MALAWISecond National Water Development Project

Implementation Support Mission October 2010

Aide Memoire

1. A World Bank mission1 visited Malawi over the period September 28 to October 8, 2010 to review the implementation of the Second National Water Development Project (NWDP II). The Project is partially financed from an International Development Association (IDA) credit (Nr.43070) an IDA grant (Nr.2940), financing from the Africa Catalytic Growth Fund (ACGF TF91521), the Government of Malawi and other Development Partners (Annex 4 shows the commitment of all financiers of the Project). The team met with representatives of the Ministry of Finance (MoF), Ministry of Irrigation and Water Development (MoIWD), and the Ministry’s Program Management Unit (PMU), the five Water Boards, beneficiary communities and donors working in the sector. A list of people met is in Annex 1. The team very much appreciates the hospitality and cooperation it received from the Malawian authorities.

2. From July 1, 2010, the Bank’s new information policy has come into effect. As per this policy, aide memoires may be made public if the client and the Bank agree 2. This issue was discussed at the wrap up meeting on October 8, 2010 in Lilongwe with the Ministry of Finance led by Mr. Simbani and the Bank and the Government agreed to make this aide memoire public.

Key project data – IDA (credit and grant)Board date May 24, 2007 Original amount (in SDR) US$ 50 million eq.Closing date October 31, 2012 Disbursed amount US$ 21.8 millionProject age 3 years 4 months Undisbursed amount US$ 32 million eq. Time remaining 2 years Percentage disbursed 44%

Key project data – ACGF grant Board date March 13, 2008 Original amount US$ 25 millionClosing date June 30, 2011 Disbursed amount US$ 19 millionProject age (from Board) 2 years 6 months Undisbursed amount US$ 6 million Time remaining 8 months Percentage disbursed 76%

3. Summary: The Bank team concluded that implementation of the project is satisfactory, consistent with the findings of the mid-term review (MTR) in March 2010; however, if implementation progress in certain areas does not improve by the next mission, the project may need to be downgraded. Disbursement has increased since the last mission (from 33% to 44% of the IDA and 62% to 76% of the ACGF) but will need to be accelerated to disburse all funds by project closing. About 150,000 people have benefitted from new water connections and 300,000 from rehabilitated connections, but the targets of 450,000 and

1 The mission comprised Messrs/Mmes Michael Webster (team leader), Steven Mhone (procurement), Devendra Bajgain, (operations), Pieter Waalewijn (water resources), Francis Mkandawire (financial management), Annie Jere (assistant), Solomon Alemu (engineer), Kanyuka Mumba (engineer), George Namazinga (engineer) and Barbara Kazibaya-Senkwe (sanitation, WSP). The mission was joined by Herbert Arceo from the Chief Economists office to oversee the ACGF funds (see annex 10 for details). Jan Jansenns (institutions) will join the EC/EIB mission in November. George Ledec (environment) and Kristine Schwebach (social) participated in the safeguards workshop in September.2 The Bank’s local office will be available for further clarifications of this policy. The documents received from the client during the mission will not be made public.

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550,000 respectively are still some way to go. Sanitation has faced significant lags and requires a major effort from the Government. Many studies are underway for priority investments in water resources, including new water sources for the major cities and other studies to improve the management of water resources. In order for the sector to address to the vast investment needs remaining, the Ministry of Finance has requested the Bank for additional financing of US$ 67 million and may request a further increase to US$ 80 million. In order for this request to be considered for financing under IDA15, preparation will need to be fast tracked to be submitted to the Bank’s Board by May 2011.

4. Agreed actions from the mid-term review: The Government and the Bank agreed 54 actions at the mid-term review. Annex 2 provides a summary of the status of all agreed actions. It is evident that about 90% of the agreed actions are fulfilled; 7% are delayed and those that are not met are related to legislations that need to be enacted dealing with establishment of Regulatory Framework for establishment of Malawi Water and Energy Regulatory Authority (MWERA). The mission re-stated the seriousness of this action as the passing of the MWERA bill is a legal covenant3 and was informed that Cabinet Papers are being prepared for submission to the Office of President and Cabinet (OPC) for the November 2010 parliamentary session.

5. Results Framework: The objectives of the Project are to increase access to sustainable water supply and sanitation services for persons living in cities, towns, villages and Market Centers and to improve water resources management at the national level. Annex 3 presents the progress in achieving the indicators for the IDA and ACGF funded projects. The Mission reviewed and assessed the progress made as of August 30, 2010 against the target values of Project outcome indicators in the Results Framework and noted that the Project is making good progress in terms of providing improved water supply in the project areas, but lags quite behind in terms of its sanitation targets. Key results include: 147,255 people with new water supply services (against a target of 450,000); 302,760 people with rehabilitated water supply services (against a target of 550,000) and 0 people with improved sanitation against a target of 500,000. The Mission noted the discrepancies in target values of outcome indicators provided in the IDA-NWDP II- PAD and its Financing Agreement. The Financing Agreement will need to be amended as part of the preparation of Additional Financing to reconcile the results targets in line with the PAD targets.

Implementation Progress

6. Component A-Urban Water Supply and Sanitation (Blantyre Water Board, Lilongwe Water Board): by September 2010, over 95,000 people (for Component A) have had sustainable access to improved water supply: over 49,000 people from new connections and over 46,000 people from rehabilitated connections. For detailed information on components A see Annex 5.

7. Low Income Areas Component: (a) Water supply: the construction of 18 kiosks in the pilot area of Mbayani in Blantyre has been completed. However, commissioning of the kiosks wait the hiring of a private operator to manage the same. It is expected that such operator will be on board by end of 2010. In order to avoid vandalism of installations, the mission recommended that the Water Board puts in place the relevant management system as soon as possible and get the kiosks functional; (b) Sanitation and Hygiene Promotion: the

3 Section II.H. of the Financing Agreement: the development of a regulatory framework for the delivery of urban water and sanitation services that is satisfactory to IDA within 18 months of effectiveness.

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mission noted that implementation of sanitation marketing activities commenced in the pilot area of Mbayani in 2009 and most planned activities have either been completed or are nearing completion. Notable among these is the construction of the sanitation demonstration centre in Mbayani which has commenced and is expected to be completed before end of this year.

8. Component B. Town, Market Center, and Rural Piped Water Supply and Sanitation (Regional Water Boards and MoIWD): by September 2010, over 135,000 people (for Component B only) have had sustainable access to improved water supply, broken down as follows: over 60,000 people from new connections and over 75,000 people from the rehabilitated connections. For detailed information on components B see Annex 5.

9. Component C. Water Resources Management (MoIWD): is progressing well. Almost all of the agreed actions were carried out since the last mission. The sub-components addressing priority water resources infrastructure investments (such as new water sources in Blantyre and Lilongwe) are making progress, but the sub-component on the regulatory and institutional environment is delayed as the Water Resources Bill has not been passed.

C1. Enabling legislation for National Water Policy – yet to be enacted; C2. Water Resources Investment Strategy: the consultant is mid-way through the 18

month contract that will make a substantial contribution to the water infrastructure investment pipeline;

C3. Lake Malawi Level Control: An engineering design firm has been contracted and the study is underway and expected to be completed by August 29, 2011;

C4. WRM institutional and technical support: some of which is pending promulgation of the Water Resources Bill;

C5. Water Source Development for Blantyre, Lilongwe and Towns: the feasibility studies and preliminary designs4 are largely completed and estimate the investment costs needed to secure future water supply for the cities at US$ 152 million for Lilongwe, US$ 300 million for Blantyre, US$ 70 million for Mzuzu and US$39 million for Mzimba. These estimates would need to be confirmed at the design stage. Studies assessing future surface and groundwater sources will be contracted over the following months.

10. Component D. Sector Management and Urban Water Sector Reform: The mission discussed the status of Sector Wide Approach Program (SWAP) with the Government and Development Partners. The Bank regards the NWDP II as having most elements of a SWAP. MoIWD is proceeding with a review of the fiduciary framework to determine whether co-financing will bring significant benefits and setting up a framework for monitoring and evaluation. MoIWD has also proposed that the Bank finance a Sector Investment Program (SIP) to better assess the sector priorities. The Bank has agreed to seek approval from the Trust Fund accessed to finance the Public Expenditure Review to finance the SIP instead. The PER could potentially be included in the sector reform component in the Additional Financing. The Bank’s institutional development specialist will join the EIB/EC mission in November 2010 and also follow-up on further issues in Component D.

11. Component E. Rural Water Supply and Sanitation (ACGF financed): The RWSS component is underway with the rehabilitation component of the 7 schemes nearing completion. To date 1,511 taps have been rehabilitated against a target of 3,126 while 312 new taps have been constructed against the target of 989. Accordingly this represents 4 Preliminary designs are for Mzuzu and Mzimba, but not Blantyre and Lilongwe.

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completion percentages 48 and 32 respectively. The establishment of Water User Associations (WUAs) tasked with management of the schemes has been successfully completed but these WUAs will need capacity support to be sustainable. General guidance and direction periodically offered by MoIWD and the PMU community participation experts in the interim will greatly assist in getting the WUAs off the ground. Periodic oversight by the District Assembly staff will also assist in improving sustainability once the schemes are completed. The implementation of district-based RWSS activities is delayed but initial activities have been completed and are waiting funding. Initial activities carried by the MoIWD included the assessment of water needs and development of designs for piped water systems. Meanwhile the MoIWD has been requested to officially submit a request for transfer of funds to the districts for the Banks approval.

12. Sanitation and Hygiene Promotion: The NWDPII target is to reach 500,000 people with sanitation by end of the project. In line with government policy on sanitation and current practice in the country which stipulates a focus on promotion for a demand driven approach, the project has not provided funding for construction of latrines at household level, although some latrines are to be constructed at schools, health centers and public places such as markets in the ACGF funded districts. In addition, some 500 sanplats have been procured under the ACGF for distribution in the seven areas where the piped water networks are being rehabilitated. Only a limited number of households are therefore expected to benefit directly from the construction of latrines under the two projects. The large target number of 500,000 was however linked to the fact that the projects are supporting public campaigns and promotions, as well as setting up systems to enable households improve their own sanitation and hygiene practices, covering proper use and maintenance of toilets, washing hands with soap and keeping and using drinking water safely. There has however been a lag in commencement of these awareness campaigns and hitherto only a limited number of households have been reached, mainly in the two cities, although currently no mechanism exists for measuring exactly how many people have been reached. If the government policy on not providing hardware is maintained, it will be difficult to reach the targets as currently stipulated in the financing agreements for both NWDPII and ACGF. The mission would therefore recommend an adjustment to these targets as part of the preparation of the additional financing to reflect more realistic targets that are in keeping with the government policy and project design. The mission also recommends that the government considers developing and putting in place a mechanism for measuring and monitoring all sanitation outreach and promotion activities to gauge results and impacts.

13. Staff Training and Capacity Building: Since the IDA funds became effective a total of 220 staff/participants have been trained with a total cost of US$ 1,152,465. Since the MTR in March 2010 to August 2010, a total of 34 MoIWD and PMU staff participated in overseas study tours and 16 participated in local group training. Under ACGF funds, since the ACGF-NWDP II became effective in April 2008, a total of US$ 556,236 have been utilized for training and capacity building activities, including training of MoIWD and PMU staff (US$ 111,373) and community capacity building, especially in establishing and assisting water user associations in participating communities (US$444,863). So far, training activities have been conducted mostly on ad-hoc basis. Training Impact Assessment of completed training (one of the agreed actions from MTR Mission) is yet to be conducted. But the training needs assessment of MoIWD and other implementing entities was conducted and based upon which a training plan was formulated and submitted to the Bank for approval. The Mission reviewed the training plan and suggested MoIWD/PMU identify and separate the training activities to be conducted under the reallocated training budget from ACGF and

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IDA funds as ACGF closes in 8 months. The PMU agreed to submit the revised training plan for Bank’s approval by October 31, 2010. See Annex 8 for detail.

14. Procurement: is rated moderately satisfactory as a number of key contracts have been signed and activities are within schedule as per the procurement plan; however, there have been two cases of misprocurement over the past year. The PMU and PIU procurement staff are adequate and knowledgeable in the use of Bank guidelines. Continued support by the PMU will be provided to the Water Boards in order to improve the quality of procurement documents submitted to the Bank. See Annex 6 for details.

15. Vetting of contracts by MoF and MoJ: As per the Joint Portfolio Review on August 10, 2010, the Bank was informed that contracts financed by the Bank are exempt from vetting by MoF and MoJ. However, the mission has been informed that this procedure is still continuing and is creating a bottleneck in procurement, for example, of the 8 most recent contracts sent for clearance, most have taken an average of 3 weeks of clearance from MoF, and 7 of the 8 have taken longer than 5 weeks for clearance from MoJ and are yet to be cleared. The Bank requests MoF and MoJ to implement the agreement reached in the Joint Portfolio Review

16. Financial Management: Financial Management (FM) is rated Satisfactory. The FM Residual Risk Rating remains Moderate. The FM Specialist was part of the mission with the following objectives: (i) to assess the continued adequacy of the NWDP II FM system, (ii) review the financial status of the five Water Boards. This included assessing their capacity to satisfy the financial covenants to clear trade debtors arrears and maintaining current trade receivables and of the Water Boards ability to meet the O&M costs from their revenues by 2008/2009 and of meeting all costs including depreciation and interest payable from their revenues by 2011/2012. It was concluded that the NWDP II Financial Management system was working well as designed. While all the five Water Boards original arrears had been cleared as at June 2008, all the Water Boards had not managed to stay current on trade receivables as they had started to accumulate new arrears immediately thereafter. Comparing 2010 with 2009 all Water Boards show improvements in their ability to collect the dues except for Northern Region Water Board (NRWB) which show a marked decline both on public and private debt collection and Central Region Water Board (CRWB) which show some decline on Private Sector Arrears. In terms of the Cost Recovery Covenants, all the Water Boards had achieved the O & M cost recovery as at 30 th June, 2008. Only Lilongwe Water Board (LWB) and CRWB had achieved Full Cost recovery by June 2010. The other three Water Boards at 90% + are on course to attain full cost recovery by 2011. However, the situation needs to be monitored very closely. This takes into account that the government’s debts have been converted to equity. The following actions have been agreed on FM: (i) the Task Force to strengthen debt collection of all Water Boards by November 30, 2010; (ii) the NRWB to explain the apparent decline in debt collection by October 31, 2010; and (iii) all five Water Boards to submit their strategy for full cost recovery (by June 2011) to the PMU by November 30, 2010. The PMU also reported that there is a delay in the processing of payments due to the mandatory clearance of all foreign exchange contracts over US$ 50,000 by the Reserve Bank. See Annex 7 for details. 17. Environmental safeguards: The mission discussed appropriate follow-up to the Environmental and Social Safeguards Training Workshop that was held at the World Bank’s Lilongwe office during 31 August-3 September 2010 (see Annex 9). As a matter of priority, it was agreed that NWDP II staff would fill out the Environmental and Social Screening

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Form (ESSF) for all NWDP II subprojects involving civil works (whether completed, underway, or planned) by November 30, 2010. For reference, a blank version of the ESSF—modified slightly during the Safeguards Workshop for increased clarity and ease of use—has been sent to the PMU. During the Safeguards Workshop, the group filled out (within 2-3 hours) a copy of the ESSF for the Mzuzu Water Supply Rehabilitation and Upgrading Subproject, as an example of how this is done. The filled-out ESSF for this subproject has also been sent to all participants. Filling out the ESSF for each NWDP II subproject is needed to ensure that specific, potential environmental and social impacts are identified (and addressed, as needed) in a timely manner. This would go a long way towards resolving the concern raised by the Mid-term Review regarding the need for more systematic environmental screening and record-keeping for each NWDP II subproject. It was agreed that the PMU/PIU would send to the World Bank (for information sharing purposes) a copy of the filled-out ESSF for each NWDP II subproject.

18. Social safeguards: In the previous supervision mission, it was identified that new civil works requiring land acquisition had been funded by the project and implemented without preparing Resettlement Action Plans (RAP) as spelled out in the project’s Resettlement Policy Framework. For several of the civil works implemented, an Abbreviated RAP should have been prepared which would have included a census of impacted persons, baseline data, and identified compensation mitigation measures to be implemented. As a result a workshop was conducted September 2010 to build capacity regarding the World Bank’s environment and social safeguards policies. The workshop provided an overview of the safeguards policy requirements, awareness of World Bank’s standards and procedures, and tools by which to screen projects and prepare appropriate action plans. During the workshop, the northern region provided the case sample to begin preparing an Abbreviated RAP. The northern region has yet to submit a draft Abbrev. RAP based on the template example prepared during the workshop. In order to comply the Bank’s social safeguard policies, the following actions need to be taken: (i) as above, all sub-project proposals submitted to the Water Boards for project funding must include a completed Environmental and Social Screening Form (ESSF). The Project Coordination Unit will then assess ESSFs to determine the magnitude of impacts and next steps with regards to environmental and social actions. Draft Abbreviated RAPs be prepared for sub-projects triggering Resettlement Policy, and submitted to World Bank for review and clearance; (ii) RAP Audits will need to be conducted and documented for all implemented projects which involved acquisition of land and/or impact on assets. These RAP Audits would include a census and social assessment of those impacted, a detailed account of the process followed from site identification through the civil works construction, and what measures need to be taken to ensure impacted persons have an improved standard of living; (iii) For current activities, records must be kept of all consultations and discussions with project affected persons which would then be added to project files. Records may include hand written notes, in local language, which can be photocopied and scanned. 19. Additional Financing: The GoM submitted a request to the Bank on August 6, 2010, for additional financing to the NWDP II of about US$ 67 million. This request was revised

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in October, after discussions with MoIWD, to US$ 80 million, and amount which needs to be confirmed by MoF. The request indicated that the additional financing is in order to meet the original goals and objectives of the project by addressing cost over-runs and scaling up water supply and sanitation services to meet increased demand. Additional Financing will allow the project closing to be extended as agreed by GoM and the Bank. The mission met with PS MoIWD, Directors of Departments, PMU staff, and management of the five Water Boards and discussed the breakdown of the proposed additional financing and the rationale for the prioritization of the proposed activities. It was agreed that the MoIWD will prepare detailed description of the proposed activities under each water board and cross cutting activities. The mission emphasized that preparatory activities need to start right away since there is a possibility for the proposed AF to be considered under IDA 15 and needs to be ready for submission for approval to the Board of the World Bank not later than May 2011 to qualify for IDA 15 financing which expires on June 30, 2011. To meet this tight time frame, appraisal of the proposed financing has to be carried out around February/March 2011, prior to which all detailed preparatory activities have to be completed. Following Government’s policy to mainstream project implementation, the mission expressed the need for assurance from GoM that adequate implementation capacity is retained in MoIWD.

20. Agreed Actions

Action By Whom By When1 MWERA Bill to be approved by Cabinet GoM (Cabinet) December

31, 20102 Focus on sanitation: (i) transfer of funds to three focus

districts to implement their action plans; (ii) acceleration of all other sanitation activities

MoIW/PMU October 31, 2010

3 Submission of revised procurement plan and response to last post procurement review and independent fiduciary review

MoIWD/PMU October 31, 2010

4 Financial management: : Task Force to strengthen debt collection of all

Water Boards by; NRWB to explain the apparent decline in debt

collection submit strategy for full cost recovery (by June

2011)

All Water BoardsNRWB

All Water Boards

November 30, 2010

October 31, 2010

November 30, 2010

5 Compliance with all environmental and social safeguard requirements such as submission of Environmental and Social Screening Form as detailed above

PMUAll Water

Boards

Ongoing

6 Submission of a detailed report on the Additional Financing request by components, including all technical, financial, economic, institutional, fiduciary and safeguard aspects

MoIWD/PMU December 31, 2010

7 Assurance from GoM that the future capacity to implement the project -- including any possible additional financing -- is adequate

MoIWD December 31, 2010

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List of Annexes:

Annex 1: List of persons metAnnex 2: Status of agreed actions from last missionAnnex 3: Updated results matrixAnnex 4: NWDP financing sources and disbursement to dateAnnex 5: Detailed review of componentsAnnex 6: Procurement Annex 7: Financial managementAnnex 8: Progress on Staff Training and Capacity BuildingAnnex 9: Summary of Environmental and Social Safeguards Training Workshop Annex 10: Field report from ACGF supervision team

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Annex 1List of persons met

Ministry of FinanceMr. Peter K. Simbani, Director, Debt and Aide Management DivisionMr. Kondwani Nsandu, Debt and Aid Officer

Ministry of Irrigation and Water DevelopmentHon. Richie B. Muheya, MinisterMr. S.Y.C. Maweru, Principal SecretaryMr. Boniface N.C. Gondwe, Director of Water Supply ServicesMs. Modesta B. Kanjaye, Director of Water ResourcesMr. Geofrey Mamba, Director of Irrigation ServicesMr. Melia Maganga, Director of FinanceMs. Mphatso J. Nyekanyeka, Deputy Director of PlanningMr. Misford W. Mikuwa, Deputy Director - Surface WaterMr. Edwin E. Wochi, CHRM & DMr. Pepani W.R. Kaluwa, Chief HydrolygistMr. John Kumwenda, Chief Civil EngineerMr. Steve Mwanza, Technical ExpertMr. James D. Kumwenda, EconomistMr. Paul Kwengwere, Swap FacilitatorMr. W.P. C. Chipeta, CWRD

National Water Development Programme (Project Management Unit)Prof. Z.M. Kasomekera, Programme ManagerMr. Oscar S. Nkhoma, Project Coordinator (ACGF)Mr. R.M.A. Champiti, Project Coordinator (AfDB)Mr. Timothy Mkandawire, Deputy Director of Water Supply (PDC)Mr. Charles Maliseche, Water Supply and Sanitation EngineerMr. Hastings Chipungu, Monitoring and Evaluation SpecialistMs. Rose Kachuma, Water Resources Management SpecialistMr. Joe Q. Kanvantope, Procurement Specialist (AfDB)Ms. Prisca J. Kutengule, Community Participation SpecialistMr. Anthony Msendema, Procurement SpecialistMr. Barnett A.N. Phiri, Programme Accountant

Blantyre Water BoardMr. Andrew M. Thawe, CEOMr. Thoko Kaitane, PIU ManagerMr. Charles Msusa, Acting Director of FinanceMr. Dan P. Chaweza, Director of Distribution

Central Region Water BoardMr. Patrick D. Makonyola, CEOMr. Maclenan Nyang'wa, PIU ManagerMr. J. B. Ching'oma, Director of Finance and AdministrationMr. Gift D. Sageme, Director of Technical ServicesMr. Madalo Manyungwa, Accountant

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Lilongwe Water BoardMr. Gabriel Gonani, CEOMr. Alfonso Chikuni, PIU ManagerMr. Richard Milanzi, Financial ControllerMr. Gladwell Mphande, PIU Accountant

Northern Region Water BoardMt. Titus Mtegha, CEOMr. A.N.A. Ungwe, PIU ManagerMr. Francis Munthali, Director of Finance

Southern Region Water BoardMr. Maxin Saulosi, PIU ManagerMr. Edward M. Mbesa, Operations ManagerMs. Jacqueline Dias, PIE

African Development BankEng. Benson B. Nkhoma, Infrastructure SpecialistMs. Eyerusalem Fasika, Principal Country Program OfficerMr. Emmanuel Chisesa, Procurement SpecialistMs. Delight Ngwira, Disbursements Assistant

AusAID  Mr. Marcus Howard, Infrastructure Adviser - Water Mr. Jason Court, First Secretary DevelopmentDr. Laila Smith, Senior Programme Manager (Africa), Water & SanitationMs. Anne Joselin, Water and Sanitation Program ManagerMr. James Mambulu, Water and Sanitation Manager

JICAMs. Minako Shiotsuka, Mr. Masayuki Shiraishi, Permanent Expert (International Development Associates Ltd. (IDeA)

UNICEFMr. John Pinfold, Chief of WASH, MalawiMr. Amose Chitonde Kudzala, WASH SpecialistMr. Chimwemwe Nyimba, Water and Environmental Specialist

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Annex 2Status of covenants and agreed actions from mid-term review

Status of compliance with remaining legal covenants:

Covenant Original / Revised Deadline Proposed New Deadline

Status

Effectiveness of the co-financing agreements December 31, 2008 November 2009 In complianceLWB and BWB to enter into a Service Contract May 14, 2009 October 31,

2009In compliance

Regulatory framework in place May 14, 2009 December 31, 2010

Not in compliance

Section IV 1: Payment of outstanding water bills by the public institution and thereafter timely payment of any dues

December 31, 2008 May 31, 2009 In compliance. All past arrears cleared and timely payment monitored and being met.

Section IV 2: The five water boards to meet their costs from revenues

O&M cost recovery by FY2008/9 and full cost recovery by FY2011/12

Not yet due O&M cost recovery achieved in all Water Boards by FY08/09; full cost recovery not yet due.

The status of agreed actions during the MTR mission is presented in the table below. It is evident that about 90% of the agreed actions are fulfilled; 7% are delayed and those that are not met are related to legislations that need to be enacted dealing with establishment of Regulatory Framework for establishment of MEWRA and establishment of National Water Resources Authority. The mission was informed that Cabinet Papers are being prepared for submission to Office of President and Cabinet (OPC).

Key Project Covenants and Action Items Status1 Establishment of Regulatory Framework for the Sector Regulatory Framework not yet in place. Cabinet Paper to be

sent to OPC by October 12, 2010. 2 Finalization of debt equity conversion of long term debt for the Water Boards Basically done, but audited accounts of Water Boards

need to confirm this.3 Continued efforts to ensure that the public and private sector arrears are paid in a

timely mannerDone. But needs continuous monitoring.

4 Submission of resource reallocation request for IDA and ACGF Done. The request was approved by the Bank in August, 2010

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A. Urban Water Supply and Sanitation StatusA1 Tender for the supply of the pump sets is floated DoneA2.1 Commencement of the advertising agency for Sanitation and Hygiene Promotion

identified for Lilongwe and BlantyreDelayed. Contract signed, commencement in mid October 2010.

A2.2 Proposal on the way forward after the W4P’s contract is completed in July 2010. Not yet. Proposal to extend W4P’s contract by 3 months to be submitted to the Bank.

A2.3 Ensure consistency in the approaches for serving the low income communities in Blantyre regardless of the funding source

Being done. Lessons learnt from Mbayani to be replicated in other LIAs.

B. Town, Market Center, and Rural Piped WSS StatusB1 ToRs for groundwater investigation and exploratory boreholes to be developed. Done. RFP to be sent to the BankB2 Drilling of Boreholes for Lirangwe to be expedited, scope has been changed to

include laying of pipes Delayed. Contract to be vetted by MoJ.

B3 Preparation of Detailed designs and bidding documents for the 4 schemes should be completed

Delayed. Designs for Mponela were completed, but draft design documents for the three expected end of October 2010.

C. Water Resources Management Component StatusC1.1 Cabinet committee sensitization on proposed Water Bill Delayed. Response from OPC being awaited.C1.2 Follow up on passage of bill This awaits the sensitization of the relevant cabinet

committees.C2.1 Thorough review and guidance to the consultant for Water Resources Investment

Strategy upon reception of Inception reportDone.

C2.2 Develop ToR for TA on multipurpose investment framework + hire individual consultant

Done. No objection granted and EOI advertised

C3.1 Complete technical evaluation; financial evaluation and contract award for design consultant

Done. Contract awarded and work commenced.

C3.2 Modify the EIA ToR for Kamuzu Barrage to reflect mission’s recommendations Done. No objection grantedC3.3 Carry out public consultation on draft ToR for EIA of Kamuzu Barrage Done. C3.4 Submit revised ToR for Kamuzu Barrage EIA to World Bank for no objection Done . No objection granted and EOI under evaluationC3.5 Initiate bidding process for EIA study Done. Request for EoI published.C3.6 Develop ToR for study on Integrated Water Management System to complement

work on operational rulesDone. Draft TORs under technical review by the Bank

C4.1 Review/finalize ToR on the Water Use Revenue MIS + procure services for study Done. Awaiting passage of the Water Bill.

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C. Water Resources Management Component StatusC4.2 Review options for licensing campaign under current institutional and legal set-up

+ develop ToR for fast-tracking this componentDone. MoIWD is finalizing the TORs with a new approach.

C4.3 Review and finalize ToRs for establishment of NWRA and Water Resources Fund Done. Revised ToR were sent to the Bank. Further progress awaits passage of the bill.

C5.1 Ensure critical review of all feasibility studies for Water Sources Studies before moving to preliminary design stages

Done. NRWB have completed preliminary designs while BWB and LWB are to start preparing the preliminary designs.

C5.2 Finalize ToR for Central/Southern Region surface water options analysis, as well as groundwater investigation studies

Done. EoI advertised for surface water, Final RFP for ground water has been submitted. (this is a copy of action B1)

C5.3 Finalize and sign MoU on hydrographical surveys Delayed. Discussions under way with Surveys Dept.C5.4 Finalize surveys and analysis. deliverable Delayed. Awaiting C5.3

D. Sector Management StatusD1. 1 Revision where needed of the M&E Framework to improve the quality and

quantity of data collected by the various water boards and MoIWD. Done

D1.2 Reconciliation of results targets to include new cost developments, project reallocations and the availability of baseline surveys

Done.

D1.3 Submission details on the status of baseline surveys in Blantyre and Lilongwe Done, but delayed due to consultant’s delayed submission

D1.4 MOF provides its comments to the TOR of the PER to ensure that the timeframe of the study coincides with the availability of financing for the study

Done. See #10 in aide memoire.

D1.5 TOR for the institutional arrangements review for NWDP be submitted to the Bank for review

Done. The ToRs were submitted to the Bank and were approved.

E. Rural Water Supply and Sanitation StatusE1 Follow up on specific requirements from Dedza and Chikhwawa District Assemblies Done. Annual work plans and budgets and the appraisal report

were submitted to World Bank for comments and approval.E2 Project Engineers to follow up on revised work schedules submitted by contractors

and ensure total complianceOn going.

E3 Hold meetings with Districts Assemblies and strategize on catchment protection for the concerned schemes

Delayed, Still awaiting identification of resources

E4 Add chlorine dosing units to treatment plants to enhance purification MoIWD to decide as this is a policy issue.E5 Conduct follow up meetings with WUAs to work on modalities of getting them to

leadDone. Meetings were conducted in all seven schemes

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E. Rural Water Supply and Sanitation StatusE6 Follow up on construction elements that were overlooked Done. All schemes have been cross checked.E7 Conduct a meetings on interventions on community participation in liaison with

District Assemblies in the 7 schemesDone.

E8 Explore the engagement of Technical Services Providers to support WUAs and Tap Committees who will provide back up in the absence of Local Operators

Done. Draft contract with MoF and MoJ for vetting.

E9 Arrange the involvement of the District Assemblies staff in implementation of sanitation activities

Done. Sanitation activities included in the districts’ annual work plan and budgets

Safeguards Status1 Safeguards training workshop to be held Done. Held on Aug 31-Sept 2, 2010

2 Clean version of Environmental and Social Management Framework (ESMF) to be distributed to all RWBs

Done.

3 Environmental and Social Screening Form to be filled out for all sub-projects Form filling pending

Financial Management Status1 Review the implications of spending the entire converted debt into equity in one

financial yearDone.

2 Scale up Private Sector Debt Collection Done.

Staff Training & Capacity Building Status1 Undertake Training Impact Assessment for completed training and conduct training

needs assessment to identify required additional training for all implementing entities

TNA done. Impact assessment yet to be done.

2 Prepare a training plan and request Bank’s approval Done.

Procurement Status1 Submission of updated detailed consolidated procurement plan Done.2 Submission of simplified procurement plan Done3 Post Procurement Review Done.4 List of contracts in the F384 under the credit/grant which should have been under

ACGFDone

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Procurement Status5 List of contracts under ACGF charged to Category 1(b) which should have been

charged under Category 4 (subprojects)Done.

15

Annex 3Updated results matrix

UnitIDA (A) ACGF-GA (B) (A + B) % of End

Project Target

Added number of people with: - New water supply # 0 250,000 200,000 450,000 147,255 33% - Rehabilitated water supply # 0 250,000 300,000 550,000 302,760 55% - Total (improved water supply) # 0 500,000 500,000 1,000,000 450,015 45%Added number of people with improved sanitation # 0 250,000 250,000 500,000 0 0%Capacity to manage water resources enhanced Yes/No No Value Yes Yes In progress

Added number of new connections # 0 7,500 N/A 7,500 9,870 131%Added number of rehabilitated connections # 0 2,500 N/A 2,500 9,215 369%

BWB=20 100%LWB=24 120%

BWB=1.00 91%LWB=1.01 92%

Added number of new connections # 0 4,500 2,500 7,000 12,093 173%Added number of rehabilitated connections # 0 10,000 5,000 15,000 15,073 100%

SRWB=22 92%CRWB=16 67%NRWB=20 83%SRWB=1.2 120%CRWB=1.17 117%NRWB=0.98 98%

National Water Resources Board established Yes/No No Yes N/A Yes In progressWater resources investment strategy prepared Yes/No No Yes N/A Yes In progressLevel control design and safeguards approved Yes/No No Yes N/A Yes In progress

hrs

ratio

Component C: Water Resources Management (IDA only)

Hours per day of supply 20 24 24 24

Ratio of operating revenues/expenses, including O&M, interest, and debt service

0.9 1 1 1

Ratio of operating revenues/expenses, including O&M, interest, and debt service

0.9 1 N/A 1.1

Component B: Town, Market, and Rural Piped WSS (IDA and ACGF)

ratio

Component A: Urban Water Supply and Sanitation (Funded from IDA Funds only; No ACGF Funding Provided for this Component)

Hours per day of supply, based on weighted average of connections*

0 20 N/A 20hrs

Project Outcome Indicators Baseline Value

End of Project Target Value Actual Status (August 30, 2010)

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UnitIDA (A) ACGF-GA (B) (A + B) % of End

Project Target

NWDP management system in place in MIWD Yes/No No Yes N/A Yes Yes

Short term service contract signed Yes/No No Yes N/A Yes Yes

Regulatory and institutional framework for urban water sector reform established

Yes/No No Yes N/A Yes In progress

Hygiene and sanitation promotion program for cities, towns and market centers refined and initiated

Yes/No No Yes N/A Yes In progress

Added Number of Connections:** - Number of new connections # 0 N/A 3,700 3,700 0

- Number of rehabilitated connections # 0 N/A 4,040 4,040 0

Added Number of Community Water Points:*** - Number of new boreholes/taps # 0 N/A 1,700 1,700 312 18%

- Number of rehabilitated boreholes / taps # 0 N/A 2,700 2,700 1,511 56%People with Access to and Using Adequate Sanitation Services # of people 0 N/A 150,000 150,000 0 0%

Number of schools with adequate sanitation facilities # of schools 0 N/A 140 140 0 0%

Number of people washings hands with soaps # 0 N/A 150,000****Decentralized service delivery modeled in districts (number of districts) # of districts 0 N/A 3 3 In progress

Planning and capacity building in districts # of districts 0 N/A 6 6 ****

AfDB=US$48.2 millionAusAid=US$14

million and Clear manual in place for use by all districts No N/A Yes**** In progress

*IDA Financing Agreement (FA) Part/Component A also includes an additional performance indicator “Hours per day of supply , based on weighted average of connections” with a Target value of “20” by Project Closing Date. But this indicator is not listed under the Results Monitoring Framework in the PAD and the ACGF Project Paper**ACGF PP includes year 4 and year 5 targets of 3,000 and 3,350 respectively .*** ACGF PP includes year 4 and year 5 targets of 1,850 and 2,120 respectively .****Indicators in ACGF PP but not in ACGF GA

Project Outcome Indicators Baseline Value

End of Project Target Value Actual Status (August 30, 2010)

249%

Component D: Sector Management and Urban Water Sector Reform (Funded from IDA Funds only; No ACGF Funding Provided for this Component)

Component E: Rural Water Supply and Sanitation [Component Added/Funded under ACGF and No IDA Funds Provided for this Component; End-of-Project (Year 3) Target Value Provided below are only for ACGF Part and are not combined]

Additional funding leveraged from other donors 0 N/A $25 Million $25 Million

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Annex 4NWDP financing sources and disbursement to date

The table below summarizes the source of funds for the various partners contributing to the National Water Development Project as of September 30, 2010.

Source of funds Project amount (US$

mln)

Date agreement

signed

Time remaining

(years)

Disbursement rate

World Bank (IDA) 50 2007 2 44%World Bank (ACGF) 25 2008 1 76%AfDB 48.2 2008 3 9%[AusAid (AfDB) (pending approval) 14 2010   0%]UNICEF 18.1 2006 3 29%EU/EIB 48.5 2008 3 11%OFID 10 2008 3 14%Gov. of Malawi 10.6     28%Communities 10.1     36%TOTAL 234.5     27%

The table below is an extract from the ACGF project paper showing the Development Partners in NWDP in February 2008 and the sub-sectors each Agency supports – for information (to be updated during the next mission)

Development Partner

Proposed

Amount(US$m)

Urban (US$m)

Town(US$m)

Market Centres(US$m)

Rural Piped

System(US$m)

Rural WS &

Sanitation(US$m)

WRM(US$m)

Program Mgt. & Capacity

Building(US$m)

IDA 50** 7 18 3 2   12 5

Netherlands / UNICEF 30         28.5   1.5

European Union 20 20            

European Investment Bank 20 20            

African Development Bank 40         35 4 1

CIDA 20       4 15   1

OPEC Fund 10   10          

UNDP 1             1

Water Aid 6 1       5    

Africa Catalytic Growth Fund 25   4.2 1.3 8.0 8.5   3

JICA Tbd              

GOM Tbd              

Expected (next five years) 222** 48 32.5 4.3 18 92 16 9.5

Required (next five years) 300* 65 63 Tbd 130 27 15

Program gap (next five years) 78*** 17 30.5    17 11 5.5

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Annex 5Detailed review of components

Component A. Urban Water Supply and Sanitation Component – Lilongwe Water Board (LWB) and Blantyre Water Board (BWB)

A1: Priority Investments - Actions to mitigate water supply disruptions in Blantyre and Lilongwe, including expansion of water production

1. Blantyre. All actions pertaining to the repair of pumps and transformers were completed by May 2010. The plant is performing relatively well, although more work still needs to be done in all pumping stations. Frequent power failures in all the pumping stations, especially at Chileka, are affecting water supply for the city. Regarding non-revenue water, measuring equipment has been secured by BWB, and measurement commenced in July 2010. The delivery of pipes and fittings for network repair has commenced, while GIS mapping of the network is on-going. The service contractor, VITENS-EVIDES International (VEI), has so far submitted the Active Leak Detection and GIS Reports, which have since been approved by the Board. The Board is yet to approve a report on Illegal Connections and Unbilled Authorised Consumption.

2. Lilongwe. Works involved the procurement and installation of essential equipment spare parts for repairs of electromechanical works. The procurement of pipes and fittings for repairs of the 525 mm asbestos cement (AC) pumping main from Northern Booster Station to Kanengo, which is experiencing high failure rate, was also undertaken. However this was declared misprocurement by the Bank in April 2010.

3. The bids for the supply of 4 no. pumpsets for Water Treatment Plant were received on September 30, 2010 (after a postponement from September 16, 2010). The bids were generally higher than the budget, and LWB will recommend the way forward to the Bank after evaluation. The on-site electrolyte chlorination (OSEC) plant, which had malfunctioned after installation in June 2009, has since been repaired and is performing satisfactorily. This plant was installed at a cost of US$ 191,092.50.

Implementation of Investment Program (production capacity and efficiency)

4. Blantyre. On improvement of production capacity and efficiency, pre-qualification for the rehabilitation and renewal works at Walker’s Ferry is underway; the deadline for bid submission was September 22, 2010. The Board is still waiting for a confirmation from the PMU on the proposed re-allocation of funds to assist in the improvement of the treatment capacity.

5. Lilongwe. The service contractor under the EIB funding, VITENS, has completed and submitted to LWB the Investment Program, Accounting and Customer Service Report, Tariff Calculation Model, Leak Detection Program, Baseline Report, and the Quarterly (February-April 2010) Report. LWB has since accepted these reports and adopted relevant recommendations.

A2: Reaching the un-served areas

6. In line with the objective of this component, which is to increase access to sustainable water supply and sanitation services for people living in the cities, 5,760 new connections were made in Lilongwe City, under Lilongwe Water Board (LWB), while 4,110 new connections were made in Blantyre City, under Blantyre Water Board (BWB). This brings the total cumulative to-date to 9,870, against the overall target of 26,147 by the year 2012, representing 38% progress. At the same time, 9,215 meters have been replaced in BWB (far exceeding the target of 7,900), thus restoring water supply to customers.

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Extension of Water Supply to Low Income Areas

7. Blantyre. The procurement of pipes and fittings for the construction of the first 30 kiosks is underway, and the locations for these kiosks have been identified in Ndirande, Machinjiri and Nkolokoti. Construction of these kiosks commenced in September and is expected to be completed by October 31, 2010.

8. Construction of pipe lines and 18 kiosks in the low income area of Mbayani is 100% complete, and commissioning of the kiosks awaits the procurement of a Private Operator. Water for People still doing the community mobilization and will assist the Board in piloting a Private Operator as a kiosk management option (insert new connections statistics). Procurement process for the Private Operator will start mid September 2010. The following reports have since been submitted to BWB:

Private Operator Report Tariff structure development for the Low Income Areas Meter reading protocol and Grievances Procedure

9. Rehabilitation of existing kiosks (15 no) will not be done due to inadequate funds (a total budget amount of US$ 102 000 against a lowest evaluated bid price of US$ 265,000). The mission was informed that BWB anticipates that it will carry out this activity using EIB funds. The construction of Sanitation Demonstration Centre in Mbayani has commenced on land provided by Blantyre City Assembly.

Sanitation and hygiene promotion

10. The IDA support to the two water Boards for this sub-component was designed to provide funding for a limited number of start-up and pilot activities on sanitation marketing and hygiene promotion. This was done bearing in mind the limited IDA available, whilst at the same time recognizing the need to complement the funding that was anticipated from EU/EIB. The activities were therefore planned to allow for the setting up of systems to enable the shift from a supply led to a demand driven approach, focusing on provision of software as opposed to hardware. The component has therefore been supplemented by technical assistance from the Water and Sanitation Program for Africa (WSP-AF) which among other things supported the two Water Boards with preparation of the sanitation marketing strategy which was officially published by the MIWD in August 2009. The bulk of the activities that have been undertaken by the Water Boards mainly through Water for People in Blantyre and Water Aid in Lilongwe, draw from this strategy.

Setting up of Local sanitation Businesses: With IDA funding, the Blantyre Water Board working through the NGO Water for People has trained 19 entrepreneurs in construction of latrines, marketing and financial management. In order to standardize the training, a training manual on construction, business management and finance has been prepared. Based on agreement within the sector, this manual will be consolidated and updated with financial and technical assistance from WSP-AF by December 2010, so that it forms the main tool for all sanitation marketing training activities regardless of the source of funding. At the time of this mission, Water for People was already using the existing manual for training of relevant groups in both IDA and EIB/EU funded projects. 10 of the trained entrepreneurs were reported to be actively engaged in marketing activities. In order to assist them further develop their sanitation businesses, the Blantyre City Assembly has provided them with free premises from which to trade. A key challenge identified during the preparation of the strategy and with implementation of an earlier pilot by Water for People is the lack of access to financing for the mainly informal sanitation entrepreneurs. In order to try and address this issue, Water for People is currently in negotiations with the Malawi Savings Bank to provide business loans of up to MWK1m (US$6600) as start-up capital. The bank is still undertaking its due diligence, although the mission was informed that the two parties have already signed a Memorandum of Understanding on the same. To make the proposition

20

attractive to the Bank, Water for People is providing a guarantee of US$10000 against these loans from its own resources.

Household Finance for Sanitation: Another major obstacle to improving sanitation using a marketing approach is the limited financing and low prioritization of sanitation at household level. This is compounded by the fact that the construction of ventilated pit latrines or ecological toilets (ecosan) which are the preferred options, is rather high ranging between MWK25000(US$165) and MWK44000 (US$291). A toilet with bathing facilities can cost up to MWK59000(US$390). Despite these costs, since July 2010, 19 households in the pilot area of Mbayani have fully paid for and had their latrines constructed by the trained entrepreneurs (8 opted for the MWK59000 toilet with bathing facilities). This uptake by the few households suggests that on one hand there is a willingness on the part of the households to improve their sanitation, whilst on the other, there may be a real financial constraint for them to do so. In order to provide financial assistance to these households Water for People is in discussions with Opportunity Bank of Malawi to set up a micro-credit facility for households to improve their sanitation. Success of such a facility however will largely depend on the interest rates as well as the repayment duration. It will be important going forward to see how this arrangement will work and to pick up lessons for scaling up. This is particularly important given that the EU/EIB funded project is taking a similar approach in terms of providing the software and not the hardware. It is worth noting that even if the Water Boards were to take a decision to subside the construction of toilets, they would not be able to reach the set target of 69000 from the available funding. At the current cost of a VIP latrine, Blantyre Water Board for instance could only construct a maximum of 2200 toilets from the available EU/EIB funding (assuming that they are spending only 250,000 Euros on sanitation as reported during the mission). Whilst the demand driven approach has been accepted as the policy position, it may be worthwhile at some point to re-examine the position on household subsidies particularly if there is funding for large scale investments in low income areas.

Pit Emptying: A third major obstacle is related to pit emptying services which currently are all but non-existent in the low income areas due to both low effective demand as well as technical problems associated with non-lined pits which are the most prevalent. To assist with pit emptying services, Water for People has procured two manual gulpers and given these to a group of entrepreneurs to manage as a business. The gulpers can be manufactured locally. The challenge however is that the entrepreneurs currently managing the same, have no vehicles for transporting the sludge to the sewage treatment plant and therefore need to hire one at fairly high cost. This is likely to present an environmental problem as the emptiers may be tempted to throw the waste in unauthorized but convenient places. The issue of pit emptying therefore needs further examination and resolution. Alternatively, ecosan toilets may be pursued rather than VIPs especially if a decision is taken to subsidy the households.

Social Marketing: In large part, increased demand for improved sanitation at household level is expected to come from a social marketing campaign expected to be developed by the advertising agency. WSP-AF is currently providing support to the Water Boards to ensure that the ad agency produces a good quality product. The success of the marketing campaign however will depend on a “Unity and Consistency of Message” by all stakeholders. Currently, Water for People like all the other agencies are carrying out their own marketing in their respective project areas using mainly trained health surveillance assistants through public meetings, focus group discussions and distribution of printed materials. It will therefore be important that a mechanism be put in place to ensure harmonization of messages once the ad agency has completed their exercise. This is particularly important given that the funding for dissemination of these messages will be paid for by the different partners. It is also important for new partners coming onto the table such as the AfDB African Water Facility which will be financing activities through the NGO CCOD in Blantyre and which might have a slightly different approach.

A3: Aqueduct Planning for Lilongwe Water supply

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11. LWB commissioned Hydroplan Consultants to undertake the Feasibility Studies and Preliminary Design for the raw water conveyance from Lilongwe River to the raw water intake point. The Consultant commenced the services in September 2009 and was expected to be concluded by June 30, 2010. However, the contract has experienced some delays, and the consultant has now applied for extension of the contract up to November 2010. The draft feasibility study report was submitted in August 2010. The Consultant is still incorporating the client’s comments and has since requested for an extension of time from July 2010 to November 2010. The Bank will provide its opinion on the matter by mission closure.

Component B. Town, Market Center, and Rural Piped Water Supply and Sanitation Component

B.1 Town Water Supply and Sanitation (IDA and ACGF)

12. Progress to date. The Regional Water Boards together made a total of 12,093 connections. Out of these, the Northern Region Water Board made a total of 6,091 new connections, while the Central Region Water Board has made 2,339 new connections and 3,663 have been made in the Southern Region Water Board. In terms of replacements of old and stuck meters, a total of 15,355 meters have been replaced/serviced as of September 2010. Central Region Water Board (CRWB) has replaced 4,277 meters, Southern Region Water Board (SRWB) has replaced 7,519, and Northern Region Water Board (NRWB) has replaced 3,559. The table below shows the progress to date of the construction (C), rehabilitation (R), extension (E) and feasibility studies and designs (S) of water supply schemes in towns and market centres (MC).

NORTHERN REGION WATER BOARD

Mzuzu

IDARE

Works for Mzuzu Water Supply Scheme (IDA financed) commenced on 15 th

August 2009 and progress is that about 80% of the works have already been completed. Due to additional works, the construction completion date has been shifted to 31 st January 2011 from 15th Aug 2010. The additional works are:

Increased length of pipelines due to minor re-routing to avoid demolishing people’s houses;

Installation of a distribution pipeline (not part of the contract) together with a transmission pipeline along the built-up area in town. This is to avoid cutting the pavements and roads twice thereby incurring additional unnecessary costs;

Relocation of power line at the tank site. The variation order was issued on 13 th September 2010 and procurement of additional pipes will take about 10 weeks. Thereafter, installation, testing and commissioning of the additional pipeline stretches will take 6 weeks. The other reasons for delays in completion of the works apart from the additional works are as follows:

One and half months were lost during the rainy season due to bad weather;

Change of design for river and road crossings from PVC to steel pipes; Delayed supply of electro-mechanical materials and DCI pipes and

fittings.

OFIDRE

Works for Mzuzu Water Supply Scheme (OFID financed) commenced on 1 st

February 2010 and progress is that about 65% of the works have already been completed. Construction completion date has also been shifted to 31st January 2011 from 30th Sept 2010 due to the same reasons as in the IDA portion above.

Feasibility study and preliminary design of raw water

IDA S The Consultant submitted final Feasibility Study report on 9th Sept 2010. The Consultant has incorporated comments related to the financial and economic analyses for the feasibility studies which were outstanding.

22

sources for Mzuzu and Mzimba and surrounds

All the outputs on the assignment have been accepted by the Ministry of Irrigation and Water Development as well as the Northern Region Water Board. The feasibility study report has since been shared with the World Bank. On the other hand, ESIA reports have been submitted to the Environmental Affairs Department for their review. Once the ESIA reports are approved by the Environmental Affairs Department, an independent Social and Environmental Impact Assessment will follow.

Mzimba, Chitipa, Chilumba, Rumphi and NkhataBay Water Supply Project

IDA CDesigns and tender documents were finalized in 2009. Implementation of works awaits sourcing of funds. The estimated cost for the five water supply schemes is US$ 45.64 million.

Likoma (MC) ACGF C Works for Likoma Water Supply Scheme were completed and the system commissioned end February 2010.

Chizumulu (MC) ACGF C

The contract was awarded 18 months after the bid submission (March 2009), and hence the contractor requested an upward adjustment in some of the rates for inputs such as steel and uPVC pipes. The final negotiated price was 23% above the original bid price. NRWB determined this increase reasonable, and the Bank provided its no objection for NRWB to sign the contract early October.

Mpherembe and Embangweni Water Supply Project

IDA C

Preparation of designs for water supply and sanitation facilities was completed by the NRWB PIU and the designed works are estimated to cost US$ 4.0 million. The Socio-economist/Communications Specialist also completed her assignment of conducting baseline assessment and household survey, and building capacity of the communities at the planning stage. On the other hand, the Financial Analyst has submitted financial analysis report and is currently building capacity of the communities so that they will be able to manage the facilities.

Songwe (MC) ACGFRE

The Consultant submitted final Detailed Design Report and tender documents on September 27, 2010. The designed works are expected to cost US$ 2.3 million.

Drilling of 2 boreholes for Chitipa Boma

CTwo boreholes are to be drilled to augment raw water availability, while funds for developing a new water source are found. The Bank gave its no objection to the bidding documents early October 2010.

Supply and installation of 2 diesel generators for Chitipa Boma

CThese generators are meant to be standby sets for the pumps due to frequent power, so that continuity of supply is guaranteed. The Bank gave its no objection to the bidding documents early October 2010.

CENTRAL REGION WATER BOARD

Kasungu

IDA CA no objection for a time-based contract for construction supervision was issued by the Bank in August 2010, and draft contract sent to MoJ and MoF for vetting. Awaiting approval.

OFIDRE

Bid Evaluation Report for the works resubmitted to the Bank and OFID in September for final review and No Objection to Award Contract. Awaiting no objection from OFID after incorporating comments on BER. Works are yet to commence.

Salima Lakeshore IDACRE

The draft designs and tender documentation for integration and expansion of Salima Lakeshore Schemes were completed on August 6, 2010 and jointly reviewed with MoIWD and PMU (the designs were in-house). The Board is incorporating review comments for final documentation to be submitted to the Bank within October 2010.

Nkhotakota OFIDRE

Draft detailed designs were reviewed and final documentation will be submitted to the Bank for no objection within October 2010.

Mponela IDA RE

Designs and tender documents were completed in March 2010 and approved by MoIWD and PMU. The Bank gave its no objection on October 3, 2010. Tenders will

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be floated by mid-October, 2010.

Kochilira – Kamwendo IDA

RE

The draft designs and tender documentation for integration and expansion of Kachilira-Kamwendo Scheme were completed on August 6, 2010 and jointly reviewed with MoIWD and PMU (the designs were in-house). The Board is incorporating review comments for final documentation to be submitted to the Bank within October 2010.

Dwangwa ACGFCE

Following approval of 2010/2011 Budgets, the Board has made payment to Borehole Treasury Fund for drilling of two Boreholes after which extension works using partly ACGF funds will commence. The storage tank was completed and tested in December 2009.

Mitundu & Linthipe (MCs) ACGF C

Erection works for the 100 m3 tanks, one for each town centre, was completed in December 2009. The contract for the development of boreholes was awarded in July 2010. Two boreholes for each market centre have been drilled and await equipping.

With regard to installation of reticulation systems for both Mitundu and Linthipe, draft contracts were submitted to the ministries of Finance and Justice for vetting on August 31, 2010. A response is still awaited.

IDA: Sanitation Planning for Central Region Towns. The contract was signed on 21 May 2010, and is for 6.5 months. The Inception Report was submitted on July 23, 2010, reviewed and finalised. The next deliverable, the Draft Socio-economic Study and Baseline Assessment Report, is expected in October 2010. Centres under study are Kasungu, Salima Lakeshore and Kochilira-Kamwendo.

SOUTHERN REGION WATER BOARD

Mangochi and Zomba IDARE

No objection for bidding documents was issued in September 2010, and tenders were floated on September 24, 2010.

Mangochi and Zomba IDARE

The initial supervision consultancy contract was revised by the consultant by 54%, which is unacceptable to the Board. This is yet to be resolved.

Lirangwe an Miseu Folo (MC)

ACGF R

The procurement process for the supervision contract has commenced, and is expected to be completed by end of October 2010.

Lirangwe an Miseu Folo (MC)

ACGF C The civil works contract is awaiting vetting by government

Neno IDA EDesigns were done Internally in-house by SRWB; the final detailed design report and tender documents have since been submitted to MoIWD for approval.

Nsanje IDA C The final detailed design report is awaited from the consultant, after SRWB commented.

Sanitation Study for Balaka, Mwanza and Mulanje Towns

IDA SProposals received from short listed consultants on September 30, 2010, and currently being evaluated.

Component C: Water Resources Management

13. Progress since last mission has been good, and most of the key agreed actions were carried out. Substantial progress was also made on most of the sub-components within the responsibility of the implementing institution.

14. No substantial progress has been made since MTR on the passage of the Water Resources Bill, which is critical for improved water resources management in the country in its support to the national water policy and river basin management. Sensitization meetings with the Cabinet Committee on Constitutional, legal and Parliamentary Affairs and Cabinet Committee on Natural Resources, Energy and Environment are under preparation ahead of discussion in cabinet, and the

24

Ministry is closely following the agenda and is putting together an information package and presentation. In the meantime, there is still preparation work pending on the different studies/consultancies proposed under component C4 on institutional support, implementation of which is dependent on passage of the bill. It was agreed during the mission that within the month of October there should be a half-day working session with PMU, Ministry, World Bank and preferably AfDB on finalizing these different building blocks as they interrelate so that they are ready for implementation as soon as the bill is approved by Cabinet and passed by Parliament. 15. Progress on the Water Resources Investment Strategy has been substantial with the consultant and the Ministry working in good mutual understanding towards the envisaged interim and end-products. Given the multiple variables and strategic decisions to be taken in the modeling the mission encouraged the Ministry to keep engaging the consultant in active dialogue on the best method to achieve the study’s objectives. A corollary activity, the TA consultant contract on multipurpose investment framework, has advanced since last mission with a full consultant ToR developed and procurement started. The procurement timeline is as follows: Shortlist: 22nd October 2010, Technical Evaluation: 10th December 2010, Contract Award 11th March. It was recommended that the Water Resources Department actively seeks to engage other main water using sectors, including Ministry of Natural Resources, Energy and Environment, Ministry of Tourism, Wildlife and Culture, Ministry of Transport and Public Infrastructure, Fisheries Department, etc) in the start-up of this TA. With all the feasibility and design studies under C5 nearing completion, and the additional investments to be pre-identified under the WRIS, Malawi will be looking at an impressive water infrastructure pipeline, which needs to be well managed and prioritized. It is within this context that this consultancy comes in timely. 16. Procurement for the engineering design consultancy firm (Norplan A.S and Willy and Partners) for Lake Malawi Level Control was completed and a contract signed on 30th August 2010. The consultant has since commenced the work, which is expected to be completed on 29th August 2011. Ministry is expecting the inception report on 27th October 2010. Given the critical and sensitive nature of this infrastructure, the mission strongly requested the Ministry to share important reports and outputs with the Task Team in time so as to enable technical review and comments. The mission noted the proposed establishment of a panel of experts, representing the different stakeholders to the operation of the Barrage. While this is a deviation from the proposed dam safety panel, the mission agrees that this forum can be very useful in sharing information, design criteria, etc. The mission urged the Ministry to share with the Bank the panel’s ToR and its membership (names and qualifications) urgently. It was also recommended to still ensure independent engineering review of technical progress and products. It was suggested to either have one time-based contract with an internationally respected dam engineer and/or work closely with technical experts mobilized through World Bank by the Task Team. It is expected that the expert will be engaged by 30 th November 2010, after consultations with the Bank. 17. The ToR for the independent EIA was finalized and no objection granted. The consultant is currently being procured. The procurement timeline is as follows: 22nd October 2010, Technical Evaluation: 10th December 2010, Contract Award 11th March 2011 so that the EIA consultant overlaps with the design consultant and recommendations can be integrated in design.

18. Regarding the feasibility studies and preliminary design studies for the Multipurpose New Raw Water Sources development within LWB, BWB and NRWB catchment areas, progress has been limited due to delays in the review and substandard quality of initial reports, leading to series of comments for improvement.

19. The ToR for multipurpose analysis in Central and Southern Region has been finalized (surface water identification) and procurement started. Procurement timeline for this consultancy is as follows: 22nd October 2010, Technical Evaluation: 10th December 2010, Contract Award 11th March 2011. ToR for a simultaneous groundwater investigation is under development and procurement is

25

expected to follow similar path as the surface water study, only delayed by a few weeks. The Ministry informed the mission during the mission that it has selected options for Lilongwe and Blantyre, however, these were not yet formally conveyed to the consultant. Because these choices are strategic and have important financial, planning and technical implications, there is need for a clearly articulated position by the Ministry weighing the different considerations and coming with a solid conclusion. This should document the decision for future reference and be shared with partners. It was therefore agreed that the Ministry would officially communicate its selected option by end of October 2009, so that design consultancies can proceed.

20. On the hydrographic surveys it was tentatively agreed that it would be explored whether Surveys Department under the Ministry of Lands, Housing and Urban Development can carry out these surveys. Discussions were held and a MoU will be drafted, to be signed between the Surveys Department and the water boards. Department of Surveys has experience with hydrographic surveys and is in the process of coming up with a costing of the activity. This is expected to be concluded on 31st October 2010 so that this activity can be concluded by 31st December 2010. It was noted during the mission that the hydrographic surveys do no longer feature in the approved procurement plan and this needs updating.

21. It was noted during the mission that preliminary designs for the selected options have not been done by Sogreah for both BWB and LWB due to reasons beyond the consultants control. It was also noted that Sogreah consultants have successfully completed the feasibility studies and preliminary designs for Mzuzu and Mzimba. It is recommended that acceptable solution on these delays be implemented soon and improved vigilance and contract management should avoid repetition of these issues.

22. In general, good progress has been made under this component. The current good working relationship between the MoIWD and the consultants should be maintained in order to ensure that the objectives are met and activities timely implemented.

Component E: Rural Water Supply and Sanitation

23. The RWSS component of the ACGF is underway with its main sub-components being (i) Rehabilitation/expansion of seven gravity-fed schemes, establishment of Water User Associations; and (ii) Implementation of district rural water and sanitation programs in three focus districts selected by the MIWD

24. The ACGF Coordinator in the PMU coordinates the overall implementation of the ACGF based on a work plan agreed with the MIWD and participating District Assemblies. The MIWD personnel are directly managing the RWSS activities while individual assemblies will manage activities in the focus district with direction and supervision from the PMU and the MIWD.

25. Overall the RWSS component is satisfactory.

Focus Districts based RWSS:

26. Work Progress – Following the assessments of the district’s ability to handle implementation of activities under the ACGF, the MoIWD had since initiated some preparatory activities in all the three Focus Districts that specifically looked at water need assessments and preparation of water system designs. The MoIWD engineers led in this exercise with support from District Assembly staff. Individual progress of activities for each of the districts is as follows:-

Chitipa - One existing piped water scheme (Misuku) was choosen and rehabilitation needs were conducted. This was followed by preparation of designs for rehabilitation of the system. Tender documents for goods were also developed.

Dedza -One area (Mvula) was identified and chosen to benefit through development of a new water supply system. Technical assessment were conducted which assisted in the

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identification of a new surface water source. Meanwhile designs for the water supply system are underway.

Chikwawa- An existing scheme (Chapananga) was chosen in the district to be rehabilitated under this project. Assessments for rehabilitation needs were conducted and designs prepared for the rehabilitation works. Tender documents for supply of goods were also developed by MoIWD.

27. Transfer of Funds to Districts -Meanwhile the Districts are awaiting transfer of financial resources from the PMU upon approval from Bank. In order to facilitate this process, the Bank has asked for submission of an official request by the MoIWD which will enable the districts implement activities with supervision from the MoIWD. The mission learnt that for effective delivery of results, the MoIWD intends to deploy engineers to coordinate implementation of activities in each district.

Rural Piped Schemes

28. Progress - It was established during the mission that works in the seven schemes under rehabilitation are close to completion and most communities are already benefitting from the project. Rehabilitation works affected almost all scheme components from intake, treatment works, pipelines, storage tanks to tap points. The technically complex structures were handled by contractors while trench excavation and pipe installation works were undertaken by communities to ensure ownership of the facility. It emerged however that progress of works in Mpira Balaka has been poor eventually leading to termination of the contract due to under performance by the contractor. The MoIWD expressed dissatisfaction with most of the contractors due to their inferior capacity in handling such works. It was suggested that in future such works could be lumped together to attract more qualified and bigger construction firms. The MoIWD is currently strategizing on a quicker modality of completing the remaining works within the project time frame.

29. RWS –Sustainability – The MoIWD lately adopted new management model for the RWS which engages (Water User Association) WUAs to manage the water systems. The WUAs lead in the management activities whilst a local operator to be employed by the WUAs will handle the technical issues and ensures consistent and adequate supply of water to all tap points. Currently all the seven schemes had their WUAs selected and trained on their operations which will enhance the schemes sustainability. The mission team however strongly felt sustainability will be a challenge if the WUAs will not be adequately empowered and also supported beyond the post- construction phase. It was learnt that MoIWD intends to support WUAs through its district based personnel but also through special arrangement with Regional Water Boards for attention to complex technical problems.

30. Sanitation – It was observed that this component has been neglected for a long time. Sanitation platforms procured by the MoIWD at the beginning of the project were distributed to all the seven schemes but have been hardly used. The delay has been partly due to the inadequate staff numbers in the sanitation department in the ministry and lack of a clear strategy on delivering this component. The mission team suggested engagement of Ministry of Health (MoH) personnel in the District Assemblies among other measures to enhance timely implementation of the activities. Meanwhile the PMU and MoIWD have been requested to develop an effective strategy to help timely delivery of activities.

31. Agreed Action. Ministry to submit official request for transfer of funds to the Bank MoIWD to develop a strategy on implementation of sanitation activities

Selected photos from site visits

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A yard connection in Mponela Area, Central Region Water Board

A 100 cubic metres overhead storage tank in Mitundu, Central Region Water Board. Two boreholes have already been drilled, awaiting equipping

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A communal water point at Senga Bay, Salima, Central Region Water Board

A communal standpipe in Likoma Island, Northern Regional Water Board

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Likoma Water Users Association

Mpalamizu Primary School rehabilitated tapstand, Northern Regional Water Board

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Annex 6Procurement

1. Summary: The overall procurement performance is rated moderately satisfactory. A comprehensive review of the agreed consolidated procurement plan was undertaken during the mission. Progress in the procurement activity was adequate considering most activities are within the schedule as per procurement plan. The Bank suggested that the plan include consultant/supplier /contractor names, PROCYS number for prior review contracts, retain estimated costs as originally planned and retain all the completed activities in the plan. The Bank has noted that under ACGF, the use of “force account” (i.e., the Ministry using its own labor force) has been used to carry out a number of activities and this may not be the most efficient and transparent procurement method. MoIWD has in the Procurement Plan made recommendation on the further use of force account in the three focus districts which in the view of the Bank should be reviewed and more competitive procedures be used.

2. Procurement has been slow since the last mission because the project was awaiting approval of the budget following re-allocations which were approved by the Bank only in August 2010. This has resulted in very few contracts being signed. Delays have been experienced due to the following: (i) delays in the approval of the reallocation; (ii) contracts have to be vetted by Ministries of Finance and Justice before signing; (iii) consultants failing to complete assignments on time for Blantyre, Lilongwe and Northern Region Water Board for Feasibility Studies and Preliminary Designs for future Water Resources; (iv) Detailed Design for Zomba and Mangochi Water Supply Schemes; (v) Urban House Water Use and Sanitation Baseline Study and (vi) lack of adequate capacity in specialized areas such as specifications for water pumps for Lilongwe Water Board.

3. Post Procurement Review: The Bank carried out a post procurement review in May 2010 and the report was shared with MoIWD; however to date no response has been received. It has been agreed that a response will be provided by October 31, 2010. No post procurement review (PPR) was undertaken during the mission but it has been agreed that a PPR be undertaken by 15 November 2010. This has been necessitated because of the due closure of ACGF by 30 June, 2011.

4. Misprocurement and Complaints: The Bank has declared misprocurement on Procurement Reference No. LWB/G/04, for Pipes and Fittings, awarded by the Lilongwe Water Board for an amount of US$828,205.94 equivalent. These funds are expected to be refunded to the Bank as soon as possible, after which a letter of cancellation of funds will be issued to the Government. The Bank also intends to declare misprocurement on an ACGF financed contract 021/IPC/MoIWD/G/26 for “Supply and Delivery of Pipes and Fittings for 7 Rural Water Supply Schemes” which is under the implementation of MoIWD. This is based on provisions of paragraph 1.12 and 1.14 of its Procurement Guidelines dated May 2004 revised October 2006 and May 2010. A letter will be sent to GoM shortly. Following persistent complaints from bidders, the Bank commissioned an independent fiduciary and governance review whose objective was to carry out an institutional and organizational analysis of the implementation arrangement of the Project with particular focus on procurement management aspect. The report of the review has been shared with MoIWD..

5. Contract Administration: The Bank has noted that there is no follow up on contract completion dates as there is no monitoring system in place as a result contract completion dates have been exceeded without formal extensions. Requests for extensions have been submitted to the Bank for review and No Objection.

6. Agreed Actions:(i) the PMU to submit the revised procurement plan including a simplified version of the plan for publication by October 31, 2010; (ii) the PMU and MoIWD to respond to the last Post Procurement Review and Independent Fiduciary Review by October 31, 2010; and (iii) the Bank will conduct a Post Procurement Review in the week of November 15, 2010.

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Annex 7Financial Management

Project Name: The Second National Water Development Program (NWDP II)

Project ID: P 096336 P110157IDA Credit/Grant No.: H 2940-MAI and Cr 4307Implementing Agency: Ministry of Irrigation and Water DevelopmentEffectiveness Date: November 14, 2007Closing Date: October 31, 2012Application Deadline: April 30, 2012Credit/Grant Amount: USD 51.75 millionProgram Duration 4 years 11 monthsRemaining Period to Closing 2 years Disbursed Amount:Cancelled Amount NonePeriod Covered by Review: April 2010 to September 2010Previous ISR Rating: Satisfactory Current ISR Rating: Satisfactory

Previous FM Risk Rating: Moderate Current FM Risk Rating: Moderate

Executive Summary and ratings are in the main text of the aide memoire.

Budgeting: Since the projects underwent restructuring and reallocations all expenditure is within the allocated amounts

Funds Flow and Disbursements: Both NWDP II (IDA) and ACGF are on track in terms of disbursement of course with ACGF doing much better due to the nature of project activities. NWDP II (IDA) will experience accelerated disbursement in FY2011 since most of the project activities will move into construction phase. Below is the disbursement table:

NWDP II Disbursements as at 31st August 2010Source of Funds Project

AmountAmount

DisbursedBalance at source of

funds

Disbursement Rate (%)

Expenditure to date

Utilization

%

NWDP II (IDA) - Grant $22,455,000 $18,311,957 $4,143,043 82% $17,296,883 94%

NWDP II (IDA) - Credit $27,545,000 $3,491,296 $24,053,704 13% $1,243,891 36%Sub Total NWDP II -(IDA) $50,000,000 $21,803,253 $28,196,747 44% $18,540,774 85%

NWDP II (ACGF) $25,000,000 $18,951,773 $9,456,165 76% $16,752,166 88%

It was noted, however, that there are delays in processing payments due to the mandatory clearance of all foreign exchange contracts of over US$50,000 by the Reserve Bank of Malawi.

Financial Reporting: The Financial Monitoring Reports for both NWDP II P096336 and ACGF P110157 have all been submitted timely including the latest for FMRs for the quarter ended 30th June, 2010 which were submitted before the due date of 15th August, 2010. The reviews indicate a generally satisfactory reporting environment. The draft Financial Statements for FY 2009/10 have been prepared on time and submitted to the National Audit Office.

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External Audit: The external audit for the Project and Water Boards are currently being undertaken and according to the plan, the audit reports will be ready by 30th November 2010. This would beat the deadline of 31st December 2010 by one month.

Action Responsible Deadline

Strengthen Debt Collection in all Water Boards Task Force 30 November 2010

Explain NRWB apparent decline in debt collection NRWB DOF 20 October 2010

Strategy for attaining full cost recovery by 2011 All Water Boards 30 November 2010

Pubic arrears: The GoM issued a directive to all government departments and institutions not to accumulate debts and that should that be the case the payment of such arrears will be from source (treasury/Accountant General). However the arrears seem to accumulate towards fiscal year end when funding diminishes and tend to be cleared at the beginning of the following FY. Enforcement of the directive not to accumulate arrears is also a problem. The table below shows public arrears status for fiscal years 2008/9 and 2009/10. NRWB is a red flag!! However the public arrears are reducing pointing to positive efforts by the GoM.

Public Arrears Status (as of June 30, 2010)

BoardDebtor Amount in MWK'000 Debtor Days

2009/10 2008/9 % Movement 2009/10 2008/9 % MovementLWB 136,037 167,564 19% 128 183 30%

BWB 118,688 150,139 21% 23 36 36%NRWB 62,434 36,509 -71% 97 74 -31%CRWB 51,184 64,857 21% 83 118 30%SRWB 173,841 254,325 32% 182 227 20%Total 542,183.91 673,395.06 -19%

Private Sector arrears: The private sector arrears are still accumulating among all the boards despite the debt collection strategy being in place. There is need for the boards to be aggressive in dealing with private companies. The table below shows public arrears status for fiscal years 2008/9 and 2009/10

Private Sector Arrears Status (as of June 30, 2010)

BoardDebtor Amount in MWK'000 Debtor Days

2009/10 2008/9 % Movement 2009/10 2008/9 % MovementLWB 335,617 298,509 -12% 88 95 7%BWB 1,120,628 1,151,386 3% 216 241 10%

NRWB 93,297 42,239 -121% 61 43 -42%CRWB 58,830 39,568 -49% 62 49 -27%SRWB 179,383 188,663 5% 155 237 35%Total 1,787,755 1,720,365 4%      

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Annex 8Progress on Staff Training and Capacity Building

1. Under IDA Funds: The original total PAD allocated amount for Training and Capacity Building under the NWDP II is US$ 1,377,000 (US$762,000 from IDA Credit and US$ 615,000 from IDA Grant). The breakdown is as follows: (i) Component B “Town, Market Centre and Rural Piped Water Supply and Sanitation”: US$1,033,000 (NRWB: US$350,000; CRWB: US$330,000; SRWB: US$350,000); and (ii) Component D: “Sector Management and Urban Water Sector Reforms”: US$344,000. Under Component D and as indicated in the first 18-months procurement plan, US$130,000 was earmarked for training of MoIWD - PMU staff, and study tours. Training budgets were not allocated in the PAD for Component A: “Urban Water Supply and Sanitation”, and Component C: “Water Resources Management”. According to PMU, since the NWDP II became effective in November 2007, to September 2010, a total of 220 staff/participants have been trained with a total cost of US$ 1,152,465. The total remaining balance for training under IDA, before the restructuring of the Project with reallocation of funds in June 2010 was US$ 426135. Since MTR Mission in March 2010 to September 2010, a total of 50 MoIWD and PMU staff participated in study tours and group training [study tour to Ghana (12), study tour to Tanzania (10), short-term training in Scotland (10), and Safeguards training in Uganda (2) and Lilongwe (16)].

2. Under ACGF Funds: Since the ACGF became effective in April 2008, a total of US$ 556,236 have been utilized for training and capacity building activities, including training of MOIWD and PMU staff (US$ 111,373) and community capacity building, especially in establishing and assisting water user associations (WUAs) in participating communities and other activities described below (US$444,863). Overall, since commencement of the project, WUAs have been formed in all the seven RWSS schemes, as well as for Likoma Water Supply scheme. Office bearers for the WUA General Assemblies and Boards of Trustees in all the seven schemes have been elected. So far 171 general assembly members have been oriented on the WUA concept, Roles and Responsibilities, WUA Institutional framework, stakeholder analysis and Laws and by-laws. In addition, 59 Board of Trustees members have been trained in Leadership, WUA Institutional Frame Work, Stakeholder Analysis, Scheme Management, Sanitation, Hygiene Promotion and Catchment Protection, Water Testing, Treatment and Pollution, Procurement and Contract Management, Tarriff Setting, Business Planning, Policies, Laws and By-Laws Corporate Governance Principles. In order to further strengthen and institutionalise their authority in the schemes, a consultant has been identified to prepare constitutions and business plans for the 7 Water Users Associations in the seven RWSS schemes and Likoma Water Supply scheme. Currently, the contract is being vetted at the Ministry of Justice. In Mpira/Balaka scheme, 16 Area Water Committees with 10 members each for Mpira Balaka Scheme were formed and trained in Community Based Water Management, Water Point and Household Sanitation and Resource Mobilization. Further capacity building activities under ACGF component have involved the preparation of 500 WUA training manuals which have since been finalized, printed and are ready for distribution to all relevant stakeholders for use. Furthermore, 1,000 WUA Formation guidelines have also been produced and are currently being printed. RWSS Implementation manuals have been reviewed and submitted to MoIWD management for approval.

3. Restructuring/Reallocation of Funds: Restructuring of the Project in June 2010 also included reallocation of funds from both IDA and ACGF for Staff Training and capacity building activities for the remaining of the project duration. The details are presented in Table 1 below. 4. As was noted by the Mission during the MTR and recorded in the MTR Aide-Memoire, MoIWD-PMU had no structured comprehensive training plan (or annual training plans) in place based on training needs assessment of the project implementing entities. Training activities were conducted mostly on ad-hoc basis. The Agreed Actions of the MTR Mission to be completed by MoIWD/PMU during April to May 2010 included: (i) undertake Training Impact Assessment for already completed training, (ii) conduct Training Needs Assessment to identify required additional training, (iii) prepare a comprehensive training plan for additional future training activities for all implementing entities, and (iv) request the Bank for approval of the training plan by end May 2010. According to PMU, the

34

required Training Impact Assessment is yet to be done. But the training needs assessment of MoIWD and other implementing entities have been conducted and based upon which a training plan has been formulated. The Training Needs Assessment Report, including the training plan was forwarded to the TTL-World Bank on September 23, 2010. The Mission reviewed the training plan and suggested the MoIWD/PMU to identify and separate the training activities to be conducted under ACGF and IDA as only about 9 months left before ACGF closes in June 30, 2011, while the closing date for IDA part is October 31, 2012. The PMU agreed to submit the revised training plan for Bank’s approval by end October, 2010.

Table1: NWDP II: Training and capacity building by source of financing (August 30, 2010)

IDA (CREDIT & GRANT)

ACGFIDA (CREDIT & GRANT)

ACGFIDA (CREDIT & GRANT)

ACGFIDA (CREDIT & GRANT)

ACGF

A: UWSS -$ -$ -$ 163,000$ -$ 163,000$ 88,579$ -$ 88,579$ 74,421$ -$ 74,421$ BWB -$ 50,000$ 50,000$ 44,289$ 44,289$ 5,711$ -$ 5,711$ LWB -$ 113,000$ 113,000$ 44,289$ 44,289$ 68,711$ -$ 68,711$

B:TMRPWSS 1,033,000$ -$ 1,033,000$ 1,030,000$ -$ 1,030,000$ 795,560$ -$ 795,560$ 234,440$ -$ 234,440$ NRWB 350,000$ 350,000$ 350,000$ 350,000$ 361,612$ 361,612$ (11,612)$ -$ (11,612)$ CRWD 333,000$ 333,000$ 340,000$ 340,000$ 273,352$ 273,352$ 66,648$ -$ 66,648$ SRWD 350,000$ 350,000$ 340,000$ 340,000$ 160,596$ 160,596$ 179,404$ -$ 179,404$

C: WRM NO PROVISION -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ MIWD -$ -$ -$ -$ -$ -$

D: SM & UWSR 344,000$ -$ 344,000$ 385,600$ -$ 385,600$ 268,326$ -$ 268,326$ 117,274$ -$ 117,274$ SECTOR MGT 215,000$ 215,000$ 215,000$ 215,000$ 84,800$ 84,800$ 130,200$ -$ 130,200$ UWSR 129,000$ 129,000$ 170,600$ 170,600$ 183,526$ 183,526$ (12,926)$ -$ (12,926)$

E (A): RWSS -$ 344,085$ 344,085$ -$ 344,085$ 344,085$ -$ 111,373$ 111,373$ -$ 232,711$ 232,711$ MIWD 344,085$ 344,085$ 344,085$ 344,085$ 111,373$ 111,373$ -$ 232,711$ 232,711$

Sub Total For Staff Training 1,377,000$ 344,085$ 1,721,085$ 1,578,600$ 344,085$ 1,922,685$ 1,152,465$ 111,373$ 1,263,838$ 426,135$ 232,711$ 658,847$

E (A &B): RWSS -$ 1,995,915$ 1,995,915$ -$ 1,358,915$ 1,358,915$ -$ 444,863$ 444,863$ -$ 914,052$ 914,052$ Community 1,995,915$ 1,995,915$ 1,358,915$ 1,358,915$ 444,863$ 444,863$ -$ 914,052$ 914,052$

GRAND TOTAL 1,377,000$ 2,340,000$ 3,717,000$ 1,578,600$ 1,703,000$ 3,281,600$ 1,152,465$ 556,236$ 1,708,700$ 426,135$ 1,146,764$ 1,572,899$

TOTAL

REALLOCATED AMOUNT (AFTER RESTRUCTURING

AUG 2010) TOTALCOMPONENT

ORIGINAL ALLOCATION (PAD 2007 & PP 2008)

AMOUNT DISBURSED/UTILISED

REMAINING BALANCE

TOTAL TOTAL

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Annex 9Summary of Environmental and Social Safeguards Training Workshop

1. The Safeguards Training Workshop took place 31 August 31-3 September 2010 at the World Bank office in Lilongwe, with George Ledec (Lead Ecologist) and Kristine Schwebach (Social Development Specialist) as the main presenters. The workshop was focused primarily on the environmental and social issues associated with NWDP II, although it also covered the ongoing Infrastructure Services Provision and future Shire River Basin Management projects. The workshop had about 30 participants each day, including staff from all 5 Water Boards, the PIU, and elsewhere from MIWD. Other Government departments and agencies represented include Physical Planning, Disaster Management, Roads, Energy, and ESCOM.

2. Topics Discussed: The workshop presentations included (i) an overview of all the Bank safeguard policies that are applicable to the Malawi projects under discussion; (ii) the Environmental and Social Management Framework (ESMF) and Resettlement Policy Framework (RPF) for NWDP II; and (iii) safeguards issues in water resources development and catchment management. We also had hands-on demonstrations for how to fill out an Environmental and Social Screening Form and how to prepare a relatively simple Abbreviated Resettlement Action Plan; in both cases, the case example used was the Mzuzu Water Supply Rehabilitation and Upgrading Sub-Project of NWDP II.

3. Field Trip: The field trip was to several sites encompassing the proposed Lilongwe Water Conveyance System Project, for which the NWDP II is supporting a feasibility study (as yet, there is no World Bank commitment for financing the civil works). The project would deliver water from the existing Kamuzu II Dam to the existing Lilongwe Water Treatment Plant by building a diversion wier in the Lilongwe River below the Kamuzu II Dam, along with a mostly covered 10 km canal that would bypass an increasingly polluted section of the Lilongwe River. This project is now being considered because the banks of the Lilongwe River became heavily settled beginning in the 1990s, when forest protection measures along the river stopped being enforced and large numbers of peri-urban dwellers moved into the area. As a result, dense human settlements, numerous farms, and other non-point water pollution sources are seriously degrading the water quality within the Lilongwe River, thus substantially greatly increasing the operating costs of the water treatment plant.

4. NWDP II Follow-up: The March 2010 Mid-term Review (MTR) found that, while significant adverse environmental impacts were not evident from the sub-projects carried out to date, the lack of systematic environmental screening and record-keeping poses risks and needs to be corrected. Accordingly, the MTR Aide Memoire (March 28, 2010, Para. 97) indicates agreement that the ESSF will be filled out for each NWDP II sub-project, with a copy of each sent to the Bank for information. The Safeguards Training Workshop made slight revisions to the ESSF to increase clarity and ease of use. This revised version of the ESSF has been sent to the PMU; it is substantively very close to the ESSF version that appears in the Environmental and Social Management Framework (ESMF) for NWDP II. The workshop demonstrated to the many NWDP II participants how to fill out the ESSF in as little as 2 hours (also sent to the PMU). Accordingly, it was agreed during the current mission that the pending ESSFs for all sub-projects involving civil works (whether completed, underway, or planned) would be filled out and sent to the Bank by November 30, 2010.

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Annex 10: Field report from ACGF supervision team

1. The ACGF contributes to the Rural Water Supply and Sanitation Program (RWSS) within the broader NWDP II. The supported activities are expected to improve access to domestic water supplies for an additional 400,000 people in villages in three focus districts, sanitation for an additional 150,000 people, and school sanitation and hygiene promotion in towns in the three focus districts by the year 2011.

2. During the visit to Malawi, the team met with donors and various members of government including the Director of Water Resources and the Chief Civil Engineer from the Ministry of Irrigation and Water Development, regional water board functionaries, project supervisors, and members of civil society to discuss the project, lessons learned, and methods to support the sustainability of the ACGF supported activities. Additionally, the team made several site visits in the Northern, Central, and Southern Regions.

3. The site visits provided clear examples of the progress made in terms of water distribution networks, intakes and water points, reliability of supply, water quality, and the establishment of Water User Associations (WUAs). For instance, the residents of Likoma Island have for the first time access to potable water taken from Lake Malawi and supplied via taps. Newly installed intakes draw water from the lake. It is passed through sedimentation and filtering tanks, chlorinated, and finally piped to the newly erected storage tank. The reliability of the system is ensured by the back-up, diesel generator that the Water Board installed at the site. The Likoma scheme has also succeeded in establishing a WUA. This community organization is collecting fees and hired an operator for the system. In addition to the direct benefits, the various water schemes have generated positive spill-over effects. For example, a newly installed water point at the rural Mpalamizu Primary School has proved to be an important incentive to attract and retain teachers according to the headmaster Mr. Luhanga.

4. Notwithstanding some procurement and implementation delays, the greatest challenge to the RWSS component is the effort to devolve responsibility for managing and maintaining the water schemes to the WUAs. Although this system is new to Malawi, it is the basis for the sustainability of the schemes. Under the aegis of the project PMU and its community participation programs, results have been positive in terms of establishing WUA’s and WUA activities – collecting fees, hiring operators, managing the schemes. The present risk is that the end of the project will see the provision of support for WUAs end before they are capable of operating independently. Therefore, it is recommended that the Government of Malawi, the Bank, donors, and other stakeholders develop programs that continue to support the WUAs after the project is closed. Efforts could include advocacy training, continued management training particularly finance, stakeholder mapping to reinforce clear lines of responsibility, and mechanisms to maintain the interest and participation of community members in WUAs.

Site Visits 

Accompanied by Date / Site People Met23 September 2010: Nkhamanga Piped Water Scheme - Rumphi

Mr. J. Kumwenda, CCE (MIWD)

1. Discussed the extent and progress of project and a number of issues among them the operations of Water User Association.

2. Water construction office and stores 3. Treatment plant consisting of a sedimentation tank   

and a slow sand filter with source on the Lunyina River.

4. Newly installed water point at Mpalamizu Primary School with an enrollment of 350 pupils. This tap is a connection to the new Katiza line.  It is also

S. Mkandawire, Clerk of WUA

Mr. J. Chingawale, Supervising Engineer

Mr Luhanga, the Headmaster

Water user Community

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Accompanied by Date / Site People Metconnected to Jino and Chozoli areas.

5. Mpalamizu Tank which is uncompleted due to termination of the contract based on the lack of capacity of contractor

6. Rehabilitated tap at a school on the way from treatment work.

24 September 2010: Lufilya Pipe Water Scheme – KarongaMr. J. Kumwenda, CCE

1. Lufirya Treatment works consisting of roughing filters, slow sand filters and storage Tank 95% completed remaining media for slow sand filter.

2. Rehabilitated water point3. Pipeline rehabilitation in the area affected by coal

running activities   

Mr. M Majiga, Supervision Engineer

Representative of Contractor, Liwenga contract

25 September 2010: Likoma Water SchemeAccompanied by: Mr. J. Kumwenda, CCE (MIWD) Mr. A. Ungwe, Project Manager (NRWB) Mr. O Nkhoma, PC (ACGF) Mr. T. Mtegha, CEO (NRWB)

1. Lake intake of lake Malawi treatment works2. Pumping station for low lift pump and high lift pump3. Elevated steel Tank4. A new water point at Chipera village

TA Mkumpha, Traditional Authority for the district

Contractor Members of Water

Users Mr. Simwayi, Utility

Operator 

25 September 2010: Mzuzu Water SchemeMr. J Kumwenda, CCE (MIWD)Mr. A. Mtawali, Deputy CEO (NRWB)Mr A. Ungwe Project, Manager (NRWO) Mr. O Nkhoma, PC (ACGF)

1. Water Tanks at Katoto, Nkholongo and Agriculture Research Station

2. Mzuzu Dam at Lunyangwa3. Treatment plant and 2000M3 concrete tank at MBC

Contractor Consultant

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