Malawi - Blantyre Water Supply Project

Report No. 1328b-MAI FILE COPY Malawi Appraisal of Blantyre Water Supply Project April 19, 1977 Eastern Africa Regional Office Energy and Water Supply Division FOR OFFICIAL USE ONLY Document of the World Bank Thts document has a restricted distribution and may be used by recipients only in the performance of their official dutes.. Its contens may not otherwise be disclosed without World Bank authorization.  MALAWI APPRAISAL OF BLANTYRE WATER SUPPLY PROJECT CURRENCY EQUIVALENTS 1 US$ = Malawi Kwacha (MK) 0.9091 1 Malawi Kwacha = US$1.10 1 Pound Sterling = MK 1.50 1 Malawi Kwacha = 100 tambala WEIGHTS, LENGTHS AND MEASURES I Imperial gallon (Ig) = 1.2 US gallons (US gal) = 4.55 liters (L) 1 million Imperial gallons (Img) = 4,545 cubic meters I Imperial gallon per minute (Igpm) = 0.00267 cubic feet per second (cfs) = 0.0757 liters per second 1 kilometer (km) = 0.62 miles (mi) 1 meter (m) = 3.0828 feet (ft) = 1000 millimeters (mm) ABBREVIATIONS AND ACRONYMS AfDF = African Development Fund BWB = Blantyre Water Board CDC - Commonwealth Development Corporation ESCOM = Electricity Supply Commission of Malawi fps = feet per second Gibb - Sir Alexander Gibb and Partners gph = gallons per hour Germany Federal Republic of Germany GTZ Deutsche Gesellschaft fur Technische Zusammenarbeit, GmbH (German Agency for Technical Cooperation, Ltd.) hp - horsepower Imgd = million Imperial gallons per day KfW - Kreditanstalt fur Wiederaufbau (German Credit Institution for Reconstruction) L/sec = Liters per second MANR = Ministry of Agriculture and Natural Resources MCDSW = Ministry of Community Development and Social Welfare MHC = Malawi Housing Corporation MLG = Ministry of Local Government MOH = Ministry of Health MTIT = Ministry of Trade, Industry and Tourism MWS = Ministry of Works and Supply ODM Ministry of Overseas Development (U.K.) UK = United Kingdom WF Walker's Ferry WHO = World Health Organization BWB's FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY MALAWI APPRAISAL OF BLANTYRE WATER SUPPLY PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ........................................... i i I. INTRODUCTION ....................................... ....... .*.... .... II. GENERAL ECONOMY AND THE WATER SUPPLY SECTOR ............ 2 The Country and the Economy ..... ................. 2 Water Resources ............ . ....................... 2 Organizatiou ........................................... .0 .... .... 3 Legislation .................................... ................. 4 Finance .................... *...*................................ 5 Urban Water Supply . .............................. . 5 Small Town and Rural Water Supply ................. 6 Sewerage and Drainage . .................... ........ 6 Comprehensive Urban Projects ...................... 7 III. THE PROJECT ............................................ 8 Project Description ............................... 8 Cost Estimates .................. .................................. 9 Financing of Project ... ......... . ................ . 10 Disbursement ..* ................................. ....... o ......... 10 Closing Date ...... ............. ................... 10 Design and Construction Supervision ..* ............ 10 Procurement ... .. ....................... ........... . 11 Land Acquisition ....... ................................. 11 Service to Low-Income, Unplanned Areas ............ 11 Maintenance and Operation of Pumping Plant ........ 11 Management Consultants .... ....* ..... ............. 12 Engineering Studies ........ ................ ....... ..... 12 Training ........... . ............... ...... . ...... . 12 Project Supervision . ............................ .. 12 Environmental Impact . ........................ ..... 12 IV. PROJECT JUSTIFICATION ... ............................... 13 Satisfaction of Demand ........................... 13 Improved Water Service ............................ 13 Least-Cost Alternative ..* ........... .............. 13 Return on Investment ....... ...... ................ 14 Non-Quantifiable Benefits ........ ........................ 14 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be discloed without World Bank authorization.  -2- Table of Contents (Cont'd) Page No. V. BLANTYPE WATER BOARD ....... ........................... ... ...... 15 The Borrower ......................................... 15 Institutional Framework ........ ................. 15 Organization and Management ....................... 15 Training .......................... .......... o............ 16 Accounting and Auditing ......................... .. 16 Billing and Collections ........................... 17 VI. FINANCE ........................................................... 17 Past Performance and Present Financial Position ........................... 17 Tariffs ........................... .......... &............ 1 Proposed Financing Plan ........................... 18 VII. AGREEMENTS REACHED AND RECOMMENDATIONS ................. 20  LIST OF ANNEXES ANNEX 1 Description of Existing Facilities 2 Water Demand and Production Capacity 3 Description of Main Elements of Project 4 Project Cost Estimates 5 Schedule of Disbursements from IDA Credit 6 Implementation Schedule 7 Incremental Costs and Return on Investment 8 Organization Chart 9 Cash Flow Projections 10 Income Statement Projections 11 Balance Sheet Projections 12 Notes and Assumptions to Financial Projections 13 Estimated Debt Statement, 1976 - 1983 14 Historical Income Statements 15 Historical Balance Sheets 16 Project Targets and Monitoring Guidelines 17 Blantyre Waterworks Bylaws, 1975 18 Proposed Tariff Reforms and Revenue Implications Map - IBRD 12376   MALAWI APPRAISAL OF BLANTYRE WATER SUPPLY PROJECT SUMMARY AND CONCLUSIONS 1. This report appraises a water supply project for the Blantyre Water Board (BWB) in Blantyre, Malawi's largest city and main industrial and commer- cial center, for which an IDA Credit of US$7 million equivalent is proposed. 2. The estimated project cost is US$15.5 million equivalent, including an estimated 70% foreign exchange cost of US$10.8 million equivalent. After taking into account estimated interest during construction of US$1.1 million equivalent, of which the foreign exchange component would be US$0.3 million equivalent, the Project's total financing requirements would be US$16.6 mil- lion equivalent, including US$11.2 million equivalent in foreign exchange. Of the total financing requirements, about 80% would be provided by various lend- ing agencies with IDA providing US$7 million equivalent, the African Develop- ment Fund (AfDF) up to US$6 million and the Commonwealth Development Corpora- tion (CDC) about US$0.7 million. The remaining finance would be provided by BWB's internal cash generation. 3. The Project is needed to meet the growing water demand in Blantyre. It would increase BWB's water supply capacity by about 4 Imperial million gallons per day (Imgd) and, when added to ongoing Phase IV improvements, is expected to more than double the population having direct access to water by providing water supply capacity for a further 220,000 people. Construction would commence in 1978 and be completed in 1980. The Project would be the first Bank Group water supply project in Malawi. Previous developments have been largely financed from CDC loans and British government grants. 4. BWB is a government-owned entity, responsible for public water supplies in the Blantyre area. It has a long history of effective manage- ment. It would carry out the Project with the assistance of engineering consultants. The arrangements to be made for project design and construc- tion supervision are satisfactory and the Project is technically sound. 5. All supply and construction contracts financed by the proposed IDA Credit would be awarded on the basis of international competitive bidding in accordance with IDA guidelines for procurement. Foreign suppliers and contractors are expected to win all major contracts. Nevertheless, in accord- ance with Government's request, a preference of 15%, or the applicable customs duty, whichever is lower, would be applied to the evaluation of bids should local manufacaturers bid for supply contracts. Similarly, a preference of 7-1/2% would be applied to the evaluation of bids submitted by domestic firms for construction contracts. Procurement procedures for goods financed through AfDF would be in accordance with their procedures. CDC would accept IDA or AfDF procurement procedures for goods and services financed by them. 6. BWB's financial policy has been to set its tariffs at a level suf- ficient to meet annual cash outlays for operating expenses and debt service.  - ii - Current tariff levels are well below economic cost and the structure is complicated and inequitable. By 1981, through phased increases, BWB plans to raise its tariff levels to close to long-run marginal cost and to reform its tariff structure. The revised tariffs will be set to achieve annual rates of return on average revalued net fixed assets of not less than 8% in 1978 and 1979, 10% in 1980 and 1981 after which BWB's financial objective will be to maintain a rate of return of not less than 9% on average revalued net fixed assets. 7. If the Project benefits are measured on the basis of 1977 tariff levels, the Project's internal rate of return would approximate 3%. If the benefits instead are valued at levels to be attained by the time the Project is completed, the rate of return would be about 7%. However, the tariffs do not fully reflect health and environmental benefits, which are difficult to quantify, but which would undoubtedly make the Project's rate of return higher. 8. An estimated 50,000 Blantyre residents in unplanned, low-income areas do not have ready access to public water supplies and the proposed Project will include provision for providing water supplies to such areas. 9. The Project is suitable for an IDA Credit of US$7 million equivalent.  MALAWI APPRAISAL OF BLANTYRE WATER SUPPLY PROJECT I. INTRODUCTION 1.01 The Government of Malawi has requested assistance from the Associa- tion to help finance a US$15.5 million project to expand the city of Blantyre's water supply system to meet the growing needs of its population. The Project would be carried out by the Blantyre Water Board (BWB), a government-owned entity. 1.02 A US$7 million equivalent IDA Credit is proposed to help meet the Project's costs. Additional external finance of up to US$6.7 million would be provided by the Commonwealth Development Corporation (CDC) and the African Development Fund (AfDF), and the remaining finance from BWB's internal cash generation. 1.03 The Project would be Phase V of a long-term BWB program for abstrac- tion of water from the Shire River at Walker's Ferry (WF), treatment and subsequent transport to Blantyre through the 23-mile long WF pipeline. The proposed Project, in addition to increasing the capacity of the WF abstraction and treatment facilities, would uprate the pipeline to its economic capacity of 14 Imgd and would include water distribution facilities in Blantyre. The Project was prepared by Sir Alexander Gibb and Partners (Gibb), United Kingdom, and is part of a long-term development program recommended by Gibb for augmentation of the Blantyre water supply during the period 1978-1990. The Gibb studies, which have taken into account Blantyre land-use planning of Government's Regional Planning Office, indicate Walker's Ferry to be the most economic of several alternative sources of supply. 1.04 This would be the first Bank Group water supply project in Malawi. Earlier projects, including the ongoing Phase IV project to increase the capacity of the pipeline from 8 to 10 Imgd, have been largely financed by the CDC and by the United Kingdom (UK) Ministry of Overseas Development (ODM) assistance (see Annex 1). 1.05 Following a project preparation mission early in 1976, field appraisal was carried out in June 1976 by Messrs. Greenwood, LaBahn and Coyaud and Ms. D. Julius. This report is based on the findings of the mission and on information supplied by BWB, by Government and by Gibb.  - 2 - II. GENERAL ECONOMY AND THE WATER SUPPLY SECTOR The Country and the Economy 2.01 Malawi is a land-locked country in southeast Africa, bordered by Zambia, Tanzania and Mozambique. About one-quarter of the country is covered by lakes, ihe largest being Lake Malawi with an area of some 11,100 sq. mi. 2 (29,000 km ). Malawi's total land area 1/ is about 36,400 sq. mi. (93,000 km ), which consists largely of plateau and highlands in excess of 1,600 ft. (500 m) above sea level; the mountainous north rises to 8,200 ft (2,500 m) and the extreme south is less than 700 ft (210 m) above sea level. With a population of about 5.1 million growing at about 2.6% per year, Malawi is one of the most densely populated countries in Africa. The population is more concentrated in the Southern region, with 180 persons per sq. mile in 1975, compared with 114 and 60 in the Central and Northern regions. 2.02 Since Independence in 1964, GNP at constant prices has grown at a comparatively high rate of almost 8% per year; the GNP (1975) per capita of about US$150 2/ is, however, still one of the lowest in the world. The economy is based primarily on agriculture in which over 90% of the popula- tion, largely at a subsistence level, is engaged. Total GNP in 1975 at current market prices was estimated at US$755 million, of which agricultural output accounted for approximately 45% and manufacturing 14%. Between 1970 and 1975, high real growth of investments and domestic savings (11% and 15% per year, respectively) played an important role in the favorable development of Malawi's economy. On the basis of present potential, an economic growth of about 6.5% per year might be possible with manufacturing, the output of large agricultural estates, and most services growing at a higher rate than the economy as a whole. 2.03 Since 1968 the growth of wage employment in Malawi has been rapid, averaging 10%. Employment in the non-agricultural sector, which is most likely to increase the number of urban dwellers, grew at a rate of about 8.5%, only marginally lower than the above growth rate, and reached 147,000 by 1975. However, by mid-1975, the urban population was estimated to represent only 10% of the total population and it is Malawi's policy to avoid a marked increase in this ratio. Urban population is concentrated in Blantyre, where most of the manufacturing industry and service trades are located, and in Lilongwe, the rapidly-expanding new capital. Water Resources 2.04 The water resources of Malawi are liberal due to precipitation ranging from 25 inches (635 mm) to 114 inches (2,895 mm) annually but varying markedly according to location and season. Good records of precipitation exist due to the maintenance of 475 monitoring stations widely distributed throughout the country. Substantial information has been developed rela- tive to the country's surface water and ground water resources. 1/ Malawi Statistical Yearbook, 1975. 2/ World Bank Atlas, 1975.  -3- 2.05 Partly due to the influence of Lake Malawi and the Shire River, surface water is the more significant of the country's sources of supply. Surface water quantity, but not quality, is monitored by a network of 148 stream gauging stations. 2.06 Ground water is widely available from shallow, dug wells and from boreholes. However, individual yields from the latter characteristically are low (averaging about 10 Igpm) while water quality varies from fair to poor* Ground water is classified according to location in three separate hydro- geological zones, i.e., Plateau-Highland, Escarpment and Rift Valley. Approximately one-half of the area of these zones have been studied in de- tail. Ground water management is not provided, partly due to the small number of observation wells, incomplete information on lithology and water quality (mainly limited to records of newly drilled wells), but mainly due to lack of policy and staff. Over 2,000 boreholes have been drilled in the past ten years with the majority of these located in rural areas and used for domestic supplies. Despite the recent increase in numbers of wells, Malawi's ground water resources are under-utilized due to financial con- straints and limited well production capacities. Organization 2.07 Apart from BWB, operations within the sector are relatively ineffec- tive, partly due to the uncoordinated efforts of several ministries but also due to budget and staffing constraints. National efforts in water resource development, in particular, need to be better coordinated. Although the formation of a single national water authority has been considered in the past, no such change currently is being considered by Government. Although some institutional changes are advisable, the extent of these changes is not apparent due to incomplete knowledge of the sector. An IBRD/WHO coopera- tive sector study mission is scheduled to visit Malawi late in 1977. 2.08 Water resources fall under the province of the Ministry of Agri- culture and Natural Resources (MANR). The Ministry's Division of Water Resources is responsible for monitoring precipitation and surface water, while the Ministry's Geological Survey is responsible for the drilling of boreholes, the collection of lithologic records, the preparation of geologic maps, administration of records of boreholes, and a maintenance program for manually-operated well pumps. The Technical Services Department of the Ministry is responsible for developing comprehensive agricultural schemes, most of which also have domestic water supply components. 2.09 The Ministry of Local Government (MLG) has jurisdiction over muni- cipalities which are empowered to provide water and/or sewer service. However, only two municipalities, Blantyre and Lilongwe, currently provide either or both of these services. The Blantyre Town Council is responsible for sewerage only whereas the Lilongwe Town Council provides sewerage for a portion of the community and potable water service (the latter of which is administered by the Lilongwe Water Board). Neither of the two Town Councils currently has the capability of planning or designing utility improvements. Partial assistance in planning and engineering is provided to Lilongwe by the Ministry of Works and Supplies (MWS). Water service is provided in Blantyre by BWB and in remaining cities and small towns by MWS.  - 4 - 2.10 The Ministry of Trade, Industry and Tourism (MTIT) supervises BWB, an autonomous water utility responsible for potable water service in the Blantyre area (see para. 5.02). BWB is able to plan, design and construct minor works but must depend upon foreign consultants for the implementation of major works. Maintenance and operation procedures of BWB generally are satisfactory except possibly in the area of electrical and mechanical equip- ment (see para. 3.13). 2.11 In addition to its assistance to Lilongwe, MWS is responsible for designing, constructing and operating water supply systems in two cities (Zomba and Mzuzu), 35 districts, and 20 small town water supply centers. In 1973, the Ministry was estimated to provide water service to about 135,000 persons. MWS is heavily dependent upon expatriate staff. Facilities appear to be well engineered although overly sophisticated and highly dependent upon imported materials and equipment. Levels of maintenance and operation are good. Due to the Ministry's special responsibilities in providing technical assistance to the Capital Development Corporation, MWS also is responsible for planning, designing and implementing water and sewer utility systems within the Lilongwe area. Upon completion, system improvements then are turned over to the local authorities, which include the Lilongwe Water Board and, in the case of wastewater systems, the Town Council, the Malawi Army and various local institutions. 2.12 The Ministry of Community Development and Social Welfare (MCDSW) plans, designs and supervises the construction and operation of a number of small, "self-help" type schemes providing potable water supplies to approxi- mately 150,000 persons in rural areas from some 950 public standposts. This program, first started in 1968, has developed simple, low-cost potable water supplies with a minimum dependence upon staff (two expatriate engineers sup- ported by several Malawi technical school diploma holders have been responsi- ble for planning, design and construction) and a maximum dependence upon local participation for construction and operation. 2.13 The Ministry of Health (MOH), which is responsible for environmental health, is headquartered in Blantyre and has branch offices within the regions and in principal municipalities. MOH records of mortality and morbidity are few, poorly documented, and difficult to obtain. Improved communication is needed between the Ministry and the country's water supply authorities. Legislation 2.14 The principal legislation concerning the sector is the "Water Resources Act of 1969" which provides for "... the control, conservation, apportionment and use of the water resources of Malawi...." The Act further decrees that ownership of all public water, which includes surface water and ground water, is vested in the President whereas control resides with the Minister of Agriculture and Natural Resources. The latter, in turn, may delegate such powers to a Water Resources Board (WRB). Abstractors are required to operate in accordance with conditions of a license issued by WRB.  - 5 - Water rights based upon prescription are not recognized and existing rights can be lost due to non-use. Rights also can be reduced or suspended at the option of the Minister. Charges are levied on abstractions to finance the administration of the Act. 2.15 In theory, the Water Resources Act provides Government with con- siderable power to control water development but the legislation is only partly effective. An example is water pollution, which is recognized in the Act as an offense but is not defined; nor is the extent of penalty to be levied identified. A 1975 draft of Water Pollution Control Regulations, which are proposed as a supplement to the Act, defines pollution but does not provide the machinery of enforcement. Finance 2.16 Capital and recurring expenditures of water supply authorities, in general, are financed through Government's departmental budget appropria- tions. BWB and Lilongwe Water Board (LWB), which are autonomous, are exceptions to this. Records of sector expenditures are incomplete. The capital costs of improvements by BWB and LWB have been met mainly from bilateral assistance and from Government grants and loans. Other water systems in urban areas and in small towns have been financed from Government funding, from bilateral assistance and from grants by charitable organizations totalling in excess of US$1 million (1975). Village water systems have been constructed on a self-help basis but have depended upon grants and, in some instances, upon contributions from local District Councils for procurement of construction materials. 2.17 Water system operations of remaining urban areas and small towns supervised by MWS are not autonomous. Although water charges are levied, they are not necessarily in proportion to costs. No water charges are levied in rural areas supplied by MCDSW. Recurring out-of-pocket costs of the latter systems are met by the Ministry and by the District Councils. Urban Water Supply 2.18 Approximately 70% (240,000 persons) of the 1975 urban population (330,000, representing the cities of Blantyre, Lilongwe, Mzuzu and Zomba) have access to piped water supplies. The level of service varies with about two-thirds of the customers having individual connections and the balance being served from kiosks. All connections are metered. 2.19 Capital improvement programs either are underway or are planned for Blantyre and Lilongwe. Ongoing Phase IV improvements at Blantyre will increase the Walker's Ferry supply from 8 to 10 Imgd and will provide BWB with the capacity to serve approximately 220,000 persons (see Annex 1). The proposed IDA Project would further increase that supply to about 14 Imgd and would satisfy demands through the mid-1980's (see Annexes 2 and 3). Government has identified a future project for LWB which would double (from 2 to 4 Imgd) the water supply capacity of the existing system for a design population of 150,000 projected for the year 1984. Financing for the LWB project, which is estimated to cost MK 2.4 million (equivalent to US$2.6 million), has been requested from the European Development Fund.  -6- Small Town and Rural Water Supply 2.20 An estimated 1.2 million persons (approximately one quarter of the total rural population of about 4.7 million) had access to potable water supplies in 1975. Thirty-eight small towns (with populations ranging from 500 to 6,500) having a 1975 combined population of 60,000 persons have piped water supplies from systems constructed by MWS since 1971. All connections are metered and a tariff is levied. Government has proposed a follow-up Rural Centers Water Supply Project that would extend service to an additional 60,000 persons in 34 towns by the year 1979. Financing for the Project, which is estimated to cost MK 1.7 million (US$1.9 million equivalent), is being provided by the AfDF. 2.21 Piped water supply systems by MCDSW provided service to 150,000 persons in rural villages in 1975. This program, begun in 1968, has resulted in the construction of simple, untreated gravity water supplies using high- elevation, perennial streams as sources. No metering is provided and de- liveries are from public standposts. Maintenance and operation is the re- sponsibility of local District Councils. Follow-on projects designed to provide similar service to an additional 430,000 persons either are underway or proposed. Finance for the procurement of construction materials estimated to cost in excess of MK 2.0 million (US$2.2 million equivalent) is being sought. 2.22 Domestic water supply to remaining rural areas historically has consisted of "dambos" (swamps or marshes) or dug wells, both sources of questionable quality. Recent implementation of comprehensive agricultural projects 1/ by MANR has provided improved supplies, generally consisting of manually operated tube wells, to approximately 1.0 million persons residing in these project areas. Adjacent rural areas also have benefited from a well-drilling and maintenance program administered by the Geological Survey. The extent of additional population to be provided with improved potable water supplies by new or follow-on comprehensive agricultural projects in rural areas is unknown. Sewerage and Drainage 2.23 Community wastewater systems exist only in Blantyre and Lilongwe providing service to about 40,000 persons out of a combined population of 290,000 in these two cities. Both systems provide secondary treatment prior to disposal. Sanitary sewerage is separate from storm water drainage and, in most instances, the latter is confined to surface facilities. Elsewhere in urban areas, sanitation service consists mainly of septic tanks or pit privies with the latter generally restricted to traditional housing areas. 2.24 Piped wastewater systems in Blantyre, which provide service to about 30,000 persons, are restricted to only three of the area's 13 catchments. 1/ Including the Bank Group's Karonga Rural Development projects, the Lilongwe Land Development projects, and the Shire Valley Agricultural Development projects.  -7- Approximately 110,000 persons are served by septic tanks and the balance by pit privies. The most recent expansion of the Blantyre sewer system was completed in 1971. Preparation of that project was financed by Government while the cost of detailed engineering and construction was financed by a DM 5.2 million (US$2.3 million) soft loan provided by Kreditanstalt fur Wieder- aufbau (KfW) of the Federal Republic of Germany (Germany). The sewer system is overloaded and the design of additions, limited mainly to the central Blantyre catchment, currently is underway. Grant funds of DM 580,000 (US$250,000) have been committed by the German Agency for Technical Coopera- tion, Ltd. (GTZ) for technical assistance including preparation and detailed design of this project. Construction, which is scheduled for the period 1977-78, will include the expansion of two existing wastewater treatment facilities and the extension of sanitary sewers. KfW has agreed to provide a DM 6.0 million (US$2.6 million) loan on soft terms to finance the construction of the project. Despite the present and previous programs, planning and implementation of sewerage projects in Blantyre have not kept pace with general development of the community. 2.25 Technical assistance in the form of training also is provided to the city of Blantyre by Germany. Under the auspices of a sister-city program shared with Hannover, Germany, several operators from Blantyre are to receive 12-months training at Hannover in the operation of wastewater treatment facilities. Additional on-the-job training of three to six months duration is to be provided to other selected operating personnel in Blantyre through grant funds provided by GTZ. 2.26 Piped wastewater systems are of less significance in Lilongwe with only 10,000 persons (out of 80,000) connected to sewers. Three small systems currently exist with two additional systems planned. Three of these systems will be operated by the Town Council and the remaining two by the Army and a Government hospital. Operation and maintenance of all systems have been poor mainly due to inexperienced operators and no provision for training. Comprehensive Urban Projects 2.27 Other projects also having water supply and sewerage components have been implemented and others are underway. The most significant of these relative to the Blantyre Water Supply Project (Phase V) is the Malawi Housing Corporation (MHC) urban development scheme proposed for the South Lunzu area in northeast Blantyre. The project, which would include land development, roads, water supply and sewerage, is expected to be constructed during the period 1977-80. The project is being prepared by MHC while KfW has indicated interest in financing the DM 7.0 million (US$3.0 million) costs of the project on soft terms.  III. THE PROJECT Project Description 3.01 The Project is the fifth phase of BWB's water supply expansion program. It would increase the capacity of the WF supply from 10 to 14 Imgd, the maximum economic capacity attainable from the existing single pipeline, and would provide other major system improvements. It will include the fol- lowing principal elements: (a) Improvements and extensions to existing facilities at WF including raw water pumping plant and water treatment plant; (b) Additions to the WF system consisting of about 15,000 feet of treated water supply main generally parallel to the existing WF pipeline; balancing tanks and pumping plant provided at WF, at Chileka and at a new, intermediate site; and a new terminus of the WF pipeline in the Blantyre area; (c) Distribution system changes including the creation of seven new pressure zones, the modification or relocation of two existing pump stations, and the construction of the following additional elements: nine service reservoirs, a pump station, and approxi- mately 35 miles (56 km) of transmission and distribu- tion mains ranging from 2 inches (50 mm) to 24 inches (600 mm) in size; (d) Construction of general plant including staff housing, laboratory and workshop; procurement of vehicles, maintenance equipment, spare parts, accounting machines and miscellaneous equipment for laboratory and workshop; (e) Consulting services for: engineering design and supervision of construction; management services to evaluate and improve BWB's accounting practices; engineering services to determine the most economic mode of future operation of the WF supply system; and (f) Training of BWB staff in engineering and accountancy. A demand forecast and analysis of required future production capacity are provided in Annex 2 and a detailed description of main elements of the Proj- ect is included in Annex 3. The locations of the proposed plant and areas to be served are shown in map IBRD 12376.  -9- Cost Estimates 3.02 The estimated project costs are detailed in Annex 4 and summarized below. Summary of Project Cost Estimates (MK 1.0 = US$1.10) MK (thousands) US$ (thousands) % Local Foreign Total Local Foreign Total Total Civil works 2,461 4,320 6,781 2,707 4,752 7,459 48.0 Equipment 268 2,330 2,598 295 2,563 2,858 18.4 Land 15 15 17 17 .1 Training - 140 140 154 154 1.0 Consulting Services 364 635 999 400 699 1,099 7.1 Subtotal 3,108 7,425 10,533 3,419 8,168 11,587 74.6 Contingencies: Physical 397 890 1,287 437 979 1,416 9.1 Price 762 1,542 2,304 838 1,696 2,534 16.3 TOTAL PROJECT COSTS 4,267 9,857 14,124 4,694 10,843 15,537 100.0 Interest during Construction 679 317 996 747 349 1,096 TOTAL FINANCING REQUIREMENT 4,946 10,174 15,120 5,441 11,192 16X633 3.03 Cost estimates, as originally prepared by the consultants, were based upon preliminary project design and were expressed in terms of mid-1976 price levels. These cost estimates were later revised to add components for training, special engineering studies, and for service to low-income, un- planned areas and, based upon information provided by BWB and the consultants, to reflect an apparent trend of increased civil works costs illustrated by Phase IV project tenders received in late 1976. Baseline cost estimates (see cost summary above) reflect March 1977 price levels. Consulting services include engineering and management advisory services and are described in paragraphs 3.09, 3.14 and 3.15. A provision of 10% on all items, excluding distribution plant where a 15% provision was used, has been added to baseline costs for physical contingencies and is considered adequate. Price contingency allowances, which conform to current Bank Group guidelines and are shown below, have been applied to the baseline costs and to physical contingencies. Period Civil Works Equipment 1977-79 9% 7.5% 1980-81 8% 7% 3.04 Government indicated that it would waive duties on all imported goods and services required for the Project. The foreign exchange component, approximately 67% of the total financing requirement, includes both direct and  - 10 - indirect foreign cost elements. It has been estimated on the assumption that equipment will be imported and construction contracts and pipe supply contracts will be won by foreign firms. This has occurred in previous BWB water supply projects. Financing of ProJect 3.05 The proposed IDA Credit of US$7 million equivalent would be used to help finance the costs of selected components of civil works, equipment, and consulting services and would cover about 42% of the total financing requirement. The civil works, of which the Association would finance only foreign exchange costs, would consist of miscellaneous additions at the M4udi treatment works, Blantyre area distribution system additions of reservoirs, pumping plant and trunk mains, and general plant. The Association also would finance the procurement of pumping equipment, vehicles, spare parts and maintenance and workshop equipment and the foreign exchange costs of consult- ing services for engineering design and construction supervision. 3.06 Remaining Project financing requirements would be met by AfDF, CDC and from BWB's internal cash generation. An AfDF loan (of up to US$6 million equivalent) would be used to finance the costs of civil works in- cluding supply and treatment works at Walker's Ferry and the foreign ex- change costs of staff housing and Blantyre area reticulation system. AfDF also would finance the costs of treatment plant equipment and a training component. CDC funds of US$0.7 million equivalent will be made available to the Project without any restrictions attached to their use (see para. 6.07). The remaining financing requirements would be available from BWB's internal cash generation. As a condition of effectiveness of the IDA Credit, all conditions of effectiveness of the AfDF finance and the CDC loan of US$3.3 million equivalent (of which US$0.7 million would be used in the Project) should have been fulfilled. Disbursement 3.07 The IDA Credit would be disbursed to meet selected portions of the project costs as follows: (a) 65% of the total costs of civil works; (b) 100% of foreign expenditures or 90% of local expenditures for vehicles, equipment and spare parts; and (c) 100% of foreign expenditures for the ser- vices of consultants for engineering design and construction supervision. An estimated disbursement schedule is given in Annex 5. Closing Date 3.08 The proposed closing date for the IDA Credit would be March 31, 1982. This allows a margin of about 15 months after the estimated completion of the work for settlement of final contract payments and for slippage in construction. Design and Construction Supervision 3.09 BWB will be responsible for project implementation but will retain engineering consultants for construction supervision and for detailed design, preparation of tender documents, and evaluation of tenders. For this purpose,  - II - BWB has retained the firm of Sir Alexander Gibb and Partners, the same firm involved in preinvestment studies and ongoing Phase IV work, with work ex- pected to begin by April 1977. This arrangement is satisfactory. BWB indi- cated that it would not seek retroactive financing of any consultant's fees expended prior to the signing of the Credit Agreement. Engineering required for planning, design and construction of staff housing, reticulation system, and facilities for low-income, unplanned areas will be performed by BWB staff. A Project implementation schedule is included as Annex 6. Procurement 3.10 All construction and supply contracts financed by the proposed IDA Credit would be awarded on the basis of international competitive bidding in accordance with Bank Group Guidelines. Foreign contractors are expected to win all major construction contracts, and foreign manufacturers are expected to furnish all pipe required in the Project. Major mechanical and electrical equipment required for pumping plant and treatment plant are not manufactured locally and will be procured from abroad. Nevertheless, should local manufac- turers bid for supply contracts, a preference of 15%, or the applicable customs duty, whichever is lower, would be applied to the evaluation of such bids. A preference of 7-1/2% would also be applied to the evaluation of bids by domestic firms for construction contracts. Detailed design work is scheduled to begin by April 1977, in which case all Project facilities should be commissioned by December 1980. Land Acquisition 3.11 The Project will require the acquisition of land for the intermediate pumping station site of the WF system and for reservoirs and booster stations within the distribution system. In the estimates it is assumed that land not owned by Government will be acquired at market value and Government land will be transferred without cost. Government indicated all land necessary for the Project can be acquired without exceeding the estimated costs. Service to Low-Income, Unplanned Areas 3.12 The Project includes provision for the extension of piped water supplies to Blantyre's low-income, unplanned areas where currently an esti- mated 50,000 persons reside. Priority will be given to those areas contain- ing unserved populations of 500 persons or more for which no redevelopment plan exists or, if such plan exists, where redevelopment is unlikely to be carried out within specified periods. BWB staff will: (i) determine the status of piped water service to these areas; (ii) develop a plan to serve areas of need according to criteria acceptable to the Association; and (iii) design and construct such facilities. Maintenance and Operation of Pumping Plant 3.13 Numerous outages of BWB pumping plant have occurred in the past due to failures of electrical plant. In view of potential hazards posed by outages and the difficulties and expense of replacing or repairing damaged units, BWB has taken steps to determine the cause and reasonableness of these  - 12 - outages. They will develop a plan of action to evaluate and upgrade BWB maintenance and operation practices, exchange views with the Association regarding the plan, and thereafter carry out such a plan. Management Consultants 3.14 Management consulting services are also required to assist in the selection and introduction of data processing equipment. The equipment is required initially to improve BWB's capability to provide financial and statistical information for project and tariff planning and, subsequently, to improve the efficiency of BWB's accounting by extension of the equipment to a wider variety of uses. Consultants acceptable to the Association will be employed to provide these services which are estimated to cost about US$20,000 equivalent. Engineering Studies 3.15 The Project includes provision for retention of engineering con- sultants acceptable to the Association to investigate alternative operations of the WF system in order to determine a plan for water treatment and pump operation that reflects minimum overall economic cost. The studies, which are estimated to cost US$120,000 equivalent, would be deferred until 1980 in order to accumulate a maximum amount of basic operational data and yet be completed in time to define principal elements of the next major (Phase VI) project. Training 3.16 To further strengthen its staff, a training component for under- graduate engineers and accountants would be included in the Project. The training component, which is estimated to cost US$150,000 equivalent, would supplement existing BWB training efforts and would be financed by AfDF. Project Supervision 3.17 Targets and monitoring guidelines will be used to improve management planning and to assist monitoring the progress of the Project (see Annex 16). Environmental Impact 3.18 Although the Project, by itself, will not prevent or reduce pollu- tion within Blantyre area catchments, present regulations of BWB and Blantyre City Council assist in controlling same. Most new water connections would be in high density residential areas being developed by MHC. Water service to these areas generally will be by kiosk or by private standposts. In view of the limited water supply capacity of such facilities, rudimentary individual disposal systems such as pit privies are considered adequate. Where direct water connections to buildings are proposed, sewer connections or septic tanks are prerequisites to water service. A continuation of this requirement, in effect, will result in improved sanitation service to that portion of the Blantyre population not now receiving water service from BWB.  - 13 - IV. PROJECT JUSTIFICATION Satisfaction of Demand 4.01 The population of Blantyre, in 1975 about 210,000 persons, is growing at a rate of 6.5% annually or 2.5 times the national growth rate of 2.6%. Annual water demand of BWB, however, has grown at approximately twice the rate of population increase due to many factors. Principal among these have been industrial growth, the increase in domestic per capita water usage, and the extension of water service to populations not previously served. Despite the latter, however, unserved squatter populations, which comprise most of Blantyre's unsatisfied demand, continue to grow. 4.02 The Project provides increased water supply capacity to satisfy future growth in demand which is projected to average about 9% annually through the period ending in 1985 (Annex 2). The population directly served is expected to increase from 140,000 in 1975 to 360,000 by the mid-1980s when both the ongoing Phase IV project and the IDA-financed Project (Phase V) will be complete and in service. The Project is a logical continuation of the estimated US$20 million (1975 prices) water supply program which BWB has undertaken since 1963 with financial assistance from the Malawi Government and from UK (CDC and ODM). Improved Water Service 4.03 Due to an inadequate distribution system, water customers in some areas of Blantyre currently are affected by interruptions in supply and/or deliveries at inadequate pressure. The Project would improve this condition through the creation of seven new pressure zones and the construction of addi- tional transmission and distribution mains. Least-Cost Alternative 4.04 During project preparation, Gibb investigated numerous alternative measures, each reflective of a different source and conveyance system, to augment the existing Blantyre water supply. The long-term economic cost of these alternatives was estimated based upon: (a) development of the existing WF supply to its maximum capacity of 10 Imgd; (b) consideration of incremen- tal capital and recurring costs specific to each alternative scheme over a 50-year period; (c) discount rates of 8% and 12%; and (d) sensitivity analyses reflecting possible increases of 20% in capital costs and electrical energy charges. The studies indicated the Shire River to be Blantyre's most economic future supply. Although several abstraction points on the Shire River also appeared promising, continued development at the existing WF site was recommended due to less uncertainty of development costs compared to those of alternative sites.  - 14 - 4.05 Of the alternatives considered, the Project is the least-cost scheme for supplying treated water to Blantyre. However, to further improve the economics of the WF conveyance system, modifications may be made to the mode of operation in the mid-1980s. Engineering studies to investigate this possibility will be undertaken as part of the Project (para. 3.15). Return on Investment 4.06 The incremental capital and operating costs used to calculate the internal rate of return are exclusive of all taxes and subsidies. No shadow pricing of labor or foreign exchange was deemed necessary since both markets function fairly efficiently in Malawi. The cost of power was based on a recent marginal cost pricing study undertaken by ESCOM in connection with another IDA Credit. Using present tariffs as a minimal measure of Project benefits results in an internal rate of return on the Project of about 2.9%. The low rate of return is indicative of the underpricing of water, the long-run marginal cost of which is estimated at MK 1.74 per thousand Ig (US$1.60 per thousand US gal) using an interest rate of 8% and at MK 2.06 per thousand Ig (US$1.90 per thousand US gal) using an interest rate of 10%. 4.07 However, with the tariff changes to be attained by 1981 to meet the financing objectives and to accomplish structural changes (reducing the use of fixed charges and increasing the progressivity of consumption charges) (see paras. 6.03 to 6.05), the average tariff rate would be MK 1.62 per thousand Ig (excluding increases projected to meet future inflation). If the project benefits were valued at this average tariff, the rate of return would be 7%. Elasticity effects have been accounted for to some degree in this calculation through the incorporation of the effect of expected price increase in the demand forecast (Annex 2) although it is impossible to accurately predict consumer reaction given data limitations. Annex 7 des- cribes the method used in calculating average incremental costs and return on investment and gives details of the calculation. 4.08 The following table summarizes the sensitivity of the rate of return to different revenue and project cost assumptions. Rate of return based upon average water charge, % 1977 1981 (MK 1.12 per (MK 1.62 per Assumptions thousand Ig) thousand Ig) a) 10% increase in capital costs 2.3 6.5 b) 10% decrease in revenues 1.6 6.0 c) Both of the above 1.0 5.3 Non-Quantifiable Benefits 4.09 The Project will reduce health hazards and improve public health standards within the community through the extension of piped water service to populations now relying upon local streams and upon other water supplies of doubtful quality.  - 15 - 4.10 Approximately 50,000, out of an estimated 70,000 persons currently without piped water service in Blantyre, live in low-income, unplanned areas. BWB has withheld water service from such areas in accordance with Government's overall policy of discouraging rural-urban migration. However, as in other developing countries, there is a lack of evidence in Blantyre that denial of piped water service has restricted such migration. In fact, unplanned area populations in Blantyre have continued to grow. For this reason and, in awareness of the potential adverse impact upon productivity, public health, and quality of life, the lack of reasonable access to safe water supplies in these areas no longer can be disregarded. Accordingly, Government is to institute a program of improved water supply to residents of low-income, unplanned areas (para. 3.12). V. BLANTYRE WATER BOARD The Borrower 5.01 The borrower would be the Government of Malawi who would relend the proceeds of the IDA Credit to BWB (the beneficiary) on the terms stated in para. 6.07. Institutional Framework 5.02 BWB is a body corporate incorporated under the Blantyre Water Works Act, Cap. 72-02. It is responsible for the supply of water to Blantyre and to designated areas adjacent to the City. The Board consists of a chairman and ten members, all of whom are appointed by the Minister. At the present time, BWB reports to the Ministry of Trade, Industry and Tourism. 5.03 The present chairman of the Board is the General Manager of the Malawi Housing Corporation. The Board includes members from private indus- try, a bank, the academic world, the CDC representative in Blantyre and a City Councilor. 5.04 BWB's capital and revenue budgets and proposals for tariff changes are submitted to the Minister for approval. BWB is also required to obtain prior ministerial approval of all senior staff appointments and of all con- tracts entered into in excess of MK 10,000. Organization and Management 5.05 The senior management position is Engineer/Manager who has reporting to him a Clerk/Treasurer and a Deputy Engineer. The position of Engineer/ Manager has recently been filled (effective December 30, 1976) with an expatri- ate engineer newly hired by the Board after former service with the Public Utilities Board of Singapore. The Deputy Engineer is a Malawian with pro- gressively responsible experience with the Board and, prior to that, overseas.  - 16 - During 1976, he served as BWB's Acting Engineer/Manager and has performed well. The Clerk/Treasurer is an expatriate with many years of experience with the Board and his performance has been good. However, the accounting staff needs to be strengthened at the managerial level to cope with the growing size of the Board's activities, to improve the accounting information system, and to help introduce tariff reforms. To help meet these needs, BWB has recently appointed a Chief Accountant. 5.06 With the recent appointments of an Engineer/Manager and a Chief Accountant, BWB should, with engineering consulting assistance, be competent to carry out the Project and other capital works during the project implemen- tation period. To ensure the continuation of BWB's management capability, BWB will consult IDA regarding future appointment to the two most senior posts, the Engineer/Manager and the Clerk/ Treasurer. 5.07 At the middle management level, and below, BWB is adequately staffed. Continued development of this staff, which is reasonably effective, would be mainly dependent upon on-the-job experience gained under the leadership of senior management. BWB's organization chart showing the principal staff positions is included as Annex 8. Training 5.08 BWB has been successful in attracting sufficient engineers. It has on its staff a number of Malawians holding university degrees in en- gineering and, by the end of 1976, is expected to have three additional Malawians studying overseas for such degrees. Technicians are trained at Malawi Poly- technic in Blantyre. Over the last two years, a number of staff have been sent to the National Water Council in the United Kingdom for further training. Financial and administrative staff are mainly recruited from Malawi Polytechnic and accountants are sent to Britain for studies leading to professional quali- fications. BWB has had difficulty in retaining the services of those who have obtained professional qualifications, but this position may improve as the supply of qualified accountants increases. It is a condition of the recent ODM loan to BWB that the Board will maintain and, if necessary, expand the training of its Malawi staff both on the job and in Britain. A training component covering further undergraduate studies is included in the portion of the proposed project being financed by AfDF (para. 3.16). Accounting and Auditing 5.09 BWB's accounting system is adequate for recording transactions, preparing financial statements and annual budgets. There is a need, however, to improve the capability of the system to provide improved management infor- mation especially statistical information for project and tariff planning. 5.10 To assist BWB in this task, the Project includes accounting machines, consulting assistance in their selection, and the development of related accounting procedures. BWB is to exchange views with the Association regard- ing the consultants' recommendations.  - 17 - 5.11 BWB's audit is conducted by the international firm, Deloitte and Company, and the arrangement is satisfactory. BWB will have its annual accounts audited by independent accountants acceptable to the Association and the audited accounts will be submitted to the Association within six months of the end of the fiscal year. Billing and Collections 5.12 Meter readings are made monthly and bills normally sent out by mail within one week. Disconnections are made if payment is not made with- in 30 days of billing. Collection performance has been good and there are few bad debts. VI. FINANCE Past Performance and Present Financial Position 6.01 BWB's financial policy has been to set tariffs at a level adequate to meet annual operating expenditures and debt service with only minor capital expenditures being financed from internal cash generation. BWB has met its financial objectives, but has not accumulated liquid resources to help finance capital expenditures. To better determine its operating expenditures and in- come in its future financial statements, BWB will change its accounting practices by introducing depreciation accounting. 6.02 BWB's revenues grew from MK 0.9 million in 1970 to MK 1.65 million in 1975 and water sales from 1,157 Img in 1970 to 2,021 Img in 1975 represent- ing average annual growth rates of 16% in revenues and 15% in water sales during the five-year period. The excess of revenues over operating expenses and debt service was small over the five years amounting to about 4% of reve- nues. As of December 31, 1975 about 65% of BWB's gross fixed assets had been financed from loans, 26% from grants, and the remainder from surpluses. After deducting estimated depreciation from revenues and from gross fixed assets at historical cost, the rate of return on net fixed assets from 1970 to 1975 was in a low range of 5% to 8%. BWB's 1976-1983 projected cash flow and in- come statements, balance sheets and debt statement, together with notes there- on, are presented in Annexes 9 to 13 and 1972-1975 historical income state- ments and balance sheets in Annexes 14 and 15. Tariffs 6.03 The effect of BWB's financial policy mentioned in para. 6.01 is that water generally is priced well below its economic cost. BWB's current tariff (which became effective January 1, 1977 and is identical in structure to the 1975 tariff shown in Annex 17) includes a fixed monthly fee for all consumer categories other than than kiosks and a monthly consumption charge. The fixed fee varies according to type of customer and the size and assessed value of property as does the "free allowance" of water delivered without additional charge. Consumption in excess of this monthly entitlement is  - 18 - charged at the rate of MK 0.80 per thousand Ig (US$0 73 per thousand US gal) for the first 5,000 Ig and MK 1.00 per thousand Ig (US$0.92 per thousand US gal) for the remainder. The tariff is unnecessarily complex and results in pricing inconsistencies, which are both uneconomic and inequitable, as customers pay widely differing amounts for water consumed without reasonable justification. Although it would be desirable to abolish soon water charges that are based upon assessed valuation of property, the required adjustment to BWB's billing system will be both difficult and time-consuming. Guide- lines for structural changes, which have been discussed with Government and BWB, are shown in Annex 18. BWB, in consultation with the Association, will introduce changes in structure along these guidelines. 6.04 BWB plans to increase its tariff levels per thousand Ig sold to close to estimated long-run marginal cost by 1981, through phased increases between 1978 and 1981. To achieve this objective and meet its cash require- ments during the construction period and also finance a reasonable proportion of its expected large future capital requirements from internal cash genera- tion, BWB will adjust its tariff to provide an annual rate of return on average revalued net fixed assets of not less than 8% in 1978 and 1979, 10% in 1980 and 1981, and 9% thereafter. To achieve the minimum 8% rate of re- turn in 1978 and 1979, BWB will either make a 37% tariff increase in 1978 or 23% and 11% tariff increases in 1978 and 1979, respectively. To achieve the above rates of return from 1978 to 1981, it has been estimated that it would be necessary to increase the average revenue per thousand Ig sold from MK 1.12 per thousand Ig (US$1.03 per thousand U.S. gal) in 1977 to MK 2.20 per thousand Ig (US$2.02 per thousand US gal) by 1981, after taking into account 8% annual inflation. The average level attained by 1981 would be only about 7% below long run marginal cost and would be such that large users would pay the full economic cost of their consumption. In constant prices the increase attained by 1981 would represent about 45%, raising the 1977 average revenue of MK 1.12 per thousand Ig (US$1.03 per thousand US gal) to MK 1.62 per thousand Ig (US$1.48 per thousand US gal). 6.05 To measure BWB's annual rate of return on net fixed assets BWB, in consultation with Government, has (based on a modified application of the British General Index of Retail Prices) revalued these assets at December 31, 1975 at a gross value of MK 17.11 million less accumulated depreciation of MK 6.17 million. Although a better method of revaluation should be established in the future, the initial revaluation is acceptable in view of the large additions to fixed assets in future years. BWB is to revalue its fixed assets annually in accordance with methods satisfactory to the Association, and a proposed method will be submitted to the Association before the end of 1977. In the financial projections, an 8-1/2% annual revaluation increase of fixed assets has been assumed from 1976 to 1981, after which prices are assumed to be constant. Proposed Financing Plan 6.06 The total financing requirement, which is estimated to approximate MK 15.1 million (US$16.6 million) including interest during construction, would represent about 53% of BWB's estimated capital expenditures and  - 19 - additions to working capital between 1977 and 1981. Under the proposed financing plan for this period, which is giv-n belot., BWB would provide 28% of its estimated capital requirements from internal cash generation, 68% would be provided from loans, and 4% from capital contributions. Millions of Millions of Kwachas US$ % Requirements Project Expenditures (including interest during construction) Development Program Phase IV /1 8.0 8.8 28 Phase V (Proposed Project) 15.1 16.6 53 Phase VI /1 0.2 0.2 1 Other 1.5 1.6 5 Additions to Working Capital 4.0 4.4 13 28.8 31.6 100 Sources Internal Cash Generation 13.8 15.2 48 Less: Debt Service and Sinking Fund Contributions /2 5.9 6.5 20 Net Internal Cash Generation 7.9 8.7 28 Capital Contributions 1.2 1.3 4 Borrowings Phase V (1DM 3.4 3.7 11 CDC ,3 4.0 4.4 14 Phase V (Proposed Project) IDA 6.4 7.0 22 AfDF (up t; US$6 m) 5.2 5.7 18 CDC /3 0.6 0.7 2 Phase VI /1 0.1 0.1 1 19.7 21.6 68 28.8 31.6 100 /I The amounts shown opposite th se items are those portions of projec- ex- penditures and borrowings incSirred between 1977 and 1981 only. /2 Excludes interest during cons ruc. ton. /3 CDC ioans consist of US$1.8 m equiva ent approved 1976 and a proposed US$3.3 m equivalent loan expected to be s-bmitted to the CDC Board in June 1977.  - 20 - 6.07 External finance for the proposed Project would come from IDA, AfDF and CDC. Government will make the proceeds of the IDA Credit of US$7 million available to BWB at an 8-1/2% interest rate. Principal repayments would com- mence in 1981 over 20 years and would be included in combined level principal and interest payments over that period. AfDF finance (up to US$6 million) is expected to be made available to Government with a service charge of 3/4 of 1% and repayment terms similar to the IDA Credit. Relending to BWB is likely to be on similar terms but has been conservatively projected in this report at an interest rate of 3-1/2%. CDC project finance of US$0.7 million would be part of a MK 3 million (US$3.3 million) loan to be made directly to BWB the balance of which would, together with a previously approved CDC loan, be used to help finance the previous phase of BWB's development program which, based on recent civil works bids, is likely to cost significantly more than originally anticipated. 6.08 The proposed Project would be followed by a Phase VI project to be constructed between 1981 and 1985 at an estimated cost of MK 20 million (US$22 million) and, in the financial projections, it has been assumed that this would be 60% debt-financed. As it is impossible to predict the price elasticity of water demand, water consumption may be less than forecast as a consequence of the proposed tariff changes (para. 6.04). In this case, the construction of the Phase VI project may be postponed. 6.09 With the change in tariff levels referred to in para 6.04, BWB will be able to improve its financial performance as indicated by the following projected financial data: 1977 1979 1981 1983 -----(millions of Kwacha)----- Operating Revenues 2.6 4.3 7.5 9.4 Operating Expenses 2.1 3.0 4.5 5.6 Net Income before Interest 0.5 1.3 3.0 3.8 Net Income Cash Generation 0.3 0.7 2.5 3.0 Operating Ratio 81 69 60 59 Debt Service Coverage 1.7 1.6 2.3 2.3 6.10 To help ensure a sound financial structure, BWB will not incur debt without IDA approval, unless future debt service is covered at least 1.5 times by internal cash generation. VII. AGREEMENTS REACHED AND RECOMMENDATIONS 7.01 Agreement was reached with Government on the following points: (a) BWB will provide piped water supplies to Blantyre's low-income, unplanned areas (para. 3.12); (b) BWB will consult with the Association before making any appointments to the positions of Engineer/ Manager and Clerk/Treasurer (para. 5.06); and  - 21 - (c) BWB will maintain its tariffs at a level which will yield at least 8% on its average revalued net fixed assets in 1978 and 1979, 10% in 1980 and 1981, and 9% thereafter (para. 6.04). 7.02 A condition of effectiveness of the proposed IDA Credit would be that all conditions of effectiveness of the proposed CDC and AfDF finance have been fulfilled (para. 3.06). 7.03 The Project is suitable for a US$7 million equivalent IDA Credit. April 19, 1977  I  ANNEX 1 Page 1 of 4 MALAWI BLANTYRE WATER SUPPLY PROJECT Description of Existing Facilities Background 1. The existing water system dates back to January 1929 when the Blantyre Water Board (BWB) was formed. Although the attractiveness of the area due to high elevation and pleasant climate have been partly responsi- ble for Blantyre's rapid growth, its highland location also has made the securing of firm water supplies difficult. Local supplies, which are rela- tively insignificant during all seasons due to geographic location on the catchments, taper off markedly during the dry season (July-December) when peak water demands normally occur. Urban growth has made local supplies less secure through encroachment upon their catchments. With the continuing growth of the community, BWB has had to reach out to more distant sources of supply outside the area of influence of urban development in order to meet increasing water demands. Sources of Supply Mudi Catchment 2. The Hynde dam impondments, which are in the upper portion of the Mudi catchment, represent BWB's earliest source of supply. They were constructed in 1930 and are effected by four, small sarth-fill dams provid- ing a combined storage capacity of 25 Img (114,000 m ). A small treatment plant, which processed water from this source for many years, was finally taken out of service upon the completion of the Mudi works in 1953 due to obsolescence and the high cost of retaining it in service. 3. Steadily increasing water demands subsequently forced the construc- tion of the Mudi works whi5h include an earth-fill dam providing a total stor- age of 290 Img (1,320,000 m ), a raw water pumping station, a conventional filtration plant using gravity-flow, rapid-sand filters, and a high-service pumping station. Due to insufficent raw water pumping capacity, the maximum daily output of the Mudi works is limited to 3.0 Imgd. The annual sustain- able yield available from the Mudi catchment (including abstractions from the Hynde dam reservoirs) varies from year to year but generally ranges from 0.5 to 1.0 Imgd. The Mudi works are an important asset to the BWB system due to their closeness to the center of demand and the extent of raw water storage  ANNEX 1 Page 2 of 4 capacity available at the site. With BWB's increasing dependence upon the Walker's Ferry source as its basic supply, the Mudi works have taken on a changed role and are now mainly used for peaking and for emergencies. This role is expected to continue in the future despite the continued pressure of urban development on lands immediately adjacent to the catch- ment. It is important that Government be convinced of the need to protect the catchment from further encroachment and actually takes steps to provide such protection. 4. Ground water potential in the area is not significant. Numerous boreholes and testholes exist largely as a result of the droughts of 1949 and 1950 which spurred the development of all potential sources. Unit capacities are low (the highest reported capacity approximates 50 Igpm) and water quality is poor. Many of the boreholes were developed by individual industries and some of these have now been abandoned. Only one of an original eight bore- holes and/or testholes constructed by BWB is still active. Due to poor water quality, its production (less than 50 Igpm) is delivered to the lower Hynde dam reservoir for blending rather than sent directly to the distribution system. Nankhunda Catchment 5. The Nankhunda works were constructed in 1919 and consist of Nankhunda reservoir with storage capacity of 40 Img (180,000 m ), a gravity raw water supply, a pressure rapid sand filter, and a high-service pump station pumping directly to the distribution system. Nominal capacity of the works is about 0.4 Imgd. Due to the construction of Government housing projects, the Nankhunda catchment increasingly is subjected to water pollution. For this reason, the Nankhunda works normally are held in reserve for emergency or for use during the peak summer demand. Government's plans to further expand public housing within the catchment are likely to require the abandonment of the Nankhunda works by the end of the current (Phase IV) capital improvement program. Walker's Ferry Supply from Shire River 6. The Walker's Ferry (WF) supply, which constitutes BWB's principal supply, was first developed in 1963 and consists of an intake and raw water pumping station located at WF, raw water supply mains, water treatment works, and a treated water conveyance system extending from WF to the Blantyre area. Additions and improvements subsequently were made to the WF supply several times with the most recent (Phase III) additions completed by late 1976. 7. Abstraction from the Shire River occurs at an intake pumping tower located approximately 4,000 ft (1,200 m) upstream of the intake of the Electricity Supply Commission of Malawi (ESCOM) Nkula Falls hydroelectric station. The tower is of reinforced concrete construction and currently houses seven electric-drive pump units totalling 895 horsepower (hp) and  ANNEX 1 Page 3 of 4 having a combined pumping capacity in excess of 8 Imgd. The tower was con- structed to a level consistent with the modifications proposed as part of the ongoing Nkula Falls II project recently approved for Bank Group financing where the forebay maximum operating level will be increased by about 20 feet (6 m). A raw water supply system consisting of two 12-inch diameter, 1,800- feet long pressure pipelines connect the raw water intake to the treatment works. 8. The treatment works have a nominal capacity of 6 Imgd although they can be operated at a rate of 8 Imgd during periods of low raw water turbidity. Pretreatment facilities include a pre-sedimentation basin and a flash-mix chamber (currently inactive) with aluminum sulfate added as coagulant and Decapol used as a coagulant aid. The treatment works include upward-flow, sludge blanket-type clarifiers, conventional rapid sand gravity filters, post-chlorination and a chlorine-contact tank. 9. The treated water is pumped from a clear water tank at the WF site a distance of over 23 miles through a 24-inch nominal diameter supply main to the Ndirande terminal reservoir in Blantyre. The pumping is accom- plished in two separate pump lifts of 1,296 ft and 1,215 ft, respectively, by pumping stations located at WF and Chileka. Although the hydraulic capacity of the pipeline in its current configuration is 9.7 Imgd (based upon a 10 fps velocity), the actual capacity of the WF scheme is limited to 8 Imgd due to limitations in installed pumping plant. The WF site includes a 1.0-Img balancing tank and a pumping plant with five electric-drive units with a total installed capacity of 5,000 hp. The Chileka site includes a 1.0-Img balancing tank and a pumping plant of six electric drive units having a total installed capacity of 4,575 hp. Distribution System 10. The distribution system provides service to about one-half of the 56-square mile net area currently planned for development within the Blantyre city area. Additional small areas (Sanjeka, Chileka village and several ESCOM field installations) external to the Blantyre municipal boundary also are served. Service within the City is provided through six separate pressure zones ranging in elevation from 3,600 feet (1,097 m) to 4,309 feet (1,313 m) and formed by eight separate reservoirs having a combined storage capacity of 7.0 Img (31,800 m ). 11. Treated water is introduced to the distribution system from the WF system via Ndirande reservoir and from the high-service pumping plant at Mudi treatment works. Pumping plant located at four booster stations located within the distribution system includes 14 separate pump units all of which are electrically driven, with a total installed capacity of 1,070 hp and delivering 9.2 Imgd. 12. The transmission and distribution systems consist of over 100 miles of pressure main ranging in size from one inch (25 mm) to 21 inches (530 mm) and constructed of asbestos cement, welded steel, cast iron and PVC. There were 9,754 metered connections providing service to an estimated 140,000 persons out of an estimated total Blantyre population of 210,000 in 1975.  ANNEX I Page 4 of 4 Twenty-three of these connections were to kiosks (two of which were in squatter areas) and over 1,000 connections to private standposts in high density and traditional housing areas. There also are approximately 100 fire hydrants attached to the system that were paid for by the municipal- ity but owned and maintained by BWB. Ongoing Phase IV Project 13. The Phase IV project, which is scheduled to be completed by early 1979, will increase BWB's basic water supply, improve the ability to meet peak and emergency water demands, and provide minor distribution system additions. The Project is being financed through external assistance provided by Common- wealth Development Corporation (CDC) and the Ministry of Overseas Development (ODM), both of the United Kingdom, and through internal assistance provided by Government. 14. The nominal capacity of the WF system will be increased from 8 to 10 Imgd. Source of supply improvements will include modification of the raw water intake and piping, construction of an access bund, and the addition of a 24-inch raw water supply main. Additions at the treatment plant site will increase treatment capacity to a nominal 10 Imgd, and will increase pumping capacity at the WF pump station through the enlargement of the pump build- ing and the addition of two 4.0 Imgd pump units. The project also will provide for the enlargement of the Chileka pump building, the addition of two 4.7 Imgd pump sets, the procurement of a spare 4.7-Imgd pump set, installation of additional surge equipment at the Walker's Ferry and Chileka sites, and increase the capacity of the Walker's Ferry pipeline to a maximum of 10.3 Imgd through the removal of existing restrictions. 15. The nominal capacity of the Mudi works, which will provide increased capability to meet peak and emergency water demands, will be increased from 3 to 10 lmgd. These improvements will include modification of the existing raw water intake, construction of a new raw water pump station immediately down- stream of Mudi Dam and a new 27-inch raw water supply main to the treatment works. Treatment plant improvements will include modification of the existing clarifiers, provision for an additional reactioI tank and gravity, dual media filters, and construction of a 0.5 Img (2,300 m ) clear water reservoir and a new high-service pump station boosting to the Ndirande zone (elevation 3,780 feet) reservoir. 16. Additions to the Blantyre area works, consisting mainly of a 0.6-Img reservoir at South Lunzu (elevation 3,660 feet), three transmission mains, and minor reticulation works, also are scheduled for construction. April 1977  ANNEX 2 Page 1 of 11 MALAWI BLANTYRE WATER SUPPLY PROJECT Water Demand and Production Capacity Introduction 1. The designers of the original Walker's Ferry (WF) pipeline planned that it would have an ultimate capacity of 10 Imgd and that construction of a parallel pipeline would be necessary to transport flows in excess of that rate. Subsequent preinvestment studies by BWB's consultants have indi- cated that it is economically feasible to increase pipeline capacity to 14 Imgd by making certain additions and changes in configuration not originally considered. However, due to the remote location and the low elevation of the WF source of supply in relation to center of demand, any significant increase in capacity is likely to be costly and have a marked effect upon BWB recurring expense. For this reason, considerable efforts were made during project preparation to ascertain the extent and trend of future water demands. Historical Water Demands 2. BWB maintains good records of water consumption (metered sales) but less satisfactory records of production (demand at source). Provision for improving the metering of production is included in the ongoing Phase IV project. This will permit a closer check on unaccounted-for water production which probably has been underestimated in the past. Since completion of the WF pipeline, annual water demands have increased markedly, mainly due to rapid urban growth, but also because the water tariff tended to encourage consump- tion. Table 1 of this annex indicates that, for the period 1964-1975, annual increases in system demand have averaged over 14% ranging from a minimum of about 8% to a maximum of approximately 20% for individual years. Factors Affecting Future Demand 3. BWB's metered records have been helpful in identifying historical trends of water usage but provide little assistance in projecting future growth. Improved statistics on population and water customers are needed. This need has resulted from a lack of census information (the most recent National Census was in 1966), the use of some bulk rather than individual water meters to monitor consumption, and a BWB system of records that is cumbersome to use in future planning. 4. In 1975 only about 140,000 of an estimated 210,000 persons living within Blantyre City were directly served by BWB. To assist in estimating future water demands, Gibb assumed that future gross Blantyre populations  ANNEX 2 Page 2 of 11 would increase from this base at an 8% (compounded) annual rate. The Gibb demand forecasts, which reflect five separate components of water demand, were mainly tied to population growth. Only the Commercial/Industrial demand component, which was assumed to match the growth of the national economy, was an exception. Remaining components, i.e., Government/Institutional and residential, were indirectly tied to population growth. 5. Modifications to the Gibb demand forecasts, which are described later in this annex (see para. 7), were made by the mission and reflect a somewhat diminished annual growth rate for residential water demands. The reasons for the change were as follows. First, a lower (6.5% as against 8.0%) population growth rate seemed appropriate based upon the results of a recent sample census obtained by Government's Regional Planning Office. This lower rate had been adopted by Government for future Blantyre area planning, but it was obtained too late to be used in the Gibb studies. Second, constraints on housing starts effected by the Malawi Housing Corpora- tion (MHC) annual budget are likely to place an effective limit on the growth of numbers of house connections and thus water demands for the fore- seeable future. This is particularly true since MRC currently is responsible for over 90% of all Blantyre area housing starts. While the number of persons served by BWB generally will increase in accordance with population, total water consumption is expected to increase at a slightly higher rate, despite the emphasis on low-income housing and sites and services type developments, due to increased per capita demands (see para. 7). MHC developments generally have reflected low per capita consumption due to increased dependence upon kiosks and private standposts. A third consideration leading to revised demand estimates was the sensitivity of demand to future tariff increases. The latter, which have been recognized as necessary and are recommended by the mission, are likely to reduce the rate of growth of water demands. 6. Currently, some unsatisfied demand exists in the Blantyre area by population not served (70,000 persons estimated of a total population of 210,000 in 1975). Most of this is represented by the approximately 50,000 persons living in four widely scattered squatter areas (Bangwe, Kabula, Ndirande and Nkolokoti) adjacent to developed areas of Blantyre. The current extent of unsatisfied demand partly is explained by BWB's stand of withhold- ing water service from squatter areas. This stand is an extension of Govern- ment policy established to discourage uncontrolled growth in urban areas. Service to these areas is likely to have little impact on water demand since per capita water use is expected to be low. Future Water Demands 7. Projections of future water demands which were developed by the mission for the period 1976-85, based upon considerations mentioned above, are shown at the back of this Annex. Table 2, the first of these, identifies the composition of future demands by principal class of consumer and in terms of average daily consumption. Residential consumption projected for any future year is expected to increase from 1975 consumption based upon expected  ANNEX 2 Page 3 of 11 future growth in numbers of residential connections and a continuation of the trend of annual increase (3.9%) in per capita water use noted for the years 1972 and 1975. Projections of non-residential consumption are in accordance with the Gibb forecasts. Table 3 shows both consumption and production. Unaccounted-for water, the difference between consumption and production, has been assumed to remain at close to the historical rate, 13% of production. Annual increases in required annual production would average about 9%, ranging from a minimum of 6.3% to a maximum of 10.1% during the period. Variations in Demand 8. In planning and sizing elements of a water utility, evaluation of likely variations in demand is important. The Blantyre system is particu- larly sensitive in this respect due to the distant location of Walker's Ferry, which constitutes the principal source of supply. Table 4 shows the likely monthly variation in demand based upon previous BWB experience during the period 1969-72. Table 5, which is based upon historical demand character- istics, shows projected flow rates for selected short-term periods that were used in the planning and design of the Project. Source Utilization 9. Studies by Gibb have indicated that, in order to avoid excessive electricial demand charges due to pumping and to minimize capital require- ments, it would be desirable to operate the WF supply at relatively uniform production rates. Local sources of supply and other local elements of sys- tem input, which are not penalized to the same degree by variations in flow rate, would be used to meet system variations in demand. Design of the Project has been based upon this rationale. The WF supply normally would be operated at, or close to, the average annual demand rate. During below- average seasonal periods of demand, water surplus to immediate needs could be bled off from the WF pipeline for storage in Mudi reservoir, subsequently treated at the Mudi treatment works, and thereafter delivered to the distri- bution system. The facilities at the Mudi site, including raw water pumping facilities, treatment plant, and high-service pumping facilities, would be designed to meet maximum-day demands. Demands during shorter-term periods (of less than one-day duration) would be met by withdrawals from distribution system storage. Production Capacity 10. Table 6 shows effective production capacity planned for the BWB system in order to meet future water demands. The total capacity shown for any given year equals the long-term sustainable capacity available from the WF works plus short-term yields available from local catchments. The capacity shown for the year 1984 is tentative due to uncertainty about future water demand. There also are uncertainties relative to optimum operation of future additions to the WF supply that could affect required production capacity (see para. 12 this annex).  ANNEX 2 Page 4 of 11 11. Page 11 presents a graphical representation of water demands and production capacity according to two separate categories relative to time, i.e., short-term and long-term. Short-term production capacity refers to that capacity that is sustainable by the end of the design period for a matter of days or, possibly, weeks. Long-term production capacity would be sustainable indefinitely, assuming no change in annual demand. The graph illustrates that total BWB production capacity must be chosen in consideration of both short- term and long-term needs. More specifically, it illustrates that the need for production capacity added by the proposed Bank Group (phase V) project is based upon long-term rather than short-term considerations. If short-term capacity is compared to maximum-day demand, there would be an apparent surplus of about 5 Imgd by the year 1980 when the Bank Group project is scheduled for completion. This is due to the extent of supply capacity added at the Mudi site for emergency protection by the ongoing Phase IV project. Since supply capacity at Mudi is not sustainable for extended periods, no additions in treatment plant capacity at the Mudi site are proposed as part of the Bank Group project. Future Operation of WT System 12. Prior to appraisal it became apparent to Bank Group staff that certain alternative operations of the WF system that could reflect lower economic costs were insufficiently considered. In particular, use of off-peak electrical energy for pumping and the conveyance of raw water, rather than treated water, to Blantyre appeared likely candidates for consideration. The mission investigated the attractiveness of such changes in future operation and the sensitivity of these changes, if desired, on future project timing. This investigation convinced the mission that, for Phase V, raw water pumping would be less economic than the more conventional current configuration. Since analysis by the mission relied upon cost information developed in the earlier Gibb studies, substantial updating of the analysis may be required. Additional studies to determine an optimum plan in operating the WF system should be completed prior to preparation of the next major (Phase VI) project. However, there is no need to conduct these studies, which are included in the Project, prior to 1980 since the current mode of operating the WF system, by necessity, must be retained until a second WF to Blantyre supply main is commissioned. This additional supply capacity is scheduled for Phase VI. Delaying the studies until 1980 should allow sufficient time to accumulate the substantial amount of basic operational data which will be required for the study. April 1977  ANNEX 2 Page 5 of 11 TABLE 1: PAST GROWTH IN WATER PRODUCTION Calendar Average Annual Increase Day Year Production I/ Amount % (Imgd) (Img) 1964 1.52 1965 1.82 .30 19.7 66 2.15 .33 18.1 67 2.54 .39 18.1 68 2.98 .44 17.3 69 3.23 .25 8.4 1970 3.70 .47 14.6 71 4.17 .47 12.7 72 4.60 .43 10.3 73 5.00 .40 8.7 74 5.49 .49 9.8 1975 6.40 .91 16.6 Note: 1/ Average daily production by high service pumps at treatment plants. January 1977  ANNEX 2 Page 6 of 11 TABLE 2: COMPOSITION OF FUTURE WATER CONSUMPTION 1/ Calendar Number of Residential Consump. Commercial/ Governmental/ Total Residential Annual Industrial Institutional Year Connections Increase, % Amount Consumption Consumption Consumption (Imgd) (Imgd) (Imgd) (Imgd) 1975 8,696 2.78 76 9,386 11.3 3.09 1.73 1.09 5.91 77 10,086 10.8 3.43 1.83 1.19 6.44 78 10,796 10.5 3.79 1.94 1.30 7.03 79 11,516 10.2 4.17 2.11 1.44 7.72 1980 12,246 9.9 4.59 2.30 1.59 8.48 81 12,986 9.6 5.03 2.51 1.75 9.29 82 13,736 9.4 5.50 2.74 1.94 10.18 83 14,496 9.1 6.00 3.00 2.14 11.14 84 15,266 9.0 6.54 3.26 2.37 12.17 1985 16,046 8.8 7.12 3.60 2.60 13.32 Note: 1/ Average daily consumption in terms of projected metered sales. January 1977  ANNEX 2 Page 7 of 11 TABLE 3: PROJECTED FUTURE WATER CONSUMPTION AND PRODUCTION 1/ Unaccounted- 3/ Annual Calendar Consumption for Water 2/ Production Increase Year Imgd Img % I_mg Imgd % 1975 6.4 76 5.91 2,157 13 2,482 6.8 6.3 77 6.44 2,352 13 2,701 7.4 8.8 78 7.03 2,566 13 2,957 8.1 9.5 79 7.72 2,818 13 3,249 8.9 9.9 1980 8.48 3,095 13 3,577 9.8 10.1 81 9.29 3,391 13 3,906 10.7 9.2 82 10.18 3,716 13 4,271 11.7 9.3 83 11.14 4,066 13 4,672 12.8 9.4 84 12.17 4,442 13 5,110 14.0 9.4 1985 13.32 4,862 13 5,585 15.3 9.3 Water demand in terms of projected: I/ Metered sales; 2/ In terms of water production; 3/ Production by high service pumps at treatment plants. January 1977  ANNEX 2 Page 8 of 11 TABLE 4: SEASONAL VARIATIONS IN DEMAND 1/ Average Daily Demand During Indicated Month Calendar As Against Average Daily Month Demand for Year, % January 86 February 88 March 89 April 90 May 97 June 97 July 100 August 106 September 116 October 123 November 111 December 97 Note: 1/ Based upon experience during period 1969-72. January 1977  ANNEX 2 Page 9 of 11 TABLE 5: PROJECTED SHORT-TERM VARIATIONS IN DEMAND 1/ (Imgd) Average Daily Demand During: Maximum Maximum Maximum Peak Calendar Demand Demand Demand Hour Year Year Month 2/ Week 3/ Day 4/ Demand 1976 6.8 8.8 9.2 10.2 15.0 77 7.4 9.6 10.0 11.1 16.3 78 8.1 10.4 10.9 12.2 17.8 79 8.9 11.5 12.0 13.4 19.6 1980 9.8 12.6 13.2 14.7 21.6 81 10.7 13.8 14.4 16.1 23.5 82 11.7 15.1 15.8 17.6 25.7 83 12.8 16.5 17.3 19.2 28.2 84 14.0 18.1 18.9 21.0 30.8 1985 15.3 19.7 20.7 23.0 33.7 Note: I/ In terms of production: Average demand during indicated period is projected based upon following relationship to average demand during year: 2/ Maximum month : 1.29:1 3/ Maximum week : 1.35:1 4/ Maximum day : 1.5:1 5/ Peak hour : 2.2:1 January 1977  ANNEX 2 Page 10 of 11 TABLE 6: EFFECTIVE PRODUCTION CAPACITY (Imgd) Indicated Phase of Source of Supply Calendar Improvements Total Year In Service WF 1/ Mudi 2/ Nankhunda 3/ Capacity 4/ 1975 II 6.3 3.0 .4 9.7 1976 III 8.0 3.0 .4 11.4 1978 IV 10.0 10.0 20.0 1980 V 14.0 10.0 24.0 1984 VI 19.0 5/ 10.0 29.0 Notes: 1/ Walker's Ferry system forming BWB's basic, year-round supply; 2/ Local source normally reserved for peaking and for emergency usage; sustainable yield approximates 0.5 Imgd; 3/ Normally reserved for meeting peak or emergency demands only; scheduled to be phased out of service by 1978 due to urban development planned for catchment; 4/ Long-term production capacity plus short-term yield from local catchments in excess of long-term sustainable yield; 5/ Estimated capacity required based upon continued utilization of WF system for supplying treated water only. January 1977  ANNEX 2 Page 11 of 11 MALAWI BLANTYRE WATER SUPPLY PROJECT BWB Water Demands and Production Capacity z 0 30 <0 0 < 0 SHORT-TERM 9L aaPRODUCTION CAPACITY 25 6< >~~0 A - 6a MAXIMUM-DAY E I Ca DEMAND- / z a