The World Bank

Report No: ICR00003112

Public Disclosure Authorized

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-39620 IDA-H1320 IDA-H7660 TF-11457 TF-92093)

ON A

GRANT

IN THE AMOUNT OF SDR 71 MILLION (US$ 103 MILLION EQUIVALENT)

Public Disclosure Authorized AND A GRANT

IN THE AMOUNT OF SDR 32.3 MILLION (US$ 50 MILLION EQUIVALENT)

TO THE

REPUBLIC OF

FOR A

URBAN WATER PROJECT Public Disclosure Authorized

December 21, 2016

Water Global Practice

Africa Region

Public Disclosure Authorized

CURRENCY EQUIVALENTS

(Exchange Rate Effective October 2016)

Currency Unit = Ghanaian Cedi 1.00 Ghana Cedi = US$ 0.25 US$ 1.00 = 4.00 Ghana Cedis

FISCAL YEAR 2015/16

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance Strategy CFAA Country Financial Accountability Assessment DCA Development Credit Agreement EAMP Environmental Assessment and Management Plan FMR Financial Monitoring Report FYIP First Year Investment Plan GAMA Greater Metropolitan Area GDP Gross Domestic Product GHC Ghanaian Cedi GOG Government of Ghana GPRS Ghana Poverty Reduction Strategy GSGDA Ghana Shared Growth Development Agenda GWCL Ghana Water Company Limited GWSC Ghana Water and Sewerage Company HIPC Highly Indebted Poor Countries Initiative ICR Implementation Completion Report IDA International Development Association IFC International Finance Corporation IO Intermediate Outcome ISR Implementation Status and Results Report KPI Key Performance Indicator LGPCU Local Government Projects Coordination Unit MDG Millennium Development Goals MMAs Metropolitan and Municipal Assemblies (Local Governments) MMDA Municipal and District Assemblies MOFEP Ministry of Finance and Economic Planning MLGRD Ministry of Local Government and Rural Development MTDF Medium Term Development Framework MWRWH Ministry of Water Resources, Works and Housing NDF Nordic Development Fund NGO Non-government organization NWP National Water Policy PCU Project Coordination Unit

PDO Project Development Objective PMU Project Management Unit PURC Public Utilities Regulatory Commission RRF Repair and Rehabilitation Fund SEC State Enterprises Commission SIL Specific Investment Loan TA Technical Assistance WASH Water, Sanitation and Hygiene WHO World Health Organization WSS Water Supply and Sanitation

Senior Global Practice Director: Guang Zhe Chen Country Director: Henry Kerali Practice Manager: Wambui Gichuri Project Team Leader: Emmanuel Nkrumah ICR Team Leader: Sanyu Lutalo

COUNTRY: REPUBLIC OF GHANA Project Name: URBAN WATER PROJECT

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 1 3. Assessment of Outcomes ...... 2 4. Assessment of Risk to Development Outcome ...... 3 5. Assessment of Bank and Borrower Performance ...... 3 6. Lessons Learned ...... 3 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ...... 3 Annex 1. Project Costs and Financing ...... 4 Annex 2. Outputs by Component ...... 5 Annex 3. Economic and Financial Analysis ...... 6 Annex 4. Bank Lending and Implementation Support/Supervision Processes ...... 7 Annex 5. Beneficiary Survey Results ...... 9 Annex 6. Stakeholder Workshop Report and Results ...... 10 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ...... 11 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ...... 12 Annex 9. List of Supporting Documents ...... 13 MAP

A. Basic Information

Country: Ghana Project Name: Urban Water Project IDA-39620,IDA- H1320,IDA- Project ID: P056256 L/C/TF Number(s): H7660,TF-11457,TF- 92093 ICR Date: 12/15/2016 ICR Type: Core ICR Lending Instrument: SIL Borrower: Republic of Ghana XDR 71 Million Original Total (US$103 million Disbursed Amount: XDR 71 million Commitment: equivalent) XDR 103.3 Million Revised Amount: (US$153 Million Disbursed Amount XDR 103.3 million equivalent) Environmental Category: B Implementing Agency: Ghana Water Company Ltd. (GWCL) Co-financiers and Other External Partners: Nordic Development Fund; Dutch Government

B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 12/07/1998 Effectiveness: 03/21/2005 03/21/2005 10/10/2010 Appraisal: 05/10/2004 Restructuring(s): N/A 09/25/2012 12/31/2015 Mid-term Approval: 07/27/2004 07/31/2007 08/06/2009 Review: Closing: 12/31/2010 06/30/2016

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Unsatisfactory

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C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Moderately Quality at Entry: Government: Unsatisfactory Unsatisfactory Quality of Moderately Implementing Moderately Supervision: Satisfactory Agency/Agencies: Unsatisfactory Overall Bank Moderately Overall Borrower Moderately Performance: Unsatisfactory Performance: Unsatisfactory

C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Quality at Entry Project at any time Yes None (QEA): (Yes/No): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Moderately

Closing/Inactive status: Satisfactory

D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central Government Administration 15 15 Water supply 85 85

Theme Code (as % of total Bank financing) Infrastructure services for private sector 29 29 development Other Private Sector Development 14 14 Participation and civic engagement 14 14 Urban services and housing for the poor 29 29 Water resource management 14 14

E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Callisto E. Madavo Country Director: Henry G. R. Kerali Mats Karlsson Practice Manager: Wambui G. Gichuri Inger Andersen

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Project Team Leader: Emmanuel Nkrumah Alexander A. McPhail ICR Team Leader: Sanyu Lutalo ICR Primary Author: Sanyu Lutalo Other members of ICR Ivaylo Kolev and Rebecca team Gilsdorf

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The project's principal development objectives (PDOs) were to (i) significantly increase access to the piped water system in Ghana's urban centers, with an emphasis on improving access, affordability and service reliability to the urban poor; and (ii) restoring long-term financial stability, viability and sustainability of the Ghana Water Company Limited.

Revised Project Development Objectives (as approved by original approving authority) The revised PDOs were: (i) to increase access to affordable and reliable piped water supply in targeted urban centers; and (ii) improve financial viability of the Ghana Water Company Ltd. (GWCL).

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(a) PDO Indicator(s)

Original Target Actual Value Baseline Values (from Formally Revised Achieved at Indicator Value approval Target Values Completion or documents) Target Years Urban centers receiving civil works add at least 50,000 new Indicator 1: connections or stand posts Value quantitative or 0 >=50000 Dropped Qualitative) Date achieved 01-Jul-2004 30-Jun-2010 Comments (incl. % Indicator dropped. Replaced with core indicators added below to achievement) add clarity and align with revised core sector indicators. GWCL in the five largest cities meet 100% of their cash obligations Indicator 2: from collected revenues Value quantitative or 60% 100% Qualitative) Date achieved 01-Jul-2004 30-Jun-2010 Achieved prior to restructuring. 100% of the O&M costs were being Comments (incl. % recovered since January 2008 following tariff adjustment. This achievement) indicator was dropped after restructuring. Indicator 2 (revised): GWCL ratio of revenues to operation & maintenance costs (%) Value quantitative or 0.60 n/a 1.05 1.07 Qualitative) Date achieved 01-Jul-2004 30-Jun-2016 13-Jun-2016 Revised target 102% achieved. Target was revised to utilize Comments (incl. % standard O&M coverage and to not cap it at 100%. Revised target achievement) also broadened to include all of GWCL instead of just five largest cities. Improved community water points constructed or rehabilitated under Indicator 3: the project Value quantitative or 0 n/a 500 449 Qualitative) Date achieved 01-Jul-2004 30-Jun-2016 13-Jun-2016 Comments (incl. % 90% achieved. This core sector indicator was added at restructuring. achievement) New piped household water connections that are resulting from the Indicator 4: project intervention Value quantitative or 0 n/a 50000 45000 Qualitative) Date achieved 01-Jul-2004 30-Jun-2016 13-Jun-2016 Comments (incl. % 90% achieved. This core sector indicator was added at restructuring. achievement) Indicator 5: Number of people in urban areas provided with access to Improved

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Water Sources under the project Value quantitative or 0 n/a 550000 850300 Qualitative) Date achieved 01-Jul-2004 30-Jun-2016 13-Jun-2016 Comments (incl. % 155% achieved. This indicator was added at restructuring. Increased achievement) by 50,000 to reflect scale up activities. Indicator 6: Direct project beneficiaries Value quantitative or 0 n/a 550000 805300 Qualitative) Date achieved 01-Jul-2004 30-Jun-2016 13-Jun-2016 Comments (incl. % 155% achieved. This indicator was added at restructuring. Increased achievement) by 50,000 to reflect scale up activities. Indicator 6: Female beneficiaries, (%) Value quantitative or 52 n/a 52 52 Qualitative) Date achieved 01-Jul-2004 30-Jun-2016 13-Jun-2016 Comments (incl. % 100% achieved. This core sector indicator was added at achievement) restructuring.

(b) Intermediate Outcome Indicator(s)

Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years At least $80 million in civil works is invested to extend and rehabilitate Indicator 1: the piped water network Value quantitative or 0 >=$80M dropped Qualitative) Date achieved 01-Jul-2004 30-Jun-2010 Comments Dropped during project restructuring. At project restructuring, $30 (incl. % million had been invested, which is 37.5% of the target value. achievement) Indicator 2: A 5-year Management Contract is bid, closed financially and carried out Value quantitative or None Done. Done. Done. Qualitative) Date achieved 01-Jul-2004 30-Jun-2010 30-Jun-2016 15-Dec-2015 Comments Achieved. Five-year management contract was signed with AVRL on 6 (incl. % June 2006. The contract was implemented as planned and ended in 2011. achievement) Indicator 3: MWH establishes a Water Directorate that conceives and implements

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policy and reform initiatives. Value quantitative or 0 >=3 n/a Qualitative) Date achieved 01-Jul-2004 30-Jun-2010 Comments Water Directorate established prior to target value changes made at (incl. % project restructuring. achievement) Indicator 3 MWH establishes a Water Directorate that conceives and implements (revised): policy and reform initiatives. Value quantitative or 0 n/a Done. Done. Qualitative) Date achieved 01-Jul-2004 30-Jun-2016 15-Dec-2015 Comments Achieved. Water Directorate was established under the MWRWH and is (incl. % responsible for sector policy. achievement) Indicator 4: Well targeted pro-poor programs are put in place by PURC Value quantitative or 0 >=2 3 3 Qualitative) Date achieved 01-Jul-2004 30-Jun-2010 30-Jun-2016 13-Jun-2016 Comments Revised Target 100% achieved. Target increased from 2 to 3 to reflect (incl. % that expected final target had already been exceeded. achievement) Indicator 5: Number of GWCL staff per 1,000 connections Value quantitative or 15 <=10 <=8 7 Qualitative) Date achieved 01-Jul-2004 30-Jun-2010 30-Jun-2016 13-Jun-2016 Comments Target exceeded. Target revised to reflect that expected final target had (incl. % already been exceeded. achievement) Indicator 6: Average GWCL wage compared to equivalent post in private sector Value quantitative or 60% 85% 85% 60% Qualitative)

Date achieved 01-Jul-2004 30-Jun-2010 30-Jun-2016 13-Jun-2016 Comments (incl. % 71% achieved. achievement)

Indicator 7: Number of water utilities that the project is supporting

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Value quantitative or 1 n/a 1 1 Qualitative) Date achieved 1-Jul-2004 30-Jun-2016 13-Jun-2016 Comments (incl. % 100% achieved. This core sector indicator was added at restructuring. achievement) Piped household water connections that are benefiting from rehabilitation Indicator 8: works undertaken by the project Value quantitative or 0 n/a 0 Qualitative) Date achieved 1-Jul-2004 30-Jun-2016 13-Jun-2016 Comments This core sector indicator was added at restructuring. No targets or data (incl. % were provided for this indicator in the project monitoring documents. achievement)

G. Ratings of Project Performance in ISRs

Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 11/17/2004 Satisfactory Satisfactory 0.00 2 04/28/2005 Satisfactory Satisfactory 2.50 3 12/14/2005 Satisfactory Satisfactory 14.39 4 06/15/2006 Moderately Satisfactory Moderately Satisfactory 24.85 5 12/11/2006 Moderately Satisfactory Moderately Satisfactory 15.26 6 06/07/2007 Moderately Satisfactory Moderately Satisfactory 17.98 7 11/30/2007 Moderately Satisfactory Moderately Satisfactory 22.60 8 05/28/2008 Moderately Satisfactory Moderately Satisfactory 27.78 9 11/26/2008 Moderately Satisfactory Moderately Satisfactory 31.48 Moderately 10 05/22/2009 Unsatisfactory 36.04 Unsatisfactory Moderately 11 12/01/2009 Unsatisfactory 40.50 Unsatisfactory Moderately Moderately 12 06/10/2010 42.81 Unsatisfactory Unsatisfactory 13 09/12/2010 Moderately Satisfactory Moderately Satisfactory 44.26 14 03/26/2011 Moderately Satisfactory Moderately Satisfactory 54.29 15 10/04/2011 Moderately Satisfactory Moderately Satisfactory 57.69 16 05/28/2012 Moderately Satisfactory Moderately Satisfactory 70.26 17 12/09/2012 Moderately Satisfactory Moderately Satisfactory 79.31

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Moderately 18 07/24/2013 Moderately Satisfactory 78.06 Unsatisfactory Moderately 19 02/05/2014 Moderately Satisfactory 91.41 Unsatisfactory 20 10/13/2014 Moderately Satisfactory Moderately Satisfactory 99.09 21 04/27/2015 Moderately Satisfactory Moderately Satisfactory 107.08 22 12/23/2015 Moderately Satisfactory Moderately Satisfactory 137.80 23 06/30/2016 Satisfactory Moderately Satisfactory 152.77

H. Restructuring

The project was restructured three times. The level and dates for the restructuring were as follows: (i) Second Order Restructuring on October 10, 2010; (ii) First Order Restructuring on September 25, 2012; and (iii) Second Order Restructuring on December 31, 2015.

ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions This restructuring comprised an extension of the project closing date by two years from December 31, 2010 to December 31, 2012 in order 10/10/2010 MS MS 42.66 to provide time to complete outstanding works required to fulfill the project’s objectives.

Provide additional financing of US$50 million; Revise PDO; extend closing date from December 31, 2012 to December 31, 2015; change in disbursement parameters to allow the project to 09/25/2012 Y MS MS 74.42 finance 100 percent of IDA- funded eligible expenditures, which were originally financed through GoG counterparts; and change results framework to incorporate the

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ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions mandatory core water project indicators, reflect the scale up, and increase targets for outcomes already attained.

The closing date was extended a final time by an additional six months from 12/31/2015 MS MS 137.80 December 31, 2015 to June 30, 2016.

If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Unsatisfactory Against Formally Revised PDO/Targets Moderately Satisfactory Overall (weighted) rating Moderately Unsatisfactory

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. Key Sector Issues. When the project was appraised in 2004, Ghana’s water sector had been facing a number of critical challenges. Only 51 percent of the country’s 20 million people had access to improved water supply, and just 61 percent of the urban population had access to reliable water supply of acceptable quality. As is often the case, vulnerable groups such as the poor, most of whom lived in low-income areas with limited or no direct access to piped water supply, were disproportionately affected by the inadequate basic services.

2. Underlying reasons for the poor access, quality, and reliability of water supply services were attributed to several factors, including among others, operational and investment challenges facing the Ghana Water Company Limited (GWCL), the nationally owned corporatized utility responsible for water supply service provision and development in urban areas in Ghana. The utility was under the Ministry of Water Resources, Works and Housing, which is responsible for formulating water supply policy, overseeing operations of GWCL, sourcing for funding from external support agencies, and coordinating sector investment plans.

3. The first major challenge facing GWCL related to the company’s worsening financial situation. The company faced heavy debt, coupled with low tariffs and inadequate collections. Investment levels in infrastructure averaged just US$1.50 per capita per year over the decade preceding appraisal. A second challenge related to the inadequate commercial focus of the utility’s operations, which affected customer relations and contributed to the low billing and collection levels. Finally, the utility faced institutional challenges, such as staffing and capacity issues. It had a staffing ratio of about 15 staff per 1000 connections, and was faced with issues such as staff attrition, salary erosion, and lack of motivation and incentives to perform. The impact of these challenges reflected in the utility’s overall performance, which was manifested in poor service quality in many areas. Many of the systems were operating below capacity due to aging infrastructure, inadequate preventive maintenance, and high unaccounted-for-water (UFW), which, at the time, was estimated at more than 55 percent.

4. It was against this backdrop that the Government of Ghana (GoG) made improving access to safe water supply an important part of its Poverty Reduction Strategy (GPRS), with a particular focus on improving access in rural, peri-urban, and poor urban areas. The GPRS emphasized, among other things: effective management of urban systems, sector restructuring to improve management and investment in water supply and sanitation, and improving GWCL’s financial solvency. To improve the state of urban water services in particular, the GoG with support from the Bank thus designed the project to focus on addressing three key aspects: (a) increasing access and quality of water supply services; (b) attracting urgently needed investment to Ghana’s urban water sector; and (c) restoring GWCL capacity to deliver services in a sustainable manner. The design strategy sought: first, to re-orient GWCL to emphasize commercial and managerial expertise to ensure effective management of urban water systems; second, to improve the financial solvency of the company through appropriate debt restructuring

1 and write-offs; and third, to restructure GWCL through a severance program to reduce the wage bill by about 40 percent. 5. Rationale for Bank Assistance and Financing. The World Bank had already had a long engagement with Ghana when the current project was conceived. The Bank’s Country Assistance Strategy (CAS) (Report No. 27838-GH) dated February 20, 2004, recognized the importance of efficient basic service delivery as an essential ingredient to ensuring sustainable economic development and a healthy population and was aligned with the GPRS in this regard. The project followed several other projects in the sector, including; the Water Sector Rehabilitation Project, which closed in 1998; the First Community Water and Sanitation Project, which closed in 2000; and the Local Government Development Project, which closed in 2003. A number of related sector projects were also ongoing or under preparation when the project was appraised. These included, the Urban Environmental Sanitation Project (UESP1) which was ongoing, and its successor, the Second Urban Environmental Sanitation Project (UESP2) as well as the Second Community Water and Sanitation Project, both of which were under preparation.

6. The project was prepared over a period of about five years from the initial Project Concept Review to approval. The apparent preparation delay was in reality a period in which Ghana’s water sector underwent a series of reforms, with the support of the World Bank. The Bank was actively supporting sector reforms in many countries to improve management of water supply services and had a comparative advantage in supporting the reforms, which were primarily undertaken in the context of a Water Sector Restructuring Project (WSRP). Key actions carried out through the reforms resulted in: (i) the establishment of the Water Resources Commission (WRC) and the Public Utilities Regulatory Commission (PURC), (ii) separation of the sewerage responsibilities from the Ghana Water and Sewerage Corporation; and (iii) establishment of the Ghana Urban Water Company Limited (GWCL). In order to ensure the viability of the newly created GWCL to manage urban water investments and service delivery, a number of further management reform options were explored, including the possible move towards Public Private Partnerships (PPP) in urban water supply service delivery. The Government initially opted for a Lease contract to restore financial stability and to lay the foundation for attracting private sector investment in the longer term. A decision was later made to undertake a less risky five-year Management Contract given changing circumstances driven in part by the recession in global private investments in water utilities in the early 2000s. The Project was seen as an opportunity to support the sector to execute the Management Contract while upgrading and expanding the urban water supply systems and improving operations under the streamlined Ghana Water Company. It was envisaged at the time that the Management Contract would transition to an ‘Affermage’ Contract after expiry of the initial five-year contract.

7. The Project was approved by the Bank’s Board of Directors on July 27, 2004, to be financed through an IDA Credit in the amount of SDR 71 million (US$103 million equivalent), with parallel financing from the Nordic Development Fund (NDF) in the amount of EUR$6 million equivalent. The NDF will supported all work related to addressing dam safety concerns including design, management and execution of rehabilitation works, the preparation of emergency Preparedness Plans for large dams, and an implementation study for a National Dam Safety Unit. It became effective on March 23, 2005, with an initial implementation period of about six years. The Project later received additional financing in the amount of SDR 32.3 million, through a restructuring approved by the Board in September 2012, to cover additional

2 works and a financing gap due to cost overruns on certain activities, described later in this report. Its closing date was also extended three times during implementation, as discussed later in the report, bringing the total implementation period to twelve years. The ICR therefore conducts its assessment on the basis of the entire project, including the additional financing.

1.2 Original Project Development Objectives (PDO) and Key Indicators

8. The project's principal development objectives were to: (i) significantly increase access to the piped water system in Ghana's urban centers, with an emphasis on improving access, affordability, and service reliability to the urban poor; and (ii) restoring long-term financial stability, viability, and sustainability of the Ghana Water Company Limited. The following key performance indicators were identified in the PAD to measure progress toward the above outcomes: (i) the increase in the percentage of the country’s urban population with access to the piped water network; (ii) the decrease in the proportion of urban water service provided through informal vendors; (iii) the increase in average hours of water availability at network distribution points; and (iv) GWCL’s ability to obtain and afford private sector financing for infrastructure.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

9. The PDOs were revised as follows: (i) to increase access to affordable and reliable piped water supply in targeted urban centers; and (ii) to improve financial viability of the Ghana Water Company Ltd. (GWCL). Revision of the PDOs was carried out as part of a first level project restructuring approved by the Bank’s Board on September 25, 2015, to better align them with the project’s interventions and to provide more clarity in the measurement of the outcome indicators. Changes to the Key Performance Indicators were also introduced to align the project results monitoring framework with the Bank’s core water sector indicators. The changes also allowed for the scaling up of outcome targets in light of the additional financing provided.

1.4 Main Beneficiaries

10. The project’s primary target group was the 50,000 urban households in the project areas, who were to be provided with increased access to piped water supply and improved service reliability through the network rehabilitation and expansion works. The poor were to be specifically targeted through extension of service to low income areas with inadequate or no service. Many of the people in these areas were served by water vendors at prices higher than the cost of piped water provided through the utility, hence the inclusion of an indicator in the PAD on the decrease in the proportion of urban water service provided through informal vendors. The project outcomes were also expected to contribute to higher level benefits such as reduced health risks from waterborne diseases, and improved convenience, wellbeing, and ultimately productivity among beneficiaries.

11. GWCL as the service provider and implementer was also a key beneficiary. In addition to the investments, the company was expected to benefit from the capacity building and institutional development activities supported through the project, in terms of improved staff skills and capacity to perform their roles in order to deliver services in a more efficient and

3 effective manner. These activities included training and technical assistance to manage the company’s operations and maintenance functions, as well as provision of operational and office equipment and facilities to perform these functions. The envisaged support for reforms, including for PPP as well as public utility management models, were also envisaged to contribute to improved operational and financial performance and quality of services delivered. Other sector entities such as the Public Utilities Regulatory Commission (PURC), the Ministry of Water Resources, Works and Housing (MWRWH), and the Environmental Protection Agency (EPA) were also secondary beneficiaries, mainly due to project support for capacity building activities involving them.

1.5 Original Components (as approved)

The original project had four components.

12. Component 1. System Expansion and Rehabilitation (US$91.8 million). This component was designed to support achievement of the project development outcomes of provision of access to more affordable and reliable water supply by: (i) increasing the amount of treated water for sale; (ii) extending service to low income areas; and (iii) rehabilitating the existing network to reduce non-revenue water. It also included dam safety upgrades (financed in parallel by NDF), meters, operational equipment, and engineering services for design and construction supervision.

13. Component 1 comprised a 6-year investment program for physical works with three main sub-components: (a) the First Year Investment Program (FYIP) in the amount of US$17 million; (b) the Subsequent Year Investment Program (SYIP) in the amount of US$70 million; and (c) the Repair, Replacement and Rehabilitation Fund (RRF) in the amount of US$5 million. The FYIP was intended to comprise construction of minor works for which no major studies would be required in order to achieve immediate impacts on improved service coverage and to reduce Non-Revenue Water. It involved minor rehabilitation on three water supply systems; Accra West, , and in the first year of the investments. Implementation of the SYIP was to involve prioritization of investments to be determined and guided by the objective of improving access with emphasis on low income groups. It included major rehabilitation and installation of new systems in the nine regions apart from the . The RRF involved minor works to be managed by the private Operator for execution on an annual/quarterly basis based on identified operation and maintenance needs in the project areas.

14. Component 2. Public-Private Partnership Development (US$6.5 million). This component was to support payment of the management fees for an international Private Operator (the Operator) which was engaged to improve GWCL’s performance under a Management Contract, and technical and financial auditors to measure the operator’s performance. The objective of the Management Contract was to restore GWCL to a sound financial footing and to make a significant improvement in the company’s operations. The Contract was to be executed for a period of five years to operate GWCL’s 85 urban water systems. The Operator was to report to a Director at GWCL Head Quarters and was to be in charge of day-to-day operations and maintenance (O&M) of the company’s water supply systems. Staff not assigned to GWCL Head Quarters were to be assigned as formal employees of the Operator and would report to it.

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The project was to pay 100 percent of the Operator’s fees in the initial four years of the contract, and 75 percent in the fifth year, with the remaining 25 percent to be paid through improved cash flows of the urban water systems. 15. Component 3. Capacity Building and Project Management (US$7.7 million). This component was to support capacity building and project management activities. The largest allocations were for Training (US$2.0 million) and Technical Assistance (US$2.5 million). The training sub-component was in part to be defined by the Management Contract operator who was expected to propose a Training Plan. This component also included training for GWCL headquarters staff, vehicles, office equipment, and technical assistance and support to the Public Utilities Regulatory Commission (PURC), the Project Management Unit (PMU) within GWCL, and the Ministry of Water Resources Works and Housing. Component 3 was designed to address the huge capacity constraints that GWCL was facing at the time. Activities pre-identified under the TA component included key studies such as; preparation of a National Wastewater Strategy, a Debt Rationalization Study, Tanker Truck Rationalization, two Stakeholder Pollings, a GWCL Regionalization Study, and support for Corporate Planning.

Component 4. Severance Program (US$11.0 million). This component was to support the anticipated voluntary severance program for GWCL staff. The Component was to cover the cost of the negotiated retrenchment packages for staff and the cost of administering the program. GWCL at the time had about 15 staff per thousand connections, and it set a target of reducing this to 10 staff per 1000 connections based on industry benchmarks. This required a reduction of staff by about 1,600 employees, representing a decrease of about 40 percent. The program had the full support of the workers and their Union on the understanding that they would receive fair and adequate compensation. The contract framework endorsed by the GoG prescribed the formation of a Retrenchment Committee to oversee the exercise. Principles to be followed included, respect for a Collective Bargaining Agreement between the Union and GWCL, agreeing on a Compensation Framework based on other public sector precedents, and agreements based on negotiations and mutual consent.

1.6 Revised Components

16. The project components were not revised. However, the Component 1 was scaled up to include additional towns that were to be financed through the additional financing approved in September 2012. Through the additional financing, the costs for this component were accordingly increased as shown in Table 1 below. Targeted results under the respective components were also revised accordingly as discussed under Section 2.3 below.

1.7 Other significant changes

17. The following changes were introduced during implementation. a) Change in financing terms from IDA Credit to IDA Grant. The original Credit (Cr. 3962-0 GH), on standard IDA terms, was approved by the Bank’s Board of Directors on July 27, 2004. The financing was however converted to a Grant at the request of the GoG, given the importance of increasing affordable access to potable water supplies in the country, and the fact that approximately US$l00 million in grants out of Ghana’s grant allocation under IDA 13 for

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FY05 projects remained uncommitted at the time. The Board subsequently approved the change in project financing terms from an IDA Credit to a Grant prior to its signing.

Table 1. Summary of Changes in Component Costs

Component Original Cost1 Additional Revised Cost Financing 1 System Expansion and 86,300 48,960 127,113 Rehabilitation 2 PPP Development 6,500 0 15,187 3 Capacity Building and Project 7,700 1,040 9,780 Management 4 Severance Program 11,000 0 11,920 5 Unallocated 1,000 0 0 6 Repay PPF 2,000 0 2,000 Total 114,500 50,000 166,000 b) Project Restructuring. The Project was restructured a total of three times over the course of implementation to allow for various changes, including several closing date extensions, changes in the PDO and scope, and provision of additional financing for project activities. The key elements of the restructurings are briefly summarized below.

(i) Restructuring for Closing Date Extension (Second Level Restructuring approved on October 10, 2010). This restructuring comprised an extension of the project closing date by two years from December 31, 2010 to December 31, 2012. It was found necessary in order to complete outstanding works required to fulfill the project’s objectives.

(ii) Restructuring and Additional Financing in the amount of SDR32.3 or US$50 million equivalent (First Level Restructuring approved on September 25, 2012). This restructuring comprised the following:

 Additional Financing. US$50 million in additional financing was provided to allow for completion of the original project activities that had suffered from unanticipated cost overruns and experienced a financing gap. The financing also covered implementation of an additional Lot of works designed to scale up the project’s impact (US$8 million). The Additional Financing was to specifically support Component 1 (System Expansion and Rehabilitation) and Component 3 (Capacity Building and Project Management) with US$49 million and US$1 million, respectively. Ongoing activities at the time that needed to be completed included, the rehabilitation and expansion of water systems in the following urban areas: ,, , Elubo and (); Dunkwa-On-Offin and Breman Asikuma (); , Akim , Suhum, and (); , Sovie, , Nkonya and

1 This cost includes the original IDA plus GoG Counterpart funds and parallel funding from the NDF.

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(); Agona and (); (Brong-); Tamale (); Wa (); and and (). Additional activities included the rehabilitation and expansion of the water distribution system of (Central Region), which would also feed nearby communities such as: , Ankamu, Mankoadze, Ankaful, Pomadze and Okyereko. The basic design and scope of the project otherwise remained unchanged.  Revision of PDO. The PDO was revised to align with the project’s interventions and to provide more clarity in the measurement of the outcome indicators as described in Section 1.3 above.  Closing date extension. The closing date was extended by three years, from December 31, 2012 to December 31, 2015.  Change in Disbursement Parameters. The original disbursement parameters were changed to allow the project to finance 100 percent of IDA-funded eligible expenditures, which were originally to be financed through Government counterpart funds.  Changes to Results Framework. The Results Framework was revised to incorporate the mandatory core water project indicators as well as to reflect the scale up and increased targets for outcomes already attained under the project. The key changes to outcome indicators are presented in Table 2 below.

(iii) Third Closing Date Extension (Second Level Restructuring approved on December 31, 2015). The closing date was extended a final time by an additional six months from December 31, 2015 to June 30, 2016. c) Dutch Trust Fund Financing. The Dutch Government provided a grant of US$13 million through a Trust Fund (TF) administered by IDA in support of the project. This TF, which was executed in May 2008, provided additional funds mainly for Component 1 and particularly for its Repair, Replacement and Rehabilitation subcomponent.

Table 2. Summary of Key Changes to the PDO Indicators

PDO Indicator Changes made Comments/ Rationale Urban centers receiving Dropped and replaced with the following To add clarity and civil works add at least core indicators: align with core 50,000 new connections  New household water connections that indicators or stand-posts are resulting from the project intervention  Improved community water points constructed or rehabilitated under the project  Number of people in urban areas provided with access to improved water sources under the project  Direct project beneficiaries of which are female GWCL in the five largest GWCL ratio of revenues to operation and To utilize standard

7 cities meet 100% of their maintenance costs (%) O&M coverage and to cash obligations from avoid capping it at collected revenues 100%

2. Key Factors Affecting Implementation and Outcomes

.1 Project Preparation, Design and Quality at Entry

18. The key aspects for the project’s quality at entry are discussed below.

19. Soundness of Background Analysis. The background analysis reflected a clear assessment of the issues facing Ghana’s urban water sector, including: limited access to reliable piped water services in many areas; challenges facing GWCL in terms of its financial, commercial, and operational performance; and the overall impact of these issues on service delivery, public health and the economy. The project supported the Government’s sector development priorities in line with the GPRS, which sought to improve access to safe water in rural, peri-urban and poor urban areas. Government commitment to the project was high.

20. The analysis considered lessons from global as well as local urban water supply projects, drawing upon best practice in the sector. Key lessons considered focused on, inter alia, experience with PSP in the water sector, recognizing that it is not a panacea to rectify years of neglect and poor management. Accordingly, the Management Contract was designed to meet limited but priority objectives focused on network extension to increase coverage and to restore GWCL’s financial stability. Other lessons focused on aspects such as : (i) physical infrastructure design, including sequencing of design activities to better evaluate demand and production needs prior to design of the distribution systems; (ii) identification of institution building priorities, such as the need for strong utility management to ensure better service delivery and long term sustainability; (iii) need for a focus on broader sector reform, including the importance of a well- functioning legal, institutional, and regulatory framework to improve the enabling environment; and (iv) need for increased utility autonomy to improve performance.

21. Assessment of Project Design. The PDOs were aligned with Ghana’s development priorities and the Bank’s CAS. However, in retrospect they were too ambitious in including multiple outcomes, some of which would be difficult to achieve with or attribute to the defined interventions. There were shortcomings in design of the project Results Framework: the PDO emphasized affordability and service reliability to the urban poor, without including indicators to measure these outcomes; and the original indicator on restoring financial stability to GWCL was not appropriate. The PDO and the Results Framework were revised through the restructuring to better align the PDO and the indicators. However, even with the revised Framework, indicators for water supply affordability and service reliability were not provided.

22. The project had a broad geographic dispersion across ten regions of the country (including Northern, Upper West, Central, Ashanti, Western, Volta, Eastern, and Brong Ahafo) and GWCL’s decentralized operational structure was expected to ease supervision arrangements by providing back up oversight for project activities in the respective regions. For the SYIPs,

8 available funds were distributed among the ten regions. As it was not possible to cover all 85 towns under the responsibility of GWCL, specific sub-projects were prioritized within individual regions on the basis of several criteria designed to promote cross-regional equity.

23. Most activities were designed on the basis of appropriate technical, social and environmental assessments; however, design shortcomings were noted in regard to several systems, in part due to inadequate stakeholder consultations during preparation. These shortcomings necessitated design changes which resulted in significant cost increases. Some shortcomings were also noted in the design of the Management Contract: baseline data on key indicators was not available, and the Management Contract did not clearly define the profitability clauses and other important aspects. These contributed to disputes between GWCL and the Operator during implementation.

24. The financial model and analysis presented in the PAD was sound. The economic analysis on the other hand did not use new piped household water connections and people provided with access to improved water sources under the project to monetize the project’s expected economic impact. Measurable economic benefits, such as time saved in fetching water, cost savings on non-incremental water consumption, value of increased water consumption, etc., were not computed.

25. Risk Assessment and Mitigation. The risk assessment covered key issues that could potentially affect project implementation and outcomes. The overall risk was assessed as Substantial, with four of the eight identified risks deemed to be Substantial and the rest Moderate. Key risks centered around reforms not having the desired impact or support: weak political will to sustain PSP activities; GWCL failing to internalize the operational improvements and corporate orientation; and politicization of the retrenchment exercise. Other risks centered around inadequate financing, for instance through donor reluctance to support investments or needs outstripping available funds, implementation capacity issues, and failure to address pro- poor concerns. Several mitigation measures were identified and addressed through technical assistance and capacity building elements under the project and implementation support.

26. Implementation Readiness. The project was prepared over a period of 5 years and 7 months from the Project Concept Review (PCN) in December 1998 to the Board approval in July 2004. Given the state of institutional flux and changing reform priorities, the Bank is to be commended for remaining engaged with the Government for the long haul. The project demonstrated a relatively high level of implementation readiness at approval. FYIP works were tendered prior to project effectiveness.

2.2 Implementation

27. The project initially had a relatively good start as investments under the First Year Investment Program (FYIP, Component 1) were ready for award, as well as the timely execution of the Management Contract (Component 2) and the voluntary retrenchment of GWCL staff (Component 4). The Project however encountered a series of setbacks early during implementation that resulted in various challenges, including significant delays and cost overruns.

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28. Delay in Procurement of FYIP. There was a delay in the award of works contracts procured under National Competitive Bidding (NCB) procedures for FYIP. About one third of the contracts ended in a declaration of misprocurement by the Bank after the implementing agency made changes to several contract awards in violation of Bank procurement guidelines. After a thorough review, the Bank accepted the explanation provided by GoG that the changes made were the result of legitimate misunderstanding of Bank requirements for NCB procurement. Consequently, the amount relating to misprocurement was not cancelled by the Bank. Deliberations to address these issues resulted in substantial delays spanning over six months.

29. Cost Overruns and Financing Gap. Unanticipated changes in some of the designs and price escalations because of delays contributed to the cost overruns under the project. A number of systems or sub-systems had to be terminated or scaled down due to lack of funds: the number of boreholes for the Berekum System in Brong Ahafo region scaled down due to lack of funds;in Axim in the Western region, the rehabilitation of the surface water system had to be scaled down.

30. Counterpart Payments. Government was unable to consistently provide counterpart funds for payment of its portion of expenditures for project activities in a timely manner. This issue was resolved after the project was restructured to allow IDA to finance 100 percent of the costs. 31. Restructuring. The project was restructured three times to address implementation issues, as detailed under section 1.7 above.

32. Contract Management. Multiple Variation Orders (VOs) in several works contracts led to a lot of material wastage and huge cost overruns. In the five water supply systems installed in the Western region, there were 22 VOs. Works executed by the same contractor in the Central and the Volta regions had 12 and 24 VOs, respectively, all with huge additional costs. Most of the VOs were linked to inadequate technical designs for the investments. The use of separate design and supervision consultants meant that rectification of designs during implementation had substantial time and cost implications. Many of the VOs issued after construction had taken place based on the original contracts necessitated additional costs for removal or demolition.

33. Contractor Performance. Poor performance of some contractors affected implementation of several contracts, e.g., rehabilitation and expansion of the three water supply systems in the Eastern Region. The contract was terminated and re-awarded to four local contractors.

34. Management Contract. The results of the Management Contract were generally sub- optimal due to a combination of design and implementation challenges: lack of sound baseline data needed to set certain targets at the start of the contract; ambiguity of clauses, such as the profitability clauses that gave rise to differences in interpretation; and capacity of some of the Operator’s staff. Early relationship challenges and disputes were related to, inter alia, contractual ambiguities; inadequate understanding, by both parties, of the new institutional structure and management arrangements; limited cross-cultural management by the Operator; lack of regular consultation between the two parties; lengthy procurement under the RRF; uncoordinated external communication, and disputed management of the revenue collection account. A

10 consultant was subsequently hired to sort out ambiguities in the contract. By 2009, communication between the two parties was improved. Although the Contract enjoyed relatively strong support and Government commitment when it was prepared, changes in Government during implementation resulted in less support for the approach. The contract was not extended and it was not allowed to transition into a lease or other PPP arrangement.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

35. M&E Design. M&E arrangements under the project were designed to be carried out through three main agencies: (a) the PMU, to track a number of indicators, including, civil works progress, new low income households added to the piped water system as a result of the project, and number of employees retrenched and remaining in service at GWCL; (b) independent Financial and Technical Auditors to monitor performance of the Management Contract Operator under Component 2, as well as track GWCL’s progress in meeting its financial goals; and (c) IDA, to monitor progress in the policy sensitive areas with the line Ministry (MWRWH) and the sector regulator (PURC).

36. Shortcomings with regard to M&E were linked to two main issues: misalignment of indicators with the PDOs as originally defined; and the lack of accurate baseline data for several indicators. The original key outcome indicators had identified the following as key parameters: (i) decrease in the proportion of urban water service provided through informal vendors; and (ii) increase in average hours of water availability at network distribution points. These parameters were however not included in the Results Framework and were not formally monitored. Changes to the Results Framework (including to PDO and intermediate outcome indicators and targets) were made as part of restructuring in order to better capture project results and achievements.

37. M&E Implementation and Utilization. M&E implementation under the project was carried out by the PMU, the Independent Auditor, and the Bank. The PMU benefitted from the overall capacity strengthening carried out under the project. Streamlining of key elements of M&E design through restructuring was also instrumental in improving M&E during implementation. Bank Implementation Status and Results (ISR) reports tracked the indicators in the project’s Results Framework and project supervision documents, including mission aide memoires reported candidly on results. . A Beneficiary Survey was carried out just before the project closed, using a combination of interviews and participatory techniques. However, it had a number of limitations, e.g., it covered areas where water supply systems had not yet been completed.

2.4 Safeguard and Fiduciary Compliance

38. Safeguards. The project triggered four Safeguard policies at appraisal (Environmental Assessment (OP/BP 4.10), Involuntary Resettlement (OP/BP 4.12), Safety of Dams (OP/BP 4.37) and Projects on International Waterways (OP/BP 7.50)) and was classified as Category B for Environmental Assessment. An Environmental Assessment Management Plan for the first package of civil works, a Resettlement Policy Framework (RPF) for the entire project, and a Dam Safety Report (DSR) were prepared prior to appraisal. A Resettlement Training Plan for

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Ghanaian project staff and consultants was also delivered to help the implementing team prepare Resettlement Action Plans (RAPs) for individual works during implementation. Adequately qualified PMU staff were hired and capacity for management of safeguards under the project.

39. Safeguards aspects under Environmental Assessment (OP/BP 4.10), Safety of Dams (OP/BP 4.37), and Projects on International Waterways (OP/BP 7.50) were generally implemented in accordance with required procedures. However, there were however issues with the payment of compensation to Project Affected Persons (PAPs). This issue was raised by the Bank on numerous occasions with both GWCL and the MoF, without timely resolution. Twenty sites are yet to be paid and identification and confirmation of ownership of an additional three sites in Bawku and Navrongo is on-going. A total of 39 PAPs under FYIP could not be traced for payment as they had moved their trades away from the pipe laying route. At the time of ICR drafting (December 2016), compensation remains outstanding to about 4,100 PAPs who were temporarily disturbed during the laying of the transmission and distribution lines under the SYIP. An amount of GHC 3,417,847.25 is required for these payments, but funds have yet been released by MoF and there is still no commitment by the government to resolve this issue.

40. Financial Management. Financial Management compliance under the project was generally satisfactory with a few moderate shortcomings. The PMU submitted audited financial statements of the project account in a timely manner and the opinions of the auditors had no qualifications. Moderate shortcomings were however noted in two main areas: audited financial statements of GWCL for the year ending December 31, 2015 were not submitted by the time the project closed; and GWCL did not maintain a comprehensive asset register. An asset register for the company is however to be established under the on-going GAMA Sanitation and Water Project.

41. Procurement. While the project generally complied with Bank and country procurement procedures for the vast majority of contracts, there were a number of significant shortcomings: contracts procured under NCB procedures for the FYIP resulted in mis-procurement; and weak contract management, demonstrated by the large number of VOs. Other shortcomings related to inadequate record keeping on supporting documentation, which precluded an adequate assessment of the VOs.

2.5 Post-completion Operation/Next Phase

42. Post completion operation of investments financed through the project are largely linked to GWCL’s regular operations. Project financed investments in most of the beneficiary urban centers are being operated by GWCL’s respective regional and district offices and they are contributing to the development outcomes of increased access to affordable and reliable piped water supply. In some of the more recently completed systems, facilities are still at various stages of operation and maintenance under the Defects Liability Period managed by the respective contractors. GWCL should take immediate steps to ensure that current and up-to-date O&M procedures and well-structured Facility Management Plans (FMPs) are developed and documented for all the systems.

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43. Issues affecting financial viability of GWCL are still a potential threat to sustainability. GWCL is continuing to implement the Delegated Performance Contracts first launched in April 2015 and intends to maintain the model on the basis of annual performance cycles. The program is now being financed using the company’s own resources and continues to show positive results. GWCL needs to establish a Monitoring Unit to ensure effective and transparent monitoring of the Performance Contracts in the medium to long-term.

44. The Greater Accra Metropolitan Area (GAMA) Sanitation and Water Project financed through a US$150 million IDA grant to the GoG, approved in June 2013, is currently providing US$48.1 million to GWCL to support further expansion of the water distribution network in the GAMA. The GAMA project is expected to contribute to the provision of access to piped water supply for an estimated 250,000 people in low income areas and their environs. It is expected to contribute additional distribution lines in the - area of Greater Accra to enable GWCL to completely distribute the full capacity of the newly commissioned BEFESA desalination plant in Accra (constructed under a Design-Build- and Operate contract outside the current project) over a two-year period (2017-2018). The GAMA project is also expected to support activities aimed at enhancing achievements under the Urban Water Project, such as improving water demand management and reducing non-revenue water, including the installation of water meters and other telemetry equipment. It will also finance development of the Asset Register for GWCL, originally envisaged to have been carried out under the current project.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

Relevance of Objectives (Substantial, Pre- and Post-restructuring)

45. Assessment of the relevance of the project’s objectives, design and implementation considers the project’s situation pre- and post-restructuring 2 . The PDO’s relevance, pre- restructuring, is considered to be substantial. Its focus on increasing access to piped water services in the targeted urban centers, with an emphasis on improving access, affordability, and service reliability to the poor, remains a priority for the Government. The coverage and quality of infrastructure provision is central to the Government’s key strategic goals of reducing the cost of doing business and diversifying the economy, reducing regional disparities in income and social indicators, and expanding intra-regional trade, in line with its aspirations to be a Lower Middle Income Country (LMIC). The second PDO element, which focused on restoring long- term financial stability, viability, and sustainability of the GWCL, also remains substantially relevant to the country’s current development priorities outlined in broader national goals such as the recently adopted Sustainable Development Goals (SDGs). The sixth SDG (SDG6) seeks to Ensure availability and sustainable management of water and sanitation for all. The World

2 The Restructuring considered here is the September 2012 restructuring, which involved revision of the PDO and associated outcome indicators.

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Bank’s current CPS (FY13-16) for Ghana seeks to support the country’s transition to LMIC status in line with the defined goals. It also recognizes that one of the main challenges facing Ghana’s water sector is the persistent failure of past reforms to translate into efficient service delivery, and highlights the need to restructure GWCL to overcome these challenges. The third pillar of the CPS specifically seeks to Protect the poor and vulnerable, with a specific outcomes in the Results Framework of Increasing access to improved water supply and sanitation services.

46. The PDO’s relevance post-restructuring remains substantial, given that the spirit of the PDOs remained virtually the same as the original, with some revisions towards more realistic outcomes to better align with the project design. The first objective, post restructuring, maintained a focus on increasing access to affordable and reliable piped water supply to targeted urban centers (without emphasizing targeting of the poor per se), while the second focused on the more realistic goal of achieving financial viability of GWCL, rather than the more ambitious objective of achieving long-term financial stability and sustainability.

Relevance of Design and Implementation (Pre –restructuring –Modest; Post restructuring - Substantial)

47. The relevance of the project design pre-restructuring was, on balance, modest. While key elements of the design, including the PDO and project interventions were designed to ensure the provision of basic water supply services in line with the country’s and the Bank’s development agenda, the PDO was over ambitious. In addition, project interventions did not fully address achievement of the PDO. Key elements of the design, such as the Management Contract, are no longer relevant given the changing priorities for urban water service delivery and management reform. Although it had been envisaged that the Management Contract would transition to a Lease or ‘Affermage’ Contract after expiry of the initial five-year contract, the Government, after extensive consultations with key stakeholders opted for a public sector model involving the use of Delegated Performance Contracts between GWCL and MWHWR. In addition, as discussed earlier, the Results Framework was weak.

48. The relevance of the project design after the project was restructured improved, following the revision of the PDO and Results Framework to better align with project interventions and to provide more clarity in measurement of the outcome indicators. The impact of the changes was mixed, though largely positive. While on the one hand the failure to provide suitable outcome indicators for key elements of the PDO, including Affordability and Reliability, was a shortcoming that affected M&E of outcomes, the project was able to maintain its relevance in other specific aspects such as sector management reforms for instance by moving away from a private sector model towards the more public Performance Contracts.

3.2 Achievement of Project Development Objectives

49. In accordance with the ICR Guidelines for projects which have been formally revised, the analysis for efficacy involves an assessment of performance against both the original and the revised targets where applicable, weighted by the amount disbursed at the time the targets were

14 revised. In this project US$66.83 million of the grant had been disbursed when the PDO was revised in September 2012; this represents about 39 percent of the final total project cost of approximately US$170 million4. Achievement of Original PDO 1 Pre-restructuring - Significantly increasing access to the piped water system in Ghana’s urban centers, with an emphasis on improving access, affordability and service reliability to the urban poor (Substantial)

50. The project provided 850,300 people in urban areas with access to improved water supply, significantly exceeding its original target of 500,000 people (170 percent achieved). This was mainly achieved through implementation of the program of expansion and rehabilitation in the targeted urban centers, which provided a total of 45,000 new piped household water connections (90 percent of the original outcome target of 50,000 connections). The project ensured that the water distribution network extensions reached the lower income communities and that access was provided through appropriate community water points, e.g., standpipes and yard connections. A total of 449 community water points were constructed or rehabilitated, substantially achieving the target (90% of the 500 targeted). In addition, GWCL promoted the provision of subsidized house connections through the project for low income households.

51. The Results Framework did not include indicators for some of the outcomes defined in the PDO, such as affordability and reliability of service. Improvements in affordability may be inferred from the fact that when the project was appraised, people in many urban centers who had no access to GWCL’s piped water supply were paying water vendors more than ten times GWCL’s price for a liter of water. At the end of the project, the cost for a cubic meter of water from a GWCL piped water connection was 3.6 Ghana Cedis, while the equivalent price from standpipes and boreholes managed by other vendors was 13.88 and 11.10 Ghana Cedis, respectively. Further, the existing GWCL tariff regime allows for a lifeline tariff to ensure affordability for the poor. Similarly, while service reliability was not monitored by GWCL in the absence of a formal indicator, general improvements can be inferred from the significant increases in water production in many beneficiary urban centers as a result of the project. Rationing of water, which was practiced in many of these areas prior to the project, has now ceased. Based on the above, the project is considered to have substantially achieved its original objectives. Achievement of revised PDO 1 Post-restructuring - Increasing access to affordable and reliable piped water supply in targeted urban centers (Substantial)

3 The relative percentage disbursement is based on the ratio of the amount disbursed at restructuring and the total final grant amount: (66.8/153.3) x 100% = 43.6%.

4 US$ costs slightly different from the appraised mainly due to exchange rate changes.

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52. The project substantially exceeded the revised target of 550,000 beneficiaries (by 155 percent). Similarly to the pre-restructuring situation, it is inferred from anecdotal evidence that GWCL piped water supply was generally more affordable and reliable than alternative sources, although specific data was not formally collected.

53. Key Outputs contributing to improved access to more affordable and reliable piped water. The project, through the System Expansion and Rehabilitation Component (Component 1), contributed directly to improving access and the reliability of water services by: (a) financing water production facilities, which increased the amount of water supplied; and (b) financing distribution network rehabilitation and expansion infrastructure in targeted urban centers (25 water supply systems, spread across 10 regions), which extended access to piped water services to low income areas. These included both treatment plant and distribution network works, especially distribution network expansions to low-income communities. By the close of the project in June 2016, 21 water supply systems had either been completed or were almost (95%) completed. At the time of the ICR, most of these systems had been completed. The project also financed meters, operational equipment, and engineering services for design and construction supervision to support the implementation and operation of the investments. Through the RRF managed by the Operator under the Management Contract, the project financed the repair or replacement of essential chemical dosing equipment, filters, and water quality monitoring equipment in 2008. Meter workshops in Accra and Kumasi were also renovated and equipped, and staff was trained to refurbish and calibrate flow meters, achieving a refurbishment capacity of more than 250 meters per week. Finally, the costs of dam safety construction and upgrades were financed in parallel by NDF. Details of the outputs are presented in Annex 2. Achievement of PDO 2 Pre-restructuring: Restoration of GWCL’s long-term financial stability, viability, and sustainability (Modest)

54. Achievement of the three pronged pre-restructuring PDO of restoring GWCL’s long term financial stability, viability, and sustainability is assessed as Modest. While the financial viability sub-objective was achieved, there was no evidence of achievement of the other two sub- objectives on GWCL’s stability and long-term financial sustainability. According to the PAD, achievement of the overall objective was to have been assessed through the five largest cities (Accra, Kumasi, , Tamale, and Takoradi) being able to meet 100 percent of their cash obligations from collected revenues. These cities account for over 70 percent of the company’s total revenues, and hence could be seen as a reasonable proxy to signal the company’s financial viability. This target was achieved, together with a significant improvement in the overall ratio of revenues to operation and maintenance costs from 60 percent to 107 percent (exceeding the 105 percent target), indicating achievement of the financial viability objective. These indicators, while indicating the significant improvement in the company’s financial viability, are however not adequate for assessing long-term financial stability and sustainability. Achievement of the latter two sub-objectives is considered Modest in the absence of supporting data, and in view of additional risks to GWCL’s long-term financial sustainability (not linked to the project), discussed in more detail in the section on risks to development outcome.

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Achievement of PDO 2 Post-restructuring - Improvement of GWCL’s financial viability (Substantial)

55. Achievement of the post-restructuring PDO of improving GWCL’s financial viability was substantial, based on the significant improvements in cost recovery as already discussed above.

56. Outputs that contributed to the financial performance outcomes. The achievement of these objectives is largely attributed to overall improvements in the company’s corporate governance and management approaches, as well as internal reforms such as the Delegated Performance Contracts which contributed to the company’s overall operations performance improvements. They can be specifically linked to a number of outputs: impact of the increased production and network expansions to reach more customers and increase revenues through various infrastructure investments: and management reforms introduced through the Delegated Performance Contracts introduced in 2015: Design and launch of the Contracts involved a high level of stakeholder participation facilitated by an independent Transaction Advisor/consulting firm M/s 2ML Ltd. The project supported the implementation of the first three performance cycles facilitated by the Transaction Advisor; the first was conducted over a 100-day period, the second over 180 days, and the third one over six months. The company’s long-term strategy is to adopt annual cycles. The results showed significant increases in revenue in many regional operation centers. The success of this program is in part linked to the incentives provided to staff upon achievement of the defined improvement targets. Other factors, such as the severance program that increased labor efficiency from 15 staff per thousand connections to 7 and periodic adjustments to the water tariffs, also contributed to GWCL’s increased financial performance.

57. The Management Contract, which ended in 2012, did not contribute significantly to improvements in commercial and financial performance in terms of cost recovery. At the end of the Management Contract period, all of the performance indicators showed that private involvement in the operations of GWCL had failed to bring about the expected positive improvement in urban water supply in Ghana. Reviews of technical, financial and audit reports of GWCL, AVRL and other independent institutions such as Fichtner/Hytsa/Watertech and State Enterprises Commission indicated that during the Management Contract period, the level of performance in almost all the systems was poor, especially with regard to reduction in non- revenue water, treatment plant operations, revenue collection, chemical usage, power consumption, and public water consumption. A summary of key results from the Management Contract is presented in Annex 2.

3.3 Efficiency (Modest, Pre- and Post-restructuring)

58. The efficiency of the project is rated Modest, based on the aggregated results of the economic and financial analysis conducted as part of the ICR, as well as other pertinent factors such as per capita investment costs and the implementation timeframe.

59. Economic Assessment of Project Benefits. The PAD contains virtually no economic analysis based on project benefits and based its assessment mainly on project inflows to the country’s budget, i.e., adding the effect of taxes for Component 1 to the financial analysis results.

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Envisaged project result indicators (such as improved community water points constructed or rehabilitated under the project, new piped household water connections resulting from the project intervention, and the number of people in urban areas provided with access to improved water sources) were not used to assess economic benefits. The difference between the financial and economic results presented in the PAD are the estimated effect of taxes equaling 15 percent, as included in the cost of Component 1 (which is principally civil works and engineering).

60. The ICR team has attempted an economic analysis as follows: (i) to repeat the PAD’s approach, but only add all corporate taxes to be paid by GWCL to the Government; (ii) add the economic benefits of water costs saved due to increased access to public water supply; (iii) add estimated electricity consumption savings due to decreased NRW; and (iv) time saved in fetching water. The economic analysis shows around $13 million in taxes on civil works and engineering and $176 million in corporate taxes; around $80 million in benefits from water costs saved; around $550 million in benefits from electricity consumption saving; and around $45 million in benefits from time saved in fetching water. This economic analysis indicates a positive NPV5 of $454 million (against $22 million in the PAD, but using completely different timeframe and exchange rate) and EIRR of 26.18% (21% in the PAD). Additional information and calculations are presented in Annex 3.

61. The ICR additionally considered the project’s per capita investment costs. In terms of investment costs, the project had a reasonable per capita investment cost (US$158 per capita, accounting for both the initial and additional financing) compared to similar projects6. However, bearing in mind the significant project implementation delays and the long implementation timeframe, the limited improvements in GWCL’s overall financial performance, additional financing required to complete the originally estimated scope of works due to cost overruns, and the lack of proper economic analysis, efficiency is rated Modest.

62. Financial estimate of project benefits. A notable achievement towards financial sustainability is GWCL’s improved ratio of revenues to Operation & Maintenance Costs from 0.60 to 1.07. In addition, the number of GWCL staff per 1,000 connections improved significantly from 15 to 7. Non-revenue water went down to around 49%, and although this indicator is still far above that of well managed utilities globally, it signals improved performance. Collection efficiency increased somewhat, from 65 percent to 75 percent, although it is still below the target of 85 percent. Despite GWCL efforts (which resulted in improved collection rate close to the target for a few years) the lack of payments from budgetary organizations in recent years has deprived the company of needed cash for proper operation and good service provision. The financial model for GWCL, created for the purposes of the ICR, demonstrated a positive NPV7 of $161 million (compared with $12 million in the PAD, but using completely different time-frame, investments, and exchange rate) and FIRR of 14.31%

5 Discounted at 10% as in the PAD, see note 7. 6 Per capita unit cost data on water supply projects from the region vary significantly depending on the type of investments (for example whether reservoir, dam, pumping station or other facilities are needed) but the range was between $100-$200. 7 Discounted at 10%, which is different from the latest World Bank recommended discount rates and WSS asset life but for comparability and consistency the financial analysis used the original assumptions 18

(compared with 16% in the PAD). These are relatively good project financial results that need to be further sustained.

Table 3. Summary of Economic and Financial Rates of Return at Appraisal and ICR

Financial (At Financial Economic (At Economic appraisal) (For ICR) appraisal) (For ICR) NPV ($ million) 12 161 22 454 IRR (%) 16 14 21 26

63. The above notwithstanding, GWCL’s financial performance has been affected in recent years as a result of a combination of factors, some of which are beyond the control of the project. These include the impact of economic and fiscal constraints at the national level, significant operational cost increases related to the BEFESA Desalination Plant (discussed in more detail below), and the transfer of significant debt from the Government to GWCL in 2015 (through various sub-loan agreements, state debt obligations for WSS investments amounting to more than $500 million were transferred to the company). Since the start of the Desalination Plant’s commercial operations in February 2015, GWCL has not been able to fully meet its obligations and has built up arrears under the WPA, incurring significant losses in the process. Water tariff increases for households, amounting to more than 300%8 between 20079 and 2015, have not been able to outpace GWCL’s cost increases. GWCL and the developer are in the process of renegotiating the contract to reach mutually agreeable terms that would help improve the company’s capacity to meet its obligations and improve its financial position.

3.4 Justification of Overall Outcome Rating – Moderately Unsatisfactory

64. The project’s overall outcome is rated Moderately Unsatisfactory considering the aggregate of: Relevance before and after the restructuring of the PDO; Efficacy in achieving the objectives before and after the restructuring; and its Efficiency. Table 6 summarizes the analysis of these aspects pre- and post-restructuring.

Table 6. Summary of Analysis for Assessment of Final Project Outcome

Description Pre-restructuring Post-restructuring Relevance of objectives Substantial Substantial Relevance of design Modest Substantial Efficacy Modest Substantial Efficiency Modest Modest Overall Unsatisfactory Moderately Satisfactory Weight 2 4 Disbursement 39% 61%

8 See http://www.purc.com.gh/purc/node/178 9 2007 was the period when local currency changed from second Ghanaian cedi to third cedi (due to inflation) 19

Weighting (2 x 0.39) = 0.78 (4 x 0.61) = 2.44 3.22 Total Moderately Unsatisfactory Note: Ratings were assigned the following values for purposes of analysis: Highly Satisfactory (6); satisfactory (5); Moderately Satisfactory (4); Moderately Unsatisfactory (3); Unsatisfactory (2); and Highly Unsatisfactory (1)

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

65. The original PDO was articulated with an emphasis on the poor in view of the fact that the impact of lack of or poor basic services such as water typically fall disproportionately on the poor and vulnerable. The project was thus designed to include low-income households within the existing service areas, as well as prioritize extension of water supply services to predominantly low income areas although the company’s service areas covered both high and low income areas and all its customers were able to benefit from the project. While no formal assessment of the project’s poverty impacts has been made, it can be reasonably concluded that in targeting the water supply investments to improve the living conditions of people in low income areas in targeted urban centers, the project improved the well-being of these people and, as such, contributed to conditions that would in turn contribute to alleviation of poverty in these areas. Pro-poor pilot water supply projects were piloted in three low income communities of Greater Accra, located in Teshie, Glefe, and Nima areas. Community Engagement and Sensitization Assessments and Baseline Studies carried out in the communities provided important feedback to PURC to design appropriate water tariffs/subsidies structure for the poor, especially for the service connection fees which were an impediment to poor people connecting to the network. Lessons from the pilot studies were incorporated in sub-project design for all the urban centers under the project.

66. Likewise, no formal gender analysis was conducted for the project. It is however evident that the burdens related to poor access to water supply services fall disproportionately on women and children in Ghana, as in many other developing countries. The number of female project beneficiaries was monitored as part of the core sector indicators, confirming that about 52 percent of project beneficiaries were female, mainly in line with existing demographics. It can therefore be reasonably concluded that the project’s impacts on gender among the beneficiary population have been positive.

(b) Institutional Change/ Strengthening

67. The project through the Capacity Building and Project Management Component (Component 3), contributed to the longer term capacity and institutional development of GWCL and Ghana’s Water Sector at large. The project has strengthened GWCL’s institutional capacity to manage water supply service delivery in urban areas within its jurisdiction in a more commercially sustainable manner. The project was instrumental in providing a forum for supporting sector dialogue and orientation and establishing the basic support structures to set the stage for further development to achieve enhanced performance objectives. It has also registered achievements in terms of capacity built in GWCL to manage water supply services in a more

20 commercially and financially sustainable manner, including through the Delegated Performance Contracts discussed earlier, even though there is need for further strengthening. The project also supported other sector institutions, such as PURC which was able to undertake technical studies on provision of services to low income areas. Training was also conducted for GWCL and other sector staff on various aspects related to management of sector operations. A summary of training carried out is presented in Annex 2.

(c) Other Unintended Outcomes and Impacts (positive or negative)

68. The project did not have any significant unintended outcomes.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

69. A Beneficiary Assessment for the project was commissioned by GWCL in June 2016 to assess the impacts of the project on household water supply. The survey was reviewed by the ICR evaluation team and found to have significant limitations which made it difficult to assess the project impacts in a coherent manner. For instance, since it did not include a baseline dataset, it was not possible to use the data to fully assess improvements in services. It was also conducted in several areas where systems were yet to be completed or commissioned. As a result, there are mixed results and inconsistencies in the beneficiary responses since some of the respondents had not yet received services at the time of the surveys. The ICR therefore does not consider the results of the Beneficiary Assessment in its analysis.

4. Assessment of Risk to Development Outcome

70. The ICR considers the risk that development outcomes from the project will not be maintained is Substantial unless adequately mitigated. The sustainability of (a) urban residents in the targeted areas maintaining access to affordable, and reliable water supply service delivery and potential further uptake by other users; and (b) GWCL maintaining financial viability in the long term is subject to factors such as: adequate operation and maintenance of systems being ensured; overall cost recovery for services being maintained by GWCL; and continuing support and enforcement of enabling policies to maintain both.

71. Technical risks to development outcome are considered moderate in the short- to medium-term for most of the systems. They are mainly embedded in GWCL’s capacity to properly operate and maintain its systems and the investments put in place. They are thus inherently linked to the quality of investments and adequacy of operation and maintenance of facilities. The quality of construction of investments and technologies used were appropriate for achieving the desired improvements in service reliability and access. There were some systems however which were yet to be completed by the time of drafting the ICR, and several still undergoing the defects liability period. GWCL will need to devise strategies for early completion of all outstanding works. There will also be the need to put in place effective modalities to ensure monitoring and supervision during the defects liability period so that identified defects are brought to the attention of the Contractors for rectification. Furthermore, in view of the role of O&M in ensuring the sustainability of the water supply system, it is recommended that GWCL takes immediate steps to ensure that current and up-to-date O&M

21 procedures and well-structured Facilities Management Plans (FMPs) are developed and documented for all the systems.

72. Financial risks to development outcome would be considered substantial without mitigation, and moderate on balance after mitigation. While the project has contributed to significant improvements in GWCL’s commercial and financial viability, the long term financial sustainability of the company is facing external threats mainly associated with the overall debt and additional operational costs from a new Desalination Plant facility in Accra, the BEFESA Plant installed under a Design-Build-Own-Operate-Transfer (DBOOT) concession with a private firm. The BEFESA Plant was commissioned in February 2015. At full capacity the plant can produce 60,000 m3 per day of potable water, yet GWCL is currently only able to off-take up to 30,000 m3 per day (50%) due to distribution network capacity limitations. The company has to pay capacity charges for the full capacity based on the Take-or-Pay contractual arrangement under the Water Purchase Agreement (WPA) with the developer. Since the start of the Plant’s commercial operations in February 2015, GWCL has not been able to meet its obligations and has built up arrears under the WPA, incurring significant losses in the process. Although the PURC increased the water tariff for households by more than 300%10 between 200711 and 2015, these adjustments were not able to outpace GWCL’s cost increases. GWCL and the developer are in the process of renegotiating the contract to reach mutually agreeable terms that would help improve GWCL’s capacity to meet its obligations and improve its financial position. The successful renegotiation of the terms of the WPA will be an important element of the company’s long-term financial sustainability plans. Additionally, Government’s transfer of the debt repayment obligations puts the company at even higher risk. The policy prior to 2012 did not require the company to cover the long-term debt obligations.

73. Economic and Social risks to development outcome are considered modest. Risks relate in part to motivation for consumers to use the services based on concerns such as affordability for instance in light of new policies requiring payment of higher tariffs. This is not considered a major risk given the dire need for water supply services in the targeted areas, as well as the implementation of policies supported through the project to ensure acceptable arrangements for low income customers, including the inclusion of standpipes and a lifeline tariff for household connections.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

74. Bank performance in ensuring quality at entry is rated Moderately Unsatisfactory on balance, taking into consideration the extent to which the Bank identified the project, and

10 See http://www.purc.com.gh/purc/node/178 11 2007 was the period when local currency changed from second Ghanaian cedi to third cedi (due to inflation) 22 facilitated its preparation and appraisal such that it was most likely to achieve its planned development objectives and was consistent with its fiduciary and safeguards roles. Project identification was strategically sound, based on relevant challenges and Government and Bank priorities for the sector. The Bank allocated adequate staff and resources for project preparation and substantial preparatory analytical work was carried out to facilitate preparation and appraisal of the Project by respective technical, fiduciary, safeguards and financial and experts. The Bank team helped the Government to mobilize resources to support project preparation, though a Project Preparation Fund (PPF) and a Policy and Human Resources Development (PHRD) Grant from the Japanese Government, and overall the design was prepared in close consultation with the GoG counterparts. Project appraisal generally took into consideration technical, environmental, social, and financial aspects.

75. Fiduciary and safeguards arrangements were well prepared, consistent with the Bank’s fiduciary and safeguards requirements, and adequate implementation arrangements were put in place for the project. While many of the water supply systems were designed in a technically sound manner, there were significant shortcomings in relation to: (a) the quality of some of the technical designs, which plagued the project and contributed to multiple variation orders, delays and cost overruns during implementation; (b) the quality of the economic analysis as discussed under Section 3.3 above; and (c) the overly ambitious definition of the PDO which informed overall project design, as well as in the associated M&E frameworks, as discussed in Section 2.3. While it is recognized in principle that the Borrower is responsible for project preparation, the Bank is jointly held accountable for the mentioned shortcomings in these aspects given its facilitating and supervisory role. Bank performance in ensuring quality at entry is therefore rated Moderately Satisfactory,

(b) Quality of Supervision

76. The ICR rates the quality of supervision Moderately Satisfactory based on the extent to which the Bank carried out its fiduciary safeguards and technical supervision roles, and more importantly its proactivity in addressing issues affecting implementation progress and the project’s achievement of its development objectives. Adequate budget, staff, and other resources were allocated throughout the Project implementation period, and project supervision was carried out at least twice a year. Having a country based Task Team Leader for the larger part of implementation allowed most issues to be proactively followed up as needed and addressed through continuous dialogue with counterparts as they occurred. Bank supervision reports were candid and informative about issues affecting the project, and the Bank responded proactively to various important issues affecting the project, including the need for additional financing and time extensions with project restructuring as necessary. In hindsight, the Mid-Term Review in July 2007 seems to have been a missed opportunity to have addressed some of the major structural issues such as the PDO and M&E framework earlier rather than in the major restructuring which occurred in 2012.

77. Supervision of fiduciary aspects was adequate. Procurement missions and post reviews, and financial management reviews were carried out regularly and their findings were reflected in the project supervision reporting. The Bank team responded proactively to issues such as the Government’s non-compliance with Bank Procurement guidelines, elevating the issue to

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Management review internally as appropriate, eventually resulting in the declaration of misprocurement of the affected contracts.

78. Safeguards supervision was also generally thorough and issues were flagged and reported upon as they occurred. The Bank team made efforts to monitor progress in regard to key safeguards aspects, including the payment of compensation to PAPs. While the Bank constantly flagged the issue to Government during implementation and elevated it to Bank Management for follow up with Government at the portfolio level, it was not fully honored by the end of the project.

79. There were some moderate shortcomings in form of apparent missed opportunities and/or delayed proactivity on certain aspects. For instance, the three-year lapse between the mid-term review (MTR) and project restructuring seems to signal a missed opportunity to have made changes earlier (during the MTR), and even after restructuring the Results Framework failed to fully allow the PDO to be assessed. The execution of the third restructuring on the project closing date on December 31, 2015, also signals an apparent lapse in acting upon the issue in a timely manner.

(c) Justification of Rating for Overall Bank Performance

80. Rating: Moderately Unsatisfactory. The ICR rates the overall Bank performance as Moderately Unsatisfactory on balance, on the basis of its contribution, as discussed above, to the Moderately Unsatisfactory project quality at entry and Moderately Satisfactory quality of supervision, ultimately resulting in the overall Moderately Unsatisfactory project outcome.

5.2 Borrower Performance

(a) Government Performance

81. The ICR assesses Government performance as Moderately Unsatisfactory on balance based on assessment of the extent to which the Borrower contributed to the project’s assessed quality at entry, as well as complied with covenants and agreements to achieve the PDO. Government ownership and commitment to the project was high at entry given its alignment with the Poverty Reduction Strategy and other sector priorities such as the ongoing reforms towards more private sector involvement in urban water supply, among other things. Government was thus involved in defining the project design with key stakeholders including GWCL and the Bank, and it requested and disbursed US$2 million in PPF funds and US$0.6 million in PHRD funds for project preparation. It also committed to ensuring a relatively high level of implementation readiness, requesting proposals from qualified firms for the Management Contract prior to presentation of the project to the Bank’s Board for approval.

82. While Government remained generally supportive to the project through implementation, contributing as needed to the resolution of issues in close collaboration with the implementing agency on aspects such as project restructuring as required, shortcomings in its performance were noted in two key areas. The first shortcoming pertained to its failure to comply with legal covenants regarding funding of the escrow account for full compensation of PAPs before

24 implementation of works. By the end of the project, large proportion of the compensation fees remained unpaid pending Government release of the funds. The second failure pertained to the occurrence of significant delays in payment of counterpart funds for project activities. The latter, as earlier discussed, was addressed through the restructuring which allowed IDA to finance 100 percent of contract expenditures. Given the seriousness of the issues around the outstanding compensation, Government performance is rated Moderately Unsatisfactory.

(b) Implementing Agency or Agencies Performance

83. The ICR rates the performance of the implementing agency as Moderately Unsatisfactory based on assessment of the extent to which the agencies contributed to the project’s quality at entry and complied with legal covenants and agreements. Consideration is also given of criteria such as management of fiduciary aspects, overall management of the investment and reform activities, and timely resolution of implementation issues. The project was implemented by GWCL through a dedicated PMU which reported directly to the MWRWH, with technical support from the Company (GWCL). The roles of all three mentioned entities are therefore jointly considered in the assessment of the implementing agencies. Both MWRWH and GWCL were committed to the project from its conception and they were closely involved in preparation and implementation support, providing oversight to the PMU. One demonstration of GWCL’s commitment is the fact that the company paid compensation for PAPs with its own funds to allow works to proceed given the delays in Government release of funds. Reimbursement from Government was still pending at the time of the ICR, although the works were completed.

84. While overall, the implementing agencies on most occasions complied with Bank fiduciary and safeguards aspects, there were major shortcomings in regard to specific instances during implementation. First, the declaration of misprocurement for about one third of the FYIP contracts under Component 1 very early in the project was an issue even though there was an apparent misinterpretation of NCB procedures vis-a-vis Bank procurement guidelines on the part of MWRWH. Second is linked to the apparent failure to adequately supervise the design consultants early on in the project, which led to the need for the numerous variation orders during implementation. Finally, the weaknesses in M&E arrangements under the project resulted in inadequate monitoring of project results and outcomes. Although the PMU had adequately qualified staff, there is evidence of apparent lapses in contract management in view of the contract management concerns mentioned above. This is attributed in part to over-stretching of the core PMU team and inadequate involvement of GWCL regional teams. Although the need for hiring additional engineers was recommended by the Bank during several supervision missions, they were not hired. After the final project restructuring, responsibility for project management was directly carried out by GWCL through its Corporate Planning and Capital Development Department, in close coordination with the Regional Operations teams. This arrangement improved coordination and project operations in the last stretch of implementation.

(c) Justification of Rating for Overall Borrower Performance

85. Moderately Unsatisfactory. The ICR rates the Borrower performance as Moderately Unsatisfactory based on the aggregate of the Government’s and the Implementing Agency (GWCL’s) Moderately Unsatisfactory ratings.

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6. Lessons Learned

86. PDO: Project development objectives should be kept as simple as possible, focusing on achievable objectives that can be measured and attributed to the project. Clear interventions to achieve each objective should be included in the project design and the results framework should be able to fully assess whether the PDO is being achieved.

87. Implementation arrangements. Using existing institutional structures with strong project oversight and accountability fore results is essential for effective project coordination and implementation, even if there is a dedicated Project Management Unit.

88. Sequencing of Water Resources Assessments and Infrastructure Design. Water resources assessment activities such as drilling of boreholes should be carefully sequenced and commence as soon as possible to provide accurate data on yields prior to design of water supply systems. Inadequate sequencing and slippages in the timing of borehole drilling to confirm availability of adequate water resources affected the design and subsequent quality of several water supply systems.

89. Escrow Accounts for Compensation of PAPs. Inclusion of dated covenants on establishment of Escrow Accounts for funding special activities such as compensation of PAPs in Legal Agreements should hold Borrower’s accountable not just for Account establishment, but also for timely replenishment with adequate funding. A dated covenant was introduced during restructuring, requiring the Borrower to establish an escrow account solely for funds to pay compensation and disturbance allowances to PAPs. The account was established in time, but it was not funded in a timely manner. The Borrower’s failure to pay full compensation costs was therefore a major implementation issue under the project.

90. Contractors should be held more accountable for providing core staff considered for selection. The quality of contractors or Operator’s individual staff seconded to manage operations under complex contracts such as Management Contracts is of paramount importance to the success of Contracts, and firms should be held more accountable to ensure that core team members such as the Project Manager included in the selected proposals or better are actually seconded. Where there are changes, the client should be offered the opportunity to interview and reject any new staff. While originally offered staff appeared to possess the required qualifications, the Operator changed the expatriate staff on its management team three times.

91. Profitability Clauses. Management Contracts should have well defined profitability clauses taking into consideration other salient factors which form the basic drivers of that business. Private enterprises in partnership are in it for profit; hence if profitability is not well defined, there is a greater likelihood of exploitation of the laxities for higher profit.

92. Alignment between indicators in project and Management Contract. Performance indicators included in Management Contracts should be better aligned with the PDO or intermediate outcomes of the parent project, even though they are more rigorous. This would

26 allow for effective monitoring and evaluation of contribution of the Management Contract to outcomes.

93. Baseline: While baselines are important, it is understandable that some of these may not be available (or if available, likely to be quite wrong) at the start of the project. Rather than focusing on ensuring that all baselines are correct (which is often impossible at the start), project and management contracts may benefit from built-in provisions for the collection of data and reviews of baselines during the first 12 – 18 months of implementation.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Not applicable.

(b) Co-financiers Comments were requested but are yet to be provided.

(c) Other partners and stakeholders Not applicable.

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent) Restructured Actual/Latest % of % of Appraisal Appraisal Estimate Appraisal Appraisal Components Estimate Estimate (USD (USD at after (USD millions) millions) millions)12 approval restructuring

Component 1: System 91.8 153 127.11 140.8 110.8 Expansion and Rehabilitation Component 2: Public Private 6.5 234 15.19 15.19 100 Partnership Development Component 3: Capacity 7.7 113 Building and Project 9.78 8.7 89 Management Component 4: Severance 11.0 108 11.92 11.92 100 Program Unallocated 1.0 0 Total Baseline Cost 118.0 164.0 167.92 150 107.7 PPF Repayment 2.0 2.0 2.0 100 Total Project Costs 120.0 166.0 169.92 149 107.6

(b) Financing Appraisal Estimate Actual/Latest % of Estimate after Type of Co- Estimate % of Appraisal Source of Funds (USD restructuring financing (USD Appraisal after millions) (USD millions) restructuring millions) IDA Grant 103.0 153.0 157.08 152.4 103.6

Grant (Trust NETHERLANDS 5.0 5.0 5.0 100 100 Fund) TRUST FUND Government GOVERNMENT Counterpart 12.0 12.0 1.5 OF GHANA Funds Total

12 Note that the totals do not add horizontally since the GoG contribution in the original cost was included in the Additional Financing.

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Annex 2. Outputs by Component

1. Component 1. System Expansion and Rehabilitation (US$91.8 million). This component was designed to support achievement of the project development outcomes of provision of access to more affordable and reliable water supply by: (i) increasing the amount of treated water for sale; (ii) extending service to low income areas; and (iii) rehabilitating the existing network to reduce non-revenue water. It also included dam safety upgrades (financed in parallel by NDF), meters, operational equipment, and engineering services for design and construction supervision. Component 1 comprised a 6-year investment program for physical works with three main sub-components: (a) the First Year Investment Program (FYIP) in the amount of US$17 million; (b) the Subsequent Year Investment Program (SYIP) in the amount of US$70 million; and (c) the Repair, Replacement and Rehabilitation Fund (RRF) in the amount of US$5 million. The FYIP was intended to comprise construction of minor works for which no major studies would be required in order to achieve immediate impacts on improved service coverage and to reduce un-accounted for water. It involved minor rehabilitation on three water supply systems; Accra West, Kumasi, and Obuasi in the first year of the investments. Implementation of the SYIP was to involve prioritization of investments to be determined and guided by the objective of improving access with emphasis on low income groups. It included major rehabilitation and installation of new systems in the nine regions apart from the Greater Accra Region. The RRF involved minor works to be managed by the private Operator for execution on an annual/quarterly basis based on identified operation and maintenance needs in the project areas.

2. Under Component 1, the following outputs were achieved: a) Twenty-five water supply systems (spread across 10 regions) were rehabilitated and/or extended (in some locations including extensions to nearby villages). Rehabilitation and extensions occurred for both treatment plant and distribution network works, with a focus on distribution network expansions into low-income communities. Twenty-four of these water supply systems extensions or rehabilitations have either been completed or are almost (95%) completed as of June 2016. The table below details the work undertaken at each site as well as the status of the work. b) Additional funds were used to support water source upgrades, including dam safety upgrades (financed in parallel by NDF) at a subset of existing dam locations. In addition to construction, the project supported the purchasing of operational equipment, engineering services for design and construction supervision, and purchased 21 operational vehicles for GWCL, Ministry of Finance and Economic Planning, MWRWH, and PURC. c) Separate funding under this component, as part of the Repair, Replacement, and Rehabilitation Fund (RRRF), was used for the following: (i) Some essential chemical dosing equipment, filters, spares, and water quality monitoring equipment were replaced or repaired in 2008; and (ii) Meter workshops in Accra and Kumasi were renovated and equipped in 2008. Staff were trained to refurbish and calibrate flow meters. The workshops have a refurbishment capacity of more than 250 meters per week, and have received 2,994 faulty meters, of which 1,294 were repaired. Additionally, AVRL supplied 14,694 used meters, of which 5,565 were refurbished and used throughout the country.

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SUMMARY OF STATUS OF OUTPUTS UNDER THE SYIP AS AT 2ND NOVEMBER 2016 ORIGINAL START ORIGINAL EXPENDITURE ITEM AND END DATE CONTRACT AS AT END 2ND PROJECT STATUS AS AT PROJECT TITLE NR. SUM NOVEMBER 2016 2ND NOVEMBER 2016 (US$0 (US$) 1 Civil and Electro Mechanical Jan 2011 – Jan 2013 12,447,049.32 12,868,317.63 The Project has been Works for the Rehabilitation substantially completed and Expansion of the Volta pending the rectification / Regional and Peki Water correction of technical issues Supply Systems in the Volta noted during the Pre- Region. commissioning and Trial Operations tests. The Project was taken over on 13th September 2016 and the one year Defects Liability Period has commenced. 2 Civil and Electro Mechanical Mar 2011-Mar 2012 11,087,024.82 12,514,224.34 The Project has been Works for the Rehabilitation substantially completed and and Expansion of Aboso, was taken over on 11th April Bogoso, Elubo, Axim and 2016 except for the Axim Prestea Water Supply Systems System. Works at Axim have in the Western Region been completed. Pre- commissioning and Commissioning Tests in Axim have now been completed and Project taken- over on Octiober 31. There are some issues with destroyed pipelines at Bogoso and Prestea by third parties (Road Contractors) which are currently being resolved. 30

ITEM PROJECT TITLE ORIGINAL START ORIGINAL EXPENDITURE PROJECT STATUS AS AT NR. AND END DATE CONTRACT AS AT END 2ND 2ND NOVEMBER 2016 SUM NOVEMBER 2016 (US$) 3 Civil and Electro Mechanical Jan 2011 – Jan 2012 6,784,344.70 8,328,597.61 The Project has been Works for the Rehabilitation completed and was handed and Expansion of Breman over in September 2015. Asikuma and Dunkwa on Offin Final inspection is to be Water Supply Systems in the undertaken after rectification Central Region of defects

4 Civil and Electro Mechanical Nov 2011 – Nov 10,922,732.46 6,241,288.78 The Project has been Works for the Rehabilitation of 2012 substantially completed. Pre- and Expansion of Asamankese, commissioning and Trial Akim-Oda, Akim Ofoase and Operations tests are currently Suhum Water Supply Systems on-going in Suhum and Akim in the Eastern Region – Ofoase which are planned to be completed and handed over before the 18th November 2016.

5 Civil and Electro Mechanical Apr 2011 – Apr 6,173,067.58 7,013,506.09 The Project has been Works for the Rehabilitation 2012 substantially completed. Pre- and Expansion of Agona and commissioning and Trial New Edubiase Water Supply Operations tests are however Systems in the Ashanti Region outstanding and will soon commence for the Project to be handed over.

ITEM PROJECT TITLE ORIGINAL START ORIGINAL EXPENDITURE PROJECT STATUS AS AT

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NR. AND END DATE CONTRACT AS AT END 2ND 2ND NOVEMBER 2016 SUM NOVEMBER 2016 (US$) 6 Civil and Electro Mechanical Mar 2011-Mar 2012 6,152,828.98 6,257,568.18 This project was completed in Works for the Rehabilitation January 2015. DLP and Expansion of Wa Water completed Supply System in the Upper West Region 7 Civil and Electro Mechanical Feb 2011-Feb 2012 5,646,032.06 5,011,020.11 This project was completed Works for the Rehabilitation on the 29th November 2012. and Expansion of Tamale DLP completed Water Supply Systems in the Northern Region 8 Civil and Electro Mechanical Apr 2015 – Dec 16,396,628.33 17,271,245.97 The Project has been Works for the Rehabilitation 2015 substantially completed. Pre- and Expansion of Berekum commissioning and Trial Water Supply System in the Operations tests have Brong-Ahafo Region commenced and are currently in Progress. It is envisaged that these will be completed and the Project handed over before 31st November 2016.

9 Civil and Electro Mechanical Feb 2015 – Dec 6,876,620.81 5,696,131.79 The Project was completed Works for the Rehabilitation 2015 and handed over in July 2016. and Expansion of Bawku Training of GWCL staff has Water Supply System in the also been completed. In DLP Upper East Region

ITEM PROJECT TITLE ORIGINAL START ORIGINAL EXPENDITURE PROJECT STATUS AS AT NR. AND END DATE CONTRACT AS AT END 2ND 2ND NOVEMBER 2016 SUM NOVEMBER 2016 10 Civil and Electro Mechanical July 2015 – Dec 8,475,524.96 7,098.355.43 The Project was completed

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Works for the Rehabilitation 2015 and handed over in July 2016. and Expansion of Navrongo Training of GWCL staff has Water Supply System in the also been completed. Upper East Region

TOTAL 90,961,854.02 81,201,900.50

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3. Component 2. Public-Private Partnership Development (US$6.5 million). This component was to support payment of the management fees for an international Private Operator (the Operator) which was engaged to improve GWCL’s performance under a Management Contract, and technical and financial auditors to measure the operator’s performance. The objective of the management Contract was to restore GWCL to a sound financial footing and to make a significant improvement in the company’s operations. The Contract was to be executed for a period of five years to operate GWCL’s 85 urban water systems. The Operator was to report to a Director at GWCL Head Quarters and was to be in charge of day to day operations and maintenance (O&M) of the company’s water supply systems. Staff not assigned to HQ were to be assigned as formal employees of the Operator and would report to it. The project was to pay 100 percent of the Operator’s fees in the initial four years of the contract, and 75 percent in the fifth year, with the remaining 25 percent to be paid through improved cash flows of the urban water systems.

4. Under component 2, the following were achieved.

a) Management Contract. On November 22, 2005, GWCL signed a Management Contract with Vitens Rand Water Services BV of Netherlands, a consortium of Vitens International BV of the Royal Netherlands and Rand Water Services Pty of South Africa. Implementation of the Management Contract commenced on June 6, 2006. Vitens Rand Water Services BV, through its subsidiary, Aqua Vitens Rand Limited (AVRL), operated the urban water systems for five years. The Management Contract set out for the Operator specific standards and targets in respect of raw and treated water quality, pressure and flow rates, non-revenue water, treatment plants operations, customer response time, customer accounts receivable, interruptions and emergency actions, customer collections, reduction in chemical usage, reduction in power consumption, and public sector consumption. At the end of the Management Contract period in June 2011, all the performance indicators showed that private involvement in the operations of GWCL had failed to bring about the expected positive improvement in urban water supply in Ghana. Review of technical, financial and audit reports of GWCL, AVRL and other independent institutions such as Fichtner/Hytsa/Watertech and State Enterprises Commission proved that during the Management Contract period, the level of performance in almost all the systems was poor especially with regard to reduction in non-revenue water, treatment plant operations, customer accounts receivable, customer collection, chemical usage, power consumption and public water consumption. Following the expiration of the Management Contract and the exit of AVRL, a new company, Ghana Urban Water Limited (GUWL), was formed by Government, on 9th June 2011, to take over temporarily the management of urban water systems in the country. According to the Ministry of Water Resources Works and Housing, ‘the move is the most attractive short term option to allow government to take stock and seamlessly manage the operations of the urban water systems for a period of only 12 months’. b) On 1st August 2013, Cabinet approved the merger of Ghana Water Company Limited and Ghana Urban Water Limited. With the merger, the company is now operating as one entity under its original name Ghana Water Company Limited. c) To ensure ongoing improvement, a consultant, 2ML Consulting Ltd, was hired to help implement new management reforms through Performance Contracts in GWCL. 2ML

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Consulting Ltd has supervised the reform process and completed 2 phases of 100-day performance programs with GWCL. The result has been significant increases in revenue in many regional operation centers. Performance contracts have been signed between the Board of Directors and Senior Management and between Senior Management and GWCL Regional (operational) Directors. d) Under this component, the use of RRR Funds was assessed to ensure they were prudently utilized by AVRL. The annual report from 2009 reported the RRR Funds were effectively utilized and helped stabilize water production through investments in chemical dosing equipment, fitlers and water quality monitoring equipment.

Summary of Key Results from the Management Contract

Operational MC Agreed Service Actual Target Actual Target Parameters Standards (SS) Achieved 4th Year Achieved 5th Year (2010) (2011) (awaiting data) WQ- raw Complying index of No significant change in An insufficient number water WRC (yet to be raw water quality of samples were developed). ‘No effect collected, preventing any range’ in terms of health time-trend analyses of and aesthetics is vaguely the raw water quality defined WQ - Complying index value No significant change Though an insufficient treated of ≥ 95% of GSB value occurred with regard to number of samples were

water at (5 water quality treated water quality. collected, all standards headworks parameters (pH, color, However, a significant attained 95% turbidity, residual deterioration observed compliance, though chlorine, and E. coli) for Eastern Region there continues to be monitoring on a routine compared to 3rd year regional variation

Water Quality Water basis WQ - Complying index value Only 55% of samples Residual chlorine has distributed of ≥ 95% of GSB value. taken from all networks deteriorated as only 53% water 5 parameters (pH, color, complied. 88% of of samples were in turbidity, residual samples from all compliance. Other chlorine and E. Coli) are network complied with parameters mostly monitored residual chlorine obtained similar standards compliance to previous years Treatment Plant Within 60 days from 4 new plants on stream. Only one region has Operation commencement operator There is nearly 10% meters, most of which to provide grantor with increase in volume of are not working, so specifications for meters water supplied. water production and their locations; 24 plants (accounting for estimates continue to be maintain average daily 42.9% of total based on historic figures production for at least 10 production) comply with and pumping data. months per year; SS, 45 plants (437.9% of Overall, total production

35

document investments to production) were not has increased 14.5% increase water compliant and no since baseline. Plant production at selected conclusions could be capacity utilization has systems in each year’s drawn for 25 plants that increased to 70%. Only Suggested Capital were new or partly 26 (of 94) plants comply Investment Report; rehabilitated because with the MC defined maintain average daily water demand figures Service Standards for production of at least were not available capacity utilization, with 90% of installed Installation of bulk another 30 plants out of capacity meters if required to compliance and 25 satisfy this SS, but plants have insufficient activity was still data to draw a outstanding in 2009 conclusion. Non-revenue 5% reduction (with lack There is improvement in Average NRW was 49%. water of clarity whether it is an database availability in But the quality of data absolute 5% reduction only a few systems. used is highly per year, totaling 25% Only 4 systems questionable and full of reduction by the 5th year; complied. The rest of the unexplained or if it is a 5% reduction systems did not comply, inconsistencies. from the previous year) mostly NRW above 50% Additionally, acquired bulk meters have not been integrated into the system to allow for more accurate measurements Customer Define “response to Majority of complaints The total number of response plan customer inquiry”; (mostly related to pipe complaints decreased document average bursts and no flow) compared to the customer response time resolved in 48 hours. previous year. Most prior to commencement Estimated it takes 80 complaints were handled data; outline plan to hours to take respond to within 48 hours. reduce average customer new serve requests response time Customer Within 12 months of In 2009, actual days was Not reported in final accounts commencement date 237 (gross) or 163 (net). Consultant’s report on receivable reduce non-public sector Values ranged from 157 the Management accounts receivable to a to 237 days (gross) or Contract level not exceeding 90 108 to 163 (net) from days of non-public 2006 to 2009 sector sales Interruptions and emergency actions

5. It is noted that during the 5th Contract Year as in previous years, the audit assessment carried out by the technical auditors was difficult due to insufficient, missing, or inaccurate data, for example data on water production, metered water, lack of figures on electrical consumption

36

in boosters, and MDAs’ consumption and baselines. Therefore the TA qualified the audit results stressing that they should be considered in general as a qualitative and – only where possible – as a quantitative assessment of the Operator’s activities during the 5th year of the Management Contract.

6. Component 3. Capacity Building and Project Management (US$7.7 million). This component was to support capacity building and project management activities. The largest allocations were for Training (US$2.0 million) and Technical Assistance (US$2.5 million). The training sub-component was in part to be defined by the Management Contract operator who was expected to propose a Training Plan. This component also included training for GWCL headquarters staff, vehicles, office equipment, and technical assistance and support to the Public Utilities Regulatory Commission (PURC), the Project Management Unit (PMU) within GWCL, and the Ministry of Water Resources Works and Housing. Component 3 was designed to address the huge capacity constraints that GWCL was facing at the time. Activities pre-identified under the TA component included key studies such as; preparation of a National Wastewater Strategy, a Debt Rationalization Study, Tanker Truck Rationalization, two Stakeholder Pollings, a GWCL Regionalization Study, and support for Corporate Planning.

Outputs from Component three are summarized below.

a) Training programs were conducted for GWCL staff, including PMU staff, and AVRL staff. These trainings focused on how to operate and manage the water utility. Additional training was provided for MWRWH staff. GWCL/AVRL provided staff training from 2006-2011 for the following number of participants:

Year Number of Participants 2006 141 2007 1,399 2008 1,284 2009 1,137 2010 685 2011 (until May) 254

b) A tanker truck regulation study was carried out as were technical studies for PURC. The technical studies for PURC focused on Water Supply to Low Income Areas and included three pro-poor pilot projects in Greater Accra (Teshie Nshoma, Nima and Glefe).

7. Component 4. Severance Program (US$11.0 million). This component was to support the anticipated voluntary severance program for GWCL staff. The Component was to cover the cost of the negotiated retrenchment packages for staff and the cost of administering the program. GWCL at the time had about 15 staff per thousand connections, and it set a target of reducing this to 10 staff per 1000 connections based on industry benchmarks. This required a reduction of staff by about 1,600 employees, representing a decrease of about 40 percent. The program had the full support of the workers and their Union on the understanding that they would receive fair and adequate compensation. The contract framework endorsed by the GoG prescribed the formation of a Retrenchment Committee to oversee the exercise. Principles to be followed

37

included, respect for a Collective Bargaining Agreement between the Union and GWCL, agreeing on a Compensation Framework based on other public sector precedents, and agreements based on negotiations and mutual consent.

8. The project specifically was able to achieve the following.

a) The administration of the severance program and the funds for 1,524 employees’ negotiated retrenchment packages. The program was not voluntary, except for a small number of employees. Instead Management spelt out guidelines for carrying out the process and the Union protected and promoted the interests of beneficiaries. The project also supported optional vocational and entrepreneurial skills training for employees, which included costs for tools and equipment.

38

REHABILITATION OF WATER SUPPLY DAMS AND WEIRS – FUNDED BY THE NORDIC DEVELOPMENT FUND

The Nordic Development Fund provided 4 million Euros to the Urban Water Project to support dam- related consultancies, construction works and other related activities. The civil works to improve Dam safety were scheduled to be executed in two sections. Section 1 comprises 10 Dams and Weirs, whilst section two is made up of 5 Dams and Weirs.

The sectional distribution was as follows:

Section 1 Section 2

Abessim Weir Brimsu Dam Axim Dam Dam Dam Weir Inchaban Dam Kwanyaku Dam Weir YendiWeir Weir Owabi Dam Tanoso Weir Vea Dam Dam

The disbursement of the 4 million Euros is as indicated below:

CONSTRUCTION WORKS EUROS US$

Dam Rehabilitation Works 1,413,698.83 1,354,065.86

CONSULTANCY

Engineering for Dam Safety Assessment & Rehabilitation. 962,036.00 1,354,065.86 Preparation of Emergency Preparedness plans for water supply 588,962.38 826,296.97 Dams and Weirs.

Resettlement studies and action plan related to dam rehabilitation 72,240.93 98,010.00 and reservoir dredging.

Environmental Impact assessment & management plans for 22,932.07 31,361.43 Dam rehabilitation.

Supervision of Dams rehabilitation works 910,464.87 1,207,039.57

39

2,556,636.25 3,516,773.83

TRAINING

Dam Safety and Environmental Preparedness plan workshop 29,664.92 43,859.59

Total Funding 4,000,000.00 5,490,430.69

The civil works to improve Dam safety were scheduled to be executed in two sections. Section 1 comprises 10 Dams and weirs, whilst section two was made up of 5 Dams and Weirs. Due to insufficient funds, section 1 was awarded to Messrs ABT Wasser/Eunitack Services (JV) on September 13, 2010 for completion within 15 months from commencement of works. Section 2 was to be awarded later on receipt of an additional 2 million Euros from the Nordic Development Fund. The additional funding did not materialise due to challenges with the issuance of legal opinion from the Government of Ghana.

The contractor for section 1, now Messrs Eunitack Services (Messrs ABT Wasser of Germany having withdrawn from the Joint Venture) could not live up to expectation and the contract was suspended due to poor performance.

The construction works were supervised by Messrs Norconsult AS of Norway. Currently the Project owes Norconsult AS an amount of 204,634.62 Euros in respect of supervision services covering the period August 2012 to November 2013.

Summary of Works executed as at the time of Suspension of the works.

The Dams Rehabilitation Project – Section 1 which was awarded to Messrs ABT Wasser / Eunitack Services (JV). The List of Dams to be rehabilitated are hereby listed below.

Nr. Name of Dam/Weir Region in which Dam is located 1 Abessim Weir Brong-Ahafo Region 2 Axim Dam Western Region 3 Barekese Dam Ashanti Region 4 Inchaban Dam Western Region 5 Koforidua weir Eastern Region 6 Mampong Weir Ashanti Region 7 Owabi Dam Ashanti Region 8 Dam Western Region 9 Tanoso Dam Brong-Ahafo Region 10 Vea Dam Upper East Region

Section 2, which was not awarded comprised of the following Dams

Nr. Name of Dam/Weir Region in which Dam is located 1 Brimsu Dam Central Region 2 Damongo Dam Northern Region

40

Brief Summary of works executed as at suspension/termination of works

Nr. Name of Dam/Weir Summary of Actual Works Executed as at time of Suspension 1 Abessim Weir No actual works commenced at this site because the Employer restricted the Contractor to complete works on the other Dams before commencing works here. 2 Axim Dam Even though some temporary works were initiated there was no significant progress on the permanent works for this Dam. Some of the works undertaken are the demolition of the old existing footbridge, extension of scour pipe and drilling of dowel holes. Approval for construction of footbridge was given by the Consultant but the actual fabrication of the footbridge was not done. 3 Barekese Dam Construction of concrete wave wall. Clearance of vegetation on Dam right embankment and reinstatement of rip-rap on dam face commenced but was not completed. 4 Inchaban Dam Construction works commenced which included the surveying, setting out and casting to raise both the right and left banks of the Dam but this was not completed. 5 Koforidua weir No actual works commenced at this site because the Employer restricted the Contractor to complete works on the other Dams before commencing works here. 6 Mampong Weir No actual works commenced at this site because the Employer restricted the Contractor to complete works on the other Dams before commencing works here. 7 Owabi Dam No actual works commenced at this site because the Employer restricted the Contractor to complete works on the other Dams before commencing works here. 8 Tafo Dam Western Region 9 Tanoso Dam No actual works commenced at this site because the Employer restricted the Contractor to complete works on the other Dams before commencing works here. 10 Vea Dam Removal of old existing rip-rap was completed and trimming of slope commenced but was not completed. The completed slope surface however deteriorated with time because of delays in obtaining and laying the new geotextile and rip-rap. Earthworks for the road over the embankment commenced but were not completed.

As at the time of Suspension of the Works the total progress of works was approximately 30%.

41

Annex 3. Economic and Financial Analysis

1. ICR team observations. The PAD indicates that the Task Team constructed a financial model for GWCL based on audited accounts for FY00, draft audited accounts for FY01 and FY02, draft accounts for FY03 and a budget for FY04 then added the estimated effect of taxes (equaling 15 percent as included in the total cost for Component 1 (which is mainly civil works and engineering) to come up with the financial and economic benefits of the project. The approach that the Task Team used is that they have estimated the effect from project investments (all Components) on the financial performance of GWCL. Although this seems as an acceptable and good approach for doing the financial analysis the lack of economic analysis on the benefits of Component 1 is quite surprising. The Bank has a good methodology in estimating economic benefits for similar projects.

2. Although it seems that the financial model and analysis was sound, it is unfortunate that project result indicators such as: improved community water points constructed or rehabilitated under the project; new piped household water connections that are resulting from the project intervention; number of people in urban areas provided with access to Improved Water Sources under the project were not used to monetize the expected economic impact of the project. Measurable economic benefits, such as time saved in fetching water, cost savings on non- incremental water consumption, value of increased water consumption and etc. have not be calculated during the preparation of the project and there is no baseline data for proper economic analysis.

3. The ICR team constructed a new financial model to assess the initial assumptions and compare those to the actuals as well as to calculate the project NPV and FIRR. Project financial indicators showing the performance of GWCL such as GWCL ratio of revenues to Operation & Maintenance Costs; number of GWCL staff per 1,000 connections were assessed along with the actual and forecasted financial statements to draw conclusions on the efficiency of the project. The economic analysis not only mirrored the PAD’s approach to compare similar calculations but also added economic benefits of water costs saved due to increased access to public water supply and water production electricity consumption saving due to decreased NRW.

4. Financial benefits and performance. The financial performance of GWCL is not improving in the recent years. The company is running significant losses which amounted to around $19 million in 2014. Water tariffs increased many times during the project implementation, much more than envisaged in the PAD, but the costs associated with the provision of water supply increased as well. Since 2007 (the change from second Ghanaian cedi to third cedi (due to inflation)) PURC increased the tariff for households more than 300%)13. Unfortunately the revenue increase was not coupled with efficiency improvements in GWCL and the overall costs increased in most of the years beyond revenue increase. Two of the biggest cost items recently are costs associated with the use of desalination plant and financial costs related to Government of Ghana investment loans that were transferred for repayment to GWCL in 2015.

13 See http://www.purc.com.gh/purc/node/178

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5. The financial model for GWCL was created using audited accounts for FY13, FY14, draft audited accounts for FY15, and a budget for FY16 is providing the following results: a positive NPV14 $161 million ($12 million in the PAD but using completely different timeframe and exchange rate) and FIRR of 14.31% (16% in the PAD). This is a rather good project financial result but needs to be sustained. The mentioned above costs related to the use of desalination plant and increased financial might lead again to financial losses if they are not managed properly (renegotiated) since the tariff increased significantly and there is still room for optimization of operating costs.

6. GWCL is on the path of becoming sustainable service provider, covering its operating costs and servicing its investment program debts. There is still Government support (repayment of the principal on some of the loans) for the company but a well thought and developed program in the next 5 years with the participation of the Government and PURC can support the utility to become fully self-sustainable company not dependent on external financial support.

7. It should be recognized that GWCL has improved the ratio of revenues to Operation & Maintenance Costs from 0.60 to 1.07, which is a good achievement that needs to be maintained in further improved. Another operational efficiency ratio – number of GWCL staff per 1,000 connections was improved significantly from 15/1000 to 7/1000 signaling staff optimization, which can be further strengthened to become line with good international practices.

8. Non-revenue water went down to around 49% but it is still far away from good international norms and practices. The team estimated that the company should aim to achieve around 35% to improve its performance and efficiency.

9. Collection efficiency increased but is far from the initially estimated target of 85% standing at around 75%. Despite GWCL efforts, which resulted in increase of collection rate to around 85% for a few years, the lack of payments from budgetary organizations in the recent years is depriving the company from the needed cash for proper operation and functioning. It is recommended that the Government of Ghana steps in and clears the long (years) outstanding payments or put in place a mechanism for water bill payments from budgetary organizations.

10. As mentioned water tariffs increased significantly; PURC changed the calculation of metered domestic consumption tariffs – from 2016 monthly consumption tariffs division between 0-20 m3 and 20-above m3 changed to 0-5 m3 and 5-above m3. This will lead to more revenues to GWCL (billed volumes also increased but revenue increase was mainly due to significant price increase) but it might be unfair to consumers if they fail to reduce consumption and fall under the first block tariff (having in mind the average household size it is less than 40 litter/person/day). Additional tariffs for special commercial (bottling water for resale), sachet producers, GHAPONA (internal usage) and GHAPONA (Ocean going vessels) were introduced by PURC to capture the variety of water consumption (bulk, domestic, commercial and etc.).

14 Discounted@10%, which is different from the latest World Bank recommended discount rates and WSS asset life but for comparability and consistency the financial analysis used the original assumptions

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To summarize the financial benefit results from the project:

IRR – 14.31% NPV @ 10% - 161,463

Further information on assumptions and financial model is in the project files.

11. Economic benefits. As mentioned above the difference between the financial and economic results in the PAD are the estimated effect of taxes equaling 15 percent as included in the total cost for Component 1 (which is mainly civil works and engineering). There was no proper economic analysis to monetize the expected economic impact of the project. Economic benefits, such as time saved in fetching water, cost savings on non-incremental water consumption, value of increased water consumption and etc. have not be calculated during the preparation of the project and there is no baseline data for proper economic analysis. Project result indicators such as improved community water points constructed or rehabilitated under the project (449 as per the last ISR); new piped household water connections that are resulting from the project intervention (45,000 as per the last ISR); number of people in urban areas provided with access to Improved Water Sources under the project (850,300 as per the last ISR) were not used to assess the above mentioned usual economic benefits from similar projects. Since there is no baseline assessment the ICR team was left with little options. Nevertheless for the ICR’s economic analysis we’ve decided 1) to repeat PAD’s approach and not only add the effect of taxes for Component 1 to the financial analysis results but also add all corporate taxes to be paid by GWCL to the Government (both project inflows to the country’s budget); 2) to add the economic benefits of water costs saved due to increased access to public water supply; 3) to add water production electricity consumption saving due to decreased NRW and 4) to add the economic benefits of time saved in fetching water.

12. Since 1) is quite clear we will explain the methodology in calculating economic benefits 2), 3) and 4). Because of the lack of baseline assessment and detailed records in GWCL the calculations required some assumptions and experts opinion. In other words, the economic benefits of water costs saved due to increased access to public water supply are calculated using the number of people in urban areas provided with access to improved water sources under the project and estimating the following: without the project those people will have access to water by 1) using public stand pipes and/or 2) using sachet water producers. By applying an average consumption per person and prices for using public stand pipes and/or sachet water producers we came up with most likely water consumption spending without the project; than we’ve compared the result to the current water costs of the same people having access to public water supply – the difference will be the economic benefits of water costs saved due to increased access to public water supply. Water production electricity consumption saving due to decreased non-revenue water uses similar approach: GWCL observed NRW without the project and electricity consumption is compared to the reported NRW at the end of the project and electricity consumption (to produce the reported water quantities by the company). The difference multiplied by the applicable electricity tariff will be the economic benefits of electricity consumption saving due to decreased NRW. In terms of economic benefits of time saved in fetching water the analysis assumed an average time saved of 1 hour per day, the number of

44

people in urban areas provided with access to improved water sources (850,300) and the current minimum wage in Ghana15 (as opportunity cost of labor).

13. The model shows around $13 million in taxes on civil works and engineering and $176 million in corporate taxes; around $80 million in benefits from water costs saved; around $550 million in benefits from water production electricity consumption saving; and around $45 million in benefits from time saved in fetching water. The economic analysis is showing the following results: a positive NPV16 $454 million ($22 million in the PAD but using completely different timeframe and exchange rate) and EIRR of 26.18% (21% in the PAD).

14. The project has a reasonable per capita investment cost of $ 158 per capita (accounting for both the initial and additional financing), compared to similar projects17 but the significant project implementation delays, lack of sustainable improvements of GWCL financial performance, additional financing requirement to complete the originally estimated scope of works and lack of proper economic analysis is preventing the team to rate the efficiency performance very high.

To summarize the economic benefit results from the project:

IRR 26.18%

NPV@10% 454,325

Further information on assumptions and economic model is in the project files.

15 The current minimum wage in Ghana is at GHS 8.00 per day as at January, 2016. 16 Discounted@10% 17 Per capita unit cost data on water supply projects from the region vary significantly depending on the type of investments (for example whether reservoir, dam, pumping station or other facilities are needed) but the range was between $70-$200.

45 Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members Responsibility/ Names Title Unit Specialty Lending Belinda Lorraine Asaam Program Assistant GWA08 Program support Ernestina Attafuah Program Assistant AFTU2 Program support Maya El-Azzazi Senior Country Program Assistant ECCU5 Program support Charles K. Boakye Consultant AFTU1 John A. Boyle Consultant AFTWR Maya El-Azzazi Senior Country Program Assistant ECCU5 Program support Sharon Felzer Senior Communications Officer ECRWS Communications Financial Jan Franck Financial Analyst AFTU2 management Tesfaalem Gebreiyesus Lead Specialist OPSPF Environmental Tracy Hart Senior Environmental Specialist GEN05 Safeguards Karen Alexandra Hudes Country Lawyer LEGAF Lawyer Jan G. Janssens Consultant GWADR Suhail J. S. Jme’An Program Leader SACKB Lead Water and Sanitation Water and Rosemary Mukami Kariuki GWAGP Specialist sanitation Lead Water and Sanitation Water and Hassan Madu Kida AFTU2 Specialist sanitation Lead Water and Sanitation Water and William D. Kingdom GWADR Specialist sanitation Senior Water and Sanitation Water and Lizmara Kirchner GWA07 Specialist sanitation Peter Koenig Senior Water Resources Specialist LCSER Water resources Sung Heng C. Kok Shun Senior Program Assistant GSU13 Program support V. S. Krishnakumar Practice Manager GGO01 Management Lead Water and Sanitation Water and Alexander A. McPhail MNSWA Specialist sanitation Paul D. Mitchell Consultant GEE02 Wiebe Moes Engineer AFTU2 Engineer Senior Financial Management Financial Ida N. Muhoho Specialist management Jane Moraa Mwebi Audit Supervisor IADVP Audit Tracey Osborne Miller Consultant GWAGP Lars A. V. Rasmusson Engineer AFTU2 Engineer Kavita Sethi Senior Transport Economist GTI04 Transportation William F. Steel Consultant GFM01 Arthur Majoribanks Swatson Engineer AFTU2 Engineer Gerhard Tschannerl TTL Wendy E. Wakeman Social Safeguards Specialists Safeguards Frederick Yankey Senior Financial Management GGO20 Financial

Specialist management Aissata Z. Zerbo Senior Procurement Specialist GGO07 Procurement

Supervision/ICR Adu-Gyamfi Abunyewa Senior Procurement Specialist EASR2 Procurement Junaid Kamal Ahmad Sector Director MNSSD Management Beatrix Allah-Mensah Senior Operations Officer AFCW1 Operations support Charlotte Anthony Program Assistant OPSPF Program support Charles John Aryee Ashong Senior Procurement Specialist GGO01 Procurement Ernestina Attafuah Program Assistant AFTU2 Daniel Bainson Consultant AFTU1 Senior Social Development Demba Balde GSU01 Social safeguards Specialist Lead Water and Sanitation Water and Ventura Bengoechea AFTU2 Specialist sanitation Charity Boafo-Portuphy Program Assistant AFCW1 Program support Charles K. Boakye Consultant AFTU1 AFTWR- John A. Boyle Consultant HIS Samuel Bruce-Smith Consultant AFTDE Robert Wallace DeGraft- Senior Financial Management Financial AFTMW Hanson Specialist management Environmental Edward Felix Dwumfour Senior Environmental Specialist AFTN3 safeguards Maya El-Azzazi Senior Country Program Assistant ECCU5 Program support Harold Esseku Consultant GWA08 Technical Jan Franck Financial Analyst AFTU2 Financial analyst Charlotte Hayfron Program Assistant AFCW1 Program support Karen Alexandra Hudes Country Lawyer LEGAF Lawyer Senior Urban Development Kremena M. Ionkova GSU09 Urban development Specialist Jonathan S. Kamkwalala Sector Manager, Water AFTN2 Management Senior Water and Sanitation Water and Camilo Cordoba Lombana GWA08 Specialist Sanitation Sanyu Sarah Senkatuka Senior Water and Sanitation GWA08 ICR Author Lutalo Specialist Senior Social Development Angela Nyawira Khaminwa GSU03 Social safeguards Specialist Lead Water and Sanitation Water and Hassan Madu Kida AFTU2 Specialist sanitation Sung Heng C. Kok Shun Senior Program Assistant GSU13 Program support V. S. Krishnakumar Practice Manager GGO01 Management Gloria Malia Mahama Social Development Specialist GSU01 Social safeguards Midori Makino Lead Evaluation Officer IEGPS Evaluation Lead Water and Sanitation Water and Alexander A. McPhail MNSWA Specialist 47 sanitation Tracey Osborne Miller Consultant TWISA Wiebe Moes Engineer AFTU2 Engineer

Senior Water Supply and Sanitation Water and Emmanuel Nkrumah GWA08 Specialist sanitation Wolfhart Pohl Adviser AFTSG Luis M. Schwarz Senior Finance Officer WFALN Finance Anil H. Somani Consultant GSURR AFTU2 - Water and Arthur Majoribanks Swatson Water & Sanitation Specialist HIS sanitation Ayishetu Terewina Program Assistant AFCW1 Program support Amadou Tidiane Toure Consultant SARPS Armele Vilceus Senior Program Assistant LCC3C Program support Geraldine Agnes Wilson Team Assistant AFCW1 Team support Senior Financial Management Financial Frederick Yankey GGO20 Specialist management Anissata Z. Zerbo Senior Procurement Specialist GGO07 Procurement Senior Water and Sanitation ICR Economist Ivaylo Kolev GWADR Specialist /Co-Author Rebecca Gisldorf Young Professional GWADR ICR Co-Author

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY00 28.05 126.90 FY01 27.41 125.36 FY02 29.82 126.76 FY03 36.27 177.31 FY04 48.70 336.63 FY05 0.30 1.51 Total: 170.55 894.47 Supervision/ICR FY05 29.94 104.92 FY06 26.51 79.16 FY07 27.28 110.21 FY08 13.99 61.15 FY09 17.88 81.81 FY10 10.48 64.81 FY11 14.57 76.46 FY12 22.05 90.37 FY13 17.06 97.87 FY14 14.38 84.32 FY15 14.20 21.88 FY16 18.27 78.76 FY17 1.80 8.44 Total: 228.41 960.16 48

Annex 5. Beneficiary Survey Results

1. A Beneficiary Assessment for the project was commissioned by GWCL in June 2016 to assess the impacts of the project on household water supply. Over 1600 household surveys and 650 in-depth interviews were completed with households living in communities targeted by the project. The survey was reviewed by the ICR evaluation team and found to have significant limitations which made it difficult to assess the project impacts in a coherent manner. For instance, since it did not include a baseline dataset, it was not possible to use the data to fully assess improvements in services. It was also conducted in several areas where systems were yet to be completed or commissioned. As a result, there are mixed results and inconsistencies in the beneficiary responses since some of the respondents had not yet received services at the time of the surveys. The ICR therefore does not consider the results of the Beneficiary Assessment in its analysis.

49

Annex 6. Stakeholder Workshop Report and Results

Not applicable

50 BORROWER COMPLETION REPORT

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

SUMMARY OF BORROWER’S IMPLEMENTATION COMPLETION REPORT

GHANA URBAN WATER PROJECT

GHANA WATER COMPANY LIMITED

BORROWER COMPLETION REPORT

TABLE OF CONTENTS FOR BORROWER ICR

1.0 PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN 2.0 KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES 3.0 ASSESSMENT OF OUTCOMES 4.0 ASSESSMENT OF RISK TO DEVELOPMENT OUTCOMES

5.0 ASSESSMENT OF BANK AND BORROWER PERFORMANCE

6.0 LESSONS LEARNED

7.0 COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS

Annex 1. Project Costs and Financing Annex 2. Data for Public Stand Pipe Construction, House Connections And Compensation Payment Implementation Under The Subsequent Year Investment Programme (SYIP) 0f The Urban Water Project (UWP)

52 BORROWER COMPLETION REPORT

1.0 PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN Project Context

Ghana has an estimated population of 20 million people, of which only approximately 10.3 million (51 percent) have access to improved water supply. In the country’s urban areas comprising about 8.4 million residents, just 61 percent of the population have access to an improved water source. It is therefore, not surprising that water supply and sanitation plays a key role in the Ghana Poverty Reduction Strategy (GPRS, approved by Parliament in February 2003). The GPRS focuses on improving access in rural, peri-urban and poor urban areas and emphasizes (among other key points): effective management of urban systems; sector restructuring to improve management and investment in water supply and sanitation; and improving financial solvency through charging appropriate tariffs.

The Ghana Water Company Limited (GWCL) is the public utility responsible for Urban Water Supply in Ghana. The Company implemented the Urban Water Project (UWP), which, among others, involved rehabilitating and improving the conditions of several urban water supply systems in Ghana. The UWP was aimed at increasing access to affordable and reliable piped water supply in targeted urban centres, and improving the financial viability of GWCL.

The UWP was approved in July 2004 for an amount of US$103m and became effective in March 23, 2005. The Project was restructured on October 10, 2010 to extend its closing date by two (2) years to December 31, 2012 to ensure the completion of all works and services. Later, an additional financing of US$50m was secured and the project period further extended by another three (3) years to December 31, 2015 to fund some cost overruns and implement additional works. The UWP was financed as follows: The World Bank (IDA) (US$153million), Netherlands Trust Fund (US$12.97million), Nordic Development Fund (€4million), and Government of Ghana (US$12million as per agreement but only US$1.5million was released). The project was executed in four (4) components by the Ghana Water Company Limited (GWCL) as following: i. Component 1: Systems Expansion and Rehabilitation; ii. Component 2: Public-Private Partnership Development/Reforms of GWCL; iii. Component 3: Capacity Building and Project Management and iv. Component 4: Severance Programme.

Development Objectives and Design

The project had two (2) development objectives namely:-

 Significantly increasing access to the piped water system in Ghana’s urban centers, with an emphasis on the urban poor.  Restoring long term financial stability and viability to the Ghana Water Company Limited (GWCL)

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BORROWER COMPLETION REPORT

Key Indicators

 Increase in the percentage of the country’s urban population with access to the piped water network.  Decrease in the proportion of urban water services provided through informal vendors  Increase in average hours of water availability at network distribution points.  Ghana Water Company Limited’s ability to obtain and afford private sector financing for infrastructure development.

Revised Project Development Objectives

 Project Development Objectives were not revised but the increase in the number of the urban population with access to the piped water network indicator was revised from 50,000 new household connections to 550,000 household connections.

Original Components

The project comprised of the following four (4) components:-

1. System Expansion and Rehabilitation. This component was designed to support:

i. Increasing the amount of treated water for sale ii. Extending service to low income areas and, iii. Rehabilitating existing network to reduce non-revenue water.

It also included dams’ safety, meters engineering, vehicles and equipment for GWCL Regional and District Offices. The investment programme for physical works were divided into three (3) sub-components namely;

i. The First Year Investment Programme (FYIP) ii. The Subsequent Year Investment Programme (SYIP) iii. The Repair, Replacement and Rehabilitation Fund (RRRF)

2. Public-Private Partnership Development.  This component supported the payment of the private operator under the implemented contract, technical and financial auditors to measure the operator’s performance.

3. Capacity Building and Project Management  This component assisted the Government of Ghana and GWCL to strengthen a major constraint in project implementation capacity. Institutions such as the GWCL,

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Ministry of Water Resources, Works and Housing, Ministry of Finance and the Public Utilities Regulatory Commission amongst others.

4. Severance Programme  This component financed the retrenched staff of the Ghana Water Company Limited (GWCL).

Other significant changes

There were quite some significant changes in the design during the Project Implementation stage of the Subsequent Year Investment Programme (SYIP) of the Urban Water Project which in turn affected the scope, scale and implementation arrangement and the cost of the Project.

A typical example was in the Volta Region where the position of the intake structure (floating pontoon) on the Volta Lake had to be relocated because it was situated in the vicinity of the landing site of boats used by fishermen. This necessitated a new bathymetric survey and design of the raw water pipeline.

2.0 KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES Project Preparation, Design and Quality at Entry The Design Consultants TAHAL Consults with their vast experience in Africa took into consideration lessons of earlier operations from GWCL. There were however some shortcomings such project coverage areas which were indicate without much consultation with stakeholders and location of intake sources in their designs which could be attributed to inadequate consultations and the short period in which they had to undertake the assignment. This had serious cost implications with respect to the available budget

Implementation  The position of the intake structure (floating pontoon) on the Volta Lake had to be relocated because it was sited in the vicinity of the landing site of boats used by fishermen. This necessitated a new bathymetric survey and design of the raw water pipelines  In Dunkwa-on-Offin additional distribution lines had to be laid certain communities which were not part of the original contract. This had to be done because of requests from Chiefs and Opinion Leaders and because some of these communities had boreholes sited on their Land  Some of the Boreholes earmarked for the Project were not utilized because it would not have been economical (due to inadequate funds) to do so because of the distance from the treatment plant.  The Berekum System uses both Surface Water from the River Koraa and Boreholes.Due to lack of funds the requisite number of boreholes which were required to meet the projected water demand were not drilled.  The Project in Axim had both surface water and borehole components. The rehabilitation of the surface water component had be to abandoned due to lack of funds.

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GWCL had to complete the borehole components from its own internally generated funds  At New Edubiase, the site for one of the Water Treatment Plants was located in a very hilly area which required the construction of retaining walls and extensive earthworks which was not originally envisaged thereby increasing cost.  The SYIP Eastern Region Project consisted of four towns, namely Akim - Oda, Akim- Ofoase, Asamankese and Suhum. The original contract had to be terminated due to non-performance by the Contractor. The outstanding works were locally tendered for and the works undertaken for Akim-Ofoase, Asamankese and Suhum. Akim-Oda had by then been awarded under a separate Contract. This causesd undue delays to the implementation of the works in the Eastern Region Monitoring and Evaluation (M&E) Design, Implementation and Utilization Supervision Consultants were appointed through World Bank selection procedures. However, the jobs which were re -tendered were supervised in house by GWCL and some individual consultants

Safeguard and Fiduciary Compliance The project triggered Environmental Assessment (OP4.01), Involuntary Resettlement (OP4.12), Safety of Dams (OP4.37) and Projects on International Waterways (OP7.50). The project safeguard category was S2 and environmental category B.

Various safeguards documents such as the Environmental Assessment and Management Plan (EAMP), Resettlement Policy Framework (RPF), Dam Safety Report (DSR), Emergency Preparedness Plan (EPP) and Resettlement Action Plans (RAPs) were prepared. The safeguards documents were disclosed both in-country and at the Info shop of the World Bank and were also implemented. With regards to the implementation of the Resettlement Action Plans (RAPs), the compensation payments due the FYIP Project Affected Persons (PAPs) were paid. The SYIP compensation for lands acquired, crops and other properties impacted on or destroyed were paid except seven pieces of land in the Volta and Eastern regions whose evaluated figures were not received from the Ghana Land Valuation Division after several attempts of demand.

The Environmental, Health and Safety Management Plans (EHSMPs) prepared by the various Civil Works Contractors were implemented during the execution of the Works Contracts. However, the EHSMPs were not excellently implemented on sites as some of the Contractors were found to be non-compliant with some aspects of the approved prevention and mitigation measures in the EHSMPs.

On non-payment or release of funds for compensation, the GWCL had being discussing with the Ministry of Finance to release the amount needed as the GWCL continues to seek for funds from its internally generated revenue to pay the PAPs.

Future projects should be allowed to commence after compensation funds have been made available in the dedicated Bank Accounts of the project. Incomes from the sales of the project systems’ water should be dedicated for the compensation payment for a stated period of time.

Post-completion Operation/Next Phase The Operation & Maintenance arrangement after Project take-over 56

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Following the issue of the Taking-Over Certificate the Employer will provide operating and maintenance personnel and consumables for the Works. Operation and maintenance of the Works shall be under the guidance of the Contractor to the extent specified hereinafter, until performance tests have been completed and the Defects Liability Certificate issued. Contractor's Obligations The Contractor shall comply with the Contract during the Defects Liability Period. The Contractors responsibilities during this period are clearly stated in his Conditions of Contract. Periodic Visits The installations shall be visited periodically after the commencement of the Defects Liability Period by a competent engineer(s) and/or other specialist representative(s) of the Contractor, who shall inspect all Plant provided under the Contract, ensure that servicing, adjustments and recalibrations as necessary are being carried out on all those items requiring attention, and assess the competence of the Employer's personnel. The Contractor shall obtain the Engineer's approval before each visit and shall supply a full service report after each visit. These Procedures are currently being followed for the Projects which have been completed and taken over by GWCL.

3.0 ASSESSMENT OF OUTCOMES

Relevance of Objectives, Design and Implementation The two Project developmental objectives namely (1) Significantly increasing access to the piped water system in Ghana’s urban centers, with an emphasis on the urban poor. (2) Restoring long term financial stability and viability to the Ghana Water Company Limited (GWCL) are still very relevant to current country priorities to assist the urban poor and to achieve developmental goals especially with regards to sanitation and prevention of preventable water-borne diseases to accelerate Ghana transition to a lower middle income country

Achievement of Project Development Objectives The Project Developmental Objectives have been achieved particularly the access to piped water to the urban poor and will continuously improve with expansion of water distribution network in the urban areas which will in turn ensure that GWCL is operated on a sound commercial and financial basis.

Justification of Overall Outcome Rating Rating: Moderately Satisfactory

Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Regular and Reliable potable water to the urban poor was a major theme of the Urban water Project. Pilot Projects undertaken in conjunction with the Public Utilities Regulatory Commission (PURC) provided valuable lessons during the project implementation of the Subsequent Year Implementation Programme (SYIP).

(b) Institutional Change/Strengthening Training Programs organized for GWCL staff under the Project has strengthened GWCL’s institutional capacity and also the capacity of other sector institutions like PURC were strengthened due to support for technical studies.

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Summary of Findings of Beneficiary Survey and/or Stakeholder Workshop Component 1 - System Expansion and Rehabilitation in Urban Towns This component consisted of two (2) investment programmes, namely; the First-Year Investment Programme (FYIP) and the Subsequent-Year Investment Programme (SYIP). The investment comprised civil works; supply and installation of equipment as appropriate for priority requirements; and upgrades. In all 3 systems18 benefitted under the FYIP, while 23 systems19 spread across nine (9) benefitted under the SYIP. The overall objective of this component was to improve the physical conditions and capacities of the water supply systems, and also improve access to potable water for (more than 550,000) low income urban population. Key findings under component 1 are as follows:

Performance of New/Rehabilitated Water Supply Systems  Generally, the works implementation in all the ten (10) regions are largely good and of high quality. This can be attributed to good designs and supervision of works, and also the high calibre of contractors selected to execute the project.  Operation and Maintenance (O&M) procedures and well-structured Facility Management Plans (FMPs) are yet to be developed for each of the systems assessed.  Production levels have improved at systems which benefitted from rehabilitation and expansion works at their production units or headworks. The major challenge of these production units is the erratic nature of power supply.  Based on the number of standpipes constructed and house connections under 12 out of the 25 systems assessed (44%), It can be projected that all the new, expanded and rehabilitated systems will serve more than half a million (550,000) people living in pro- poor urban areas when all the systems are fully functioning and operational.

Component 2 - Public-Private Partnership Development and Reforms of Ghana Water Company Limited

Overview and Objective of Component 2 This component was designed to support the engagement and operations of the international operator (Aqua Vitens Rand Ltd), which the Government of Ghana (GoG) engaged to improve the operations of GWCL under a Management Contract. This component also supported the payment of fees of a Consultant (2ML Consulting Ltd) for a Performance Impact Programme (PIP) Contract in GWCL. The direct beneficiary of Component Two (2) of the UWP is the GWCL as an entity.

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At the end of the PPP the following were achieved

 A marked improvement in the metering of systems was observed  Very significant reduction in the treatment plant losses were also observed, though there were a few systems which still suffered appreciable losses. There were no explanations given for these losses.  Capacity for data collection and management saw significant improvement  Improved installation of and efficiency of equipment.  Not much improvement in capacities of plants nor their production capacities  Production volume increased by about 10% countrywide

The PIP achieved both corporate and customer benefits, namely

 High levels of motivation and readiness to be more involved in planning and execution of assignments.  The finance of the company improved within the short period as water sales, billing and collection increased and added more revenue to the finances of the company.  There was noted improvement in water supply in terms of stability, quality and quantity  Production volumes increased by about 10% countrywide

Component 3 - Capacity Building and Project Management

Overview and Objective of the Component The component was designed to strengthen GWCL (and PMU Staff) and other relevant sector institutions in relation to development of human skills, improved leadership and managerial skills and provision of human, financial and technical resources to all persons and institutions (GWCL, PURC, EPA, PMU and MWRHW) involved. Task 1: Training Programmes

 Training Plans were developed and implemented by GWCL under the Urban Water Project. GWCL Staff benefitted from numerous programmes organized under the project. And the sampled staff confirmed attending the training programmes and also indicated that the training programmes were beneficial.  Staff of MWRWH and PURC benefitted from training programmes under the Urban Water Project.  Between 2006 – 2011 GWCL/AVRL provided various training programmes for staff as indicated in the table below Year Number of Participants 2006 141 2007 1,399 2008 1,284 2009 1,137 2010 685 2011 (until May) 254

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 The component also includes a study on Truck Tanker Regulation, GWCL debt rationalization and Technical Studies by PURC on water supply to low income areas.

Component 4 - Severance Programme Overview and Objective of Component The component was designed to assist the Government of Ghana (GoG) to implement staff reductions by providing financing for negotiated retrenchment package and cost of administration of the programme. This programme was also targeted at improving the staff- connection ratio which in 2005 was at 15: 1000 (above the industry standard of 10:1000). A total of 1524 staff were retrenched. A total amount of US$11m was invested in this component, including some US$1m constituting administrative costs. A summary of the Severance Programme is as follows

 The severance programme was completed largely as planned, except for the procurement and distribution of tools and equipment, which was well outside the time plan. Currently, some tools and equipment are still in the stores of GWCL in various locations, while some beneficiaries have not received their allocations.  The number of retrenched staff of 1,524 exceed the planned number of 1,500 staff. This led to an improvement of the staff to from 15:1000 before the period of retrenchment to 7:1000 post retrenchment.  Majority of beneficiaries participated in the skills training programme

4.0 ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME

The assessment of Risk to Development Outcome is Moderate.

5.0 ASSESSMENT OF THE OUTCOME AND OF BANK AND BORROWER PERFORMANCE

We rate the Banks Performance in terms of Ensuring Quality at Entry as Moderately Satisfactory. We rate the Banks Performance in terms of Quality of Supervision as Moderately Satisfactory. We rate the Overall Banks Performance as Moderately Satisfactory. Governments Performance. We rate the Governments Performance as Moderately Unsatisfactory.

6.0 LESSONS LEARNED

1. Inadequate stakeholder involvement during Project Preparation results in enormous request for additional works (expansion of the scope of works) during Project Implementation and overrun of cost.

2. When the design Consultant is at times different from the Supervision Consultant, there is usually no clarity with some drawings and other documents especially when the design consultant has left the Project.

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3. Acquisition of Land and development of water sources after works contracts have been awarded, impacts negatively on project implementation.

4. Delay in payments of Compensation impacts negatively on project outputs and outcomes.

5. Need for Oversight responsibility by top management other than the implementation team is essential for effective and efficient project outputs and outcomes.

6. Adherence to project implementation deadlines is critical as depreciation of the funding currency could affect the value of the allocated funds.

7.0 COMMENTS ON ISSUES RAISED BY BORROWER /IMPLEMENTING AGENCIES/PARTNERS Implementing Agency or Agencies Performance The rating of the Implementing Agency’s/ Borrower’s Performance is Moderately Satisfactory

Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) (final costs still under verification) Restructured Appraisal Actual/Latest Appraisal % of % of Appraisal Estimate Estimate Components Estimate Appraisal at at approval after (USD (USD (USD approval restructuring. millions) millions)11 millions) Component 1: 91.8 140.8 134.77 46.9 (4.21) System Expansion and Rehabilitation Component 2: 6.5 6.5 16.24 149.8 149.8 Public Private Partnership Development. Component 3: 7.7 8.7 6.75 12.3 (22.4) Capacity Building and Project Management Component 4: 11.0 11 11.23 0.09 0.09 Severance Program Unallocated 1.0 1.0

Total Baseline 118.0 16.8 168.99 43.0 - Cost PPF Repayment 2.0 2.0 2.0 - - Total Project 120.00 170 170.99 42.4 -

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(b) Financing Source of Type of co- Appraisa Estimate Actual/Late % of % of Funds financing l after st Estimate Appraisal Appraisal Estimate restructu (USD after (USD ring Millions) restructurin millions) (USD g millions) IDA Grant 103.0 153.0 154.12 47.6 - NETHERLA Grant (Trust 5.0 13 12.97 154 - NDS TRUST Fund) FUND GOVERNM Government 12.0 - 1.90 (0.84) - ENT OF Counterpart GHANA Funds Total 120 166 168.99

11 Note that the totals do not add horizontally since the GoG contribution in the original cost was included in the Additional Financing. Government of Ghana includes contribution of 0.40 million from GWCL for payment of compensation to Project Affected Persons.

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ANNEX – 2 DATA FOR PUBLIC STAND PIPE CONSTRUCTION, HOUSE CONNECTIONS AND COMPENSATION PAYMENT IMPLEMENTATION UNDER THE SUBSEQUENT YEAR INVESTMENT PROGRAMME (SYIP) 0F THE URBAN WATER PROJECT (UWP)

ACTIVITY NAME: PRO-POOR PUBLIC STAND PIPE CONSTRUCTION Item Activity Location No. of Population No. of Stand No. of Total Remarks Stand Proposed Pipes Stand Pipes Population Pipes Stand Pipes Confirmed for constructed Constructed Proposed to serve construction Stand Pipe to serve Region Town 1. Northern Tamale 44 26,400 44 44 26,400 Construction completed

Total 1 44 26,400 44 44 26,400 Construction completed

2. Western Axim 32 19,200 8 8 4,800 Construction completed Aboso 16 9,600 7 7 4,200 Construction completed Bogoso 19 11,400 7 7 4,200 Construction completed Elubo 27 16,200 7 7 4,200 Construction completed Prestea 47 28,200 23 23 13,800 Construction completed

Total 5 141 84,600 52 52 31,200 Construction completed

3. Central Breman Asikuma 14 8,400 14 14 8,400 Construction completed Dunkwa-On- 21 12,600 21 21 12,600 Construction completed Offin

Total 2 35 21,000 35 35 21,000 Construction completed

4. Volta Anfoega 12 7,200 3 3 1,800 Construction completed Kpando 31 18,600 14 14 8,400 Construction completed Nkonya 22 13,200 22 22 13,200 Construction completed 63

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Sovie 24 14,400 10 10 6,000 Construction completed

Total 4 89 53,400 49 49 29,400 Construction completed

5. Ashanti Agona 14 8,400 8 8 4,800 Construction completed Jamasi 15 9,000 10 10 6,000 Construction completed New Edubiase 17 10,200 14 14 8,400 Construction completed

Total 3 46 27,600 32 32 19,200 Construction Completed

6. Upper East Bawku 50 30,000 14 14 8,400 Construction completed Navrongo 50 30,000 7 7 4,200 Construction completed

Total 2 100 60,000 21 21 12,600 Construction Completed

7. Upper West Wa 61 36,600 42 21 12,600 Construction Completed

Total 1 61 36,600 42 21 12,600 Construction Completed

8. Brong Ahafo Berekum 60 36,000 108 108 64,600 Construction Completed

Total 1 108 64,800 108 108 64,600 Construction Completed

9. Eastern Akim Oda 14 8,400 NIL NIL NIL - Akim Ofoase 15 9,000 15 15 9,000 Construction Completed Asamankese 31 18,600 NIL NIL NIL - Suhum 19 11,400 8 8 4,800 Construction Completed

Total 4 79 47,400 23 23 13,800 Construction Completed

GRAND TOTALS 23 655 421,800 385 385 231,000

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DATA FOR PUBLIC STAND PIPE CONSTRUCTION, HOUSEHOLD WATER CONNECTIONS AND COMPENSATION PAYMENT IMPLEMENTATION UNDER THE SUBSEQUENT YEAR INVESTMENT PROGRAMME (SYIP) 0F THE URBAN WATER PROJECT (UWP)

ACTIVITY NAME: PRO-POOR INDIVIDUAL HOUSEHOLD WATER CONNECTION Item Activity Location No. of Population No. of No. of Total Remarks Household Proposed Household Household Population Water Household Connections Connections Household Connections Water Confirmed for completed Water Proposed as per Connections to connection as Connections Contract serve per Contract to serve Region Town 1. Northern Tamale 200 1,000 200 -

Total 1 200 1,000 200

2. Western Axim 560 2,800 560 These figures are Aboso 358 1,790 358 constantly being Bogoso 312 1,560 312 updated Elubo 225 1, 125 225 Prestea 312 1,560 312

Total 5 1,767 8,835 1,767 301 1,505

3. Central Breman 560 2,800 560 These figures are Asikuma constantly being Dunkwa-On- 510 2,550 510 updated Offin

Total 2 1.070 5,350 1,070 442 2,110

4. Volta Anfoega 118 590 118 These figures are

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Kpando 2067 10,335 2067 constantly being Nkonya 219 1,095 219 updated Sovie 185 925 185 Peki 885 4,425 885

Total 5 4,474 17,370 4,474 1,287 6,435

5. Ashanti Agona 240 1,200 240 These figures are Jamasi 100 500 100 constantly being New Edubiase 333 1,665 333 updated

Total 3 673 3,365 673 420 2,100

6. Upper Bawku 1,000 5,000 1,000 These figures are East constantly being Navrongo 400 2,000 400 updated

Total 2 1,400 7,000 1,400 1,304 6,520

7. Upper Wa 500 2,500 500 These figures are West constantly being updated Total 1 500 2,500 500 2,671 13,385

8. Brong Berekum 300 1,500 300 These figures are Ahafo constantly being updated Total 1 300 1,500 300 2,356 11,780

9. Eastern Akim Oda 100 500 100 These figures are Akim Ofoase 280 1,400 280 constantly being Asamankese 258 1,290 258 updated Suhum 50 250 250 66

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Total 4 688 3,440 688 -

GRAND 24 11,072 50,360 11,362 8,781 43,905 TOTALS

Total Number of Beneficiaries from standpipes and house connections is 231,000 + 43,905 = 274,905. NB: These numbers keep on increasing because the number of standpipes and house connections are constantly being added on.

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Annex 8. Comments of Co-financiers and Other Partners/Stakeholders

The draft ICR was shared with partners. However, formal comments were not provided.

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Annex 9. List of Supporting Documents

1. Project Appraisal Document dated July 1, 2004

2. Conformed Copies of Development Grant Agreements dates January 5, 2005; May 1, 2006

3. Project Papers on Restructuring dated October 10, 2010; March 5, 2012; September 25, 2012; December 31, 2015

4. Development Grant Agreement (DGA) Amendment letters dated September 25, 2012

5. Project Supervision Aides-Memoires

6. Project Implementation Status and Results Reports.

7. Project Financial Reports

8. Project Procurement Plans dated April 2008, February 2010, February 23, 2012, June 2009

9. GWCL Implementation Completion Report dated December 13, 2016

10. Additional Financing Agreement dated September 25, 2012

11. Beneficiary Assessment Report

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MAP MAP OF GHANA

3