizing PPP initiatives or in regard to specific transactions.

31. Support for establishing a Project Development Facility (PDF): As noted in the PPP National

Policy, the GoG shall establish a PDF in line with the emerging PPP programs. The PDF shall operate

according to standard operating procedures and guidelines. The PDF, initially capitalized through

IDA funding under Component 2, shall finance upstream investment appraisal, value for money

assessments and other feasibility and safeguard studies. In addition, it shall support the financing of

transaction advisors for undertaking project and transaction structuring and implementation up to the

signing of the contractual arrangements with the private investor(s). Over the medium to longer term,

this may be a revolving fund with the third party costs being reclaimable from winning bidders in

some instances, particularly where projects reach financial close. Additionally this project component

will also support the GoG to design and mobilize domestic and donor funding for a Project

Development Facility (PDF).

Sub-Component 2.2: Support to Tier III PPP Projects ($1.5 million):

32. In addition to supporting full preparation of PPP transactions to market, in accordance with

the new PPP Policy, this sub-component of the project would also provide technical advisory support

to assist the GoG to manage the development and negotiation of existing PPP projects (Tier III

Projects). This includes many of the prospective PPP projects currently on an unsolicited bid track.

In this instance, the World Bank would support via the provision of technical advisory services to

government MDAs to assist in specific areas of project development and contract negotiation.

Examples of such projects include the current support provided to the Asutsuare Water project (see

box below), in addition to the Accra-Kumasi toll road that is recently under negotiation.

Box: Asustuare Urban Water Works PPP

The GoG is in the process of undertaking a PPP for urban water provision in the Accra and Tema metropolis.

The current proposed project consists of:

(i). A water treatment plant located downstream from the Kpong Dam on the Volta River and expected to

draw an estimated 0.1percent of the total water resources of the river. The facility will have two streams

with a total average project capacity of 360,000m³/day (180,000m³/day per stream) and a maximum

capacity of 432,000m³/day, developed in two phases, with the first stream coming on line in three years

and the second after a further two years – total of five years construction period.

(ii). A transmission system expansion involving 72 kms of pipelines from the water treatment plant in

Asustuare to distribution points in Accra and Tema, high pressure pumps, boosters and a terminal

reservoir of 35,000 m³.

The proposed project will be developed in phases - the First Stream Pipeline and the Second Stream Pipeline.

The water will be supplied to the Ghana Water Company, Ltd (GWC). GWC will be responsible for payments

under an off-take agreement to the concessionaire. Total project cost is estimated at €500 million, with a capital

cost component of approximately €410 million. The construction period is estimated to be five years. The power

supply will be sourced from the nearby Akosombo Hydropower plant. The Sponsor expects the water price to be

agreed in the concession agreement to be around €0.6 / m³, excluding energy cost (€0.7 / m³ with energy).

The current PPP arrangement is envisaged to be a 25 year concession post construction. Construction is

expected to last about five years. A Special Purpose Vehicle is envisaged to be established whereby Government

of Ghana (GoG) is to be a 40 percent shareholder of the SPV and the Developer is to hold the remaining 60

percent. A shareholders agreement will regulate the roles and responsibilities of the parties, granting full

construction and operational responsibilities to the Developer. Other contractual agreements have been

40

developed in draft form and include (a) the Shareholders Agreement, (b) the Concession and Support

Agreement, and (c) the Off-take Agreement.

The GoG is now in the process of reviewing these draft contractual agreements with the assistance of special

technical advisors to ensure proper risk allocation between the private and public parties and maximize the

project‘s fit into the larger sector development plan.

Component 3: Project Management and Monitoring & Evaluation - (US $ 1.5 million)

33. A Project Implementation Unit (PIU) will be established as to oversee the activities covered

under the two phases of the PPP Program. It will be staffed by seven professionals responsible for

financial management, procurement, monitoring and evaluation, capacity building, audit and overall

project coordination and outreach. Embedded consultants in the BOG and the Budget Division will

form project implementation teams to cover the further development work and start-up activities for

the VGS and FIL to be financed under Phase II (see Annex 3 for detailed implementation

arrangements). The PIU will maintain Program supervision and support these implementation teams

to follow proper monitoring and evaluation procedures.

34. This M&E team will also be responsible to prepare the Impact Evaluation Design and

Implementation Plan and commence the compilation of the baseline data required for the impact

evaluation. Specialized consultancies will be recruited as required to assist the PIU team in this aspect

of their assignment.

41

Annex 3: Implementation Arrangements


I. Project Administration Mechanisms

1. The lead implementing Agency will be the Public Investment Division (PID) within the

Ministry of Finance. The project will be implemented with support of a Project Implementation Unit

(PIU) that will be composed of seven positions: Project Coordinator & Outreach/Communication

specialist, Financial Management Consultant (FMC), Procurement Consultant (PC), Monitoring and

Evaluation (M&E) Consultant, Internal Auditor, Safeguard & Environmental Consultant, and

Capacity Building consultant. The Project Implementation Unit (PIU) will ensure that the operational

safeguards, procurement, disbursement, financial management, outreach and communications

requirements, monitoring, and reporting of the Project are implemented in accordance with the

Financing Agreement and in accordance with the Project Implementation Manual (PIM). The PIM

will describe in detail the general functions, core membership and terms of references, specific

responsibilities for team member, and other umbrella tasks that contribute to the implementation and

success of the country‘s PPP work. Asides the core members of the PIU, the PIU project will draw

upon independent consultants, along with a team of experienced technical advisors who will be

providing advisory services.

2. The PID will work closely with other Government partners with key responsibilities for the

implementation of the PPP Policy. This includes, in addition to other departments and divisions

within MoFEP, line ministries including Ministry of Health, the Ministry of Transport, the Ministry of

Roads and Highways, and the Ministry of Environment, Science and Technology. Other MDAs that

initiate a potential PPP transaction eligible for support under the credit may also come into the project

during the course of implementation. It also includes the Bank of Ghana which, will under the APL

Phase I project be developing its capacity to implement the FIL planned for the Phase II project, as

well as leading the due diligence to be carried out on prospective PFIs during this first phase program.

It is to be noted that the partner role to be performed by BOG will not entail any fiduciary

responsibilities during APL Phase I. These will remain the sole responsibility of PID.

3. The project will also entail close collaboration with other key World Bank agencies – namely

the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA)

and the World Bank Institute (WBI) to facilitate their technical, advisory and investment service

engagement in the GoG PPP Program.

4. Implementation of PPPs Based on the National Policy on PPP: The PPP Policy outlines

the roles of the various MDAs and MMDAs for the successful processing and implementation of a

PPP program. In general the various institutions will be supporting the following broad functions: (a)

PPP policy development, dissemination, monitoring and enforcement; (b) Individual project

sponsorship, design, preparation and execution; (c) Financial management of funded and contingent

obligations; (d) Gate-keeping and approval functions, and (e) PPP project advice, support and

promotion. See Boxes 1 and 2 below for the specific roles of the various institutions and the approval

of the PPP process as stipulated in the National Policy on PPP.

Box 1: Roles of the various MDAs in the PPP Process:

Ministry of Finance and Economic Planning (MoFEP) - PID: through its Public Investment Division (PID)

is spearheading the development of PPP and is responsible for developing the legal, institutional, and regulatory

framework for the PPP program. MoFEP is also responsible for the issuing of Standardized PPP provisions and

PPP Manual/Guidelines for effective management of PPP Projects. The PID of MoFEP through its PFA and

PAU act as gatekeeper and provide advisory services and support to MDAs and Contracting Authorities in the

public sector respectively. Their particularly roles are:

Project and Financial Analysis Unit: The PFA Unit shall serve as the secretariat to the PPP Approval

42

Committee and be responsible for the systematic coordination of all the different activities which would be

required as part of the gate keeping review and approval process. The specific functions under the PPP process

shall be to: (a) Screen PPP projects to ensure consistency with the National Infrastructure Plan (NIP) and

government policy; (b) Verify that the use of the PPP option is preferable and beneficial relative to direct public

investment; (c) Ensure financial viability and economic soundness; (d) Examine the robustness of PPP contracts

over the long term before they are signed; (e) Ensure compliance with good PPP procurement processes; and (f)

Oversee the management and compliance of PPP Agreements/Concessions.

PPP Advisory Unit: The PAU shall promote the flow of bankable and sustainable PPP projects that further the

National Policy on PPP. The PAU shall have the following responsibilities: (a) Provide advice and support to

the MDAs and other Contracting Authorities in the public sector to enhance the identification, preparation of

feasibility analysis, structuring, negotiations and procurement of PPP projects, (b) Build capacity among public

sector stakeholders, and MDAs, to enable them to lead the implementation of a PPP project from start to finish

in a professional and technically competent manner, (c) Promoting awareness and understanding of Ghana‘s

PPP program in order to encourage the use of PPP for selected appropriate projects; (d) Act as a centre of

excellence for PPPs in Ghana. (e) Provide assistance to MDAs and other Contracting Authorities that want to

promote PPPs and developing in collaboration with the PFA Unit, Model Agreements for that sector; (e) Assist

MDAs and other Contracting Authorities in understanding approval requirements for PPPs, and developing

necessary documents for review.

MoFEP- Debt Management Division: The Debt Management Division will ensure fiscal sustainability for PPP

projects, considering both direct and contingent liabilities on government‘s finances including guarantees,

arising from each PPP project. Specifically, the DMD will be responsible for: (a) Fiscal impact: assessing and

managing the long-term fiscal risks and impact of the PPP project (direct or contingent, explicit or implicit) and

determining whether it is acceptable, given other priority national needs; and (b) Government support:

confirming the appropriateness of the project for sovereign guarantees (debt or specific-event) or other kinds of

government support.

MoFEP- Budget Division: The Budget Division shall establish processes to incorporate PPP project

development into the annual budgeting exercise, and fund direct as well as contingent (unanticipated) calls on

the budget. The Division shall therefore ensure that any payments to be made by MDAs under the PPP contract

are consistent with the national budget.

PPP Approval Committee: A PPP Approval Committee shall be established for the purpose of considering

requests by contracting entities to undertake PPPs and shall be the approving authority for PPPs subject to the

provisions of the Approval Schedule to this Policy and detailed regulations to be promulgated. The members of

the PPP Approval Committee shall comprise but not be limited to the following: (a) Minister responsible for

Finance (in the Chair); (b) Chairman of the National Development Planning Commission (NDPC); (c) Minister

of Justice and Attorney General; (d) Minister of Trade and Industry, (e) Chief Executive of Ghana Investment

Promotion Centre, (f) Director of Public Procurement Authority and (g) Minister of the Contracting entity or

where there is no sector Minister, the Head of the contracting entity as co-opted member or their designated

representatives. The PPP Approval Committee shall be serviced by the PFA Unit of MoFEP which shall serve

as the secretariat to the Committee. The PPP Approval Committee may co-opt experts as necessary.

Ministry of Trade and Industry will facilitate the participation of SMEs in the PPP Process through the

promotion of indigenous Ghanaian enterprises through effective capacity building activities and creating

awareness in the SMEs.

Cabinet shall be the approving authority for PPPs subject to the provisions of the Approval Schedule to this

Policy and detailed regulations to be promulgated.

General Assembly of the MMDA through a formal session shall be the approving authority for PPP projects

carried out by MMDAs subject to the provisions of the Approval Schedule to this Policy and detailed

regulations to be promulgated.

Parliament shall be the final approving authority for PPP projects where PPP Projects require the approval of

Parliament subject to the provisions of the Schedule to this Policy and detailed regulations to be promulgated.

This is to ensure the protection of public interest.

National Development Planning Commission in collaboration with Contracting Authorities shall prepare the

43

National Infrastructure Plan (NIP). Every PPP project initiated by Contracting Authorities shall emanate from

this plan or the approved development plan of the Contracting Authority, if not; prior approval should be sought

from NDPC.

Government Contracting Entities: The implementing entities shall be the implementing Contracting

Authorities under GoG. MDAs, MMDAs and other contracting entities shall be required to develop capability in

PPP development with support from PAU. Where appropriate, Contracting Authorities, especially sector

Ministries shall be encouraged to set up Project Management Units (PMUs), particularly to assist in the project

identification, needs and options analysis, initial definition of PPP concept and PPP Contract Management,

Monitoring, Reporting and Evaluation.

Attorney-General’s Department with the assistance and advice of MoFEP‘s Legal Division shall ensure the

conformity of all project agreements with Ghanaian law.

Regulatory Authorities shall ensure that the PPP contract, insofar as it will have an impact on customer tariffs,

is consistent with and furthers good regulatory principles.

Source: Ghana National Policy on PPP (2011)

Box 2: PPP Approval Process based on the National Policy on PPP

44

II. Financial Management, Disbursements and Procurement

A. Financial Management and Disbursement

5. The proposed financing instrument is an Adaptable Project Lending (APL) to be implemented

in two phases; the current project is for Phase 1 to be implemented over a four year period. Thus the

focus of the FM arrangement is on the Phase 1, it is expected that by mid-term review the institutional

arrangements for Phase II will have been firmed up and a more detailed FM assessment for that phase

will be conducted. For an overview of the Phase II please refer to Annex 7 of the PAD.

6. In line with the guidelines as stated in the Financial Management Manual issued by the

Financial Management Sector Board on March 1, 2010 a financial management (FM) assessment was

conducted on the Public Investment Division (PID) of the Ministry of Finance and Economic

Planning (MoFEP) – the lead implementing entity of the activities to be financed under the Ghana

PPP Project. The objective of the assessment is to determine (a) whether the Project Implementation

Unit (PIU) that has been established within the PID has adequate financial management arrangements

to ensure project funds will be used for purposes intended in an efficient and economical way; (b) the

project‘s financial reports will be prepared in an accurate, reliable and timely manner; and (c) the

project‘s assets will be safeguarded.

7. The FM assessment also included a review of the (i) number and quality of financial

management staff at the Ministry that will have fiduciary responsibilities under the project; (ii) FM

organization structure of the Ministry and the PID and its impact on the internal control processes to

be employed under the project; and (iii) the proposed FM systems and processes to be established in

support of the implementation of the project.

8. The assessment of the financial management arrangements at the PID and MoFEP concludes

that there are adequate systems in place that satisfy the Bank‘s minimum requirements under

OP/BP10.02. However due to the lack of prior experience of PID in implementing IDA projects, and

also it being a newly created division, yet to have its full complement of fiduciary and technical staff,

the overall FM risk has been assessed as Substantial.

9. In line with the IDA default position of using country systems, this project will to the extent

possible adopt the full use of government systems for – budgeting, accounting, internal control,

financial reporting, and external audit. The project allocation will be budgeted as part of the GoG‘s

annual budget, and the periodic disbursements from the IDA will flow directly into the dedicated

sub-account of the consolidated fund of the GoG, i.e. Sub Consolidated Fund Account” (SCFA).

The reporting format will follow the government‘s standard chart of accounts classification and the

audit of the annual financial statements of the project will be integrated as part of the wider audit of

MoFEP, although these financial statements will show separately and in adequate detail the sources

and uses of funds under the PPP together with accompanying notes. The financial statements and

audit report shall be submitted to the IDA within six months of the end of the GoG‘s fiscal year.

10. In summary, the existing state of PFM systems and the direction and pace of ongoing

improvements (notably the IDA funded Government Integrated Financial Management Information

System (GIFMIS)) have fostered confidence and would enable significant reliance on country systems

in the areas of budgeting, budget execution (including accounting and internal controls), financial

reporting, and external auditing.

45

Country Issues

11. Ghana‘s fiduciary environment for utilizing both budgetary funds and donor funds is

considered adequate. Under the GIFMIS project funded by the Bank and other development partners,

Ghana is gearing itself up to embark on a comprehensive PFM reform that caters for, among others,

(a) systems-based good practice treasury management premised on a renewed set of in-built re-

engineered business processes; (b) adoption of a harmonized chart of account and budget

classification across the whole government, consistent with Government Finance Statistics 2001; (c)

refining the MTEF approach using a program-based budgeting approach rather than an activity based-

line item one; (d) revision of PFM related laws and regulations for full conformance with international

standards; (e) adoption of a Treasury Single Account for improved cash management; (f) maintenance

of system-based hard-budget constraints to avoid over spending and reinforce budget discipline; (g)

improvement in resource allocation and budget release predictability; (h) management of internally

generated funds within a single treasury account model; and (i) strategies to introducing a human

resources management information systems, with in-built establishment control, to manage personnel

costs.

12. Meanwhile a number of activities (revision of rules, business processes, and centralization of

treasury activities under the overall control of the Controller and Accountant General) will continue to

be carried out to soften the impact of the more serious PFM weaknesses before the full mitigation

effects are achieved.

13. Use of Country PFM systems will remain the default for Bank operations but full readiness is

expected upon the completion of the GIFMIS project. Selectivity will, in the meantime, prevail where

it is considered that an entity within the government has developed adequate PFM capacity to

implement the project without ring-fencing. As regards public procurement, Ghana is a pilot country

that is planned to be tested for transition to use of country systems in the medium term.

14. GoG has also demonstrated its commitment to continue its PFM reforms by developing more

efficient public financial management systems and ensuring transparency by strengthening state

oversight institutions including the Public Accounts Committee of Parliament which has recently been

holding public hearings on instances of financial irregularities and allegations of fraud and corruption.

Project Financial Management Arrangements

15. Given that the project‘s financial management arrangements will follow the country systems,

the Director of Finance of MoFEP will have overall financial management responsibility. The

responsibility of the Director is to ensure that throughout implementation there are adequate financial

management systems in place which can report adequately on the use of project funds. However in

carrying out this mandate, the specific day to day transaction processing and reporting will be

assigned to the Financial Management Consultant (FMC) recruited for the PIU and supported by a

Principal Accountant assigned from the Controller and Accountant General Department (CAGD). It is

expected that the FMC will be for an initial two year period, by which time the CAGD Principal

Accountant would have taken over fully all accounting responsibilities.

16. The Director of Finance with the assistance of the FMC and Principal Accountant will have

oversight responsibilities with regards to ensuring compliance with financial covenants such as

submitting Interim Unaudited Financial Reports (IFRs), maintaining internal controls over project

expenditure and engaging external auditors. The FMC will also be responsible for maintaining and

operating the project‘s designated account and make payments to contractors and service providers

and verifying and authorizing payments for all contracts and activities under this project.

46

Project Risk Assessment and Mitigation

17. This section presents the results of the risk assessment and identifies the key FM risks that the

project management may face in achieving project objectives together with the related risk mitigating

measures.

Table 1: Risk Rating Summary Table

Risk Risk

Rating

Risk Mitigating Measures/Remarks

Conditions for

Effectiveness/

Negotiations

Residual Risk

Rating

Inherent Risk

Country Level

Weaknesses in the effective use

of public funds, weak oversight

regarding transparency and accountability. Poor linkages

between strategic planning and

long term budgeting at the sector levels.

M Strengthening the role of the MMDAs in FM capacity building through ongoing reforms in the public financial

management.

No M

Entity Level ( MoFEP)

The ability of MoFEP and PID to effectively coordinate

implementation and get key

stakeholders (private sector) buy in. Weak institutional capacity

and legal framework within

MoFEP to undertake effective investment appraisal and oversee

PPP transactions.

Inadequate experiences in PPP

preparation and management

expertise across the sponsoring MDAs.

S New legislation on PPP to be developed as part of the

project objectives. The implementation arrangements include the establishment of key technical and

stakeholder committees. These committees will provide

ongoing strategic guidance and monitor the results of implementation progress towards outcomes.

Introduction of technical expertise into PID allayed to training of government staff to increase capacity to

assess prospective PPPs

Establishment of PPP Project Management Units in key

ministries and provision of extensive technical

assistance and capacity building to these units.

No

M

Project Level

Coordination during

implementation amongst the

different stakeholders and MMDA.

Lack of knowledge about IDA policies and procedures can

hamper smooth implementation.

Potential challenges in coordinating the role of MMDAs-

who will originate potential

PPPs.

Being the pilot projects to use the

full extent of country systems

poses an inherent risk on how

effectively the systems can be

relied upon.

S

TA and capacity building is a key component of Phase

I. Staff members to be trained on IDA policies and

procedures. Intensive IDA supervision to help identity and address weaknesses.

No

M

Overall Inherent Risk S M

Control Risk

Budgeting

Challenges in translating the

allocated funds into realistic time bound budgets with specific

activities and outputs.

Risk of cost overruns and adverse variations in expenditure due to

potential slow implementation.

S

Implementations challenges are expected to be

addressed through the various institutional hierarchies established for the project. The budget for the PID will

be part of the overall MoFEP budget which has to be

prepared in line with GoG timelines.

Budget execution to be monitored through quarterly

reports and IFRs by IDA.

No

M

47

Risk Risk

Rating


Conditions for

Effectiveness/

Negotiations

Residual Risk

Rating

Accounting

MoFEP uses manual and Excel

based systems and these have weaknesses in tracking funding

and expenditures from various

sources as well as in allocating expenditure.

Lack of familiarity with IDA

financial management requirements.

S

Excel will be used initially, followed by full migration

to the GIFMIS as soon as the new system becomes operational. The timeline for full implementation of

GIFMIS by MoFEP is in the second half of 2012.

However should there be any delay, the project may purchase a small application.

Accounts staffing capacity to be strengthened with the

recruitment of a qualified FMC on a two year contract.

No

M

Internal Controls

Risk of non compliance with internal control processes.

Possibility of weaknesses in GAC (transparency in processes)

particularly in procurement and

contract awarding/execution.

M

MoFEP/PID has a functioning Internal Audit Unit to help minimize risk. The GoG financial regulations and

manuals are adequate for operational control under the

project. These manuals document clearly the approval and authorization hierarchies applicable for processing

financial transactions.

Regular IDA supervision missions and reviews will help ascertain level of compliance.

No

L

Funds Flow

Non compliance with the IDA

requirements and procedures can pose a challenge to smooth funds

flow arrangements, thus undermining implementation

progress.

S

Use of government approved treasury and funds flow

processing should speed up cash-flow.

Training to be provided to core accounts staff on IDA

requirements and the processes documented as part of the PIM.

No

M

Financial Reporting

Delays in processing and

submitting IFRs and other

progress reports.

S

Training to be provided to core accounts staff on IDA

requirements and the processes documented as part of

the PIM.

No

M

Auditing

The risk that audits will not be submitted on time to ensure

compliance with covenants.

MoFEP/PID is audited by the GAS and their scope of work and

timing may be different and this

may lead to delays in adhering to the financial covenant dates.

S

An arrangement will be reached with the GAS to complete and report on the audit of MoFEP/PID within

the defined timeframe‘. However where this is not

feasible due to work load challenges of the GAS, then alternative arrangement will be made using private

firms appointed by the GAS to audit project specific

transactions.

No

M

Overall Risk Rating S M

H – High S – Substantial M – Moderate L – Low

Strengths and Weaknesses of the Financial Management System

18. The assessment concludes that there are adequate systems in place at MoFEP that satisfy the

Bank‘s minimum requirements under OP/BP10.02. However, since the PID is a newly created outfit

and yet to have it full complement of fiduciary staff, the effectiveness of these systems will be better

evaluated during implementation.

19. From the FM perspective, the key strength of the project is that it will be implemented under

the auspices of MoFEP/PID which is technically well resourced in accounting and financial

management. In addition, the Ministry of Finance has well established procedures to ensure sound

internal control environment.

20. A possible weakness could arise from the inherent risk associated with newly created units

coupled with the lack of adequate experience and knowledge of IDA procedures. This risk is

primarily being mitigated through the competitive recruitment of an FMC and also by regular

48

supervision and interactions with the client to ensure that reliable and complete reporting on funds use

can be provided. Other fiduciary weaknesses will be addressed through training of the PIU staff.

Time Bound Action Plan

21. The action plan below indicates the actions to be taken for the project to address the

weaknesses that have been identified to ensure the FM system is robust and strengthened. Some of

these activities and actions have been completed during project appraisal and others will be completed

prior to credit effectiveness and these will be monitored on an ongoing basis during implementation.

Table 2: Action Plan

Action Date due by Responsible

viii. Recruit a Financial Management Consultant No later than 30 days after

the Effectiveness Date.

PID/MoFEP

ix. Assign a Project Accountant from CAGD Completed PID/CAGD

x. Assign a Project Internal Auditor from CAGD Completed

xi. Prepare a comprehensive initial twelve months budget

on the use of funds

Completed PID/MoFEP

xii. Preparation of a Project Implementation Manual Effectiveness Condition PID/MoFEP

xiii. Installed a computerized accounting and financial

management system for the Project

No later than six months

after the Effective Date

PID/MoFEP

xiv. Conduct financial management and procurement training At the start of the project IDA

Summary Financial Management Assessment

22. A summary of the key finding of the financial management assessment is presented as

follows:

Budgeting Arrangements

23. MoFEP/PID follows the budget preparation guidelines as per the Financial Administration

Act (2003), the Financial Administration Regulation (2004) and also the annual budget guidelines

issued by the Ministry of Finance. Specifically for this project, it is expected that, prior to the start of

the budget cycle, the Project Director/Head of PID will have discussed with IDA the work plan,

procurement plan etc for the coming year which will serve as input for the budget.

24. The overall budget will be determined between the GoG and the IDA whilst the annual

budgeting will be done in line with the Government‘s existing budget framework and timetable

(MTEF/Budget calendar) as part of the regular budget submission of MoFEP/PID. The budget line

under which the funds will be allocated for the project should be clearly identified and reported upon

as part of MoFEP/PID Budget allocations under a sub-budget category. This will ensure that the

principles of ‗aid on budget‘ are observed for this operation.

25. Approved budgets will then be submitted to the IDA for reference purposes. The current

budgetary control processes used mostly for the Government‘s discretionary budget are capable of

monitoring commitments and outstanding balances and this helps to reduce risk of multiple payments.

In addition, the Bank approved PIM will outline the budgetary processes for preparing the Annual

Work Plans. The assessment indicates that budgeting processes are satisfactory and can be relied upon

to reflect the various components to be implemented.

Accounting Arrangements

26. The Director of Finance at MoFEP/PID will be responsible for overall fiduciary aspects of the

Project. The director, a staff of CAGD, is a qualified chartered accountant with relevant years of

49

experience, having worked at different MDAs within the government service. Though the Director

has overall oversight, the daily operational accounting function will be handled by the Financial

Management Consultant (incremental staff) and Principal Accountant. It is envisaged that the FMC

will be recruited for an initial two year period to help in setting up effective systems and train the

GoG assigned accounts staff who will subsequently take over project accounting function.

27. Accounting and financial reporting for the proceeds of the credit will follow the existing GoG

accounting policies and rely on the existing systems including the GoG Chart of Accounts, internal

approval processes, payment vouchers, and authorization limits etc. Initially, until such time that the

GIFMIS becomes functional, the project‘s accounting function, will be done through the use of the

existing manual system already in use at MoFEP/PID. As part of the implementation readiness, IDA

will organize financial management training programs for all project staff.

Internal Control and Internal Auditing

28. In line with the decision to adopt the Country Systems (CS) for implementation, the project‘s

internal controls will rely on the government established accounting and internal control guidelines as

documented in the Financial Administration Act (2003) and the Financial Administration Regulation

(2004), and informed by the Internal Audit Agency Act (2003).

29. In addition the controls will follow the authorization and approval processes as per the

internal control guidelines issued by Internal Audit and Procurement Unit of MoFEP. MoFEP/PID

has a functioning internal audit unit which helps to ensure a sound control environment for transaction

processing. Recent audit reports on MoFEP/PID did not indicate any material weaknesses. Our

assessment indicated that the internal audit and control environment is adequate for project

implementation; the role of the internal audit will be regularly assessed during supervision missions

by reviewing their reports and management responsiveness to their findings. This is to ensure that the

role is not limited to transactional reviews (pre-auditing) but adds value to the overall control

environment.

30. With regards to issue of governance and corruption, the outline of the implementation

arrangements, the oversight role of MoFEP, coupled with the use of IDA fiduciary procedures should

help to minimize or prevent any instances of fraud and corruption.

Funds Flow and Disbursement Arrangements

31. The proposed financing instruments is an APL to be implemented in two phases; the current

project (and FM assessment) is for Phase I estimated at US$30 million to be implemented by

MoFEP/PID over a four year period. In line with using the country‘s systems, all funds for the project

will be transferred by IDA through the Central Bank/Bank of Ghana to the Ministry of Finance/PID to

support implementation. On receipt of the funds, the BOG will within ten working days notify

MoFEP of the funds and MoFEP will subsequently advice PID.

32. Funds for the project will be operated via a designated account which will be part of the GoG

consolidated funds (sub consolidated account), and the account shall be denominated in US$. This

account is not a traditional Designated Account but rather part of the Government consolidated fund

and should be reported upon as such and rolled up to the Consolidated Fund Account being held by

MoFEP Treasury. The GoG, through the Bank of Ghana, shall ensure that upon the deposit of the

credit into the said sub-consolidated account, an equivalent amount in local currency is automatically

credited (notionally) in GoG‘s budget management system and allocated to MoFEP/PID in line with

Ghana‘s established procedures. Notwithstanding the above banking arrangement, on a periodic basis

the BOG will provide a statement of receipts and payments into the account and this will part of the

supporting documentation for replenishment.

50

33. The signatories to MoFEP/PID account will be (i) the Chief Director (MoFEP) or the Director

of PID or (depending on the value of transaction), (ii) the Director of Finance (MoFEP) and (iii) the

Director of Budget or Head World Bank Desk.

34. The proposed processing for accessing the funds as transferred to the Bank of Ghana is

summarized as follows:

On notification by BOG of receipt of transfers by the IDA and paid into the

Consolidated Funds Account (CFA), the Project Director (PID) sends a request through

the Director of Budget requesting for funds.

Director of Budget requests the approval of the funds release from the Minister of

Finance.

Upon approval by the Minister, a ―funds release letter‖ is issued to the Controller.

Controller signs the warrant together with a Bank Transfer Advice (BTA) - the BTA

indicates the particular account with the BOG that would serve as the transaction

account for the project - in this case the Sub Consolidated Fund Account (MoFEP PID

Account).

35. Once the above processes are completed and funds are received into the Sub Consolidated

Fund Account (SCFA), the funds will be available for use by the Project for payment of eligible

expenditures.

36. Disbursement arrangements and use of funds. Proceeds of the facility will be used for

eligible expenditures as defined in the Financing Agreement. Disbursement arrangements have been

designed in consultation with the Recipient after taking into consideration the assessments of

MoFEP/PID‘s financial management and procurement capacities, the procurement plan, cash flow

needs of the operation. For reasons of flexibility and simplification, for each component of the project

(as per the PAD or FA) a single disbursement category shall be established e.g.: Goods, consultancy,

civil works training under Part A etc rather than the traditional specific categories for Goods, Works,

Training.

37. Based on the assessment of financial management, the proceeds of the credit will be disbursed

to the project using report based documentation procedures (Interim Financial Reports). Subsequent

replenishments of the Designated Account (DA) would be done quarterly based on the forecast of the

expenditures for the subsequent six months less the balance in the DA after the previous quarter, and

on duly approved withdrawal applications submitted by the PIU and supported by Interim Financial

Reports (IFRs). Additional instructions for disbursements have been provided, during negotiations, in

a disbursement letter issued by the Bank.

Financial Reporting Arrangements

38. Financial reporting under the PPP will follow the current GoG GFS-compliant Chart of

Accounts and other reporting templates and formats as in use at MoFEP/PID. Even though the project

is adopting the country systems, it is expected that the project should be able to generate adequate

project specific financial reports as bi-products of the reporting system in use. The FMC/Principal

Accountant acting on behalf of the Director of Finance will be required to prepare and submit separate

quarterly Interim Unaudited Financial Reports (IFRs) to account for activities funded under the

project. IFRs for the project are expected to be submitted not later than 45 days after the end of each

calendar quarter. The financial reports will be designed to provide relevant and timely information to

the project management, implementing agencies, and various stakeholders monitoring the project‘s

performance. The formats and content of reporting have been agreed during negotiations.

51

Auditing

39. In line with its mandate as per the Ghana Audit Service Act (Act 584), the Auditor General is

solely responsible for the auditing of all funds under the Consolidated Fund and all public funds as

received by government ministries, agencies and departments. In this regard, and consistent with the

use of country FM systems for the GIFMIS component, the Ghana Audit Service (GAS) will conduct

the audit of the project‘s financial statements and furnish copies to IDA within six months of the end

of each fiscal year of the GoG, that is by June 30 each year. The capacity of the GAS is considered

satisfactory. As is the practice, due to capacity constraints, it is usual for the Auditor General to

subcontract the audit of donor funded project to private firms. Under the project, this arrangement will

be followed subject to the Bank‘s clearance of the terms of reference (TOR) for the engagement of the

audit firm. The appointment of private audit firms on behalf of the GAS is to ensure that there are no

delays in meeting the financial covenants for submission.

Conclusion of the Assessment

40. A description of the project‘s overall financial management arrangements above indicates that

they satisfy the Bank‘s minimum requirements under OP/BP10.02. The assessment of the financial

management arrangements at the PID and MoFEP concludes that there are adequate systems in place

that satisfy the Bank‘s minimum requirements under OP/BP10.02. However due to the lack of prior

experience of PID in implementing IDA projects and also it being a newly created department, yet to

have its full complement of fiduciary and technical staff, the overall FM risk has been assessed as

Substantial.

Supervision Plan

41. Based on the risk rating of the project and the current FM arrangement, it is expected that in

the first year of implementation there will be two onsite visits to ascertain adequacy of systems and

how effective the country systems are being used to support implementation. The FM supervision

mission‘s objectives will include ensuring that strong financial management systems are maintained

throughout project tenure. In adopting a risk-based approach to FM supervision, the key areas of

focus will include assessing the accuracy and reasonableness of budgets, their predictability and

budget execution, compliance with payment and fund disbursement arrangements, and the ability of

the systems to generate reliable financial reports.

Indicative Financial Management Arrangements for APL Phase II

42. As stated earlier, the current project focuses on the Phase I of the APL for which the detailed

FM Assessment has been conducted. This section presents a high level summary of proposed funds

flow arrangements for the Phase II; the outline is only indicative and it is expected that prior to the

start of Phase II a more detailed assessment will be done. Detailed outline of APL has been included

under Annex 7 of the PAD.

B. Procurement

B1. General

43. Applicable Guidelines: Procurement will be carried out in accordance with the World Bank‘s

documents "Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD

Loans and IDA Credits & Grants by World Bank Borrowers" dated January 2011; (ii) "Guidelines:

Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World

Bank Borrowers‖ dated January 2011, and the provisions stipulated in the Legal Agreement; and (iii)

―Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans

and IDA Credits and Grants‖, dated October 15, 2006, as revised in January 2011, and the provisions

52

stipulated in the Legal Agreement. The general description of various items under different

expenditure categories is presented below. For each contract to be financed by the Credit, the different

procurement methods or consultant selection methods, the need for prequalification, estimated costs,

prior review requirements, and time frame have been agreed between the Borrower and IDA project

team in the Procurement Plan. The Procurement Plan would be updated at least annually or as

required to reflect the actual project implementation needs and improvements in institutional capacity.

Procurement Arrangements

44. The proposed operation will use an IDA Adaptable Program Loan (APL) instrument with two

phases that also incorporates a Financial Intermediary Loan (FIL) sub-component in the second

phase. Phase I is valued at US$30 million while Phase II estimated at US$195 million.

Phase 1

45. Procurement of Goods: Goods procured under this phase of the APL Program will include:

computers, office equipment/furniture, vehicles, ICT- related goods, etc. Procurement will be done

using the World Bank‘s SBD for all ICB and National SBD agreed with or satisfactory to the World

Bank. All the goods required by the participating Ministries and Agencies will be packages together

and centrally procured by the PIU created under MoFEP-PID to achieve greater economy using the

ICB, NCB or appropriate procedure in line with the Procurement Plan. Contracts for goods estimated

to cost US$500,000 equivalent or more per contract shall be procured through ICB. Contracts

estimated to cost less than US$500,000 but equal to or above US$50,000 equivalent per contract may

be procured through NCB. Contracts estimated to cost less than US$50,000 equivalent per contract

may be procured using shopping procedures in accordance with paragraph 3.5 of the Procurement

Guidelines and based on a model request for quotations satisfactory to the Association. Such goods

will normally include readily available off the shelf items that cannot be grouped or are standard

specification commodities. Direct contracting may be used in exceptional circumstances with the prior

approval of the Bank, in accordance with paragraph 3.7 and 3.8 of the Procurement Guidelines.

46. Selection of Consultants: Consultancy services for both individuals and firms will be

procured to provide support to activities under the Program. Services to be procured under this project

would include but are not limited: (i) the selection of consultants (transaction advisory services ,

hiring of sector specialists etc); (ii) Outline Business Case preparatory work; (iii) safeguards due

diligence work; and (v) Preliminary engineering designs.

47. (a) Firm – Consultancy services would be selected using Request for Expressions of Interest,

short-lists and the Bank‘s Standard Requests for Proposal, where required by the Bank‘s Guidelines.

The selection method would include Quality and Cost Based Selection (QCBS) whenever possible,

Quality Based Selection (QBS), Fixed Budget (FBS), Least Cost Selection (LCS), Single Source

Selection (SSS) as appropriate. Unless agreed to otherwise by the Bank, external auditors will be

selected through LCS in accordance with Para. 3.6 of the Consultant Guidelines.

48. (b) Individual Consultants - Specialized advisory services would be provided by individual

consultants and will be hired in accordance with the provisions of paragraphs 5.1 to 5.5 of the

Consultant Guidelines.

49. Assignments estimated to cost the equivalent of US$200,000 or more would be advertised for

expressions of interest (EOI) on the Bank‘s Client Connection or Operations Portal and in United

Nations Development Business (UNDB) online, in addition to respective local newspapers of wide

national circulation and Ghana Public Procurement Authority‘s website. In addition, EOI for

specialized assignments may be advertised in an international newspaper or magazine. In the case of

assignments estimated to cost less than US$200,000, but more than US$100,000, the assignment

would be advertised nationally and the shortlist of firms composed entirely of national firms in

accordance with the provisions of paragraph 2.7 of the Consultant Guidelines provided a sufficient

53

number of qualified national firms are available and no foreign consultants desiring to participate has

been barred. For all contracts to be awarded following QCBS, LCS and FBS, the Bank's Standard

Request for Proposals will be used.

50. Procedure of Single-Source Selection (SSS) would be followed for assignments which meet

the requirements of paragraphs 3.8-3.11 of the Consultant Guidelines and will always require the

Bank's prior review regardless of the amount. Procedures of Single-Source Selection of Individual

Consultants (IC) would be followed for assignments which meet the requirements of paragraph 5.6 of

the Consultant Guidelines.

51. The use of civil servants as individual consultants or a team member of firms will strictly

follow the provisions of Article 1.9 to 1.11 of the Consultant‘s Guidelines.

52. Capacity Building, Training Programs, Workshops, etc.: Training and capacity building

activities would include the development of procurement capacity in MoFEP-PID and the relevant

line Ministries to enhance their capability to review the eligibility and compliance with procurement

process of subprojects funded through the sub-loans provided by the FILs, workshops, study tours,

seminars, conferences and on the job training. All training and workshop activities would be carried

out on the basis of approved annual programs that would identify the general framework of training

activities for the year, including: (i) the type of training or workshop; (ii) the personnel to be trained;

(iii) the selection methods of institutions or individuals conducting such training; (iv) the institutions

which would conduct the training; (v) the justification for the training, how it would lead to effective

performance and implementation of the project and or sector; and (vi) the duration of the proposed

training; (vii) the cost estimate of the training. Report by the trainee upon completion of training

would be required.

53. Operating Costs: Operating Costs financed by the project are incremental expenses arising

under the Project, and based on Annual Work Plans and Budgets approved by the Association. Such

costs may include office rent and maintenance; utilities (including electricity, water and gas),

communications (including telephone and internet charges); equipment rent, operation and

maintenance; office materials and supplies (stationary and other consumables, but not the purchase of

equipment); lease of vehicles, operation, maintenance and repair; and travel cost and transport of the

staff associated with project implementation. These items will be procured by using the implementing

agencies‘ administrative procedures, which are reviewed and found acceptable to the Bank. The

procedures for managing these expenditures will be governed by the Borrower‘s own administrative

procedures, acceptable to the Association.

54. Advertising procedures: In order to get the broadest possible interest from eligible bidders

and consultants, a General Procurement Notice (GPN) will be prepared by each participating country

and published in United Nations Development Business online (UNDB online), on the Bank’s external

website and in at least one national newspaper, or technical or financial magazine of wide national

circulation in the Borrower’s country, or a widely used electronic portal with free national and

international access; after the project is approved by the Bank Board, and/or before Project

effectiveness. The borrower will keep a list of received answers from potential bidders interested in

the contracts.

55. Specific Procurement Notices for all goods and works to be procured under International

Competitive Bidding (ICB) and Expressions of Interest for all consulting services to cost the

equivalent of US$200,000 and above would also be published in the United Nations Development

Business online (UNDB online), on the Bank’s external website, and the widely circulated national

newspapers. For works and goods using NCB, the Specific Procurement Notice (SPN) will be

published in widely circulated national newspapers in the country that is procuring for such works and

goods.

54

56. NCB and other post review contracts shall be published in national gazette or on a widely

used website or electronic portal with free national and international access within two weeks of the

Borrower‘s award decision and in the same format as in the preceding paragraph.

57. Exceptions to National Competitive Bidding Procedures. The procurement system of the

Borrower, including Standard Bidding Document, has been assessed and found to be, a large extent,

acceptable. In the light of this, for Goods and Works procurement under National Competitive

Bidding, the Borrower may follow its own national procedures that are governed by the Ghana Public

Procurement Act 663 of 2003 after incorporating the following exceptions: (a) foreign bidders shall

be allowed to participate in National Competitive Bidding procedures; (b) bidders shall be given at

least one month to submit bids from the date of the invitation to bid or the date of the availability of

bidding documents, whichever is later; (c) no domestic preference shall be given for domestic bidders

and for domestically manufactured goods; and (d) in accordance with paragraph 1.14 (e) of the

Procurement Guidelines, each bidding document and contract financed out of the proceeds of the

Grant shall provide that: (i) the bidders, suppliers, contractors and subcontractors shall permit the

World Bank, at its request, to inspect their accounts and records relating to the bid submission and

performance of the contract, and to have said accounts and records audited by auditors appointed by

the World Bank; and (ii) the deliberate and material violation by the bidder, supplier, contractor or

subcontractor of such provision may amount to an obstructive practice as defined in paragraph 1.14

(a) (v) of the Procurement Guidelines.

Phase II

58. The following procurement procedures will apply for financing under the program and sub-

loans provided by the Phase 2 Financial Intermediary Loan (FIL) and Viability Gap Scheme (VGS).

59. Procurement under PPP and Similar Private Sector Arrangements: In Phase II, contractual

arrangements for public-private partnerships (PPPs) under Component 3 will be awarded under the

project to private sector partners through a competitive selection process. A total of about US$195

million will be awarded in accordance with the provisions of paragraphs 3.14 and 3.15 of the

Guidelines for Procurement under IBRD Loans and Credits issued by the World Bank in January

2011. Since the Bank does not have standard bidding documents for this type of procurement, the

Bidding Documents will be prepared by the Borrower in consultation with the Bank and must be

satisfactory to the Bank. In this regard, the following types of procurement will be eligible for Bank

financing and, therefore, applicable to sub-loans provided to the beneficiaries by PFIs and funds from

the VGF. Detailed descriptions and procedures of PFI and VGF are found in Annex 7 of this PAD.

60. Procurement arrangements accompanying the APL Phase II Program may occur under the

following scenarios and would be further elaborated in detailed procurement arrangements and the

Procurement Plan in the preparation for approval of the APL Phase 2 Program.

(i) The concessionaire or entrepreneur under a BOO/BOT/BOOT or similar type of contract

shall be selected by the Borrower under open competitive bidding procedures determined

acceptable by the Bank, as spelt out in paragraph 3.14 of the Bank Guidelines, and may

include several stages in order to arrive at the optimal combination of evaluation criteria, such

as the cost and magnitude of the financing offered, the performance specifications of the

facility offered, the cost charged to the end user, other income generated for the

concessionaire or entrepreneur by the facility, and the period of the facility‘s depreciation.

The said concessionaire or entrepreneur selected in this manner shall then be free to procure

the goods, works, and consulting and non-consulting services required for the facility from

eligible sources, in accordance with established private or commercial practices. The

Borrower and the concessionaire shall agree on and specify the types of activities and

expenditures to be incurred by the said concessionaire or entrepreneur towards which Bank

financing will apply.

55

(ii) If the said concessionaire/entrepreneur has not been selected in the manner set forth under

paragraph 3.14(a) of the Bank‘s guidelines and restated in (i) above, then the procurement of

goods, works, and services required for the infrastructure facility and to be financed by the

World Bank will be conducted by the concessionaire/entrepreneur in accordance with the ICB

procedures of Section II of the World Bank‘s guidelines referred to above;

(iii) If the entrepreneur whose Sub-project is to be financed by the Bank through the FIL is a

private-sector enterprise or any of the other types of enterprises specified in paragraph 3.13 of

the World Bank‘s guidelines referred to above, then the entrepreneur may undertake the

procurement of goods, works, and services from eligible sources, in accordance with

established private or commercial practices. Such commercial practices of the entrepreneur

should be compatible with the Procurement Principles in order to be deemed acceptable by

the World Bank. Even in this case, the purchase of large single items or cases where large

quantities of like goods can be group together for bulk purchase, ICB method of procurement

will be used. The procedures acceptable to the Association to finance contracts procured by

Concessionaires using their own procedures are detailed in the Project Implementation

Manual.

Procurement Principles Applicable to Commercial Practices

61. Procurement principles application to commercial practices will require that:

(a) All procurement actions be based on economy and efficiency, i.e., value for money,

with due consideration toward the promotion of sustainable and competitive markets.

(b) Transparency to the maximum extent possible and consistent with achieving sound

procurement results are a key component of the applied procedures.

(c) Procurement procedures be effective and provide for a wide range of modalities, including

competitive bidding, prequalification for critical processes, single-sourcing, etc.

(d) Competitive bidding is based on bidding documents that explicitly identify all bidding

requirements, bid evaluation criteria, and contract award criteria.

(e) The contract documents define the rights and obligations o f the contracting parties, as

well as the remedies available to them in case of disputes and nonperformance.

(f) Bidding documents require potential contractors, suppliers, or service providers to

disclose actions or temporary suspensions imposed on them by the Association.

The above principles must be well documented and included in the Project Implementation Manual.

In addition to the above, the document should include mandatory provisions that beneficiaries of the

loan shall not award contracts to close relatives or affiliates. The document shall define the main

responsibilities of financial intermediary institutions (or other designated agencies) such as: (a)

assessing the capacity of the beneficiaries to carry out procurement efficiently; (b) approving

acceptable plans for goods, works and services as may be applicable; (c) agreeing to supervision and

oversight arrangements under each sub-loan (consistently with the provisions under the Bank loan) for

the procurement to be carried out by the beneficiaries so as to ensure compliance with the agreed

private sector methods and commercial practices under the sub-loans; and (d) maintaining all relevant

records for the Bank‘s post review and audits when requested. The financial intermediary or its

designated agency should satisfy itself with the reasonableness of the price of contracts awarded by

the beneficiaries, if necessary through the hiring of an independent entity or auditors.

B2. Assessment of the Agency’s Capacity and Risks to Implement Procurement

62. Institutional Responsibilities for Procurement: Procurement activities will be carried out and

coordinated by the Project Implementation Unit (PIU) to be set up within the Public Investment

Division (PID) of the Ministry of Finance (MoFEP). The PIU will be adequately staffed with a

Procurement Specialist with special technical skills in negotiations and understanding in large

consultancy contracts and a PPP Specialist who would provide technical support to procurement as

well. Relevant MDAs under close supervision and coordination of the PIU will manage the PPP

56

process under Phase 2 of the APL. Within the first year of Phase II activities, the procurement

capacity assessment of the MDAs shall be conducted and detailed finding reflected in Phase II

preparatory work. The MDAs are also staffed with the relevant specialists but will require capacity

building in the area of procurement processes to improve their efficiency.

63. Capacity Assessment: An assessment of the capacity of MoFEP/PID to implement

procurement for the Project was carried out in accordance with the Procurement Services Policy

Group (OCSPR) guidelines dated August 11, 1998, and the newer Procurement Risk Assessment &

Management System (P-RAMS). The objectives of the assessment were to (a) evaluate the capacity of

the executing agency and the adequacy of procurement and related systems in place, to administer

procurement; (b) assess the risks (institutional, political, organizational, procedural, etc.) that may

negatively affect the ability of the agency to carry out procurement; (c) develop an action plan to

address the deficiencies detected by the capacity analysis and to minimize the risks identified by the

risk analysis; and (d) propose a suitable Bank procurement supervision plan for the project compatible

with the relative strengths, weaknesses and risks revealed by the assessment. P-RAMS organize the

assessment into 11 risk factors that relate to controls at the level of the Implementing Agency (i.e.

MoFEP/PID).

64. The capacity assessment observed that the PID has no procurement experience of IDA/World

Bank -funded projects, and no capacity for the large volume of consultant services procurements. The

project appraisal mission has therefore recommended the strengthening of the Department‘s

procurement capacity by the recruitment of a Senior Procurement Specialist experienced on both

IDA/World Bank funded project and consultant services procurement procedures for the Project

Implementation Unit (PIU).

Procurement Risk Assessment and Mitigation

65. This section presents the results of the risk assessment and identifies the key procurement

management risks that the Project may face in achieving project objectives together with the related

risk mitigating measures.

Table 3: Action plan to strengthen capacity and mitigate procurement risks

Risk Description Risk

Rating


Responsibility Due Date

Low level of knowledge

about IDA procurement

policies and procedures,

and in particular

procurement of

consultant services,

could hamper smooth

implementation.

H

Recruit a suitably-qualified Procurement

Specialist with special technical skills in

negotiations and understanding in large

consultancy contracts for one year initially, with

renewals upon satisfactory performance for up to

four years.

Preparation of Project Implementation Manual

with a section on procurement, detailing out

instructions for handling procurement and

clarifying that Bank Guidelines should be

followed in case of conflict between National

Procurement Law and the World Bank Guidelines

and the Financing Agreement. This should be

disseminated to all staff involved in the project

implementation at project launch.

PID/MoFEP

30 days after

effectiveness

date

Before

Project

Effectiveness

Lack of contract

management skills

especially for large

value consultancy

contracts

Training in contracting, management and

monitoring to assure delivery of quality outputs,

value for money, accountability and transparency.

PID/MoFEP

On a

continuous

basis

57

Risk Description Risk

Rating


Responsibility Due Date

Support and Control

Systems

Low level familiarity

with IDA guidelines on

the part of internal

procurement approving

authorities and internal

audit staff could

compromise the

effectiveness of the

procurement system.

S Procurement knowledge of MoFEP‘s internal

procurement approving authorities and MoFEP

internal audit staff to be strengthened in the area

of procurement review and auditing procedures,

through training.

Capacity building and additional staffing in

procurement is a key component of Phase I. Staff

members to be trained on IDA procurement

policies and procedures.

PID/MoFEP At the start of

the Project

Procurement Cycle

Management

Risk of non compliance

with IDA procurement

guidelines and

processes. Possibility of

weaknesses for contract

awarding and execution,

particularly lack of

transparency in

processes.

M

Regular IDA supervision missions and reviews

will help ascertain level of compliance.

MoFEP/PID has well functioning structures for

procurement process review and approval (e.g.

Entity Tender Committee and Ministerial Tender

Review Board) to help minimize risk. IDA

procurement review mechanisms will also deter

any such occurrences.

IDA

PID/MoFEP

Continuous

during

supervision

Records Management

Poor records

management can pose a

challenge to easy

identification and

retrieval of procurement

and contract records,

and undermine progress

reviews.

S

Institute a structured filing and identification

system.

Training to be provided to core procurement staff

on IDA guidelines on filing and records

management systems.

PID/MoFEP

Within 3

months of

effectiveness

Centralized

procurement complaints

M Establishing a central procurement complaint

online database for the project

PID/PPA Within 12

months from

effectiveness

Overall Risk Rating S

H – High S – Substantial M – Moderate L – Low

66. The overall Project risk for procurement is Substantial, prior to mitigation.

B3. Procurement Plan

67. At appraisal, the Borrower developed a procurement plan for the first phase of project

implementation which provides the basis for the procurement methods applicable to each contract and

indicates those requiring Bank‘s prior review. This plan has been agreed between the Borrower and

the Association on February 10, 2012 (reflected in the negotiations minutes) and is available at the

country office in Accra. It is also available in the project‘s database and in the Bank‘s external

website. The Procurement Plan will be updated in agreement with the Association annually or as

required to reflect the actual project implementation needs and improvements in institutional capacity.

58

Table 4: Thresholds for Procurement Methods and Prior Review

Expenditure

Category

Threshold for

Method (US$)

Procurement

Method Contracts Subject to Prior Review

Goods and non-

consulting

services.

>=500,000

<500,000

<50,000

ICB

NCB

Shopping

Direct Contracting

All

First 2 contracts for each entity

None

All

Consulting

services

>=200,000

<200,000

QCBS

QCBS, CQS, LCS,

FBA, QS

Single Source

All contracts of US$200,000 and above

First two contracts under US$200,000

All single source

Individual

consultants

IC

All contracts of US$50,000 and above

All single source

Note: All Term of reference regardless of the value of the contract are subject to prior technical review 1.1 ICB – International Competitive Bidding QCBS -- Quality and Cost-Based Selection method

1.2 NCB – National Competitive Bidding CQS – Consultants’ Qualification Selection method

1.3 IC – Individual Selection method

B4. Frequency of Procurement Supervision

68. Based on the risk rating of the project and the current procurement arrangement, Bank

procurement team will offer continuous support to the Project by paying regular working visits to

ascertain adequacy of systems and how effectively the systems are being used to support

implementation. Official implementation supervision mission be carried out twice each year, and

post-review of procurement actions will be carried once annually.

B5. Details of the procurement arrangements involving international competition

(a) Goods and Non Consulting Services

69. Indicative List of Contract Packages to be procured following ICB and Direct Contracting:

None

70. Note: ICB contracts estimated to cost the equivalent of US$500,000 and above for all other

countries per contract, for Goods and non consulting services, and all Direct Contracting will be

subject to prior review by the Bank.

59

(b) Consulting Services

Table B: Indicative List of International Consulting Assignments Contracts with Indicative

Costs

1 2 3 4 5 6 7

Ref.

No.

Description of Assignment Estimated

Cost

Selection

Method

Review

by Bank

(Prior /

Post)

Expected

Proposals

Submission

Date

Comments

Transaction Advisory Services

for Korle Bu Diagnostic Centre 800,000 QCBS Prior June 2012


for Asutsuare Water Project 500,000 QCBS Prior

November

2011


for Takoradi Ports-Oil and Dry

Bulk Terminals and

Container\Multi-purpose

terminals 1,200,000 QCBS Prior June 2012


for Airports (Accra, Kumasi,

Tamale, Takoradi) 1,400,000 QCBS Prior Aug 2012


for Accra-Takoradi Highway 1,200,000 QCBS Prior Jul 2012

VGF Specialist technical advisor

200,000 IC Prior May 2012

Preparation of Contingent Liability Management Framework

80,000 IC Prior Jun 2012

PPP Project Finance Advisor 200,000 IC Prior Jun 2012

Preparation of Sector Laws/ Guidelines/ Regulations

200,000 QCBS Prior Jan 2013

PPP Technical Advisory Services

200,000 IC Prior May 2012

Sector Studies- Transport, 120,000 CQS Prior Sept 2012

Sector Studies- Roads & Highways

120,000 CQS Prior Sept 2012

Sector Studies- Water resource, works & housing

120,000 CQS Prior Sept 2012

PIU PPP Specialist 180,000 IC Prior April 2012

PIU FM Specialist 90,000 IC Prior Feb 2012

PIU Procurement Specialist 90,000 IC Prior Feb 2012

PIU Project Coordinator 108,000 IC Prior Feb 2012

PIU Safeguards Specialist 90,000 IC Prior Feb 2012

Note: (a) Consultancy services estimated to cost US$200,000 equivalent or more per contract

with firms and US$50,000 or more per contract with individual consultants and all Single Source

Selection of consultants will be subject to prior review by the Bank.

(b) Short lists of consultants for services estimated to cost less than US$200,000 equivalent per

contract may be composed entirely of national consultants in accordance with the provisions of

paragraph 2.7 of the Consultant Guidelines.

60

B6. Publications of Awards and Debriefing:

71. For all ICBs, request for proposal that involves the international consultants and direct

contracts, the contract awards shall be published in UN Development Business online and on the

Bank’s external website within two weeks of receiving IDA‘s "no objection" to the recommendation

of contract award. For works, goods, and non-consulting services, the information to publish shall

specified (i) name of each bidder who submitted a bid; (ii) bid prices as read out at bid opening; (iii)

name and evaluated prices of each bid that was evaluated; (iv) name of bidders whose bids were

rejected and the reasons for their rejection; and (v) name of the winning bidder, and the price it

offered, as well as the duration and summary scope of the contract awarded. For Consultants, all

consultants competing for an assignment involving the submission of separate technical and financial

proposals, irrespective of its estimated contract value, should be informed of the result of the technical

evaluation (number of points that each firm received), before the opening of the financial proposals.

Furthermore, the following information must be published: (i) names of all consultants who submitted

proposals; (ii) technical points assigned to each consultant; (iii) evaluated prices of each consultant;

(iv) final point ranking of the consultants; and (v) name of the winning consultant and the price,

duration, and summary scope of the contract. The same information will be sent to all consultants who

have submitted proposals. The Borrower‘s implementing agency will be required to offer debriefings

to unsuccessful bidders and consultants, should the individual firms request such a debriefing.

72. NCB and other post review contracts shall be published in national gazette or on a widely

used website or electronic portal with free national and international access within two weeks of the

Borrower‘s award decision and in the same format as in the preceding paragraph.

B7. Fraud, Coercion and Corruption.

73. All procurement entities as well as bidders and service providers, i.e., suppliers, contractors,

and consultants shall observe the highest standard of ethics during the procurement and execution of

contracts financed under the project in accordance with paragraphs 1.16 and 1.17 of the Procurement

Guidelines and paragraph 1.23 and 1.24 of the Consultants Guidelines, in addition to the relevant

Articles of the Ghana Public Procurement Laws which refer to corrupt practices.

III. Environmental and Social (including safeguards)

1. Environmental Assessment category

74. The project has been Categorized as A because, even though most of the proposed program

activities are expected to have positive environmental and social impacts, some of the planned

transactions to be financed in the planned second phase of this APL may have significant adverse

impacts that are sensitive, diverse, cumulative, irreversible or unprecedented. In addition, some of

these potential impacts may affect areas broader than the sites or facilities subject to physical works.

In most cases, however, the transactions will involve limited adverse social or environmental impacts

that are few in number, generally site-specific, largely reversible, and readily addressed through

mitigation measures.

75. Because the full extent of the environmental and social impacts of the Program is not known

in advance, the Borrower has prepared an Environmental and Social Management Framework

(ESMF) and the Resettlement Policy Framework (RPF). The ESMF ensures that the principles and

procedures for the development of in-country capacity and compliance with local regulations are

established and it serves as the basis for environmental assessment of all future transactions to be

carried out under this APL. Most of the transactions in the PPP Program are not expected to result in

major losses or acquisition of land or in restrictions to sources of livelihoods. However, given the

possibility that some of the transactions may involve land acquisition and involuntary resettlement, an

RPF has also been prepared. Because the ESMF provides guidance for preparation of ESIAs, ESMPs,

61

integrity studies, and environmental audits, it remains in effect for the Program. It includes a

screening process that is consistent with both World Bank operational policies and Ghanaian

regulations, and a chapter on project processing that describes the responsibilities of each organization

involved in PPP. The ESMF and RPF were both prepared by the Borrower according to national and

World Bank policies and were disclosed in-country in Ghana and through the World Bank‘s InfoShop

in November 22, 2011.

2. Safeguards policies triggered

76. The following table indicates the safeguard policies triggered. Two safeguards policies will be

triggered. They are Environmental Assessment (OP 4.01) and Involuntary Resettlement (OP 4.12).

Some safeguards policies might be triggered but cannot be determined at this stage as the specific

transactions and project sites have not been finally determined. These policies include (i) Natural

Habitats (OP/BP 4.04), Pest Management (OP/BP 4.09), Physical and Cultural Resources (OP/BP

4.11), and Safety of Dams (OP/BP 4.37).

Table 5: Safeguard Policies Triggered

Safeguard Policies Triggered by the Project Yes No TBD

Environmental Assessment(OP/BP 4.01) [x] [ ] [ ]

Natural Habitats (OP/BP 4.04) [ ] [x] [ ]

Pest Management (OP 4.09) [ ] [x] [ ]

Physical Cultural Resources (OP/BP 4.11) [ ] [x] [ ]

Involuntary Resettlement (OP/BP 4.12) [x] [ ] [ ]

Indigenous Peoples (OP/BP 4.10) [ ] [x] [ ]

Forests (OP/BP 4.36) [ ] [x] [ ]

Safety of Dams (OP/BP 4.37) [ ] [x] [ ]

Projects in Disputed Areas (OP/BP 7.60) [ ] [x] [ ]

Projects on International Waterways (OP/BP

7.50) [ ] [x] [ ]

77. Environmental Assessment (OP/BP 4.01): Safeguards policy OP 4.01 has been triggered, as

components of the PPP include civil works including the rehabilitation and refurbishment of existing

infrastructure, as well as the construction of new infrastructure. The exact locations and impacts of the

sub-projects have not been identified, though the pipeline includes possible first movers; thus, the

ESMF was prepared and disclosed in November 22, 2011. The ESMF addresses the mitigation of

adverse impacts, and includes a budget for such mitigation.

78. Involuntary Resettlement (OP/BP 4.12): Many of the transactions in the PPP program could

involve minimal or moderate land acquisition and or restriction of access to usual means of livelihood

as most of the transactions will largely be rehabilitation of existing infrastructure. However, some of

the transactions may involve significant land acquisition. As part of safeguards due diligence, an RPF

was prepared and disclosed in November 22, 2011.

79. In subsequent phases of the APL, the following safeguard Operational Policies may be

triggered:

Natural Habitats (OP/PB 4.04): Activities envisaged in the second phase of the Program may

involve civil works that transverse sensitive ecosystems, such wetlands. In addition, the

Program may support port concessions that include rehabilitation and dredging of existing

ports and harbors which could have potential impacts on marine life.

Pest Management (OP/BP 4.09): This APL will not fund directly procurement of pesticides

or pesticide application equipment. However, associated or induced projects may introduce



















62

new pest management practices, or expand of alter existing practices and increased pesticide

use and subsequent environmental and health risks. Thus, the procurement of any pesticide in

a World Bank-funded project is contingent on an assessment of the nature and degree of

associated risks, taking into account the proposed use and intended users and in line with

World Bank, World Health Organization (WHO) and Food and Agricultural Organization

(FAO) standards.

Physical Cultural Resources (OP/BP 4.11): Activities during Phase II of the APL may

include civil works that could affect or expose chance finds of physical cultural resources.

The ESMF includes provisions for addressing such cultural heritage chance finds.

Safety of Dams (OP/BP 4.37): This PPP Program will not be directly involved in the

construction of new dams. However, the Phase II of the APL may support projects that

depend on water from existing dams or water reservoir. The ESMF and RPF checklists would

be used to screen such projects for their potential and environmental and social impacts. Dam

safety reports and environmental and social audits of the associated facilities would be carried

as required.

Projects on International Waterways (OP/BP 7.50): Some of the water projects that may be

funded during Phase II of the APL may rely on water resources from other countries, thus

triggering the World Bank‘s OP for projects on International Waterways.

80. Legacy Issues: Finally, though not a safeguard policy, the activities in Phase II of the APL

may have legacy issues. These could include a situation where the World Bank is asked to participate

in a relatively small or narrowly defined component of a much larger or broader project whose design

has been completed and construction has progressed significantly or is near completion, with the

exception of the component for which World Bank participation has been requested. The component

for which World Bank support is solicited could be an associated facility in some cases. A rapid

assessment would be prepared to assess the existing safeguards documents and/or implementation

measures, taking into account Bank safeguard requirements. Appropriate follow-up terms of

safeguards due diligence, including updating or preparing new safeguards instruments, would be

undertaken once the rapid assessment is completed.

81. Cumulative and Induced Impacts: No long term or cumulative adverse impacts were

identified in the ESMF and the RPF. However, the combination of multiple impacts from existing

projects, the proposed project, and/or anticipated future projects may result in significant adverse

and/or beneficial impacts that would not be expected in case of a standalone project. The ESMF‘s

baseline study identifies relevant existing environmental and social conditions in Ghana. In addition,

the proposed Strategic Environmental Assessment (SEA) for the program would give priority to

assessing cumulative impacts stemming from the proposed program activities, including those

scheduled for phase two.

82. Alternatives considered: The ESMF and RPF of the PPP Program contain sections on

―Analysis of Alternatives‖. They conclude that the ―Do Nothing‖ scenario would worsen the present

situation in the proposed government infrastructure.

Environmental Issues

83. The PPP Program has been assessed for both positive impacts and adverse effects on the

biophysical and social environment.

84. Positive Impacts: If successfully implemented, the PPP Program could provide a number of

benefits to Ghana. Although anticipated benefits will be in the area of economic growth and improved

human development, some environmental benefits are expected. Positive impacts include: increasing

63

efficiency and speed in the execution of projects; modernization of facilities and services; enhancing

implementation capacity; reducing risk for the public sector; providing alternative funding/freeing

government funds; providing funding to maintain infrastructure overtime; improved environmental

performance; and improved economic growth.

85. Potential Adverse Impacts: Adverse impacts have been identified for this Program and also

for typical sub-project activities. Most of the identified impacts are limited, site-specific, and can be

mitigated. The program-level impact analysis has focused on how the Program can affect or could be

affected by attendant conditions, which also has an impact on the environmental sustainability of

policies or programs. Identified program-level impacts are: poorly regulated monopolies; social

exclusion and poor ethnic/regional coverage; and, increased corruption and rent seeking

86. In addition, the associated and potential impacts of the sub project activities include such

issues as: access creation, land acquisition, increased traffic, emissions and increased air pollution,

noise, solid waste generation and handling, effluents and wastewater generation, chemical handling,

use of natural resources, population influx, labor issues, occupational and public health, biodiversity

loss, endangered and exotic species, and loss of cultural resources. However, not all project types will

involve interactions that lead to all types of adverse impacts. To support improved scoping of

Environmental Assessments, a preliminary impact analysis matrix (Table 2) has been designed for all

project types identified in the PPP pipeline. The matrix presents the list of projects as rows while each

of the impact types are listed in header columns. The rows are matched against the columns and the

following entries provided as considered applicable:

- Low (L) - if there is either a low or close to nil chance of the project type causing the specific

impact type or if anticipated impacts will be minimal.

- Medium (M) - if there is a low to medium chance of the impact occurring from the project

type or if anticipated impacts will not be severe and are largely reversible.

- High (H) - if there is a high chance of the impact occurring from the project type and or if

anticipated impacts could be severe and or long term.

64

Table 2: Impact Analysis Matrix

Project- Environment Interaction/Environmental and Social Impact Type

Project Sector or Type

Acc

ess

Cre

ati

on

La

nd

tak

e

Incr

ea

sed

Tra

ffic

Air

Em

issi

on

s

No

ise

Eff

luen

ts

So

lid

Wa

stes

Use

of

Na

tura

l R

eso

urc

es

Ch

emic

al

Ha

nd

lin

g

La

bo

ur

Rel

ati

on

s

Po

pu

lati

on

In

flu

x

Occ

up

ati

on

al

an

d P

ub

lic

Hea

lth

Bio

div

ersi

ty L

oss

an

d

En

da

ng

ered

Sp

ecie

s

Imp

act

s o

n V

uln

era

ble

Gro

up

s

Lo

ss o

f C

ult

ura

l R

eso

urc

es

Power generation plants and

transmission /distribution networks;

H

H

H

H

H

H

L

H

H

H

H

H

H

H

H

Roads and bridges H H H H H L L L M H H H H H H

Ports L L L H M H M L H H M H H L L

Airports L H L H H L M L M H H H L L L

Railways H H M H H L L L M H H H L L H

Inland container depots and logistics hubs H M L M M L M L L M H H M H M

Gas and petroleum infrastructure such as storage depots

and distribution pipeline

H

H

M

H

M

L

L

L

M

H

H

H

H

H

Water supply, treatment and distribution systems

M

M

M

L

L

M

L

L

M

M

M

H

L

L

L

Solid waste management; L M L H L M H L H M L H L L L

Educational facilities (e.g., schools, universities)

L

M

L

L

L

L

M

L

L

L

M

H

L

L

L

Urban transport systems L H H H H L L L L M L H L L L

Housing M H M L M M M M L M H H M M M

Health care facilities L M L L L M M L H L L H L L L

65

Measures Taken By the Borrower to Address Safeguard Issues

87. The GoG has undertaken a number of mitigation measures to address the environmental and

social issues associated with the PPP Program. These include implementing existing laws and regulations,

preparation and disclosure of ESMF and RPF, consultation with key stakeholders, and budget provision

for capacity building in the project to ensure safeguards compliance.

88. Existence of policy and regulatory framework in Ghana: There are a number of relevant national

and international environmental policies and regulations that are applicable to this APL and its sub-

projects. Some labor laws were also identified. The Ghana Environmental Protection Agency (EPA)

enforces all activities that may affect the Ghana environment. Its mandate includes co-ordination of

environmental protection and conservation of natural resources for sustainable development in Ghana. A

number of other government Ministries Departments and Agencies (MDAs) have enabling laws that

support the objectives of this ESMF. Some of these laws also seek to eliminate or minimize

environmental and social impacts of activities associated with their various functions. Ghana is signatory

to a number of international treaties and conventions, including those regarding climate change, medical

waste management oil and chemical pollution, labor and others. Further, the World Bank financed

projects are governed by a number of operational and safeguard policies that aim to prevent and mitigate

undue harm to people and their environment in any development initiative involving the World Bank.

Preparation and Disclosure of ESMF and RPF:

89. The objective of the ESMF is to establish a mechanism to determine and estimate the future

potential environmental and social impacts of the Bank-financed activities to be undertaken under the

program, and to define the measures of mitigation, monitoring and the institutional measures to be

undertaken during implementation of this Program. The ESMF includes sections on: (i) Environmental

Screening and scoping (ii) Environmental Policy and Regulatory Framework; (iii) Current Environmental

Situation; (iv) Analysis of Environmental Impact Issues; (v) Development of Management Plan to

Mitigate Negative Impacts (vi) Institutional Framework; (vii) Training Needs; and (viii) Public

Consultation. In addition, the ESMF contains appendices explaining the ESIA process of the Ghana EPA,

guidelines for preparing terms of reference for ESIAs, national guidelines for environmental audit in

Ghana, World Bank interim guidelines for addressing legacy issues and the list of participants at

stakeholder workshops and meetings. As stated above, an (RPF) has also been prepared, and this will be

translated to Resettlement Action Plan (RAPs) as and when the need arises during Program

implementation.

90. The PID will be responsible for the implementation of the ESMF and RPF recommendations.

Resettlement Actions Plans, Environmental Management Plans (EMPs), and/or Environmental and Social

Impact Assessments (ESIAs) will be prepared as and when necessary. The PID is to recruit an

environmental and social safeguards specialist. This team member will be responsible for implementing

the recommendations contained in these safeguards instruments, and he/she will be complemented with

short-term national social/environmental safeguards consultants as and when the need arises.

Project Screening, Scoping and Categorization Mechanism

91. The project includes support for the preparation of PPP transactions, some of which may be co-

financed or financed by the Bank as part of Phase II of the APL. This includes the preparation of PPP

transactions, which will include initial assessments of safeguards risks and mitigation, based on the

ESMF and RPF. In some cases, the Borrower may initiate the preparation of detailed safeguards

assessments and plans before the PPP transactions are finalized. The project ESMF and RPF will guide

the preparation of environmental and social impact assessments (ESIAs)/environmental and social

66

management plans (ESMPs), resettlement action plans (RAPs), and/or other safeguards instruments that

will be prepared for these PPP transactions, some of which will be financed by the Bank Phase II of the

APL. Transactions not financed by the Bank, whether in whole or in part, will not fall within the Phase II

APL Program description.

92. This APL will have a review process in place to ensure screening of all potential transactions for

environmental and social impacts prior to approval by the PID. The screening can be carried out by a

designated officer of the PID (Environmental and Social Officer) or other MDA in accordance with the

PID procedure. This will include an environmental screening sheet showing the estimated impact

category of each sub-project destined for rehabilitation and/or up-grading. The screening process will

involve an assessment of the project to determine: (a) the appropriate project categorization for the EA;

(b) applicable World Bank environmental and social safeguards; (c) potential for environmental and

social impacts and (d) cultural or other sensitivities. In addition, each project will be screened to identify

relevant stakeholders and, the nature and extent of engagement for each stakeholder category.

93. The screening decision has three parts: the assignment of the environmental assessment category,

the determination of the safeguards instrument(s) that should be prepared, and the identification of

applicable safeguards policies. In Phase II, there may be some subprojects financed by the Bank classified

as Category A and EPA Category 1, requiring full ESIAs. In cases where the categorization is split, e.g.,

Category B under OP 4.01 and Category I under the Ghana EPA Act, the more stringent category will

apply. The ESMF and RPF provide guidance for screening based on the scale and type of project and the

potential impacts that can be envisioned. The project screening reports will be reviewed by the

safeguards specialist and the EPA to confirm that all project-financed work falls within Environmental

Category B and that the recommended action plan is appropriate. Projects considered to fall into

Environmental Category A will also be identified at that time for particular mitigation attention. The

safeguards specialist will then submit the report of the screening exercise with its recommendations for

clearance to the World Bank to proceed with the detailed ESMPs, ESIAs, and/or RAP, and any other

safeguards instruments. The executive summaries of the Category A safeguards instruments will be

circulated to the World Bank‘s Board of Executive Directors. As part of safeguards due diligence, a

notional budget for mitigation will be specified in the contact documents to ensure provision of the

necessary funds for implementation of the approved mitigation measures identified in the plans.

Environmental and Social Management Plans (ESMPs)

94. The Program and all sub-projects will include the preparation of ESMPs to address achieve

health, safety, and environmental regulatory compliance objectives, institutional responsibilities (e.g.,

World Bank), and other related commitments. An ESMP is an important element of the PPP program's

overall Environmental and Social Management strategy to ensure environmental, social, and health

performance of the entire program and sub projects. In addition to addressing environmental impacts, the

EMP for the PMU focuses on policy, personnel management, and competence building communications

with the public and monitoring. Environmental Management Plans for each sub-project will be required at

two stages. During the proposal stage, each intending concessionaire will as part of its proposal, submit

an overview of how environmental issues of the project will be addressed on a continuous basis. The

plans will also specify standards proposed for the sub-project to ensure environmental sustainability.

Standards and plans proposed to address social issues including labor relations will be particularly

important. This could include, inter alia, structures to handle retrenchment, special packages for workers

that have attained retirement age, retraining of staff to acquire the needed skills.

67

Capacity Building and Training Requirements

95. The capacity of the borrower to carry out their respective design, planning, approval, permitting,

monitoring and implementation roles will, to a large extent, determine the success and sustainability of

the PPP program in addressing environmental and social issues. The first step in pursuing capacity

building will be to identify the capacity building needs of the various stakeholders. Given the nature of

the environmental and social management requirements and provisions outlined in this ESMF,

competencies and capacity building will be required in the following areas: (i) Environmental Impact

Assessment Process - Basic Concepts, Screening, scoping, impact analysis, mitigation measure and

monitoring, reviewing ESIA Reports, (ii) Environmental Due Diligence - Types of due diligence,

screening projects for liabilities, scoping due diligence investigations and reviewing due diligence reports

and (iii) Monitoring and Evaluation - Understanding the importance of M&E in project implementation,

M&E requirements for environmental and social sustainability of projects.

96. Budget to Implement the ESMF: To achieve the stated goals of this ESMF, it is important to

identify financial resource requirements even if indicative. This ensures upfront attention to the financial

requirements and allows early planning and budgeting accordingly.

3. Involuntary Resettlement

97. Involuntary land taking and/or restriction of access to economic assets and/or livelihood might

not be avoidable for many of the transactions in the PPP program as most of the transactions will largely

be rehabilitation of existing infrastructure or new construction of large scale infrastructure. To mitigate

the resettlement impacts, a resettlement policy framework (RPF) has been prepared in compliance with

the World Bank Policy on Involuntary Resettlement OP 4.12 and relevant Ghanaian laws and regulations.

However, the World Bank policy will apply in circumstances where gaps exist between national laws and

World Bank policy.

98. The RPF contains details of the principles and objectives governing the preparation and

implementation of resettlement action plans (RAPs), including review, approval and disclosure of RAPs,

screening for Involuntary Resettlement, establishment of baseline and socioeconomic data, and the likely

categories of project affected persons. Compensation arrangements for those being involuntarily resettled,

including possibilities for land exchange, are outlined in the RPF. In particular, the RPF also contains a

mechanism for resolving disputes that may arise.

99. Key Resettlement Objectives and Principles: The key objectives of resettlement are i) to explore

all viable alternative project design to avoid or minimize land acquisition and other adverse impacts; ii)

those adversely affected are compensated at replacement cost for lost assets, and otherwise receive any

assistance necessary to provide them with sufficient opportunity to improve, or at least restore, incomes

and living standards. The key policy resettlement principles include:

(a) When possible, resettlement plans should be conceived as development opportunities, so

that those affected may benefit from project activities.

(b) Lack of legal rights does not bar displaced persons in peaceful possession from

compensation or alternative forms of assistance.

(c) Compensation rates refer to amounts to be paid in full to the individual or collective

owner of the lost asset, without deduction for any purpose.

(d) When agricultural land is acquired, it often is preferable to arrange for land-for-land

replacement. In some cases, as when only small proportions of income are earned

through agriculture, alternative measures such as payment of cash are acceptable if

preferred by the persons losing agricultural land.

68

(e) Replacement house plots, sites for relocating businesses should be of equivalent use

value to the land that was lost.

(f) Transition periods should be minimized. Compensation should be paid prior to the time

of impact, so that new houses can be constructed, fixed assets can be removed or

replaced, and other necessary measures can be undertaken before displacement begins.

(g) Displaced persons are consulted during the planning process, so their preferences

regarding resettlement arrangements are considered; resettlement plans are disclosed in a

publicly accessible manner.

(h) The previous level of community infrastructure and services and access to resources will

be maintained or improved after resettlement.

(i) The borrower is responsible for meeting costs associated with land acquisition and

resettlement, including contingencies.

100. Organizational responsibilities for resettlement planning and implementation: PPP project

agencies will take the lead in project preparation and implementation. They will also be responsible for

resettlement planning and implementation. In working with MMDAs and RCCs, they will explore project

alternatives to avoid or minimize resettlement impacts, identify resettlement impacts, assess the

significance of resettlement and prepare adequate resettlement plans. The resettlement plans will go

through Ghanaian internal review and clearance procedures before they are submitted to Bank for final

review and clearance. The PPP project will not be eligible for Bank financing if the resettlement plans are

not adequately prepared, consulted upon and cleared for disclosure by the World Bank.

101. Consultation and participation: Extensive consultations have been conducted with various

stakeholders and their feedbacks have been incorporated in the RPF. Consultation with PAPs and

different stakeholder will continue during project preparation. The affected persons and businesses will

participate in and consulted with in resettlement planning and implementation, including the census,

inventory and formulation of the livelihood rehabilitation strategy, etc.

102. Grievance Redress Mechanisms: The grievance redress mechanisms include two steps: (i) PPP

offices will be established at community, district and regional levels to be responsible for registering the

complaints received from PAPs; (ii) a mediation committee will be established to handle the complaints

received. The Committee will include the representatives from the implementation PPP agencies, District

Assembly, traditional leaders, and an attorney of the affected person. The mediation meeting will be

organized with interested parties.

103. Monitoring and evaluation: Implementation of resettlement plans will be regularly monitored

through both internal and external monitoring arrangements. The internal monitoring will be carried out

by PPP project agency and the external monitoring will be carried out by an independent Monitoring

team. The key monitoring indicators will include restoration of living standards and livelihoods and level

of affected persons‘ satisfaction to the resettlement measures. The contents and time frequency will be

described in the resettlement plans.

104. Vulnerable groups: Particular attention will be paid to vulnerable groups, including disabled, the

elderly, widow, children, female headed households, and indigenous peoples. Vulnerable persons will be

identified at census in preparation of resettlement planning stage. Each resettlement plan developed under

a PPP project will make precise provisions with respect to assistance to vulnerable persons affected.

105. Resettlement cost and funding: All resettlement cost will be funded by the Government of Ghana.

Each resettlement plan will include detailed cost of compensation and other rehabilitation entitlements.

The resettlement plan will also include information on sources of funding, flow of funds, and the

compensation schedule.

69

4. Social impact assessment

106. The other social impacts and risks besides resettlement will be addressed through the ESMF. It

established a process of environmental and social screening which will permit the institutions in charge of

the implementation of the project to identify, assess and mitigate the environmental and social impacts of

the proposed intervention. Social impacts assessment will be carried during implementation, and Social

Management Plan will be prepared accordingly and implemented during project implementation. In

addition, the ESMF also determines the institutional measures to be taken during the program

implementations, including those relating to capacity building.

IV. Monitoring & Evaluation

107. Results Monitoring and Evaluation: The M&E function within the PIU within the PID will

coordinate with the PFA and PAU of the PID as well as other project implementing MDAs to ensure

coherent and standard M&E data gathering and reporting system are in line with the Project Development

Objective (PDO) and PDO level and intermediate results indicators established for the project and further

explained in the Project Performance Framework in Annex 1. The scope of the work of that unit is

broader as outlined below and not only covers the phase I of the APL but the whole program. The

function also includes coordination and capacity of participating line ministries and agencies, and

ensuring adequate reporting to the National Development Planning Commission.

108. Reviews during implementation support missions by IDA will include formal Annual and Semi-

Annual Work program consultations at which time annual procurement and capacity building plans will

be subjected to detailed review and approval actions by the PID and the World Bank. The PPP PIU will

be required to prepare information necessary to inform these implementation review exercises and to

ensure that all indicators in results framework of Annex 1 are reported on with recent progress data.

109. A mid-term review will take place 24 months after the APL Phase I Credit effectiveness in

accordance with terms of reference agreed upon by Government/PID, the PPP PIU, IDA and other donors

and will include an assessment of the five triggers identified and clarify whether conditions to move to the

second phase are fulfilled. The PPP PIU will prepare the mid-term report detailing implementation

progress under all Program components and identifying implementation issues. This report will be

submitted to PID, IDA and other donors not later than two months prior to the mid-term review. During

the midterm review, implementation progress and solutions to identified implementation issues will be

discussed and agreed on and, if required, project redesign steps will be taken. An Implementation

Completion and Results Report (ICR) will also be jointly prepared by the PPP PIU, PID, and IDA within

six months after the closing date of Phase I and Phase II credits.

110. The project will also implement an Impact Evaluation which will be designed during APL I,

including development of information systems necessary to effectively compile and manipulate baseline

data.

111. M&E Framework Systems and Reporting: Establish the M&E framework, systems, and

operations of the PPP PIU in accordance with the Project‘s objectives and strategy, which include a

detailed description of: (i) data collection, analysis, and reporting plan for each indicator; (ii) M&E

implementation arrangements (institutional mandate, responsibility, and partnership); (iii) work plan and

budget for M&E activities (human resources, timetable, and cost); (iv) Management Information System

(Data collection, storage, and analysis tools);

Prepare quarterly, half yearly and annual project monitoring reports, containing summary data on

overall performance against targets;

70

Coordinate the organization of annual and semi-annual M&E reviews and lessons-learned workshops

to ensure the M&E function enhances the ability to increase project outcomes.

112. M&E Coordination: Liaise with line ministries and agencies and private sector stakeholders

and other staff to ensure a two-way flow of information on implementation; facilitate communications

between those carrying out field implementation and decision-makers on the number and quality of

activities undertaken for each project component;

113. M&E Participatory Mechanisms: Ensure that an effective and participatory M&E system and

methodology are established consistent with a robust M&E function – this includes:

The establishment of ―third party‖ demand-based feedback arrangements (at policy, program and

project levels) with civil society and other community interests in line with commitments made

during the September\October Project Stakeholder Meetings;

Feedback from wider private sector with stake in development of the PPP market;

Ensure that the diversity in the group is respected by allowing space for women, the poorest, and

marginalized social/ethnic groups to make a meaningful contribution.

114. M&E Implementation: Supervise implementation of approved M&E Work plans and during

implementation, if required, update and amend the M&E process following ongoing consultation with

stakeholders, partners, and beneficiaries with particular attention to:

What to monitor and what support is needed for this to be possible;

Ensure that agreements with others in the program (eg within MDA PPP project teams) with M&E

responsibilities are fulfilled;

Hold regular local meetings to reflect on project activities and gather opinions on future

developments for feedback to project management;

Ensure that information on project plans are discussed in the relevant group and that local voice are

actively present in relevant decision-making processes.

115. Staff and Consultant Management: Depending on workload and resource requirements as

approved under the M&E Annual Plan, the M&E Specialist will identify, recruit and supervise with work

assignments other M&E short-term and longer-term consultant specialists in line with IDA guidelines, the

Project PIU and under the direction of the PIU Manager.

116. M&E Advisory: Consult closely with partners and primary stakeholders on the analysis of the

implications of M&E data, project reviews, and identification of the causes of potential bottlenecks in

project implementation and threats to achieving the project objectives and advise PID management

accordingly on analysis and potential remedial actions.

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Annex 4: Operational Risk Assessment Framework (ORAF)


1. Project Stakeholder Risks

1.1 Stakeholder Risk Rating Substantial

Description:

(a) MDAs buy-in: While there is strong interest in employing the

PPP model across line ministry MDA head staff (eg: Ministry of

Roads and Highways and Ministry of Transport), there is a lack of

technical and procedural expertise that could impact

implementation. There is also a risk that MDAs may not want to

collaborate to the PPP procurement model that is led by MoFEP.

This can be due to their perception that they are losing ownership of

these projects as they become PPP candidates.

(b) NGOs and Citizens support: The Ghanaian population is the

ultimate beneficiary of this project through the provision of

increased and improved infrastructure services. There is risk of

perceived threats to social and environment safeguards and the

threat that the PPP program will be perceived as equivalent to the

unpopular privatization scheme.

Risk Management:

(a) MDAs: This risk is being tackled by the project through passage of the PPP Policy by Cabinet in

June 2011 and its launch in October 2011. To build ownership across the MDAs, the Policy was

prepared by way of an extensive stakeholder consultation with them. Also the project will support

follow-up training, capacity building and outreach targeted towards MDAs to ensure their

understanding\ ownership of: the PPP model, the specific MoFEP role and line ministry priority as

PPP project sponsors and ―owners‖. Furthermore the expected passage of a PPP Law will further

consolidate MDA responsiveness to the PPP program.

Resp: Client Stage: Implementation Due

Date:

Status: In Progress

Risk Management:

(b) NGOs and Citizens: Consultations with these parties have taken place during preparation (through

the ESMF and RPF where were disclosed on November 22, 2011 after public consultations in three

different areas of Ghana) and is an ongoing process through implementation to ensure that

community issues and environmental and social safeguards are met. It is also worth noting that under

Component (1), thorough feasibility studies will be undertaken for each PPP project to ensure that the

latter safeguards have been addressed and have been planned for. Furthermore, the capacity building

support includes outreach efforts.


Date:

Status: In Progress

3. Implementing Agency (IA) Risks (including Fiduciary Risks)

3.1 Capacity Rating Substantial

Description: Risk Management:

(including fiduciary) Prior to the Board, the PID will hire the following key project implementation consultancies: a senior

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Lack of PPP capacity of the Implementing Agency PID: The PID in

MoFEP is expected to anchor the PPP agenda and support MDAs in

moving their PPP transactions. However PID, which was only

established in late 2010, has limited capacity. Currently the unit has

a Director, senior staff member in the PFA and three DFID

supported consultants in the PAU. There is also a number of recently

recruited junior staff in the Department. While there is scope to

training the new staff yet at the initial stage of the project strong

expertise is urgently needed.

PPP Specialist; a project coordinator, FM Specialist, Senior Procurement Specialist, Safeguard

Specialist. An M&E Specialist, Capacity Building Specialist and Auditor will be retained before

Effectiveness. This team of experts will ensure acceptable project implementation standards and will

provide the training needed to the PID staff.

Resp: Client Stage: Implementation Due Date: Status: In Progress

3.2 Governance Rating Moderate


There has been no allegation of fraud, or corruption in MoFEP.

However with the new function of handling PPP projects which

entail large contract amounts, there is scope for weak governance

The recently approved National Policy on PPP outline various functions in the PID, namely the PFA

and PAU. It is important to mention that the structure is such that there is a ―Chinese Wall‖ between

the advisory function of the PAU and the gate keeping function of the PFA.

Additionally, the drafting and passage of a PPP law – which is considered a high priority by the

Government of Ghana - is in process which will further ensure that issues relating to governance,

fraud and corruption are addressed through diligent processes and through transparency and

disclosure requirements.

Resp: Stage: Due Date: Status:

4. Project Risks

4.1 Design Rating Moderate

Description:

(a) The project design is new, following on from similar model

developed for Nigeria. It seeks explicitly - through an APL product -

to develop a PPP market in new countries in a way that mitigates the

IDA development and Borrower financial risk. There remains the

risk that this APL I may not ultimately lead to the development of a

functioning and competitive PPP market with acceptable levels of

private financing to infrastructure as would be anticipated. This can

be due in particular to the long-gestating nature of PPP projects and

the difficulties that this can pose given results needed within a

political cycle.

Risk Management:

(a) The design of this project has been based on lessons learnt from other World Bank PPP Projects

(Bangladesh, India, and Indonesia) which have all confirmed the importance of strong government

capacity to lead the PPP process. Additionally, this design is also based on a number of private sector

consultations which have also outlined the importance of government capacity and PPP project

preparedness, in addition to PPP legislative enabling environment as key challenges to undertaking

PPPs, which are all elements this project is addressing. The passage of legislation to re-inforce the

key tenets of the Policy will be important to ensuring the Policy sustainability beyond a given

administration.

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(b) The capacity of the World Bank to manage multi-sector

program: while FPD will be leading this project, significant

collaboration will be needed with colleagues from other sectors such

as the Sustainable Development Network (SDN), the Human

Development Network (HDN), the International Finance

Corporation (IFC) and the Poverty Reduction and Economic

Management Network (PREM).


Date:

Status: Not Yet

Due

Risk Management:

(b) The World Bank team has worked cooperatively with all key departments and specialist to

prepare this project where colleagues from other departments have been active members in this

project. While oversight and implementation will be managed by AFTFP, PPP transactions covered

under this project will be co-managed by sector units and departments.

Resp: Bank Stage: Implementation Due

Date:

Status: In Progress

4.2 Social and Environmental Rating High


Adhering to Safeguards: Participating financial intermediaries

and/or MDA#s leading a PPP transaction to be supported by the

Bank do not adhere to safeguards standards acceptable to the World

Bank.

The importance of adherence to social and environmental safeguards has been emphasized through

public consultations held in preparing this project. As a result of these discussions, MoFEP have

agreed to incorporate World Bank safeguards standards into all its PPP transactions supported by this

project. To do so, MoFEP has indicated its preparedness to second\hire a full-time safeguards

specialist to ensure adherence to these policies. Furthermore, an Environmental and Social

Management Framework (ESMF) and Resettlement Policy Framework (RPF) have been prepared

and disclosed on November 22, 2011 in line with World Bank guidelines. These documents outline

the safeguards procedures that must be followed for any PPP transaction for this project.

In addition to these activities, the project has allotted money and initiated select Strategic

Environmental Assessments (SEAs) to provide a more thorough treatment of safeguard issues. These

SEAs will provide a more robust safeguards treatment of the infrastructure interventions being

covered through the PPP Program. This adheres to international best practices and is intended to

reinforce further the GoG‘s strong support of safeguard policies.


Date:

Status: In Progress

4.3 Program and Donor Rating Low


Donor Collaboration: The only active donor in PPPs in Ghana is

DFID who are providing TA and Capacity Building support for

PPPs to the PFA unit under the PID in MoF. The World Bank and

The project will ensure that regular consultations with donors take place. A workshop in Accra took

place in October 2011 to all donors (DFID; SECO; GIZ and the European Commission) and

confirmed their support to the project.

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DIFD have been working closely and in coordination on the PPP

agenda. Furthermore, GIZ, European Commission and SECO have

showed interest in working with the World Bank to support Ghana

PPP Agenda.

Resp: IDA Stage: Preparation Due Date: Status: In Progress

4.4 Delivery Monitoring and Sustainability Rating Moderate

Description:

(a) Due Diligence of PPP Projects: Currently there is no structure in

place to ensure that projects are carefully designed based on value

for money. MDAs are undertaking PPP projects with no guidelines

and thus with minimum due diligence being undertaken. While

APL1 provides financing to support undertaking the relevant pre and

full feasibility studies for PPP projects, there is a risk of the non

sustainability of this support to line MDAs if the government does

not capitalize the Project Development Facility (PDF) stipulated in

the National Policy on PPP which will be the instrument to

encourage MDAs to undertake the required PPP due diligence.

(b) Fiduciary management of the project (Fiscal Commitments and

Procurement): the Government may not have a Fiscal Management

Framework and monitoring system in place prior to expanding its

portfolio of bank-funded PPP transactions. Additionally, and as

currently happening, the Government can continue to receive

unsolicited bids that may derail the PPP agenda from its competitive

procurement process.

Risk Management:

(a) Under the PPP Policy, and as will be confirmed by the PPP Law, the institutional structure under

the PID will include a PFA unit which will be the gatekeeper of the PPP process, thus will ensure that

projects are designed based on a Value for Money and Affordability. Additionally, APLI will support

• the development of the guidelines and operational manuals to ensure a PDF is in place.

Resp: Client Stage: Implementation Due Date: Status: In Progress

Risk Management:

(b)Throughout project preparation, the Government has been informed of the importance of closely

managing Fiscal Commitments from PPPs. The importance of this topic is also outlined in the

recently approved National Policy on PPP. The project design takes into account capacity building to

both the Budget Division and the Debt Management Division that is necessary to implement a proper

financial management framework as transactions come online.

Resp: Client Stage: Implementation Due Date: Status: Not Yet

Due

5. Overall Implementation Risk

Substantial

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Annex 5: Implementation Support Plan


1. The strategy for project implementation support has been adapted to the client government‘s

characteristics and implementation capacities. Taking into account the political economy context and

the risks and challenges mentioned in the ORAF, the following aspects have been considered:

Weak institutional and fiduciary capacity for project implementation might delay the

implementation process.

Participation of several Government MDAs might cause bottlenecks and hold back smooth

implementation.

Presidential elections and change in administration during project time might slow down

implementation.

2. The implementation will be supported by the Bank team through the following activities:

Fiduciary staff of project implementation and project execution units have received additional

financial management and procurement training during the preparation of the project

There will be supervision missions at least twice a year and frequent dialogue with the client

led by the TTL and the team.

Based on the recommendations of the procurement assessment, the official implementation

supervision mission will be carried out twice each year, when post-review of procurement

actions will be done. The procurement post-reviews would cover 100 percent of contracts

subject to post-review. Post review will consist of reviewing technical, financial and

procurement reports carried out by MoFEP/PID and/or consultants selected and hired under

the PPP Project according to procedures acceptable to the Bank.

Based on the recommendations of the FM assessment, it is expected that in the first year of

implementation there will be two onsite visits to ascertain adequacy of systems and how

effective the country systems are being used to support implementation. The FM supervision

mission‘s objectives will include ensuring that strong financial management systems are

maintained throughout project tenure. In adopting a risk-based approach to FM supervision,

the key areas of focus will include assessing the accuracy and reasonableness of budgets, their

predictability and budget execution, compliance with payment and fund disbursement

arrangements, and the ability of the systems to generate reliable financial reports.

The fiduciary team based in the country office will give day-to-day fiduciary assistance and

will coordinate upcoming issues with the TTL

There will be at least one official financial management and procurement review per year

A mid-term review on about 24 months after project effectiveness will be carried out to assess

the progress of the project against the PDO.

Review of the interim financial reports review (IFRs) that are to be submitted quarterly.

3. World Bank Team Skills Mix Required

Skills Needed Number of Staff

Weeks/year

Number of Trips Comments

Task Team Leader 10 2 per year Dialogue and supervision

and Mid-term review

PPP Specialist 5 2 per year Supervision and

Technical input

Transaction Specialist (GET PPP) 3 1 per year Midterm Review

Financial Institutions Specialist

(FCMNB)

6 2 per year Dialogue and supervision

Road (SDN) specialists 3 1 per year Dialogue and Supervision

Ports (SDN) Specialist 3 1 per year Dialogue and Supervision

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Health (SDN) Specialist 3 1 per year Dialogue and Supervision

PREM support on Fiscal Risk 2 1 per year Dialogue and Supervision

Financial Management Specialist 5 As necessary FM supervision &

support

Procurement Specialist 5 As necessary Technical and

procurement review of

bidding documents ; and

Procurement supervision

& support

Safeguard Specialist 5 As necessary Supervision and Midterm

Review

M&E Specialist 4 As necessary Supervision

4. Other World Bank Group Partners

Skills Needed Number of Staff

Weeks/year

Number of Trips Comments

International Finance

Corporation (IFC) –

Advisory and Investment

As Required As Required support to specific

transactions.

Multilateral Investment

Guarantee Agency

(MIGA)

As Required As Required Potential guarantee

Support to specific

transactions.

World Bank Institute

(WBI)

10 2 per year PPP Institutional and

Capacity Building

5. International Partners

Name Institution/Country Role

DFID UK The only currently active donor in PPPs in Ghana is

DFID who are providing TA and Capacity Building

support for PPPs to the PFA unit under the PID in

MoFEP.

The World Bank and DIFD have been working

closely and in coordination on the PPP agenda

through the current PPP component under the World

Bank EMCB project. DFID‘s support has been

confirmed during the identification and preparation

of this project. Furthermore the World Bank is

providing technical and supervisory support to the

DFID PPP activities through an Externally Funded

Operations (EFO) arrangement.

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Annex 6: Sector Policy Letter provided by the GoG (includes The National Policy on

PPP)


78

REPUBLIC OF GHANA

NATIONAL POLICY ON PUBLIC PRIVATE PARTNERSHIPS

Private Participation in Infrastructure and Services for Better Public Services Delivery

Acronyms and Abbreviations

BOT Build, Operate, Transfer

DMD Debt Management Division

GoG Government of Ghana

IFF Infrastructure Finance Facility

MDAs Ministries, Departments and Agencies

MMDAs Metropolitan, Municipal and District Assemblies

MoFEP Ministry of Finance and Economic Planning

NDPC National Development Planning Commission

NIP National Infrastructure Plan

PAU PPP Advisory Unit

PDF Project Development Facility

PFA Project and Financial Analysis Unit

PID Public Investment Division

PMU Project Management Unit

PPP Public-Private Partnership

SME Small and Medium Enterprises

SPV Special Purpose Vehicle

VGS Viability Gap Scheme

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INTRODUCTION

1. The provision of public infrastructure and services is one of the prime mandates of Governments

all over the world. Infrastructure (roads, power, rail, water and sanitation, sea and airports, among

others) is a fundamental prerequisite for economic growth and development. In addition, social

and community infrastructure including education and health facilities, public housing and

buildings, cultural facilities and environmental infrastructure are essential in modern societies.

All across the world studies have consistently shown the close relationship between infrastructure

and economic output.

2. However, fiscal constraints experienced by countries have resulted in the development of new

and innovative approaches to the provision and financing of public infrastructure and services.

The traditional role of the Government as the primary infrastructure and public service provider is

gradually being supplemented with private sector expertise and financing. Accordingly, the

Government is implementing a combination of policy and legal reforms, financing mechanisms,

incentives and institutional support to bolster private sector participation in provision of public

infrastructure and services.

3. The adoption of a Public Private Partnership (PPP) framework therefore reflects the

Government‘s desire to improve the quality, cost-effectiveness and timely provision of public

infrastructure and services in Ghana. The Government is mindful that PPPs are not a panacea for

all public infrastructure investment needs and therefore the PPP Framework should be viewed as

a complement to and not a substitute for the Government‘s continued commitment to open up key

service markets to competition. PPPs should only be considered where they can provide greater

value for money than other fully-private or fully-public service delivery options.

4. The private provision of public infrastructure and services has the potential to offer enhanced

value for money and enables the Government to use the private sector‘s delivery and project

completion expertise and capability for the benefit of the people. In addition, it helps the

Government better understand the whole of life cycle cost of investments and enables a more

rigorous project assessment and sharing of risk with the private sector.

5. Experience worldwide suggests that a comprehensive policy, supported by the requisite legal and

regulatory framework, financial and other incentives, guidelines and commitment by government

contributes to promoting PPPs. The Government of Ghana (GoG) is committed to establishing a

clear financial, legal and transparent administrative framework and eliminating obstacles to PPP

arrangements. In 2004, Ghana developed PPP policy guidelines13

. However these were not

operationalised. This current policy framework is enhanced and harmonised with the 2004 Policy

Guidelines.

6. This PPP framework therefore guides the PPP development process and is aimed at providing

certainty to all stakeholders that the GoG is committed to partnering with the private sector for

the delivery of public infrastructure and services. The Government is confident that using the PPP

modality, the private sector can offer a dynamic and efficient way to deliver and manage

infrastructure, ensuring high standards of construction and maintenance. Through PPPs the

Government intends to harness this dynamism to support Ghana‘s development objectives so that

13

Government of Ghana, Ministry for Private Sector Development and Presidential Special Initiatives, Policy

Guidelines for the Implementation of Public-Private Partnerships in Ghana, (approved by Cabinet) 2004

80

future generations can gain the benefits of modern services, improved living standards and

reduced poverty.

THE CONCEPT

Definition of PPP

7. A PPP is a contractual arrangement between a public entity and a private sector party, with clear

agreement on shared objectives for the provision of public infrastructure and services traditionally

provided by the public sector. Usually, in a PPP arrangement, the private sector party performs

part or all of a government‘s service delivery functions, and assumes the associated risks for a

significant period of time. In return, the private sector party receives a benefit/financial

remuneration (according to predefined performance criteria), which may be derived:

entirely from service tariffs or user charges;

entirely from Government budgets, which may be fixed or partially fixed, periodic

payments (annuities) and contingent; or

a combination of the above

8. The benefits of PPPs include the following:

(a) Accelerated delivery of needed infrastructure and public services on time and within budget.

(b) Encouraging the private sector to provide innovative design, technology and financing structures.

(c) Increased international and domestic investment.

(d) Risk sharing by government with private sector partners.

(e) Ensuring good quality public services and their wider availability.

(f) Real financial benefits reflected in reduction in the initial public capital outlay, and a better

utilization and allocation of public funds.

(g) Economic growth and increased and wider employment possibilities.

(h) Technology transfer and capacity building.

(i) Improved operation and maintenance of public infrastructure.

9. There are several well-defined models of PPPs, differing in purpose, service scope, legal structure

and risk sharing, and increasingly, permutations and combinations of them. Specific forms of PPP

are often referred to by special names. However, a single PPP can have the characteristics of

several different forms and new types may emerge from time to time. One end of the spectrum

could be an outsourcing of some routine operation, while the other could involve the private

sector conceiving, designing, building, operating, maintaining and financing a project, thereby

assuming a considerable proportion of risks. For the sake of clarity privatization is not a PPP.

Also outsourcing without a significant transfer of risk to the private sector over a period of time is

not a PPP.

Objectives of the PPP Policy

10. The key objectives of this policy are to:

(a) Leverage public assets and funds with private sector resources from local and international

markets to accelerate needed investments in infrastructure and services;

(b) Encourage and facilitate investment by the private sector by creating an enabling environment for

PPPs where value for money for government can be clearly demonstrated;

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(c) Increase the availability of public infrastructure and services and improve service quality and

efficiency of projects;

(d) Ensure attainment of required and acceptable local and international social and environmental

standards

(e) Protect the interests of all stakeholders including end users, affected people, government and the

private sector;

(f) Set up efficient and transparent institutional arrangements for the identification, structuring and

competitive tendering of PPP projects;

(g) Provide a framework for developing efficient risk sharing mechanisms;

(h) Encourage and promote indigenous Ghanaian private sector participation in the delivery of public

infrastructure and services

11. This Policy is therefore structured to encourage the provision of a wide variety of quality and

timely public infrastructure and services. This will be achieved through faster project

implementation, maximum leveraging of public funds, enhanced accountability and a shift to

whole-life cycle costing and infrastructure management by the private sector.

Guiding Principles for PPPs

12. All PPP arrangements in Ghana shall be guided by the following principles:

Value for money: Value for money is paramount and PPPs should give greater value for money than

the best realistic public sector project designed to achieve similar service outputs. Achieving value for

money is a key requirement of government at all stages of a project‘s development and procurement

and is a combination of the service outcome to be delivered by the private sector, together with the

degree of risk transfer and financial implications for government. Value for money is the driver for

adopting the PPP approach, rather than capital scarcity or the balance sheet treatment.

Risk allocation: An efficient risk allocation is vital in determining whether value for money can be

achieved in PPP projects. GoG‘s principle with regards to risk allocation shall be used to optimise,

rather than maximise, the transfer of project risks to the private party. Risks will therefore be

allocated to the party best able to control and manage them in such a manner that value for money is

maximised. The allocation of risk will therefore determine the chosen method of private sector

involvement and allocation of responsibilities, which shall take into account the protection of the

public interest.

Ability to pay: End user ability to pay shall be a key consideration for all PPP projects. The PPP

option must demonstrate long-term affordability to the public and overall Government budgetary

sustainability, forward commitments in relation to public expenditure and the potential for returns on

private sector investment, given other priorities and commitments.

Local content & technology transfer: PPP projects shall be structured to encourage the maximum

use of local content and technology transfer. As much as possible, the PPP arrangement shall

facilitate the promotion of local industries and the private sector in Ghana.

Safeguarding Public Interest and Consumer Rights: GoG is committed to ensuring that each PPP

project shall have positive impact upon the public interest. The following principles shall be

addressed in PPP transactions:

o Safeguards to users particularly vulnerable groups;

o Setting affordable user charges and tariff structures

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Environmental, Climate and Social Safeguards: The Government shall ensure that PPP activities

conform to the environmental laws of Ghana and the highest standards of environmental, climate and

social safeguards.

13. Furthermore, all PPP projects shall be governed in accordance with the following:

Clear objectives and output requirements: PPP projects shall take into account the expected

outputs of each project, allowing for optimal risk transfer to the private party and thereby ensure

greater value for money for the public sector.

Accountability: As a means of good governance PPP projects must ensure accountability:

o Every stage of the PPP arrangement shall follow laid-down procedures and regulations.

o Decisions must be objective and in consonance with law and government policies.

o Public sector entities undertaking PPPs must follow prescribed processes for decision-making

within their organizations.

Transparency: Principles of transparency shall guide all PPP projects:

o There must be a well-defined procurement process for the PPP. Instructions to bidders must

be clear and unambiguous to prevent manipulation or abuse of the process. The bid

conditions and evaluation criteria must lead to the attainment of value for money, economy,

and efficiency and must be made available to all interested private sector parties.

o Where a decision is taken to consider an unsolicited bid, there must be clear and objective

reasons supporting the decision which shall be in conformity with this policy.

o The process shall be accessible to the public to the extent allowed by law except where

national security would be prejudiced.

o Equal opportunity and access to information must be given to all interested bidders.

Competition: As much as feasible all PPP projects should be subjected to a competitive process so as

to obtain value for money and efficiency.

Contracting Authority, ownership and commitment: Contracting Authorities shall have the

primary responsibility for managing the process and implementing the project.

Stakeholder Consultation Process: Contracting authorities shall ensure adequate stakeholder

consultation, understanding and support in advance of entering into a PPP arrangement and shall

endeavour to identify relevant stakeholders and undertake comprehensive consultation and awareness

of PPP projects under consideration.

Scope of PPP Projects

14. This Policy shall apply to all sectors and levels of government and shall be pursued where they

represent priority projects, are affordable to the government and consumers, represent value for

money and allow for appropriate risk transfer.

15. Sector specific PPP policies may be developed to accommodate the needs of specific sectors

consistent with the overall GoG PPP Policy.

ROLES AND RESPONSIBILITIES

The Parties

16. PPPs allow each partner to concentrate on activities that best suit their skills. For the public sector

this not only means planning and identifying infrastructure and public service needs and focusing

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on developing national and local sector-specific policies, but also overseeing these and enforcing

the PPP agenda.

17. For the private sector, the key is to deliver effectively the infrastructure and facilities required by

the public sector and consumers at the project level. Usually, in a PPP arrangement, the private

sector party provides the design, construction, operation, management, maintenance and

financing for the partnership project, and is paid according to performance. Risks are identified

and placed with the party best able to bear and manage them at lowest cost.

Government Support

18. Government shall deploy a range of instruments to support project preparation and financial

viability of projects, including the following:

a. Project Development Facility (PDF)

The GoG shall establish a PDF in line with the emerging PPP programs. The PDF shall operate according

to standard operating procedures and guidelines issued for PDF managers and users/beneficiaries. The

PDF shall finance upstream investment appraisal, value for money assessments and other feasibility and

safeguard studies. In addition it shall support the financing of transaction advisors for undertaking project

and transaction structuring and implementation up to the signing of the contractual arrangements with the

private investor(s). This may be a revolving fund with the third party costs being reclaimable from

winning bidders in some instances, particularly where projects reach financial close.

b. Viability Gap Scheme (VGS)

GoG shall support projects that fall within its national development agenda and are economically justified

but not financially viable. The GoG shall establish a VGS in line with the emerging PPP programme

which shall operate according to standard operating procedures and guidelines issued for VGS managers

and users/beneficiaries. The VGS aims at providing rule-based incentives for PPP projects that are

economically justified but financially not feasible without reasonable support of their investments or

operation.

c. Infrastructure Finance Facility (IFF)

To be successful, PPPs require fixed rate long-term financing preferably in local currency. GoG shall

establish an IFF which may be a fund or a company, to raise the requisite long-term financing with

government support for on-lending at commercial rates to the private sector partner for PPP projects.

Detailed guidelines shall be issued on the intended Government Support for PPP projects following their

establishment.

Key Institutions

19. The GoG shall establish institutional arrangements for the successful implementation of PPP

programmes. These institutional arrangements shall support the following broad functions:

PPP policy development, dissemination, monitoring and enforcement.

Individual project sponsorship, design, preparation and execution.

Financial management of funded and contingent obligations

Gate-keeping and approval functions, and

PPP project advice, support and promotion

20. The following institutions shall play key roles in these arrangements:

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The Ministry of Finance and Economic Planning through relevant divisions/units, including:

o Public Investment Division

o The Project and Financial Analysis (PFA) Unit

o The PPP Advisory Unit (PAU)

o Debt Management Division (DMD)

o The Budget Division

o The Legal Division

The National Development Planning Commission (NDPC)

Government Contracting Authorities (Ministries, Departments and Agencies and Metropolitans,

Municipalities and District Assemblies)

General Assembly of Metropolitans, Municipalities and District Assemblies

Public Procurement Authority

Ministry of Trade and Industry

Cabinet

Parliament

PPP Approval Committee

Attorney General‘s Department

Regulatory Authorities (e.g. Public Utilities Regulatory Commission, Water Resources

Commission, Ghana Railway Development Authority etc.)

Ministry of Finance and Economic Planning

21. The Ministry of Finance and Economic Planning (MoFEP) through its Public Investment

Division (PID) is spearheading the development of PPP and is responsible for developing the

legal, institutional, and regulatory framework for the PPP programme. MoFEP is also responsible

for the issuing of Standardised PPP provisions and PPP Manual/Guidelines for effective

management of PPP Projects.

22. The PID of MoFEP through its PFA Unit and PAU shall act as gatekeeper and provide advisory

services and support to MDAs and Contracting Authorities in the public sector respectively.

Project and Financial Analysis Unit

23. There shall be a unit in MoFEP responsible for project and financial analysis of projects. The

PFA Unit shall serve as the secretariat to the PPP Approval Committee and be responsible for the

systematic coordination of all the different activities which would be required within and outside

of MoFEP as part of the gate keeping review and approval process.

24. The specific functions of the PFA Unit under the PPP process shall be to:

Screen PPP projects to ensure consistency with the National Infrastructure Plan (NIP) and

government policy;

Verify that the use of the PPP option is preferable and beneficial relative to direct public

investment;

Ensure financial viability and economic soundness (Value for Money) of PPP projects;

Examine the robustness of PPP contracts over the long term before they are signed; and

Ensure compliance with good PPP procurement processes;

Oversee the management and compliance of PPP Agreements/Concessions

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PPP Advisory Unit

25. The PAU shall be a unit within MoFEP. PAU shall promote the flow of bankable, viable and

sustainable PPP projects that further the National Policy on PPP.

26. The PAU shall have the following responsibilities:

Provide value added advice and support to the MDAs and other Contracting Authorities in the

public sector to enhance the identification, preparation of feasibility analysis, structuring,

negotiations and procurement of PPP projects;

Build capacity among public sector stakeholders, and MDAs, to enable them to lead the

implementation of a PPP project from start to finish in a professional and technically competent

manner;

Promoting awareness and understanding of Ghana‘s PPP programme in order to encourage the

use of PPP for selected appropriate projects;

Act as a centre of excellence for PPPs in Ghana.

Provide assistance to MDAs and other Contracting Authorities that want to promote PPPs in their

respective sectors and developing in collaboration with the PFA Unit, Model Agreements for that

sector;

Assist MDAs and other Contracting Authorities in understanding approval requirements for

PPPs, and developing necessary documents for review.

Debt Management Division

27. The DMD within MoFEP shall ensure fiscal sustainability for PPP projects, considering both

direct and contingent liabilities on government‘s finances including guarantees, arising from each

PPP project. Specifically, the DMD will be responsible for:

Fiscal impact: assessing and managing the long-term fiscal risks and impact of the PPP project

(direct or contingent, explicit or implicit) and determining whether it is acceptable, given other

priority national needs;

Government support: confirming the appropriateness of the project for sovereign guarantees

(debt or specific-event) or other kinds of government support.

Budget Division

28. The Budget Division shall establish processes to incorporate PPP project development into the

annual budgeting exercise, and fund direct as well as contingent (unanticipated) calls on the

budget. The Division shall therefore ensure that any payments to be made by MDAs under the

PPP contract are consistent with the national budget.


29. A PPP Approval Committee shall be established for the purpose of considering requests by

contracting entities to undertake PPPs and shall be the approving authority for PPPs subject to the

provisions of the Approval Schedule to this Policy and detailed regulations to be promulgated.

30. The members of the PPP Approval Committee shall comprise but not be limited to the following:

Minister responsible for Finance (in the Chair)

Chairman of the National Development Planning Commission (NDPC)

Minister of Justice and Attorney General,

Minister of Trade and Industry,

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Chief Executive of Ghana Investment Promotion Centre

Chief Executive Public Procurement Authority and

Minister of the Contracting entity or where there is no sector Minister, the Head of the

contracting entity as co-opted member or their designated representatives.

31. The PPP Approval Committee shall be serviced by the PFA Unit of MoFEP which shall serve as

the secretariat to the Committee. The PPP Approval Committee may co-opt experts as necessary.

Ministry of Trade and Industry

32. The Ministry will facilitate the participation of SMEs in the PPP Process through the promotion

of indigenous Ghanaian enterprises through effective capacity building activities and creating

awareness in the SMEs.

Cabinet

33. Cabinet shall be the approving authority for PPPs subject to the provisions of the Approval

Schedule to this Policy and detailed regulations to be promulgated.

General Assembly of the MMDA

34. The General Assembly of the MMDA through a formal session shall be the approving authority

for PPP projects carried out by MMDAs subject to the provisions of the Approval Schedule to

this Policy and detailed regulations to be promulgated.

Parliament

35. Parliament shall be the final approving authority for PPP projects where PPP Projects require the

approval of Parliament subject to the provisions of the Schedule to this Policy and detailed

regulations to be promulgated. This is to ensure the protection of public interest.

National Development Planning Commission

36. The NDPC in collaboration with Contracting Authorities shall prepare the National Infrastructure

Plan (NIP). Every PPP project initiated by Contracting Authorities shall emanate from this plan

or the approved development plan of the Contracting Authority, if not; prior approval should be

sought from NDPC.

Government Contracting Entities

37. The implementing entities shall be the implementing Contracting Authorities under GoG. MDAs,

MMDAs and other contracting entities shall be required to develop capability in PPP

development with support from PAU. Where appropriate, Contracting Authorities, especially

sector Ministries shall be encouraged to set up Project Management Units (PMUs), particularly to

assist in the project identification, needs and options analysis, initial definition of PPP concept

and PPP Contract Management, Monitoring, Reporting and Evaluation.

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Attorney-General’s Department

38. The Attorney General‘s Department with the assistance and advice of MoFEP‘s Legal Division

shall ensure the conformity of all project agreements with Ghanaian law.

Regulatory Authorities

39. Regulatory authorities shall ensure that the PPP contract, insofar as it will have an impact on

customer tariffs, is consistent with and furthers good regulatory principles.

Legal Framework

40. Government shall provide a credible and conducive legal and regulatory framework to guide the

PPP process in the Country. These shall be designed to ensure that relevant principles including

competition, local content, environmental safeguards, predictability and transparency are

reflected in the PPP legal and regulatory frameworks. Until the PPP law is enacted, PPP projects

shall be guided by this policy and to the extent applicable existing public procurement

regulations.

Risk Sharing and Management Framework

41. Unlike public procurement where government bears all or most of the risks, the risks in PPP

projects are allocated to the party (private or public) which is best placed to manage it.

42. A risk management framework shall be instituted to cover generic risk and the principles of

dealing with them. The feasibility study for each PPP project shall clearly identify and propose

allocation of all specific and major project risks, as well as generic risks. The contractual

arrangement for each PPP project shall be based on the risk allocation profile. A framework for

managing the fiscal risk associated with guarantees issued to infrastructure PPP projects shall be

developed. Government support may be available if the risk profile so requires.

THE PPP PROCESS

The PPP Project Process for Government Originated Projects

43. PPPs involve a number of players from different sectors, representing a variety of interests, and

thus the partnership needs to be formalized and processes need to be followed in a systematic and

transparent way. Detailed documentation need to be prepared at all phases of the PPP project. It is

important to note that PPPs can take a long time to procure if these processes are not carefully

followed. PPP projects shall be selected from sectors which have been identified within the

National Infrastructure Plan (NIP) and have the potential for development under PPP. To improve

credibility and transparency at all phases of project development, the input of both government

and the private party shall be assessed in terms of their compliance with the legislation,

regulations and the PPP process and its components, including the bidding process, local content

and the formation of Special Purpose Vehicles (SPVs).

44. MDAs and Contracting Authorities (assisted by PAU and/or qualified and experienced

transaction advisors as appropriate) shall go through the following steps to ensure that PPPs are

carried out rigorously:

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a. Project Inception

45. As soon as an MDA or MMDA (Contracting Authority) identifies a project that may be

concluded as a PPP, the institution must in writing accompanied by a Project Brief/Concept Note.

Register the project with MoFEP-PID;

Inform MoFEP-PID of the expertise within that institution to proceed with the project;

Appoint a Project Officer from within or outside the institution; and

Appoint a Transaction Advisor if MoFEP-PID so requests.

b. Pre-Feasibility Study – Approval I

46. To determine whether the proposed PPP is in the best interest of the government, the Contracting

Authority must undertake a pre-feasibility study that:

Makes a business case in terms of:

o Explaining the strategic and operational benefits of the proposed PPP for the Contracting

Authority in line with its strategic objectives;

o Demonstrating the alignment of the project with the NIP and government policy;

Describes in specific terms

o In the case of a PPP involving the performance of the Contracting Authority‘s function,

the nature of the Contracting Authority‘s function concerned and the extent to which this

institutional function, both legally and by nature, may be performed by a private party;

and

o In the case of a PPP involving the use of state property, a description of the state property

concerned, the uses (if any) to which such state property has been subject prior to the

registration of the proposed PPP, and a description of the types of use that a private party

may legally subject such state property to;

Indicates the possible location(s) and provides estimates of broad project costs, and an initial

indication of whether the project is likely to be viable and affordable.

47. All sector Ministries through their PMUs shall have the responsibility for the review and approval

of pre-feasibility studies for Contracting Authorities under their respective sectors.

48. The approval referred to in paragraph 47 shall be regarded as Approval I.

49. No Contracting Authority may proceed with the full feasibility phase of a PPP without a prior

written approval of their sector Ministry-PMU and a concurrent review by MoFEP-PID of the

pre-feasibility study.

c. Feasibility Study – Approval II

50. Subsequent to Paragraph 49, a Contracting Authority shall undertake and submit to MoFEP-PID a

full feasibility study and appraisal of the proposed project. The full feasibility report should –

In respect to a PPP project pursuant to which the Contracting Authority will incur any financial

commitments, demonstrate the affordability of the PPP for the institution;

Set out the proposed allocation of financial, technical and operational risks between the institution

and the private party;

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Demonstrate the anticipated value for money to be achieved by the PPP;

Provide detailed estimates of viability gap and the need for incentives; and

Explain the capacity of the institution to procure, implement, manage, enforce, monitor and report

on the PPP.

51. The Contracting Authority may request funding from the PDF to carry out the feasibility study.

Where appropriate, the Contracting Authority, in consultation with MoFEP-PID, may include the

feasibility study in its procurement process and pass on the cost to the private sector.

52. A Contracting Authority shall not proceed with the procurement phase of a PPP project without a

prior written approval of the PPP Approval Committee of the feasibility study, where the PPP

involves projects with estimated project costs of up to Fifty Million Ghana Cedis

(GH₵50,000,000) but exceeds Two Million Ghana Cedis (GH₵2,000,000). Where the PPP

involves projects with estimated project costs of above Fifty Million Ghana Cedis

(GH₵50,000,000) Cabinet shall approve the feasibility study based on recommendation from the

PPP Approval Committee. Where the PPP involves projects with estimated project costs of Two

Million Ghana Cedis (GH₵2,000,000) and below, MoFEP-PID shall approve the feasibility

study. All approvals shall be communicated to Cabinet on a quarterly basis.

53. The approval referred to in paragraph 52 shall be regarded as Approval II.

d. Procurement – Approval IIIA and IIIB

54. Prior to the issuing of any procurement documentation for a PPP to any prospective bidders, the

Contracting Authority must obtain approval from MoFEP-PID for the documentation, including

the draft PPP Agreement/Concession.

55. A MoFEP-PID approval referred to in paragraph 54 shall be regarded as approval IIIA.

56. The procurement procedure

Must be in accordance with a system that is fair, transparent, competitive and cost-effective;

Must ensure that PPP activities that are within the scope of public procurement shall be

undertaken under the Public Procurement Act; and

Must encourage the maximum use of local content and transfer of technology.

57. After the evaluation of bids, but prior to appointing the winning bidder, the Contracting

Authority must submit an evaluation report for review and recommendation by MoFEP-PID to

the Approving Authority for PPPs subject to the provisions of the Approval Schedule to this

Policy and detailed regulations to be promulgated to approve the Winning Bidder –

o demonstrating how the criteria of affordability, value for money and substantial technical,

operational and financial risk transfer were applied in the evaluation of the bids; and

o demonstrating how the criteria of affordability, value for money, and risk allocation were

satisfied in the winning bid, and including any other information as required by MoFEP.

58. The approval referred to in paragraph 57 shall be regarded as approval IIIB.

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e. Contracting PPP Agreements/Concessions – Approval IV

59. After the procurement process has been concluded but before the Contracting Authority

concludes a PPP Agreement/Concession, the Contracting Authority must obtain approval from

the Approving Authority for PPPs subject to the provisions of the Approval Schedule to this

Policy and detailed regulations to be promulgated–

that the PPP Agreement/Concession meets the requirements of affordability, value for money

and substantial technical, operational and financial risk transfer as approved in terms of

paragraph 55;

for a Management Plan that explains the capacity of the Contracting Authority and its

proposed mechanisms and procedures to effectively implement, enforce, monitor and report

on the PPP; and

that a satisfactory due diligence, including a legal due diligence, has been completed in

respect of the Contracting Authority and the proposed private party in relation to matters of

their respective competence and capacity to enter into the PPP Agreement/Concession.

60. The approval referred to in paragraph 59 shall be known as approval IV. This shall be considered

as the final approval of the PPP Process.

61. PPP projects involving financial transactions that require Parliamentary approval must first

receive MoFEP-PID reviews and approvals, General Assembly of the MMDAs, PPP Approval

Committee and Cabinet final approvals before it is submitted to Parliament for such approval.

f. Process for Unsolicited Proposals

62. Government‘s policy on unsolicited proposals aims to balance its desire to stimulate innovation

and to create new opportunities for the private sector, with the need to ensure that the

Government and consumers get value for money in PPP transactions in a competitive

environment. Unsolicited proposals shall only be considered based on guidelines to be issued and

the dictates of the NIP.

63. All unsolicited proposals shall be considered on a case-by-case basis and shall be limited to

projects that are NOT in the project list of any Contracting Authority, has not already been

considered by the Contracting Authority and that demonstrate genuine and substantial innovation

and are supportive of public policy. In addition, the unsolicited proposal should be consistent with

the national development agenda, serve the public interest, needs and priorities of the Contracting

Authority as well as long-term strategic plan for investment in that sector.

64. The criteria for considering unsolicited proposals shall be provided in the PPP Manual/Guidelines

and the Standardised Provisions. In all circumstances, unsolicited PPP projects shall be subject to

a value for money, technical, financial and economic assessment. Criteria shall be developed to

prescribe circumstances under which unsolicited proposals shall be subjected to competitive

process.

65. In general, the Government shall verify project performance including viability with the

assistance of independent transaction advisors.

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PPP CONTRACT MANAGEMENT

Management of PPP Agreements/Concessions

66. A Contracting Authority that is party to a PPP Agreement/Concession is responsible for ensuring

that the PPP Agreement/Concession is properly implemented, managed, enforced, monitored and

reported on, and must maintain such mechanisms and procedures as approved in approval IV for

Measuring the outputs of the PPP Agreement/Concession;

Monitoring the implementation of the PPP Agreement/Concession and performances under

the PPP Agreement/Concession;

Liaising with the private party;

Resolving disputes and differences with the private party;

Generally overseeing the day-to-day management of the PPP Agreement/Concession; and

Reporting on the PPP Agreement in the Contracting Authority‘s Annual Report.

67. A PPP Agreement/Concession involving the performance of a Contracting Authority‘s function

does not divest the Contracting Authority concerned of the responsibility for ensuring that such

institutional function is effectively and efficiently performed in the public interest or on behalf of

the public service.

68. A PPP Agreement/Concession involving the use of state property by a private party does not

divest the Contracting Authority concerned of the responsibility for ensuring that such state

property is appropriately protected against forfeiture, theft, loss, wastage and misuse.

69. Government shall take steps to institute mechanisms to ensure that its financial obligations under

PPPs are settled in a timely manner.

Amendment and Variation of PPP Agreements/Concessions

70. A prior written approval of MoFEP-PID is required for any material amendments to a PPP

Agreement/Concession, including any material variation to the outputs or any waivers

contemplated or provided for in the PPP Agreement/Concession.

71. MoFEP-PID will approve a material amendment only if it is satisfied that the PPP

Agreement/Concession, if so amended, will continue to provide –

Value for money;

Affordability; and

Substantial technical, operational and financial risk transfer to the private party.

Agreements/Concessions Binding on the State

72. A PPP Agreement/Concession or an agreement amending a PPP Agreement/Concession binds the

state only if the Agreement/Concession was entered into on behalf of the Contracting Authority –

By the Minister, Chief Executive or Chairman of the Board of that Contracting Authority;

and

If all approvals required in terms of this Policy Framework have been granted by the relevant

approving authorities in respect of the PPP.

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REVIEW

73. A comprehensive and regular review of the overall process shall be a core responsibility of

MoFEP. Reviews shall be prepared openly and transparently within an appropriate time-frame.

The review shall specify implications for the procurement of infrastructure and the delivery of

quality services helping to shape the future of the PPP programme.

74. The implementation of, and adherence to, the policy will be monitored and reviewed by MoFEP

in particular, on the consistency of conduct of the PPP process with the policy and the need for

any revisions required to maintain its consistency with ongoing developments and expansion of

Ghana‘s PPP programme.

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APPROVAL SCHEDULE

The exercise of the authority to approve or reject a request by a contracting entity to

undertake a PPP shall be subject to the criteria in this schedule:

Criteria

Approving Authority

Notes

PPPs which requires the

Government of Ghana (GoG) to

comply with Article 174 or 181 of

the Constitution.

Cabinet/Parliament

This shall be applicable

irrespective of the financial

threshold or capital outlay of

the project.

PPP‘s which at project inception

or planning stage involves a total

estimated project cost exceeding

Fifty Million Ghana Cedis

(GH₵50 million).

Cabinet/Parliament

The amount established at

pre-feasibility or feasibility

shall be used to determine

threshold.

PPP‘s whose estimated project

cost do not exceed Fifty Million

Ghana Cedis (GH₵50m ) other

than PPP‘s undertaken by

MMDAs with total estimated

project cost exceeding GH¢2

million





threshold.

PPP‘s undertaken by MMDA‘s

where the total estimated cost

does not exceed:

GH₵0.5 million in the

case of District

Assemblies,

GH₵1 million in the case

of Municipal Assemblies

GH₵2 million in the case

of Metropolitan

Assemblies

General Assembly of the

MMDA (for MMDA Project)




threshold.

NB: The Ministry of Finance and Economic Planning shall communicate all approvals to Cabinet on a

quarterly basis.

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Annex 7: Detailed Outline of APL II


1. This program is designed as an APL in order to tailor World Bank support to a start-up National

PPP Program in a manner that balances: (i) initial absorptive capacity constraints that need to be eased,

with; (ii) the requirement to address financing gaps that currently exist for PPPs in a way that mitigates

the financial exposure risk that the World Bank and the client would have under a standard ―Specific

Investment Loan‖ (SIL). More specifically, it ensures that the larger PPP project financing that is

available under the APL Phase II project is only deployed and the associated commitment and service fee

charges incurred once: (i) a clear pipeline of bankable projects has been developed, within: (ii) a

strengthened enabling environment that gives comfort to the private sector that the political and other

risks they are taking on are manageable.

2. Subject to successful progress on Phase I and compliance with the triggers detailed below, the

Phase II of the APL Program will make available infrastructure financing both the public and private

sides of a PPP project through two instruments. A currently estimated US$195 million is potentially

available for this Phase II operation. The first instrument will target the public side of the PPP project by

making resources available for upfront capital expenditures through the Viability Gap Scheme. The

second financial instrument will be a Financial Intermediary Loan (FIL) that will provide long-term debt

financing for eligible financial intermediaries. Subject to GoG compliance with the agreed-upon triggers

included in this proposed operation, this second phase has an anticipated effectiveness date of September

30th, 2012. Listed below are the proposed triggers for Phase II:

a) PPP Law, acceptable to the Association, enacted;

b) The passing of associated regulations in accordance with the PPP Law, acceptable to the

Association;

c) Completion of at least 5 Pre Feasibility Studies (PFSs) by contracting authorities and submitted to

the respective sector Minister, acceptable to the Association;

d) One first-mover transaction for which an EOI for the procurement of the project

sponsors/concessionaires has been issued, acceptable to the Association;

e) Selection of at least two PFIs, acceptable to the Association, after undertaking the relevant due

diligence on their appropriateness.

3. What follows is a summary of the design status of each of the instruments and outstanding issues

to be addressed in order to finalize the work. Final determination of the allocation of the US$195 million

between the VGS and the FIL will be made based on the following criteria: (i) specific financing

requirements of targeted PPP Pipeline; (ii) alternative sources of financing available from GoG and other

donor agencies and their preferences/capacities to direct to VGS and/or FIL. This will be determined in

advance of Phase II activation. Additionally key OP8.30 issues that will need to be addressed in the

preparation work for the FIL component of the APL Phase II program are detailed below in Section C of

this Annex.

A. Viability Gap Scheme (VGS)

4. Rational for a VGS: Given demand estimates and willingness and ability to pay assessments

across many of the infrastructure sectors in emerging and developing markets, it is anticipated that – with

the exception of telecommunications – much of a country‘s core infrastructure will continue to require

substantial public sector investment over the coming phase of development. The capital cost and revenue

structures of many infrastructure developments will preclude wholly commercial financing solutions, but

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do not need to exclude private sector investment and expertise, provided the commercial ―viability gap‖

can be closed.

5. The balancing of social and economic considerations often results in tariff rates for different

infrastructure (power, water, transport) that are not cost recovering. This can be due to limited traffic –

for instance on key road networks – that would imply exorbitant tariff rates for the investment to be viable

with private finance. In other instances, where the end user has become habituated to low prices and poor

service, there may be widespread consumer (ie voter\political) resistance to an abrupt move to higher

tariffs, particularly before there is any credible evidence of improved service. Where this is the case,

private investment is not going to be forthcoming. The Government has two policy routes from which to

choose. It can decide that the investment has sufficiently high social and longer-term economic value to

make it a priority for full public procurement. Alternatively, it can decide to consider a PPP that would

require a public contribution – either in the form of an upfront capital investment and\or transfers over the

life of the prospective PPP contract. In both cases, the objective is to close a ―viability gap‖ and provide a

potential profit margin to the transaction sufficient to crowd-in private investors.

6. For a VGS to effectively perform its function there must be thorough screening for VGS

eligibility. First there must be robust determination as to whether an investment is justified from an

economic viewpoint and then an assessment whether it is suitable for a PPP structure. In line with the

proposed Ghana Policy on PPPs 14

this assessment is contained in what is referred to as a ―Pre-feasibility

Study‖. The Pre-feasibility Study entails the standard cost-benefit analysis to determine the overall

economic merits. Then a ―value-for-money‖ (VfM) exercise to determine if there is a PPP arrangement

that could deliver the investment at an overall lower cost and better service quality through the

involvement of private operators and financiers versus a strictly public financing arrangement. The Pre-

feasibility Study is a fundamental first step in determining the public merit of an investment, the PPP

rationale and to lay the foundation for the detailed PPP project development, structuring and financing

that would then follow. As described in the National Policy on PPPs, the Pre-Feasibility Study also

makes a rough estimate on the amount of VGS funding needed based on certain analysis and investment

projections.

7. VGS Design Features: One option for the Government of Ghana would be to develop a central

VGS Scheme that resembles the structure used in India15

. A centralized VGS model suits Ghana‘s PPP

Program since:

(a) Managing the VGS from the Ministry of Finance and Economic Planning provides a degree of

government authority relative to line ministries and gives a centrally controlled budget-backed

signal that the Government is committed to prioritizing PPP options. This provides considerably

more comfort to the private sector that this funding is reliable.

(b) It enables the Government as a whole to ensure closer alignment to national PPP policies and

practices and mitigates the coordination challenges across the different MDAs to ensure

conformity with the PPP guidelines set out in the National Policy.

(c) It provides a clear mechanism with its own governance and reporting requirements that can attract

other international and donor funding looking to target measureable contributions to PPP

infrastructure financing. This in turn can contribute significantly to the market signaling

highlighted in the first bullet.

14

Ghana National Policy on Public Private Partnerships. MOFEP. Draft September 2010. 15

Refer to www.pppinindia.com

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Ghana Viability Gap Scheme Defined

Viability Gap Funding: The Viability Gap Scheme (VGS) provides public financing to fill capital investment

funding gaps required to make infrastructure PPP projects commercially viable. The VGS, which would be a line

item in the Ministry of Finance and Economic Planning budget, would be administered by MoFEP Budget

Department with technical support from the PAU/PFA Units. This funding would focus on key capital investments

over the initial 3-5 year period of a concession. These are capital investments that are shown to be essential for the

PPP to become operational and revenue-earning but cannot be financed by the private sector without undermining

required levels of commercial rates of return.

Management of the Viability Gap Scheme: Management of the VGS could rest in with the Budget Division

within the Ministry of Finance and Economic Planning. The VGS would enjoy the same status as the service-wide

vote allocations in the budget.

Budget Division: The Budget Division within the Ministry of Finance and Economic Planning could

manage the Viability Gap Scheme.

Lead Line Ministry (Works, Transport, Aviation, etc.): While the Budget Division would be responsible for

keeping track of expenditures processed through the VGS, the lead ministries would retain responsibility

over the concession-specific expenditure to which VGS funds are allocated. These expenditures would

comply with specific procurement guidelines agreed upon in the VGS Operations Manual.

Bank of Ghana: The BOG could play a ―banking‖ role for all the funds processed through the Viability Gap

Scheme. The BOG will be responsible to keep track of these disbursements. Funds contributed by the

Government of Ghana as well as funds allocated to the VGS from international development institutions

will be channeled through the Bank of Ghana.

Aid Debt Management Department: The Aid and Debt Management Department could be required to

monitor all contingent liabilities that are associated with VGS investment into PPP transactions.

VGS – Sources of Funding: The VGS could be funded through GoG‘s national budget (with potential co-financing

of Government allocations by donor partners), with budgetary allocations being committed on a rolling three-yearly

basis. This method of extended commitment is be necessary in light of the multi-year (up to 15-25 year) character of

PPP financing arrangements with the private sector. The preparation period for a PPP to commercial closure can

frequently be two years and often much longer to financial closure. While this poses various problems, from a

budget planning perspective it assists budget management by providing a long lead time to estimate and revise

potential VGS allocations over the coming few years. As a result, the VGS budgeting process can usually

effectively predict demand and thereby ensure that the pipeline opportunities are adjusted to budget exposure

limits16

. An annual report for the VGS will be prepared and made publicly available as part of the accountability

arrangements set forth in the PPP Policy and VGS Operations Manual.

PPP Sector Eligibility: Over the initial phase of the proposed life of the VGS mechanism, project eligible for its

financing will be limited to following sectors:

Roads and bridges, railways, seaports, inland waterways, airports;

Power;

Urban: transport, water supply, sewerage and sewage treatment, solid waste management and other core

infrastructure in urban areas;

Social infrastructure: health, education

This sector eligibility list will be subject to revision over time, reflecting GoG priorities and available 3-year funding

capacity for the VGS envelope. What will be critical is to ensure that the VGS builds and maintains credibility in the

market. This will be a function of establishing a track record of delivering the financing approved, including releases

the money in a timely and efficient manner.

16

The Indian Federal Ministry of Finance indicated that they had at no time found demand for VGS in excess of

funds set aside in the annual budget. The Government has stated that the gestation time on a PPP project going to

market provided sufficient lead-time to sufficiently provision.

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VGS Operational Structure17

The formal process of receiving viability gap funding can be broken down into four main phases: (i) eligibility, (ii)

submission, (iii) appraisal, and (iv) approval.

Project Eligibility Requirements: For projects to be eligible for VGS funding, certain requirements would have to

be met. It is proposed that these would include:

The concession is awarded in favor of a private company in which 51 percent or more of the subscribed and

paid up equity is controlled or owned by a private sector party or entity;

The private sector concessionaire has been selected through open competitive bidding;

All PFA/PAU procurement and safeguards standards (including compliant Social and Environmental

Impact Assessments) are met;

The private sector concessionaire is responsible for financing, construction, maintenance and operation of

the project during the contract/concession period;

Proper due diligence, as detailed in the National Policy on Public Private Partnerships, has been completed

and Pre-Feasibility Study approval gained prior to submission for VGS funding;

The amount of VGS funding requested cannot exceed 50 percent18

of total project cost. Exceptions could

potentially be made on a case-by-case basis, but the VGS amount must not render PPP option unaffordable

or unviable from the public perspective.

8. Capital Contribution to VGS: Donors considering support to the VGS would be able to do this

either by contributing directly to a Government account linked to the VGS or by paying directly eligible

invoices submitted to the donor by the concessionaire. Whichever option is adopted, close monitoring

and management of these funds by MoFEP would be required.

9. Credit Enhancement Support- MIGA and IDA PRGs: Another consideration is the provision

of guarantees against government failure to honor a VGS payment to a concessionaire. As indicated, for

instance, by MIGA there is potential a MIGA guarantee support to the VGS, albeit on an individual PPP

project transaction basis. There is also potential to deploy the Bank‘s PRG, through the Letter of Credit

structure, to provide PPP projects with liquidity support when there are delays in VGS disbursements –

this could be a critical element in structuring the project financing and project bankability.

10. Under Phase I, a comprehensive VGS Operations Manual will be drafted and approved before the

commencement of Phase II. This VGF Operations Manual will detail the roles and responsibilities of the

various key MDAs involved in the VGS, application and approval processes, budgeting details, and other

VGS policies. The VGS will require that all eligible projects be properly procured through competitive

bidding processes, the concession be awarded in favor of a private company in which 51 percent or more

is owned by a private sector party, that PID procurement and safeguards standards are met and proper due

diligence- such as the PFS- is completed according to the National Policy on PPP.

B. Financial Intermediary Loan (FIL)

11. Rationale for a FIL: PPP financing where the project does not involve a foreign exchange

earning requires long-term domestically denominated money, beyond the current 3-7 years limits of the

public bond markets of all but a few Africa countries. In recognition of the absence of long-term funds in

the market, agreement has been reached with the GoG for the introduction of a FIL facility as a key

17

This method parallels the Viability Gap Funding Scheme included in the Guidelines for Financial Support to

Public Private Partnerships in Infrastructure by the Government of India. 18

This is the currently proposed percentage share. It may merit review, based on the project financial analysis that

will be completed as part of Pre-Feasibility Study exercise on the priority project pipeline.

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financing sub-component to Phase II. The FIL will provide a limited source of long-term infrastructure

financing to the market and help, in addition to funding key first mover PPPs, to build out the yield curve

by providing a market-based pricing of funds with tenors of a minimum of ten years and, ideally over the

life of the FIL, reaching up to 20 and 25 years.

12. FIL Design Features: The government will on-lend the funds to financial intermediaries

through the BOG which will act as the Apex administrator of the facility. Three key aspects to this

product is: (i) the selection of the Apex administrator; (ii) the pricing of the products available under the

FIL, and; (iii) the selection of ―Participating Financial Institutions‖ (PFIs). The following sections address

these three issues.

13. On the Apex Institution: The BOG is regarded as the best suited Apex institution to administer

the FIL facility. BOG has established a Project Administrator External Facilities Office (PCEAO) within

the Treasury Department to function as an Apex unit for existing Government lines of credit. The

Director of the Treasury Department reports directly to the Governor. As there is no other reporting

relationship with the Banking Supervision Department and the Treasury has entirely different

responsibilities, a potential conflict of interest is significantly diminished but not eliminated.

14. The Apex will be responsible for:

(a) approving participating financial institutions (PFIs) in accord with agreed criteria and in

coordination with MOF;

(b) having sole responsibility for managing an off-balance sheet PPP fund which shall contain dollar

and cedi subsets;

(c) establishing criteria to be agreed with IDA for subproject eligibility;

(d) analyzing and approving subproject loan applications submitted to the apex;

(e) disbursing funds to PFIs for approved projects and collecting repayments from PFIs in accord

with schedules and IDA requirements;

(f) monitoring how serious problem projects are being managed by PFIs, on a management by

exception basis, and participating in discussions on loan-related aspects;

(g) managing the stock of repayments received as a separate fund in accord with agreements with

government as to how it will be used;

(h) augmenting its operations, as needed, with BOG Banking Operations Department support to

provide all necessary accounting, funds management and IT services relating to the managed

funds. 19

15. A written agreement between the Ministry of Finance and BOG will be signed which will give

the BOG Apex unit the power, following approval by the Governor or his representative to approve

subproject applications and disburse cedis and dollars, as needed for the PFIs in accord with disbursement

schedules established for subprojects at the time of the first disbursement. The managed fund will

continue to be owned by Government.

16. Government will pay BOG a fee for managing the FIL. The fee is established for the purpose of

reimbursing BOG for direct and indirect expenses associated with operating the Apex. BOG will not

receive additional reimbursements beyond the agreed fees. It will, however, be available to receive

capacity building grants from Government to implement a capacity building program for the Apex

designed by BOG. This capacity building program will inter alia include:

(a) a technical advisor to work in the apex for two years assisting in decisions relating to PFI

eligibility, initial subproject approvals; and writing an operations manual for the apex in addition

to his other duties; and

19

Much of this work is already being done by the unit itself for existing lines of credit.

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(b) a program of workshops and on-the-job training. BOG will prepare an apex plan identifying

requirements in terms of numbers of staff and skills requirement to undertake both its existing

and future apex responsibilities under an assumption that the FIL will contain a total of three to

five projects to be submitted by up to three PFIs. Job descriptions will be prepared for the new

staff that may need to be recruited.

17. Subprojects, to be eligible, must be on a government approved pipeline list. Once on that list, no

additional government approvals should be necessary. Once on that pipeline list, the Apex approval

process, following submission of an eligible project application, will include (i) preparation of a report by

the Apex, (ii) submission of the report together with the recommendation for approval of the subproject

commitment to the Treasury Department Director; and (iii) submission of the recommendation by the

Treasurer to the Governor or his representative for final approval.

18. The Apex, once disbursement has commenced, should:

(a) follow-up on projects after commitment on a management by exception basis, monitoring actual

underlying disbursements to the project compared with the schedule for disbursements and,

where it falls fully significantly behind, investigating the reasons for delay to ascertain what

implementation problems there may be and whether they can be of assistance and informing

MOF that the problem exists;

(b) approve one rescheduling at the time of project completion if the PFI recommends it and there

have been significant time delays or cost overruns during implementation; and

(c) ascertain, based on submitted reports, that the PFI used the earlier disbursements for the purpose

intended and that all scheduled repayments of interest, fees (if any), and principal are being made

by the final borrower as scheduled.

19. The Apex should also before making a commitment, ensure that:

all technical analyses, background tests, and required approvals have been obtained;

the subproject and the PFI meet all established criteria;

compliance with all environmental impact and social safeguard study requirements;

all procurement will be conducted in full compliance with the requirements for that type of borrower;

the PFI‘s project appraisal and origination documents are appropriately prepared;

IDA approvals have been obtained as required, i.e., possibly in the case only of the first project

submitted by each individual PFI;

the loan will not be denominated in foreign exchange except in those cases in which the final

borrower is a net foreign exchange earner and can therefore easily hedge that risk from its business

operations;

the loan will not be a variable rate loan for projects for which borrower projections show that it

cannot fully service the debt if interest rates were to move to the ceiling level allowed under the loan

agreement between the apex and the PFI;

the loan will be for a period of not less than 10 years with more than half of the principal coming due

after more than five years to ensure that for the most part it does not replace funds already available in

the market place;

the PFI appraisal will include examination of project sponsors and borrowers through available credit

risk management systems.

20. On the Pricing of the FIL: The objectives for determining FIL pricing and related subloan

terms and conditions should include:

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(a) Ensuring that interest rates are reasonably market-based such that they don‘t crowd out potential

privately mobilized funding of similar tenor and don‘t create obvious subsidies.20

(b) Ensuring that other terms are sufficiently flexible to allow financial intermediaries to custom

tailor to cash flow generation and foreign exchange hedging capacity of borrowers and, in that

sense, make use of these funds attractive for banks.

(c) Pricing funds sufficiently competitively that there will be adequate effective demand for the

funds, after addition of an adequate PFI spread.

(d) Creating enhanced market conditions for eventually creating a significant supply of long term

local currency debt capital as this is essentially absent in Ghana, as well as, perhaps more

importantly, creating some local banking capacity to prepare and make long-term local currency

and foreign currency loans and develop relevant experience.

21. Proposed Fundamental structure and pricing of FIL: BOG will take no credit risk, foreign

exchange risk, or credit risk on funds on-lent under the FIL. Commercial banks that meet eligibility

requirements as participating financial intermediaries (PFIs) will take all credit risk and will be required

to on-lend to final borrowers in the same currency, the same tenors, and the same terms and conditions

(other than interest rates and fees) as they borrow funds on-lent by the apex.

22. It is proposed that funds can be made available in either foreign exchange or cedis, at the choice

of the PFI and client with the provision that foreign exchange can only be lent to clients that can fully

hedge that risk because they have de facto dollar revenues and are net foreign exchange earners (i.e.,

excluding dollar based contracts where the final user of services can‘t hedge foreign exchange risk, e.g.,

highway tolls).

23. As long-term local currency is in shorter supply than long-term foreign exchange (which can

sometimes be borrowed offshore by blue chip borrowers) it is important that the foreign exchange

borrowing interest rates for PFIs should not be seen as much more attractive to PFIs than the local

currency option. Moreover, as it is anticipated that several large probable borrowers may qualify for

foreign exchange loans.

24. Tenor to loan to the PFI must match tenor of loan to final borrower and can vary between 10 and

25 years, with full right of prepayment after an initial period of three years. Based on current market

assessment it is anticipated that maximum tenor will initially be 15 years. This could lengthen as or if

inflation and interest rate level reduce to single digits. A maximum subproject loan size should be set as a

percentage of the total size of the FIL which would apply equally to all eligible PFIs. Grace periods

should be allowed for at least three years, possibly as long as five years, where there are specific

circumstances relating to the needs of a particular final borrower, e.g., when the implementation period is

unusually long. Grace period should be identical to that provided by the PFI to the borrower. PFIs should

be required to repay Apex if and when they receive prepayment of principal as well as in accord with

their sub loan agreement with Apex whether or not they have been repaid by their client. However, the

Apex should agree to one rescheduling at the time of project completion if the PFI determines that a

rescheduling of the underlying loan at that time is prudent in light of time delays and/or cost overruns.

FIL funds should not be available to intermediaries for making equity investments but PFIs should not be

prohibited from exchanging debt for equity in the context of a defaulted loan and problem project

resolution. Repayments should normally be either monthly or quarterly but exact schedule can take client

seasonal revenue patterns into account.

20

This is an extremely important issue from an OP 830 perspective, but less important from a practical point from

the Ghana context perspective, as there may be relatively little potential for mobilizing long-term finance of this in

the domestic currency market during the commitment time period for the FIL.

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25. The client and PFI can choose either a fixed interest rate or a variable interest rate with exact

matching of the sub loan and underlying loan to the client. Initial variable interest rate should be 150 basis

points less than fixed rate should be adjustable only after an initial two year period at the initial rate, and

should be subject to a maximum ceiling or floor above and below the initial rate. In practice, variable

interest rates are often more than 1.5 percent below fixed rates but in those cases there often is not a

ceiling so close to the proposed fixed interest rate. The Ghana market place, especially lenders, expresses

an unusually strong bias in favor of variable interest rates because of Ghana‘s history of relatively

unstable macro-economic conditions and high inflation and interest rate conditions on a periodic basis.

Indeed, the market has become used to very high nominal interest rates. They fear the rise of high real

rates more than the risk of high nominal rates. Many lenders expect inflation and interest rates to increase

sharply before the December 2012 elections and believe variable rates provide a better tool for adjusting

to a situation of that type.

26. A maximum ceiling on variable interest rates is being considered because (i) a variable interest

rate with no ceiling creates a significantly greater credit risk if interest rates were to spiral out of control

as has happened before in Ghana; and (ii) this increased credit risk would probably lead to banks insisting

on a higher spread and would provide a disincentive to banks that may need incentives to spend the front

end preparation and management distraction costs to prepare for a new kind of lending that they have not

done before and may not need to do to remain competitive in the market place.

27. Benchmark interest rate for foreign exchange fixed rate loans should probably be the USD 30

year Treasury bond rate (presently 3.0 percent) plus a premium for risk. (A risk premium of 2.5 percent

per annum was proposed for Ghana so 3.0 percent would seem to be an appropriate premium risk as

representing the difference between US sovereign risk and a PFI operating in Ghana as these PFIs are far

smaller than those in Ghana and are likely to have lower international credit ratings.) Another possible

benchmark is the five year US dollar labor rate for interest rate swaps but that is harder to ascertain and

far less suitable.

28. Benchmark interest rate for local currency loans should be the best available proxy for long-term

funds in Ghana. It is recommended that, as of this date, the benchmark long-term interest rate for Ghana

should be the average (14.125 percent) of the two longest market determined interest rates in the market,

i.e., the three year and five year government treasury bond rate (using at least a 30 day moving average)

which appears to be the best market proxy for the cost of long-term sovereign risk debt. It is further

recommended that the benchmark be updated every quarter and that yield curve increments (see point 13

below) be updated every six months.

29. Any benchmark chosen will have weakness and spurious accuracy criticisms associated with it—

leading to a risk that it could create a distortion because markets are thin, foreigners are the primary

source of buying for the longer term maturities, there is a minimal record for five year bonds (although

government expresses the intent to issue them on a fairly regular basis in the future), and inflation, yields,

and the shape of the yield curve are somewhat erratic. Nonetheless, the most critical criteria is that it fits

the market place as it evolves over time, does not lead to distortion relative to other market-determined

interest rates in that market and fits an upward sloping yield curve that provides some incentives for

investors and lenders to move toward longer maturities. It is believed that the benchmark will strengthen

in soundness over time as markets change and the size of the government five year bond issue outstanding

increases.

30. A risk premium for the higher risk associated with a PFI than Ghana government sovereign risk

and a foreign exchange risk insurance fee (to the extent needed) should be added to this base, although

not necessarily separately identified. As PFIs will have to meet stringent financial soundness eligibility

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requirements, a risk fee of 0.25 percent per annum (the same risk fee recently determined as appropriate

in Tanzania) would appear appropriate.

31. The government will be taking foreign exchange risk on sub loans made in foreign currency.

Although macro-economic conditions have stabilized significantly in recent years (present inflation is

8.4%) and is expected to remain relatively stable in the future, foreign exchange risk has been historically

significant with average 14.3 percent per annum devaluation of the cedi over the last 4 ½ years. It can be

argued that the difference in interest rates between the proposed benchmark interest rate and the US

government five year rate (14.25 percent-.9 percent percent or 13.35 percent) roughly approximates the

upward limit for calculating historical foreign exchange risk and, indeed, overstates it, say by 1 percent, to

the extent that the rating for Ghana sovereign risk is considerably higher (B+ negative) than US sovereign

risk. If pricing recommendations (see below) are adopted, government would be receiving 15.75 percent

on a 15 year loan or 16.4 percent on a 20 year loan, offset by roughly 1.75 percent for the interest paid to

IDA plus, say, a 1 percent administrative fee for BOG. The resulting margin for government of about 14

percent on local currency loans appears adequate to cover foreign exchange risk without the need for an

additional add on.

32. It is recommended that a longer term yield curve be simulated based on projecting the per annum

absolute difference in the market determined interest rate for three year and five year bonds in Ghana,

presently .125 percent per annum. Any assumption as to what a real yield curve would be in Ghana for 10

to 15 year cedi debt would be speculative because that kind of money does not exist. Other than a very

few seven year bank loans to unusually sound expansion projects, there is no significant market for funds

in excess of five years in maturity. Based on the above recommendations, If interest rates do not change

in Ghana, interest rates to PFIs and to final borrowers would approximate the following:

Projected local currency interest rates to PFIs

if yield curve is equal to present difference between 3 and 5 year bonds p.a

tenor of loan in years 5 10 15 20 25

base interest rate 14.13% 14.13% 14.13% 14.13% 14.13%

risk premium 0.25% 0.25% 0.25% 0.25% 0.25%

yield curve @.125% p.a. 0.13% 0.75% 1.38% 2.00% 2.63%

on lending fixed rate to PFI 14.50% 15.13% 15.75% 16.38% 17.00%

variable minimum to PFI (-1.5%) 13.00% 13.63% 14.25% 14.88% 15.50%

variable maximum to PFI (+2.5%) 17.00% 17.63% 18.25% 18.88% 19.50%

minimum with PFI 7% margin 20.00% 20.63% 21.25% 21.88% 22.50%

maximum with PFI 7% margin 24.00% 24.63% 25.25% 25.88% 26.50%

33. PFI Selection: A minimum of two PFIs will be selected for participation in the FIL based on an

Expression of Interest process and due diligence of suitability against a range of criteria related to

governance, capital adequacy and financial policies and practices, portfolio performance, management

and technical capacity. Institutional Development Plans (IDPs) are agreed with those prospective PFIs

that need to strengthen themselves in these different areas before being able to receive FIL monies.

34. The BOG Apex will have the responsibility of catalyzing applications for participation in the PPP

FIL from qualified candidate participating financial intermediaries (PFIs) for on-lending FIL funds to

eligible subprojects, establishing criteria for determining eligibility, applying those criteria in examining

applications, and approving candidate institutions that meet the criteria.

35. Based on initial assessments, it is anticipated that a probable total of two or three intermediaries

and will be approved as eligible to participate. Possible short list candidates for participation as loan

originators include Stanbic and Eco Bank, and Africa Finance Corporation (AFC). Other banks, e.g.,

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Ghana Commercial Bank (GCB) and the Agricultural Development Bank (ADB), that may choose to

apply and could be found eligible for capacity building grants to improve their long term lending skills

and, possibly, to also on-lend FIL funds on a syndicated basis. After the IDA credit has been approved,

BOG should seek expressions of interest (EOI) through advertising directed at Ghana‘s commercial

banks.

36. Proposed PFI Eligibility Criteria: PFIs should meet eligibility requirements in three primary

areas, i.e., (i) financial and governance criteria; ( ii) lending ability and experience criteria; and (iii) ability

to satisfactorily comply with subproject procurement, environmental impact, and other safeguard

protection requirements specifically required for participation in the FIL. It is anticipated that PFIs will

need capacity building assistance. At minimum, to meet the eligibility requirements associated with IDA-

required subproject procurement and safeguard requirements. The proposed criteria in these three areas

are:

37. Financial and Governance Criteria: This should, subject to further assessment, include:

A minimum of three years of audited financial statements with unqualified opinions showing

profits in each year and a net profit in 2011 of at least four percent of total assets.

A capital adequacy ratio of over 12 percent and NPLs of less than 15 percent of portfolio.

A minimum Fitch credit rating equal to that of Ghana, e.g., S&P B stable or equivalent from an

internationally recognized rating agency.

A minimum single credit risk exposure limit of not less than cedi 25 million equivalent lent that

complies with BOG 25 percent of net worth minimum single credit exposure requirements.

Some private sector ownership and representation on the Board of Directors to enhance

independence from possible government influence over credit risk decision-making.

Senior management composed entirely of bankers or other private business sector professionals

and with private sector professionals composing a majority on the Board of Directors.

A statement of no objection for participation from BOG‘s Banking Supervision Department.

38. Lending ability and experience criteria: The PFI qualified to do origination should have:

A unit established for at least six months responsible for long-term lending that has full time staff

working inter alia on infrastructure lending and project finance in sectors to be financed by the

FIL. A submitted organigram should show how it fits into the overall organization and its

professional staffing composition.

Satisfactory staff capability in that unit or accessible to that unit in terms of an academic

background (normally a degree in finance or banking) and at least two years of relevant

experience.

Lending experience as lead term lender on an infrastructure project of significant size in at least

one of the sectors for which FIL money can be lent.

Established ownership relationship or ongoing technical cooperation agreements with a qualified

international lender with significant experience lending to large infrastructure projects to augment

existing staff to the extent necessary if staff and experience are not, in themselves, adequate.

An existing long term loan portfolio, i.e., initial tenors in excess of five years, including at least

one infrastructure project of the type eligible for financing under the FIL, that is performing

reasonably well (NPLs below 15 percent). Submission of a list of all outstanding loans with initial

tenors of more than five years and all infrastructure project loans, together with their repayment

status.

Submission of a detailed description providing evidence of satisfactory existing term lending loan

administration policies and processes in the areas of appraisal, credit risk management and

approval, implementation monitoring, and loan supervision.

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Submission of a satisfactory institutional development plan (IDP), if necessary, to address

weaknesses in lending ability and experience as evidenced by submissions and recommendations

associated with any diagnostic review in the above areas.

39. Ability to satisfactorily comply with subproject procurement, environmental impact, and

other safeguard protection requirements. This includes:

Submission of evidence that the PFIs‘ existing environmental impact requirements satisfactorily

meet existing Ghana requirements and norms and IDA requirements.

Evidence of an understanding of, and will to implement, changes necessary to satisfactorily meet

subproject procurement, environmental impact, and other safeguard requirements.

Submission of a satisfactory plan for building capacity to enable the PFI to comply with

implementing subproject procurement, environmental impact and other safeguard protection

requirements.

40. Arrangements for the flow of funds to approved PFIs will be detailed in the FIL Operations

Manual, but follow the schemata set out below:

41. PFIs will on lend funds to the subprojects at interest rates and with fees of their own choosing but

in all other respects on the same terms and conditions that they borrow from the apex, i.e., the same

currency, maturities, and grace period. PFIs take all credit risk. On the sub loans denominated in Cedis,

Government takes the foreign exchange risk and will be compensated for that risk by the large margin

between the interest rate PFIs will pay in Cedis and the interest Government pays on the credit. BOG will

be taking no risk.

42. PFIs should be allowed to add any spread they wish and be encouraged to vary the spread to take

relative risk into account. If there are economically viable projects that cannot service debt at the proxy

for market rates that result, adjustments should be made by lengthening maturities and/or using viability

gap funds, and not by subsidizing interest rates. Subsidized interest rates would crowd out potential

privately mobilized funding for this market.

105

43. PFIs should be encouraged to seek partial risk guarantees (PRGs) and/or MIGA guarantees when

available and appropriate and to pass the cost of these guarantees on to their borrowers.

C. Feedback from the OP 8.30 Review

44. OP 8.30 assessment of the initial work done to date on the FIL – namely the due diligence of the

prospective APEX for the FIL and the pricing strategy concludes that, while, the parameters of the

proposed FIL are, broadly, consistent with the requirements of OP 8.30, a final compliance review should

be undertaken at the time of the due diligence work for APL Phase II when all the details of the FIL

would be available. The areas where additional work is needed include the macroeconomic and sectoral

framework, lending terms and the eligibility of participating financial institutions.

45. Since this is an APL and the FIL component would be included after due diligence work relating

to APL Phase II, the compliance with OP 8.30 is rather broad and indicative at this stage. In light of the

outcome of the proposed due diligence a full and final review of the Project‘s compliance with OP 8.30

will need to be undertaken. Thus the following discussion identifies aspects of OP 8.30 requirements that,

based on the current state of the Project, are in compliance and highlights those that need further

analytical work.

46. Macroeconomic Environment. OP 8.30 stipulates “Given the critical importance of the macro-

economic and sectoral framework for financial sector sustainability and efficiency, the Bank considers

FILs only in the context of a satisfactory macroeconomic and sectoral framework: Recent

developments in Ghana are indicative of a gradual movement towards macroeconomic stability. After

sustained growth rates (5.7-7.2 percent) between 2003 and 2008, GDP growth decelerated to 4.7 percent

as a fall-out of global financial crisis. However, GDP is estimated to have expanded by 5.5– 6 percent in

2010 driven by increases in commodity exports and increased construction and service activities. The

start of oil production is projected to underpin 13 percent real GDP growth in 2011. A notable feature of

Ghana‘s macroeconomic scenario is the persistence of high fiscal deficits, which widened from five

percent of GDP in 2003 to 14.5 percent in 2008. Consequently, the inflation remained in double digits,

though it did come down from over 20 percent in 2009 to about 12 percent in 2010 (estimated). Similarly,

the exchange rate after depreciating by about 50 percent in 2008 has since stabilized.

47. Ghana‘s mixed macroeconomic performance has had a direct impact on the performance of its

financial sector. During 2003 and 2008, the period of sustained GDP growth, the banks in Ghana

responded positively and rapidly expanded credit with nominal growth rates reaching 60 percent by 2008

and 35 percent in real terms. However, the rapid expansion of credit in a high inflation and high interest

rate environment created conditions for the subsequent asset quality deterioration. Moreover, due to a

massive widening of the fiscal deficit, the Government was unable to make payments for works done by

contractors and other service providers, thereby creating NPLs across the banking system. The slowdown

in the economy also contributed to defaults, particularly as the drivers of growth (cocoa and gold) source

their funds in international markets. These developments underscore the critical importance of a sustained

stable macroeconomic environment for the requisite response of the financial sector to the projected

investment needs of the required infrastructure development in Ghana. It is also important to ensure

availability of strong financial intermediaries to participate in the planned FIL. Therefore, while the

overall macroeconomic environment seems to be currently improving, as part of the due diligence work

for Phase II, the macroeconomic environment should be reviewed again.

48. Financial Sector. In the last decade, Ghana‘s financial sector has undergone major and rapid

transformation at different levels after a series of reforms. The recent FSAP (august 2010) observed that

these reforms have equipped the country with modern legislation and an enabling financial infrastructure.

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In particular, a series of key laws was passed for the banking, insurance, pensions and payments. A

number of institutions designed to improve the environment for assessing credit risks and enforcing

creditor rights were also established, including the credit registry and collateral registry. The reforms also

led to the establishment of a pension‘s regulator.

49. A number of policy initiatives led to significant changes in the structure of the financial sector.

Though the banking sector continues to dominate the financial system, considerable changes have

occurred to the scale, structure and business strategies of various segments of the financial system. The

banking sector has witnessed an increase in bank numbers and in foreign shareholding, particularly

subsidiaries of regional banking groups. The branch network has also expanded and capital levels

increased due to increases in statutory regulatory capital levels. The introduction of universal banking in

2003 led a number of locally incorporated banks to establish domestic subsidiaries of securities firms and

in a few cases, insurance. The insurance and securities industries witnessed comparable increases in the

number of intermediaries and an increase in foreign subsidiaries. The Foreign Exchange Act relaxed

capital controls and enabled the participation of foreign investors in the domestic capital market products.

50. Despite impressive progress, Ghana‘s financial sector, particularly the banks, is faced with a

number of structural weaknesses as identified by the recent FSAP: (a) State ownership in the financial

sector remains large leading to poor credit origination and imprudent lending practices; (b) Government

arrears have again impacted the banking sector stability; (c) Prevalence of high NPLs with under-

provisioning; (d) Persistently high interest rates: (e) Product innovations in the financial sector have out-

paced its risk management capacity; (f) The regulatory framework and supervision capacity needs

upgrading to face the challenges posed by the development and expansion of the financial sector; (g) The

non-banking sector is exhibiting some weaknesses inhibiting its ability to contribute long-term funding or

access; and (h) There are many constraints to long-term finance. These issues if not addressed could pose

major risks to the project. The availability of strong and viable FIs for the FIL could be seriously

jeopardized. The dearth of long-term funding could adversely affect the viability of PPP projects because

of difficulties in raising funds beyond what will be provided by the proposed FIL. Finally, if regulatory,

supervisory and institutional weaknesses continue, the exposures in PPP projects under FIL could lead to

damage to the solvency of PFIs.

51. However, the prospects of further reforms are promising. GoG has a proven track record of

implementing reforms in the financial sector. From late 1980s through mid-1990s, Ghana implemented

two Financial Sector Adjustment Programs, which, among other developments, resulted in the

privatization of commercial banks, increased competition following the licensing of new banks,

liberalization of financial markets and enhanced financial supervisory capacity. In early 2000s the

Government developed its Financial Sector Strategic Plan I that covered a wide spectrum of reforms in

the form of 98 recommendations. This Plan was implemented between 2003 and 2008, with over 80

percent of recommendations implemented.

52. In 2010, GoG developed the Financial Sector Strategic Plan II (FINSSP II) for the period 2011-

2015 taking into account, inter alia, the findings and recommendations of FSAP. The set of reforms

targeted in FINSSP II, relate to almost all segments of the sector. The broad objectives of this Plan are to:

(a) be the preferred source of finance for domestic companies, (b) promote efficient savings mobilization,

(c) enhance the competitiveness of Ghana‘s financial institutions within a regional and global setting, (d)

ensure a stronger and more facilitative regulatory regime, (e) achieve a diversified domestic financial

sector within a competitive environment, and (f) promote education, public awareness, capacity-building

and financial literacy. To achieve these objectives, the Plan includes 90 different actions, including

numerous actions in areas of direct relevance to the Project (such as the banking sector, the stock

exchange, the bond market, the securities market and the legal and regulatory framework and capacity).

When implemented these reforms would significantly address the major issues identified by FSAP. The

107

FINSSP II also includes adequate and explicit implementation and monitoring arrangements.

53. Given its large magnitude and complexity, the planned agenda of reforms would take a long time

to implement and to have full effect on the efficiency, depth and breadth of Ghana‘s financial sector.

Therefore, it would not be necessary to include the financial sector reforms as a part or conditionality of

the Project as long as the implementation of FINSSP II remains on track, particularly for reforms relevant

to the success of the FIL component. In view of this, it is recommended that the progress on the

implementation of FINSSP II be reviewed as a part of the due diligence work for APL Phase II to assess

whether the conditions in the financial sector are conducive to the success of the FIL component. In this

respect, areas needing particular attention would be the level of lending/interest rates, the NPL level in the

banking sector and the regulatory framework and capacity for the financial sector.

54. Directed Credit: The proposed FIL is an intervention in the financial market and

therefore, a directed credit program. OP 8.30 allows Bank’s support to directed credit programs provided

they are accompanied by reforms to address underlying institutional problems and market imperfections

that inhibit the market-based flow of funds to the target sector\: There is a convincing justification for the

proposed intervention. The development of infrastructure in Ghana has a high economic priority and the

involvement of private sector is essential given that GoG‘s fiscal position does not allow the amount of

investment needed to meet the country‘s infrastructure investment needs, as also for higher efficiency

reason. Currently, due to a host of reasons discussed above, the availability of long-term funding is a

highly constrained. However, the underlying reasons for these constraints are going to be addressed by

the financial sector reforms under FNSSP II. Also, in order to support the FNSSP II agenda of reforms in

the capital market, the Project includes appropriate technical assistance to the relevant Government

department for capital market development. Moreover, the proposed FIL would serve as a demonstration

of the commercial viability of lending for long-term investment projects. In view of these factors, the

Project is considered in compliance of the relevant OP 8.30 requirements.

55. Lending Terms: OP 8.30 states “Bank funds are priced to be competitive with what the

participating FIs and their sub-borrowers would pay in the market for similar money, taking into

account, as relevant, maturities, risks, and scarcity of capital‖: The pricing of IDA funds for the

proposed FIL has not been finalized yet, but broad principles and terms have been developed and

discussed with some of the stakeholders, i.e., GoG, BOG and some of the potential PFIs. IDA funds for

FIL would be on-lent by the Government to the PFIs in both domestic and foreign currencies and at fixed

as well as variable interest rates. The credit risk would be borne by PFIs. BOG, which will administer FIL

funds, would take neither the foreign exchange nor credit risk. The PFIs would be given full freedom to

determine the terms of their lending to sub-borrowers. For lending by GoG to PFIs the following pricing

mechanism has been developed by the task team:

a. Domestic Currency Lending: The average of three and five-year government treasury bond rates

(currently 14.125 percent) would serve as the benchmark for domestic currency lending. (These

are the two longest market determined interest rates in Ghana). This benchmark would be

adjusted every quarter. In addition, a risk premium of 0.25 percent will be added to compensate

for the higher risk associated with PFIs as compared to GoG. For fixed interest rates, a yield

curve would be simulated using a factor of 0.125 percent per annum. For example, a 10-year loan

would be priced at 15.13 percent including a yield curve premium of 0.75 percent. 21

The variable

rates would be priced at 150 basis points below the fixed rate, i.e., 14.25 percent based on the

currently prevailing rates with a floor and ceiling of 4 percent above and below the initial lending

21

The rate of 15.13 percent consists of the benchmark rate, 14.125 percent, plus risk premium, 0.25 percent, plus

yield curve premium, 0.75 percent (0.125 percent multiplied by six, i.e., the period beyond the average four years

maturity of treasury bonds).

108

rate and a maximum of 26 percent. GoG would bear the foreign exchange risk for which it would

receive a margin of about 14.0 percent (net of IDA fees and charges and administration fee

payable to BOG). This margin is considered an adequate compensation to GoG; and

b. Foreign Currency Lending: The 30-year US Treasury Bond rate (currently 3.0 percent) is

proposed to be used as a benchmark for lending in foreign currency. To this will be added a risk

premium of three percent. It should be noted that most lending under the Project is expected to be

in domestic currency. The modalities for fixed rate foreign currency lending have not been

spelled out fully yet.

56. In the absence of established long-term lending, there are no comparable lending rates available

in Ghana. In such a situation simulated rates, as being done for this FIL, are the best proxy for market

rates required by OP 8.30. Therefore, broadly, the proposed principles underlying the pricing of IDA

funds meet the requirements of OP 8.30. Having said that while finalizing the lending terms the following

further refinements are advisable:

a. The rationale for risk premium of 3.0 percent for foreign exchange lending needs to be

established;

b. In view of the fact that in a way the financial markets in Ghana are in a transition (inflation

has just come down and fiscal regime is rather uncertain), it would be desirable that the

pricing terms be reviewed every year and adjusted according to the evolving market

conditions;

c. The assumed yield curve premium of 0.125 percent per annum for fixed rate lending needs a

stronger rationale. The financial markets generally do not determine the yield curve using a

uniform steepness pattern. For example, in the US Government Bond market this premium

for 2-5 years is currently about 0.35 percent, but it goes down sharply to about 0.09 percent

for maturities between 10 and 30 years; and

d. Terms for foreign currency lending should be specified and elaborated. At present it is not

clear if variable rate foreign currency lending would have a ceiling and a floor. Also, the

basis for determining fixed rates, if any, needs to be specified.

The final lending terms would need to be reviewed for compliance with OP 8.30 at the time of the due

diligence work for APL Phase II.

57. Eligibility of Participating Financial Institutions - OP 8.30 requires an assurance that

financial intermediaries acting as on-lenders are viable institutions, which should be assessed taking into

account the financial strength, portfolio quality, institutional capacity, etc: The Project for FIL

component would use BOG as the apex institutions to administer fund on behalf of the GoG, and banks as

PFIs to function as retailers of FIL funds.

58. OP 8.30 allows the use of a central bank as an apex institutions provided: (a) there is no other

commercial institution available for assuming this role; (b) the assigned role does not conflict with or

compromise the central bank‘s core functions, particularly if the central bank is responsible for the

supervision and regulation of financial institutions; and (c) the central bank has requisite capacity and

expertise.22

These conditions are met satisfactorily in the Project. At present, there is no other commercial

entity in Ghana that could reliably perform the functions of an apex institution. The proposed governance

structure for BOG administering the FIL explicitly provides for an arms-length relationship with PFIs.

BOG will not take any kind of risk, credit or foreign exchange, and that it would perform functions that

would not require it to second-judge the investment/credit decisions of PFIs. Finally, BOG has the

capacity and expertise as it already has a unit dedicated to handling existing government lines of credit.

22

As elaborated by the ―Guidance Notes‖, dated March 3, 2008.

109

Therefore, the relevant OP 8.30 requirement as far as they relate to the apex arrangement, are met.

59. The work relating to the eligibility of PFIs under FIL is still at a preliminary stage. The PAD

states that the PFIs would need to comply with eligibility criteria which are not elaborated. In addition,

the PAD further states that at least two eligible PFIs would be identified at the stage of the appraisal of

Phase II of the APL. Therefore, it is too early to assess the compliance with the relevant OP 8.30

requirement. This aspect would need to be reviewed when relevant details are available. However, in this

respect the following recommendations are made for consideration during further work on this matter:

a. GoG‘s long-term plans call for the establishment of a dedicated Infrastructure Financing Facility

(IFF) that would eventually take over the lending operations under the FIL (Paragraph 4). This

proposal needs to be carefully evaluated before the Bank agrees to the transfer of FIL because

such financing models generally involve significant levels of sustained subsidy. Moreover, since

this facility most likely be in the state domain, it could entail major risks considering the

disappointing track record of state-owned banks in Ghana;

b. Given that the banking sector in Ghana is experiencing a high level of NPL and their lack of

experience in long-term investment lending, it would be advisable to assess the capacity of the

sector to participate in the proposed FIL as well as to develop a sustainable long-term lending

market in the country. This assessment should cover banking sector‘s financial strength, capital

adequacy level and institutional capacity. Since the size of transactions under FIL is likely to be

large, the capital adequacy level is critical; and

c. The eligibility criteria, among other factor, should specify stringent requirements for state-owned

banks.

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Annex 8: Statement of Loans and Credits


Original Amount in US$ Millions

Difference between

expected and actual

disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev‘d

P118858 2012 GH-Statistics Development Program

(FY11)

0.00 30.00 0.00 0.00 0.00 30.26 0.00 0.00

P122692 2011 GH Local Government Capacity Support 0.00 175.00 0.00 0.00 0.00 179.17 0.00 0.00

P120636 2011 GH-Land Administration - 2 0.00 50.00 0.00 0.00 0.00 50.39 18.61 0.00

P118112 2011 GH-Skills and Technology Development Pro

0.00 70.00 0.00 0.00 0.00 71.76 1.33 0.00

P120005 2011 GH:Gas and Oil Capacity Building Project 0.00 38.00 0.00 0.00 0.00 35.35 8.54 0.00

P115247 2010 GH-Social Opportunities Project (FY10) 0.00 88.60 0.00 0.00 0.00 79.83 -11.94 0.00

P120026 2010 GH:Sustainable Rural Water & Sanit Serv 0.00 75.00 0.00 0.00 0.00 76.58 3.83 0.00

P102000 2009 GH-Transport Project SIL (FY09) 0.00 225.00 0.00 0.00 0.00 225.29 76.19 0.00

P105092 2008 GH-Nut. & Malaria Ctrl Child Surv (FY08)

0.00 25.00 0.00 0.00 0.00 14.14 8.84 3.95

P074191 2008 GH-Energy Dev & Access SIL (FY08) 0.00 160.00 0.00 0.00 0.00 88.37 -11.72 0.00

P101852 2008 GH-Health Insurance Project (FY08) 0.00 15.00 0.00 0.00 0.00 12.82 11.61 0.00

P100619 2007 GH-Urban Transport Project SIL (FY07) 0.00 45.00 0.00 0.00 0.00 30.46 17.69 0.00

P093610 2007 GH-eGhana SIL (FY07) 0.00 84.70 0.00 0.00 0.00 67.96 19.98 0.00

P092986 2006 GH-Economic Management CB 0.00 35.00 0.00 0.00 0.00 6.95 -4.79 5.21

P085006 2006 MSME Initiative 0.00 45.00 0.00 0.00 10.94 24.93 32.10 4.90

P056256 2005 GH-Urban Water SIL (FY05) 0.00 206.00 0.00 0.00 0.00 49.26 42.32 15.18

P082373 2004 GH-Urban Env Sanitation 2 ( FY04) 0.00 62.00 0.00 0.00 0.00 22.11 19.16 0.00

Total: 0.00 1,429.30 0.00 0.00 10.94 1,065.63 231.75 29.24

GHANA

STATEMENT OF IFC‘s

Held and Disbursed Portfolio

In Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

111

Annex 9: Letter of PPP Transactions from MoFEP
