Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4378-BT

STAFF APPRAISAL REPORT Public Disclosure Authorized BOTSWANA

THIRD WATER SUPPLY PROJECT Public Disclosure Authorized

May 9, 1983

Water Supply and Urban Development Division Public Disclosure Authorized Eastern Africa Projects Department

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. | BOTSWANA

APPRAISAL OF THIRD WATER SUPPLY PROJECT

Currency Equivalents

Currency Unit = Pula (P) 1 Pula = 100 Thebe = US$0.9 US$1 = P 1.1

Weights and Measures

I Imperial Gallon (Ig) = 1.2 US Gallons = 4.55 liters (1) I cubic meter (m 3 ) = 220 Ig, 264.2 US gallons, or 1 kiloliter (kl) 1 liter per capita per day = I lcd 1 million Imperial gallon per day (Imgd) = 4,546 m3 /day 1 meter (m) = 3.28 feet (39.37 inches) 1 millimeter (mm) = 0.039 inches 1 kilometer (km) = 0.62 miles 2 1 square kilometer (km ) = 0.386 square miles = 247 acres (ac)

Abbreviations and Acronyms

AfDF = African Development Fund BPC = Botswana Power Corporation CIDA = Canadian International Development Agency CDC = Commonwealth Development Corporation DCs = District Councils DWA = Department of Water Affairs (MRWA) GTC = Gaborone Town Council Gibb = Sir Alexander Gibb & Partners Government (GOB) = Government of the Republic of Botswana GSD = Geological SturveyDepartment (MRWA) GWEU = Gaborone Water & Electricity Unit IDRC = International Development Research Center of Canada MFDP = Ministry of Finance & Development Planning MLGL = Ministry of Local Government & Lands MOH = Ministry of Health ~TRWA = Ministry of Mineral Resources & Water Affairs MWC = Ministry of Works & Communications NDP = National Development Plan, 1979-1985 RSA = Republic of SouithAfrica SIDA = Swedish International Development Authority UK = United Kingdom of Great Britain & Northern Ireland UNDP = United Nations Development Programme USAID = United States Agency for International Development WUC = Water Utilities Corporation

Fiscal Year (FY)

April 1 to March 31 LIST OF ANNEXES

ANNEX DESCRIPTION

1 Sector Investment Programme 2 Population/Water Demand Growth 1979-1990 3 Description of the Proposed Water Supply Facilities 4 Description of the Gabarone Dam Raising Works 5 Project Cost Estimates 6 Project Implementation Schedule 7 Disbursement Schedule 8 Yields of Proposed Raw Water Sources and Average Water Demand for Gabarone 9 Water Utilities Corporation - Organization Chart 10 WUC / Gabarone/Lobatse Income Statement 11 WUC - Gabarone/Lobatse Division Financing Plan 12 Economic Rate of Return for Gabarone WS/Average Investment Cost of Water 13 Proposed Monitoring Guidelines

MAPS

IBRD 16921R - Layout of Proposed Gabarone Dam IBRD 16922 - Catchment Area of Gabarone Dam IBRD 16923R - Existing and Proposed Water Supply System of Gabarone I BOTSWANA

THIRD WATER SUPPLY PROJECT

I. THE WATER SUPPLY AND WASTE DISPOSAL SECTOR

Country Background

1.01 Botswana, which has an area of about 582,000 km2 (225,000 sq. mi.), is landlocked and is bordered by Zimbabwe, the Republic of South Africa (RSA), Namibia, and Zambia. Botswana occupies the central portion of the great plateau of southern Africa and the ground surface, which is relatively flat, averages about 1,000 meters (3,000 ft.) in elevation.

1.02 The climate is continental and semi-arid with an average annual rainfall of 475 mm which is highly erratic and unevenly distributed. 1/ Precipitation is seasonal, mostly occuring during the period of November through April. Temperatures generally range between 5CC and 38°C with wide diurnal variation particularly evident during the "southern" winter months (May through October).

1.03 The population of Botswana, mainly situated in eastern Botswana, was 935,000 according to a 1981 census and is increasing at about 3.5% annually. Although the urban population comprises only about 16% (resident in five towns, Gaborone, Lobatse, Francistown, Selebi-Phikwe and Orapa), the country has one of the world's highest urbanization rates, currently close to 12% per year.

1.04 The rangeland of Botswana basically consists of a number of bush and tree savannah types. In only about 5% of the surface area of Botswana do adequate rainfall and suitable soils occur together to provide potential for arable agriculture.

1.05 Intensive, large-scale prospecting for minerals has begun only in recent years. Commercially exploitable deposits of diamonds, copper-nickel and coal have been brought into production at Orapa, Selebi-Phikwe and Morupule, respectively. A third diamond mine has just been put in operation at Jwaneng.

Water Resources

1.06 Although Botswana's total water resources are fairly substantial 2/, due to their unfavorable location and/or variability in occurence, the country is effectively water deficient. Surface water, representing over 85% of the total resources and of good quality, occurs mainly in the Okavango River located in the north and, to a lesser extent, in border rivers. Except for the Limpopo and its tributaries located in eastern

/ Average annual rainfall ranges from 250 mm in the southwest to more than 650 mm in the northeast. 2/ The total annual resource, though not well documented, has been estimated at about 21 billion m3 of which approximately 18 billion m is surface water and about 3 billion m3 is ground water. - 2 -

Botswana, they are little utilized. Surface water located elsewhere, although more accessible, is ephemeral and small in volume (representing less than 5% of all surface water).

1.07 Although ground water is believed to underlie much of Botswana, these resources have not been fully investigated. The majority of existing boreholes are located in the eastern part of the country where 90% of the population is located. The country has over 5,000 registered boreholes, and the number of unregistered boreholes is estimated at 50% of this figure. Shallow wells are much smaller in number. Yields of individual boreholes are small 3/ and natural water quality in some areas is unacceptable for human consumption due to high salinity. Many of the wells are unuseable during extended drought periods due to lowered water levels and the small storage capacity of individual aquifers. Further, due to the nature of the aquifers and to inadequate control of the disposal of waste from livestock and/or humans, high nitrate concentrations and serious fecal bacterial contamination exists in ground water underlying many villages and certain of the towns.

1.08 In recognition of increasing water demands in the eastern portion of the country, the Government of Botswana (GOB) recently investigated the feasibility of developing supplies from several potentially attractive sources. The first of these studies, which was financed by the United Nations Development Programme (UNDP), concerned transfer of water from the Okavango Delta to potential areas of demand. The studies concluded that such a transfer is unlikely to be economic in the foreseeable future. The practical limitations are that the demand must be either close at hand or very large and concentrated. A second study, financed by the African Development Fund (AfDF), concerned the feasibility of water development in northeast Botswana. Several attractive schemes were identified in this study including that of the just completed Second Water Supply (Francistown) Project financed by the World Bank. A third study by the Department of Water Affairs (DWA) of the Ministry of Mineral Resources and Water Affairs (MRWA) investigated the feasibility of developing supplies from principal sand rivers of eastern Botswana. Findings of this study indicate that sand rivers have potential mainly as supplies to villages and other minor demand centers.

1.09 Water resources studies relevant to the proposed Third Water Supply Project (Gaborone) have been:

(i) "Water Resources Reconnaissance of lower Metsemotlhaba and lower Ngotwane River" prepared by B.G.A. Lund and Partners, RSA, 1977.

(ii) "A Reconnaissance Study for Major Surface Water Schemes in Eastern Botswana", prepared by Sir Alexander Gibb and Partners, 1977.

(iii) "Gaborone Water Resources, Review of Alternative Development Options" prepared by Sir Alexander Gibb and Partners, 1981.

3/ Only 17% of all wells are yielding more than 2.5 litres per second, and typical depths range from 30 to 100 m. - 3 -.

A complete list of all documents relevant to the project is available on the project file.

Sector Legislation

1.10 Various Parliamentary Acts dealing purely with water sector issues, legislated between 1956 and 1970, together with the Tribal Land Act of 1968 and the Town and Country Planning Act of 1977, provide adequate legislative instruments. However to further improve the situation Government have invited SIDA to study all existing water legislation and obligations covering domestic and international water regulation. The studies are in progress and will also include recommendations for necessary amendment of legislation to deal with the evolving water needs and establish controls for the management of Botswana's own national water resources and common international water resources. During negotiation, Government agreed to make the studies available for Bank review and comment prior to introducing legislative changes. (Guarantee Agreement Section 3.02).

Sector Organization

1.11 Four different ministries are active in the sector. Two of these, the Ministry of Mineral Resources and Water Affairs (MRWJA) and the Ministry of Local Government and Lands (MLGL), have principal roles while the Ministry of Works and Communications (MWC) and the Ministry of Health (MOH) have minor roles. Given the size of the population and existing high level of service coverage, the present organizational and institutional arrangements are satisfactory.

1.12 MRWA, through the Department of Water Affairs (DWA), is concerned with Botswana's total water resources and their development. It collects and maintains hydrological and hydrogeological records, plans and implements water supply projects in rural areas, designs, constructs, equips and, in certain instances 4/, operates and maintains village water supplies. It also registers new boreholes, monitors ground water production and, ground water pollution, administers special water resource investigations and provides technical training to its own staff and to village water supply operator candidates recruited by the District Councils (DCs). Another department of MRWA, the Geological Survey Department (GSD), through its Hydrogeological Division, is responsible for locating and evaluating the country's aquifers and assisting in the development of ground water resources. The Water Utility Corporation (WUC), a parastatal

4/ The DWA is responsible for operation and maintenance of water supply systems in large villages (with populations larger than 7,000 persons). Water supplies for smaller villages are turned over to the DCs for operation and maintenance upon completion. - 4-

body under MRWA, is responsible for water supply in urban areas 5/.The performance of WUC, which will be responsible for project implementation, has been fully satisfactory (see Chapter IV).

1.13 MLGL has responsibilities both in rural and urban areas. In all urban areas except Orap 6/, MLGL is responsible for the preparation of town development plans including provision for water supply. However, WUC provides MLGL with planning input relative to water supply and is also responsible for the implementation of water supply schemes.

1.14 In urban areas, large water supply projects are prepared and designed by consultants, and financed mainly by bilateral and multilateral agencies. Construction is by contract. Smaller urban projects generally are prepared and designed by staff of the responsible government agency. In such instances, funding is frequently provided by Government and construction is by force account. In rural areas, planning and implementation of village water supply projects normally are accomplished by DWA staff although, due to staff constraints, consultants are sometimes used for preparation and design.of larger projects. Financing has been provided mainly by bilateral assistance agencies, and construction is normally by force account.

1.15 MLGL is also responsible for sewerage, drainage and sanitation, both in rural and urban areas. Large urban projects are usually designed by consultants, constructed by contractors and financed by Government loans to the Town Council. Once constructed, the sewerage and sanitation systems together with the refuse collection and disposal are operated by the Town Councils.

1.16 MOH currently has no primary role in the sector but is responsible for: (a) health education, (b) maintenance of health statistics, and (c) monitoring of environmental sanitation. MOH has developed a substantial network of health facilities including clinics and health posts which are well distributed in both rural and urban areas. The health posts are staffed by family welfare educators. A National Health Institute in Gaborone trains junior health personnel while a Health Education Unit, also in Gaborone, promotes health education in general.

5/ In Botswana, only towns characterized by significant trade and/or industry are considered as urban. Currently, five towns meet this classification, viz., Gaborone, Francistown, Lobatse, Orapa and Selebi-Phikwe. Although some villages have larger populations than the towns, they are officially classified as rural since they are oriented toward subsistence agriculture. The only exception to WUC's operation of urban supplies is Orapa, where the mining company runs the supply.

6/ In Orapa, these responsibilities are met by a diamond mining concessionaire. -5-

Cost Recovery

1.17 Government policy requires that urban water supplies be financially self-supporting whereas rural water supplies are subsidized. In urban areas, other than Orapa, WUC charges for all water supplied based upon metered consumption. Customers with private connections are charged directly while the town councils are billed for standpost deliveries for which they, in turn, levy a flat rate charge on individual plots dependent upon standpost supplies. Water users taking delivery through public standposts receive a partial subsidy in the form of a cross subsidy from other water consumers.

1.18 In rural areas, the DCs charge only those consumers having private water connections with the charges based upon metered consumption. Water tariffs are determined by the operating agency, with the approval of the concerned ministry.

1.19 Charges for sewer service are based on full cost recovery. Fees are collected through the property tax levied by the town councils on those plots receiving such service. In site and service areas where the town councils provide for sanitation such as the substructures of the pit latrines and are responsible for emptying of pit latrines, costs are recovered through a monthly service levy.

Manpower and Training

1.20 The appraisal report for the second water project drew attention to the severe countrywide shortage of technical manpower in all sectors which necessitated substantial recruitment of expatriates, mainly professional but also higher levels of sub-professionals. Government was aware of the situation but appreciated that increased localization was dependent on the pace of general education improvement and the availability of suitably qualified Batswana. The Banks' second education project, appraised in 1979, was directed to improving the country's supply of skilled manpower. Understandably this is a long term project and benefits will take some time to become apparent. Consequently the water supply sector continues to experience the problem associated with the shortage of adequately educated Batswana candidates available for training beyond the level of craftsmen and operators. For the time being Government has to rely on expatriate assistance, mainly financed from bilateral sources, to staff and manage the Department of Water Affairs, which assists the District Councils to manage and operate rural water schemes.

1.21 The Geological Survey Department, which is responsible for monitoring the country's water resources, provides in service training for cartographers and technical assistants. The training continues to be provided by bilateral funded expatriates and equipment.

1.22 Staffing and training for WUC is better managed than the Sector as a whole. However WUC is also still heavily dependent on expatriate management and operating staff notwithstanding the existence of a sound training policy and program. A full description of the existing training program and the status of implementation is given in paras. 4.08 to 4.11. -6-

Present Service Levels

1.23 Over 90% of the urban population has access to piped water supplies. Until recently, the water supply coverage in rural areas was relatively low, about 30%. The situation is now much improved through an active program which is mainly financed by SIDA and in 1982 the coverage has reached 68% of the rural population (mainly from ground water sources) which is high by African standards 7/.

1.24 Water service in urban areas is generally good. Approximately 60% of Gaborone and Lobatse water consumers have private connections while in other urban areas the percentage is substantially less than that (e.g. Francistown 13%). Remaining water consumers are served from public standposts. Service levels in the major villages where water systems are operated by DWJA,generally are higher than those in the minor and small villages, where water systems are operated by the DCs. Design criteria for the major villages (Population 3000) currently require supply capacity averaging 40 lcd and water points located no further than 400 m from any consumer. Design criteria for smaller villages are similar although, in some instances, supply capacity requirements are based on 20 lcd. These criteria are reasonable.

1.25 In urban areas, piped wastewater systems are limited to high and medium cost housing plots, and institutional, commercial, and industrial properties which have piped water supply . Treatment is by waste stabilization ponds. For other urban water consumers with private connections but outside the sewer system septic tanks are generally used. For water consumers using standposts, sanitation facilities are limited to pit latrines. More sophisticated 8/ on-site sanitation units have been tested in two-year pilot study on low-cost sanitation recently concluded by IDRC. However, difficulties have been encountered with these units due to relatively high construction costs and/or poor performance. At present only single and twin pitlatrines are constructed.

1.26 Sanitation facilities in rural areas if existing, are generally pit latrines. Due to poor sanitation practices in some rural areas and in Francistown, ground water quality has been badly degraded. This situation is often compounded by poor practices in siting and constructing boreholes.

Service Level Policy

1.27 Government analysis of the District Development Plans (1977) showed thlatwater supply was rated the highest priority. Accordingly the Government has adopted the following policy in the National Development Plan 1979-1985:

(i) reduce drudgery and improve health levels by keeping existing water supplies operating, installing new water supplies as to reach all villages by 1985 and by action against pollution;

7/ In northern Zambia only 40% of the rural population have access to wells and boreholes.

8/ Aqua privy and Reed Odorless Earth Closet. (ii) provide adequate domestic water to urban areas without subsidy and assist the growth of productive employment for Botswana by providing the water required for industry and mines.

1.28 Health care has also been given high priority in the Fifth National Development Plan. Elements listed as essential for attaining an acceptable level of health are adequate food and housing, safe water, basic sanitation, health education and immunization against communicable diseases as well as appropriate treatment of diseases.

1.29 Through its integrated water supply program the Government intends to cover the presently unserved rural village population by 1988. Although all major villages already have existing water supply systems covering almost 100% of their population, many of the system capacities are now inadequate due to low original design criteria and high population growth. In addition, some small scale industries have established their plants in villages and the Government's policy is to support this development in order to reduce the very rapid growth in the urban areas. Rehabilitation and extension of these works are planned but these are dependent on the development of additional water sources which are being studied under the South East and Central Eastern Botswana Study. It is probable that it will not be possible to serve nomadic rural population, about 8% of the total rural population, under the decade plan.

Sector Development

1.30 Sector Development accelerated after independence in recognition of the need for water supply to support urban and mining development, and with the initiation of large-scale efforts to improve village water supply systems. The majority of these expenditures were met through external assistance with the main donors being SIDA (mainly for the implementation of rural water supply schemes), the United Kingdom (UK), the United States Agency for International Development (USAID), and the World Bank Group. Urban water supply projects were completed in the towns of Gaborone, Lobatse, Selebi-Phikwe and Francistown. In rural areas, water supply schemes were completed in 145 major and medium-size villages, thus increasing the percentage of rural population served from less than 5 (at independence) to about 68.

1.31 About P 100 million (US$90 million) of expenditures are planned for urban water supply schemes up to year 1988. Projects underway or proposed include water supply extensions for the towns Francistown, Selebi-Phikwe, Jwaneng and Lobatse and major water supply plants for Gaborone (raising of the Gaborone Dam under this project and future construction of two smaller dams at Kolobeng and Metsemotlhaba). In rural areas the planned expenditures of P 57 million (US$51 million) are for the completion of water supply schemes in 209 minor villages and the rehabilitation and extensions of water supply schemes in 17 major villages. For details of the sector investment programme see Annex 1.

1.32 The NDP includes a relatively small sanitation component which is not separately identified but included as parts of other programs, most of which are to be implemented through MLGL. These include sanitation and/or sewerage studies for Francistown, Gaborone, Lobatse and Selebi-Phikwe. -8-

Possible Constraints

1.33 Training of skilled manpower, particularly that associated with maintenance and operation, are critical to the success of the rural water supply program. In urban water supply the Government is largely dependant on expatriate managers and engineers and localization in this area is making only slow process. The provision of funds to finance the ambitious rural and urban water supply programme poses an increasing problem for the GOB. Water resources in the estern part of Botswana are scarce and it will be more and more difficult to provide the rapidly increasing population with water at affordable prices.

Previous Bank Group Projects

1.34 Five Bank Group projects have assisted sector development in urban areas. A US$3 million credit was made in 1971 for the Gaborone-Lobatse Water Supply Project (Credit 233-BT) which was completed in mid-1974. All project objectives were achieved and one of the more important accomplishments of this and the following Shashe Infrastructure Project was the establishment of WUC to operate on a commercial basis without subsidy.

1.35 Bank loans for the Shashe Infrastructure Project (Loan 776-BT of June 30, 1971 and Loan 776-2-BT, dated June 7, 1974) included finance for a major water supply component to serve the BCL Limited mining complex and the township of Selebi-Phikwe. The water supply facilities were commissioned in June 1974 after minor delays due to cost overruns and subsequent financing difficulties.

1.36 The Francistown Urban Development Project (Credit 471-BT dated May 9, 1974) included water supply and minor sanitation components. Several problems were noted on this project that have been useful in designing subsequent projects, and resulted in Government decisions that future urban projects should stress: (a) a greater degree of community participation, and (b) the elimination of subsidies to low-income beneficiaries.

1.37 The Second Urban Project (Loan 1584-BT dated September 11, 1978) also includes water supply and sanitation components to support urban development in Francistown and Selebi-Phikwe. The water supply component provided for expansion of the primary water supply system in Francistown including equipment improvements for existing boreholes, and the expansion of the distribution system and provision of water standpipes in both Francistown and Selibi-Phikwe to serve the urban poor. The Sanitation component in both towns mainly provided double pit vented latrine type units for 6,500 low income housing plots. The projects' physical works have been completed successfully within budget. However there will be about one year delay in overall project completion (closing December 1983) caused by early institutional and staffing problems.

1.38 The Second Water Supply project (Loan 1763-BOT) September 26, 1979 for US$4.4 million provided for (a) the extension of the Francistown supply, treatment and distribution system and (b) and preparation of the - 9 - third water project comprising raising of the Gaborone Dam with associated expansion of the existing treatment plant, storage and pumping capacity. The Francistown component was completed satisfactorily in May 1982, approximately half year behind schedule with modest cost overruns. Preparation of the third project was also completed with minimal delay and minor cost overruns due to higher than anticipated local inflation. The water supply facilities were officially put into operation in September 1982. As soon as final accounts with contractors are settled the Project Completion Report will be prepared by Government.

II. THE PROJECT AREA

Location - Special Features

2.01 The project is located in Gaborone, the capital of Botswana although it will also provide partial supply to the town of Lobatse located about 70 km south of Gaborone. Gaborone, the only major town in South East Botswana became the capital in 1966 when Botswana achieved independence. Since that time, the town experienced a very rapid but controlled growth, its population increasing from a village level of 6000 to the present 62,000.

2.02 Gaborone is the administrative center of Botswana and the seat of Government. It is also the major commercial and educational center of the country. At present an international airport is under construction near Gaborone. The better employment opportunities have been and are still the main reasons for the unexpected growth of Gaborone. In 1978 the Cabinet decided that Gaborone should be developed towards the west. In a subsequent study Gaborone West (see IBRD Map 16923) was divided into ten residential "super blocks", three industrial areas and a number of recreational zones. At present Phase I of this development is under construction.

Existing Water Supply and Waste Disposal Systems

2.03 Gaborone's sole source of water supply, the Gaborone Dam was constructed in 1964 on the Notwane River some 4 km south of the town. The reservoir also serves as a supplemental source of water to the town of Lobatse. The catchment area of the reservoir is about 3,800 km2 and lies partly in Botswana and partly in neighboring south Africa (see IBRD Map 16922). Based on 20 years of flow records the safe yield of the full existing reservoir at a risk of failure in 1 in 20 years is about 6.Mm3 /annum 9/. The reservoir is currently operated above this rate to satisfy demand. With abstraction rates equal to the safe yield above, projections indicate that the dam would spill in one year in five at an average rate of 14.5 Mm3 /annum. There is thus scope for capturing spillage

9/ Recorded mean annual inflows have varied from maximum 194 Mm3 /a (1966) to minimum 0.2 Mm3 /a (1979). - 10 - by increasing the reservoir storage capacity by raising the height of the dam.

2.04 The existing primary water supply system of Gaborone consists of the following (See IBRD Map 16921).

(i) The raw water system consists of the Gaborone Dam, intake tower, raw water pumping station, and raw water main to the Gaborone treatment plant. The system has a capacity of 25 to 35,000 m3 /d depending on the water level in the reservoir.

(ii) The water treatment works consists of clarifiers and rapid gravity sand filters. The works have been constructed in 1965 and have been extended in 1974 and 1981. The present nominal capacity is 28,500 m3/d, the present maximum daily demand 29,400 m3 /d.

(iii) The treated water transmission system consists of three pumping stations at the treatment plant site, one at the town storage site and one at the Broadhurst storate site and associated transmission pipelines. Another pumping station at the treatment plant site pumps water to Lobatse.

(iv) Treated water storage consists of 2 elevated reservoirs one in the town and one at the Broadhurst storage site and of seven ground level reservoirs, one at the treatment plant, four at the town storage site and two at the Broadhurst storage site. The total storage capacity is 38,000 m3 representing two days storage at average daily demand.

2.05 Gaborone has an extensive sewer system covering almost the entire town area and is designed to cope with the ultimate flow when all town areas will be sewered. The sewage is treated in oxidation ponds at the South, North and Broadhurst treatment plants, along the Notwane River downstream of the Gaborone Dam. Non sewered areas rely on pit latrines (5,600 units). Most common are the ventilated single or twin pit latrines with seat. In a pilot area in Broadhurst the aqua privy type has been tested but has not been fully successful so far because the users did not maintain the necessary water seal. Septic tanks are not common in Gaborone (only 100 units).

Population Served and Standards of Service

2.06 Gaborone's 1982 population is approximately 62,000. The whole population has access to public water supplies; about 62% through private connections and 38% from public standpipes. Lobatse has a population of 19,000 and the supply conditions are almost the same as in Gaborone.

2.07 The Gaborone water supply system is completly metered, including the public standposts. Sales amount to approximately 85% ofthe treatment plant output which is an acceptable performance by any standard. In 1982 the average specific domestic consumption at private connections amounted to 138 I/cd and at public standposts 42 1/cd. The water quality is good. Details of water analyses are available on the project file. - 11 -

2.08 Gaborone has regular refuse collection. In residential areas refuse is collected once to twice a week, in commercial areas daily. The refuse is disposed of by sanitary land fill on two sites.

2.09 Due to the present satisfactory water and sanitation conditions, water borne diseases do not pose a problem in Gaborone. Nevertheless, diarrhea is still a frequent disease, but this is probably due to improper sanitation habits. Bilharzia has not been found in the dam. There are occasional outbreaks of Malaria, especially in wet years.

Population Projections and Demand for Service

2.10 The Department of Town and Regional Planning of the Government conducted population growth studies and projected the population as follows. For comparison actual previous growth rates are also stated.

Year inhabitants annual % increase

1964 3,900 24 (actual) 1971 17,700 18 1975 34,500 9 1982 62,000 8 1985 79,000 8 (forecast) 1990 115,000

After 1990 the Government intends to halt further immigration to Gaborone by developing other urban centers and allow only for natural growth. The 8% growth rate upto 1990 appears to be on the high side but is possible.

2.11 Gaborone's and Lobatse's future water demands have been projected by Gibb up to 1991 (see Annex 2). For comparison previous demands for the years 1979 to 1982 are also given. The demand projections are based upon unit water demands for house connection and public standpipe users, projected population and demands by industrial, commercial and institutional water consumers. The projected average unit water demands of Gaborone of 160 1/cd for house connections and 45 I/cd at public standpipes are assumed to remnainconstant through the period 1983 through 1991. These consumption levels are considered realistic based on other comparable African countries. Due to the projected substantial increases in water charges, an increase in average water consumption levels is not expected. Although the specific water consumption at standpipes of 45 1/cd in Gaborone appears to be high, past records confirm this. The good coverage of standpipes with relatively short walking distances (100-150 m) appear to be the main contributing factors.

2.12 The town of Lobatse is partially supplied with water from Gaborone via a 250 mm pipeline from Gaborone to Nnywane treatment plant at Lobatse (see para. 1.34). This contribution is necessary for the foreseeable future due to the limited alternative sources at Lobatse.

2.13 A summary of the previous and future total raw water demand of the Gaborone Dam is given below (for details see Annex 2). - 12 -

Raw water demand in million m3 /a Year Lobatseb/ Gaborone Total

1979/80 0.699 5.027 5.726 1980/81 0.657 5.288 5.945 1981/82 0.717 5.992 6.709 1982/83 0.744 7.168 7.912 1983/84 0.812 8.111 8.923 1984/85 0.877 9.087 9.964 1985/86 0.948 9.618 10.566 1986/87 1.021 10.169 11.190 1987/88 1.100 10.659 11.759 1988/89 1.177 11.252 12.42ga/ 1989/90 1.259 11.929 13.188a/ 1990/91 1.344 12.666 14.010a/

Losses between treatment plant output and raw water sources are estimated at 5%. Sales amount to 85% of the treatment plant output. Maximum-day system demands are estimated at 1.6 times average-day demands.

a/ The proposed raising of the Gaborone dam by 8 m will be unable to meet this demand of 1:20 years risk of failure of the yield.

b/ The Lobatse demand is mainly for the Lobatse Abattoir (Botswana Meat Corporation BMC).

III. THE PROJECT

Genesis

3.01 The Government of Botswana urgently requested the Bank to assist in financing the project to which they give highest priority. The ongoing development of Gaborone West, (see para 3.09) would have to be stopped if additional water supplies are not assured. The Bank agreed to accelerated project processing and to advance contracting for the Gaborone dam raising works in order to complete the project one year earlier than originally envisaged to impound the 1984/85 rains.

3.02 The need to augment Gaborone's water supply was forseen during the appraisal of the Bank financed Second Water Supply Project in 1979 (para. 1.38) and as a result funding was included for engineering investigations and preliminary design to increase the capacity of the existing Gaborone dam reservoir.

3.03 Following the 1981/82 drought in the Gaborone area, an "Urban Drought Committee" was appointed by the Cabinet which consisted of technical and administrative experts of all ministries. The Committee commissioned the "Gaborone Life Extension Study" which was prepared by the Consultant,Sir Alexander Gibb and Partners (Gibb). - 13 -

3.04 Gibb's final report was submitted in January 1982 which recommended the immediate raising of the Gaborone dam by 8 meters but without confirmation that it was the least cost solution or the optimum height of the dam. At the Bank's request, WUC instructed Gibb to review both these points in a supplementary report. Gibb's supplementary report confirmed that of the seven possible sources of raw water for Gaborone (Gaborone dam, Kolobeng dam, Metsemotlhaba dam, Ramotswa Wellfield, Bokaa dam, Marico dam and Limpopo dam) raising the Gaborone dam by 8.0 meters was the least cost solution. The Bank has reviewed these reports and agreed with the conclusions.

3.05 Due to the forecasted shortages of water which can be expected to occur anytime from 1983 onwards, the Government and WUC understandably attached great importance to the earliest start of construction. Consequently in consultation with the Bank and CDC the timetable of project implementation was accelerated, detailed design and tender documents were completed, reviewed and approved by the Bank, and bids for the construction of the dam were received December 1982.

Dam Safety

3.06 In view of the size, complexity, and required speed of construction the Bank requested WUC to appoint a Panel of Experts to review the design and safety aspects of the dam. A panel of three experts was appointed and submitted their report in early January 1983 which WIJC, its consultants Gibb, and the Bank have reviewed and accepted. The Panel's recommendations are being incorporated into the contract for the dam raising. During negotiations, WUC agreed to retain the services of the Panel of Experts to review the construction of the dam (Loan Agreement Section 3.02(c), and to make satisfactory arrangments for periodic safety inspections of the dam and other works after completion of the project (Loan Agreement Section 4.02(b)).

International Water Rights Issues

3.07 Approximately one-third of the catchment area of the dam is situated in the Republic of South Africa. Furthermore, when the dam is completely filled, an area of approximately 10 hectares will be inundated beyond the border of Botswana (IBRD maps 16921/22). In accordance with the Bank's request the Government of Botswana has contacted all up stream and down stream riparians of the Notwane and Limpopo rivers and informed them of the proposed project. The riparians have either expressed no objection to the project or given explicit agreement to its execution. The Bank reviewed the respective documents and was satisfied with the actions taken by GOB.

Objectives

3.08 The principal objectives of the proposed project are to augment and secure the water supply to Gaborone, Botswana's rapidly developing capital, through the raising of the existing dam by 8 meters which will meet the city's water demands up to about 1988, and to expand Gaborone's existing water treatment and supply system to cater for the increased water availability. The project also provides for the site investigations and - 14 - preliminary designs of two new dams (Koloberigand Metsemotlhaba dams) to further augment the water supply to Gaborone beyond 1988.

3.09 An urban expansion plan has been prepared for Gaborone and the Gaborone West Phase 1 (of a total of 10 phases; see IBRD MAP 16923), is under construction and will provide 3,000 hoising plots, civic community and commercial land. Total cost for the infrastructure for the ongoing Phase 1 is estimated at P 25.0 million (US$22.5 million) and is being developed with assistance from USAID. Work on Phase II will have to be delayed by some two years until additional water supplies from the raised Gaborone dam are assured.

Technical Alternatives

3.10 Comparisons between alternative sources of water supply have been made on the basis of present value of the investment and operation costs of each program (see para. 3.04). Raising the Gaborone dam by 8 m proved to be the least cost solution, followed by Kolobeng and Metsemotlhaba dams in priority of development.

3.11 Water supply facilities for Gaborone West must be designed in a way that up to 1988 the water demand can be met from the Gaborone dam and treatment plant East. After 1988 additional water from the proposed Kolobeng and Metsemotlhaba dams will require a new treatment plant West. The consultant investigated three alternatives for the primary water supply system and two for the secondary water supply system and has determined the least cost solution. The solution is described in Annex 3 and is acceptable to the Bank.

Water Saving Techniques

3.12 Proposals have been put forward by the Public Health Engineer of MLGL to introduce water saving flush toilets as a standard in all high, medium and low cost houses. In a pilot project, toilets with 3 and 6 liter flushing capacity will be tested. This research work is actively being supported by the TAG group of the Bank. If the project is successful, the Botswana Housing Corporation proposes to introduce these systems on a large scale. At present, however, magnitude of water savings cannot be estimated.

3.13 Due to the scarcity of water resources and the high cost for developing of existing sources the question of returning of sewage effluent to the Gaborone dam has been investigated (see document on project file). It was agreed that presently the economic and operational requirements are not favorable, but this possibility should be borne in mind for the future when alternative sources of water may become unacceptably expensive.

Service Standards

3.14 The majority of future consumers (Gaborone West) will be residents of Site and Service areas 65%, 20% will be low cost, 10% medium cost, and 5% high cost housing. All Site and Service areas will have non waterborne on-site sanitation units. Low, medium, and high cost housing areas will be supplied through individually metered connections and will be - 15 - connected to the puiblicsewers system. Water supply to Site and Service areas will be through public standpipes,with one standpipe for 20 plots. The service levels for Gaborone are proposed to be developed as shown below.

Individual Public Total Population Water Connections Standpipes Year Served in (1000) Pop.(1000) % Pop.(1000) %

1982/83 67.5 41.0 61 26.5 39 1985/86 84.8 47.1 56 37.7 44 1990/91 124.0 60.8 49 63.2 51

Descriptionof Project Components

3.15 The project, which is more fully described in Annexes 3 and 4 consists of three parts; (a) the raising of the Gaborone dam; (b) the extension of basic water supply facilitiesin Gaborone; and (c) consulting services and investigationsfor preparation of future extensionsand training. The main project componentsare:

(a) Raising of the existing Gaborone dam by 8 m. This is mainly a civil works contract and consists of: (i) site clearance, drilling and grouting works; (ii) earthworks for the dam construction;(iii) concrete works for the spillway and outlet; (iv) instrumentation,pipeworks and fencing; (v) road, rail, power and water pipeline diversions; (vi) land acquisition;and (vii) engineeringincluding panel of experts.

(b) Expansion of treatment and transmissionfacilities for Gaborone. This will comprise civil works and supply contracts covering: (i) extension of the Gaborone East treatment works; (ii) extension of the raw and treated water pumping capacity; (iii) constructionof additionalraw and treated water mains to treatmentplant and storage sites; (iv) constructionof additional ground level reservoirs;and (v) engineering.

(c) Consultantand technical services for: (i) site investigations for the future Kolobeng and Metsemotlhabadams; (ii) engineering for the preliminarydesign of two new dams, Gaborone West treatmentplant and transmissionpipelines; and (iii) a manpower development study and training support.

Location of the various sites are shown on IBRD Maps 16921 and 16923.

Cost Estimates

3.16 Total project cost exclusive of interest during construction,is estimated at P 49.9 million (US$44.9 million). Duties, are only payable on goods imported into the Southern Africa Customs Union, of which Botswana is a member. Goods and services purchased within the Customs Union would not - 16 -

be subject to duties and taxes. Since this project has only small components for supply of material, the share of duties and taxes are not significant and will probably be below 2% of the total cost. Foreign exchange costs would amount to P 32.8 million (US$29.5 million, equivalent), or 66% of total project costs. A summary of the project cost estimates and interest during construction is shown below and a more detailed breakdown of these estimates is included in Annex 5).

Sumnaryof Project Cost

Million Pula Million US$ Foreigi as % of % of Local Foreign Total Tocal Foreign Total Total Total

1. Garbone dam raisirg 10.8 19.2 30.0 9.4 17.3 26.7 65 59

2. Expansion of treatment plant, punpirng stations, reservoirs, and transmission mains 2.6 4.0 6.6 2.3 3.6 5.9 61 13

3. Technical services and consultants 1.0 3.6 4.6 1.2 3.2 4.4 73 10

Base Line Costs (June 83 Prices) 14.4 26.8 41.2 12.9 24.1 37.0 65 82

Physical contingencies 1.4 2.7 4.1 1.3 2.4 3.7 65 8 Price Contingencies 2.3 2.3 4.6 2.1 2.1 4.2 50 10

Total Project Cost 18.1 31.8 49.9 16.3 28.6 44.9 64 100

Interest during Construction 1.4 4.2 5.6 1.2 3.8 5.0 76 11

Front end fee on Bank Loan 1/ - 0.1 0.1 - 0.1 0.1 100 -

Total Financing Required 19.5 36.1 55.6 17.5 32.5 50.0 65 111

Bank Loan of US$22.0 million

Not included above are the costs of the associated expansion of the secondary and tertiary distribution system as these costs are always pre-paid by the appropriate development authorities who then recover from sale of developed plot proceeds. However, the cost of the expansion program which is directly related to the project has been included in the Economic rate of return calculation (para. 6.04). Based on the development - 17 - program up to 1988, expansion of the distribution system will cost (including physical and price contingencies) about Pula 16.0 million (US$14.4 million). During negotiations, an assurance was obtained from Government that adequate funds will be made available in a timely manner to expand the secondary and tertiary distribution systems (Guarantee Agreement Section 2.02(b)).

3.17 Project costs are based on the awarded contract price for the dam, and on estimates by the consultant Gibb for the other components at June 1983 price levels. An allowance of 10% was added to baseline costs for physical contingencies. For price contingencies distinction was made between expected local and foreign inflation rates. For local costs, price contingency factor of 9.0% has been applied for FY1984 (for 9 months), and 12.0% and 10.0% for FY1985 and 1986 respectively. For foreign costs, the respective factors applied are 6.0%, 7.5% and 7.0%. The costs of engineering design and construction supervision have been calculated on the South African Model Form Payment Agreements for consulting engineer work which forms the basis of the contract between WUC and Sir Alexander Gibb & Partners. Engineering and supervision of construction costs are estimated at US$1.8 million for Gaborone dam raising (5% of cost), and US$0.R million for the associated treatment plant and supply system expansion (10% of cost).

Project Financing

3.18 The proposed Bank loan of US$22.0 million would finance 68% of the total foreign exchange cost of US$32.5 million and would cover about 44% of total project cost of US$50.0 million, including interest during construction and front end fee. Remaining financing requirement totaling US$28.0 million would be provided by a loan of about US$10.8 million equivalent from the Commonwealth Development Corporation (CDC), about US$5.5 million from WUC from self generated funds; and the balance of US$11.7 million from GOB as a loan from the Public Service Debt Fund (PSDF).

The roject Financing Plan is as follows:

US$ million % IBRD loan 22.0 44 CDC loan 10.8 22 Government loan 11.7 23 WUC self generated contribution 5.5 11

Total 50.0 100 %

Details are provided in Annex 11

3.19 The Bank loan would be for 17 years including a grace period of 4 years; interest wouild be variable in accordance with Bank's current procedures; and a front end fee of 1/4 of 1% would be payable on the total Bank loan of US$22.0 million on loan signature by deduction from loan proceeds. - 18 -

3.20 CDC's loan of about US$10.8 million is expected to be on same terms as those of the Bank i.e. for 17 years including 4 years grace period but with a fixed interest rate of 10.5% and no front end fee.

3.21 Government's contribution of US$11.7 million (Pula 13.0 million) will be provided as a PSDF loan, interest would be at 10% per annum for a term of about 25 years with the grace period restricted to the period of construction (i.e. a maximum of 3 years). Of the US$11.7 million, Government has already advanced about US$5.0 million to cover mobilization and initial progress payments of the dam raising contract.

3.22 The completion of all necessary loan formalities including effectiveness of the CDC loan and the PSDF loan will be a condition of effectiveness for the Bank's loan.

3.23 WUC is expected to contribute about US$5.5 million to finance all interest during construction amounting to US$5.0 million, Bank front end fee of US$0.1 million, and about US$0.4 million of project costs.

Implementation

3.24 WUC would be responsible for project implementation and has retained Sir Alexander Gibb and Partners ("Gibb"), an UK engineering consultant firm to carry out all engineering work including supervision of construction, in respect of raising the Gaborone dam. WUC, with Bank approval will also retain Gibb for preparation of detailed engineering, and tender documents for the treatment and pumping plants, service reservoirs and trunk water mains, together with supervision of construction.

3.25 Based on the award of contract in January 1983, work on the raising of the Gaborone dam commenced in February 1983 with completion estimated in October/November 1984. Construction of treatment plant and service reservoirs is scheduled to begin in September 1983 and completion is expected May 1985. An implementation schedule is included as Annex 6.

3.26 The project also provides finance for the ongoing geological investigations of the proposed two future dam sites, Sites 61 and 62 at Kolobeng and Metsemotlhaba. WUC has engaged a contractor at a cost of US$0.9 million to carry out these investigations; whilst Gibb has been retained for site supervision and for the preliminary design of the two dams, the new water treatment plant WEST, transmission pipeline and pumping stations.

Land Acquisition

3.27 Enlargement of the Gaborone dam reservoir area including realignment of the road and railway lines, and land for new reservoirs and pipelines will involve acquisition of about 1600 ha, mainly undeveloped, from some 15 different owners. As the project is in the public interest, the existing "Acquisition of Property Act" provides Government with compulsory powers to acquire the necessary land on payment of appropriate - 19 - compensation. Government does not forsee any problems of entry and acquisition, the costs of which have been estimated not to exceed Pula 200,000, (i.e. about Dula 125/ha. US$110/ha.). Government is responsible for determining the amount of compensation, and WUC is responsible for payment. At negotiations, an assurance was received from Government that it will indemnify WUC against all land compensation claims in excess of Pula 200,000 (Guarantee Agreement Section 3.03).

Procurement

3.28 Three major contracts are planned:

(i) Civil works covering the raising of the Gaborone dam costing about US$32.7 million. Tendering for the raising of the Gaborone dam followed the Bank's ICB guidelines. Tender documents and prequalification of bidders were reviewed by the Bank prior to project appraisal. Subsequent to project appraisal, tenders have been received and the tender evaluation report has been reviewed by the Bank. The contract was awarded in January 1983, on a no objection basis by the Bank.

(ii) Civil works covering construction of pumping stations, treatment plant, reservoirs, and trunk mains costing about US$5.1 million; and

(iii) Supply and erection of equipment and instrumentation of pumping stations, treatment plant, reservoirs and trunk mains costing about US$2.1 million.

3.29 Tender documents for both contracts (ii) and (iii) are being prepared in accordance with Bank ICB Guidelines, which will also be followed for the tendering evaluation and award of contracts. Equipment and instrumentation is not manufactured locally and would have to be procured outside the country. The size of the civil works contract is expected to attract both local and overseas contractors.

Disbursement

3.30 The Bank's loan will be disbursed as follows:

(i) 60% of the balance of the cost of the dam raising contract to be incurred after Board presentation (about US$28.0 million) amounting to US$17.3 million;

(ii) 100% of total expenditure for all consultants services, including the services of the Panel of Experts, amounting to US$4.7 millions.

Disbursement schedule is given in Annex 7.

3.31 CDC are expected to match the Bank's disbursement arrangements and finance jointly about 23% of the expenditure of the dam raising contract to be incurred after Bank Board presentation, amounting to US$6.3 million, and about 60% of the expenditure of the treatment plant and - 20 -

transmission system expansion amounting to US$4.5 million. The bulk of Bank funds are expected to be disbursed within the first two years. All disbursements will be fully documented and any loan funds remaining undisbursed at the end of the project would be cancelled. The project is expected to be completed by December 31, 1985, about three years after award of the Gaborone dam raising contract. The proposed closing date would be six months later at June 30, 1986 to allow adequate time (a) to settle and pay all outstanding claims and retention monies, and, (b) to complete payment for all preparatory works on dam Sites No. 61 and 62 up to and including preparation of bid documents.

3.32 During appraisal, Government requested retroactive financing of about US$1.7 million equivalent to about 3% of total project cost, and 8% of Bank's proposed loan of US$22.0 million. The retroactive finance would cover the cost of (i) engineering consultants fees for a) the preparation of preliminary engineering, bid documents, evaluation and award of contracts for both the raising of the Gaborone dam and the associated expansion of the treatment plant and the main supply system; initial supervision of construction of the Gaborone dam raising prior to Board presentation, and cost of the expert panel totalling about US$0.7 million; and b) preliminary engineering of dam sites Nos. 61 and 62 of about US$0.3 million; and (ii) the ongoing site and soil investigations contract for dam sites Nos. 61 and 62 of about US$0.7 million. This request is justified and should be supported on the grounds that Government has already made a substantial advance payment (para. 3.21); WUC has or will prepay these expenditures from funds earmarked for other investments; and the urgency of both the raising of the dam and need to firm up additional water sources.

Water Resource Aspects

3.33 Gaborone dam is the only existing developed source of water for Gaborone. The next three least cost sources have been identified as:

(i) Kolobeng dam (Site 61), (ii) Mletsemotlhaba dam (Site 62), and (iii) Ramotswa Wellfield.

3.34 Based upon a risk of source failure of once in 20 years (5%), the raised Gaborone dam and the proposed Kolobeng and Metsemotlhaba dams will have the following safe yields:

Average Yield Cumulative Demand FY …mil ms/a ------Gaborone dam 11.5 11.5 11.7 1988 Kolobeng dam 4.0 15.5 16.0 1994 Metsemotlhaba dam 3.0 18.5

These figures indicate that the Kolobeng dam should be completed by the end of 1988, and Metsemotlhaba dam by 1994. To achieve an end 1988 completion date, decision to proceed with the project will be required by end 1985. In addition to the two new dams, the potential of the existing Ramotswa - 21 - wellfield has yet to be fully evaluated with regard to long term safe yield. Preliminary estimates range from 1500 to 5000 m3 /d which would represent a relatively minor contribution to Gaborone's water supply.

Environmental and Health Aspects

3.35 The project would contribute to maintain the present high standard of water supply and health conditions. The project does not include sanitation or public health education components as these are being satisfactorily addressed by the Town Council, MH and UNDP Global Sanitation projects. The raising of the dam would have minor adverse impact as the land to be flooded is marginal grazing land with virtually no permanent human settlement.

IV. THE BORROWER AND THE IMPLEMENTING AGENCY

The Borrower

4.01 At the request of the Government, the borrower and the implementing agency for this project would be the Water Utilities Corporation. In the previous second water supply project Government choose to be the borrower in order to on lend to the WUC (the implementing agency) on more generous terms. However WUC is now adequately managed and financially viable to undertake the project.

Organization, Management and Staff

4.02 WUC was established in 1970 as a parastatal entity to operate on sound commercial public utility lines under the Water Utilities Corporation Act. This Act was drafted with Bank Group assistance provided under a previous Bank Group project (para. 1.34). WUC's initial responsibilities were (a) to operate and maintain the bulk water supply facilities for the Shashe Infrastructure Project covering the townships of Francistown and Selebi Phikwe, and (b) to replace the existing government agency, the Gaborone Water and Electricity Unit, as the sole supplier and distributor of water in the Gaborone-Lobatse region. The Second Water Supply project helped expand WUC's areas of responsibility to the distribution system of Francistown township. It is Government's general intention to expand WUCs mandate to cover bulk supply and distribution of water to Jwaneng (a diamond mining town east of Gaborone) in 1983, and the distribution of water in Selebi Phikwe at some later date. Precise timing depends on the availability of staff and finance. Jwaneng will be supplied eventually from the Gaborone dam when adequate water is available.

4.03 WUC's Board consists of nine members, all of whom are appointed by the Minister of MRWA. The Chairman is the Permanent Secretary of MRWA, the remaining eight members comprise four drawn from the public sector, and four from the private sector. The Board meets at least quarterly, approves budgets and establishes policy. As the need arises, the Board delegates certain authorities to sub-committees to deal with such specific matters as - 22 - procurement and contract award, loan negotiations, the recruitment of senior staff, etc. The Chief Executive Officer (CEO) known as Engineer/Manager is appointed by the Board to manage the day-to-day business of the Corporation. The Act empowers the Minister of MRWA to give directions^to WUC that are consistent with the Act and are related to broad policy matters but not for day-to-day operations.

4.04 WUC is presently organized into two operating divisions: the Gaborone-Lobatse Division based on Gaborone, and the Shashe Division based on Selebi-Phikwe. The Shashe division currently supplies water in bulk to the township, power plant and mine at Selebi-Phikwe, and provides a full commercial service in Francistown. Each division is headed by a Divisional Engineer, who reports to the CEO and is primarily responsible for the operation, maintenance and routine expansion of the water supply systems in his area. The divisional engineer is also responsible for meter reading, revenue collection, new service connections and disconnections in his area. In addition to the two Divisional Engineers, the CEO is assisted by a Principal Administrative Officer in charge of administration, a third Divisional Engineer responsible for planning and supervision of new water works, a Chief Accountant, and a recently appointed Project Engineer for the raising of the Gaborone dam. The routine accounting work of the Shashe division is carried out in Selebi Phikwe under the direction of a Principal Accountant, reporting to the Chief Accountant in Gaborone. The accounting of the Gaborone division is carried out under the direction of the other Principal Accountant operating within WUC's headquarters, and he is also responsible for the consolidation of the accounts of the Corporation. An organization chart of WUC is shown in Annex 9.

4.05 The present organization structure of WUC is well suited to its needs and provides a sound framework into which WUC can eventually absorb the water supply and commercial operations in the remaining towns of Jwaneng and Selebi-Phikwe.

4.06 The present expatriate CEO has been in charge of WUCs affairs since mid 1982. He is an able and highly experienced water engineer and a competent manager. His services are covered by a two year renewable contract. In previous loans it was agreed that WUC would consult with the Bank before making any appointment to the position of CEO. WUC has honoured this assurance and it is continued in the proposed loan. (Loan Agreement Section 4.04).

4.07 The First Water Loan (776-BT) included an assurance that any appointment to the position of Chief Accountant should have appropriate qualifications and experience but this assurance was dropped from the Second Water Supply Project (Loan 1763-BT). Notwithstanding the recent change of Chief Accountant, WUC will not be asked to reinstate this assurance as the Corporation may be relied on to appoint competent management.

4.08 WUC has developed into an effective and well-managed organization. It has a total establishment of 394 including proposed staffing of Jwaneng. Of the 31 senior posts, 20 are filled by expatriates. In addition to the recent appointment of a project engineer (para. 4.04), the size and complexity of the proposed project requires the appointment of a project accountant who could eventually assume the - 23 - responsibilities of internal auditor. Following construction of the project, responsibility for the operation and maintenance of the facilities would be assumed by the Gaborone/Lobatse divisional engineer, with some increase in skilled and unskilled personnel.

Personnel Development and Localization

4.09 The steady progress of WUC as an organization over the past nine years is good evidence not only of the competence of its management but also of the efforts that WUC has made in the development of its personnel. Faced with an acute countrywide shortage of trained personnel (para. 1.20), WUC's practice has been to provide its recruits with the necessary training, either on-the-job and/or through formal courses, and to promote them through the ranks depending on the experience and levels of skill which they acquire over the years. In recognition of WUC's staffing needs a sound training policy and program was established some six years ago which is periodically reviewed and up dated. When the program was formulated, the lack of good promising Batswana candidates with minimum education standards was recognized as a major constraint to rapid progress in localisation, and in fact this has been the experience over the past six years. Notwithstanding management's consistent attention to training, progress has been both slow and limited. In common with the experience in other African countries, the most promising trainees leave as soon as they attain modest levels of qualification and competency for better opportunities in the private sector or outside the country.

4.10 The second Water Supply project appraisal report noted that WUC made good use of training facilities available within the country and externally; this use has been continued. WUC also encourages staff generally to continue their general education by financing night classes and the more usual externial correspondence courses. Many of WUC's artisan cadre continue to benefit from technical training offered by DWA and the National Center for Vocational Training (mechanics, plumbers, etc.). The majority of WUC's accounting staff are following some form of upgrading courses mainly covering book-keeping. Three of the accounting staff were enrolled in either the three year afternoon course run by the Botswana Training College or the four year evening course given by the Institute of Development Management at the University of Botswana both leading towards a professional qualification. Unfortunately the most promising trainee has recently left WUC for improved prospects outside Botswana. With regard to the water technicians, WUC continues to send promising staff to the one year course for water works operators provided by the Swaziland College of Technology (SCOT). The best of the SCOT graduates are expected to progress to water superintendent after five years work experience. One of the earliest trainees was appointed the first local water superintendent during 1982; whilst initial indications are not promising, it is much too early to make an overall judgement on the success of the program. It has always been recognised that WUC would be unlikely to localize completely the water superintendent staff level before 1990. Given the relatively small WUC establishment, the training programs described above are well conceived and implemented, and should meet WUC's future staffing needs below the professional and sub-professional level. At this time, local staff turnover and wasteage is not excessive given the country's growing manpower demands. - 24 -

4.11 The major personnel problem which continues to face WUC is it's excessive reliance on expatriate staff. The professional and sub-professional cadres comprising engineers, accountants, and water works superintendents (with the one recent exception) are staffed by expatriates. For the engineer cadre, there continues to be no significant improvement in the very limited number of Batswana civil engireering graduates available in the country. WUC will have to compete for this limited number of graduates against the attractions of the diamond mines and the private sector. With the training program mentioned in para 4.09 WUC expects to localize all water works superintendent posts by 1990. The same target date was set for the accountant posts. An additional concern is that WUC is experiencing increasing expatriate staff turnover. One of the past strengths of WUC has been staff continuity both local and expatriate. This resulted in the establishment of sound technical and commercial practices which have been consistently applied during the fairly rapid growth and evolution of WUC. However, within a space of twelve months, five senior staff members comprising the CEO, chief accountant, two divisional engineers, and the divisional engineer for new capital projects will have left, others are expected to follow. Two major factors are responsible - firstly Botswana's fairly high and accelerating rate of inflation coupled to the recent devaluation of the pula for which no compensation has been granted by WUC on Government's instruction; secondly WUC's expatriate staff conditions, which are based on the UK supported overseas civil service scheme, have been eroded following reduction in UK's level of support. As a result there has been a marked drop both in the number and level of qualified candidates willing to accept more than one to two-year contract. This problem is common to other parastatals. Whilst Government is sympathetic, the issue of precedence for the substantial expatriate civil service and the weakened economy puts them in very difficult position.

Manpower Development Study and Implementation Program

4.12 WUC's training program for lower level staff is sound and future staffing and training requirements should be met without great difficulty. However, the need to accelerate the supply of suitably qualified Batswana at all management and senior technical levels, is acute. WUC is anxious to mitigate its current heavy dependence on expatriates and the special problems posed by their increasing cost and turnover at a time of operational expansion and rising water demand. To this end WUC intends to undertake a special study of this manpower constraint. The object of the study would be to design a short and long-termstrategy, and implementation program, for the recruitment, education, training and succession of Batswana professional and sub-professional cadres which would, over time, alleviate and eventually remove WUC's dependence upon expatriates. An intensive study of short duration is envisaged. This will require support from a short-term consultant, or expert, in water sector management development to assist WUC with the design and implementation of the study. The Bank's role in the study would be to provide, as a minimum, information and advice on the availability of current and planned relevant technical education opportunities within the region, or elsewhere. Finance has been included in the proposed Bank loan both for the study and to assist with the first phase of a senior staff development program. During negotiations an assurance was obtained from WUC that, if required, a consultant to - 25 - assist with the study would be appointed by Marci 31, 1984 with qualifications, experience, terms of reference and contract terms acceptable to the Bank. (Loan Agreement Section 3.02(b)).

Accounting and Audit

4.13 The accounting system of WUC is commercially oriented. It was developed and implemented during the early years of WUC with assistance from Cooper Brothers, an accounting firm from the UK. Cooper Brothers also advised WUC on the initial choice of accounting machines, used mainly for billing and consumer accounts records. However, with the recent growth of consumers consideration is now being given to replacing the present billing accounting machines by a simple computer (para. 4.17). Accounting practices and procedures are adequate; separate accounts are maintained for the various water supply operations. WUC's accounts are well kept and its annual financial statements have been published promptly.

4.14 Whilst WUC does not currently have an internal auditor's position in its establishment, certain internal audits have been conducted on an informal basis. WUC accepts the need to formalize its internal audit function and proposes that if a project accountant is appointed he will take over the internal auditor function on completion of the project. Additionally the appointment of this project accountant should permit the existing principal accountant Gaborone/Lobatse division to undertake informal internal audit duties during this interim period.

4.15 External audit of WUC's accounts has been carried out to a high standard, by Coopers and Lybrand, an international accounting firm (formerly Cooper Brothers of UK). WUC's audited annual accounts include separate accounts for the Gaborone/Lobatse division, the Francistown water undertaking, and the Shashe division in order to determine the individual rate of return of the various divisions as required by previous loans. The audited annual accounts have been submitted consistently to the Bank Group within five months after the close of each year, as provided for in previous Loans. During negotiations, assurances were obtained that WUC would continue to maintain separate accounts for the Gaborone/Lobatse division, the Shashe division, and the Francistown Undertaking and that annual accounts audited by independent auditors acceptable to the Bank would be submitted to the Bank within five months of the end of the financial year (Loan Agreement Section 5.01 and 5.02(a) & (b)).

Billing and Collection

4.16 Prior to the transfer of the Francistown water undertaking to WUC, the processing of billings for the two divisions of Gaborone/Lobatse and Shashe was centralized in Gaborone from monthly meter readings sent to Gaborone. Following the assumption of responsibility for Francistown by the Shashe division, the divisional number of consumer accounts jumped from 1700 to 4,000. This prompted the decision to decentralize and transfer the Shashe divisions' accounting and billing to Francistown. The transition was well planned and is working satisfactorily. Meters continue to be read monthly. Due to the relatively modest numbers of consumers in each of the two existing divisions (Gaborone/Lobatse 7,000 and Shashe 4,000), meter readers normally only read meters on certain days in the month and are - 26 - employed elsewhere within the corporation for the remainder of the month. The flexibility inherent in this arrangement is essential for a small organization such as WUC to control operating costs.

4.17 WUC's billing performance has in the past been completely satisfactory with total accounts receivable averaging about 35 days. In September 1982, total accounts receivable for the Gaborone/Lobatse division averaged about 56 days but this was a temporary situation due to senior accounting staff changes, and machine breakdowns. As the capacity of the present mechanical accounting system for billing is now fully utilized and the machines are reaching the end of their useful life, WUC with its auditors assistance, is investigating computer billing systems as a possible option to help maintain a satisfactory billing performance and cope with future increases in number of consumers.

V. FINANCIAL ASPECTS

5.01 As mentioned in para. 4.15, WUC maintains separate accounts for the Gaborone/Lobatse and Shashe divisions, and as agreed under the second water supply project also maintains accounts for the former Francistown water undertaking separate from those of the Shashe division. Summarized past and future financial Statements for the three operations, as well as the estimated future financing plan for the Gaborone/Lobatse division, are analysed in the following paragraphs.

WUC's Past Operating Results and Financial Position

5.02 WVC's income statements for the three operational units for five years ending March 31, 1982 are: - 27 -

WUC's Income Statements FY1978 through 1982

Year EndingMarch 31 1978 1979 1980 1981 1982

Sales in '000m3 Gaborone-LobatseDivision 3,920 4,584 5,365 5,497 6,223 ShasheDivision - PotbleWater 1,762 2,032 2,573 2,476 3,258 Francistown - Undertaking 425 e/ 1,006 849

Average Tariff, in thebe/m 3 Gaborone - Lobatse Division 33 33 35 40 40 Shashe Division - Potable Water a/ 54 50 48 53 53 Francistown Undertaking - - - 41 41

Pula 000's OperatingRevenues Gaborone- LobatseDivision 1,476 1,709 1,968 2,243 2,581 Shashe Division b/ 2,486 2,609 2,857 2,920 3,464 Francistown - Undertaking - - 175 359 436

Total Operating Revenues 3,962 4,318 5,000 5,522 6,481

Operating Expenses Gaborone - Lobatse Division 890 1,112 1,354 1,595 1,776 Shashe Division 1,025 1,129 1,239 1,344 1,577 Francistown - Undertaking - - 123 273 334

Total Operating Expenses 1,915 2,241 2,716 3,212 3,687

Operating Income Gaborone - Lobatse Division 586 597 614 648 805 Shashe Division 1,61 1,480 1,618 1,576 1,887 Francistown - Undertaking 52 86 102

Total Operating Income 2,047 2,007 2,284 2,310 2,794

Operating Ratio, % Gaborone - Lobatse Division 60 65 69 71 69 Shashe Division 41 43 43 46 46 Francistown Undertaking - - 70 76 77

Financial Rate of Return, % Actual: c/ Gaborone - Lobatse Division 11.1 11.5 10.2 8.9 8.0 Shashe Division 7.8 8.1 8.0 8.0 8.0 Francistown Undertaking. - - - 14.0 7.9

Required: d/ Gaborone - Lobatse Division 8.0 8.0 8.0 8.0 8.0 Shashe Division 7.5 8.0 8.0 8.0 8.0 Francistown Undertaking - - - 11.0 -

a/ Including contributions from raw water consumers. tI Includes sales of raw water. c/ See computation in Annex 5.1, p.2, on net fixed assets for the Gaborone - Lobatse Division and on gross fixed asstts for the Shashe Division. d/ Under Credit 233-BT for Gaborone - Lobatse Division, Loan 776-BT for Shashe Division, and Loan 1763-BT for Fiancistown Undertaking. e/ WUCtook responsibility for Francistown Undertaking October 1, 1979. - 28 -

As indicated in the above table, WUC has been able to meet the various financial rate of return (FRR) targets in each of the last five fiscal years.

5.03 WUC's financial position as of March 31, 1982, is summarized below:

WUC's Audited Balance Sheet as of March 31, 1982

Pula Millions Gaborone- Water Lobatse Shashe Francistown Utilities Division Division Undertaking Corporation

ASSETS

Net Fixed Assets 9.6 21.9 5.9 37.4

Current Assets Cash and short-term deposits 2.2 2.0 0.2 4.4 Inventories 0.2 0.1 0.1 0.4 Accounts Receivable 0.5 1.0 0.2 1.7 Total Current Assets 2.9 3.1 0.5 6.5

Total Assets 12.5 25.0 6.4 43.9

LIABILITIES

Equity Retained Earnings 0.1 1.8 0.2 1.1 Others 4.2 2.7 1.0 7.9 Total Equity 4.3 3.5 1.2 9.0

Long-term Debt 6.9 19.4 4.4 30.7 Current Liabilities 1.3 2.1 0.8 4.2 Total Liabilities 12.5 25.0 6.4 43.9

WUC's debt/equity ratio of 77/23 as of March 31, 1982, was marginally worse than the forecasted position of 73/27. However, this represented considerable improvement over the position at the time of WUC's creation, when it had virtually no equity. Such a capital structure is the direct result of Government's policy of making financial contributions to WUC's development program mainly in the form of commercially oriented loans which are recovered from water consumers through tariffs, rather than as equity, WUC's capital structure is projected to continue to improve. - 29 -

Financial Performance of Gaborone/Lobatse Division Water Supply Operations

5.04 Gaborone/Lobatse financial performance over the past three FY's 1980 through 1982 has been overall very much as forcasted in the second water supply project in September 1979. Demand, average tariff rates and water revenues have grown as predicted. Operating expenditures (including depreciation) has been controlled, whilst the operating ratio has been in the satisfactory range of 69 to 71. The rate of return target of 8% on net revalued assets has been consistently met or bettered thereby enabling the Gaborone/Lobatse division to generate a favorable cash position (aided by good billing and collection performance and tight financial control). Operations and maintenance levels have been fully satisfactory.

Financing Plan Gaborone/Lobatse Division 10/

5.05 As the project is expected to be physically completed within three years by about mid 1985, the financing plan for the Gaborone/Lobatse division covers the four FY's 1983 through 1986 and is summarized as follows:

10/ Since the preparation of the financing plan for Gaborone/Lobatse division, the 1982/83 rains in the Gaborone area have completely failed. Emergency drought measures have been introduced effective April 1, 1983 to conserve the remaining limited water supplies. As a result, the expected level of water sales for FY1984 is unlikely to be achieved. At this early stage, it is difficult to quantify the expected loss of revenue but it has been prudently estimated at about Pula 3.0 million. Government readily appreciates that loss of revenue of this magnitude would jeopardise WUC's proposed contribution to project financing at a critical time and has therefore agreed to provide bridging finance in the form of a special Pula 3.0 million PSDF loan on concessional terms. With this Government assistance offsetting the expected FY1984 loss of revenue, the financial projections and assessments in Chapter V and Annex 10 remain valid. - 30 -

BOTSWANA WUC - Gaborone/Lobatse Division Financing Plan FY's 83 through 86 Pula millions

Pula US$ millions millions %

Sources of Funds:

Internal generation Retained profits 18.7 16.8 26.7 Depreciation 5.4 4.9 7.7 24.1 21.7 34.4 Less: Debt service (P&I) 7.1 6.4 (10.1) Working capital requirement 2.1 1.9 (2.9) 9.2 8.3 (13.0) Net internal generation 14.9 13.4 21.4

External Sources External borrowings 37.5 33.8 53.5 Government borrowings 11.5 10.4 16.4 Consumers capital contributions 11.7 10.5 16.6

Total external sources 60.7 54.7 86.5

Total funds 75.6 68.1 107.9

Total Capital Expenditure Project 49.9 44.9 71.2 I.D.C. 5.6 5.0 8.0 Other 14.6 13.1 20.8

Total Expenditure 70.1 63.0 100.0

Surplus Cash Pula 5.5 US$ 5.1 7.9%

5.06 The financing plan is considered reasonable and within WUC's financial capacity. In previous water sectors' loans, Government as the borrower has borne the foreign exchange risk and only passed on to WUC 3%or less of the actual foreign exchange fluctuation. Previous exchange differences have been relatively modest due to stable exchange rates. However, WUC as the direct borrower will now assume the full foreign exchange risks which is in accord with Bank policies. Should the recent volatility in exchange rates continue, this could pose substantial risks and costs for WUC in face of its rapidly increasing external debt burden. Government is now reassessing its policy on foreign exchange risks on external borrowings by parastatals. In line with past practice Government would be expected to share the risk should the cost prove excessive. - 31 -

5.07 The financing plan assumes the following tariff increases effective at the start of each financial year: 50% for FY1984, 50% for FY1985, and 30% for FY1986, which would produce rates of return on net revalued assets in operation of 17.6% FY1984, 12.2% FY1985 and 9.5% FY1986. These high rates of return in the first two years results from the benefit of the substantial tariff increases on a basically unchanged assets in operation base. In the third year, the net assets in operation include the cost of the project and the rate or return starts to fall back into to the 8% range. WUC considered limiting tariff increases for the FY's 1984 and 1985 to those required to maintain an 8% rate of return but decided this would have resulted in an uneven tariff increase pattern and inadequate cash flows. A steady 8% rate of return achievement would have required tariff increases of about 4% in FY 1984, 74% in FY1985, and 47% in FY1986; and cash flow would have been reduced by about Pula 4.8 million (US$4.3 million) over the three year period. WUC's past financial performance has been excellent, partly in response to the Bank's 8% rate of return target. In recognition of the need for further substantial investments over and above the proposed project within the next five years, during negotiations WUC agreed to maintain the 8% rate of return target on revalued assets in operation for the Gaborone/Lobatse division (Loan Agreement Section 5.04(a)).

Future Operations and Financial Position of Gaborone/Lobatse Division

5.08 Forecast income statements, balance sheets, and funds flow statements for the Gaborone/Lobatse division for FYs 1983 through 1986 are given in Annex 10.

5.09 Based on existing figures for the Gaborone/Lobatse division, revenues from water sales are expected to grow by about 11% in FY1984 to about 7.2 million M3 and thereafter to taper down to a steady annual growth rate of about 5% p.a. by FY1987. The volume of water sold in FY 1988 is expected to reach around 10.3 million M3, 66% increase over the FY1982 level of 6.2 million M3. Revenues over the same period are expected to grow to about Pula 16.8 million compared to the actual revenue for FY 1982 of Pula 2.6 million, an increase of 550%, derived primarily from tariff increases. Direct operating expenses (including depreciation) percentage is forecast to remain steady at around 42% from FY1984 onwards; notwithstanding a jump in the annual depreciation charge from Pula 0.6 million in FY1984 to Pula 2.7 million by FY1986. Interest chargeable to operations will rise dramatically from Pula 0.4 million in FY1983 to a maximum of Pula 4.8 million in FY1986 (following project completion); annual interest payable then commences to decrease progressively with repayment of principal. From FY 1986 onwards rates of return are expected to average around 8.0%, based on tariff increases which reflect local inflation rates i.e. zero tariff increases in real terms.

5.10 Given the substantial increases in depreciation and the 8% rate of return, cash flows are expected to remain healthy and be more than adquate to cover the debt servicing of the proposed financing plan, together with nonral renewals and expansion of the distribution system. Should further substantial capital expenditure be incurred around FY1988 onwards, additional external financing will be required which could strain WUC's financial resources. During negotiations WUC gave an assurances not - 32 -

to incur any loan without Banks prior approval, unless there is sufficient internal cash generation to cover 1.5 times maximum future debt service (Loan Agreement Section 5.06).

Tariffs

5.11 The tariff level and structure of WUC's Gaborone/Lobatse and Shashe divisions and of Francistown water operations as of November 1, 1982 are summarized in the following table.

Gaborone Lobatse Shashe a/ Francistown …------~~~~--- Thebe/m…Thebe/m ------For 1st 10 M3 /month and for Standpipe delivery 23 23 23 25 Next 20 M 3 /month 42 55 36 63 Next 40 M3 /month 56 84 42 82 In excess 70 M3 /month 49 70 37 75

a/ Excluding contributions from raw water consumers -

5.12 The first category is a social lifeline tariff for small consu- mers and for standpost delivery. Although the average tariffs for the Gaborone/Lobatse division will require substantial annual increases over the next several years, it is envisaged that the social lifeline tariff increases would correspond to the general level of urban inflation. Consequently the bulk of the tariffs increase are expected to be borne by the larger consumers. In particular, during appraisal both WUC and Government agreed that consumers using more than 70 m3 /month should pay the highest rates. This will be reflected in the tariff adjustment for Gaborone/Lobatse division to be introduced effective April 1, 1983.

5.i3 The varying tariffs scales and levels between the respective divisions reflect their individual operating and capital structure characteristics and debt servicing obligations. The tariff levels for Francistown were determined as part of the financial obligations agreed under the Second Water Supply Project (September 1979). These provided for a modest rate of return growth from 0% in FY1982 rising to 3% in FY1987 and there after in recognition of financial impact of the long run marginal cost of water for Francistown beyond 1987. Had these modest rates of return not been adopted unacceptably high tariffs would have resulted. WUC also agreed to progressively increase Francistown tariffs up to FY1987 to reach the targeted rate of return of 3% on net revalued assets in operation.

5.14 Government is still firmly commited to its long standing policy of not subsidising the urban water sector. During appraisal the general level of required tariff increases in para. 5.16 were discussed and agreed in principle with Government and WUC. Since then WUC Board has approved, with Government's endorsement, the tariff increases which became effective April 1, 1983. WUC's proposal will increase average tariffs by about 50% to Thebe 72/M3 (US$2.52/1,000 US gallons) and at the same time will introduce a progressive tariff structure which will place the bulk of the - 33 - tariff increase burden on the industrial, commercial and large residential consumers. Tariff increases to the smaller consumers will be limited to about 20% thereby raising the cost of water to about Thebe 28/M3 (US cents 98/1,000 US gallons) for the first 10 M3 per month. Future tariff increases beyond FY84 will be introduced at the commencement of each FY (April 1), and will be calculated to achieve rate of return targets, debt service coverage, and self-generated investment needs.

Rate of Return - Gaborone/Lobatse Division

5.15 As part of past Bank support, WUC was required to achieve a rate of return of at least 8% on revalued net assets of the Gaborone/Lobatse division. This requirement was reduced for FY's 1975, 1976 and 1977 but reinstated in FY1978 and continued through FY1983. Except for FY's 1976 and 1977, of which the Bank had prior knowledge, WUC has consistently met its rate of return targets by appropriate tariff adjustments and tight financial control.

5.16 To continue to meet or better the existing 8% rate of return target, WUC proposes to increase tariffs as follows:

FY ending March 31 Average tariff Annual % Increase Average tariff Pula/M3 Current Real Real Terms Terms Terms Pula/M3

1983 (actual base yr) 0.48 0.48 1984 0.72 50 39 0.67 1985 1.08 50 41 0.94 1986 1.40 30 21 1.14 1987 1.51 8 0 1.14 1988 1.63 8 0 1.14

Overall Growth Rate FY's 1983-1988 240% 138%

Revaluation of Assets

5.17 The current method of revaluation of assets is based on the Government's Urban Cost of Living Index for "All Income Groups" issued by the Central Statistics Office of MFDP. This index served as a reasonable approximation when Botswana was experiencing modest inflation roughly equal to the price increases of imported goods. However with the increasing disparity between the accelerating rate of local inflation and the slow down in the price increases of imported capital goods, the present method of revaluation could lead to the need for excessive tariff increases. Consequently WUC has requested that the basis of revaluation be amended. During negotiations, it was agreed that WUC will revalue its assets annually using methods of valuation satisfactory to the Bank (Loan Agreement Section 5.05). - 34 -

Affordability for Low Income Groups

5.18 In 1975 the NRWA launched a sociological and housing attitudes survey in low cost housing areas in order to determine guidelines for future planning. As far as the physical aspects of water supply and sanitation was concerned, the survey revealed that water borne toilets were favored, whilst communal toilets were not acceptable, dissatisfaction existed with the standard of standpipe water supply, and preference was for individual garbage bins. The affordability aspect was however another matter. Since reliable statistical sources on Gaborone urban income are not available only estimates are possible. In the low income group, the average household size is 6.2 persons, of whom an average 1.3 persons are in employment. The CY1982 average household income in this group is estimated to range between Pula 100 and Pula 150 and the urban poverty line per household is estimated at P 100/month. Based on standpipe water consumption of 45 1/cd, per person, a poverty line household's water bill would absorb about Pula 2.00 or about 2.0 % of total income, at existing standpipe rate of Thebe 23/M3 . This is considered affordable even if standpipes tariffs were to increase by about 10% in FY1983. The Town Council reimburses WUC for actual metered consumption of individual standpipes and recovers the cost through a monthly flat charge incorporated in plot fees. (para. 1.17).

VI. PROJECT JUSTIFICATION

Project Benefits

6.01 The project would satisfy the water demand in Gaborone up to about 1988 and would thus enable the Government to continue with the large-scale development of Gaborone West. Demand in Gaborone at present has already outstripped the safe yield of the existing dam, and provisional measures (raising the existing spillway by 1 meter) are envisaged by WUC in order to avoid possible water shortages until the new dam is completed. The people in low-income areas of Gaborone, who pay for water as part of a fixed monthly fee per plot, would also benefit from the (cross) subsidized tariff for water supplied through standposts. The project would also finance foundation investigations and preliminary engineering studies for the construction of the Kolobeng and Metsomotlhaba dams, treatment plant, and transmission water mains, which would be necessary to meet the water demand forecast for Gaborone beyond 1988.

6.02 The two previous Bank financed projects helped to strengthen WUC's organizational and financial capability, as demonstrated by the orderly transfer of the Francistown water undertaking in the second project. The proposed project would continue to strengthen WUC by expanding the Gaborone/Lobatse Division's capacity to meet the growingdemands of industrial and residential consumers. WUC is required as part of its mandate to recover from existing water consumers all operating and debt servicing costs, and under the Government's long range planning will progressively assume full responsibility for the supply and - 35 - distribution of potable water to the five major urban areas of Botswana: Gaborone, Lobatse, and Francistown (in effect); Jwaneng and Selebi-Phikwe (future developments).

Least Cost Solution

6.03 Previous engineering studies have identified the raising of the Gaborone dam by 8 m to be the most economic alternative (paragraph 3.04 and 3.10). Comparisons among alternative programs have been made on the basis of the present value of investment and operating costs of each program. The proposed project has the lowest present value.

Economic Rate of Return (ERR) and Pricing Consideration

6.04 The Economic Rate of Return of the project is the discount rate at which the present value of the capital, and operating and maintenance costs is equal to the present value of benefits attributable to the investment over the economic life of the project. In the cost calculaion, taxes and duties have been excluded, whilst shadow pricing of foreign exchange and labor was not applicable. Capital costs include the annual investments in the expansion of the secondary and tertiary distribution system up to 1988 when the additional water supply is fully committed (para. 3.16). Capital costs are based on mid 1983 prices plus appropriate physical contingencies; incremental operating and maintenance costs are based on 1983 actual expenditure levels, split 40% variable/60% fixed. The incremental water revenues were taken as the best proxy of the benefits attributable to the investment and have been calculated on proposed average tariff changes in real terms (based on 1983 price levels). On this basis, the ERR is 8.3%, and would have been higher if unquantifiable health, environmental, social benefits and consumer surplus could have been included. The rate of return is sensitive to a 10% increase in costs or a 10% reduction in benefits by about 1%. A combined 10% increase in costs and 10% reduction in benefits would result in an ERR of 5.9% (details of the calculations are given in Annex 12).

6.05 The average incremental cost of supply for the project area is estimated at Pula 1.30/m3 at an opportunity cost of capital of 10%. The average incremental cost is marginally higher than the expected average selling price of Pula 1.16/m3 (in real terms) in 1985 when the benefits become available. The highest block of the tariff is expected to be priced around Pula 1.40 which is above the incremental cost. (Details of the calculations are given in Annex 12).

Project Risks

6.06 Project construction would be relatively straightforward and would not pose any significant risks particularly as the Expert Panel will continue to monitor safety aspects during the construction of the dam. WUG's record of good management gives assurances that the Project will be satisfactorily operated and maintained after commissioning. The only appreciable risk may be W(C's ability to increase Gaborone water tariffs to the necesssary levels, which are estimated to more than double in real terms over the next three years. However, this risk is acceptable in view of: (i) the Government's firm policy of not subsidizing urban services; - 36 -

(ii) WUC's plan to increase Gaborone tariffs in gradual steps each vear; and (iii) WUC's intention to maintain a socially acceptable tariff structure, cross subsidy for standpost users, as well as to those with minimum house connections and consumption by cross-subsidisation from the largest industrial and commercial consumers.

Project Monitoring System

6.07 The most important monitoring aspects concern implementation of the proposed Project and actions on tariffs. Suitable indicators for monitoring project implementation and for measuring performance against project goals are set out in the project monitoring systems given in Annex 13. During negotiations, it was agreed that, after completion of the proposed Project, WUC will prepare a *Droject Completion Report" on the basis of an outline to be agreed with the Bank (Loan Agreement Section 3.04(e)).

VII. AGREEMENTS REACHED AND RECOMMENDATION

Agreements to be Reached.

7.01 During negotiations, assurances were received from Government that:

(a) a copy of the reports on review of existing water legislation covering domestic and international water regulation will be made available to the Bank for review and comment prior to the introduction of legislative changes, (para. 1.10, G.A. Section 3.02);

(b) Government will ensure adequate funding for the secondary and tertiary distribution systems in a timely manner; (para. 3.16, G.A. Section 2.02(b));

(c) Government will reimburse WUC for any land acquisition costs connected with the raising of the Gaborone dam, inexcess of Pula 200,000 (para. 3.27, G.A. Section 3.03).

7.02 During negotiations, assurance were received from WUC that:

(a) WUC will continue to retain the services of the Panel of Experts to review construction of the dam, and after completion of the dam will make satisfactory arrangements for the periodic safety inspections (para. 3.06, L.A. Sections 3.02(c) and 4.02(b));

G.A. = Guarantee Agreement; L.A. = Loan Agreement. - 37 -

(b) WUC would continue to retain engineering consuLltants for project implementation, whose qualifications, experience, and terrms and conditions of employment would be satisfactory to the Bank (para 3.24 and 3.25, L.A. Section 3.02(a));

(c) WUC would consult with the Bank prior to making any appointments to the position of Chief Executive officer. Appointee would have the necessary qualifications and experience, (para. 4.06, L.A. Section 4.04);

(d) If required, WUC would appoint consultants to assist with the manpower development study by March 31, 1984 with qualification experience terms of reference and contract terms acceptable to the Bank (para. 4.12, L.A. Section 3.02(b));

(e) IWUC would submit its audited accounts, including separate accounts of its Gaborone/Lobatse and Shashe divisions and Francistown Undertaking together with the auditors' reports, not later than five months after the close of each financial year and will continue to employ independent auditors, acceptable to the Bank, (para. 4.15, L.A. Sections 5.01 and 5.02(a) and (b));

(f) WUC, in respect of Gaborone-Lobatse Division will adjust tariffs so as to enable the Division to earn a rate of return of not less than 8% on revalued net fixed assets in operation (para. 5.07, L.A. Section 5.04(a); method of revaluation to be acceptable to the Bank (para. 5.17, L.A. Section 5.05);

(g) WUC will obtain Bank's prior agreement before incurring any loan if the cash generation for the previous year is less than 1.5 times maximum future debt servicing requirement (para. 5.10, L.A. Section 5.06);

(h) WUC would prepare, after completion of the proposed Project, a "Project Completion Report" on the basis of an outline to be agreed with the Bank (para. 6.08, L.A. Section 3.04(e)).

Recommendations

7.03 Retroactive finance of up to US$1.7 million is recommended to cover technical and consultant services incurred after July 1, 1982 and prior to loan signature, (para. 3.32, L.A. Schedule 1, para. 3).

7.04 The completion of all conditions of effectiveness for the CDC loan together with the completion of all necessary formalities for the Government PSDF loan would be a condition of effectiveness for the proposed Bank Loan, (para. 3.22, L.A. Section 8.01).

7.05 With the above assurances, the project would be suitable for a Bank loan of US$22.0 million equivalent to WUC for 17 years including a 4 year grace period. - 38 - ANNEXI Page 1 of 2

B)ISWANA

THIRDWAM SUPPLY EROJECr

Sector Investment Programme

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 Ibtal Remarks

(Pula x 103 in 1982prices) URBANSUPPLIES

Investments 1. Francistown (i) IBIRDII 1,2D0 250 1,450 (ii) Francistown, Phase IV 500 1,000 1,000 2,500 (iii) Othersi/ 60 30 30 10 10 10 10 160

Subtotal 1,260 780 1,030 1,010 10 10 10 4,110

2. Selebi-Phikse (M) Treatment Works Extensions 1,200 300 1,500 (ii) Others 85 85 95 95 95 105 105 665

Subtotal 2/ 85 1,285 395 95 95 105 105 2,165

3. Gaborone/Iobatse (i) IHRD III 6,600 20,900 13,700 2,600 43,800 (ii) Next Phase 7,000 13,500 9,500 30,000 (iii) Gaborone West 1,000 5,700 1,900 2,100 1,600 2,000 14,300 (iv) Investigation: Sites: 61 & 62 1,000 250 1,250 (v) Nnywane/Ramotswa Wellfields, Main & Treatment Wbrks/ Lobatse 80 1,000 500 1,580 (vi) Others 65 215 15 15 15 15 15 355

Subtotal 3/ 8,745 28,065 16,115 4,715 8,615 15,515 9,515 91,285

4. Jwaneng (i) Takeover Expenses 350 350 (ii) Reticulation, Reservoirs arnd Pumping Stations 260 520 150 170 600 1,700 (iii)Others 40 40 40 40 40 40 140 380

Subtotal 650 40 560 40 190 210 740 2,430

TOTAL- URBANINVESTMENT 10,740 30,170 18,100 5,860 8,910 15,840 10,370 99,990

1/ Minor capital works, acquisitions and replacement of assets. ANNEX I Page 2 of 2

BOTSWANA

THIRD WATER SUPPLY PROJECT

Sector Investment Programme

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 Total Remarks

(Pula x 103 in 1982 prices)

RURAL SUPPLIES

Investments 1/ I. Minor Villages (35/34 Minor Villages: villages per year) 4,700 4,700 4,700 4,700 4,700 4,700 28,200 Completed March 31, 1982 128 82/83-87/88 programme 209

Total 337

Total of 17 major villages 2. Major Villages (re-habilitation and extensions) 4,600 4,000 4,000 4,000 4,000 4,000 4,000 28,600

TOTAL - RURAL INVESTMENT 9,300 8,700 8,700 8,700 8,700 8,700 4,000 56,800

1/ lnformation are based on Review Report of the Village Water Supply Programme - SIDA/DWA May 1982 THMODWAIR SUPPLY PRaJECf

POPULATION/WATERDEMAND GROWTH 1979-1990 DR-OMS0N CAINE WER SaJRCE

Population (1,000) Amial Average Water Denaid (000 /manum_ Total House Public Doonestic Specific Specific Total Gaborone Demrnd (All Connec- Staid House Deiman Stani- D1oard Industry/Comerce Goverment Sales to T. Plant at Gabs. Served) tions Ptpes onnections l/ld pipes 1/od Brewery Other 10/ Total Institutioes Consumers 1/ Output 2/ wSirce 7/

Gaborone

1979/80 47.71 32.22 15.49 1,518 129 260 46 110 1,109 1,219 1,073 4,070 9/ 4,788 5,027 1980/81 53.56 33.23 20.33 1,502 124 301 41 329 1,041 1,370 1,107 4,281 9/ 5,036 5,238 1981/82 60.13 37.02 23.11 1,862 138 354 42 548 848 1,396 1,239 4,851 9/ 5,707 5,992 1982/83 67.50 41.C0 26.50 2,394 160 435 45 633 923 1,556 1,418 5,803 6,827 7,168 1983/84 72.83 42.86 29.97 2,503 160 492 45 718 1,080 1,798 1,773 6,566 7,725 8,111 1984/85 78.58 44.87 33.71 2,620 160 554 45 803 1,393 2,196 1,986 7,356 8,654 9,087 1985/86 84.79 47.05 37.74 2,748 160 620 45 888 1,428 2,316 2,102 7,786 9,160 9,618 1986/87 91.49 49.40 42.09 2,885 160 691 45 973 1,460 2,433 2,223 8,232 9,685 10,169 1987/88 98.71 51.92 46.79 3,032 160 769 45 1,059 1,438 2,497 2,330 8,628 10,151 10,659 1988/89 106.51 55.15 51.36 3,221 160 844 45 1,144 1,441 2,582 2,459 9,106 10,716 11,252 8/ 1989/90 114.92 57.59 57.33 3,363 160 942 45 1,229 1,516 2,745 2,607 9,657 11,361 11,929 8/ 1990/91 124.00 60.77 63.23 3,549 160 1,039 45 1,314 1,583 2,897 2,769 10,254 12,063 12,666 8/

reanid at Covernmnet Total Sales Gabs. T.P. Denard Lobatse at Abattoir 4/ Institutions To Cmsuners 2/ and 6/ Gabs.Source 7/ 1979/80 17.50 10.85 6.65 379 96 26 11 3/ 540 214 5/ 754 136 1,295 9/ 666 699 1980/81 18.24 11.31 6.93 404 98 29 11 515 128 643 140 1 216 9/ 626 1981/82 19.00 11.78 657 7.22 464 108 31 12 486 208 5/ 694 183 1,372 11/ 683 717 1982/83 19.76 12.25 7.51 492 110 55 20 540 121 - 661 172 1,380 709 744 1983/84 20.55 12.74 7.81 511 110 57 20 540 150 690 178 1,436 773 812 1984/85 21.37 13.25 8.12 531 110 59 20 540 177 717 186 1,493 83Y) 877 1985/86 22.23 13.78 8.45 553 110 62 20 540 205 745 193 1,553 933 948 1986/87 23.12 14.34 8.78 576 110 64 20 540 234 774 201 1,615 1987/88 24.04 973 1,021 14.91 9.13 599 110 67 20 540 265 805 209 1,6a) 1,0/9 1,100 1988/89 25.00 15.50 9.50 622 110 69 20 540 299 839 217 1,747 1,121 1,177 8/ 1989/90 26.00 16.12 9.88 647 110 72 20 540 332 872 226 1,817 1,199 1,259 8/ 1990/91 27.00 16.74 10.26 672 110 75 20 540 367 907 235 1,889 1,280 1,344 A/ z

1/ Sales amount to 85%of Treatment Plant output in Gaborone ard 10 lcsses assunied between consuner ard biulk storage in Iobntse. 2 5Z losses assuned between treatmrent plant output ard water source.* 3/ Lobatse standpipe areas are essentially squatter develoimnts. 4/ 1obEtse Abattoir - 730,000 m /year mnxim (to detreswnt of other users if necessary). 5/ Abnormally h1X due to road constrution works. 6/ Water to be supplied frrn Gaborone; remtinig demaid is covered by NnywaneDan, aid wellfields mear Tobatse. 7/ Total Demandon GaboroneDom in anm year is thus suomntioniof Gaboroneand Lobatse totals. 8/ Gaborone Damn8m Raise unable to meet this denand at I in 20 risk of failure of the yield. 9/ Actual Water Sales. TO/Other nm.jorwet industries in Caborone are the power plant, abattoir, local brewery and the vaccine center. ANNEX 3 - 41 - Page I of 3

BOTSWANA

THIRD WATER SUPPLY PROJECT

Description of the Proposed Water Supply Facilities

1. According to the land use plan, Gaborone will only extend towards the west. The Gaborone West development plan is therefore the basis for the design of the required extension for the water supply facilities. Various alternatives have been investigated by the consultant. The least cost solution is described below and shown on IBRD Map 16923.

2. Gaborone West is considered as a single supply zone with storage provided by ground level reservoirs sited on Forest Hill. In the period prior to 1988/89 water for Gaborone West would be pumped from the Gaborone East Treatment Works to the Gaborone West distribution system with balancing flows into or out of the ground level reservoirs on Forest Hill. From 1988/89 onwards, raw water from Kolobeng and later on also from Metsemotlhaba Dam would be piped to the Gaborone West Treatment works and then pumped to the Forest Hill reservoirs. Water for the rest of the Gaborone and the satellites would be pumped directly from the Gaborone East Treatment Works to the Town storage site as at present. The primary system for Broadhurst would remain as it presently exists.

It is also believed that this solution has an additional advantage in terms of greater flexibility of operation in regard to the whole of the Gaborone Water Supply System. It allows for the laying of a large diameter trunk main through the Gaborone West Development and it will be possible to make connections off this at selected points to link into the existing town distribution network for use in emergency situations.

3. Two separate water treatment works will be required in Gaborone. These are:

(i) the existing Gaborone East Treatment Works near the Gaborone dam that treats raw water from the Gaborone dam, and

(ii) the Gaborone West Treatment Works that will treat raw water from the Kolobeng and Metsemotlhaba dams.

These treatment works are required to treat water at a rate equal to the peak day demand (1.6 times of average day demand) in the areas which they serve. In addition the Gaborone East Treatment Works supplies a quantity of treated water to Lobatse via the Gaborone-Lobatse pipeline.

Capacity of Gaborone East Treatment Works

The safe yield of the Gaborone Dam after raising is estimated to be 30,000 m3 /d. Therefore, the Gaborone East Treatment Plan should have a ultimate nominal capacity of 48,000 m3/d. Since the present capacity amounts to only 28,500 m /d, an additional treatment works capacity of approximately 20,000 m 3 /d will be required. - 42 - ANNEX 3 Page 2 of 3

Capacit-y of Gaborone West TrfeatmentWorks

The combined safe yield of the Kolobeng and Metsemotlhaba dams has 3 been estimated as 205,000 m day. Therefore the ultimate capacity of the Gaborone West Treatment Works will, on applying the same peak day factor, be 32,000 m3/d. The works will be implemented in 2 construction stages.

4. The present ground level storage capacity at the Gaborone East Treatment Works, the Town Storage and the Broadhurst Storage Site amounts to 36,000 m 3. At a storage capacity equal to two times the average day demand (WUC design criteria) the future ground level storage requirements are:

Year Average day Storage Storage to be added (1000 m 3) Total Demand Required Town Gaborone West Storage 1,000 m 3 /d 1,000 m3 Storage Site (Forest Hill) (1,000 m 3)

1983/84 22.0 44 -- 9.0 36 1984/85 24.0 48 45 1985/86 25.5 51 16.5 / -- 45 1986/87 27.0 54 60 1987/88 28.0 56 -- 9.0 60 1988/89 29.5 59 -- -- 69 1989/90 31.0 62 -- -- 69 1990/91 33.0 66 -- - 69

/ Space for future reservoirs at the Town storage site is limited. It is suggested that the existing 910 m3 reservoir be demolished in order that a new reservoir can be constructed. The space then available will be adequate for a reservoir of 16,500 m3.

5. Water supply facilties to be financed and constructed under this project are listed below:

(a) Raw water main from Gaborone Dam to raw water pumping station, dia 500 mm, 1,200 m.

(b) Raw water pumping station -- installation of 4 duty and 2 standby pumpsets in the extended raw water pumping station,

(c) Extension of Gaborone East Treatment Works to raise the capacity by 20,000 m 3/de

(d) Extension of the treated water pumping station at the treatment plant by installing 2 duty and 1 standby pumpset.

(e) Extension of the existing pumping station at the Town Storages Site by installing 2 duty and 1 standby pumpset. - 43 - ANNEX 3 Page ;3of 3

(f) Extension of the pumping station at the treatment plant for Gaborone West supply by installing 2 duty and 1 standby pumpset.

(g) Treated water main from Gaborone East Treatment Plant to Forest Hill Storage Site, dia 350 mm, 5,000 m.

(h) Ground level reservoirs at Forest Hill Storage Site, 2 reservoirs of 4,500 m3 capacity each.

(i) Ground level reservoir at Town Storage Site of 16,500 m3 capacity.

6. The secondary and tertiary distributionsystem is not part of the IBRD Third Water Supply Project. This part of the project is financed through the sale of the plots to be serviced and will be constructedin stages as required for the town development. - 44 - ANNEX 4

BOTSWANA

THIRD WATER SUPPLY PROJECT

DESCRIPTION OF THE GABORONE DAM RAISING WORKS

Gaborone Dam is situated some 4 km to the South of Gaborone and is at an altitude of 1,000 m above sea level. The dam will be raised by 8 m above the existing level. When full the reservoir will have a capacity of 140 million m3 . The works to be carried out will include the following:

(i) zoned earthfill embankment construction on the crest downstream face and downstream of the existing embankment dam.

(ii) extensions at each end of the existing embankment dam in zoned earthfill construction, with a central core trench cut-off.

(iii) construction of a zoned rockfill and gabion fuse section.

(iv) construction of a mass concrete overspill structure located immediately downstream of the existing overspill structure, together with associated mass concrete wing walls.

(v) strengthening and extension of the existing reinforced concrete outlet culvert, and heightening of the outlet tower, including provison of rock anchors.

(vi) supply and installation of pipework, valves and miscellaneous steelwork and provision of lighting in the culvert and outlet tower.

(vii) Reconstructing sections of the Gaborone-Lobatse road and railway and rerouting the Gaborone-Nuane Water pumping main to avoid the extended reservoir area.

(viii) clearing trees, undergrowth and building from the extended reservoir area, and constructing a reservoir fence. BarSWAM TnD WAk1f.SUPPLY PROLJECr EROJEACTCOST ESTIMATES

Description of works local Costs 1,000 Pula Foreign Costs 1,000 Pula Total Costs Year erding llarch 31 1983 1984 1985 1986 Sub-total 1983 1984 1985 1986 Sub-total 1,000 PuLa

A. Gaborone Dan Raising

Site clearance, drilling & grouting 508 258 40 806 Mobi- 656 344 71 1,426 2,232 EartImrks for the dam 3,508 1,785 278 5,571 lisa- 4,546 2,377 493 9,884 15,455 Concrete works for spillway & outlet 950 484 76 1,510 tion 1,231 645 134 2,676 4,186 Instrunentation, pipework, fencing 139 71 11 221 4,781 180 95 19 391 612 Road, rail & pipeline diversions 1,701 867 135 2,703 2,206 1,155 241 4,797 7,500 Sub-total cvii works 6,806 3,465 540 10,811 4,781 8,819 4,616 958 19,174 29,985 Land acquisition 150 50 - - 200 - - - - - 200 Final design & supervision 62 55 32 4 153 561 496 285 37 1,379 1,532 Expert panel for Gaborone Dan - - - - - 2_0 200 2 Baseline cost 212 6,911 3,497 544 11,164 5,542 9,315 4,901 995 20,753 31,917 Physical contingencies 21 691 350 54 1,116 554 931 490 100 2,075 3,191 Price contingencies - 684 850 205 1,739 - 614 755 240 1,609 3,348 Total costs A 233 8,286 4,697 803 14,019 6,096 10,860 6,146 1,335 24,437 38,456

B. Extension of Water Supply Facilities

Civil works for extension of water treatiaent plant - 245 470 103 818 - 245 470 103 818 1,636 Water mains & pumping stations - 128 246 54 428 - 217 414 92 723 1,151 Reservoirs - 280 538 117 935 - 280 538 117 935 1,870 Supply ard installation of equipjient for treataenc plant & pumpIng station - 115 217 51 383 - 460 882 192 1,534 1,917 Sub-total - 768 1,471 325 2,564 - 1,202 2,304 504 4,010 6,574 Final design & supervision 22 23 28 2 75 206 188 258 21 673 748 D Baseline cost 22 791 1,499 327 2,639 26 1,390 2,562 525 4,683 7,322 U Physical contingencies 2 79 150 33 264 20 139 256 53 468 732 Price contingencies - 78 373 122 573 - 91 395 127 613 1,186 Total costs B 24 948 2,022 482 3,476 226 1,620 3,213 705 5,764 9,240 BASWANA TfHRD 1WATERSUPPLY PROJECT Project Cost Estimate

Description of Wbrks Local Cost 1,000 Pula Foreign Costs 1,000 Pula Total Costs Year ending March 31 1983 1984 1985 1986 Sub-total 1983 1984 1985 1986 Sub-total 1,000 Pula

C. Miscellaneous

Investigations for the follow-up project Site investigation for Kolobeng and Metsemntlhaba Dams 200 50 - - 250 480 170 - - 650 900 Preliminary design for these dams, treatment plant & water nmains 30 20 - - 50 200 150 - - 350 400 Training - 250 - - 250 - 350 - - 350 600 Baseline cost 230 320 - - 550 680 670 - - 1,350 1,900 Physical contingencies 23 32 - - 55 68 67 - - 135 190 1 Price contingencies - 23 - - 23 - 44 - - 44 67 Total costs C 253 375 - - 628 748 781 - - 1,529 2,157

Suinary of Costs A. Gaborone Dam 233 8,286 4,697 803 14,019 6,096 10,860 6,146 1,335 24,437 38,456 B. Extension of Water Supply Facilities 24 948 2,022 482 3,476 226 1,62D 3,213 705 5,764 9,240 C. Miscellaneous 253 375 - - 628 748 781 - - 1,529 2,157 Total 510 9,609 6,719 1,285 18,123 7,070 13,261 9,359 2,040 31,730 49,853

Not included above are the costs for the distribution system. These costs will be recovered through the sale of plots to be served. Construction of the distribution system will take place in stages as required for the town development. The estimated cost of these mnnths are given below,

Sub- Sub- Total D. Distribution System 1983 1984 1985 1986 1987 Total 1983 1984 1985 1986 1987 Total 1000 P

Gaborone West (six phases) 1,550 518 576 444 544 3,632 3,618 1,210 1,345 1,037 1,268 8,478 12,110 ( x Physicalcontingencies 155 52 58 44 54 363 362 121 135 104 127 849 1,212 ' ¢ Price contingencies 153 125 216 224 359 1,077 239 186 326 331 516 1,598 2,675 0 Total D 1,858 695 850 712 957 5,072 4,219 1,517 1,8(% 1,472 1,911 10,925 15,997 F BOTSWANA THIRDWATER SUPPLY PROJECT Project Implementation Schedule

1988 __ . 1982 _ _ 1983 _ _ 1984 ___ 1985 1986 1987 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

A GABORONE DAM RAISING

1. Planning & Design & Tender Documents

2. lender Period & Bid Analysis t- 4V

3 Construction: EarthEmbankmaent

SpillwOy & Wing Walls ......

Outlet Works Fencing

Road Realgnment

Rail Realignment

Servces Diversions

8. PRIMARYWATER SUPPLY WORKS

Contract No. I Civil Works

Desrrig & Preparation Tender Documents

lender Period & Bld Analysis *

Raw Water Pipeline _ Raw WaterPump House

Treatment Worrs

Extend 1982 Pump House

Extend Town Pump House

Pump House to Forest Hil

350 Pipeline to Forest Hill _…

Reservoirs at Forest Hill _ _ _

Contract No. 2 Procurement tar Pumping and Tteatment Plant Equlprment

Design & Document Preparation

Tonde Period & Bid Analysis Moarutacture

Erect Plant

C. SECONDARY& TERTLARYMAINS (GABORONE WEST)

Phases I & 3. Town Center Phase2 Phawe4

Phase S _ _ _

Phase 6

Legerd:

Constructlon Activilty

Perlod ot Tender.Rs & Analysis ot Rids o Advertise

* Open Tenders World Bank-24527 V Award Contract - 48 - ANNEX 7 Page 1 of 2

BOTSWANA

Third Water Supply Project

Estimated Schedule of Bank Disbursements (US$ million)

Bank FY Disbursement Accumulated Cumulative Semester During Semester Disbursement % Disbursement

FY 1984 Dec. 31, 1983 4.0 4.0 18 June 30, 1984 4.5 8.5 39

FY 1985 Dec. 31, 1984 4.2 12.7 58 June 30, 1985 4.0 16.7 76

FY 1986 Dec. 31, 1985 4.0 20.7 94 June 30, 1986 1.3 22.0 100

Assumptions 1. Loan is approved June 1983, and effectivewithin two months. 2. Dam raising which represents about 65% of total project cost, is completed as scheduledby November 1984. 3. Corporationuses Procedure III for disbursement.

April 1983 _ 49 _ ANNEX 7 Page 2 of 2

BOTSWANA

Third Water Supply Project

Schedule for Withdrawal of Proceeds of the Loan

Amount of the % of Loan Allocated Expenditure (Expressed in to be Category Dollar Equivalent) Financed

1. Gaborone dam raising - civil works 16,000,000 60% of total expenditure

2. Consultant and technical services 4,000,000 100% of total expenditure

3. Fee 55,500 Amount due

4. Unallocated 1,945,000

TOTAL 22,000,000 -50 -

BOTSWANA ANNEX 8 THIRDWATER SUPPLY PROJECT Yieldsof Proposed Raw Water Sources and Average Water Demand for Gaborone

+MARICO I DAM

20

+ METSEMOTU-iABA DAM

15 l D)AM + KOLOBENG YIELD DAM 3% GROWIF.IN DEMAND AND , AFrER1990 AVERAGE (lowAr esR19te) DEMAND _ ,,, IN 3 MIL r9 /a

10_, + GABORONEDAM RAISING

E)XISTING- RAMOTSWAWELLFIELD GABORONE T DAM 5

o I I I I I ! I I 1980/1 1985/6 1990/1 1995/6 2000X1

Woeid Bank-24474 ------

00A I iF8 2 A

D .lIa|aI0

0023 A __ i

0~|<

______ANMKXi~109 -52- - 52 - P;tt,e 1~~~~of 6 t,ISWNA

Water Utiiities Crporation

Gaborne/Lobatse Division

Balance Sheet

1983 1984 1985 1986

Assets

Plant in 0vration 13.883 20.958 64.651 79.753 Less Accui_lated Deprecation 2.683 3.333 4.933 7.633 11.200 17.625 59.718 72.120 Work in Progress 7.500 32.500 10.8D0 2-3C 18.700 50.125 70.518 74.320

Current Asets

Cash and deposites 3.502 3.687 3.392 7.745 Accou-ts recaivable 0.527 0.828 1.314 1.802 Inventories 0.171 0.191 0.246 0.288 Sub-total 4.200 4.706 4.952 9.835

Less Currert Liabilities Acc,unts Payable 0.257 0.286 0.368 01.432 0titrs 0.74 0.77 0.81 0.85 Sub-total 0.331 0.363 0.449 0.517 Net Current Assets 3.869 4.343 4.503 9.318

Total Assets 22.569 54.468 75.021 83.638

Represented by Equity ani Reserves Irredeemable Capital 0.96 0.96 0.96 0.96 General/Capital Reserves 1.647 1.647 1.647 1.647 Censurer Capital Contributions 3.607 9.448 11.611 ILL.233 Retained Earnings 1.264 4.477 9.267 12.262 Sub-total 6.614 15.668 22.621 28.238

I'.-te.m Debt 15.955 38.800 52400 55.400

Total Liabilities 22.569 54.468 75.021 83.638

Debt/Equity Ratio 71/29 71/29 70/30 66/34 - 53 --- 53 ~~ANNEK10 Page 2 of 6 BJTSWANA

Water Utilities Corporation

Gaborne/Lobatse Division

Inc}m Statement

(Pula 000's)

FY (March 31) 1983 1984 1985 1986

Water Sales P.A. (M/L) 7.108 8.002 8.849 9.339

Average Traffic (Pula per K/Litre 0.48 0.718 1.08 1.40 P.000 P.000 P.000 P.000

Operating Revenues

Sales of Water 3.412 5.745 9.557 13.074 Other 0.314 0.326 0.289 0.300

Operating Revenue Total 3.726 6.071 9.846 13.374

Operatirg Expenses

Direct Operating 1.712 1.908 2.456 2.879

Depreciaticn 0.450 0.650 1.600 2.700

Subtotal 2.162 2.558 4.056 5.579

Operating Surplus 1.564 3.513 5.790 7.795

Interest Charged to Operations (Net) 0.300 0.300 1.000 4.800

Net Income 1.264 3.213 4.790 2.995

Surplus B/F - 1.264 4.477 9.267

Balanre C/F 1.264 4.477 9.267 12.262

Operating Ratio 0.58 0.42 0.42 0.42 - 54 ANNEK10 Page 3 of 6 BRrSWANA

Water Utilities Corporation

Gaborne/Lobatse Division

Source and Application of Funds

(Pula O00's)

1982183 1983/84 1984/85 1985/86 TIbtal

Internal Sources

Lncome 1.564 3.513 5.790 7.795 18.662 Depreciation 0.450 0.650 1.600 2.700 5.400 Sub-Total 2.014 4.163 7.390 10.495 24.062

Less: Operational Requirements

Increase in Working Capital 0.850 0.289 0.455 0.462 2.056 Interest Chargedto Operations (net) 0.300 0.300 1.000 4.800 6.400 Debt Repayment 0.148 0.155 0.200 0.200 0.703 Sub-total 1.298 0.744 1.655 5.462 9.159 Internal Funds Available 0.716 3.419 5.735 5.033 14.903

Capital Investment (inc I.D.C) 9.512 32.075 21.993 6.502 70.082

Balance to be financed 8.796 28.656 16.258 1.469 55.179

Finaced by Rrrc mngs

Borrowings 9.000 23.000 13.800 3.200 49.000 CCC(Grants) 1.050 5.841 2.163 2.622 11.676

Total Finance Sources 10.050 28.841 15.963 58.222 60.676

Surplus (Deficit) of Funds 1.254 0.185 (0.295) 4.353 5.497

Balance Beginnirg of Year 2.248 3.502 3.687 3.392 2.248

Balance at end of year 3.502 3.687 3.392 7.745 7.745 - 55 - ANNEX 10 Page 4 of 6 BTSWANA,

Water Utilities Corporation

Gaborne/lobatse Mvision

Fixed Assets Schedule (Pula 000's)

Historical Cost

1983 1984 1985 1986

OpeningBalance 10.308 13.883 20.958 64.651 Additions 1/2 3.575 1.787 7.075 3.537 43.693 21.846 15.102 7.551 Balance for Depreciation 12.095 17.420 42.804 72.202 Additions 2 1/2 1.788 3.538 21.847 7.551 Closing Balance 13.883 20.958 64.651 79.753 Depreciation for Year 0.450 0.650 1.600 2.700 Balance B/F. 2.233 2.683 3.333 4.933 Acc.Depreciation C/F. 2.683 3.333 4.933 7.633

NetAssets in Operation 11.200 17.625 59.718 72.120

Workin Progress 7.500 32.500 10.800 2.200 - 56 -ANEi Page 5 of 6 BYTSWtNA

Ihter Utilities Corporation

Gaborne/Lobatse Division

Revaluation of Assets (Pula 000's)

EY 1983 1984 1985 1986 Inflation Factor 12% 11% 11% 9%

April 1 (Revalued) 13,629 18,839 27,986 74,757 Revalued 15,264 20,911 31,064 81,485 Assets j at cost 3,575 1,787 7,057 3,537 43,696 21,846 15,102 7,551 Revalued Assets in Operation for deprec. 17,051 24,448 52,910 89,036 Assets second I at cost 1,788 3,538 21,847 7,551 Revalued Gross Assets in Operation March 31 18,839 27,986 74,757 96,587 Cumulative Depreciation B/F 3,278 4,310 5,700 8,310 Revalued 3,671 4,784 6,327 9,058 Depreciation for year 3.75Z 639 916 1,983 3,339 Revalued Cumulative Deprec. March 31 4,310 5,700 8,310 12,397 (1982) Net Assets in Operation 10,351 14,529 22,286 66,447 84,190 Average of 2 years 12,440 18,407 44,366 75,318 Adjusted Profit 1,375 3,247 5,407 7,156 Rate of Return 11.1% 17.6% 12.2% 9.5% - 57 - ANNEK10 Page 6 of 6 BJTSWANA

Water Utilities Corporation

Gaborne/Lobatse Division

Tariff Increases Required for Rate of Return of 8%

FY 1983 1984 1985 1986 TOTAL

Average net assets in Operation 12,440 18,407 44,366 75,318 8% RCR Adjusted Profit 995 1,473 3,550 6,025 Forecasted Adjusted Profit 1,375 3,247 - 5,407 7,156 Excess Profit 380 1,774 1,857 1,131 4.762 - Sale of Water M/L 7,108 8,002 8,849 9,339 Reduction Unit reduction M3 Pula .05 .22 .21 .12 in cash Proposed unit price M3 48 Actual 72 1.08 1.40 flow 3 FYs Required unit pricefor 1984-86 8% ROR 43 50 .87 1.28 Price increase % over previous year 4% 74% 47% Forecasted % increase 50% 50% 30% -58 - AMU 11 TSWANA

Water Utilities Corporation

Third Water Supply Project

Project Cost Summaryand Financing Plan (Pula Mllions) (Based on Tender of Stirlirg International)

YEARSOF EXPEMDITURE COSTSpLIT % of FINANDIW,PLAN

F.Y. 's (1/4 - 31/3) 1983 1984 1985 1986 Total Local Foreign Foreign I T) CDC Govt. WlJC

PROJBCTELEMENT

(1) DamRaising including Realigruent, land acquisition 5.41/18.5 10.3 2.1 36.3 13.7 22.6 62 19.2 7.0 10.0 0.1

(2) Treatment plant, pinping stations, reservoirs 2.3 4.9 1.2 8.4 3.4 5.0 60 - 5.0 3.0 0.4

(3) Preparation for clas 61 & 62 irncluding trainrig, engineering costs, & expert panel 2.12/ 2.2 0.8 0.1 5.2 1.0 4.2 81 5.2 - - -

SUBTOTAL 7.5 23 0 16.0 3.4 49.9 18.1 31.8 66 24.4 12.0 13.0 0.5

Interest during construction 3/ 2.0 3.2 0.4 5.6 1.4 4.2 75 - - - 5.6

IlRD Front end fee 0.1 - - 0.1 - 0.1 - - - - 0.1

TOTALPula 7.5 25.1 19.2 3.8 55.6 19.5 36.1 65 24.4 12.0 13.0 6.2

100°% 35% 65% 44% 22% 23% 11%

NB

Payments required prior to July 1983:

(1) MDbilisation paynent (required to be paid in US Dollars)

(2) Retroactive payments to be reiibursed by IIRD.

(3) Damcompleted Dec. 1984 Treatment plant completed Sept. 1985. - 59 - ANNEX 12 Page 1 of 5 BOTSWANA Third Water Supply Project Economic Rate of Return Calculation Capital Costs 1/ and Incremental Operating Costs Pula 000's

1988- 2002- 2017- 1983 1984 1985 1986 1987 2000 2001 2015 2016 2018

Capital Costs Description

1. Gaborone Dam 6,329 17,848 9,238 1,693 - - 3,068 - 3,068 - 2. System Extensions 250 2,399 3,467 938 - - - - - 3. Distribution network expansion (Gaborone WEST) - - 2,114 1,629 1,993 - - - - -

Sub-total 6,579 20,247 14,819 4,260 1,993 - 3,068 - 3,068 -

Incremental Operating Costs of new system _ _ 757 838 918 986 986 986 986 986

Total Capital and Operating Cost Stream 6,579 20,247 15,576 5,098 2,911 968 4,054 968 4,054 968

1/ These costs (base cost + physical contingency) exclude the site investigations and design work for Dam 61 and 62 as these works are not related to the benefits accruing from this project. - 60- ANNEX 12 Page 2 of 5 BOTSWANA

Third Water Supply Project

Economic Rate of Return Calculation

IncrementalRevenue Benefits

Additional AnticipatedTariff Incremental Water Sales (in real terms) Revenue FY Period 000's M3 Pula/M3 Pula 000's

1983 1 nil 0.48 nil 1984 2 nil 0.66 nil 1985 3 3,266 0.94 3,071 1986 4 3,753 1.16 2/ 4,355 1987 5 4,259 1.16 4,940 1988 6 4,715 1/ 1.16 5.474 2018 36 4,715 1.16 5,474

1/ Additional treated water (sales) available from raised dam and expanded treatment system which correspond to safe yield of dam at 1:20 risk of failure.

2/ After FY1986 tariff increase in real terms - future tariff increases expected to reflect inflation rates i.e. no real increase. - 61 - BOTSWANA ANNEX 12 Page 3 of 5 Third Water Supply Project

Economic Rate of Return Calculation

List of Stream Data

PERIODS C.1 B.1 N.1

1 6,579 - 6,579 2 20,247 - -20,247 3 15,576 3,071 -12,505 4 5,098 4,355 -743 5 2,911 4,940 2,029 6-18 986 5,474 4,488 19 4,054 5,474 1,420 20-33 986 5,474 4,488 34 4,054 5,474 1,420 35-36 986 5,474 4,488

Stream Name Economic Rate of Return

N.1 8.3% - 62 - ANNEX 12 Page 4 of 5

BOTSWANA

Third Water Supply Project

Economic Rate of Return for Gaborone Water Supply

Assumptions

1. Capital expenditure has been based on June 1983 base line costs plus physical contingencies and include:

(a) Cost of dam raising;

(b) Expansion of the treatment plant, pumping station reservoirs and transmission mains, and replacement of equipment in years 2001 and 2016, i.e. approximately every 15 years;

(c) Expansion of the tertiary and secondary system, mainly in Gaborone West, in FY1985 through 1987 to utilize additional water from the dam. Expansion will have to cease after 1988 unless additional water sources are available.

Dam will be completed by November 1984 rains which will benefit FY1985 revenues. Treatment plant expansion will be completed by June 1985.

Value of Incremental Water

2. Incremental water has been valued at the proposed average tariff calculated in real terms (FY1983 as base year).

Operating Costs

3. Incremental operating costs have been based on previous actual costs (vairable to 40% and fixed 60%) and calculated on incremental water sales attributed to the project. - 63 - ANNEX12 Page5 of 5 BDTSkNA

THIRDWATER SUPPLY PROJECT

Average Incremental Cost of Water

1988 2002 2017 Fiscal years thru thru thru ending March 31 1983 1984 1985 1986 1987 2000 2001 2015 2016 2018

Annual water sales - - 3,267 3,754 4,259 4,719 4.719 4,719 4,719 4,719 due to additional yield of the raised Gaborone Damin 1000 m3

Annual capital arnd 6,579 20,247 15,576 5,088 2.911 986 4.054 986 4,054 986 operating costs for the project in 1000 P

Incremental Cost Per m3 of Water

Discount Rate Present Value of Incremental Costs Consumption Cost per m3 1000 P in 1000m 3 in Pula

8% 50,094 44,703 1.12 10% 46,131 35,437 1.30 15% 39,101 21,847 1.80 - 64 - ANNEX 13 Page 1 of 2

BOTSWANA

THIRD WATER SUPPLY PROJECT

Proposed Monitoring Guidelines

General

1. The following guidelines are prepared to facilitate planning and to evaluate achievement of technical, financial, management and training goals. Certain of these will be included in periodic reports to be submitted to the Bank whereas the remaining data may be included in WUC's annual reports.

Monitoring Guidelines

2. WUC would develop and maintain Gaborone Undertaking records for the following:

a. Water System Operation Data

(1) Water production: metered production by month at the Gaborone treatment plant;

(2) Water consumption:metered monthly consumption for all categories of water demand and consumption steps including, but not restricted to, the following uses: (1) residential; (ii) commercial/industrialand (iii) governmental/institutional;

(3) Unaccounted-forwater by month;

(4) Numbers of connections at year-end listed by consumption step and category (see para. a(2) above) including residential connections of the following types: (i) private connections; (ii) public standposts, and (iii) other;

(5) Interruptions in service: the extent to which water service was interrupted on an annual basis with specific consideration of: (a) frequency, (b) duration, and (c) cause of interruption.

b. Treated Water Quality: Summary of physical, chemical and bacteriologicalquality. - 65 - ANNEX 13 Page 2 of 2

c. Project implementation: Quarterly forecasts of expenditures are to be prepared for each contract within three months of signature of contract. Quarterly reports are to indicate percentage completion of original forecasts and revised forecast of expenditure for remainder of contract.

d. Financial Indicators (required annually)

(1) Contributions to capital expenditures from internal cash generation during the Project construction period as measured by historic performance and WUC's five-year forecast;

(2) Annual rate of return on revalued average net fixed assets in operation;

(3) Operating ratio;

(4) Debt service coverage.

(5) Audited Accounts.

e. Staffing, Training and Localization (WUC, consolidated)

(1) Staffing (end of financial year)

(a) Number of permanent employees;

i. Professional; ii. Subprofessional.

(2) Training: Number of staff trained during financial year by category, duration, and type of training (viz., on-the-job, off-the-job);

(3) Localization: Water works superintendent and accounting posts filled versus total numbers of posts authorized.

Consultation with World Bank

3. The Borrower would consult with the Bank, at least on an annual basis, relative to the revaluations of average net fixed assets in operation, and the calculations of annual rates of return relative thereto.

2001ZAMBIA 300-~'-',-.MALAWION

KANGOLA ZAMBIA 20 S ', r\Z IMBABWE BUSINE 200\ NAMIBIA I 0 CENTER

5c:T ,VVA A \GaboroneJ 4 . SWAAZILAND SOUTH AFRICA,

300 30/!

200 300 GABORON .7 / i - ~~~~DAM>

Thnsm-p t-a been pre-lo-d by The World00,100 staft eootoO-Ity tott, odO,000 bOlof the rOOdmrsand 0seo vOWy to, the:-k W oteoflatoose ot The WorldBak! 000,B !3i1 BO0TSWAfNA -od the Fo--On ,porat-n ThOdtenommdbtons. I V WATERSUPPLYPROJECT te-onda--slo.Hhsd THIRD SUPPL o0 00mapdo lot nply ton A ,,rt otO W~ordnanttrollcalwFvoadnneanr-asapnsdrlBan! -nn thleD : lI ; GABORONE DAM RAISING 001y ofigmont 00 tOObboSh 010105 / hoy tdrfltnhyoroany ,i,(! .f1 Mainroads eouorsomootundaoOeytsoh:hoh ot- ,, . Roadrealignment Railroad Railroad realignment Water pipeline to Lobatse diversions r/ -- / -; , Water pipeline D/, / __ Existing dam

...... Dam extensions

A .\0 Notwane.t §1Dam.. S O U T H AFRICA New boundary fence Present fLood surface level Future flood surfcLe level River , KILOMETERS 0 1 2 3 4 5 ______/_____ -/ KILMEER0 1 2Internotional boundaries

l . ~~~~~~~~~~L ES 0123 ~ ~ ~~~~MI

|l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~c M r

i BRD 16922

To M./epsio!.r To Ponc/s. FEBRUARY 1983

BOT SWA N A THIRD WATERSUPPLY PROJECT "GABRoNE CATCHMENTAREA OF GABORONEDAM -EAB

Towns I GABORONE DAM ' /o Roads o CATCHMENT

-,---,--, R0I.woys Ro 6 1,500 SQ. MILES

--- r'chmRn, boLndories NOTAN= DAMt

N>e FS.L. /

-..- Iternotlonc( bounCor,es /f',1

r 0\C-nML - R¶R IMILES

0 10a O15 M. KILOMETERS __| RAMOTSWA

RANAKA ' 9

KANYE'tV \ fv335SQ. MILES / I.~~~~~~~~~~~~~~~~11,S11~A T X -

S-KLANEANE La TSE / NGOTWANE \ / ~~~CATCHMENTJ X t {//o' , ;i 335 SQ.MILESZZ'-/t'w'k'

BO WT S A N A \X_ <' ~~HMET DAM(\

B0T'\ A:N A W1 \'

A4b M B I A 7 2d

Z I M BA B W E

-2O 20i

m [05 YLPesa T\ z -~~ FSANOCSTCWN5 \5 /\\

B 0 T S W A N A 24 24--I,c

L .. clo -50' -"

2~ ~~~ ~ ~ ~ ~~~~~f ~- - d-W..I- C5-t--1y~-- 24RUR2NE / I'D'OISE/R R.5- j ( v ~S0 U T ,2/A F R I C A ,a-tOp j,atio -The~ depmol Ent- L Lf The Wp,td B- nt ad Ine N-o G I 340. 2EO ,aR / tne .. th. d- e d th n Fna h- .L5etT5.-. - h,n 1n - f

-NGOLA ANI < '-N)

rL ZIMBABWEt t 2 NAMIBIA I " r BOTSWANA¾ /

!Getowee.rsv / \

I SOUTH AFRICA

^ . , t s(r | X \ H f .~~(rSorn

* -rs wKC1 KesrJ cc* /F 5

wrac,i,eoe,,,,, / e / emMswrAiyFcl.C,w /< Seweragesystem of /

KlAKKC§t / Gasboro-n-Westwll connect- to the StoodhuostSewage /Works \ 8u / 8 //g/ BROADHUR S T * / 7u . Broa/dhorY/'-.s ' EVELOPMENs?r

/? X @/Z \/S >2~~~~~~ ~ ~~StorogeIV>w r Sewogr Work,s |0 '\ . // / /| snds) cr> V / {(oxidatonpo IMO GO T

| 's (b° \X

X -oEw/ //> !/0, ' iSewgeW-r, 0- oxi~~~~~~~~~~~~~~~~~~~~~~~~(.dationporidl

a; - [-t +-N' / ,/N 'I/

_veo* ,, t *.. -- -- ye---pi PvpitngSon.ftionl/ 1, s i/ X ,PPng Statio

i S t_ - oe > I / oz .jGABORONEt

S. StoragerStn L --- \ PLApin GCE TLOKWENG

P.- 7 Stat on

Sewage Works

'° \\ / ^\ (.ot~~~~~~~~~~~~cidatinoponds)

i\ ensionof BOTSWANA WATERSUPPLY PROJECT Gab,oroner-teaset WorksWater ond PS THIRD Idresth,ll... , . EXISTING AND PROPOSED WATER +St-rqge So. R a'ter SUPPLYAND SEWERAGESYSTEMS Vsne-ping Woier S-nnlryFociliie- Sewerage Srsrrm

3sr Idzom~~~~~-aetersn or,

/| >;r. . %) ' @ ~~~~~~~~~~~~~~~~~~~~~~~~~~~P..npnorqtorons GAbORO NI ROsnivors _Lob.tse P-wpng Main DAM . .cods - Man

| . | ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~S:tesandi cervices areas l / ~ Central bocress diet-icr

q ~~~~~/z , ;,R-,tribal e rree-a llege areas

-I-~~~~~~~~~~~~~~~~~~~~~~~~~~wC li 5'_ zS ~~Ktmrr 2< NAiv S- f '.I' * I F:1~~~~l.g <;K_.-nantooibudre

FOR OFFICIALUSE ONLY

BOTSWANA

STAFF APPRAISAL REPORT

THIRD WATER SUPPLY PROJECT

Table of Contents

Page No.

I. THE WATER SUPPLY AND WASTE DISPOSAL SECTOR...... 1 Country Background ...... 1 Water Resources ...... 1 Sector Legislation...... 3 Sector Organization.....o...... *.3 Cost Recovery...... 4 Manpower and Training...... *,,...... o...... 5 Present Service Levels.-...... o....5 Service Level Policy*.o...... 6 Sector Developmento...... o....*.o..o...... 7 Possible Constraints...... o9 ....9.. 7 Previous Bank Group Projects...... 8

II. THE PROJECT AREAE...... o..o.* . . ... o...... 9 Location - Special Features.oo.o.....o.o...... o.... 9 Existing Water Supply and Waste Disposal Systems...s 9 Population Served and Standards of Service...e.o-o-10 Population Projections and Demand for Service. l...... 11

TIII. THEnEsis...... T.E.R.E ...... o..12 Genesiso.o .. o..oo..o.ooooooo*oo.12 Dam Safety....o ...... o o .13 International Water Rights Issues ... 13 Objectives.oo.. .oo.*.oo..to..oo.14 Technical Alternativeso o*oosoooooooo*o14 Water Saving Techniques.... 14 Service Standards.... o. * ... * oo.o.*o. e... o.... 14 Description of Project Componentsoo.- ..... l...... 15 Cost Estimates...... 15 Project Financing...... *oo.... o...o.. 17 Implementation... 99..9 .* .....*...... 18 Land Acquisition..o.oo.o.o...... o...... oo.....18 Procurement .. l.o...... o....oo...... o...o.... o.o....19 Contract Review . ... 19

This report was prepared by Messrs. A. Arben and K. Kleiner and is based upon information obtained during a mission to Botswana in November 1982.

Thisdocument has a restricteddistribution and may be usedby recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Disbursements .. *.*.*...... 19 Water Resource Aspects ...... *.... 20 Environmental and Health Aspects ...... 21

IV. THE BORROWER AND THE IMPLEMENTING AGENCY ...... 21 The Borrower ...... 21 Organization, Management and Staff . . 21 Personnel Development and Localization ...... 23 Manpower Development Study ...... 24 Accounting and Audit ...... 24 Billing and Collection ...... 25

V. FINANCIAL ASPECTS...... 26 WUC's Past Operating Results and Financial Position ....26 Financial Performance of Gaborone/Lobatse Division Operations ...... 29 Financing Plan: Gabarone/Lobatse Division ...... 29 Future Operations and Financial Position of Gabarone/ Lobatse Division.#...... 31 Tariffs ...... 32 Rate of Return - Gaborone/Lobatse Division...... 33 Revaluation of Assets ...... 34 Affordability for Low Income Groups 34

VI. PROJECT JUSTIFICATION ...... 34 Project Benefits ...... 34 Least-Cost Solution ...... 35 Economnic Rate of Return ...... 35 Project Risks ...... o...... o...... 35 Project Monitoring System ...... * ...... 36

VII. AGREEHENTS REACHEI) AND RECOMMENDATION ...... 0.36 AgreementsReached ...... 36 Recommendation ...... 37 I ZAMBIA 3 ) / ANGOLA /

\ ZIMBABWE? ,n- >NAMIBIA r BOTSWANA_ / \

SOUTH AFRICA

,/ \ ,/f:V

AeW....f'0O... err,,Ir ' \0° o \'s4

Th PnmdbL m3orcrmeorte *2 S /l / / ) Co5PrA.,onrPhedeArOnd"ol i N° ZV< used and Lf boL - dn33 ShOLV o V f'0 ; rC

/ y p2rf02 TIe YCol.d f.D3 Pap Ahb " 0 pro',lrroemnore/c S,c Sewerage systemof \ x, ,- J- oro ,,0w7aw7mU3oro Galborone-West will connect to the Broadhurst Sewage /

' / 'F, Works

SeaeWrks

0~~~~ \ / e / r=

\ /: <...,77A:i'09;- <21 ~ , ' /.w X ~~ ~ ~ ~ ~~~9 '''2si/ ',§' 0' >o''

<0~~~~~~~~~~~~~~~~~C

MOGODThdA4 , '- '' pond ) xd'o-o' neidatien ponds)g

%> O> <04 tF s.4uwPIjg Stetron; 5'a tt , _ T StA

n&/ At-- -'s1t TownStoyageS,te -A - ,

BOTSWANg Jt wG, zi ~. \ ,E-tnin of ( LobatsePumping Maeidntle ponds)M Mair oto Sewage Wos LAGPoicE>iigrit a . r ;Station9

SPumpons ' \ , 1S) 21 " fg Pumpirq / ;-^- BOTS WANA 'Gaborone Water TIDW TRSPL RJC "Treatment Worlksend PS. I bS Pr,c

For st Hill xtnoonfEXISTING AND PROPOSED WATER ~~~"~2oy y/ .===Rv~~~~~~~~~~~ul e rn Sloerage~~ Site ~ ~ T> Raw Watr.r'i SUPPLYAND SEWERAGESYSTEMS png Woer Supp F ireSe-oerge System S,aton I P,o-1ct E's'rig Exosting

-g .2Pt ___Nr t Sltes andPrnsectin serv ces ainnncedomereos me / : Extnsion o fr 21 Prrrprq Slot- ort -t- EXISTING '2r >et,,ent Plants GABORONE C e-e,'-s DAMStired -_Lobatse PumpingMain --. od Railroad

fX@, Mllrs 1'/ z -_ InternOtlonol boundOrlK..Ma n Ppe rne

Sinesand se,, ces areas Central businressd strict Tribal eiiage areas

KrC;E,0 I 2A

-El[ 52 - -Internect-ool boundaries 1 C ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~NcrI-rrndtnpnm-emrI;-d,