Senegal - Long Term Water Supply Project

Report No. PID6764 Project Name Senegal-Long Term Water (@) Supply Project Region Africa Sector Water Supply and Sanitation Project ID SNPE41528 Borrower Government of Senegal Implementing Agencies Oversight: Ministry of Hydraulics (MH) Day-to-day Coordination: Project Coordination Unit Tel: (221) 823-84-07 Fax: (221) 823-44-70 Execution of Components/Activities: Department of Water Works and Sanitation (MH-DHA); National Water Company of Senegal (SONES); National Office of Urban Sanitation (ONAS); Water Resources Management and Planning Unit (MH- SGPRE); Executing Agency for Small and Community Enterprises in Water and Sanitation (AGETIP) Date PID Revised September 21, 1999 Appraisal Date May 31, 1999 Projected Board Date February, 2000 Country Background 1. Senegal has a population of approximately 8 million, of which 41% lives in the urban areas. The population growth rate is approximately 2. 7% per annum. During the period 1989-1993 GDP growth rate was 1.7%. At end 1993 however, economic growth was a negative 2.1% and internal and external arrears reached 221 billion CFA Franc. In the urban areas the standard of living has deteriorated. The incidence of poverty continues to be high in the rural areas. Poor economic performance was mainly due to: inappropriate policies undertaken by the Government which placed excessive regulation on the private sector; insufficient internal adjustment measures undertaken; and the overvaluation of the exchange rate of the CFA Franc. 2. In addition to the devaluation of the CFA Franc in January 1994, the Government of Senegal (GOS) has taken steps to improve the economy and enhance the activities of the private sector through structural and institutional reforms. In 1994, following an initial phase in which the private sector adopted a cautious attitude, primary sector production and export oriented activities started increasing significantly. There was much renewed tourist activity in the Casamance and elsewhere. Structural reforms have covered price and trade liberalization, labor and regulatory legislation, public enterprise reform, the public administration, agriculture, energy, transport, social sectors and the environment. As a result, in 1995 the economy grew at 4.8% in real terms, in 1996 at 5.6 %, and in 1997 growth was about 4.7%. Sector background  3. The reform of the water sector, started in December 1993 and completed on 23 April 1996, included the creation of a public asset holding company SONES (Societe Nationale des Eaux du Senegal) and a private operating company SDE (Senegalaise des Eaux), who is contracted by Government for a 10 year enhanced lease agreement with concession elements with respect to the renewal of the distribution network. The transaction includes performance-based financial incentives for SDE, in particular reducing UFW in the Greater Dakar water distribution system (from the current 32 to 15 percent over 6 years). 4. Within the framework of the current Water Sector project, Senegal is continuing the reform of the water supply sector institutions and is creating an environment conducive to sector growth including, ensuring continuity of management and rational organization, encouraging the development of human resources, supporting improvements in commercial management and cost effectiveness, instituting a new tariff policy for better cost recovery and aiming at financial equilibrium of the urban water supply subsector by the end of 2003, independent from Government. Private sector participation was considered to be required to achieve these objectives. 5. In 1996, as part of the institutional reform of the urban water sector, the Government created Office National d'Assainissement urbain (ONAS), an autonomous public office to operate and manage the sewerage networks and the urban storm drainage, mainly to create a vehicle to bridge the development gap with the urban water supply subsector by the end of the current management lease contract for water supply operations in 2006. However, achieving financial sustainability of the urban sanitation sub-sector remains a major issue. Project Objective 6. The Development Objective of the Long-Term Water Sector Project (LTWSP) is to obtain a sustainable improvement in the provision of water and sanitation services in unserved and low-income areas of Dakar and secondary cities. This objective will be pursued by supporting further institutional and regulatory reforms and policy enhancements in the water sector and, at the same time, removing its major physical constraints, using private sector project financing, thus consolidating and building on the achievements of the current Water Sector Project (Cr. 27580), to be completed in 2001. Project Description 7. In order to meet the objectives of the project, the credit will include the following components: (i) Urban Water Supply - Dakar area:; to improve the reliability, quality, quantity and coverage of water supply services in unserved and low income areas of Dakar through: (i) increasing the number of connections; (ii) restructuring and balancing Dakar's water distribution network to enable it to handle the increased volumes; and (iii) increasing water storage capacity (ii) Urban Water Supply- Secondary centers: to expand and reinforce the drinking water networks in three regional capitals (Tambacounda, Saint-Louis and Kaolack), as well as a program of rehabilitation and strengthening of water distribution systems in 20 semi-urban centers to be incorporated into SONES' service area upon completion. (iii) Urban Sanitation: to increase the usage of the existing sewer networks through increased sewer connections. It will help to improve demand management and reduce environmental pollution and also aid in reducing the severity and duration of -2 -  flooding in the most affected areas of Dakar. The off-site sanitation component will include investments in wastewater management and drainage in Dakar, St Louis, Louga, Kaolack and Sally Portugal. (iv) Water Resources Management: to improve the quality of water from Guier's lake which is the major source of water able to satisfy the growing needs of Dakar, by developing a participatory catchment preservation program and rehabilitating studies for the banks of the lake and the water intake; (v) Institutional Strengthening and Capacity Building: to (i) increase the efficiency of public entities involved in the water and sewerage sector (MH, SONES and ONAS) by strengthening their capacity for planning and management; (ii) restructure the sector's institutional and regulatory framework to adapt it to the second generation contract of private operator; and (iii) develop/strengthen the capacity of small private and community enterprises to respond to the demand for services in urban and peri-urban areas. Project Cost and Financing 8. The total project cost is estimated to be US$231 million of which US$100 million will be financed by IDA, US$--- million by cofinanciers still to be determined and US$---- by the Government of Senegal. Project Implementation 9. The Ministry of Hydraulics (MH) is expected to provide oversight and guidance for the project. Day-to-day coordination and follow-up of the entire project will be the responsibility of the Project Coordination Unit. Project components will be implemented by each interested agency and supervised by the project coordinator of the Project Coordination Unit (PCU) set up under the WSP within the Direction of Water Works and Sanitation (MH-DHA). SONES will manage the urban water supply component. Rehabilitation, extension and connection works will be implemented by private firms after a competitive bidding process. Some bidding documents will be prepared by local consulting firms under the responsibility of SONES. Connections on the lease contract service areas will be implemented by SDE, the lease operator, based on connection costs included in the lease contract Supervision of works will be done by SONES with quality control performed by SDE. ONAS will manage the sanitation component and will delegate to AGETIP the procurement activities for the peri-urban sanitation component. Implementation of major civil works for sanitation will be contracted out by ONAS to the private sector. Consultants recruited by SGPRE will assist SGPRE in preparing bidding documents for the water resources management component. Procurement of consultancy services will be managed and their activities monitored by SGPRE. Project Sustainability 10. Sustainability is enhanced by demonstrated Government commitment to the water sector. The need and justification of adequate investments in water supply and sanitation infrastructure is well understood. Factors critical to the sustainability of the project will be mainly the lasting willingness of contracting agencies to involve local contractors and the enabling financial and regulatory environment for the development of SME. The willingness of communities to pay for improved water and sanitation services and to take responsibilities for direct or delegated management of facilities will be critical to the development of appropriate service coverage. - 3 -  Lessons learned from past operations in the Country/Sector 11. The past projects focused on paving the way for a water sector reform. A private operator, SDE, was introduced into the restructured sector under the ongoing Water Sector Project in order to increase operating efficiency. SONES is thus allowed to focus on building capacity to plan sector development and monitor SDE's performance. This approach achieved measurable improvement in sector performance but neglected sanitation which is actually underfinanced. The current project will address this gap by developing and implementing a revised tariff policy in order to finance recurrent costs of sanitation investments as well as hygiene education and sanitation promotion. Poverty Category 12. The project is expected to impact positively a large number of poor people, particularly women in periurban areas with currently limited access to regular, clean or affordable supplies of water and sanitation. Environmental Aspects 13. The project has been assigned to category A. It is expected to have significant positive effects in eliminating the current over-exploitation of the littoral aquifers. Another essential factor is that the project is dependent on Lac de Guiers as a stable and good quality source of raw water. The required maintenance of a high water level could have severe negative economic and health impacts on the local population in the lake area, incuding loss of agricultural land, water logged areas, and unhygienic conditions along the shore. These environmental and socio-economic concerns, including an integrated lake management action plan and specific mitigation measures for the affected communities, have been identified and dealt with as a significant component of the environmental assessment and mitigation plan. The environmental impact of transmitting water from the Senegal River to Gueoul has been carried out and no related resettlements issues were identified. An environmental Assessment (EA) was completed in December 1998. Following public display, relevant comments and updated information were incorporated and responded to in a second draft dated May 1999. The EA contains an Environment Management Plan (EMP) which provides guidance on the main actions to be taken to ensure good environmental performance of the project. During appraisal, the EMP was reviewed and finalized with the Government. Program Objective Categories 14. In addition to poverty alleviation, improvement of life conditions in the targeted populations, including the creation of gainful employment opportunities, the project also seeks to improve basic water sector management and support community sector development and environmentally sustainable development. Contact Points: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone: (202) 458-5454 -4-  Fax: (202) 522-1500 Jan Janssens Task Manager (202)458-7247 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending October 1, 1999. - 5 -