Zambia - Lusaka Squatter Upgrading and Site and Services Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4611 PROJECT COMPLETION REPORT ZAMBIA: LUSAKA SQUATTER UPGRADING AND SITE AND SERVICES PROJECT (LOAN 1057-ZA) June 30, 1983 Eastern Africa Region Urban Projects 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.  ZAMBIA LUSAKA SQUATTER UPGRADING & SITE & SERVICES PROJECT Abbreviations and Acronyms AFSC American Friends Service Committee FNDP First National Development Plan GRZ Government of the Republic of Zambia GTZ German Agency for Technical Cooperation HPU Housing Project Unit LUDC Lusaka Urban District Council NRA National Housing Authority O&M Operations and Management PLGAD Provincial and Local Government Administration Division, Office of the Prime Minister SNDP Second National Development Plan TNDP Third National Development Plan UNICEF United Nation's Children's Fund Country Exchange Rates (Averages for selected years) Currency Unit = Kwacha (K) 1975 US$1 = K.64 1978 US$l = K.77 1980 US$1 = K.79  PROJECT COMPLETION REPORT FOR OFFICIAL USE ONLY ZAMBIA: LUSAKA SQUATTER UPGRADING AND SITE AND SERVICES PROJECT (Loan 1057-ZA) Table of Contents Page No. Preface ................................................ i Basic Data Sheet ....................................... ii Mission Data ........... ................................ iv Highlights . ............................................. v I. INTRODUCTION ........... ................................ I A. Sector Background ....................................... 1 B. Lusaka .................................................. 1 C. The Project . ............................................. 2 D. Project Achievements and Conclusions .................... 3 II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL ....... 6 A. Identification .......... ............................... 6 B. Preparation and Appraisal ............................... 6 III. IMPLEMENTATION .......... ............................... 10 A. Effectiveness and Start-up .............................. 10 B. Progress of Physical Works ............................. ' 11 C. Progress of Non-physical Program ........................ 13 IV. OPERATING PERFORMANCE ........... ........................ 19 A. Performance of Consultants ........ ...................... 19 B. Performance of Contractors ........ ...................... 19 C. Performance of Suppliers ......... ....................... 19 D. Performance of Standards Used ....... .................... 19 E. Reporting .............................................. 20 F. Compliance with Covenants ......... ...................... 20 V. FINANCIAL PERFORMANCE ........... ........................ 21 A. Pricing .............................................. 21 B. Cost Recovery ............................................ 22 C. Financial Position of LUDC ........ ...................... 22 VI. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT .... ........... 24 A. Central Government Agencies ........ ..................... 24 B. Lusaka Urban District Council ....... .................... 25 C. The Housing Project Unit ......... ....................... 25 D. Role of Expatriates . ..................................... 26 E. Overall Project Coordination ....... ..................... 27 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.  Page No. VII. ECONOMIC REEVALUATION ............ ....................... 28 A. Rate of Return ........................................... 28 B. Poverty Impact ........................................... 30 VILE. PERFORMANCE OF THE BANK AND OTHER DONORS .... ............ 30 A. Performance of the Bank .......... ....................... 30 B. Performance of UNICEF and AFSC ...... ................... 30 IX. LESSONS LEARNED ......................................... 32 ANNEXES 1. Grouping of Civil Works Contracts and Details of Cost Increases 2. On Site Servicing Standards Built and Proposed 3. LUDC Finances 4. Economic Reevaluation CHARTS 1. Construction Schedule at Appraisal and Actual 2. Schedule of Disbursements MAPS This report was prepared by Faye Johnson, with assistance from Laurence Clarke, Sarah Wakeham (Consultant) and Harcharan Mangat (Consultant).  PROJECT COMPLETION REPORT ZAMBIA: Lusaka Squatter Upgrading and Sites and Services Project (Loan 1057-ZA) PREFACE Loan 1057-ZA for the Lusaka Squatter Upgrading and Sites and Services Project was signed in July 1974. The final disbursement of the proceeds of the loan for $20 million was made in October 1981 and the balance of $717.41 was cancelled. During implementation, the project's content was revised and the Closing Date was postponed. This Project Completion Report (PCR) was prepared by Urban Development Division of the Eastern Africa Projects Department. It is based on a review of files and documents, interviews with Bank and Borrower staff and a visit to Zambia in June 1981. In accordance with the revised procedures for project performance audit reporting, this Completion Report was read by the Operations Evalu- tion Department but the project was not audited by OED staff. The draft Completion Report was sent to the Borrower; however, no comments were received.  I z I I  - ii - PROJECT COMPLETION REPORT ZAMBIA: LUSAKA SQUATTER UPGRADING AND SITES AND SERVICES PROJECT (LOAN 1057-ZA) BASIC DATA SHEET KEY PROJECT DATA Actual as % of Appraisal Appraisal Estimate Actual Estimate Project Cost (US$ million) 41.27 41.8 1/ 101 Credit Amount (US$ million) 20 20 100 Date of Board Approval 10/15/74 07/05/74 - Date of Effectiveness 04/07/75 04/01/75 - Date Physical Components Completed 09/30/77 07/30/81 - Proportion then completed (%) - 98 - Closing Date 12/31/79 12/31/81 - Economic Rate of Return (%) 2/ 12-28 18 - Financial Performance 3/ Good Fair - Institutional Performance Good Fair - Number of Direct Beneficiaries (1981) 28,850 31,355 109 / As of 12/31/80 converted at an average rate of US$1=KO.78. The project was scaled down to exclude the schools component which was transferred to the Education Project. Other community facilities were also reduced as a result of anticipated cost overruns. 2/ Rates were calculated for individual.sites at appraisal. The exercise was repeated, and a weighted average calculated for the reevaluation. 3/ A financial rate of return was not calculated at appraisal.  > . w t * x~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~  - iii - OTHER PROJECT DATA Borrower: The Government of the Republic of Zambia Executing Agency: Lusaka City Council (Housing Project Unit) Fiscal Year: January 1 to December 31 Name of Currency (abbreviation) Zambian Kwacha (K) Currency Exchange Rates: Appraisal Year Average (1975) US$1.00 = KO.65 Intervening Years Average (1976) US$1.00 = KO.79 (1977) US$1.00 = KO.76 (1978) US$1.00 = KO.79 (1979) US$1.00 = KO.78 (1980) US$1.00 = KO.81 Completion Year Average (1981) US$1.00 = KO.88 Follow-on Project: None. A possible second project is being discussed. CUMULATIVE DISBURSEMENTS FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 Appraisal Estimate (US$ million) 2.25 9.68 16.14 18.74 20 Actual (US$ million) .08 2.30 5.64 10.52 15.77 19.30 19.30 20 Actual as % of estimate: 4 24 35 56 79 97 97 100 Date of final disbursement:10/31/81 Principal repaid to 5/11/83 (US$ millions equivalent): 2.0  I I I I  - iv - ZAMBIA LUSAKA SQUATTER UPGRADINC AND SITE AND SERVICES PRCJECT Mission Data Persorr- No. of days Specializatiorsl/ Perfonrance2/ Mission Month/Year Persons in field Represented Rating Trend3/ Problems4/ Identification 11/72 1 2 1 Preparation 3/73 3 42 1,1,2 Appraisal 8/73 7 147 1,1,5,3,2,4,4 - - - Post-Appraisal 10/73 1 2 4 - - TOTAL 19 3 Supervision I 9/74 4 32 1,5,2,1 2 2 Supervision II 11/74 3 12 1,2,6 2 2 T Supervision III 3/75 4 51 1,5,2,1 1 2 T Supervision IV 9/75 3 30 1,5,2 2 2 04/ Supervision V 2/76 2 26 1,2 2 1 P Supervision VI 7/76 2. 40 1,2 2 1 04/ Supervision VII 2/77 1 10 2 3 1 F,P,05 Supervision VIII 7/77 2 20 2,1 2 1 P,/ Sueprvision IX 6/78 3 27 n.a. 2 1 P,O/ Supervision X 2/79 2 18 2,4 2 2 P,M,0,16/ Supervision XI 7/79 2 20 2,4 3 2 F,P,M,T Supervision XII 11/79 2 18 2,4 3 3 F,P,M,T Supervision XIII 3/80 1 7 4 3 1 F,M,P Supervision XIV 10/80 2 20 4,7 3 1 F,M,P Supervision XV 2/81 3 31 4,7,7 3 1 F,P Supervision XVI/PCR 6/81 5 120 4,8,7,7,2 2 1 F,P,M TOL 482 1l 1 = Econcmnist; 2 = Engineer; 3 = land Econonist; 4 = Financial Analyst; 5 = Urhan Affairs Specialist; 6 = Procurement Specialist; 7 = Urban Planner; 8 = Architect/Ardiitect Planner. 2/ 1 = Improving; 2 = Stationary; 3 = Deteriorating. / F = Finanaal; M = Mnagerial; T = Tecmical; P = Political; 0 = Other. 4/ Problens due to unavailability of foreign excdange. _/ Problems due to unavailability of foreign exchange, inadequate budgtary allocation ard delays in lard acquisition. 6/ Unavailability of foreign exchange, delays in land acquisition, poor organization of contractors ard abnormal rains. ^ The Education Cinponent was supervised by the Education Division along with their 1st, 2nd and 3rd projects (Loans 592-ZA, 645-ZA and 900-ZA). This project campletion report is based on infonnation in Appraisal Report No. 42C1-ZA, as well as Supervision, Quarterly and Consultants reports, official project correspondence files, discussions wLth former and present Bark staff and Government officials and field mission findings.  I  .~~~~~~~~~~~~~ PROJECT COMPLETION REPORT ZAMBIA: Lusaka Squatter Upgrading and Site and Services Project Loan 1057-ZA HIGHLIGHTS The Lusaka Squatter Upgrading and Sites and Services Project was one of the Bank's first urban projects in Africa. It was also the first externally-financed low-cost shelter project to be undertaken in Zambia. The project was undertaken in Lusaka mainly because it was the largest and fastest growing city in Zambia and had the most pressing shelter problems. In addition to physical targets, designed to address the needs of the city, the project was to influence national shelter policies by demonstrating the feasibility of designing low-cost shelter and infrastructure programs affordable to low income households. It was also to have strengthened the City Council's planning and execution capability for similar projects in the future. In order to achieve the abovementioned objectives the project in- cluded provision of infrastructure for squatter upgrading, as well as the development of sites and services plots for residential as well as commer- cial or industrial use; building material loans for housing improvement and construction; community facilities; and, technical assistance for project unit operations, construction supervision, community development training, further project preparation and undertaking studies. A special project unit was created within the City Council to implement the project. The American Friends Service Committee (AFSC) and the United Nations Children's Fund (UNICEF) assisted in the financing and implementation of the project. While the project was underway the Zambian Government experienced an acute financial crisis which led to delays, cost overruns and, eventual- ly, cutbacks in the original plan. Nevertheless, much was accomplished; over 31,000 plots--accommodating approximately 30 percent of Lusaka's popu- lation--were provided with basic infrastructure; half the sites and services units were allocated to low-income households--the poorest 40 per- cent of the population; upgrading reached over 90 percent of the households in the targeted area; plots and loans were allocated according to a point system which favored the poorest residents; and houses built under the project cost approximately one tenth of the amount required under conven- tional schemes. Once the project was completed, the special project unit created for its implementation was disbanded. A new unit, which is a more integral part of the council structure has been created to take its place. This unit continues to use the approaches and techniques which were developed by its predecessor in new areas of the city. The sites and services approach has also been endorsed in the Third National Development Plan (1979 to 1983).  I I I  - vi - Aspects of the project implementation experience that may be of special interest are: - the difficulty in arriving at a suitable project size--while the need to demonstrate new approaches may suggest a modest- sized project in terms of physical outputs, the complementary administrative systems need to be tested and demonstrated at a much larger scale. (PCR, paras. 2.04, 2.09, 3.12, 4.02, 6.01- 6.14, 9.01) - the system of participation which permeated all aspects of the project, which is widely acknowledged as having contributed to its success. (PCR, paras. 2.13, 2.14, 3.31-3.33, 9.01) - the persistence of the traditional problems of land acquisi- tion despite government-ownership of all land. (PCR, paras. 2.08, 3.09, 3.21-3.30, 9.01) - the complexity of the cost recovery issue, which has not yet been resolved. (PCR, paras. 1.10, 2.06, 5.03, 5.04 and 9.01).  I  I. INTRODUCTION A. Sector Background 1.01 At the time of Independence (1964) Zambia was the second most urbanized country in Africa south of the Sahara with approximately 20% of its population of 3.5 million living in urban areas, as opposed to 12% in the rest of the continent. Following Independence the rate of urban growth increased significantly as new jobs were created and restrictions on move- ment lifted and by 1971 over 30% of its population was urban. The system under which employers were responsible for housing their employees also proved to be unable to cope with overall growth and the development of the informal sector. Embryonic illegal settlements established on the peri- phery of the colonial centers mushroomed. Initially the Government of the Republic of Zambia (GRZ) hoped that these areas could be removed and their residents resettled elsewhere so urban services and utilities were not pro- vided. When the cost of this alternative was explored and found to be un- affordable, new approaches to the provision of urban shelter had to be sought. 1.02 By 1966 GRZ had adopted the site and services approach. Whereas the First Development Plan (FNDP)(1966-1970) allocated only 30% of all housing funds to this mode of development, the Second National Development Plan (SNDP) (1972-1976) presented this approach and that of squatter devel- opment as the exclusive vehicle for public sector involvement in housing development. Against an estimated need for 85,000 new urban dwellings during the SNDP period however, the target set was to provide only 70,000 serviced plots. At the time of project identification in 1973 very little had been achieved as a result of: (i) Financial constraints. Scarce finan- cial resources which had dictated the modest targets had become even more constrained because of falling copper prices and a slowing down of overall economic activity; (ii) Implementation capacity. Zambia had very little experience in this area and lacked the personnel and general know-how for designing, preparing and delivering services of this nature; (iii) Inappropriate standards. Under the SNDP the GRZ indicated its intention to abandon the use of "basic" plots and to develop only "normal"1/ sites, following its experience with both under the FNDP. This meant that plot costs were inevitably high and affordable to few Zambians. Existing land legislation also required a large number of highly qualified personnel who were not available in Zambia at the time. GRZ approached the Bank for assistance. B. Lusaka 1.03 Founded as a railway siding in 1905, Lusaka had become the capital of Zambia (then Northern Rhodesia) in 1931. By 1973 Lusaka had a population of some 381,000 and was growing at an annual rate of over 13%. 1 / Basic plots utilized pit latrines and communal water services and were generally smaller than normal plots which had water-borne sewer facilities and individual water taps.  -2- It was chosen for implementation of the first project mainly because it was the largest and fastest growing city in Zambia and had the most pressing problems of urban shelter. Work had already been undertaken on a Master Plan for Lusaka and so there was also a significant amount of information, including aerial photography and socio-economic and physical surveys, which was not available for other centers. Furthermore, although the City Council was very inadequately staffed, technical and community development personnel were available in other public agencies in Lusaka to augment City Council resources. C. The Project 1.04 The project, which was prepared.by the GRZ and the Lusaka City Council, now Lusaka Urban District Council (LUDC), was appraised in August and September 1973. The Bank loan (1057 ZA) was approved bDy the Bank in July 1974 and became effective in April 1975. The project, as appraised consisted of: (a) upgrading and servicing of 1,700 dwellings in four major settlements; (b) preparing of 12,000 residential plots (7,600 in three overspill areas adjacent to upgraded settlements and 4,400 in six sites). All were designated for site and services development, with the provision of primary infrastructure such as water, sewerage and roads; (c) provision of building material loans for housing improve- ment and construction; (d) construction of related community facilities including schools, health clinics, multipurpose coommunity centers markets and demonstration houses; and (e) provision of technical assistance for project unit operations, construction supervision, community development training, further project preparation and undertaking of studies. 1.05 In addition to the physical targets outlined above, the project was to demonstrate the feasibility of designing low-cost shelter and infra- structure programs affordable to low-income households and to thus in- fluence national shelter policies. 1.06 It was estimated at appraisal that the total cost would be appro- ximately K26.5 (US$41.2 million). The Bank loan of US$20.00 million was to finance the foreign exchange costs, which were then estimated to be 33% of total costs, and about 23% of local costs. The United Nations Children's Fund (UNICEF) and the American Friends Service Committee (AFSC) were to make a contribution amounting to less than 5% of the total project costs. The funds were to be onlent to LUDC along with GRZts own contribution under a subsidiary Loan Agreement.  -3- 1.07 Because of the innovative nature of the project a systematic evaluation of its effects was funded by the International Development Re- search Center of Canada and the World Bank. An Evaluation Team was attach- ed to the PLGAD for this purpose. The findings and analysis of these ef- forts are set out in detail in a separate report.2/ A sector survey was also conducted in parallel with the upgrading and site and services project and evaluation exercise, to evaluate the need for and potential of projects in other urban centers to complement the government's priority objective of rural development.3/ D. Project Achievements and Conclusions 1.08 The project implementation period proved to be one of the most difficult periods in Zambian economic history. A 40% drop in copper prices4/ followed by significant reductions in copper output at a time when the effects of the international oil crisis were also being felt led to six consecutive years of financial hardship beginning 1975. Political and military strife in Angola, Zaire and Zimbabwe were also costly and in- creased Zambia's need for defense expenditures and disrupted access routes to the sea and the pattern and cost of importing and exporting. Total for- mal sector employment stagnated throughout most of the period and inflation was rapid, reaching a high of 20 percent in 1978. The Kwacha was also de- valued twice during the period. 1.09 Despite the difficulties outlined above, the project was substanr- tially implemented as planned (Table 1) and was physically one of the most successful first generation urban projects that the Bank has financed. Due to the ongoing evaluation exercise and monitoring conducted by the project unit itself, all project modifications necessitated by cost overruns and shortages of local counterpart funds were based on earlier actual project experience and therefore did not jeopardize achievement of project goals. 1.10 The project has also contributed significantly to the eventual elimination of the constraints identified above in the following ways: Financial Constraints: Although cost recovery under the project has been very poor to date, the importance of financial replicability and of levying and collecting of user-charges have been acknowledged by the Government. As a result of the project experience studies of the status of 2/ Sanyal, B. et al. "Final Report on the Evaluation of the First Lusaka Upgrading and Site and Services Project" World Bank 1981. 3/ "Urban Sector Survey: Republic of Zambia" World Bank 1976 Report No. 490-ZA. 4/ Copper has historically provided over 95% of Zambia's export earnings.  -4- ZAMBIA LUSAKA SQUATTER UPGRADING AND SITE AND SERVICES PROJECT Table 1: Appraisal Targets and Project Achievements .,praisaJ. AC