Burkina Faso - Ouagadougou Water Supply Project

Report No. PIC3326 Project Name Burkina Faso-Ouagadougou Water Supply Project Region Africa Sector Water Project ID BFPA306 Borrower Government of Burkina Faso Implementing Agency ONEA Contact: Mr. Amadou Lamine Kouate Directeur General 01BP 170 Ouagadougou 01 tel: 226-34 15 12 / fax: 226-34 15 13 Initial PID prepared February 23, 1995 This PID prepared December 12, 1996 Appraisal December 1996 Board Presentation June 1997 1. Country and Sector Background. Burkina Faso, a landlocked country in Western Africa of about 274,000 km2 with nearly nine million inhabitants is only sparsely endowed with water resources. Rainfall is irregular and unpredictable, with an annual average ranging from 400 mm in the north to 1,200 mm in the south. In the urban areas, the National Water and Sanitation Authority (ONEA), a financially autonomous agency, cannot expand its operations fast enough to satisfy the rapidly increasing demand caused by rapid urbanization, mainly in Ouagadougou, the capital and the largest city, which accounts for more than 50 percent of the urban population. The population of Greater Ouagadougou, currently 775,000 inhabitants, is expected to reach 1.5 million inhabitants in 2010. In order to promote efficient water resource management, the Government created a Ministry for Water in 1982, now merged into a Ministry for Environment and Water, with a Minister Delegate for Water. 2. Project Objectives. The main objective of the project is to improve access to safe water for the population living mainly in poor suburbs of Ouagadougou. To achieve this objective, the project will focus on improving autonomy, accounting, longterm planning and efficiency of ONEA's operation and maintenance and more generally on enhancing the management of water resources. 3. Project description. The proposed project would include the following components: (a) an earth dam on the Nakambe River, at Ziga, with a total capacity of about 200 million m3 and a pumping station of 3,150 m3/h; (b) a water treatment plant of 3,150m3/h and a pumping station of 3,000m3/h, located about two km from the dam;  (c) a transmission main, 1000mm diameter, between the dam and the treatment plant (2,430m), the treatment plant and the Boudtenga Reservoir (17,310m), the Boudtenga Reservoir and the city of Ouagadougou (23,800m), and a reservoir at Boudtenga (5,400 m3); (d) a primary distribution network, including pumping stations and reservoirs; (e) secondary and tertiary networks, including house connections and the provision of water meters (16,000); (f) a development plan for the Ziga-Ziniare area around the newly created reservoir, including the resettlement of 2,500 persons; and (g) the strengthening of ONEA and the Ministry of Water through the provision of technical assistance, equipment and training and introduction of private sector participation in the sector. 4. Project Financing. Project preparation had confirmed that a strong mobilization of the donor community was needed to make external financing available. A donors meeting was held in Ouagadougou, on May 20-22, 1996, and many commitments were obtained from the donor community, representing a total of US$ 203.7 million. The main cofinanciers are: IDA, CFD, EDF, KfW, BEI, Koweit Fund, IDB, Government and ONEA. 5. Project Implementation. The water supply strategy is dictated both by the need to serve a more important part of the urban poor and of the rural population. To assure successful implementation, the Government has embarked on a program to strengthen the management of the sector. For the urban areas, ONEA has proven to be a fairly well managed water utility. A performance contract (Contrat Plan) between the Government and ONEA was signed on December 22, 1993. Up to now, the performance criteria of the contract have largely been met by the Government and ONEA. In particular, a program of substantial tariff increases (between 30 percent and 156 percent in three years) and a staff reduction from 670 to 580 persons have been implemented. As of now, operating and maintenance costs are being covered. On July 22, 1985, ONEA was created as an "Etablissement Public e caractjre Industriel et Commercial" (EPIC). On November 2, 1994, ONEA became a State Company (Societe d'Etat), in order to give it more autonomy. Legal documents have been issued since then to legally enact this new status: statute and composition of the Board and the transition balance sheet is being finalized. The Ministry of Water and Environment will be in charge of overall coordination and monitoring of project implementation. In order to avoid a heavy administrative structure and to ensure the sustainability of the transfer of know-how, the project will be directly implemented by ONEA, with the help of technical assistance. A small coordinating and monitoring unit has been set up at the Ministry of Water to ensure the coordination between sectoral ministries. After implementation, the whole system (including the dam) will be operated by ONEA. 6. Project Sustainability. The ongoing Engineering Credit supports part of the actions required for the strengthening of ONEA's management - 2 -  capabilities. The project would help the government follow-up with the reorganization of the water sector, set up a new river basin management system and develop sound procedures. This should provide the central government agencies, as well as ONEA, with better management capabilities, financial accountability and resource allocation. Cost recovery would also be developed for the sector, including adjustment of the tariffs for water and sanitation and update of collecting methods. 7. Lessons Learned from Previous IDA Involvement. The Association approved, on June 22, 1993, an Engineering Credit (Cr.19-BUR) of US$ 4. million for the preparation of engineering designs and environmental assessment, as well as bidding documents, for the proposed Ouagadougou Water Supply Project. This Engineering Credit is IDA's first involvement in Burkina Faso's water sector. The Caisse Frangaise de Developpement cofinanced a part of these studies (treatment plant and water distribution system), which have been completed in March 1996. This Engineering Credit also financed technical assistance to ONEA, in preparation of the future project. Studies under the project have shown that issues related to the construction of the proposed dam, including the resettlement and environmental aspects, will be adequately addressed. 8. Poverty Category. The proposed project is a poverty-focused intervention, aimed at improving accessibility of safe drinking water to poor peri-urban areas. A specific mechanism for targeting the poor will be set up (social tariff). 9. Environmental Aspects. The project is rated A. An analysis of the environment and the potential impact of the project was carried out as part of the project preparation. Specific constraints in terms of biophysical impact were identified. All recommendations made in the EA would be addressed by the project and included in the specifications, and potentially negative consequences are being addressed in project- detailed engineering. A specific mitigation plan, including the resettlement of about 2,500 persons is being finalized by the Government. Thanks to an iterative process between the EA and the technical studies, the number of persons to be relocated has been reduced from 5,000 (as estimated in 1993) to about 2,500 and the resettlement program will be part of a development plan for the area. Precautionary measures are being implemented to prevent the arrival of new comers. 10. Participatory Approach. All environment and resettlement issues are currently handled by the Government using a participatory approach. The governmental mitigation plan will be finalized also through a participatory process involving public meetings and local and international NGOs. Stakeholder participation will be developed during project implementation and will help manage the use of water in the Nakambe River basin. Involvement of customers through participatory methods will also be sought to ease project implementation and sector management. 11. Program Objective Categories. Safe drinking water is one of the most important human basic needs and is indispensable for sustaining and enhancing the quality of life, especially in Sahelian countries. -3 -  Currently, due to the lack of water, only 26 percent of the ouagalais have access to safe drinking tapwater. The project would ensure accessibility to clean water in poor peri-urban areas, whose numbers are expected to grow very rapidly, as well as those in the dam site. It will allow affordability through a graduated tariff and low connection costs. 12. Project Benefits. The economic rate of return of the water supply project was estimated at 8 percent, without consumer surplus and with current tariffs. In determining the economic rate of return financial costs were adjusted by eliminating taxes and duties and transfer payments. The exchange rate was assumed to be in equilibrium as a result of the 1994 devaluation. Incremental revenues from the sale of water were taken as a proxy for direct use benefits. In addition to the quantified benefits included in the economic analysis, a number of non quantifiable ones, if included would further increase the economic rate of return. These include the income effect of lower water prices. Finally, although some of direct benefits to the households members are most likely taken into account in the price paid for water services, the indirect benefits accruing to the other members of the community are not, and thus represent additional benefits. 13. Risks. The greatest potential risk would be the insufficient capacity of ONEA to operate and maintain the expanded water system over time. This issue will be considered carefully during the appraisal mission. Other potential risks are: (a) the lack of support for an effective management of the water sector at the national level; (b) the inability of the ONEA to carry out highly specialized studies and supervision tasks and improve its management; and (c) the benefiting population would not have the capacity to pay for water connections which would deteriorate ONEA's financial situation. These risks are addressed by: (a) a built-in institutional component including support to the sectoral policy implementation; (b) the strengthening of the technical departments of ONEA within the ongoing Engineering Credit and the enforcement of the proposal made by the Government to transform ONEA into a Societe d'Etat; and (c) a policy of low cost house connections with payment facilities. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by The Public Information Center week ending December 20, 1996. - 4 -