Supplementary Loan to Kampala Sanitation Program (Afksp) Country

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AFRICAN DEVELOPMENT FUND

PROJECT : SUPPLEMENTARY LOAN TO KAMPALA SANITATION

Public Disclosure Authorized PROGRAM (AFKSP)

COUNTRY : UGANDA

PROJECT APPRAISAL REPORT

Public Disclosure Authorized

RDGE/COUG

December 2017

Table of contents

Currency Equivalents ...... i Acronyms ...... ii Loan/Grant Information ...... iii Client’s information ...... iii Program Summary ...... iv Results-Based Logical Framework ...... vi 1. Introduction ...... 1 2. Description of Original Program ...... 1 2.1 Program Background and Origin ...... 1 2.2 Program Objectives and Components ...... 2 2.3 Project Cost and Financing Arrangements ...... 2 2.4 Program Implementation Arrangements ...... 3 2.4.1 Procurement Arrangements ...... 3 2.4.2 Disbursement Arrangements ...... 3 2.4.3 Financial Reporting and Auditing ...... 4 2.4.4 Monitoring and Evaluation...... 4 2.4.5 Sustainability ...... 4 2.4.6 Environmental and Social impacts ...... 5 3. Program Implementation Status ...... 5 4. Additional Financing of the Program ...... 6 4.1 Justification for Additional Finance ...... 7 5. Legal Instrument ...... 8 5.1 Legal Instruments ...... 8 5.2 Conditions Associated with Bank’s Intervention ...... 8 6. Recommendations ...... 8

Appendix I: GoU Request for re Allocation of ADF Resources ...... I Appendix II: Updated Program Implementation Schedule ...... III Appendix III: Uganda ’s Comparative Socio-Economic Indicators ...... IV Appendix IV Uganda _ On going portfolio as at end of August 2017 ...... V Appendix V: Map of Project Area ...... VI

Currency Equivalents As of September 2017 1 UA = 5,088.74 UGX 1 UA = 1.41339 USD 1 UA = 1.19526 EUR

Fiscal Year 1st July – 30th June

WEIGHTS AND MEASURES 1metric tonne = 2204 pounds (lbs) 1 kilogramme (kg) = 2.200 lbs 1 metre (m) = 3.28 feet (ft) 1 millimetre (mm) = 0.03937 inch (“) 1 kilometre (km) = 0.62 mile 1 hectare (ha) = 2.471 acres

i ACRONYMS AfDB African Development Bank NRW Non-revenue Water ADF African Development Fund NWP National Water Policy CSP Country Strategy Paper NWSC National Water and Sewerage Corporation CSI Core Sector Indicator O&M Operation & Maintenance CSS Climate Safeguards System PDU Procurement Disposal Unit DPs Development Partners PIT Project Implementation Team DWD Directorate of water Development PCR Project Completion Report EA Executing Agency ESMF Environmental and Social Management RBLF Result Based Logical Framework Framework ESMP Environmental and Social Management Plan RAP Resettlement Action Plan FM Financial Management SDG Sustainable Development Goals GoU Government of Uganda SESA Strategic Environmental And Social Assessment ICB International Competitive Bidding IFMS Integrated Financial Management System IWRM Integrated Water Resources Management SWAp Sector Wide Approach to Planning UA Unit of Account

JSR Joint Sector Review USD United States Dollars

KCCA Kampala Capital City Authority WESWG Water and Environment Sector Working Group M&E Monitoring & Evaluation WSSDPG Water and Sanitation Development Partner Group MTS Medium Term Strategy WSDF Water and Sanitation Development Facility MOFPED Ministry of Finance, Planning and Economic WSP Water Service Provider Development MWE Ministry of Water and Environment WPO Water Private Operators NCB National Competitive Bidding WSSB Water and Sanitation Service Board NDP II National Development Plan II WSSWG Water and Sanitation sub-sector Working Group NEMA National Environmental Management Authority WB Water Board NGOs Non-Governmental Organizations

ii Loan Information

Client’s information

BORROWER: Republic of Uganda

EXECUTING AGENCY: National Water and Sewerage Corporation

Financing plan (additional Funds)

Source Amount (UA) Instrument

ADF 19 million Loan GoU/NWSC 9.83 million Counterpart Funding TOTAL COST 28.83 million

ADF’s key financing information

Loan UA Interest type N/A Interest rate spread N/A Commitment fee 0.5% Other fees 0.75% service charge Tenor 40 years Grace period 10 years EIRR, NPV (base case) (17.4%, NPV UGX 94.3 billion)

Timeframe - Main Milestones (expected)

Supplementary Loan Approval December, 2017 Effectiveness March, 2018 Completion December, 2018 Last Disbursement July, 2019 Last Repayment December 2058

iii Program Summary 1 Program Overview

1.1 The long term sanitation development Program for Kampala up to 2033 is elaborated in the Kampala Sanitation Master Plan study of 2004. The Kampala Sanitation Program Phase I (KSP) is set to address the most pressing sanitation needs for the capital City (Appendix V). Its main outputs are a refurbished sewerage system including 53,000 m3/d waste water plants, 400 m3/d feacal sludge treatment plants and sewer network and treatment if the effluent going into the Murchison bay. The program was costed at total UA 64.95 million and though in advanced stages of implementation is currently facing cost overruns. Government of Uganda (GOU) has reprioritized its ADF 14, allocating UA 19 million towards completion of KSP and is also committing another UA 9.83m, cofinancing towards the cost overrun. The main plant under KSP is large and complex and hardly had any reference bidding in the region. The feasibilities studies did not provide accurate data for quantities and required costs. This was exacerbated by the numerous start up challenges. Since 2016, the program has witnessed accelerated implementation and is in advanced stages of implementation. The additional financing can therefore lead to completion of the outputs and yield benefits to the country in one year.

The completed and commissioned Lubigi plant is operating at full capacity of feacal sludge, a clear indication that the demand is huge and therefore need for completion of the other two plants. The plant has also revealed a very high potential for private sector involvement and job creation in sludge emptying and cesspool transportation. The agro sector demand for treated waste too is above supply and completion of the other plants will go a long way in addressing this demand as well as increasing jobs in the agro sector.

1.2 Programme Beneficiaries and Impact: The direct beneficiaries of the program will be the population of Kampala which was estimated at appraisal to be 1.4 million and the people living along the nearby shores of Lake Victoria., The program will improve public health in the City and curtail water and sanitation related diseases. The main plant will generate power and will also treat effluent from the contaminated main channel draining the city before it empties into the lake. The lake is the source of water for Kampala, and surrounding towns and the source of livelihood for many people in Uganda. Beneficiaries are participating in the planning and implementation process and the contractors will continue employing many as the plants are completed. The bi products of the plants will provide needed fertilizers for agro business.

2 Needs Assessment The sewerage system in Kampala built over 30 years ago, only. The system currently serves less than 7.5% of the total population. As a result, the bulk of the people in the city rely on poorly managed on-site sanitation which increase incidences of water and sanitation related diseases, and degradation of the environment in and around Kampala. Sanitation related diseases are among the top five causes of child mortality and morbidity in Uganda. The program with therefore improve the living conditions, especially for the urban poor.

3 Bank’s Value Addition The Bank has been supporting the water and sanitation sector from the 60’s and has acquired vast experience and many lessons learnt which puts the bank in a strong position to lead in the financing of this program. The program is unique and on a scale that is the first in the country and in many parts of the continent. The Bank has also Chaired Water sector DP group in Uganda twice enabling it to understand the sector’s issues, constraints and needs.

iv 4 Knowledge Management National Water and Sewerage Corporation (NWSC) the Executing Agency (EA) has a Business and Scientific Services Directorate mandated to ensure, that all performance monitoring and evaluation activities of the corporation's programs are effectively carried. It maintains a data base on key performance indicators. It also implements an M&E framework for asset management. The monitoring and evaluation (M&E) data collected by NWSC will feed into the annual Sector Performance report discussed in the Joint Sector Reviews.

Results-Based Logical Framework Country and Program Name: UGANDA: ADDITIONAL FUNDS TO KAMPALA SANITATION PROGRAM (AFKSP) Purpose of the Program: Improve the living conditions for the current 1.4 million people living in Kampala through enhanced access to better sanitation and environment protection PERFORMANCE INDICATORS MEANS OF RESULTS CHAIN Baseline VERIFICA- RISKS/MITIGATION MEASURES Indicator (including CSI) Target (2018) (2009) TION

 Increased access to improved sanitation 1.1 National access to improved sanitation 57% 77% Health sector Risk #1: GOU discontinuing its urban services 1.2 Reduced incidences of infant mortality 130/1000 60/1000 performance conditional grants to some towns  Reduced health risks due to poor sanitation 1.3 Reduced incidences of maternal mortality 435/100000 200/100000 Report which pays part of new connection fees services; UBOS IMPACT Mitigation: Use of the National Utility Report(UNHHS) to manage and operate new town 1. Increased number of people using the 1. Number of sewer connections 87,000 180,000 systems and strong sensitization for sewerage system 2. % of people with acceptable onsite sanitation 45% 65% Annual Water & increased demand for water supply 2. Increased number of people using improved 3. Effluent quality meets national standards - (BOD5 < 30 mg/l; P < 2 Environment services on-site sanitation; mg/l; N< 50%; FC < Performance 3. Improved water quality of Murchison Bay 10E+5/0.1l Report Risk #2: Local political leadership of Lake Victoria; derailing of Programme support,

OUTCOMES 4. Improved management of sanitation in 4. Establishment of a Sanitation Management Unit within NWSC 0 1 cooperation and embracing. Kampala. Signed minutes Mitigation: effective Programme of Joint Sector Component 1: Nakivubo Sewerage System advocacy, transparency, inculcating Review 1.1.1 No. of new wastewater treatment plants (WWTP) 0 1 trust and involvement of local 3 1.1 Construct Treatment plant 45,000 m /d 1..1.2.No. of rehabilitated exiting WWTP 0 1 leadership in various Programme Quarterly 1.2 Construct Sewer network 1.2.1 Sewer network constructed 0 1 activities and commitments to progress reports Programme deliverables, including Component 2 Faecal Sludge adoption of appropriate feasible Management and Treatment 2.1 Construct feacal sludge plants 500 m3/d 2.1.1 No. of new feacal sludge plants constructed 0 2 technological options. 2.2 Feacal sludge management 2.2.1 Feacal sludge management system in plance 0 1

OUTPUTS Risk #3: depreciation of the Uganda Component 3: Kinawataka Sewerage shilling System: 3.1 Construct Treatment plant( 8,000 m3/d) 3.1.1 No. of new Waste water treatment plants (WWTP 0 1 Mitigation: Central Bank inflation 3.2 Construct Sewer network 3.1.2 Sewer network constructed 0 1 targeting light monetary policy regime is intended to avert exchange rate Component 4: Institutional Support volatilities on a monthly basis. The contract to the extent possible will be 4.1 Training of NWSC staff in sludge and 4.1.1 NWSC staff trained in WWT management 0 20 in local currencies and benefit from the Waste water treatment management exchange gains on the committed UA

0 1 in the procurement plan 4.2 Reorganisation of sanitation management 4.2.1 Sanitation management unit established with in NWSC 0 500 4.3 Conduct community mobilisation 4.3.1 No of community members mobilized/trained

ACTIVITIES INPUTS

Component 1: Nakivubo Sewerage System: Construct new treatment plant/ rehabilitate old plant and construct sewer network Amount (UA m) Component 2: Faecal Sludge Management and Treatment : Construct feacal sludge plants and establish a feacal management system ADF 35.0 Component 3: Kinawataka Sewerage System: : Construct new treatment plant/ sewer network KfW 15.3 Component 4: Institutional Support: : conduct training of NWSC staff, establish sanitation management unit in NWSC; conduct community mobilization and support auditing and EU 6.7 engineering services GoU 7.9 ADF additional fund 19.0

KEY ACTIVITIES GOU additional funds 9.83 Total 93.78

REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE AFRICAN DEVELOPMENT BANK GROUP TO THE BOARD OF DIRECTORS ON A PROPOSED LOAN TO UGANDA FOR THE SUPPLEMENTARY FUNDS TO KAMPALA SANITATION PROGRAM (AFKSP) Management submits the following Report and Recommendation for a proposed ADF loan of UA 19.0 million to the Government of Uganda (GoU) to finance the required additional funds to the Kampala Sanitation Program. The proposed Bank Group financing to the AFKSP is the Bank’s response to a formal request by the GoU to support its efforts aimed at achieving sustainable provision of hygienic sewerage facilities within easy reach to 1.4 million Ugandans in Kampala Capital City.

1. Introduction 1.1 The award of ADF financing totalling UA 35.0 million to Uganda to finance the Kampala Sanitation Program (KSP) was approved on 16th December 2008. The Loan Agreements was signed on 11th May 2009 and became effective on 18th February 2010. The total amount disbursed so far as of end of August 2017 is UA 32.44 (92.69%). The expected outcomes of the program include improved access to sanitation in the capital city, reduction in water-borne diseases, improved quality of effluent flowing into Lake Victoria and protection of the City’s water sources.

1.2 KSP is considered vital to the protection of Kampala’s natural environment but the program is experiencing a funding shortfall. The Government of Uganda on 11th September 2017 opted to revisit its ADF 14 allocation to the water sector, re allocating UA 19million as additional funding to the ongoing Kampala Sanitation Program to ensure its competition and achievement of its objective. . GOU letter is attached (appendix 1).

2. Description of Original Program

2.1 Program Background and Origin

2.1.1 At the time of KSP appraisal, the importance of water and sanitation sector to Uganda’s economy and poverty alleviation was already demonstrated by its inclusion among the key pillars in Uganda’s Poverty Eradication Action Plan (PEAP). Water supply and sanitation was included in: Pillar 2 (increasing production, competitiveness of Uganda’s products and household incomes), Pillar 3 (trans-boundary water resources management and adaptation to climate change), and principally Pillar 5 (Human Development - water supply, and sanitation) of the PEAP. The current National Development Plan II (NDPII) (2015-2020) also aims to propel Uganda towards a middle income status with a strategic focus of ‘Strengthening Uganda’s Competitiveness for Sustainable Wealth Creation, Inclusive Growth and Employment’. This is through four objectives; (i) increasing sustainable production, productivity and value addition in key growth opportunities; (ii) increasing the stock and quality of strategic infrastructure to accelerate the country’s competitiveness; (iii) enhancing human capital development; and (iv) strengthening mechanisms for quality, effective and efficient service delivery. The NDP II emphasises promotion of appropriate sanitation technologies and identifies the provision of adequate water supply and improved sanitation as key priority interventions for promoting efficient service delivery. KSP is therefore well anchored in the current NDP II for the country.

2.1.2 In conformity with the thrust of the NDP II, the Bank’s current Country Strategy Paper (CSP) for Uganda for 2017-2021 focuses on two pillars: Pillar 1: Infrastructure Development for Industrialization; Pillar 2: Skills and Capacity Development. This project fits within pillar 1 of the CSP. By providing sustainable and affordable sanitation services, the project will lay foundations for

improved quality of life for the people which are in line with the Bank’ five (5) priority areas of focus (High-5s) geared to advance Africa’s transformative agenda and to deliver the outcomes of the Bank’s Strategy for 2013-2022. The project will also directly support Uganda to achieve the Sustainable Development Goal (SDG) 6, “Ensure access to water and sanitation for all”. The KSP will improve access to sanitation in the capital city reducing pollution in the Murchison bay where the capital city draws its water supply. At a regional level, the program will reduce pollution of Lake Victoria, a water body shared by Kenya, Tanzania and Uganda and the Victoria basin at large.

2.2 Program Objectives and Components The national goal of Uganda’s water supply and sanitation sector is to achieve universal access to water supply and sanitation services by 2035. The Program specific objective is to improve the living conditions for the 1.4 million people living in Kampala through enhanced access to better sanitation and environmental protection.

The components being implemented under the additional funding are similar to the original Kampala Sanitation Program and are summarized in the table below. The program still focuses on Kampala capital city. Table 1 Program Components

No. Component Component Description Rehabilitation of existing sewerage plant and extension of existing sewerage system by 30 km of Nakivubo new sewers within Nakivubo catchment. 1. Sewerage Construction of a 45,000 m3/day wastewater treatment plant comprising: preliminary treatment, System trickling filters, biogas digesters with capacity to produce biogas for electricity production and treatment plant operation. Faecal Sludge Construction of Faecal sludge (sludge emptied from on site sanitation facilities and transported for treatment) treatment plants at Lubigi including preliminary treatment, sludge conditioning Management 2. and stabilisation, and treatment of the resultant liquid waste before reintroduction into the and Treatment environment. In addition, it includes support in faecal sludge collection, and management of the services, (including the private sector). Kinawataka Construction of: 8,000 m3/day wastewater treatment plant for pre-treatment and link it to the 3. Sewerage Nakivubo Sewage Treatment Works; and Sewer network of approximately 15 km long. Train staff to operate and manage the improved sanitation system, formation and training of Institutional NWSC and KCC staff in sludge and waste management 4. Support Provision of engineering services, support to PIT, program Audit, reorganisation of sanitation management within NWSC.

2.3 Project Cost and Financing Arrangements The Bank Group contribution to the ongoing cofinanced program, amounts to UA 35 million (92.7% disbursed), KfW contributed Euro 15.3million (94% disbursed), European Union (EU) UA 6.7million (100% disbursed). Republic of Uganda’s original contribution was UA 7.9million.

Table 2 Original Program Cost by Source in million Source Amount ORIINAL UPDATED UA UA ADF 35,000 54,000 KfW 15,310 15,310 EU 6,698 06,698 GOU contribution 7,944 17.774 Total 64,952 93.782

Table 3 Original Allocation by Component (UA million)

Total 1- Nakivubo Sewerage System 31,058 2- Faecal Sludge Management and Treatment 5,287 3-Kinawataka Sewerage System 8,133 4- Promotional Sanitation and Hygiene Education 1,914 5- Institutional Support and Program Management 6,329 Total Base Cost 52,722 Physical Contingencies 5,272 Price Contingencies 6,958 Total PROGRAM COSTS 64,952

(Component 4 following joint KfW/AfDB discussion in 2011 was transferred to a sister project “the Lake Victoria-Kampala Watsan Project” funded by KfW which covered a wider scope of promotional sanitation and Hygiene Education)

2.4 Program Implementation Arrangements The implementation arrangements of the KSP as outlined in the original Program Appraisal Report is as follows.

The program is implemented using existing structures and incorporating lessons and experience gained from similar programs. The GoU is the borrower of the ADF loan while National Water and Sewerage Corporation is the Executing Agency. Transfer of the ADF loan proceeds to NWSC was made a condition of the loan. NWSC has the experience in the implementation of similar operations. And it constituted from its staff, a Program Implementation Team (PIT), comprising a Program Coordinator, 2 Sanitary Engineers, Social/Community Mobilization Expert, and Program Accountant. The PIT is in charge of the program implementation for the whole duration of implementation. The Bank’s COUG assists the executing agency in the application of the relevant Bank’s rules and procedures. The NWSC is responsible for overall coordination of the Program and reporting obligations to the financiers.

2.4.1 Procurement Arrangements: Any additional procurement of goods and works and acquisition of consulting services financed by the Bank will be done in accordance with the Bank's Rules of Procedure for Procurement of Goods and Works dated May 2008, Revised July 2012 and “Rules of Procedure for the Use of Consultants dated May 2008, Revised July 2012, and using the relevant Bank Standard Bidding Documents and provisions stipulated in the Loan Agreement. NWSC as the executing agency is responsible for the procurement of goods, works and service contracts.

2.4.2 Disbursement Arrangements: Disbursement of the ADF resources is made directly to the suppliers and contractors for the International Competitive bidding (ICB) and National Competitive

bidding (NCB) packages, and for consultancy services contract. There is no operational Special Account for disbursement.

2.4.3 Financial Reporting and Auditing: Assessment of the financial management of NWSC confirmed that the corporation has sound financial management system, and has experience in managing similar operations. The PIT in the NWSC maintains separate accounts for the Program showing all the required Program financial details, including expenditures by component, category and financing source. NWSC is responsible for the preparation and submission of withdrawal applications. External audit firms recruited by the Office of the Auditor General (OAG) in accordance with the Bank’s rules and procedures, undertake annual audits of the program. Certified copies of audited accounts are submitted to the financing agencies by the executing agency within six months after the end of each financial year.

2.4.4 Monitoring and Evaluation: The AFKSP will make use of the existing sector M&E system, which is part of the Government’s M&E system. NWSC, the executing agency, will have the overall responsibility for monitoring the implementation of the programme, tracking of gender segregated data and the social safeguards for the various sites. NWSC has a Business and Scientific Services Directorate mandated among other things to ensure, effective post-evaluation of implemented expansion projects and advise management on value for money creation and also ensuring that all performance monitoring and evaluation activities in respect to the corporation's performance improvement contracts and programs are effectively carried out in a timely and cost-efficient manner. It maintains a credible operating performance data base on key performance indicators. It ensures continuous modernization of the corporation's performance measurement criteria and benchmarking systems to ensure sustained efficiency improvements and internal and external research activities are well conducted in a way that derives maximum value for the corporation. It also implements a comprehensive monitoring and evaluation framework for the asset management system. The broader sector has well defined national indicators that track urban water and sanitation performance. The M&E data collected by NWSC will feed into the annual Sector Performance report. Which is discussed in the Joint Sector Reviews (JSRs), held twice a year, the Technical Review in April and Joint Sector Review in Sept/October. The Bank will follow up the implementation of the program, through active participation in the periodic technical and sector reviews, regular supervision missions during project implementation, and ex-post evaluations. The NWSC will prepare and submit to the Bank quarterly and annual progress reports and Annual financial audits will be undertaken. Upon completion of the project, NWSC together with the Bank will prepare and submit a project completion report (PCR).

2.4.5 Sustainability: In conformity with the Durban eThekwini Declaration on sanitation, GoU resolved to raise the profile of hygiene and sanitation, review institutional arrangements, increase funding and roll out an Integrated Hygiene and Sanitation (IHS) strategy for the whole country. KSP is among the first positive moves towards implementing this strategy of addressing the serious sanitation problems in Uganda. NWSC has capable staff and is already operating very sophisticated water supply systems in Kampala. From which selected staff are identified and trained to manage the new sanitation facilities under the Program. In addition, 2 year post-construction training on operation and maintenance of Nakivubo Sewage Treatment Plant is embedded in the program. The unit responsible for sanitation within NWSC is currently being strengthened to enable it to cope with the increased responsibilities. NWSC completed sanitation management study and has implemented its recommendations. NWSC already collects adequate revenue from sanitation services to cover the operations and maintenance costs of the services within the City.

2.4.6 Environmental and Social impacts The Kampala Sanitation Program Phase I is an environmental category I. The key components of the program remain: rehabilitation and extension of sewer pipelines; construction and operation of the Nakivubo sewage treatment works; improvement of faecal sludge management and treatment in Lubigi; construction of Kinawataka sewerage system. The ESIA executive summary was posted on 31 July 2008.

The impacts was expected to occur on the wetlands during and after the construction and of the sewage treatment works at Nakivubo and Kinawataka, displacement of biodiversity during rehabilitation and extension of sewer pipelines. Other impacts include flies and odour posing health hazards during disposal of faecal sludge, works construction close to fragile ecosystems and resultant in soil erosion and water contamination causing health risks and environmental problems, and finally discharge of the treated effluent into the wetlands. The additional funding is not introducing any new activity and will therefore not result in Environment and Social impacts outside of original disclosed ESIA.

The mitigation measures include: restoration of degraded wetlands, limitation of human encroachment on fragile ecosystem and wetlands, planting of appropriate vegetation the degraded areas to minimize soil erosion, and to reduce informal settlements in wetland areas. The positive impacts include: increased natural filtration by wetlands of storm waters and improvement of water quality in Lake Victoria, improvement in sanitation and good hygiene that will raise the standards of urban poor in Kampala.

Both the Contractors and the consultants have environment experts on their teams ensuring implementation of the mitigation measures. The Executing Agency (NWSC) has a complete unit monitoring the mitigations and these are captured in the Quarterly report. NWSC is committed to compliance with Environmental, Health and Safety requirements during execution of projects. NWSC developed an Environmental and Social Management System (ESMS) for which the contractors on the project complies with. The ESMS is in line with Uganda laws and ADB Safeguard Requirements. To ensure contractor’s compliance with Environmental Safeguards Obligations, NWSC monitors all project activities.

3. Program Implementation Status 3.1 All works are procured out and are at various levers of implementation. The program is being implemented in Kampala through the institutional structures of NWSC. The program implementation status described below:

i. Nakivubo Sewerage System: The Nakivubo Wastewater treatment plant (WWTP) with a treatment capacity of 45,000 m3/day and a biogas production capacity of 5,940 m3/day with energy potential of 630KW is overall 86% complete. It’s contracted to a consortium of OTV, Cementers Uganda Ltd and ROKO Company. The initial Nakivubo site was abandoned due to soft formation and the plant relocated to Bugolobi site. Civil works for most structures are 90% complete except for the channel intake works and anaerobic digesters. The other pending works are mainly in electrical and mechanical installations. ii. The Nakivubo and Kinawataka sewer networks designed to lay 24km of trunk sewer line and 5.8km of feeders including manholes and tie in works is 75% complete. It is contracted out to Sogea- Satom/Dott Services ltd iii. The Kinawataka WWTP is 30% complete. Designed for pretreatment and then linked to the Nakivubo WWTP. It is contracted out to Sogea- Satom/ Cementers Uganda Ltd.

iv. Lahmeyer GKW/PEC Engineers are providing consultancy services for engineering design and construction supervision

3.2 The current Program closing date is set for 31 December 2017. Government submitted a request for 12 months extension which was reviewed by COUG and cleared by the country teams (RDGE) and forwarded for RDVP approval. The attached workplan (Appendix II) show that the remaining works can be completed in the requested extension.

4. Additional Financing of the Program The program objective, components, implementation arrangements including fiduciary, monitoring and evaluation, will remain unchanged. The additional financing will be used for completion of the ongoing contracts as direct payments and all the procedures for financial management, procurement and audit arrangements for the original ADF loan will be applied, as stipulated in the Technical Annex B4, B5and B6 of the approved original PAR.

Table 4: - Revised Cost of Program by Source of Funds (UA million) Source Amount Original Plan Additional Revised Total Funds ADF 35,000 19,00 54,000 KfW 15,310 0 15,310 EU 6,698 0 06,698 GOU contribution 7,944 9,83 17,774 Total 64,952 28,83 93,782

Table 5 - Revised Allocation by Component (UA million) Adjusted costs in Additional Revised Total Original Allocation Components 2012 ADF Loan Amount In million UA 1- Nakivubo Sewerage System 31,058 35,951 10,153 46,104 2- Faecal Sludge Management and Treatment (Lubigi ) 5,287 21,751 0 21,751 3-Kinawataka Sewerage system 8,133 8,514 7,425 15,939 4- Promotional Sanitation and Hygiene Education 1,914 0 0 0 5a- Institutional Support and Program Management /(Tariff/Audit/ community mob/ Engineering services) 6,329 6,329 1,422 7,751 Total Base Cost 52,722 72,545 19,000 91,545 Contingencies 12,230 2,237 0 2,237 Total Cost 64,952 74,782 19,000 93,782

Table 6 - Additional ADF Cost Allocation by Category (UA million)

Adjusted costs in Additional Revised Total Original Allocation Components 2012 ADF Loan Amount In million UA Works 44,404 66,216 17,578 83,794 Goods 1,171 - - 0 Services 5,534 4,716 1,422 6,138 Miscellaneous 1,613 1,613 - 1,613 Total Base Cost 52,722 72,545 19,000 91,545 Contingencies 12,230 2,237 - 2,237 Total Cost 64,952 74,782 19,000 93,782

4.1 Justification for Additional Finance The program experienced cost overruns due to inevitable changes in technical specifications. The initial feasibilities studies did not provide for actual geophysical investigation to guide on the sub strata and thickness of soft argillaceous material at the selected sites and based the quantities on estimates leading to inadequate information for design and costing and the resultant under estimation of the required funding from the financiers and the Bank loan. The main plant is large and complex and has no reference bidding in the region. It’s the other RMC that are going to benefit from Uganda’s experience. The program also had numerous start up challenges including delayed financing agreements of the co-financier, need for design modification, legal engagements on site ownership and site relocation. The new site too had many unknown buried installations which required relocation prior to commencement. These not only increased the required amount but also delayed the cost review.

4.1.1 Since 2016, the program has witnessed accelerated implementation and is in advanced stages of implementation. The supervision rating have been satisfactory and the additional financing can therefore lead to completion of the outputs and yield benefits to the country in one year. The banks current disbursement is at 92.7% while the other co-financiers are almost 100% disbursed.. The implementation status of the key installations is outlined. a) The Lubigi WWTP in the northern catchment with sewerage capacity 1600 m3/d and feacal sludge 400 m3/d was completed and commissioned. b) The sewer networks for the central and eastern catchments have so far laid 76% of the 1500mm diameter trunk sewer lines and its feeder lines. c) The main Nakivubo WWTP of capacity 45,000 m3/d is 86% completed and the remaining works are on the intake, bio-digesters and mechanical installations. d) The smaller Kinawataka WWTP of capacity 9000 m3/d is 30% complete with a planned completion of mid-2018 (appendix II).

4.1.2 The contractors and consultants are committed to complete the works in the requested extension. The Program is currently co-financed by the African Development Fund (UA 35.0 million), the Germany Government through KfW (UA 15.31 million), EU contributed UA 6.7 million while GoU counterpart contribution was UA 7.9million. GoU had committed to provide the cost overrun as part of co-financing however, the sector’s budget ceiling was not commensurately increased to take care of the above commitments. This meant that the GoU releases were not sufficiently matching the projects financial requirements leading to program budget shortfall. GOU in its communication to the Bank (appendix 1) adjusted its priorities in the ADF 14 allocations to the water and sanitation sector to address the cost overruns on the Kampala Sanitation Program by reallocating UA 19 million of ADF14

towards completion of this vital program to Kampala’s natural environment. The government is also committing another UA 9.83m, cofinancing towards the cost overrun.

4.1.3 The completed and commissioned plant in Lubigi with wastewater treatment capacity 5400 m3/day and 400m3/day Faecal sludge capacity is receiving its full capacity of feacal sludge, a clear indication that the demand is huge and therefore need for completion of the other two plants. The plant has also revealed a very high potential for private sector involvement and job creation in sludge emptying and cesspool transportation. The agro sector demand for treated waste too is above supply and completion of the other plants will go a long way in addressing this demand as well as increasing jobs in the agro sector.

4.1.4 The main Bugolobi plant is the first of its kind in the region with modern German/ Italy and France technology and has equipped NWSC with a wealth of data, financial figures and lessons learn which will serve as a model for other regional member states who are seeking feasibility/ designs and data to implement similar waste water treatment plants in their cities.

4.1.5 The insufficient feasibility studies meant that information for design were inadequate and the costing under-estimated. The additional financing therefore will address the funding shortfall necessary to ensure proper completion of the pending works on the plants and network to achieve the desired maximum benefits from the project”

5. Legal Instrument

5.1 Legal Instruments The legal instruments for the supplementary financing will be: (i) an ADF Loan Agreement

5.2 Conditions Associated with Bank’s Intervention A. Condition Precedent to Entry into Force of the ADF Loan Agreement: The loan agreement shall enter into force subject to fulfilment by the Borrower of the provisions of section 12.01 of the General Conditions Applicable to Loan Agreements and Guarantee Agreement of the African Development Fund. B. Conditions Precedent to First Disbursement for the Loan: The obligation of the Bank to make the first disbursement of the Loan resources shall be conditional upon entry into force of the Loan Agreement. C. Undertakings: The Borrower undertakes to: (i) Implement the Program in accordance with national legislation and the Environmental and Social Impact Assessment (ESIA).

6. Recommendations Management recommends that the Board of Directors approve the proposed supplementary ADF loan of UA 19 million to the Republic of Uganda for the purposes of completing the implementation of the Kampala Sanitation Program (KSP) and subject to the conditions stipulated in this report.

Appendix I: GoU Request for re Allocation of ADF Resources

Appendix II: Updated Program Implementation Schedule

Time schedule: Comparison a planned and actual times

Item Description Year 2012 2013 2014 2015 2016 2017 2018 No. Quarter 3. 4. 1.2. 3. 4. 1.2. 3. 4. 1.2. 3. 4. 1.2. 3. 4. 1.2. 3. 4. 1.2. 3. 4. 1.2. 3. 4.

Construction

1 Nakivubo Wastewater Treatment Plant Implementation Schedule Status

2 Kinawataka Pre-treatment Plant and Lifting Station Implementation Schedule Status

3 Nakivubo and Kinawataka Sewers Network Implementation Schedule Status

Consultancies

4 Lake Victoria Protection Phase II Supervision Implementation Schedule Consultancy Status

5 Community Mobilisation and Awareness Raising Implementation Schedule Campaigns Status

6 Tariff and Affordability Study Implementation Schedule Status

III

Appendix III: Uganda ’s Comparative Socio-Economic Indicators Uganda COMPARATIVE SOCIO-ECONOMIC INDICATORS

Develo- Develo- Year Uganda Africa ping ped Countries Countries Basic Indicators GNI Per Capita US $ Area ( '000 Km²) 2016 242 30,067 97,418 36,907 Total Population (millions) 2016 40.3 1,214.4 6,159.6 1,187.1 2500 Urban Population (% of Total) 2016 16.9 40.1 48.7 81.1 2000

Population Density (per Km²) 2016 201.8 41.3 65.1 33.8 1500 GNI per Capita (US $) 2015 670 2 153 4 509 41 932 1000 Labor Force Participation *- Total (%) 2016 85.0 65.7 63.5 60.0 Labor Force Participation **- Female (%) 2016 82.3 55.7 48.9 52.1 500

Sex Ratio (per 100 female) 0

2000

2005

2009

2010

2011

2012

2013 2014 2016 99.9 100.1 106.0 105.0 2015 Human Dev elop. Index (Rank among 187 countries) 2015 163 ...... Popul. Liv ing Below $ 1.90 a Day (% of Population) 2012 34.6 ... 14.6 ...

U ganda Afr ica Demographic Indicators Population Grow th Rate - Total (%) 2016 3.3 2.5 1.3 0.6 Population Grow th Rate - Urban (%) 2016 5.5 3.6 2.4 0.8 Population < 15 y ears (%) 2016 47.8 40.9 27.9 16.8 Population Growth Rate (%) Population 15-24 y ears (%) 2016 20.3 19.3 16.9 12.1 4.0 Population >= 65 y ears (%) 2016 2.5 3.5 6.6 17.2 3.5 Dependency Ratio (%) 2016 101.3 79.9 54.3 52.0 3.0 Female Population 15-49 y ears (% of total population) 2016 22.4 24.0 25.7 22.8 2.5 Life Ex pectancy at Birth - Total (y ears) 2016 59.9 61.5 69.9 80.8 2.0 Life Ex pectancy at Birth - Female (y ears) 2016 61.9 63.0 72.0 83.5 1.5 Crude Birth Rate (per 1,000) 1.0 2016 42.1 34.4 20.7 10.9 0.5

Crude Death Rate (per 1,000) 2016 9.0 9.1 7.6 8.6 0.0

2000

2005

2009

2010

2011

2012

2013 2014 Infant Mortality Rate (per 1,000) 2015 37.7 52.2 34.6 4.6 2015 Child Mortality Rate (per 1,000) 2015 54.6 75.5 46.4 5.5 Total Fertility Rate (per w oman) 2016 5.6 4.5 2.6 1.7 Ug anda Afr ica Maternal Mortality Rate (per 100,000) 2015 343.0 476.0 237.0 10.0 Women Using Contraception (%) 2016 34.6 31.0 62.2 ...

Health & Nutrition Indicators Phy sicians (per 100,000 people) 2005-2015 12.0 41.6 125.7 292.2 Life Expectancy at Birth Nurses and midw iv es (per 100,000 people) 2005-2015 134.2 120.9 220.0 859.4 (years) Births attended by Trained Health Personnel (%) 2010-2015 58.0 53.2 69.1 ... 80 Access to Safe Water (% of Population) 2015 79.0 71.6 89.4 99.5 70 60 Access to Sanitation (% of Population) 2015 19.1 39.4 61.5 99.4 50 Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 40 2015 7.1 3.4 ...... 30 Incidence of Tuberculosis (per 100,000) 2015 202.0 240.6 166.0 12.0 20 Child Immunization Against Tuberculosis (%) 10

2015 93.0 81.8 ...... 0

2000

2005

2009

2010

2011

2012

2013 2014 Child Immunization Against Measles (%) 2015 82.0 75.7 83.9 93.9 2015 Underw eight Children (% of children under 5 y ears) 2010-2015 14.1 18.1 15.3 0.9 Prev alence of stunding 2010-2014 33.7 33.3 25.0 2.5 U ganda Afr ica Prev alence of undernourishment (% of pop.) 2015-2016 25.5 16.2 12.7 ... Public Ex penditure on Health (as % of GDP) 2014 1.8 2.6 3.0 7.7

Education Indicators Gross Enrolment Ratio (%) Primary School - Total 2010-2016 101.1 101.2 104.9 102.4 Primary School - Female 2010-2016 102.1 98.4 104.4 102.2 Infant Mortality Rate Secondary School - Total 2010-2016 26.1 52.6 71.1 106.3 ( Per 1000 ) Secondary School - Female 2010-2016 24.6 50.2 70.5 106.1 100 90 Primary School Female Teaching Staff (% of Total) 2010-2016 42.3 47.1 59.8 81.0 80 Adult literacy Rate - Total (%) 2010-2015 73.8 66.8 82.3 ... 70 60 Adult literacy Rate - Male (%) 2010-2015 81.0 74.3 87.1 ... 50 Adult literacy Rate - Female (%) 2010-2015 66.8 59.4 77.6 ... 40 30 Percentage of GDP Spent on Education 2010-2015 1.7 5.0 4.0 5.0 20 10

2000

2005

2009

2010

2011

2012

2013 2014 Environmental Indicators 2015 Land Use (Arable Land as % of Total Land Area) 2014 34.4 8.7 11.2 10.3 Agricultural Land (as % of land area) 2014 71.9 41.7 37.9 36.4 Forest (As % of Land Area) 2014 11.0 23.2 31.4 28.8 U ganda Afr ica Per Capita CO2 Emissions (metric tons) 2014 0.1 1.1 3.5 11.0

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update : June 2017 UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports. Note : n.a. : Not Applicable ; … : Data Not Available. * Labor force participation rate, total (% of total population ages 15+) ** Labor force participation rate, female (% of female population ages 15+)

Appendix IV Uganda _ On going portfolio as at end of August 2017

Summary of Bank Group Portfolio of On-going and Newly-approved Projects/Programs/Studies Country: UGANDA

Date of Update: 30TH SEPTEMBER 2017

Amount Cancelled (UA Extended date of Approved Amount UA million Disbursement million) Net Amount Deadline for Last Disbursement Status (not effective & Serial No. Project Description Approval Date Signature Date Effectiveness ADF Commitments Disbursed Disbursed (%) Last 1st Date of ADF ADF on-going/effective, etc) Date ADB Grant ADB ADF (UA million) (UA million) Disbursement disbursement Disbursement Loan Grant

A. AGRICULTURE

1 Community Agricultural Infrustructure Improvement Programme III 03/05/2011 10/06/2011 22/02/12 21/03/2012 nil 40.00 nil nil nil nil nil 40.00 36.94 92.4% 31/12/2017 31/12/2016 on going

2 Markets and Agricultural Trade Improvement II (MATIIPII) 10.12.2014 28.07.2015 02.10.2015 16.11.2015 58.78 nill nil nil nil nil nil 58.78 0.70 1.2% 30.06.2020 on going

3 Preparation for Strategic Plan for Climate Resilience 17.03.2016 14.07.2016 14.07.2016 17.10.2016 1.11 nill nil nil nil nil nil 1.11 0.20 18.0% 30.04.2018 on going

4 Farm Income Enhancement and Forestry Conservation Project II 20.01.2016 17.02.2016 12.04.2016 31.05.2016 53.40 nill nil nil nil nil nil 53.40 7.07 13.2% 30.06.2021 on going

Agriculture - Sub Total 153.29 44.91 29.3%

B. TRANSPORT

5 Road Sector Project 4 ( Kigumbba Masindi Rd) 135 KM 13/03/2013 11/12/2013 08/08/2014 21.10.2015 nil 72.94 nil nil nil nil nil 72.94 8.90 12.2% 30/06/2018 ongoing

6 Road Sector Project V 28/05/2014 03/02/2015 26/08/2015 19.05.2016 nil 70.00 nil nil nil nil nil 70.00 2.87 4.1% 31/12/2020 ongoing

Transport - Sub Total 142.94 11.77 8.2%

C. WATER

7 Kampala Sanitation Project 16/12/2008 11/05/2009 18/02/10 16/07/10 nil 35.00 nil nil nil nil nil 35.00 32.44 92.7% 31/12/2017 31/12/2016 ongoing

8 Water Supply and sanitation program Phase 1 5/10/2011 11/01/2012 26/09/2012 19/10/2015 nil 40.00 nil 3.59 nil nil nil 43.59 42.59 97.7% 31/12/2017 ongoing

9 Water Supply and sanitation program Phase 2 3/2/2016 03-Mar-16 11/05/2016 19/07/2016 nil 65.80 nil nil nil nil nil 65.80 14.21 21.6% 30/06/2021 ongoing

10 Additional Funds to Water Supply and Sanitation Program 4/3/2015 30/04/2015 30/04/2015 18/10/2015 nil nill nil 8.37 nil nil nil 8.37 3.40 40.6% 30/06/2018 ongoing

Water and Sanitation - Sub total 152.76 92.64 60.6%

D. SOCIAL

11 Rehabilitation of Mulago and KCC Clinics 06/07/2011 11/01/2012 02/07/2012 28/08/2012 nil 46.00 10.00 nil nil nil nil 56.00 41.06 73.3% 31/12/2017 31/12/2016 on going

12 Education V Project (HEST) 21/11/2012 05/07/2013 18/11/2013 19.02.2014 nil 67.00 nil nil nil nil nil 67.00 25.19 37.6% 30.06.2018 On going

Social - Sub Total 123.00 66.25 53.9%

13 Rural Electricity Access 16.09.2015 04.11.2015 12.02.2016 25.05.2016 70.92 nil nil 0.00 nil nil nil 70.92 0.53 0.7% 31.12.2020 on going

14 Mbarara-Nkenda/Tororo-LiraTransmission Lines Project 16/12/08 26/03/2010 18.02..2011 20/04/11 nil 52.50 nil nil nil nil nil 52.50 42.41 80.8% 31/08/2017 31/08/2016 ongoing

Energy - Sub total 123.42 42.41 34.4%

GRAND TOTAL FOR PUBLIC SECTOR OPERATIONS 695.41 257.98 37.1%

F. MULTI NATIONAL PROJECT

15 East Africa's Centre of Excellence for Skills 03/10/2014 06/10/2015 01/02/2016 16.02.2016 nil 22.50 nil nil nil nil nil 22.50 1.57 7.0% 31/12/2019 on going

16 Lake Edward Integrated Fisheries & Water Resources Mgt Project 20.05.2016 27.01.2016 11.05.2016 26.07.2016 nil 5.00 nil nil nil nil nil 5.00 0.73 14.6% 30.06.2021 on going

17 Lake Victoria Water Supply and Sanitation program phase II 17/12/2010 04/04/211 04/04/11 31/01/2012 nil nill nil 11.13 nil nil nil 11.13 10.58 95.1% 31/12/2017 31/12/2016 ongoing

18 Multinational Uganda/Rwanda-Busega -Mpigi Express Highway 22/06/2016 nill nill nill 64.44 42.50 nil nil nil nil nil 106.94 0.04 0.0% 31/12/2021 ongoing

Multi National Projects- Subtotal 145.57 12.92 8.9%

GRAND TOTAL INCLUDING MULTI NATIONAL 840.98 270.90 32.21

Appendix V: Map of Project Area