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FOR OFFICIAL USE ONLY Report No: PAD2896 Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION

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FOR OFFICIAL USE ONLY Report No: PAD2896 Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF EURO 26.3 MILLION (US$30 MILLION EQUIVALENT) Public Disclosure Authorized AND A PROPOSED SCALE UP FACILITY CREDIT IN THE AMOUNT OF EURO 42.1 MILLION (US$48 MILLION EQUIVALENT) TO THE KINGDOM OF LESOTHO FOR A LESOTHO LOWLANDS WATER DEVELOPMENT PROJECT – PHASE II Public Disclosure Authorized April 25, 2019 Water Global Practice Africa Region Public Disclosure Authorized 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. CURRENCY EQUIVALENTS (Exchange Rate Effective April 1, 2019) Currency Unit = Lesotho Maloti (LSL) US$1 = LSL 14.02 US$ 1 = Euro 0.87581012 US$ 1 = SDR 0.7153 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AC Asbestos Cement AfDB African Development Bank APL Adaptable Program Loan CERC Contingent Emergency Response Component CERM Contingent Emergency Response Manual CoW Commissioner of Water CPF Country Partnership Framework DHS Demographic and Health Survey DLI Disbursement-linked Indicator DLR Disbursement-linked Result DRWS Department of Rural Water Supply DWA Department of Water Affairs EFR Environmental Flow Rate EIB European Investment Bank EIRR Economic Internal Rate of Return ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan EU European Union FM Financial Management GDP Gross Domestic Product GoL Government of Lesotho GRM Grievance Redress Mechanism IBNET International Benchmarking Network for Water and Sanitation Utilities IFA Instream Flow Assessment IFI International Finance Institution IFR Instream Flow Rate IHME Institute for Health Metrics and Evaluation IMF International Monetary Fund IPF Investment Project Financing JMP Joint Monitoring Project KPI Key Performance Indicator LBWSA Lesotho Bulk Water Supply Agency LEWA Lesotho Electricity and Water Authority LHDA Lesotho Highlands Development Authority LHWP Lesotho Highlands Water Project LLWDP Lesotho Lowlands Water Development Project LLWSS Lesotho Lowlands Water Supply Scheme LLWSSU Lesotho Lowlands Water Supply Scheme Unit LNDC Lesotho National Development Corporation LRWSP Lowlands Rural Water Supply and Sanitation Project LTWSS Long-Term Water and Sanitation Strategy M&E Monitoring and Evaluation MDWSP Metolong Dam and Water Supply Program MLG Ministry of Local Government and Chieftaincy Affairs MoDP Ministry of Development Planning MoF Ministry of Finance MoH Ministry of Health MoW Ministry of Water Affairs MSME Micro, Small, Medium Enterprises NPV Net Present Value NRW Nonrevenue Water O&M Operation and Maintenance PAP Project Affected Person PDO Project Development Objective PFM Public Financial Management PFMRAP Public Financial Management Reform Action Plan PIA Paleontological Impact Assessment PIU Project Implementation Unit PMC Project Management Consultant POE Panel of Experts POM Project Operational Manual PPSD Project Procurement Strategy for Development PRAMS Procurement Risk Assessment and Management System PS Principal Secretary RAP Resettlement Action Plan RPF Resettlement Policy Framework SACU Southern African Customs Union SADC Southern African Development Community SADP Smallholder Agriculture Development Program SC Steering Committee SCADA Supervisory Control and Data Acquisition SS Suspended Solids STEP Systematic Tracking of Exchanges in Procurement TA Technical Assistance TOR Terms of Reference UNICEF United Nations Children’s Fund WASCO Water and Sewerage Company WASH Water, Sanitation, and Hygiene WATSAN Water and Sanitation WHO World Health Organization WSIP Water Sector Improvement Project WSS Water Supply and Sanitation Regional Vice President: Hafez M. H. Ghanem Country Director: Paul Noumba Um Senior Global Practice Director: Jennifer Sara Practice Manager: Catherine Signe Tovey Task Team Leader: Sanyu Lutalo The World Bank Lowlands Water Development Project (P160672) TABLE OF CONTENTS DATASHEET ................................................................................. Error! Bookmark not defined. I. STRATEGIC CONTEXT ...................................................................................................... 8 A. Country Context ............................................................................................................................ 8 B. Sectoral and Institutional Context ................................................................................................ 9 C. Relevance to Higher Level Objectives ......................................................................................... 13 II. PROJECT DESCRIPTION .................................................................................................. 15 A. Project Development Objective .................................................................................................. 15 B. Project Components ................................................................................................................... 15 C. Project Beneficiaries ................................................................................................................... 18 D. Results Chain ............................................................................................................................... 20 E. Rationale for World Bank Involvement and Role of Partners ..................................................... 22 F. Lessons Learned and Reflected in the Project Design ................................................................ 22 III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 23 A. Institutional and Implementation Arrangements ....................................................................... 23 B. Results Monitoring and Evaluation Arrangements ..................................................................... 24 C. Sustainability ............................................................................................................................... 25 IV. PROJECT APPRAISAL SUMMARY ................................................................................... 25 A. Technical and Economic & Financial Analysis ............................................................................. 25 B. Fiduciary ...................................................................................................................................... 29 C. Safeguards ................................................................................................................................... 31 V. KEY RISKS ..................................................................................................................... 38 A. Risk Summary Table .................................................................................................................... 38 B. Overall Risk Rating and Explanation of Key Risks........................................................................ 38 VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 41 ANNEX 1: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN ................................... 57 ANNEX 2: DETAILED PROJECT DESCRIPTION ......................................................................... 63 ANNEX 3: DISBURSEMENT LINKED INDICATORS (DLIS), DISBURSEMENT ARRANGEMENTS AND VERIFICATION PROTOCOLS .................................................................................................. 75 ANNEX 4: ECONOMIC AND FINANCIAL ANALYSIS ................................................................. 83 ANNEX 5: FIDUCIARY ASPECTS - FINANCIAL MANAGEMENT, DISBURSEMENTS AND PROCUREMENT ................................................................................................................... 87 ANNEX 6 MAP OF LESOTHO ................................................................................................. 94 The World Bank Lowlands Water Development Project (P160672) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name Lesotho Lesotho Lowlands Water Development Project - Phase II Project ID Financing Instrument Environmental Assessment Category Investment Project P160672 A-Full Assessment Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [✓] Disbursement-linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) Expected Approval Date Expected Closing Date 16-May-2019 28-Mar-2024 Bank/IFC Collaboration No Proposed Development Objective(s) The Proposed Development Objectives are to: (a) increase water availability and access to improved water supply services in two priority zones; and (b) improve technical and financial performance of WASCO. Components Component Name Cost (US$, millions) Page 1 of 94 The World Bank Lesotho Lowlands Water Development Project – Phase II (P160672) Component 1. Water Supply Investments in Zones 2 and 3 68.30 Component 2. Capacity Building, Institutional Strengthening and Project
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