Senegal - Eleven Centers Water Supply Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 13833 PROJECT COMPLETION REPORT REPUBLIC OF SENEGAL ELEVEN CENTERS WATER SUPPLY PROJECT (CREDIT 1554-SE) DECEMBER 27, 1994 Infrastructure Operations Division Country Department V Africa Region This document has a restricted distribution and may be used bv recipients only in the performance of their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EOUIVALENTS Currency Unit = CFA Franc (CFAF) US$1.0 (1981) = CFAF 271 US$1.0 (1982) = CFAF 328 US$1.0 (1983) = CFAF 340 US$1.0 (1984) = CFAF 437 US$1.0 (1985) = CFAF 449* US$1.0 (1986) = CFAF 346 US$1.0 (1987) = CFAF 301 US$1.0 (1988) = CFAF 298 US$1.0 (1989) = CFAF 319 US$1.0 (1990) = CFAF 272 US$1.0 (1991) = CFAF 303 US$1.0 (1992) = CFAF 265 US$1.0 (1993) = CFAF 287 *rate used in the SAR FISCAL YEAR July 1 - June 30 = Up to June 30, 1991 July 1 - December (18 months) = For FY 1991/92 January 1 - December 31 = Starting January 1, 1993 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS CCCE Caisse Centrale de Cooperation Economique CCCG Cahier des Clauses et Conditions Generales CFD Caisse Franqaise de Developpement ETAP Engineering and Technical Assistance Project KfW Kreditanstalt fir Wiederaufbau MH Ministry of Hydraulics PCR Project Completion Report PPF Project Preparation Facility SAR Staff Appraisal Report SDR Special Drawing Rights SONEES Societe Nationale d'Exploitation des Eaux du Senegal  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation December 27, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Report on Senegal Eleven Centers Water Supply Project (Credit 1554-SE) Attached is the Project Completion Report on Senegal - Eleven Centers Water Supply Project (Credit 1554-SE) prepared by the Africa Regional Office, with part II contributed by the Borrower. The project focused heavily on capacity building and creating a national urban water supply and sewerage entity. The process was already initiated during a preceding engineering and technical assistance credit. Through this extensive exercise the Bank tried to gain a full understanding and reach an agreement with the Government on critical sector issues and necessary reforms prior to entering into major investments. Physical components targets were exceeded,, e.g. the number of connections was nearly tripled. Despite every effort by the Bank to reach an agreement on institutional issues, the Government was not in the end committed to carry out the reforms that would have been required. Several useful studies and improved project preparation and implementation capacity as well as enhanced capacity to operate and maintenance facilities remain, however, important institutional achievements of this project. Despite some initial progress on tariff issues, cost recovery and substantial arrears owned by the Government and municipalities remain unresolved. The project outcome is rated as marginally satisfactory. The project's institutional development impact is rated as modest, and the sustainability of its benefits as uncertain, largely due to the lack of progress on major financial issues. The PCR is of good quality and provides a candid discussion on project's achievements and problems faced, and presents practical lessons for a follow-on operation under preparation. Part II is limited to reviewing progress made in sanitation and rural water supply studies. The project may be audited. Attachment 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 disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY REPUBLIC OF SENEGAL ELEVEN CENTERS WATER SUPPLY PROJECT CREDIT 1554-SE PROJECT COMPLETION REPORT Table of Contents PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE .......... 1 A. Project identity. 1 B. Background .1 C. Project objectives and description .3 D. Project design and organization. 4 E. Project implementation. 5 F. Project results. 6 G. Project sustainability. 9 H. Bank performance. 9 I. Borrower performance .10 J. Project relationship .................... 10 K. Consultant services .................... 10 L. Project documentation and data ...... ....... 11 PART II ..................... 12 I. A study of the reorganization of the sanitation subsector, and an analysis of the procedures for its transfer to SONEES .12 A. Project objectives .12 B. Physical implementation .12 C. Financial performance .13 D. Comments .......................... 13 E. Conclusion ......................... 13 II. Preparation of a Rural Water Supply Master Plan ... ... 14 F. Project objectives ...... ............... 14 G. Physical achievements: ..... ............. 14 H. Financial performance ..... ............. 15 I. Comments ......... ................. 15 J. Conclusion ........ ................. 15 PART III. STATISTICAL INFOMATION. .17 A. Related IDA Credits .17 B. Project Timetable .17 C. Credit Disbursements. 8 D. Project Imnlementation. 2) E. Project Cost and Financing. 21 F. Proiect Results .23 C. Status of Covenants .32 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 disclosed without World Bank authorization.   SENEGAL ELEVEN CENTERS WATER SUPPLY PROJECT (CREDIT 1554-SE) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Eleven Centers Water Supply Project, for which Credit 1554-SE in the amount of SDR 24.1 million was approved on April 1, 1985. The Credit was closed on June 30, 1993, as originally scheduled. The last disbursement was on October 1st, 1993, and the outstanding balance of SDR 59,690.90 was cancelled. The PCR was jointly prepared by the Infrastructure Operations Division of the Sahelian Department, Africa Regional Office (Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II). Preparation of this PCR was started during the Bank's last supervision mission of the project in May 1993, finalized during a final mission in October 1993, and is based, inter alia, on the Staff Appraisal Report, the Credit and Project Agreements, supervision reports, correspondence between the Bank and the Borrower, and internal Bank memoranda.   SENEGAL ELEVEN CENTERS WATER SUPPLY PROJECT (Credit 1554-SE) PROJECT COMPLETION REPORT EVALUATION SUMMARY Objectives The project's major objectives were to: (i) help develop the "Societe Nationale d'Exploitation des Eaux du Senegal" (SONEES) into a national enterprise fully responsible for the water supply and sewerage sector in all the urban centers of the country; (ii) rehabilitate and expand water supply facilities in eleven urban centers to increase the population served from 420,000 to 705,000; (iii) strengthen SONEES' financial structure; (iv) assist Government define acceptable solutions for expansion of the Dakar/Cap Vert water supply; (v) help Government formulate policies for implementation and maintenance of facilities in the rural water supply subsector; and (vi) assist Government promote appropriate sewerage technologies, including sewage effluent re-use in the Dakar area (para.9). Implementation The Project was prepared through an Engineering and Technical Assistance Project (ETAP), Credit S23-SE, approved on April 24, 1979, which provided financing for 15 reconnaissance boreholes, feasibility studies and final design for the eleven centers, updating of sewerage studies, institutional and tariff studies, and technical assistance to the Ministry of Hydraulics and to SONEES. ETAP was intended to be a vehicle for an in-depth dialogue with the Government on major institutional and financial issues, but it was unable to meet its main objective of resolving disagreements between the Bank and the Government. Twelve years of preparation were necessary from the first mission, in April 1973, to Board Presentation, in March 1985, but this approval was based on a compromise, rather than on a comprehensive agreement (para.4). Project implementation was the responsibility of the new Planning and Studies Department of SONEES which, thanks to the skills of its staff, helped by a technical assistance team, worked efficiently and obtained very good results (para.12). Contractor performance was also satisfactory. The works were completed at the end of 1988, ahead of schedule, and within the appraisal cost estimates (para. 17). The construction of office space for SONEES' headquarters was abandoned after many architectural studies, because SONEES found it too expensive. It was replaced by the construction of a training center. Many studies were carried out under the project, satisfactorily and on time, but it was difficult to reach an agreement with the Government on the  ii conclusions of these studies. In particular, the Dakar/Cap Vert water supply study was used, in April 1991, as a basis for the appraisal of the Third Water Supply Project, but the Government disagreed with the conclusions of the appraisal and required new studies, which were financed by the Caisse Francaise de Developpement (CFD). These additional studies are now completed and the Government agreed with their recommendations, which confirm exactly the conclusions of the appraisal mission of April 1991, but three years have been wasted (para. 15). Results The project was successful in meeting its objective of improving access to potable water in the eleven centers covered by the project, since the project provided 483 km of pipes and 29,963 house connections, compared to 328 km of pipes and 10,000 connections estimated at appraisal (para.20). In addition, it helped strengthen SONEES in planning and implementing the project through a new Planning and Studies Department. This is the only institutional achievement of the project (para.22). However, the major objective was to put in place new institutional and financial arrangements giving SONEES full responsibility for the development of the urban water supply sector, and ensuring that the Government and the municipalities would regularly pay their water bills. This objective was not achieved: SONEES has no real authority on sector development, and Government arrears amounted to US$ 19.2 million equivalent on June 30, 1993, exactly as twenty years ago (para.23). Sustainability The project helped SONEES strengthen its capacity to identify, prepare, implement and supervise urban water supply projects throughout the country. The main risk is the lack of financial resources to maintain and develop correctly the water supply facilities, because the water tariffs have not been increased as necessary (para.29). Findings and lessons learned The technical aspects of the project were performed by SONEES satisfactorily and on schedule with the help of foreign consultants. However, as happens in many developing countries and with many projects, the financial and institutional arrangements were more difficult to implement owing to the Government's reluctance to give the water agency the desired managerial and financial autonomy (para.26). Twenty years of difficult dialogue with the Government have shown that the only reasonable solution is to privatize the operation and maintenance of all SONEES' facilities. The Government seems to have accepted  iii this recommendation, which would only be beneficial to the sector with a firm commitment from the Government to develop the sector (para.26). Overall proiect assessment The project clearly achieved its physical goals. Nonetheless, the institutional and financial objectives were not achieved. Overall, the project may be considered satisfactory on the physical side, but less successful on the institutional and financial side.   SENEGAL ELEVEN CENTERS WATER SUPPLY PROJECT (CREDIT 1554-SE) PROJECT COMPLETION REPORT PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE A. Project identity Name: Eleven Centers Water Supply Project Credit Number: 1554-SE RVP Unit: Africa Region Country: Senegal Sector: Water Supply and Sanitation B. Background 1. The first Bank involvement in the water supply sector in Senegal was a mission in February/March 1973, to explore the situation of the sector. The private company responsible for water supply and distribution in the Greater Dakar area had been nationalized two years earlier, and replaced by a Government owned company, the "Societe Nationale d'Exploitation des Eaux du Senegal" (SONEES). In July 1975, an identification mission proposed a water supply project for six centers, plus Saint-Louis, for an amount of US$ 20.0 million. On October 9, 1975, a contract was signed with a German consulting firm for preliminary studies in Kaolack, Louga, Thies, Diourbel, Ziguinchor, Tambacounda and Saint-Louis. Studies included sewerage for Thies, drainage for Ziguinchor, sewerage or drainage for Diourbel and Tambacounda. In November/December 1975, a Bank mission recommended to eliminate sewerage and drainage, and to concentrate the project on water supply in these six towns, except for Saint-Louis because KfW had proposed to finance water and sewerage in this city, plus seven small urban centers. 2. A joint appraisal mission with CCCE took place in October/November 1976. The mission recommended to award a PPF of US$400,000 to finance detailed studies, but concluded that the institutional and financial problems of SONEES and the sector were unresolved: water tariffs were inadequate and the Government owed huge arrears to SONEES. In addition, the Ministry of Hydraulics was responsible for planning, studies and new works, without any involvement of SONEES. The mission had requested a reform of the sector, but an inter-ministerial committee, on February 1, 1977, decided to preserve the status quo. A memo from the water supply division, dated April 8, 1977, recommended to "place the project on an indefinite hold status". It would have been a wise decision. However, a mission was sent to Senegal, in November 1977, for the preparation of a water supply engineering loan, which was intended to prepare the investment project and to serve as a vehicle for an in-depth institutional dialogue with the Government.  2 3. This Engineering and Technical Assistance Project (ETAP) was appraised in October 1978 and approved on April 24, 1979. The Credit S23-SE was signed on May 23, 1979 and declared effective on August 10, 1979. It provided financing for 15 reconnaissance boreholes, feasibility studies and detailed design for water supply in the eleven centers, updating of sewerage and sanitation studies, organizational, financial and tariff studies, and technical assistance to the Ministry of Hydraulics (MH), which was only a directorate of the Ministry of Equipment at the time of appraisal, and to SONEES. Credit S23-SE was closed on December 31, 1984, after a three year extension and a Project Completion Report No.6392 was issued on August 27, 1986. The drilling of boreholes in six centers were successfully executed, and the engineering studies were satisfactorily carried out, even though no acceptable solution could be found to remove the excess of fluoride from the water produced in the Sine Saloum Region, including the city of Kaolack. On the other hand, the institutional studies, which were at the center of the controversy between the Government and the Bank since 1973, did not lead to any substantial reorganization. The manpower study was far too ambitious and did not lead to any concrete action, while the tariff study was successfully carried out and served as the basis for an important refonn. 4. ETAP was intended to be a vehicle for an in-depth dialogue on major institutional and financial issues concerning the urban water supply and sewerage sector, but it was unable to meet its main objective of resolving disagreements regarding institutional arrangements and allocation of responsibilities. The fact that it took 12 years to reach a compromise, not an agreement, would suggest that it may not have been the best vehicle for that purpose. Nonetheless, the Engineering Credit paved the way for the Eleven Centers Water Supply Project, even if this way was only technically paved. 5. The Bank sent a mission to Senegal in February 1981 to identify a project .in the water supply sector. The mission identified a project covering eleven urban centers, for which the feasibility study was ongoing, financed from the Engineering Credit S23-SE. The final report was submitted in September 1981 and concluded that additional test borings were needed to establish the adequacy of the proposed water sources as regards the quantity of fluoride and the yield of the boreholes. However, the main issue was the huge arrears owed by the Government to SONEES: US$ 16.7 million at the end of 1980, US$ 17.8 million in June 1981 and US$ 22.2 million in March 1982, at the time of appraisal. The second issue was the reluctance of the ministry to give SONEES full responsibility for planning, preparation of projects, implementation and supervision, and debt service. It took a very long time to reach a compromise with the result that negotiations only took place in October 1984, 31 months after appraisal. 6. Most of the delay was caused by the difficulties experienced by the Government in understanding the rationale behind the proposed sectorial  3 reorganization and reallocation of responsibilities. Nevertheless, the Bank also shared the responsibility: although there was a shortage of financing, a Bank memo, dated December 29, 1982, proposed that the financial rehabilitation of SONEES become the central focus of the proposed project. This was in line with the new mode of sectoral adjustment projects but increased the confusion and led to one more year of delay. A supplementary Decision Memorandum, after a meeting held on January 26, 1983, decided to include in the project US$ 15.0 million, as a SONEES rehabilitation component to provide foreign exchange for spare parts, chemicals and fuel. To fill in the financial gap, Italian financing was sought, without success. Finally, this component was reduced to US$ 6.0 million. 7. CCCE has been associated with the preparation of the project from the beginning and, in October 1983, agreed with the following co-financing arrangement: US$ 8.6 million would be financed from CCCE, US$ 24.0 million from IDA and US$ 5.1 million from SONEES. To finance additional drilling works, the Government submitted a request on January 12, 1984, for a PPF, which was approved on February 3, 1984, in the amount of US$ 750,000 (PPF No.P 280-SE). The conditions of negotiations were: (i) a tariff increase, which was met in September 1983 (increase of 43%); (ii) draft contract plan; and (iii) draft "cahier des clauses et conditions generales". The conditions for Board presentation were the signing of documents (ii) and (iii) above and the settlement of all administrative arrears. In March 1984, the Government proposed to pay the arrears in 8 years, but the Bank refused. 8. A memo from a technical assistant to MH, dated July 11, 1984, mentioned the possibility to build the Cayor Canal to resolve the long term water supply problem of the Cap Vert Region. During negotiations, which took place from September 24 to October 7, 1984, the Senegalese Delegation requested to include in the project the feasibility studies for the Cap Vert water supply which was agreed upon for an amount of US$ 1.4 million. The Ministry of Finance confirmed its agreement by telex dated November 7, 1984. On December 28, 1984, the Government requested to increase the PPF amount from US$ 750,000 to 1,000,000, but the Bank refused on March 21, 1985. C. Project objectives and description 9. Project objectives: The project's major objective was to help develop SONEES into a national enterprise responsible for preparation and implementation of all urban water supply and sewerage projects, as well as for operation of the systems. To meet this objective, the Project proposed to: (i) rehabilitate and expand water supply facilities in the Eleven Centers, in order to increase the population served from about 420,000 to 705,000; (ii) strengthen SONEES' financial structure by replenishing its working capital; (iii) assist Government to define acceptable solutions for expansion of the Dakar/Cap Vert water supply; (iv) help Government prepare  4 institutional and fnancial arrangements for the rural water supply sub-sector; and (v) assist Government to promote appropriate sewerage technologies, including sewage effluent re-use in the Dakar area. 10. Project description: The project consisted of: (a) expansion of water supply facilities in the Eleven Centers (Thies, Kaolack, Fatick, Louga, Linguere, Bambey, Diourbel, M'Backe, Tambacounda, Ziguinchor and Kolda); (b) rehabilitation of SONEES through technical assistance, expansion of office space, consultancy in organization and accounting, training and increase in working capital; (c) feasibility studies of the Dakar/Cap Vert water supply; (d) technical assistance to MH and institutional studies for rural water supply; and (e) urban sewerage studies. D. Project design and organization 11. The project concept was developed, with inputs from Bank staff, by the participating institutions and ministries over a twelve year period (03/73 to 03/85). This long period of preparation was due to the difficult dialogue between the Bank and the Government on institutional aspects (para.4). The Engineering and Technical Assistance Credit S 23-SE was intended to prepare the investment project and to resolve the institutional issues. Although the closing date of the Credit was postponed three times from the original date of December 31, 1981, until December 31, 1984, major disagreements still remained regarding institutional arrangements and allocation of responsibilities. The Project was finally presented to the Board in March 1985, but only after the Governrment agreed to: (a) revise SONEES' statutes; (b) entrust SONEES with full responsibility for urban water supply and sewerage, including planning, financing, construction, operation, billing and collection, and debt servicing; (c) sign a Contract Plan defining mutual agreements and commitments for a three-year period; (d) put into effect new water tariffs and provisions for regular revisions; and (e) settle mutual arrears. 12. The feasibility and final design studies of the Eleven Centers, as well as institutional, manpower and tariff studies, had been satisfactorily carried out under the Engineering Project. The Credit also financed technical assistance: (i) technical assistance to MH, intended to strengthen planning capability and implement the new institutional setup, but this was not an effective intermediary between the Government and the Bank; and (ii) technical assistance to SONEES focused on creating a Studies and Planning Division within the Technical Department and performed without any problem. Contracts were also signed with consulting firms for assistance in the evaluation of bids, for the re-evaluation of SONEES' assets and for the supervision of the works. Therefore, when the Credit became effective, the bidding process was ready to start.  5 E. Project implementation 13. Credit effectiveness and project start-Up. The Credit was approved on March 7, 1985 and signed on April 1, 1985. The conditions of effectiveness were the signing of the Caisse Centrale de Cooperation Economique (CCCE) Loan Agreement and the Subsidiary Financing Agreement between the Government and SONEES. Effectiveness, originally scheduled for September 27, 1985, was declared on July 31, 1985. 14. Implementation schedule. Table 4, Part III, gives the actual implementation schedule, compared with that estimated at appraisal. Project implementation was originally scheduled to be completed by December 31, 1988, except for the house connection program which was planned to be spread over the whole project period. All physical works were completed as scheduled, with one exception, the training center not forecast at appraisal: instead of building office space, SONEES requested the Bank, in 1991, to finance a training center, and the Bank agreed. It was completed in June 1993. 15. Most of the studies were also completed by the end of 1988, but it took much more time to reach an agreement on the conclusions of these studies, particularly the Dakar/Cap Vert water supply study. This study was used in April 1991, as a basis for the appraisal of the Third Water Supply Project, but the Government disagreed with the conclusions of the appraisal, and required new studies which were financed by the Caisse Francaise de Developpement (CFD): (i) estimation of the additional quantity of water which could be produced from the Northern Coastal Zone; (ii) study of a new transmission main between this Northern Coastal Zone and Dakar; and (iii) a new institutional study of SONEES. These studies are now completed and the Government agreed with their recommendations. 16. Procurement. After effectiveness, the procurement process started out quickly and proceeded satisfactorily. The only procurement problem was related to the feasibility study of the Cayor Canal. On January 5, 1986, the Bank agreed to the request of Government that the letter of invitation not include the short list of the consulting firms. For the same study, MH sent the evaluation report on June 2, 1986, and proposed to award the contract to the firm ranked second. The Bank refused, by telex dated June 26, 1986, but the Government insisted and sent a mission to Washington. After long discussions, the contract was awarded to the firm ranked first. 17. Project costs. A comparison between the appraisal estimates and the actual costs of the project is given in Part III, section 5, table 5.A. The appraisal cost estimate was CFAF 14,590 million (about SDR 33.5 million), and the actual cost is CFAF 12,683.1 million. The main differences were due to the water supply works  6 in the 11 centers, which amounted to CFAF 5.2 billion instead of 7.0 estimated at appraisal, and the construction of headquarters for SONEES, estimated at CFAF 1.1 billion which was abandoned. 18. Disbursements. In Part III, Table 3, actual quarterly disbursements of the Credit are compared with the appraisal estimates and the disbursement profile of water and sanitation projects in Africa. Disbursements were spread over 6 years, for the project as initially designed. This compares to the profile of water supply projects in Africa (7.5 years) and to the 8.5 year disbursement period which had been estimated at appraisal, based on the disbursement profile used at that time. At the end of the initial project, on December 31, 1990, US$ 29.13 million had been disbursed, and only US$ 0.47 million were disbursed between January 1991 and October 1993, for the training center and the preparation of the follow up project. As a result of the US dollar/SDR depreciation, US$ 29.6 million was disbursed, against the appraisal estimate of US$ 24.0 million. The original closing date of June 30, 1993 was respected, and disbursements on commitments took place through October 1st, 1993 with the outstanding balance of SDR 59,690.90 cancelled. 19. Credit allocation. The original allocations by category and the actual disbursements under Credit 1554-SE are shown in table 5.C, Part III. There was a formal reallocation, in August 1990, mainly to increase categories 2 and 5 for consulting services, technical assistance and training. Categories 1 (civil works) and 4 (chemicals) showed a cost underrun of SDR 1.8 million and SDR 0.9 million respectively, while categories 2 and 5 (consultants services) were overrun by SDR 2.7 million and SDR 1.5 million respectively. F. Project results 20. Proiect obiectives. The Project was partially successful in meeting its objective of developing SONEES into a national enterprise responsible for preparation and implementation of all urban water supply projects, as well as operation of the systems. The Project assisted in strengthening the management and organization of SONEES and its capacity to implement subsequent projects. Moreover, the objective of improving access to potable water in the Eleven Centers was fully met. Nevertheless, SONEES has not the necessary autonomy to undertake the development of the water sector and has not yet taken over the urban sewerage sector as forecast. In addition, the issue of Government's arrears is still unresolved. 21. Physical results. The physical targets of the project were fully achieved, as it is shown on table 6.A, Part III. From 1982 to 1992, 12 new boreholes were drilled and equipped, 483 km of pipes and 29,963 connections were installed, compared to 328 km of pipes and 10,000 connections estimated at appraisal. Reservoirs were built for a total capacity of 2,350 m3. The number of standpipes was reduced by 155, compared to an increase of 186 estimated at appraisal. This is  7 the result of the success of the house connection program. The facilities built under the project are working well and are well operated and maintained. 22. Institutional performance. On the institutional side, the project objectives were twofold: (i) strengthen SONEES, the implementing agency, in operation, maintenance and implementation of the project, and (ii) put in place new institutional and financial arrangements giving SONEES full responsibility for the development of the urban water supply sector, and ensuring that the Government and the municipalities would regularly pay their water consumption. The first objective was satisfactorily achieved, thanks to the help of the technical assistance team. This is the only institutional achievement of the Project. 23. The second objective was not achieved and requires further efforts from the Government. The lengthy discussions about the solution to be adopted for the Dakar area water supply have shown that SONEES has no real authority on the future of the sector. The Government has objectives which are not consistent with those of SONEES and is reluctant to give it the necessary autonomy. The wish of the Government to build as soon as possible the Cayor Canal led to long delays in meeting the urgent needs of the Dakar population. A Third Water Supply Project was appraised in April 1991, focused on an interim solution to provide water to the Dakar area, which was the main issue for SONEES, but MH made many objections and it is only now that the technical solutions proposed by the April 1991 appraisal mission have been accepted by the Government. 24. The conditions of Board Presentation were the signing of a Contract Plan, of a "Cahier des Clauses et Conditions Generales" (CCCG), and the settlement of all Government and municipal arrears. The Government did not respect its obligations: (i) water tariffs were to be revised twice a year, according to a formula included in the CCCG. It was only done until December 1986; (ii) arrears were settled in 1984 in order to satisfy the conditions of Board presentation, but began to accumulate immediately after. The last settlement was done in February 1992, but arrears reached CFAF 5,174.8 million on June 30, 1993, or US$ 19.2 million equivalent. The situation is exactly the same as twenty years ago! 25. Another important issue is the utilization of potable water for growing fruits and vegetables in the Cap Vert area. This use should be discouraged and phased out, because it is a waste of limited natural resources. This water comes from the Senegal River and needs pumping and treatment, which is very costly. Notwithstanding the shortage of water in the Dakar area, this activity has a preferential water tariff, about one third of the cost, which was not revised in February 1992. In addition, there are many illegal connections and SONEES has difficulties to collect bills: arrears amount to CFAF 636 million. In 1992, the water use for agriculture represented 8,708,170 m3, or 9.8% of the total of SONEES' production, even though CCCG limited to 7% the use for agriculture. This is  8 unacceptable when the Dakar area is short of water for human use. Article 30 of CCCG states that, in case of water shortage, SONEES should request the reduction of quotas for agriculture, in order to first meet the population needs. The cancellation of the preferential tariff and the phasing out of the use of potable water for agriculture should be a condition for the financing of the Third Water Supply Project. 26. These difficulties stemmed from the lack of autonomy of SONEES. It is impossible to launch a high investment program before an exhaustive reform is implemented. In this regard, a new institutional study has been carried out and recommends, inter alia, to entrust a private company with the responsibility of operation and maintenance of all SONEES' facilities. Twenty years of difficult dialogue with the Government has shown that this is the only reasonable solution. A firm commitment to the recommendations of the studies from the Government should also be a condition of the Third Water Supply Project. Nonetheless, the privatization of O&M cannot solve the issue of planning and financing new investments in the sector, which would remain the responsibility of the Government. 27. The difficulty to provide water in sufficient quantity to the Dakar area raises another question, which is much larger than the water supply framework: why is it necessary to transport huge quantities of water from the Senegal River to Dakar, rather than moving part of the Dakar population from Dakar to the Senegal River ? 28. Financial performance. The project accounts were regularly audited by an external auditor, and the reports were received (with some delays) by the Bank. Table 6.C, Part III, gives a summary of SONEES accounts from 1983 to 1992. Operating expenses are slightly higher than appraisal estimates, while revenue is much below appraisal estimates. Therefore, the net income is very low and limits the financing of new investments from SONEES own resources, which should be equivalent to not less than 15% of SONEES' total annual gross revenues, according to Section 4.04(a) of the Development Credit Agreement. In addition, depreciation of assets transferred from the Government to SONEES is compensated, every year, by an investment subsidy. As a matter of fact, for these assets, there is no depreciation covered by the water tariff, which is insufficient to meet the SONEES needs. 29. According to the CCCG, the water tariffs should be reviewed twice a year, on January 1 and July 1, by application of a formula taking into account all price components: operation, renewal, growth, sanitation, rural water supply and taxes. When the formula gave more than 2%, SONEES had to propose the tariff increase to the Ministry and, without response within 15 days, could implement the tariff increase. This was only done in 1985 and 1986. Since then there were two tariff increases in 1989 (about 21%) and 1992 (about 12.9%), except for the social tariff, the standpipes and agricultural use. Table 6.E, Part III, gives the water tariffs from 1980 to 1992, and shows that the social and agriculture tariffs have not followed  9 the cost of living increases over this long period. This should be corrected in the future. 30. During the Project, SONEES has privatized all the standpipes under operation. The financial results are very satisfactory because this has put an end to the wastage of water and considerably reduced the municipalities' arrears. G. Project sustainabilitv 31. The project has had a significant positive impact in that it has caused new arrangements to be put in place, giving full responsibility to the Planning and Studies Department of SONEES for preparation and implementation of urban water supply projects. Nevertheless, the Project has not achieved its objective to strengthen the financial situation of SONEES, in order to help it increase financial allocations to maintenance of existing facilities and to new investments. H. Bank performance 32. Supervision by IDA was relatively continuous, with only two project officers succeeding one another . During implementation, a total of 15 successive supervision missions visited Senegal, at the rate of 3 a year in 1985, 1986 and 1987, twice a year in 1988 and 1989, then once a year. Some 332.8 staff-weeks were spent on this project over the entire project cycle, which is already high, since the average is 200 s/w. But if we take into account the number of s/w spent on the Engineering and Technical Assistance Project, Credit S23-SE, which aimed at preparing this project, the total number exceeds 500 s/w, which is incredibly high. The details of staff input and missions are given in Part III, section 8, tables 8.A and 8.B. 33. The project was well appraised and supervised. On the technical side, IDA's performance was satisfactory during preparation and implementation. 34. IDA was partly responsible for the very long period of preparation, from 1973 to 1985. It was clear from the beginning that the Government did not adhere to the Bank's policy to establish an autonomous and financially sound water company. A memo of April 8, 1977 recommended to "place the project on an indefinite hold status". It would have been a wise decision (para.2). In addition, although there was already a financial gap, the decision, after appraisal, to add a new component for the financial rehabilitation of SONEES increased the confusion and the delays (para.6). After 12 years of preparation, everybody was happy to believe that the institutional and financial conditions were met for Board Presentation, but it was only a temporary compromise, not an agreement. When it was clear, at the end of 1986, that the Government had no intention to fulfill the covenants of the Credit Agreement, the Bank had no reaction and did not threaten to suspend disbursements.  10 Therefore, IDA's efforts were ineffective and the Project has been disappointing on the institutional side. 35. One remark concerning the use of disbursement profiles should be made: the implementation schedule, annex 4-7 of SAR, shows that the works would be completed by December 1990 but, to respect the Africa disbursement profile for water supply projects, disbursements were estimated to be spread out on a 8.5 year period. Actually, the implementation schedule was respected and real disbursements were done on a 6 year period. On December 31, 1990, US$ 29.13 million had been disbursed, and only US$ 0.47 million were disbursed since that date, in three years. The graph on page 3, Part III, clearly shows that the project was completed by the end of 1990, and it would have been better to close the Credit at that time, rather than to continue for three years for such a small amount, with a cost for IDA and the borrower higher than the disbursed amount. I. Borrower performance 36. Thanks to the high competence of its staff, the Planning and Studies Department of SONEES turned in an excellent performance: the bidding process progressed on schedule, with the bid appraisal reports prepared on time and the contracts concluded without any problem and below the appraisal cost estimates. Quarterly progress reports were submitted to IDA in a timely manner up to the end of 1990. There have been no progress reports since then. 37. The performance of the Government has been very poor: (i) it did not fully respect its commitments as regards water tariffs and administrative arrears; and (ii) it is fully responsible for three years of delay in the launching of the Interim Project for the Dakar water supply, called Third Water Supply Project, appraised by IDA in April 1991. J. Project relationship 38. IDA's relationship with SONEES on the project has been very good. Relations with the Government were rather strained in 1990/92, as a result of problems connected with delays in the start of the Third Water Supply Project. Borrower-contractor relationships were good, as well as with the consultants. In addition, relationships with the co-financing agency CCCE, now CFD, were excellent and helped IDA keep a firm position on institutional problems. K. Consultant services 39. The successful completion of the works, on schedule and within the limits of the appraisal estimate, would not have been possible without the high-quality consultant inputs received during project preparation and implementation. During  11 implementation, the technical assistance provided to SONEES was in general competent and efficient. On the other hand, the Ministry did not benefit as fully as it could have from the technical assistance provided during project preparation. L. Project documentation and data 40. The original documentation for the project was adequate and appropriate. The appraisal report provided a useful framework for both IDA and SONEES in their review of project implementation.  12 PART II 1. A study of the reorganization of the sanitation subsector, and an analysis of the procedures for its transfer to SONEES. A. Project objectives 1. The purpose of this study was to seek ways of achieving the financial e,lijlibriuiii of the sanitation subsector over the medium term. It consisted of the following components: effective demand analysis, based on detailed surveys in the cities of Dakar, Kaolack, Louga, Thies and Saint-Louis; establishment of a medium-term investment plan for the purpose of rehabilitating existing facilities and improving their cost-effectiveness and operating conditions; analysis of the conditions for transferring fixed assets and existing debt service to SONEES; determination of the key parameters to be taken into account in setting sewerage tariffs. B. Physical implementation 2. Contract No. C/18/FM of October 2, 1986 was signed between the Direction de l'Hydraulique Urbaine et de l'Assainissement, representing the Minister or Iydraulics, acting on behalf and in the name of the Government of Senegal, and the J3B'TUJRE-SETAME and SONED-Afrique Consulting Group. The first report, delivered in July 1987, concerned: effective demand analysis; short-term investment plan; preliminary estimate of potential revenue; - operating cost estimate; - analysis of the conditions for transferring fixed assets and debt service obligations to SONEES; -. simulation of SONEES' short-term accounts; - outline of a general sanitation subsector policy.  13 3 The second report, delivered in June 1988, concerned assessment of the average "sewerage surcharge." The wrap-up report was delivered in September 1988, and indicated a 100% physical execution rate. C. Financial performance 4. Estimated cost: CFAF 46,695,000 net of tax Down payment: CFAF 4,305,000 Contract price: CFAF 51,000,000 net of tax: Completion time: 8 months and 3 weeks 5. Additional studies concerning the draft of a general sanitation subsector policy were entrusted to the Group (service order No. 139/MH/DHUA of October 31, 1987), for which it would receive CFAF 4,305,000. Financial performance presented no difficulties and was 100% comparable with the appraisal estimates. D. Comments 6. Bank performance. The Bank contributed a great deal to the success of the project, thanks particularly to the regularity with which it transmitted to the Government its reactions to all issues submitted to it. It also showed great understanding when it approved the Government's suggestions concerning extension of the project completion date and the additional studies proposed. However, it should be noted that in the case of the "program to rehabilitate, strengthen and improve the cost-effectiveness of the existing sanitation facilities in Dakar, Kaolack and Louga" and "sewage effluent re-use" in the Third Water Project, it was not possible to make a start on the relevant projects, the significance of which had been emphasized in the study. 7. Consultant's performance. The consulting group performed its obligations to satisfaction. Despite the extension of the completion dates, it did not request any adjustment of its prices, even though these were not actually fixed and firm. 8. Performance of the Directorate of Debt and Investments (Ministry of the Economy. Finance and the Plan). The consultants' statements of account were always paid in good order. The consultants registered no complaints for delayed payment. E. Conclusion 9. To sum up, the study set out the essential guidelines for a harmonious development of the sanitation subsector, and also demonstrated the need for greater donor support for this subsector, which is inseparable from that of potable water  14 supply. The study was carried out to the Government's overall satisfaction, its conclusions fully meeting their expectations. II. Preparation of a Rural Water Supply Master Plan F. Project objectives 10. The objectives of the study were as follows: - an accurate assessment of the water needs of the communities and of their livestock; - an accurate determination of the hydraulic and hydrogeological contexts of the various rural areas; - identification and programming of priority actions for the construction and/or upgrading of waterworks [realisation et/ou l'equipement d 'ouvrages]; - search for an appropriate and standardized technology for the construction of waterworks; - estimate of the potential contribution of the rural consumers to financing of the waterworks and to their operating and management costs, and practical procedures for obtaining that contribution. 11. Because of the financial constraints and the difficulties of acquiring the necessary data, the study had to be revised. In its final form, the study aimed to consolidate existing data, prepare mapping and data processing tools capable of providing effective help in the programming of the waterworks, and carry out a socioeconomic study geared basically to demographics and to the communities' capacity for making a financial contribution. G. Physical achievements: 12. The study's achievements were as follows: consolidation of data into two maps on a scale of 1/1,000,000; preparation of two consolidated maps on a scale of 1/1,000,000, with identification, orientation and operation of the aquifers, to serve as planning tools;  15 preparation of BOCAR software, in which the "hydrogeology" and "programming" databases are located downstream of those of the GOREE software designed for the purpose of another study; a general inventory of facilities already in existence, under construction or programmed, compared with the need trends addressed in the socioeconomic component; assessment of the communities' financing capacities. H. Financial performance 13. The original financial estimate made at the time of project preparation indicated that a budget on the order of CFAF 340 million would be necessary for overall project implementation. This amount was not made available to the project either by the Senegalese government or by the World Bank. Thus contract C/37/FM was signed with the BRGM/SONED Group in the amount of CFAF 64,999,990, down payment included, the original terms of reference being retained. For publication of the mapping tools it was necessary to sign an ancillary CFAF 5 million contract to supplement the principal contract. I. Comments 14. Bank performance. The Bank's agreement to finance publication of the consolidated maps represented a very positive contribution. These maps, for which provision had not been made in the terms of reference, came to represent a very significant portion of the results obtained. 15. Consultant's performance. The Consultant satisfactorily performed all its obligations as set forth in the terms of reference. 16. Performance of the Directorate of Debt and Investments (Ministry of the Economy. Finance and the Plan). The consultants' statements of account were always paid in good order. The consultants registered no complaints for delayed payment. J. Conclusion 17. The results of this study finally appear to be very positive, thanks in particular to the BOCAR software and to the programming maps, which the Government found to be very useful practical tools. However, much remains to be done to achieve the initial objectives and to provide management tools that would make it possible to satisfactorily plan the use of the country's water resources. An outline of actions to be taken downstream of this study is given in document 5 of the  16 report, in the form of program briefs [fiches de programme]. Several of these represent priorities for achieving the stated objectives: - conduct of exhaustive studies among villagers concerning the meeting of their water needs, and data input; a study concerning user takeover of the rural infrastructure by users - privatization of water sales; estimate and planned management of Senegal's groundwater resources. A true Rural Water Supply Master Plan should be able to be prepared downstream. The Director of Rural Engineering and Hydraulics  17- SENEGAL ELEVEN CENTERS WATER SUPPLY PROJECT PROJECT COMPLETION REPORT PART III STATISTICAL INFORMATION 1. Related IDA Credits Credit Purpose Approval Status CR S 23-SE Preparation of an investment 04/24/79 Closed on Water Supply Engineering project and improve institutional 12/31/84 and Technical Assistance arrangements of the sector Third Water Supply Resolve the institutional and No Appraised Project financial problems of the sector, in April 1991 and seet the water denand in the but without Greater Dakar area follow-up 2. Project Timetable Planned Revised Actual Date Date Date Identification 07/75-03/81 * Preparation 10/75-09/81 t Pre-appraisal 11/81 Appraisal 03/82 Negotiations 03/05/84 10/01/84 Board Approval 03/07/85 Credit Signature 04/01/85 Effectiveness 09/27/85 07/31/85 Credit Closing 06/30/93 06/30/93 Project Completion 12/31/92 06/30/93 * the first date concerns the Engineering Credit S 23-SE, and the secoad date concerns the Credit 1554-SE itself  - 18 - 3. Credit Disbursements Cumulative Estimated and Actual Disbursesents (in millions of US dollars) WB Fiscal Year SAR Estimates Actual I Disbursed Africa and Quarter Profile FY 86 Sept.30, 1985 3.35 3.78 15.75 0.00 Dec.31, 1985 4.90 4.86 20.25 0.00 March 31, 1986 6.70 5.52 23.00 0.71 June 30, 1986 8.50 7.48 31.17 1.44 FY 87 Sept.30, 1986 10.45 9.07 37.79 2.40 Dec.31, 1986 10.85 11.17 46.54 3.36 March 31, 1987 11.35 12.68 52.83 3.84 June 30, 1987 11.90 14.94 62.25 4.32 FY 88 Sept.30, 1987 12.50 16.99 70.79 5.76 Dec.31, 1987 13.10 18.99 79.13 7.20 March 31, 1988 13.75 20.67 86.13 8.16 June 30, 1988 14.40 22.71 94.63 9.12 FY 89 Sept.30, 1988 15.05 23.32 97.17 10.56 Dec.31, 1988 15.70 24.84 103.50 12.00 March 31, 1989 16.35 25.93 108.04 13.44 June 30, 1989 17.00 26.94 112.25 14.88 FY 90 Sept.30, 1989 17.60 27.70 115.42 15.84 Dec.31, 1989 18.20 28.07 116.96 16.80 March 31, 1990 18.80 28.74 119.75 18.24 June 30, 1990 19.40 28.82 120.08 19.68 FY 91 Sept.30, 1990 19.95 28.97 120.71 20.64 Dec.31, 1990 20.45 29.13 121.38 21.60 March 31, 1991 20.90 29.17 121.54 22.08 June 30, 1991 21.35 29.25 121.88 22.56 FY 92 Sept.30, 1991 21.75 29.26 121.92 23.04 Dec.31, 1991 22.10 29.28 122.00 23.52 March 31, 1992 22.45 29.35 122.29 23.75 June 30, 1992 22.80 29.41 122.54 24.00 FY 93 Sept.30, 1992 23.15 29.42 122.58 24.00 Dec.31, 1992 23.50 29.42 122.58 24.00 March 31, 1993 23.80 29.43 122.63 24.00 June 30, 1993 24.00 29.54 123.08 24.00 FY 94 Sept.30, 1993 24.00 29.60 123.33 24.00  - 19 - DISBURSEMENTS 25 - 5 - _ 1tJ 1 1 1 [ 3 t ] [ L 4 t ] [0tl 0 ] 2 ~~~~~1-4 ~4 p4 1 20 15 _ CD cn 't n D - CD 0D aC4 -N t La CO r% 00 - 0 N CD qr W <0 M 0 0-N w- - - - N CS N N N N N N N n Cr) CO C17 Quarters | " Appraisal Actual Profile  - 20 - 4. Project Implementation IMPLEMENTATION SCHEDULE YEARS 1984 1985 !1986 1987 1988 I 1989 1990 !1991 1992 1993 -------------------------------!------!------!------!------!------!------!------!------!------!------! Water Supply in 11 Centers ! ! ! ! -------------------------------! Drilling of 4 'Wells !--- ! ! ! ! Drilling of 8 'Wells ! ! ------ ! I,,,,tt1,*t,, ! ! Electrical L Pumping Equipnent! !..... ..I-.... ! !-!-! Civil Works ! ! .