Support Project for Youth Employability And

Home , Togo

AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPENT FUND

Public Disclosure Authorized

PROJECT: SUPPORT PROJECT FOR YOUTH EMPLOYABILITY AND

INTEGRATION IN GROWTH SECTORS

COUNTRY: TOGO

PROJECT APPRAISAL REPORT

Public Disclosure Authorized

OSHD DEPARTMENT

October 2015

Translated Document

TABLE OF CONTENTS

Project Summary ...... vii

I. Strategic Thrust and Rationale ...... 1 1.1 Project Linkages with Country Strategy and Objectives...... 1 1.2 Rationale for Bank’s Involvement ...... 2 1.3 Aid Coordination ...... 4

II. Project Description ...... 5 2.1 Project Components ...... 5 2.2 Technical Solutions Retained and Other Alternatives Explored ...... 6 2.3 Project Type ...... 6 2.4 Project Cost and Financing Arrangements...... 6 2.5 Project Target Area and Beneficiaries...... 8 2.6 Participatory Approach for Project Identification, Design and Implementation….....8 2.7 Bank Group Experience, Lessons Reflected in Project Design...... 9 2.8 Key Performance Indicators ...... 9

III. Project Feasibility ...... 10 3.1 Economic and Financial Performance ...... 10 3.2 Environmental and Social Impact ...... 11

IV. Implementation ...... 12 4.1 Implementation Arrangements ...... 12 4.2 Financial Management ...... 14 4.3 Project Monitoring ...... 14 4.4 Governance ...... 15 4.5 Sustainability ...... 15 4.6 Risk Management and Mitigation ...... 16 4.7 Knowledge Building...... 16

V. Legal Framework ...... 16 5.1 Legal Instrument...... 16 5.2 Conditions Associated with Bank’s Intervention ...... 16 5.3 Compliance with Bank Policies ...... 17

VI. RECOMMENDATION ...... 17

LIST OF ANNEXES

Annex I : Comparative Socio-Economic Indicators of Togo Annex II : Table of AfDB Portfolio in Togo Annex III : Key Related Projects Financed by other Development Partners Annex IV : Mainstreaming of Gender-related Challenges in Project Annex V : Map of Togo

Currency Equivalents July 2015

Currency Unit = CFA franc UA 1 = CFAF 824.5

Fiscal Year January – December

Acronyms and Abbreviations ADF African Development Fund AFD French Development Agency ANPE National Employment Agency ANPGF National Agency for Promoting and Guaranteeing Financing for SME/SMI AVC Agricultural Value Chain BPW Building and Public Works CSP Country Strategy Paper CWIQ Core Welfare Indicators Questionnaire DFS Decentralized Financial System ETD Enterprises, Territories and Development (Entreprises, Territoires et Développement) FAIEJ Youth Economic Initiative Support Fund FECECAV Umbrella Organization of Village Savings and Credit Associations FI Financial Institution FNFI National Inclusive Finance Fund FRR Financial rate of return FUCEC Federation of Savings and Credit Cooperative Unions GDP Gross Domestic Product GIZ German Technical Cooperation Agency GNI Gross National Income ICT Information and Communication Technologies IFAD International Fund for Agricultural Development IFC International Finance Corporation ILO International Labour Office M&E Monitoring and Evaluation MAEP Ministry of Agriculture, Livestock and Fisheries MDBAJEJ Ministry of Grassroots Development, Crafts, Youth and Youth Employment MEIA Ministry of Livestock and Animal Industries MFI Microfinance Institution MUFEC Women’s Mutual Savings Credit Union NEPAD New Partnership for Africa’s Development NGO Non-Governmental Organization NPV Net Present Value NTF Nigeria Trust Fund OEF Training and Employment Observatory PADAT Agricultural Development Support Project PAEIJ -SP Support Project for Youth Employability and Integration in Growth Sectors PASA Agricultural Sector Support Programme PCR Project Completion Report PFIs Partner Financial Institutions PNIASA National Programme for Agricultural Investment and Food Security PNPER National Rural Entrepreneurship Promotion Project PRADEB Grassroots Development Support Programme PSNEJ National Strategic Plan for Youth Employment RESEN Government Reports on National Education Systems SCAPE Accelerated Growth and Employment Promotion Strategy SME Small and Medium Enterprises SMI Small and Medium Industries SPPO Service Provider and Producer Organizations TFMU Technical Fund Management Unit TFP Technical and Financial Partner TSF Transition Support Facility U-CMECS Union of Mutual Savings and Credit Funds of the Savannah Region UNDP United Nations Development Programme URCLEC Renovated Union of Local Savings and Credit Funds UTB Union Bank of Togo (Union Togolaise de banque) VT Vocational Training WAAPP-Togo West Africa Agricultural Productivity Programme-Togo WADB West African Development Bank WAEMU West African Economic and Monetary Union WAGES Women’s Association for Economic and Social Well-Being WB World Bank

Project Information Sheet

Client Information BORROWER: Togolese Republic

EXECUTING AGENCY: Ministry of Grassroots Development, Crafts, Youth and Youth Employment (MDBAJEJ)

Financing Plan Source Amount (UA) Instrument

ADF 6.67 million ADF Grant TSF 1.33 million TSF Grant NTF 6.5 million NTF Loan Government 0.77 million Counterpart Funds

TOTAL COST 15.27 million

AfDB Key Financing Information

Grant Amount UA 8 million Loan Amount UA 6.5 million Interest Type* NA Interest Rate Spread* NA Commitment Fee* 0.5% Service Charge 0.75% Tenor 20 years Grace Period 7 years FRR 29% NPV (baseline scenario) CFAF 5.083 billion

Timeframe –Milestones (expected)

Concept Note Approval May 2015 Project Approval October 2015 Effectiveness December 2015 Last Disbursement December 2020 Completion December 2020

iii

Results-Based Logical Framework

Country and Project Name: Togo – Support Project for Youth Employability and Integration in Growth Sectors (PAEIJ-SP) Project Goal: Contribute to creating the conditions for a more inclusive economic growth by boosting youth employability and promoting entrepreneurship in growth sectors PERFORMANCE INDICATORS MEANS OF RISKS/MITIGATION RESULTS CHAIN Indicator VERIFI- Baseline Target MEASURES (including CSI) CATION

2011 2025 Employment and Contribute to inclusive growth and -Incidence of poverty 58.7% 49% Informal Sector poverty reduction W: 54.3% W:45% Survey and/or CWIQ survey

IMPACT - Combined unemployment and underemployment rate M: 22% M: 16% among youth aged 15-34 years W: 31.9% W: 26%

Outcome 1: Income of project 2015 2020 1 Risk 1: Deterioration of macroeconomic beneficiaries are increased -% increase in beneficiary income M, W: 25%, 0 situation

OMES PMU activity and Mitigation Measure 1: Continuation of Outcome 2: Youth integration into the - Number of direct jobs created by enterprises supported 0 In 2020: 19 600 (incl. project study ongoing economic reforms with the support labour market is improved 40% women) reports OUTC of Technical and Financial Partners

Component 1: Development of entrepreneurial skills in growth sectors Output 1.1 Operational and effective 2015 2020 entrepreneurship support mechanism - Number of agro-processing SMEs supported 0 12 Risk 2: An unconducive business - Number of young entrepreneurs provided support in the 0 1200 (W: 50%) environment for small and microenterprises

agricultural value chain (AVC) 0 14 280 (incl. W: 40% - Number of farmer groups supported and youth: 60%) PMU Reports Mitigation Measure 2: Institutional support 0 200 to improve the business environment. The - Number of women rural entrepreneurs sensitized and 0 100 (W: 40%) project seeks to support the regulatory literate (vulnerable villages) framework for contractual actors in the AVC - Number of young entrepreneurs provided support in pilot sectors (tourism, environment, craft) NGO Report

Output 1.2 Training scheme - Number of establishments incorporating training 0 5 incorporating entrepreneurship modules on entrepreneurial spirit and entrepreneurship PMU Report OUTPUTS education and market needs - Number of establishments with technical facilities 0 5 commensurate with market needs

Output 1.3 Labour market - Number of reports of the youth employment survey and - 2 Project observation and entrepreneurship anticipating the skill needs of businesses implementation programme monitoring mechanism is - Number of professional staff trained in the management 0 20 reports (Youth strengthened of a labour market information system Employment - A single identifier is established to monitor the youth 0 1 Department) enlisted in the entrepreneurship support programme Component 2: Support to the setting up of an inclusive financing mechanism for entrepreneurship in growth sectors

1 A baseline situation survey is planned at project inception. iv

Output 2.1 Establishment of financing - Number of SMEs established with access to financing 0 12 Consolidated report mechanism for entrepreneurship and - Number of young beneficiaries of financing 0 780 (W: 40%) of project MFIs SMEs in the AVCs - Number of beneficiary farmers’ groups 0 1000 (W: 40%) Risk 3: Distortion created by public funds to support entrepreneurship Output 2.2 Capacity building of - Number of MFIs/FIs trained in AVC financing 0 At least 5 PMU Reports microfinance institutions (MFIs) and - Number of MFIs trying out mobile banking 0 3 Mitigation Measure 3: Promoting public- financial institutions (FIs) - Number of innovative financial products for AVC 0 4 private partnership and capacity building of

MFIs Output 2.3 An inclusive financing - Implementation of a pilot agricultural mutual health 0 1 (2019) NGO and PMU mechanism is established for scheme 0 1 (2019) Report vulnerable communities -Entrepreneurship financing mechanism

Component 3: Project Management and Coordination

Output 3.1 Project is managed - Project management team is operational NA 100% (2016) PMU Reports Risk 4: Weak project management capacity effectively and efficiently - M&E system is operational NA 100% (2016) of Department of Youth Employment - Number of timely technical reports NA 40 Mitigation Measure 4: Technical - Findings of baseline survey available NA 100% assistance provided by the project - Entrepreneurship impact analysis conducted NA 100%

COMPONENTS INPUTS

Component I: Development of entrepreneurial skills in growth sectors Sources of Financing: Component II: Support to the establishment of an inclusive financing mechanism for entrepreneurship in growth sectors ADF/TSF Grant: UA 8.00 million; NTF Loan: UA 6.5 million Component III: Project management and coordination Govt.: UA 0.77 million Component 1: UA 5.06 million Component 2: UA 8.09 million Component 3: UA 1.65 million Physical contingencies: MUA 0.17 Financial contingencies: UA 0.30 million

KEY ACTIVITIES

Project Implementation Schedule

2015 2016 2017 2018 2019 2020

Jul

Oct

Jan Apr Jun Jan Apr Jun Jan Apr Jun Jan Apr Jun Jan Apr Jun

Aug Sep Nov Dec Feb Mar Aug Sep Nov Dec Feb Mar Aug Sep Nov Dec Feb Mar Aug Sep Nov Dec Feb Mar Aug Sep Nov Dec Feb Mar Aug Sep Nov Dec

May

May Grant/Loan Information Negotiation Board approval Signing of Loan Agreement Project launch

Comp.1 - Entrepreneurial Skills Business model design Support via ETD NGO Training of young entrepreneurs

Post-business creation support

Resilience kit for vulnerable villages Support to employment information system and training Support to training centres Comp.2 - Inclusive Financing Entrepreneurship financing Capacity building of MFIs and FIs Inclusive financing mechanism for vulnerable villages Comp.3 - Project Monitoring/Evaluation Recruitment of PIU Baseline survey Audit Mid-term review Implementation of impact assessment protocol at start-up Impact Analysis Completion

PROJECT SUMMARY Project The objective of this project is to create the conditions for more inclusive economic growth by Overview improving youth employability and promoting entrepreneurship in growth sectors. In particular, it aims to provide a contextual response to youth integration needs through support to entrepreneurship in the agricultural value chain (AVC). Specific support will be provided to the populations of vulnerable and remote villages in order to attune them to the economic momentum that the project aims to boost in rural areas. The project also aims to provide a solution to youth underemployment by developing prospecting tools that will adapt the vocational training system to labour market requirements. This is an integrated project which has involved the participation of several Bank departments on the basis of their specific expertise (human development, agriculture, fragile States, inclusive financing and research). Needs The analysis of the country's poverty and employment characteristics revealed regional Assessment vulnerabilities and the vulnerability of youth and women who are the hardest hit by unemployment and underemployment. The country also has great agricultural product processing potential in terms of employment upstream and downstream of the AVC. The main public sector projects which are planned as part of the Government's strategy will provide employment opportunities for young people provided they have the required qualifications. The aim of this project is to contribute to this. The extreme poverty that exists in villages which are often remote with limited market access was taken into consideration in this project. A resilience kit will be offered to these villages within a radius of 50 km of the AVC identified. It will provide the communities, in particular, women, with specific support such as functional literacy education, access to planning and support to entrepreneurship. Analysis of the national entrepreneurship financing mechanism revealed the need to bolster coordination of central government funds and the need for closer involvement of the private financial sector. Targeted About 150,000 people from the poorest regions will be affected (Savannah, Central and Plateau Regions). Beneficiaries About 2,600,285 people from the regions of the interior, 50.7% of whom are women, will be indirectly affected. The project will specifically target 12 key established SMEs, 1200 young entrepreneurs (30% of whom are women), 14,200 producers/stockbreeders (40% of whom are women) and 200 women from vulnerable rural villages, 1000 young people trained in vocational training (VT) centres supported by the project, 40% of whom are women. The other project targets are 4 microfinance institutions (MFIs), one financial institution (FI) and 5 training centres in the same regions in order to train young people in trades with good prospects. Outcomes The project's expected impact is a reduction in the incidence of poverty from 58.7% (2011) to 49% and Impact (2025) and a reduction in the combined unemployment and underemployment rate for young men from 22% (2011) to 16% (2025) and young women from 31.9% (2011) to 26% (2025). It is expected that, in the medium-term, about 19,600 direct jobs (40% of which will be for women) will be created and that beneficiaries' income will have risen by 25% by 2020. These outcomes will be assessed by an empirical impact analysis planned under the project. Bank's Value The Bank's value added will be the adoption of an innovative approach to supporting youth Added employment in Togo which may be summarized in the following five points: (i) support to existing processing SMEs which are potential agricultural value chain (AVC) drivers, (ii) support to youth entrepreneurship in these AVCs and to producers who will have access to a guaranteed market by these SMEs, (iii) inclusive financing as part of a PPP approach by delegating resource management to the private financial sector and support to the development of innovative financial products, (iv) the establishment of a connection between these AVC and the poorest and most remote villages in the area, (v) consideration of the job creation potential of the country's major public sector investments in order to better adapt the training system. Knowledge One of the project's objectives is to carry out an impact analysis of entrepreneurship support. The Management innovative approach which consists in supporting all the AVC actors will thus be empirically evaluated in order to assess its impact in terms of job and income creation. This will help to guide public action with a view to the widespread dissemination of the approach. The project also makes provision for strategic studies such as: (i) a report on the characteristics of youth employment, (ii) a prospective study on the skill requirements of growth sectors, (iii) a study on agricultural insurance and mutual fund mechanisms, and (iii) an analysis of the regulatory framework for contract compliance in the AVC.

vii

REPORT AND RECOMMENDATION OF MANAGEMENT OF THE BANK GROUP TO THE BOARD OF DIRECTORS CONCERNING THE AWARD OF AN ADF GRANT AND A TSF GRANT, AND THE EXTENSION OF AN NTF LOAN TO THE TOGOLESE REPUBLIC FOR THE YOUTH EMPLOYABILITY AND INTEGRATION IN GROWTH SECTORS SUPPORT PROJECT (PAEIJ-SP)

Management hereby submits the following report and recommendation for a proposed ADF grant of UA 6.67 million, a TSF grant of UA 1.33 million and an NTF loan of UA 6.5 million to the Togolese Republic to finance the Youth Employability and Integration in Growth Sectors Support Project (PAEIJ- SP).

I. Strategic Thrust and Rationale

1.1 Project Linkages with Country Strategy and Objectives

1.1.1 The Government's key priorities are human capital development, youth integration, inclusion and fairness. Togo’s 2013-2017 Accelerated Growth and Employment Promotion Strategy (SCAPE) 2013-2017 seeks to lay the foundations for the country's future emergence. To this end, five strategic thrusts were adopted: (i) developing sectors with high growth potential; (ii) strengthening economic infrastructure; (iii) developing human capital, social protection and employment; (iv) strengthening governance; and (v) promoting participation, and a balanced and sustainable pattern of development. A major concern of the Government is the promotion of youth employment, which cuts across all the strategic thrusts of SCAPE. In 2013, the Government, with the support of AfDB and other partners, prepared a National Strategic Plan for Youth Employment (PSNEJ 2013-2017), which this project operationalizes. SCAPE and PSNEJ make agriculture a leading sector for integrating youth in agribusiness and processing. This project is in line with the National Agricultural Investment and Food Security Programme (PNIASA) adopted in 2009 which organizes the value chains around business models.

1.1.2 The primary focus of the Togolese authorities in promoting youth employment is providing support for business creation. The National Inclusive Finance Fund (FNFI) provides support and funding to people who were excluded from the financial system. Two other structures – the Youth Economic Initiative Support Fund (FAIEJ) and the National Agency for Promoting and Guaranteeing Financing for SME/SMI (ANPGF) – target young first-time entrepreneurs, with the main implementing instrument being the business plan. They offer support services (FAEIJ) and facilitate access to financial services through co-financing agreements with financial institutions (MFIs and banks). While the involvement of these actors is an indication of the priority set by the authorities to support entrepreneurship, at the same time, this makes it difficult to coordinate government action due to the large number of stakeholders2. The project will involve these three different State funds in its implementation and will conduct consultations on microfinance refinancing mechanisms (see Technical Annex A5.2.2). The project aims to revitalize the dialogue and microfinance reform body established in 2012, but which is not operational.

1.1.3 PAEIJ-SP is fully in keeping with the Bank’s strategies, including: (i) the Long-Term Strategy (LTS) for 2013-2022, through the operational priorities of “qualifications and technologies” and “private sector development” and (ii) the Human Capital Strategy (2014-2018), which has the overall objective of skill building for employment. The project is also aligned with the Gender Strategy of “Investing in Gender Equality for Africa’s Transformation” (2014-2018), particularly its Pillar II on economic empowerment as well as with the Strategy for Addressing Fragility and Building Resilience in Africa. Collaboration with several Bank departments made it possible to cover all the essential factors

2 Cf. Technical Annex A.2.1 1 for youth integration: (i) skill building, access to non-financial services for young entrepreneurs and gender promotion (OSHD); (ii) access to inclusive financial services (OFSD), (iii) structuring of agricultural value chains (OSAN) and (iv) consideration of fragility factors (ORTS). In this regard, the project is also consistent with the strategies for promoting the inclusive financial sector, agriculture and countries in transition.

1.2 Rationale for Bank’s Involvement

1.2.1. Some of Togo’s factors of Graph 1: Poverty Incidence and Contribution by Region 91% fragility are endemic poverty and 87% 80% regional inequalities. Despite a reduction 74% 74% 67% 68% in the incidence of poverty in the country 63% 62%65% 54% from 2006 to 2011, there was a worsening of the extreme poverty and inequality rates 27% 26% 19% (the Gini index increased from 0.361 to 14% 14% 15% 0.393) over the same period. Poverty 12% increased in the Plateau, Central and Grand Lomé Maritime Plateaux Centrale Kara Savanes Savannah regions (Figure 1). Independent Poverty 2006 Poverty 2011 Contribution to Poverty 2011 farmers are the most vulnerable with a poverty incidence of 78%. Rural women are more underprivileged than men in terms of access to inputs (land, financing, technical and managerial capacity, etc.). PAEIJ-SP aims to boost the resilience of beneficiaries by supporting the economic empowerment of young women and men through the promotion of inclusive Chart 2: Combined Unemployment and Under- financial systems and capacity building Employment Rate by Gender and Place of Residence activities, including literacy education and 35% 30% family planning activities. 29% 25%

1.2.2 Coupled with this poverty-related 26% 19% 27% fragile situation is a relatively high rate of 20% underemployment in Togo and a weak labour market information system. Figure 10% 3% 9% 2 shows a high combined 4% unemployment/underemployment rate of 30% Urban Rural Men Women in rural areas. The labour market in Togo is Unemployment Under-employment characterized by the predominance of the Source: CWIQ 2011 Survey Report informal sector which accounts for 86.7% of jobs. Youth and women are most affected by unemployment with respective rates of 8.1% and 9%. Togo’s situation is similar to that of WAEMU countries in which the youth unemployment rate is estimated at 10.6%3. According to an ILO survey conducted in 2012, women’s transition to stable employment lasts almost 6.6 months longer than that of men. The employment statistics need to be refined with decent work indicators. An unemployment rate of 3% in rural areas does not reflect local realities. The Bank will therefore provide support in this regard in order to build the capacity of the employment observatory in partnership with ILO.

It is also important to highlight the peculiarity of the Savannah region, which, despite being the poorest in the country, has a very low unemployment rate (0.8%), the lowest regional inactivity rate and a high underemployment rate (41.3%). This reflects the constant struggle of the people of the region to fight

3 Study on youth employment in the WAEMU zone conducted as part of the 6th Conference of WAEMU Ministers of Employment and Training, held in June 2015 in Abidjan. 2 poverty, with no option but to work to survive. The project plans to provide specific support to this region, which has potential in the animal processing sub-sector. (cf. Technical Annex A 5.2.1).

1.2.3. Under-education and inadequate qualifications are a major constraint to socio-economic development. 55% of job seekers have not completed primary education. While 17% of young people have no qualifications, girls are particularly affected with 23.4% of them never having been to school. A total of 304,881 young people (including 229,310 girls) are in a fragile situation, and unlikely to find jobs, particularly those requiring basic general knowledge. Furthermore, the structure of the economy does not create enough employment, resulting in a quantitative mismatch with 3,500 higher education graduates or senior secondary school leavers competing for 1,050 skilled jobs annually.

1.2.4. The sectors with high employment potential considered by the project are primarily agriculture and the BPW sector. At the request of the Togolese authorities, the tourism, crafts and green economy sectors will be included on a pilot basis. Agriculture accounts for 51.8% of GDP (2013). It occupies 70% of the workforce (56% women) and attracts many young people (68.9%). The sector has advantages including available arable land (3.4 million hectares 45% of which is cultivated), diverse agro-ecological zones and potential irrigable land.

1.2.5 Additionally, the massive investments planned to develop modern transport infrastructure (road, sea, rail and air) represent job opportunities for the youth. Similarly, the social housing programme through the construction of 10 000 housing units will help create thousands of jobs. The project will analyse the job creation potential of the public investment programme and attempt to anticipate skill needs in order to ensure placement of skilled human resources on the labour market. The Government also intends to promote tourism and the arts by developing untapped natural assets such as sandy beaches, varied flora and fauna, historical and archaeological remains, arts and traditions. The Togolese authorities have asked for financing to be provided under the PAEIJ-SP project for pilot entrepreneurship initiatives in the area of arts and crafts and eco-tourism.

1.2.6. The project intends to foster innovative approaches to support entrepreneurship through the promotion of agricultural value chain business models. It will help to organize all the links in the agricultural value chains, ranging from SME processing to producers through the development of agribusiness investment opportunities for the youth (service providers, mechanization, warehousing, etc…) (cf. Annex IV). Some reluctance was also observed on the part of MFIs and commercial banks to finance the agricultural sector. The project intends to address this by: (i) supporting entrepreneurship to limit the risks perceived by MFIs and FIs; and (ii) building the innovative capacity of financial institutions and proposing financial products suited to agriculture.

1.2.7 The existing entrepreneurship support mechanisms are a blend of non-financial support services and financial services. They are used to identify and support first-time entrepreneurs and to finance activities. This is the main cause of the distortions observed: long lead times, mismatch between needs and resources, non-compliance with fund disbursement plan, deterioration of portfolio quality, etc. This project aims to separate the two functions. Support to businesses (established and start-ups) will be provided through existing, but strengthened mechanisms. Activities will be financed through a private banking service provider under a public-private partnership (see Technical Annex A. 5.2.2). The bank to be selected will be the interface for refinancing microfinance institutions will provide direct financing for SMEs. It will hold the revolving fund the use of which will be governed by the credit operations manual to be prepared at project start-up.

1.3 Aid Coordination

Table 1 Government and TFP contribution in targeted sectors Sector or Sub-Sector GDP Employment and Vocational Training 1.2% (2014-2015 average) Stakeholders – Annual Public Expenditure in UA million Government (2014 and 2015 Donors Period average) AfDB 4.2 2014-2018 28.9 WB 2.8 2016-2017 WADB 19.4 2012-2016 IFAD 28.1 2012-2016 AFD 4.8 2011-2015 GIZ 21.6 2012-2016 Level of Aid Coordination

Existence of thematic working groups Yes

Existence of comprehensive employment sector programme Yes

AfDB’s role in aid coordination Member of thematic group

1.3.1 An institutional development policy coordination, monitoring and evaluation mechanism (DIPD) has been in place since 2010, and consists of two levels of coordination with Technical and Financial Partners (TFPs): the Government-Donor Committee, at the central level, and the sectoral committees (a total of 11) at sector level. Within the Education Thematic Group a sub-group is dedicated to vocational training and entrepreneurship, in which the Bank plays an active role.

1.3.2 Besides the Bank, other key partners involved in supporting entrepreneurship and vocational training in Togo are listed in Annex 3 and summarized below:

Table 2 TFP Intervention in the Sector Partners Project and Amount World Bank Private Sector Development Support (PADSP) – USD 13 million BOAD Grassroots Development Support Programme (PRADEB) – CFAF 6 billion CFAF 10 billion loan (CFAF 5 billion in 2014 and CFAF 5 billion in 2015) IFAD National Rural Entrepreneurship Promotion Project (PNPER) – USD 39.6 million AFD Modernization of Vocational Training in Togo Project – EUR 6 million Agricultural Training Support Project – EUR 6 million GIZ Employment Promotion and Vocational Training Project (PROFOPEJ) – EUR 20 million Programme for Rural and Agricultural Development in Togo (PRODRA) – EUR 7.25 million

1.3.3 PAEIJ-SP will work in synergy with these partners, and especially PNPER, to build the capacity of MFIs. A partnership with ILO is envisaged to build the capacity of the employment observatory for the establishment of a labour market information system and training. Provision is also made for supporting the supervising ministry in designing effective entrepreneurship support programmes, and more generally active labour market policies.

II. Project Description

2.1 Project Components

2.1.1 The project’s expected long-term impact is a reduction in the incidence of poverty as well as a combined cut in the under-employment/unemployment rate among youths by 2025. The specific medium-term objectives include increasing the income of entrepreneurship support beneficiaries by 25% and creating at least 19,600 direct jobs by 2020. To attain the above objectives, the project comprises three components. The first component aims to strengthen the entrepreneurial skills of youths in growth sectors. The second component provides support for the establishment of an inclusive mechanism to finance entrepreneurship among the youth who benefit from support under Component 1, while the third component aims at providing support to project management and monitoring.

Table 3 Description of Project Activities

Component 1: Development of Youth Entrepreneurial Skills in Growth Sectors – UA 5.06 million (34%)

1. Support to youth entrepreneurship 1.1 Support to the design of business models and identification of sub-sectors (i) International and local expertise for the design of agricultural value chain business models; and (ii) Feasibility study for business creation in the environment sector 1.2 Entrepreneurship capacity building and support mechanism: (i) Support to SMEs in agro-processing; (ii) Technical training and support to youth entrepreneurship and post-business start-up; (ii) Support to women’s entrepreneurship, (iii) Mentoring and networking system for entrepreneurs; (iv) Establishment of a single identifier for monitoring entrepreneurship support 1.3 Support to entrepreneurship and resilience in remote and vulnerable villages: (i) Identification of targets and needs assessment; (ii) Support to business creation by women; and (iii) functional literacy education and sensitization on family planning, especially for women. 2. Support to establishment of a training scheme incorporating market needs and strengthening entrepreneurship education 1.1 Support to the establishment of a labour market information system and training: (i) Skill needs anticipation in growth sectors (agro-industry, BPW and tourism), and (ii) capacity building of the employment observatory in the analysis of youth employment situation, with a gender perspective, as well as for staff of the ministry in charge of youth employment. 1.2 Support to vocational training centres: (i) Development of training modules incorporating entrepreneurship and business management; (ii) Improving the technical facilities of 4 centres connected with the new programmes to meet market needs, and (iii) Support to training programme design for skills training modules in collaboration with ANPE and FAEIJ. Component 2: Support to the Establishment of an Inclusive Financing Mechanism – UA 8.09 million (55%) 1. Establishment of the entrepreneurship financing mechanism (i) Financing various links of the agricultural value chain; (ii) Financing pilot entrepreneurship initiatives in the green economy, tourism and the arts and craft sectors. 2. Capacity building of MFIs and financial institutions (i) Training on agricultural value chain financing; (ii) Support to the establishment of a mobile banking mechanism; (iii) Development of new financial products in the agricultural value chain; (iv) Support to the establishment of an MFIs refinancing mechanism; and (v) study on agricultural insurance. 3. Support to the establishment of an inclusive financing mechanism for vulnerable communities (i) Support to the establishment of a pilot agricultural mutual scheme; (ii) Financing entrepreneurship in vulnerable villages Component 3: Support to Project Management and Impact Assessment – UA 1.65 million (11%) 1. Support to project management and monitoring/evaluation (i) Installation of project management team, and (ii) Establishment of an operational monitoring/evaluation system 2. Support to the establishment of an impact analysis mechanism (i) Conduct of baseline surveys, and (ii) Conduct of impact analysis of the entrepreneurship component.

2.2 Technical Solutions Retained and Other Alternatives Explored

2.2.1 The option retained by the project is the promotion of entrepreneurship and skills, based on the key growth sectors of the economy, particularly in the agricultural value chain. The project intervention will target all the links in the agricultural value chain from producers to young first-time entrepreneurs in order to improve the competitiveness of the entire chain through reduction of costs and risks, and increasing the income of all the actors. The project also aims to provide a solution to the structural causes of youth underemployment by strengthening entrepreneurship education and anticipating the skill needs of growth sectors with a view to adapting the training mechanism accordingly.

Table 4 Alternatives considered and reasons for rejection Alternative Brief Description Reason for Rejection

Support to Support based on call for . Offers limited viability as open to all sectors, even non- entrepreneurship without proposals, support to the growth sectors, and markets not guaranteed link to value chain development of a business plan, . Weakened by lack of business (technical skills) support, business plan competition and especially in the Togolese context where most job seekers grant or assistance in securing are unqualified financing for project . Potential for creation of sustainable jobs rather low implementation Support to skill building Support to technical education . Does not address Government’s major concern of and vocational training resolving current unemployment crisis by tackling the issue of the large numbers of job seekers. . The project has chosen to focus its action on anticipating skill needs in the growth sectors and adapting the vocational training system by strengthening entrepreneurship education. Support to income- Support to financing income- . Such support does not ensure sustainable improvement in generating activities generating activities for the living conditions of the population due to the lack of vulnerable people access to markets . The proposed project will target producers involved in the value chains and will link them up with agro-processing SMEs and young entrepreneurs providing agricultural services.

2.3 Project Type: This is an investment project. This approach was adopted to provide specific support to the country in the implementation of training activities and entrepreneurship support. Since the project concerns a country in transition, special attention has been given to institutional capacity building and support to the coordination of Government and TFP interventions.

2.4 Project Cost and Financing Arrangements

2.4.1 The total project cost, net of taxes and customs duties, is estimated at 15.27 million Units of Account (UA), or approximately CFAF 12,590.18 million. This cost comprises UA 10.50 million in local currency and UA 4.77 million in foreign exchange. Average provisions of 1% and 2% on the base cost were applied for physical (UA 0.17 million) and financial (UA 0.30 million) contingencies, respectively. The summary of estimated costs by component, expenditure category, sources of financing as well as an expenditure schedule are presented in the tables below. Detailed project cost tables and the list of goods and services are presented in the Technical Annexes to this report.

Table 5 Summary of Estimated Costs by Component

% CFAF Million UA Million % COMPONENTS Base F.E. Cost L.C. F.E. Total L.C. F.E. Total 1. DEVELOPMENT OF YOUTH ENTREPRENEURIAL SKILLS 1 419.53 2 750.16 4 169.68 1.72 3.34 5.06 66 34 2. SUPPORT TO INCLUSIVE FINANCING MECHANISM 6 137.22 536.75 6 673.97 7.44 0.65 8.09 8 55 3. PROJECT COORDINATION AND MANAGEMENT 970.80 390.82 1 361.62 1.18 0.47 1.65 29 11 TOTAL BASE COST 8 527.54 3 677.73 12 205.27 10.34 4.46 14.80 30 100 Physical contingencies 47.78 91.69 139.47 0.06 0.11 0.17 66 1 Financial contingencies 79.40 166.04 245.44 0.10 0.20 0.30 68 2 TOTAL PROJECT COST 8 654.72 3 935.46 12 590.18 10.50 4.77 15.27 31 103

Table 6 Summary of Estimated Cost by Expenditure Category

Million CFAF Million UA EXPENDITURE CATEGORIES % F.E. L.C. F.E. Total L.C. F.E. Total A. GOODS 112,91 1 016,21 1 129,12 0,14 1,23 1,37 90 B. SERVICES 1 701,98 2 552,97 4 254,95 2,06 3,10 5,16 60 C. OTHERS: ENTREPRENEURSHIP - FINANCING 5 882,45 - 5 882,45 7,13 - 7,13 D. PERSONNEL 719,00 - 719,00 0,87 - 0,87 - E. OPERATION 111,20 108,55 219,75 0,13 0,13 0,27 49 TOTAL BASE COST 8 527,54 3 677,73 12 205,27 10,34 4,46 14,80 30 Physical contingencies 47,78 91,69 139,47 0,06 0,11 0,17 66 Financial contingencies 79,40 166,04 245,44 0,10 0,20 0,30 68 TOTAL PROJECT COST 8 654,72 3 935,46 12 590,18 10,50 4,77 15,27 31

Table 7 Expenditure Schedule by Component

COMPOSANTES CFAF Million UA Million 2016 2017 2018 2019 2020 Total 2016 2017 2018 2019 2020 Total

COMPONENT 1 1 268.49 1 122.58 767.83 516.35 494.44 4 169.68 1.54 1.36 0.93 0.63 0.60 5.06

COMPONENT 2 1 078.91 1 285.40 1 606.95 1 174.09 1 528.62 6 673.97 1.31 1.56 1.95 1.42 1.85 8.09

COMPONENT 3 381.36 227.69 242.19 225.19 285.19 1 361.62 0.46 0.28 0.29 0.27 0.35 1.65 TOTAL BASE COST 2 728.76 2 635.66 2 616.97 1 915.63 2 308.25 12 205.27 3.31 3.20 3.17 2.32 2.80 14.80 Physical contingencies 38.02 34.55 34.08 16.55 16.27 139.47 0.05 0.04 0.04 0.02 0.02 0.17 Financial contingencies 17.04 38.88 70.50 51.05 67.97 245.44 0.02 0.05 0.09 0.06 0.08 0.30 TOTAL 2 783.82 2 709.10 2 721.55 1 983.23 2 392.49 12 590.18 3.38 3.29 3.30 2.41 2.90 15.27

Table 8 Sources of Financing

Million CFAF SOURCES OF FINANCING Million UA % L.C. F.E. Total L.C. F.E. Total

ADF GRANT 2 224.96 3 274.46 5 499.42 2.70 3.97 6.67 43.7

TSF GRANT 435.60 661.00 1 096.60 0.53 0.80 1.33 8.7

NTF LOAN 5 359.25 - 5 359.25 6.50 - 6.50 42.6

TOGOLESE GOVERNMENT 634.91 - 634.91 0.77 - 0.77 5.0

TOTAL 8 654.72 3 935.46 12 590.18 10.50 4.77 15.27 100.0

2.4.2 The project will be financed with an ADF grant of UA 6.67 million, a TAF grant of UA 1.33 million, an NTF loan of UA 6.5 million and a counterpart contribution of UA 0.77 million (5% of the project cost). The ADF grant resources will cover over 90% of the investment expenditure (goods and services) and 80% of operating expenses. All the NTF loan resources will be allocated to the financing of youth entrepreneurship. The Government contribution will cover operating costs and the financing of youth entrepreneurship.

2.5 Project Target Area and Beneficiaries

2.5.1 The project area covers five regions of the country but its main focus is the poorest regions (Savannah, Central and Plateau). The population of these regions is approximately 150,000 - all from poor districts. The population from regions of the interior stand at 2,600,285, of which 50.7% women. The project will specifically target 12 key established SMEs, 1,200 young entrepreneurs (30% of whom will be women), 14,200 producers/livestock farmers (40% women) and 200 women from rural and vulnerable villages, 1,000 young people (40% women) trained at vocational training (VT) centres supported by the project. The project also targets 4 MFIs, 1 financial institution and 5 training centres in the same regions, to train young people in artisanal trades (artisanal auto mechanics and equipment supplier) in relation with agricultural value chains.

2.5.2 The following criteria will determine the choice of specific intervention areas: (i) high level of poverty; and (ii) selection of processing SMEs that can demonstrate a potential for development and the ability to integrate a sizeable number of young entrepreneurs in the supply chain (the criteria are listed in Technical Annex A 5.2.1 b/ and c/). The needs of the key enterprises targeted will determine the areas of intervention, while a radius of 50 km around the processing units or aggregators may be used to determine the production areas. Out of the 12 targeted, the feasibility study has already identified seven key SMEs in the soya, maize and cassava sub-sectors, which meet these criteria and are located in the disadvantaged Kara, Central and Plateau regions.

Special attention will also be paid to the poorest region, Savannah, where poultry farming and processing potential has been identified. The project will conduct the studies required for the establishment of the new processing SME in this region (cf. Annex A.5.2.1 c/).

2.6 Participatory Approach for Project Identification, Design and Implementation

The project was prepared following broad consultation with major stakeholders during the identification, preparation and appraisal missions, and which will continue during implementation. Recommendations from civil society organizations on the need to provide specific support to the most vulnerable

(resilience kit) and reduce gender inequalities were taken into account. Private sector producers4 also informed the project about their challenges and skill needs. Meetings with MFIs and banks confirmed the relevance of the approach adopted by the project to finance entrepreneurship. The concerns of the direct beneficiaries, including the youth, women’s groups, farmers and agro-processing enterprises also guided the strategic choices of the project. The consultative approach will be used in project implementation by setting up a Steering Committee that will include civil society, the private sector and Ministerial Departments involved in the project.

2.7 Bank Group Experience, Lessons Reflected in Project Design

2.7.1 The project benefits from lessons learned from other interventions by the Bank and other actors in Togo. The project portfolio comprises 9 operations for a total UA 86.7 million, of which 6.5% in the social sector. The mid-term review mission fielded in October 2015 rated operations implementation as satisfactory. The project has drawn lessons from the completion reports of projects in Togo which have been closed and focus on the following four points: (i) Building the capacity of Project Implementation Units (PIUs); (ii) strengthening supervision missions and monitoring results indicators during these missions; (iii) coordinating with other TFPs; and (iv) improving project quality at entry. The project was the subject of close inter-Departmental collaboration at the Bank in order to improve its quality. The project feasibility study also highlighted the lessons learned from entrepreneurship programmes supported by Government and TFPs in Togo. These include: (i) lack of coordination among the various funds and programmes; (ii) difficulties faced by the first established enterprises to access markets; (iii) the confusion between financial and non-financial services; (iv) poor technical training; and (v) lack of a monitoring mechanism. Technical Annex B1 shows how the project factors in these lessons.

2.7.2 The project also drew on the recommendations contained in the IDEV evaluation reports and international best practices, identified by impact analyses performed by other partners. The evaluation of the Bank’s intervention in microfinance and SME financing highlighted: (i) the need to enhance analysis of the constraints of the financial sector and (ii) encourage the private financial sector to refinance MFIs, rather than use government funds. The project also includes a public-private partnership arrangement between government institutions and the private sector with responsibility for the private financial sector to make financing available for entrepreneurs (see Technical Annex A.5.2.2). The impact analyses of entrepreneurship and microfinance support projects5 have shown that the most effective and sustainable actions are those that take the level of education and characteristics of young people into account, the introduction of related sensitization activities (family planning sensitization for women) and the development of a more appropriate financial instrument for the dynamics of agricultural entrepreneurship, including micro-insurance6.

2.7.3 The Bank provides added value in the design and monitoring of youth employment and training support. It has gained experience in several countries including Tunisia, Côte d’Ivoire, Egypt, Mauritania, Niger and Senegal. There are also: (i) support programmes for matching training to employment and identifying the skill needs of the productive sector, which encourage more involvement of the productive sector in training (Morocco, Rwanda, Côte d’Ivoire, Tunisia and Mauritania); (ii) youth entrepreneurship support programmes (Senegal and Egypt); and (iii) projects to strengthen vocational training and youth integration (Niger and Kenya).

4 The Chamber of Commerce and Industry of Togo (CCIT), The National Employers’ Council of Togo (CNPT), The Association of the Large Companies of Togo (AGET) and several other enterprises. 5 La politique de l’autonomie. Lutter contre la pauvreté (The Politics of Empowerment: Poverty Alleviation), Esther Duflos, 2010 6 https://www.devex.com/news/critique-of-microfinance-raises-questions-about-efficacy-donor-support-of-the-industry-85617 9

2.8 Key Performance Indicators

2.8.1 The objective of the PAIJ-SP is to provide the most favourable employment conditions for young people and reduce poverty. The project’s expected long-term impact is to reduce the incidence of poverty and the combined underemployment and unemployment rate by 2025. The results chain is summarized in the diagram below:

Key Performance Indicators

Impact – Level 1 Reduce poverty incidence from 58.7% (2011) to 49% (2025) Reduce the combined unemployment and underemployment rate for young men from 22% (2011) to 16% (2025) and for young women from 31.9% (2011) to 26% (2025)

Impact – Level 2 Increased income for entrepreneurship support beneficiaries by 25% in 2020 At least 19,600 direct jobs created in 2020, 40% of which are for women.

Key indicators of Targeted Outcomes – Level 3 Component 1: Development of entrepreneurial Component 2: Inclusive Component 3: Project skills entrepreneurship financing mechanism management and impact assessment -12 existing processing SMEs receive technical - 12 SMEs, 800 young people and - The project team is support 1,000 producer organizations have operational from the first year - 1,300 young people are trained to start up their access to financing - The baseline survey is own businesses (40% women) -At least 5 MFIs7 and one financial conducted at the start and end -200 women from 21 vulnerable villages targeted institution are trained in agricultural of project - Capacity of employment observatory built value chains - The impact analysis report is - 5 training centres incorporate the new training - 3 MFIs pilot mobile banking available modules and are equipped - 21 villages receive equipment financing for income-generating activities Source: PAEIJ-SP Project Logical Framework

III. Project Feasibility

3.1 Economic and Financial Performance

3.1.1 The project’s profitability analysis gives a financial rate of return of 29% and an economic rate of return of 14%, with a net present value (NPV) of CFAF 5.083 billion. This analysis was conducted on the component concerning support to AVC entrepreneurship in the cassava, soya, maize and poultry sub-sectors. Technical Annex B7 presents the income flows generated for each of the AVC links, i.e. SMEs, young entrepreneurs and producers. The sensitivity test shows that by increasing the cost by 10%, the financial profitability would stand at 26% and the VAN at CFAF 4.6 billion.

3.1.2 The economic analysis shows the project to generate the following positive externalities, especially in terms of tax revenue and jobs created: an estimated 19,600 direct jobs over a five-year period, 18,187 of which will be in the AVC targeted by the project. The impact on indirect jobs (linked to intermediate consumption) and induced jobs (from consumption of primary or secondary goods) is difficult to estimate. A partnership is envisaged with the 'Let's Work' initiative of the International

7 The exact number of the project's partner MFIs will be determined in credit fund operations manual in order to ensure optimal coverage in the region. 10

Financial Corporation (IFC) to carry out this work. Tax revenue flows are estimated at CFAF 18.5 billion over a 20-year period which will result in increased investment in basic public services especially in the regions of the interior (see Technical Annex B7).

3.2 Environmental and Social Impact

Environment

3.2.1 The project was classified as category 3 in May 2015 and is, therefore, under no requirement to observe any environmental or social safeguards. In this respect, it will include in the training curricula, modules on raising environmental awareness in an effort to enhance the level of environmental culture of future employees and entrepreneurs while developing professional practices that reconcile the economy with the ecology.

Climate Change

3.2.2 While the project does not fall under the climate risk assessment system, with climatic vagaries likely to impact adversely on the country’s economic growth, a study will be conducted on green economy entrepreneurship opportunities and jobs. A prospective study will also be conducted on the impact of climate change on prospects in growth sectors.

By investing in human capital and social inclusion, the project contributes to building the people’s resilience to climate change. By raising the level of qualification of the human resources and promoting their access to job opportunities, the project prepares the beneficiaries to emerge from poverty as well as to become better equipped to develop climate change adaptation strategies. The project will also develop modules on climate change adaptation so as to build the technical skills of the beneficiaries to boost their resilience.

Social Impact

3.2.3 By refocusing the employment and skills development issues at the heart of public policy in Togo, the project will help to ensure inclusiveness in the country’s growth. The project will have quite a significant social impact as it will reduce the risk of vulnerability to poverty and social exclusion by improving youth employment (drop in the unemployment and underemployment rate from 29% to 19% from 2011 to 2025). These combined effects will help to reduce the poverty rate estimated at 58.7%, according to the last Core Welfare Indicators Questionnaire (CWIQ) survey in 2011, to 49% in 2025, going by projections.

3.2.4 The project, therefore, contributes to calming social tensions generated by youth unemployment. It also contributes to mitigating the risk of social conflicts among the different population categories by reducing regional disparities in access to quality training and job opportunities. Togo has just emerged from a severe socio-political crisis which occurred from 1990 to 2006 and needs to consolidate the gains made in recent years. Lastly, the project will help to settle young people in their own environment by developing regional and local potential on agricultural value chains.

3.2.5 The project will also provide specific support (resilience kit) to 21 remote and vulnerable villages located in the agricultural value chain support area. Interventions such as functional literacy education and family planning sensitization tailored to the characteristics of these communities, will help link them to sources of growth boosted at the regional level.

3.2.6 Increasing agro-processing will improve the nutritional status of the country for vulnerable children. The project will support food-processing SMEs in the fortification of food

11 products such as soy flour, in an effort to diversify their production. This will help solve the chronic malnutrition prevalence among under-five children in rural areas.

Gender

3.2.7 Gender inequalities are still very prevalent in the social and economic fabric of the country in terms of access to resources and decision-making and in family organization and reproductive life. In 2011, about 43.3% of young people and adults aged 15 to 44 were illiterate, with over two-thirds (670 000) of them women. Indeed, 23.4 % of young girls have no qualification (compared to 17% of boys). Only 15% of women completed secondary school (compared to 45% for men). Access to family planning is poor and early and unwanted pregnancies among young girls further complicate their access to education, decent employment and any likelihood of social mobility. Also, factors of production such as land and infrastructure are an issue for women who are hampered by transportation difficulties in rural areas. The project includes the following gender promotion activities:

- Specific support to women entrepreneurs in AVC and access to financing (650 young women entrepreneurs and 5,712 women belonging to producer organizations);

- Establishment of a mentoring system for young women entrepreneurs;

- Support to functional literacy for women in targeted vulnerable villages;

- Sensitization on, and access to family planning for young girls and women;

- Pilot agricultural mutual health scheme, with gender approach;

- Training on gender and inclusion for all project stakeholders;

The Table in Annex IV of this report shows the major challenges and how the project plans to address them. Technical Annex A4 presents a more detailed gender situation analysis in Togo

IV. Implementation

4.1 Implementation Arrangements

4.1.1 Institutional Arrangements: The Executing Agency is the Ministry of Grassroots Development, Crafts, Youth and Youth Employment (MDBAJEJ), through the Department of Youth Employment (DEJ). A Project Management Unit (PMU) will be established within the DEJ to oversee the implementation of all the project components and prepare periodic project status reports under the guidance of a Coordinator to be recruited. The capacity assessment of the DEJ revealed the need to recruit PMU staff made up of a team of experts (procurement, financial management, monitoring and evaluation and gender) and support staff (secretary, driver and messenger).

4.1.2 A Steering Committee, chaired by the General Secretary of MDBAJEJ, and comprising a representative of all beneficiary institutions of the project, will be set up to ensure efficient guidance and coordination of activities. The Steering Committee will supervise and monitor implementation. It will meet every six months to validate the annual reports, the programme and work timetable, and the annual project budget. The Project Coordinator will provide secretariat services for the Steering Committee meetings. A Financing Committee will be established to supervise the part concerning the entrepreneurship financing mechanism. This committee will comprise the Project Unit, State funds and

12 representatives of the banking system. At project start-up, it will be responsible for validating the credit operations manual and terms of reference for the selection of the commercial bank and microfinance institutions through competitive bidding.

4.1.3 Procurement Arrangements for Goods, Works and Services: In November 2011, the Bank reviewed the country’s national procurement procedures which were updated in February 2014. Bank- financed procurement will be made according to national procedures for national competitive bidding for goods and works in accordance with Letter of Agreement No. ORVP.0/LTR/2014/06/002 dated 22 May 2014 on the use of national procedures for national competitive bidding. Procurement by international competitive bidding and selection of consulting services will be carried out in accordance with the Bank's Rules and Procedures for the Procurement of Goods and Works (May 2008 edition, revised in July 2012), or as the case may be, Bank Rules and Procedures for the Use of Consultants (May 2008 edition, revised in July 2012) using appropriate Bank standard bidding documents. It will also be carried out in accordance with the provisions to be set out in the financing agreement. The procurement plan for 18 months prepared by the Government, the detailed procurement methods and the table on the procurement of goods, works and services are presented in the technical annexes of the report (Annex B5). Advance Procurement Action (APA) may be used if the Government submits a request for it to the Bank. It will concern the recruitment of members of the project unit and technical assistance staff to facilitate project start-up.

4.2 Financial Management

4.2.1 The PAEIJ-SP will be implemented by a Project Management Unit within the Department of Youth Employment (DEJ) of the Ministry of Grassroots Development, Crafts, Youth and Youth Employment (MDBAJEJ). The management tools, namely accounting software, the administrative, financial and accounting procedures manual and the youth credit operations manual, will be prepared and introduced no later than three (3) months following the first disbursement. All the financial management components, from the budget, internal audit, accounting, cash situation, financial reports to the external audit mechanism will be set up.

4.2.2 Disbursements will be made using the direct payment and reimbursement methods for suppliers and service providers, and by the revolving fund or special account method for the youth credit tranches. First disbursement will be subject to the opening of special accounts. Preparation of the credit manual and opening of special accounts that will be activated by the Coordinator and financial management expert will be a condition precedent to disbursement of the entrepreneurship financing tranche. The project will produce quarterly financial monitoring reports and an annual budget, annual financial statements, financial statement notes, special accounts reconciliation statements and physical inventory statements of capital assets.

4.2.3 An independent project audit will be conducted at the end of each fiscal year for the duration of the project. The auditor will be recruited by competitive bidding based on terms of reference previously approved by the Bank for a maximum duration of three fiscal years, subject to validation of the report of the first fiscal year. The auditor will be paid using the direct payment method. A second auditor will be recruited under the same conditions to verify resources and expenditure under the entrepreneur financing component.

4.2.4 The overall risk relating to the financial management of the, including that of lack of internal control, is moderate, taking into account the financial management system and risk mitigation measures proposed by the Bank.

4.3 Project Monitoring

4.3.1 The project will focus on establishing a project monitoring mechanism, and will strengthen the national entrepreneurship support programmes monitoring system. A survey on the baseline situation will be conducted at project start-up. A single identifier will be introduced to monitor the beneficiaries of all the entrepreneurship support programmes. Based on the work plan retained, the project will transmit a performance monitoring plan at the beginning of each year and update the results indicator framework. Core project activities will be closely monitored as set out on the table below:

Table 9 Monitoring of project's key activities Activities Period Responsible institution

Project approval October 2015 AfDB

Signing of Grant and Loan November 2015 AfDB Agreements Fulfilment of disbursement December 2015 GOV/AfDB conditions Recruitment for PIU and the December 2015 GOV international expert Establishment of Steering January 2016 GOV Committee Preparation of operations manual January 2016 GOV/AfDB for financing component Official launching January 2016 AfDB/GOV Competitive bidding for initial February - May 2016 GOV/ Project team contracts, including selection of commercial bank and MFIs Conduct of study on the baseline March to July 2016 GOV/ Project team situation Signing of agreement with ETD and February 2016 GOV Project team ILO Start-up of activities May 2016 GOV Project team Mid-term review October 2017 AfDB/GOV Project team Impact assessment June 2017 and June 2020 GOV Project team Project closure December 2020 AfDB/GOV Project completion June 2021 AfDB/GOV

4.4 Governance

4.4.1 The project will strengthen existing institutional structures to enhance their efficiency in the fulfilment of their missions. First, the project aims to improve coordination between the actions of Government and TFPs in order to support entrepreneurship at the central and regional levels. The single identifier will be used to monitor young entrepreneurs from the time they start the training to when they obtain a loan from a microfinance institution. This monitoring platform will help avoid duplication and heighten the visibility of support from the various partners and State institutions. The project will also build the capacity of MDBEJ in order to improve the efficacy of active labour market programmes, in collaboration with ILO. The monitoring and evaluation system and the impact analysis will help create a culture of evaluation that will guide results-based policy decision-making.

4.4.2 The project will also work together with the Ministry of Education to support MDBEJ to implement activities that will have medium and long-term impacts on the root causes of youth underemployment. The study on skill needs for growth sectors, implementation of programmes

14 resulting from the study and the improvement of entrepreneurship education will ensure that training is constantly anchored in the expectations of the productive sector.

4.5 Sustainability

4.5.1 The inclusion of entrepreneurship support in the value chain, with specific actions for the various links of the chain, will help ensure the sustainability of the different enterprises to be established. The contractual terms will have provisions ensuring that all parties meet their commitments. The study on agricultural insurance will lead to the introduction of insurance products that are suited to the agricultural sector. The agriculture mutual health scheme will be used to cover any health risks of beneficiaries and their family members – risks that otherwise, could jeopardize their capacity to repay the loan. It will also improve the health status of the beneficiaries, thereby enabling them to be more productive. The project aims to create a pool of young people who will receive assistance to set up their businesses and fulfil certification formalities. The project will also help to establish an office specialized in supporting enterprises, and which may continue to exist after the end of the project.

4.5.2 The technical training designed to meet the needs of the agricultural value chains and of young entrepreneurs will be institutionalized with the support of a training design expert who could also use the design as training modules for job seekers. Improving entrepreneurship training will ensure that the young people who come out of the training system are equipped with the skills needed to start their own business, thereby reducing the current costs for training and providing support to start businesses.

4.5.3 The establishment of the financial mechanism has been designed to fit into the private financial sector. The use of a commercial bank will lead to the establishment of an MFI refinancing system suitable for the private financial sector. Similarly, the project will encourage commercial banks to prioritize the financing of agricultural sector SMEs by helping them to improve their knowledge of the sector. This financial mechanism will be established under a public-private partnership arrangement, where government funds for supporting young entrepreneurs are allocated upstream, and downstream for the selection of MFIs and financial institutions. Technical assistance will be provided to support Government in its selection of the most appropriate microfinance refinancing mechanism, drawing on best practices and following the example of Morocco or Cameroon which have opted for private sector funding.

4.6 Risk Management and Mitigation

4.6.1 Measures will be taken to mitigate the risks identified in order to ensure the project's success. The main risks presented in the table below are also indicated in the results-based logical framework matrix.

Table 9 Risk Assessment and Mitigation Measures Risk Level Mitigation Measures Deterioration of the Continuation of ongoing economic reforms with the support of Low macroeconomic situation TFPs Moderate Institutional support to TFPs to improve the business environment Unconducive business environment for VSE and SMEs

Crowding out effects and distortion Moderate Project to promote public-private partnership and capacity created by public entrepreneurship building of MFIs support funds An operations manual will be prepared using Advance The commercial bank selected Procurement Action in order to identify such risks and propose delays the release of resources to Moderate mitigation measures in the provisions of the contracts to be signed microfinance institutions by the parties Weak participation by productive Enhance dialogue with federation of enterprises upstream of the Low sector project and determine the collaboration framework

4.7 Knowledge Building

4.7.1 The PAIEJ-SP will ensure the production of analytical reports on the status of young people on the labour market in Togo through the use of the first employment survey to be conducted with WAEMU support. The report will be produced by the employment observatory with ILO support considering its value added in terms of labour market statistics.

4.7.2. An impact study will be conducted under the project to provide empirical evidence of the project’s decision to support entrepreneurship and SMEs in agricultural value chains. The findings of this study will improve the Bank’s knowledge of factors underpinning the success of support to entrepreneurship and also inform decision-making in a country which invests heavily in such activities.

4.7.3 The skill needs study will lead to the development of tools to forecast labour market expectations. With such tools, the training system could be adjusted more effectively to enhance the employability of young people.

V. Legal Framework

5.1 Legal Instrument

The project will be financed with an ADF grant of UA 6.67 million, a TSF grant of UA 1.33 million, an NTF loan of UA 6.5 million and a counterpart contribution of UA 0.77 million. The legal instrument of the project will be a Grant Protocol Agreement and a Loan Protocol Agreement to be signed between the Togolese Republic and the Bank.

5.2 Conditions Associated with Bank’s Intervention Conditions associated with the Grant

5.2.1 Conditions precedent to Grant effectiveness. The Grant Agreement will become effective on the date of its signature by the Donee and the Bank

5.2.2 Conditions precedent to first disbursement of the Grant resources. The Fund’s obligation to effect the first disbursement of the grant shall be subject to the effectiveness of the Grant Protocol

Agreement pursuant to the provisions of paragraph 5.2.1 above, and evidence that the Donee has, both in form and in substance, fulfilled the following special conditions to the satisfaction of the Fund:

(i) Recruitment of the Project Implementation Unit Coordinator and financial manager, whose qualifications and experience shall be deemed acceptable by the Bank; and

(ii) Opening of a special account in a commercial bank deemed acceptable by the Bank, into which the grant resources shall be paid.

Conditions associated with the Loan:

5.2.3 Conditions precedent to loan effectiveness: effectiveness of the Loan Agreement shall be subject to fulfilment, to the Bank's satisfaction, of the conditions stipulated in Section 12.01 of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank.

5.2.4 Conditions precedent to first disbursement of loan resources. The Fund’s obligation to effect the first disbursement of the loan shall be subject to the effectiveness of the Loan Agreement pursuant to the provisions of paragraph 5.2 above, and evidence that the Borrower has, both in form and in substance, fulfilled the following special conditions to the satisfaction of the Fund:

(i) Recruitment of the Project Implementation Unit Coordinator and financial manager, whose qualifications and experience shall be deemed acceptable by the Bank; and

(ii) Opening of a special account in a commercial bank deemed acceptable by the Bank, into which the loan resources shall be paid.

5.2.5 Other Conditions: Moreover, the Donee/Borrower shall submit to the Fund:

(i) No later than three (3) months following the first disbursement of the grant and the loan, the project’s administrative and financial procedures manual as well as the operations manual of the entrepreneurship and VSE/SME financing mechanism; and

(ii) The credit fund operations manual.

5.2.6 Undertakings. The Donee/Borrower shall also undertake to:

(i) Set up and appoint the members of the Project Steering Committee and the Financing Committee without delay;

(ii) Proceed with the recruitment of all members of the project team.

5.3 Compliance with Bank Policies

This project is in line with the Bank’s applicable policies. It will be implemented under the Bank’s operations strategy for Togo as defined in the CSP (2010-2015), which was reviewed at mid-term and approved in December 2013 by the Board as well as the Bank’s 2013-2022 Strategy and the Human Capital Strategy (2014-2018).

VI. RECOMMENDATION

Management recommends that the Board of Directors approve: (i) an ADF grant for an amount not exceeding UA 6.67 million; (ii) a TSF grant for an amount not exceeding UA 1.33 million; and (iii) an NTF loan for an amount not exceeding UA 6.50 million to the Togolese Republic for the purposes and subject to the conditions stipulated in this report.

Annex I Comparative Socio-Economic Indicators of Togo

Togo COMPARATIVE SOCIO-ECONOMIC INDICATORS

Develo- Develo- Year Togo Africa ping ped Countries Countries Basic Indicators GNI Per Capita US $ Area ( '000 Km²) 2014 57 30 067 80 386 53 939 Total Population (millions) 2014 7,0 1 136,9 6,0 1,3 2500 Urban Population (% of Total) 2014 39,5 39,9 47,6 78,7 2000

Population Density (per Km²) 2014 123,1 37,8 73,3 24,3 1500 GNI per Capita (US $) 2013 530 2 310 4 168 39 812 1000 Labor Force Participation - Total (%) 2014 81,0 66,1 67,7 72,3 Labor Force Participation - Female (%) 2014 50,9 42,8 52,9 65,1 500

Gender -Related Dev elopment Index Value 0

2008 2011 2005 2007 2009 2010 2012 2013 2007-2013 0,803 0,801 0,506 0,792 2000 Human Dev elop. Index (Rank among 187 countries) 2013 166 ...... Popul. Liv ing Below $ 1.25 a Day (% of Population)2008-2013 52,5 39,6 17,0 ... To go Africa Demographic Indicators Population Grow th Rate - Total (%) 2014 2,6 2,5 1,3 0,4 Population Grow th Rate - Urban (%) 2014 3,8 3,4 2,5 0,7 Population < 15 y ears (%) 2014 41,7 40,8 28,2 17,0 Population Growth Rate (%) Population >= 65 y ears (%) 2014 2,8 3,5 6,3 16,3 3,0 Dependency Ratio (%) 2014 71,4 62,4 54,3 50,4 Sex Ratio (per 100 female) 2014 97,4 100,4 107,7 105,4 2,5 Female Population 15-49 y ears (% of total population) 2014 24,7 24,0 26,0 23,0 2,0 Life Ex pectancy at Birth - Total (y ears) 2014 56,9 59,6 69,2 79,3 1,5 Life Ex pectancy at Birth - Female (y ears) 2014 78,5 60,7 71,2 82,3 1,0 Crude Birth Rate (per 1,000) 2014 35,9 34,4 20,9 11,4 0,5 Crude Death Rate (per 1,000) 2014 10,5 10,2 7,7 9,2

0,0

2000 2009 2012 2008 2010 2011 2013 2014 Infant Mortality Rate (per 1,000) 2013 55,8 56,7 36,8 5,1 2005 Child Mortality Rate (per 1,000) 2013 84,7 84,0 50,2 6,1 Total Fertility Rate (per w oman) 2014 4,6 4,6 2,6 1,7 Togo Africa Maternal Mortality Rate (per 100,000) 2013 450,0 411,5 230,0 17,0 Women Using Contraception (%) 2014 21,2 34,9 62,0 ...

Health & Nutrition Indicators Phy sicians (per 100,000 people) 2004-2012 5,3 46,9 118,1 308,0 Life Expectancy at Birth Nurses (per 100,000 people)* 2004-2012 27,4 133,4 202,9 857,4 (years) Births attended by Trained Health Personnel (%) 2009-2012 59,4 50,6 67,7 ... 80 Access to Safe Water (% of Population) 2012 60,0 67,2 87,2 99,2 70 60 Healthy life ex pectancy at birth (y ears) 2012 50,0 51,3 57 69 50 Access to Sanitation (% of Population) 40 2012 11,3 38,8 56,9 96,2 30 Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2013 2,3 3,7 1,2 ... 20 Incidence of Tuberculosis (per 100,000) 10

2013 73,0 246,0 149,0 22,0 0

2000 2010 2014 2008 2009 2011 2012 2013 Child Immunization Against Tuberculosis (%) 2013 97,0 84,3 90,0 ... 2005 Child Immunization Against Measles (%) 2013 72,0 76,0 82,7 93,9

Underw eight Children (% of children under 5 y ears) 2005-2013 16,5 20,9 17,0 0,9 To go Africa Daily Calorie Supply per Capita 2011 2 366 2 618 2 335 3 503 Public Ex penditure on Health (as % of GDP) 2013 4,5 2,7 3,1 7,3

Education Indicators Gross Enrolment Ratio (%) Primary School - Total 2011-2014 134,4 106,3 109,4 101,3 Primary School - Female 2011-2014 126,7 102,6 107,6 101,1 Infant Mortality Rate Secondary School - Total 2011-2014 54,9 54,3 69,0 100,2 ( Per 1000 ) Secondary School - Female 2011-2014 30,4 51,4 67,7 99,9 100 90 Primary School Female Teaching Staff (% of Total) 2012-2014 14,7 45,1 58,1 81,6 80 Adult literacy Rate - Total (%) 2006-2012 60,4 61,9 80,4 99,2 70 60 Adult literacy Rate - Male (%) 2006-2012 74,1 70,2 85,9 99,3 50 Adult literacy Rate - Female (%) 2006-2012 48,0 53,5 75,2 99,0 40 30 Percentage of GDP Spent on Education 2009-2012 4,0 5,3 4,3 5,5 20 10

2000 2010 2013 2008 2009 2011 2012 Environmental Indicators 2005 Land Use (Arable Land as % of Total Land Area) 2012 48,7 8,8 11,8 9,2 Agricultural Land (as % of land area) 2012 0,7 43,4 43,4 28,9 Forest (As % of Land Area) 2012 4,9 22,1 28,3 34,9 To go Africa Per Capita CO2 Emissions (metric tons) 2012 0,2 1,1 3,0 11,6

Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update : octobre 2015 UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports. Note : n.a. : Not Applicable ; … : Data Not Available.

Annex II Table of AfDB Portfolio in Togo Amount Sec- Approval Disbursement Amount Amount Disburs. Project Name committ Window tor Date Deadline Disbursed Approved Rate (%) ed (%) Integrated Water Information System Development Project AWF 12/01/2009 30/08/2015 1 237 031 1 237 031 100,00 Toilets for all in Sokodé through the valorisation of faecal sludge and microcredit AWF 19/04/2013 30/06/2016 99 314 934 277 10,63

Water Water & Sanitation Sub-Total Water and Sanitation 2.49 1 336 345 2 171 308 61,55 Resource Mobilization and Institutional Capacity Building Project

(PAMOCI) FSF 09/10/2014 30/06/2019 245 052 5 000 000 4,90

Gov Sub-Total Governance 5.73 245 052 5 000 000 4,90 Kara and Lome Markets Reconstruction and Traders Support Project ADF 22/01/2014 31/12/2018 0 1 930 000 0,00 Kara and Lome Markets Reconstruction and Traders Support Project ADF 22/01/2014 31/12/2018 208 268 1 650 000 12,62 FAPA- Kara and Lome Markets Reconstruction and Traders Support Project FAPA 26/01/2015 31/12/2018 0 584 093 0,00

Emergency Aid to Mitigate Effects of Lome and Kara Market Fires SRF 14/08/2013 30/06/2015 714 796 714 796 100,00

Social Sub-Total Social 5.59 923 064 4 878 889 18,92

Total National 13.80% 2 504 461 12 050 197 20,78 Benin/Togo: Lome-Cotonou Road Rehabilitation and Abidjan- Lagos Corridor Transport Facilitation Project – Phase 1 ADF 05/10/2011 31/12/2016 217 207 4 810 000 4,52

Togo/Burkina: Community Road Rehabilitation and Lome-Ouaga Corridor Transport Facilitation Project ADF 27/06/2012 31/12/2017 10 004 829 17 800 000 56,21 Togo/Burkina: Community Road Rehabilitation and Lome-Ouaga Corridor Transport Facilitation Project ADF 27/06/2012 31/12/2017 10 290 496 30 230 000 34,04 l Transport Togo/Burkina: Community Road Rehabilitation and Lome-Ouaga Corridor Transport Facilitation Project FSF 27/06/2012 31/12/2017 181 780 21 500 000 0,85 Togo/Burkina: Community Road Rehabilitation and Lome-Ouaga Corridor Transport Facilitation Project EU-AITF 23/02/2015 31/12/2017 0 922 451 0,00

Multinationa Sub-Total Transport 86.20 20 694 312 75 262 451 27,50

86.20% 20 694 312 75 262 451 27,50

Total Multinational

100.00 23 198 773 87 312 648 26,57

Total Public Sector

The overall performance of the Bank's portfolio as at 31 July 2015 is considered satisfactory with a score of 3.14 on a scale of 0 to 4. For projects approved between 2014 and 2015, the average lapse of time between approval and fulfilment of the conditions precedent to first disbursement was 4.5 months. The disbursement rate for public sector projects was 26.57% for an average age of 2.44 years. The portfolio does not contain any project at risk.

Annex III : Key Related Projects Financed by Other Development Partners

Partners Project and Amount Project Purpose World Bank Private Sector Development Support Entrepreneurship support, based on Project (PADSP – USD 13 million call for proposals, support and competition of the business plan and grant for project implementation WADB Grassroots Development Support Support for grassroots Programme (PRADEB) - CFAF 6 development and youth billion employment promotion: multifunctional platform and rural entrepreneurship CFAF 10 billion loan (CFAF 5 billion Support to replenish the National in 2014 and CFAF 5 billion in 2015) Inclusive Finance Fund IFAD National Rural Entrepreneurship Support for development of rural Promotion Project, (PNPER) - USD entrepreneurship for the youth in 39.6 million rural communities AFD Modernization of Vocational Training Support for modernization of in Togo Project, for an amount of vocational training schemes under EUR 6 million public-private partnership arrangement Agricultural Training Support Project - Support for vocational training, EUR 6 million whose main component will focus on the agricultural and rural training sector GIZ Employment Promotion and Support for upgrading learning Vocational Training Project methods through dual training (PROFOPEJ) - EUR 20 million schemes in growth sectors Programme for Rural and Agricultural Support for development of Development in Togo (PRODRA) – farmers’ business schools, with EUR 7.25 million focus on agricultural value chains

III

Annex IV Mainstreaming of Gender-related Challenges in Project

Challenges Project Response Gender expertise in the Bank’s project In addition to literature review during project appraisal, meetings were design team also held with key gender actors in order to include their input in the project design, and use their expertise through: - Dialogue with the Ministry of Social Action, Women’s Promotion and Literacy; - Appraisal mission meeting with five civil society organizations working on women’s rights and gender equality in Togo; - Meeting with a group of rural women farmers from remote communities in the region where the project is implemented; and - Crosscutting gender issues considered in meetings with all project actors. Gender expertise within PIU The project ensures adequate presence of gender expertise throughout the project implementation period: - Inclusion of a gender expert in PIU - Inclusion of Ministry of Social Action and Women’s Promotion and Literacy in the Steering Committee - Provision of gender training for major organizations active in project implementation Monitoring and evaluation Collect all disaggregated data on project Include gender indicators in project implementation to narrow gender gaps Country’s challenges Ensure that all studies, reports and research supported by the project are Lack of qualitative and quantitative carried out with a gender perspective disaggregated gender information Quantitatively collect all gender disaggregated data Selection criteria for young beneficiaries of Apply affirmative action with specific criteria, to support women entrepreneurship support, excluding women entrepreneurs (due to their poor access to education, poor mobility and lack of autonomy) Lack of knowledge of the business Implement mentoring system for women by linking them with women environment who have successfully helped young women to develop their initiatives or enterprises Women’s illiteracy in remote rural villages Develop a mobile caravan to promote functional literacy education integrating the gender perspective, in vulnerable villages targeted by the project Lack of education on reproductive health, Collective and individual counselling on reproductive health during undesired pregnancies and early marriages women’s literacy and entrepreneurship activities, including assisting women confidentially with the contraceptive method of their choice. Difficult access to health services, in particular for women in rural areas Develop pilot health insurance scheme in agricultural areas Lack of financing for women entrepreneurs Provide gender training for microfinance/microcredit institutions Inability of Government and private sector Provide gender training and economic empowerment for women, yearly actors to take gender inequalities into account for all actors involved, including management, with commitments signed by each stakeholder and monitoring the agreements for the period.

Annex V Map of Togo

This map has been provided by the staff of the African Development Bank exclusively for the use of the readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank Group and its members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders