Senegal - Municipal and Housing Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 6984-SE STAFF APPRAISAL REPORT SENEGAL MUNICIPAL AND HOUSING DEVELOPMENT PROJECT February 24, 1988 Infrastructure Operations Division Sahelian Department Africa Region Thi docement has a reticted dibibudon and may be used by rfepiens only in the performance of their ofkiw dutie its contens may not otherwise be disosed wihout Wodd Bnk authorzaton.  CURRENCY EQUIVALENTS Currency Unit - CFA Franc (CFAF) US $1.00 u CFAF 300 CFAF 1 million = US $3.333 WEIGHTS AND MEASURES Metric British/US Equivalents 1 meter (m) - 3.28 feet (ft.) 1 cubic meter (m3) = 35.3 cubic feet 1 are (100 m2) = 0.02 acre 1 hectare (ha) - 100 ares = 10,000 m2 - 2.47 acres 1 kilometer (km) 8 1,000 m - 0.624 mile 1 square kilometer (km2) - 100 ha - 0.386 square mile (sq. m.) 1 kilogram (kg) - 2.20 pounds (lb.) 1 liter (1) m 0.26 US gallon (gal.) 0.22 Imperial gallon (imp. gal.) 1 metric ton (m t) - 1,000 kg = 2,204 pounds (lb.) LOSARY OF ABBREVIATIONS BCEAO - Central Bank of Western Africa States/Banque Centrale des Etats de l'Afrique de l'Ouest BHS - National Housing Bank/Banque de l'Habitat du Senegal CIDA - Canadian International Development-Agency CUD - Greater Dakar Intermunicipal Organization/Communaute Urbaine de Dakar FAHU - Fund for Housing and Urban Improvement/Fonds d'Amelioration de l'Habitat et de l'Urbanisme FECL - Grant System for Local Governments/Fonds d'Equipement des Collectivites Locales GOV - Governnmrnt of Senegal Mt.F - Municipal Credit Fund OHLM - Public Developer of Inexpensive Rental Housing/Office d'Habitation a Loyers Moderes SICAP - A mixed economy corporation for-housing development/ Societe Immobiliere du Cap-Vert STCUD - CUD's Technical Services UMOA - Western Africa Monetary Union/Union Monetaire Ouest Africaine FISCAL YEAR Central and Local Governments - July 1 to June 30 Banque de l'Habitat-du Senegal - October 1 to September 30 This report was based on the findings of a World Bank mission consisting of Messrs. F. Pechon (mission leader), F. Amiot (economist), B. Delaval (urban planner), Ms. C. Farvacque (research asssistant), Me3srs. B. Fournial and T. Kangudi (consultants), which visited Senegal in June/July 1987 to appraise the project.  FOR OMCIL USE ONLY - Mi) - SENEGAL MUNICIPAL AND HOUSING DEVELOPMENT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. Credit and Project Suumary (iv) to (vii) I. THE URBAN SECTOR CONTEXT ........................... 1 A. Urbanization and Demographic Trends ......................a 1 B. Government Policy in the Urban Sector .......... 1 C. Municipal Institutions ......................... 4 D. Long-term Plan for Municipal Development ....... 5 E. Housing Demand and Supply ........ .............. 7 F. Land Tenure and Related Issues . ................ 7 G. Financial Constraints to Housing Supply ........ 8 H. The Bank's Previous Role ... .................... 9 II. THE PROJECT ....................................... 10 A. Project Objectives ................... 10 B. Project Description .................... ...... 11 C. Rationale for Bank Group Involvement ........... 14 D. Status of Project Preparation .................. 15 E. Project Costs and Financing .................... 15 F. Implementation Schedule and Responsibilities ... 17 G. Procurement ... ................................. 17 H* Disbursements .. ..................... ........... 19 I. Accounting, Auditing and Reporting ............. 20 J. Financial and Economic Analysis ................ 20 K. Benfits and Risks ...o.....................e.. 24 III. AGREEMENTS AND RECOMMENDATIONS ..................... 25 This document has a matrkted distribution and may be used by recipients only In the performanco of their ofllcia duties. Its contents may not othewise be disclosed without World Bank authorzain  - (ii) - P!Aa No. TABLES IN THE MAIN EXT Table 2.1 - Estimated Costs ........................... 16 Table 2.2 - Financing 16 Table 2.3 - Procurement ........................ ....... 18 Table 2.4 - IRS Intermediation - Schedule of Disbursements ..... ..................... 19 SUPPORTING ANNEXES. TABLES. CHARTS AND NAPS Annexes and Tables Annex 1 - Detailed Description of Project Components 28 Annex 2 - Summary and Detailed Cost Tables Table IA - Project Cost Summary (CFAP)....... 50 Table 1B - Project Cost Summary (US $)....... 51 Table 2 - Proposed Project Financing S**0. 52 Table SA - Execution of Project Components by Yoar (CFAF)................. 53 Table 31 - Execution of Project Components by Year (US $) .......... ....... 54 Table 4 - Project Costs by Categories ...... 55 Table 5 - CUD's Technical Department Strengthening - Detailed Cost Estimate. 56 Table 6 - Transport Sub-component - Detailed Cost Estimates ....... 57 Table 7 Fiscal Cadastre - Detailed Cost Estimates 58 Table 8 - Project Unit - Detailod Cost Estimates . .9 Annex 3 - Project Execution Schedulo and Responsibilities Table 1 - Project Execution Calenda. 60 Table 2 - Project Implementation Responsibilities .............. 61 Annex 4 - Implementing Institutions .................. 62 Annex 5 - Financial Tables of Implementing Institutions Table IA - Municipal Credit Fund - Income Statement (BUS) ............... 69 Table 1B - Municipal Credit Fund - Source and Application of Funds .......... 70 Table IC - Municipal Credit Fund - Balaneo Shoot oooo............. 71 Table ID - Municipal Credit Fund - Indicators 71 Table 1E - Municipal Credit Fund (Graph) .... 72 Table 2 - Consolidated Budgets of the Local GovernmAents 73  - (iii) - Part No. Table 3A - Banque de l'Habitat du Sonegal - Income Statement .......... . ....... 74 Table 3B - Banque de l'Habitat du enengal - Balance Sheet . .. . 75 Table 3C - Banque do l'Habitat du Sen;gal - Indicators ................... 75 Table 3D - Banque de l'Habitat du Siragal - Average Costs and Returns ..... 76 Table 3E - Banque de l'Habitat du S0nigal - Debt Service ... 76 Table 3F - Banque de l'Habitat du Sen;gal - Incresse of Outstanding Loans 76 Table 4A - Land Development Corporation - Income from Plot Sales ........ 77 Table 4B - Land Development Corporation - Development Expenditure ....... 78 Table 4C - Land Development Corporation - Balance Development Income - Expenditure ............. . 78 Table 4D - Land Development Corporation - Operation Expenditure ......... 79 Table 43 - Land Development Corporation - Cash Flow ..................... 79 Table 4F - Land Development Corporation - Financing ..... . 79 Annex 6 - Training Program and Technical Assistanc.. 80 Annex 7 - Procurement Arrangements .... ...... . ..... 86 Annex 8, Table 1 - Disbursement Schedule ............ 87 Table 2 - Allocation and Disbursement of the IDA Credit .... . 88 Annex 9 - Cost Recovory, Replicability and Affordability ..... .o. 89 Annex 10 - Economnic Analysis .... .... 92 Table 1 - CUD's Collector Roads Costs and Benefits ...................... 93 Table I - CUD's Collector Roads - ERR Calculation ............94 Annex 11 - Selected Data and Documnts Available in the Project File ................*. . 95 Charts Chart 1 - Communaute Urbaine de Dakar ................ 97 Chart 2 - CUD's Technical Services ................... 98 Chart 3 - Banque de l'Habitat du Sn;gal ............. 99 I8RD No. 21021 IBRD No. 21022  - (iv) - SENEGAL MUNICIPAL AND HOUSING DEVELOPMENT PROJECT Credit and ProJect Summarv Borrowers Senegal Beneficiaries: Ministry of Plan and Cooperation Ministry of Economy and Finance Ministry of Urban Planning and Housing Ministry of Equipment Ministry of Interior Communsute Urbaine de Dakar Banque de l'Habitat du Senegal Credit Amounts SDR 32.5 million (US $46.0 million) Terms: Standard, with 40 years maturity Co-financinas: CIDA, US $2.7 million equivalent Proiect The proposed project has two major objectivess (a) Oiectives strengthening local governments (particularly in and metropolitan Dakar) to Improve policy making, service Descriotion: delivery, urban Investment and resource mobilisation; and (b) expanding the economic impact and efficiency of the housing sector bys (i) removing financial and institutional constraints to the National Housing Bank (Banque de l'Habitat du Senegal (BRS) )I and (iI) improving the operation of the urban land market through the annual supply of a significant number of serviced and titled plots, while promoting progressive privatization of the delivery of housing. The proposed project includes: (a) A municipal management component which would includes (i) the creation of a MWaicival Credit Fund administered by BHS for medium-term lending on commercial terms for municipal income generating projects such as market rehabilitation and construction; initial financing-of this fund will be provided by IDA and by a share of the Government's financed 'Fonds d'Equipement des Collectivites Locales' (FECL); (,i) equipment and training of the municipal technical department to  - (v) ' follow-up efforts started under the Technical Assistance Project for Urban Management and Rehabilitation (Credit 1458/SF-13 SE); funds for the rehabilitation and equipment of selected communitv facilities would be made available; (iii) ongoing technical assistance and complementary support to the Traffic Bureau (Bureau de la Circulation), rehabilitation and improvement of selected sections of the urban road network to improve public transport operation particularly in the Pikine area; implementation of a Traffic Management Plan (Plan de Circulation) for central Dakar (plateau); and (iv) improved collection of municipal taxes through implementation of a fiscal cadastre in the Dakar metropolitan area; this would support initial efforts by the Tax Administration and Treasury to improve tax billing and collection and would focus on expanding the existitg tax base by organizing and unifying property and business registry and valuation. (b) A housinat component which wouldt (i) finance medium-term loans intermediated by BHS for land development activities and particularly for the land development corporation to be created with a majority of private shareholders as an intermediary for initiating the development of about 1,800 serviced plots annually (40S of the estimated market); and (ii) finance a long-term loan from the Government to BHS to help remove bottlenecks, preventing BHS from increasing its share of housint construction financing and particularly to foster more efficient schemes of saving mobilization. Benefits and Risk.t The internal rate of return (IRR) of the land development sub-component is satisfactory (22S) under conservative assumptions. Economic rates of return (ERR) for civil works aiming at traffic improvements are high (281 on the basis of maintenance cost savings without taking time savings into account). The proposed project is expected to boost the private supply of housing through a more efficient financing system. Homeownership is a powerful motivation for household savings which are, in turn, the main source of domestic savings that can be invested in economic growth. The municipal component would have direct economic impact through improved efficiency of the public transport. Furthermore, improved efficiency of the municipal services is a key aspect of the strategy aiming at enhancing  - (vi) Dakarts role as a regional service center. Main risks may arise from the involvement of many implementing agoencies (five ministries, CUD, BH8 aud the land development corporation) and from the difficult related coordination. BHS will play a key role by intermediating most of the financing of the two major components; however, tho relsted risk is minimal as this institution is sound and well managed. Another risk stems from the status of the land development corporation which will be controlled by the private shareholders whose interest will not necessarily match the project*s objectives. Specific and general contractual arrangements between the Government and the corporation bave been proposed for minimising this risk. Estimated Prolect Costst Local Taxes Foreitn Total ------ (- (US $ million) ------ A. Municipal Credit Funds 10.3 0.0 4.4 14.7 FECL contribution 7.9 0.0 3.4 11.4 IDA contribution 2.4 0.0 1.0 3.3 CUD's technical department: 3.0 2.8 4.5 10.4 Technical assie,tance 0.2 0.1 0.6 1.0 Training 0.1 0.0 0.0 0.2 Equipment 0.0 2.2 3.2 5.4 Public facilities 2.1 0.4 0.5 3.0 Technical centers 0.6 0.1 0.2 0.8 Transports 5.0 2.5 7.9 15.4 Technical assistance 0.3 0.2 0.9 1.4 PAP (Traffic Management Plan) 0.7 0.5 1.6 2.8 PAP (Other) 2.0 1.2 4.0 7.2 CUD's road network 2.0 0.6 1.4 4.0 Fiscal cadastre 2.6 1.5 26 6. Total municipal component 20.9 6.8 19.4 4iL1 B. Land development 4.6 0.0 2.5 7.0 Housing loans 0.0 4.0 13.3 Total housing component 13.9 0.0 6.5 20.3 C. Project Unit operation 0.4 0.0 0.1 0.5 Feasibility Studies Urban 4 0.1 0.1 0.2 0.4 PPF and unallocated _13 2.0 0.0 1.3 Total Project Unit 1.8 0.1 0.3 2.2  - (vlii) - Local Taxes Foreign Total -------- (US S million) ----- Base costs 36.1 6.9 26.2 69.6 Physical contingencies 2.1 0.6 1.9 4.6 Price contingencies 2.6 0.7 0.9 4.1 Total 41.2 8.1 29.0 78.3 Financint Plan: S of Total Project Local Taxes Foreign Total Cost Government 9.8 8.1 3.4 21.3 27 BHS 5.4 2.9 8.3 11 IDA 25.3 20.7 46.0 59 CIDA 0.7 2.0 2.7 3 Total 41.2 8.1 29.0 78.3 100 Estimated Disbursements: FY 89 FY 90 FY 91 FY 92 FY 93 FY 94 FT 95 FY 96 MCF 0.7 0.7 1.0 0.7 0.2 0.2 0.0 0.0 Long-term loans to BHE a.0 3.8 1.5 0.0 0.0 0.0 0.0 -0.0 Other components la - -.& 4.4 5.3 5.5 4.7 _3.8 3.5 0.9 Total 9.9 8.9 7.8 6.2 4.9 4.0 3.5 0.9 Cumulative 9.9 18.7 26.5 32.8 37.6 41.6 45.1 46.0 Economic Rate of Returns 282 for the rehabilitation of CUD'8 collector roads. Estimated Prolect Completion Datet June 30, 1994 Memorandum of the Presidents No. P-4738-SE Maps: IBRD No. 21021 IBRD No. 21022 la Disbursement profiles Former Western Africa Region - IBRD and IDA Sector Investment and Maintenance Loans.  SENEGAL MUNICIPAL ANM HOUSING DEVELOPMENT PROJECT STAFF APPRAISAL REPORT I. THE URBAN SECTOR CONTEXT A. Urbanization and Demotraphic Trends 1.01 High natural growth rates and an extremely mobile population are significant features of Senegal's urbanization process. In 1985, the urban population represented more than one-third of the total population (6.5 million). Approximately 1.5 million of the 2.2 million urban residents reside in the Dakar metropolitan area, with the remainder distributed among 15 cities and concentrated in six regional centers. The overall urban growth rate is 3.8X (4.7% in Dakar) compared to a national growth rate of 2.8%. By the end of the century, Senegal's urban population is expected to reach 5.2 million, representing 50% of a total estimated population of 10.3 million. 1.02 Almost a quarter (22%) of Senegal's population is concentrated in less than 0.3% of the country's area, greater Dakar, where 70% of modern emp3oyment and 90% of industrial firms are located (58% of GNP). The population is shifting eastward to Pikine, a predominantly low income and poorly serviced area approximately 25 km from Dakar and adjacent to the new industrial area. According to recent estimates, Pikine is now Senegal's largest community (600,000 to 800,000) whereas central Dakar is less than 500,000. 1.03 Population overconcentration in metropolitan Dakar would be counterproductive in the medium and long-term and measures needs to be taken to foster a more balanced distribution or urban population throughout the country. However, Dakar is clearly one of the country's major assets for development. Its potential to become a modern international service center surpasses most other regional capitals. Therefore, the urban strategy should aim at improving Dakar's efficiency while mitigating its relative attractiveness for new residents. B. Government Policy in the Urban Sector 1.04 As the Government's strategy emphasizes the promotion and diversification of agricultural and export oriented activities, the central Government is eager to gradually withdraw, at least partially, from direct support to urban services, urban infrastructure development and provision of shelter. These functions should be taken over, to the extent possible, by the local governments and the private sector.  -2- 1.05 funiciyal Poliev. The municipal development policy aims at strengthening the local governmentst techbical and financial capability to take over t1e urban services and to become effective actors in the economic development. This policy covers the secondary cities as well as D..kar. In Dakar particularly, the newly implemented reform (para. 1.07 and Annex 4) of the municipal organization, which is considered as a pilot undertaking, is expected to provide experience applicable to other regional capitals. 1.06 Fonds d'Eauibement des Collectivitis Locales (FECL). The Government established a grant system in 1977 to help finance the local governments9 capital investments. The system is called "Fonds d 'Equipement des Collectivites Locales' (FECL). It was originally financed by an earmarked business tax based on turnover and is now financed by the Government's general budget. FECL has distributed an annual amount of CFAF 1.3 billion (US $4.3 million) since its creation. The bulk is allocated as 'fonds de concours ordinaireos according to comprehensive criteria (such as the total amount of the capital budget and population) without reference to specific projects. A small part Is allocated as "fonds de concours spociaux" for financing specific projects. However, supervision is poor and reporting on the use of funds is virtually absent. The Government has very recently decided to increase the annual amount from FECL and reallocate a share of this fund to the financing of a Municipal Credit Fund (MCF) that would offer loons instead of grants and thus expand FECL's imupact by recycling funds (para. 2.05 and Annex 1). 1.07 Transport and Traffic. Efforts have been undertaken in 1980 to Improve the management of transport and traffic in the Dakar area on a comprehensive basis. A Transport Plan (Plan de Transport de la R;gion de Dakar) has been prepared and approved by the Government in 1985. The Traffic Bureau (Bureau de la Circulation), created under the Technical Assistance Project for Urban Management and Rehabilitation (Credit 14581SF-13 SE) within the Ministry of Equipment (Annex 4), was expected to provide a suitable institutional framework in order to follow-up and Implement the Transport Plan. However, due to inadequate local staffing and latk of Government support, the Traffic Bureau has, up to now, been prImarily operated by technical assistance experts. The Government has presently comoitted itself to strengthen the Traffic Bureau and to Implement measures proposed under the Transport Plan. 1.08 Housint Sector. Until the early 1980s, the Government's housing policy was based on planned construction projects implemented by specialized parastatals ("Societe Iimobiliere du Cap-Vert' (SICAP), a "societe d'economie mixte' created in 1950 with only a small minority of private shareholders (42), and the Office d'Habitations ; Loyers Modreis" (OHLM), a public agency created in 1960). The projects were intended to supply housing to a wide spectrum of the urban population including middle and low income households. However, most projects have failed to take into account affordability considerations and have been designed on the basis of irrealistic technical standards. As a result, between two-thirds and 902 of Dakar's population have been "de facto" excluded from the benefit of this policy.  - 3 - 1.09 Since creation, SICAP has built approximately 11,000 housing units, of which 6,000 were for rental and 5,000 sold by installments (location-vente), and OHLM has built approximately 10,000 units, of which 3,000 were for rental and 7,000 sold by installments. Construction has fallen dramatially since 1975, primarily because of the disruption of the concessional financing abundantly provided previously by the OCaisse Centrale de Cooperation Economique" (CCCE). In 1976, the Government created the "Fonds d'Amelloration de lMHabitatO (FAH), which later became 'Fonds d'Amelioration de l'Habitat et de l'Urbanisme" (FAKU), a treasury account earmarked to finance public housing and urban development. The financing of OHLM projects relied on the Government's subsidies derived from this fund until 1981. Thereafter, the Government reallocated FAHU's monies to the newly created National Housing Bank (Banque de l'Habitat du Senegal (BHS), thus requiring OHLM to fund its own proj3cts. 1.10 BHS was created In 1979 in the form of a public-private joint venture (so