PARLIAMENT OF

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C PARLIAMENT OF THE REPUBLIC OF UGANDA

REPORT OF THE COMMITTEE OF NATIONAL ECONOMY ON THE PROPOSAL BY GOVERNMENT TO BORROW UP TO UNITS OF ACCOUNT (UAl 44 ]e,trILLION FROM THE AFRICATTT DIVELOPMENT FUND OF THE AFRICAN DEVELOPMENT BAI{K (ADBI FOR FTNANCTNG THE STRATDGIC TOWNS WATER SUppLy AND SANTTATTON PROJECT (STWSSPI a Nv/ ( \FI @ NOVEMBER, 2018 I. INTRODUCTION Rt. Hon. Speaker, Hon. Members, this is a report of the Committee of National Economy on the proposal by Government to borrow Unit of Accounts (UA) 44 million (Approx US$ 62.48 million) from the African Development Fund of the African Development Bank (ADB) for financing the Strategic Towns Water Supply and Sanitation Project (STWSSP).

The proposal was presented to this House by the Hon. Minister of Finance, Planning and Economic Development on 1le September,20 18 and accordingly referred to the Committee on National Economy for consideration in accordance with Rule L7S l2l (b) of the Parliamentary Rules of Procedure. o The Committee considered and scrutinized the proposal and now begs to report.

2. METHODOLOGY 2.1. Meetings The Committee held meetings with;

i. The Ministry of Pinance, Planning and Economic Development; and

ii. The Ministry of Water and Environment; 2,2. Document Review The Committee studied and made reference to the following documents; a The Minister's brief on the proposal;

II The Project Appraisal Report for the Strategic Towns Water Supply and Sanitation Project;

111 The draft Loan Agreement between the Republic of Uganda and the African Development Fund for financing the Strategic Towns Water Supply and Sanitation Project (STWSSP);

lv The Program Completion Report for Water Supply and Sani on Program Phase I (WSSP I); 1 lPage &// ' v. The Minister of Finance, Planning and Economic Development's letter dated 12ft September confirming that Government of Uganda will avail counterpart funding for the Strategic Towns Water Supply and Sanitation Project; vi. The National Planning Authority clearance letter for the Strategic Towns Water Supply and Sanitation Project; and vii. The Procurement plan of the Strategic Towns Water Supply and Sanitation Project. 2.3. Field Visits The Committee conducted field visit in Mukono and Kalrunga Districts. In , the committee visited one of the completed Water Supply o Scheme under the Water Supply and Sanitation Program II of Kabembe-Kalagi- Nagalama Water Supply. In Kayrnga district, the committee visited the ongoing works for (phase I) for the Kay,urnga-Busana and the proposed Phase II expansion facility for Kalrunga and Kamuli districts that are among the beneficiaries for this Strategic Towns Water Supply and Sanitation Project (sTwssP).

3.O BACKGROUND The water and environmental resources are critical in national transformation and sustainable development. Uganda's economy is dependent on its stock of environment and natural resources, calling for significant investments in water f development and natural resources management if the country is to achieve its goals focusing on attainment of a middle income status. Water and the environment are central in contributing to the achievements of NDP goals most especially the goal on Sustainable Production, Productivity and Value ,\ Addition in Key Growth Opportunities

The availability of safe water and hygiene facilities is of paramount importance

to human development. Likewise, the sustainable mana boement and utiliza

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Some of the key priority interventions identified by the NDP II for the Water and Sanitation Sub-Sector are; to increase access to safe water in rural and urban areas to 79oh and 1OO7o respectively by ensuring that each village has a safe water source; increasing sanitation and hygiene levels in rural areas, and a sewerage coverage in urban areas to 95%; and increasing functionality of water supply systems and promote catchment based integrated water resources management.

Improved access to safe water and sanitation is inextricably linked to economic growth and development thus safeguarding the right of the current and the future generations to live health and fulfilling lives. The water and sanitation sector commitment is to progressively provide safe water and sanitation to both rural and urban population in order to facilitate improved health and increased productivity. o As of June 2018, the national safe water coverage in rural areas was estimated at 7Ooh. There was no change in coverage from that of June 2017. Out of the 57,974 rural villages in Uganda, 38,183 (66%) of the villages had valid water sources as of June 2018. The functionatity for rural water supplies remained the same (85%) as last financial year. The population using an improved drinking water source in urban areas increased from 7lo/o in June 2017 to 77oh in June 2018. Access to safely managed water (available on premises) was [e- estimated at 2Oo/o. 515 villages (local council 1s) in urban areas had

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rc-t improved water source. Functionality of small towns and rural growth centres increased from 92o/o in June 2Ol7 to 93oh in June 2018.

The challenges in rural water supply and sanitation include: poverty, rapid population growth resulting in congested and informal settlements and a continuously increasing need for new safe water sources; lack of funding to keep up with this increasing need; un-reliable Operation and Maintenance (O&M) of water facilities; poor protection of water sources resulting in low and decreasing water quality; poor sanitation practices due to negative customary beliefs and lack of sensitisation; unavailability of appropriate technologies at reasonable cost; Weak enforcement of existing laws and regulations; poor operation and maintenance of sanitation facilities, more especially in public a places and schools; climate change causing frequent floods and drought; political instability in neighbouring countries creating settlement camps which characteristically remain unplanned settlements.

Constraints to Urban Water Supply and Sanitation include: pollution and depletion of water resources; unplanned settlement patterns which lead to difficulties in supply of water and sewerage services; inadequate institutional capacity; weak local private sector players temporal and spatial variability of water resolrrces leading to high investment costs; high energy costs and limited G grid power network leading to use of high cost alternatives; and. low- prioritization of sanitation hygiene levels o and at all

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4 lpage M* 3.f Performance of Loans ln the Water and Environment Sector

Table 1: Performance of externally funded projects in the Water and Environment Sector

Lake Victoria 2e l09lo9 2s lot / to 30l6l13 27.O7 98.4Y. Completed Environmental in June Management 2018 Project II

Kampala 2e loe loe 28l2lto 31 112114 53.19 52.13 9a.OVo Extended Sanitation for one year Programme FY 2018l 19 o Phase 1 27 /04lrr 28/4 / tt 30l6lls 108.18 75 69.3Yo Extended to Water Lake FY 2018/ 19 Victoria WATSAN Proiect Kampala 27 /04l1t 28141 t1 231 tr I 17 108. 18 75 69 .3"/o Extended to Water Lake FY 2018/ 19 Victoria WATSAN Project Rural Water tElos/12 sltoItt 131 12 I t7 63.29 63.29 1OO.Ooln Completed and Sanitation in June Programme 20ta Water osl02lLs 8l12/13 3r / 12l L8 135 108 55.O% On-Going Management and Development a Prolect Farm Income slotl16 6lor/16 30 l6/21 to. t 18.50 15.O% On-Going Enhancement and Forest Conservation Programme Project 2

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.---. Lhkes Edward 08l or I t6 6l01l16 sol6ll2l 7.3 3.5 l5o/o On-Going and Albert Integrated Fisheries and Water Resources Management Proiect Water Supply 07 lor lts 11lsl16 30l12/20 92.t2 46.06 620/o On-Going and Sanitation Programme Phase II (wssP II). Kampala 29 I o3l r8 28l2lro 3t lt2lt4 26.85 1 1.28 420 Extended Sanitation for one year Programme FY 2018/ 19 Phase I (Supplementar v) a 698.31 479.a3 68-7lo/" Source: Uganda trIater and EnvironErent Sector Performance Report July, 2018, MoWE.

Table 1 shows the performance of the externally funded projects in the Water and Environment Sector. The sector received funding from development partners including the world Bank, Arab Bank for Economic Development in Africa (BADEA), African Development Bank (AfDB), European Investment Bank (EIB) and French Development Fund (AFD). From these Partners, Government secured usD 698.31 milllon to finance 9 projects. By the end June 2018, 68.7 lo/o (us$479.83 million) had been disbursed to the 10 loans; which was an improvement from 4o.2o/o (us$170.3mi11ion) in June 2olr. Despite the a improvement, some projects did not perform well. For example Kampala water re.l \J Lake Victoria wATSAN Project had challenges of court cases and cost variations which took long to conclude

6 lP.rge 4. PRoJEcT LINKAGE To coI,NTRY STRATEGIES The Strategic Towns Water Supply and Sanitation Project (STWSSP) is in line with; i. The Uganda vision 2O4O and the National Development Plan II (NDP II) (201512016- 2Ol9l2O20) that identify the provision of adequate water supply and improved sanitation as one of the key priority areas for promoting sustainable wealth creation and inclusive growth; and ii. The Water and Environment Strategic Sector Investment Plan (2009- 2035) whose objective is to have water and sanitation access coverage for all by 2035 and with 95% functionality. a 5. PROJECTOBJECTIVE The objective of the Strategic Towns Water Supply and Sanitation Project (STWSSP) is to support the Government of Uganda's efforts to achieve sustainable provision of safe water and hygienic sanitation for the urban population by the year 2O30. This in turn will contribute to improved health and productivity of the population in the targeted towns across the country.

6. PROJECTBENEFICIARIES The primary beneliciaries of the project will be residents of ten towns spread across the country. The identified towns are Kyenjojo-Katooke (), (Nakasongola District), Kayr-rnga-Busana (Kayunga O District), Kamuli (), Kapchworwa (), Dokolo (), Bundibugyo (Bundibugro District) and Buikwe ()

The project will provide additional access to water and sanitation to 390,000 people by 2023. The residents of the towns will benefit from a much more regular supply of water and from improved wastewater d septic sl collection and treatment services 7 rHlr lPage *u'\"s, N$

..s --_{- 7. PROJECTCOMPONENTS The project has three components, namely i. Urban Water Supply; ii. Improved Urban Sanitation and Environmental Management;and iii. Sector Programme Support

The table 2 provides a description of these components Table 2: Programme Components

No. Component Est, cost Component Description Name (ua) a I Urban Water 41.62 . Construction of urban water supply systems covering 10 Supply (37.46m) strategic towns. . Engineering Services (Design and construction supervision). (Rwss) . Detailed engineering designs. . Production capacity; transmission & distribution lines and reservoirs. . Equipment for the wider operation and maintainance through umbrella utilities. 2 Improved 4.89m . Construction of 3 regional feacal sludge treatment facilities. Urban (4.4Omf . Procurement of6 cesspool trucks. Sanitation and . 40 gender-segregated & disabled-friendly public sanitation Environmental facilities constructed including in schools/institutions. . Implementation environmental management Management of and ciimate change resilience measures within urban and sanitation sub-sector. J Sector 2.38m . Support the regulatory framework through developing of Program 12-L4nl regulations and tariff regime reviews. Support (SPS) o Skills development for women and youth (trained in water and sanitation services as a business) .l o Framework for bulk water. e Water and sanitation atlas. r Sector coordination and Monitoring and Evaluation E Source: STWSSP Appraisal Document Note: O Amount in brackets depicts the ADF Loa-n contribution. lUA: USD $ 1.42 s ofJanuary,20 18) Nft-' F \$k

8 lPage tuw Ii. PROGRAMME COST AND FINANCING ARRANGEMENTS The total cost of the project is estimated at UA 48.89 million (Aprox. USD fi69.42 million)l net of taxes and duties. The ADB credit wiII contribute UA 44 million (Approx. USD US$ 62.48 million, (90%)) and GoU counterpart funding of UA 4.89 million (Approx. USD $6.94 million, (10%)). The Government shall provide budget allocation for all applicable taxes in each financial year in addition to the 10%o Government counterpart contribution to this project.

A summary of project cost estimates by components, source of financing and expenditure categories, and disbursement schedule are presented in the Tables 3-6. o Table 3: Summary Programme Cost estimates by Components

Components Total Costs o,1 (Million UA) Urban water supplv 37.84 '77.40o/o Improved urban sanitation and environmental management 4.44 9.08% Sector Program Support 2.16 4.42% Total Base Cost 44.44 I Physical Contingency 5%o 2.22 4.54% Price Contingency 5o/o 2.23 4.56% Total proiect cost 48.89 I Source: STWSSP Appraisal Document Under component 1: This component takes the largest share of the project costs (77.4oh), where a total of UA 37.84 mitlion will be invested in development e of the urban water supply systems for 1o towns. The provision of piped water supply and improved sanitation in these 10 towns will trigger economic growth through stimulation of commercial activities such as hotels and suppo to end-user social services @ f

' tUa=USD $t.+2 as at January,2018 9 lpage )

=K Under component 2: This component takes UA 4,44 million (9.08% of the project costs) and will finance activities of sanitation and hygiene awareness creation, construction of public sanitation infrastructure ,including 3 regional feacal sludge management facilities in the towns of Kyenjojo,Buikwe and Dokolo districts. This component will also finance the procurement of 6 cesspool emptier trucks to support desludging in the different regions. Under component 3: A total of UA 2.16 million (4.42% of the project costs)will be invested in supporting the MoWE to strengthen the water and environment sector co-ordination, monitoring and evaluation framework and cross cutting issues of gender equality and economic empowerment for women and youth through skills development. The project will build the capacity of 200 women t and youth in the 10 towns. Examples of water and sanitation related economic empowerment activities that the project could focus on include; Soap making, Affordable sanitary towels production,Bio gas and energz saving stoves, Solid Waste management and recycling; water vending; Backyard gardening; Emptying pit latrines; craft making, management of urban water kiosks by including other business ventures; Training of mansons, mechanics (Plumbers) and artisans; and Establishment of tree nurseries.

Table 4: Programme Sources of Financing Sources of Financing Total Cost (Million UA) % Total ADF Group 44.OO 90.Oo/o Government of Uganda 4.49 10.o% t Total Project Cost 48.89 Source: STWSSP Appralsal Document Table 4 shows that 90% of the total project costs will be financed by the African Development Fund of the African Development Bank (UA 44 million) while 10% (UA,-- 4.89 million) will be Government of Uganda counterpart contribution to the proj M w

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(\t( Table 5: Programme Costs by category of expenditure

Categories of Expenditure Total Costs % Expenditure (Million UA) Works 29.24 59.8% Services 10.85 22.2% Goods 1.99 4.1% Operational Cost 2.36 4.8% Total Base Cost 44.44 Physical Contingency 5% 2.22 4.5%

Price Contingency 5o/o 2.23 4.6% Total proiect cost 48.89

Source: STWSSP Appraisal Documeut a From table 5, the highest expenditure will be incurred by the civil works related activities of the project (59.8%) that will include the construction of urban water supply systems for 10 towns. The identified towns are Kyenjojo-Katooke (Kyenjojo District), Nakasongola (Nakasongola District), KaSrunga-Busana (), Kamuli (Kamuli District), Kapchworwa (Kapchorwa District), Dokolo (Dokolo District), Bundibugro (Bundibugro District) and Buikwe (Buikwe District). The project will provide additional access to water and sanitation to 390,000 people by 2023 and access to 812,000 people in2o4o.

22.2 o/o of the project costs will be spent on procurement of services that will t largely include Consultancy services for detailed design and construction supervision of water and sanitation systems to be constructed for the 10 towns among others.

In addition, 4.8 o/o of the project costs will be used to cater for the operational costs of the project, while 4.r yo of the project costs will be used to procure goods that will include procurement of 6 cesspool trucks,project vehicles d supply of office and IT Equipment ong others. NJtr_---' 11 lpage &"-t- )

f--. Table 6: Annual ADF Loan Disbursement schedule by component [Million UAsl Compouents 2OtSl2Ot9 2OL9l20 2O2Ol2O2t 2O2tl2O22 202212023 TotaI Urban water su pply 4.47 r2.03 10.26 5.31 1.86 33.93 Improved urban 0 0.51 o.7a 2.51 0.20 4.OO sanitation and environmenta-1 management Sector program 0.40 0.52 o.64 0.38 0. 13 2.O7 Support Total base cost 4.47 13.06 11.68 8.20 2.19 40.oo

Physical o.24 0.65 o.58 o.41 0.1 1 2.OO Contingency 57o Price Contingency o.24 0.65 o.58 0.41 o. 11 2.OO 5o/o Total project cost 5.36 14.37 12.85 9.O2 2.+L 44.OO il Source: STWSSP Appraisal Document 9. LOAN TERMS AND CONDITIOI{S The African Development Fund of the African Development Bank (ADB) will make available Unit of Accounts (uA) 44 million (Approx us$ 62.48 million) loan for financing the strategic Towns water Supply and sanitation project (STWSSP). table 7 below.

Table 7: Loan Terms

Item Terms

Nominal Value of the Loan UA 44 million (Approx.US$ 62.48 Million) ; Maturity period 40 years Grace period 1O years

Service charge O.75% per annum on the principal amount of the Loan disbursed and outstanding Commitment fee O.50% on undisbursed loan amount which shall begin to accrue one hundred twenty (120) days after the date of ,/ signalure of this Agreement / Source: Drafi loan Agreement. 12 lpage

f Conditions The financing has the following conditions attached to it

a Submission to ADB of the Attorney General's Legal Opinion on the legal validity of the loan documentation including the Project and Subsidiary Agreement to the Government; a Opening of two Special Accounts in Bank of Uganda i.e. a foreign currency denominated account for the deposit of the proceeds of the Loan; and a local-currency account. a Government to cause the MoWE to comply with the national environmental and waste management guidelines and procedures o applicable in Uganda from time to time, and a1l applicable national environmental management and coordination laws and biomedical procedures; a Government to cause the MoWE to fully implement the Enviromental and Social Management Plan (ESMp); and a Government to cause the MoWE to comprehensively report on the implementation of the ESMP on semi-annual basis

8.1 Financing conditionality of the project

Table 8: Coucessionality of the Loan o Item Value/rate Repa5rment period 40 years Grace period 10 years Present value ofthe loan UA 25.43 Million Debt service of the loan UA 71.14 Million Graat Element 42% Discount rate 5o/o Source: Drafi, loan Agreement and pBO Staf! Ccomputdtions @ 6P 13 lpage Table 8 shows that the present value of the loan UA 25.43 million is lower than the nominal value of the loan contracted (UA 44 million) which shows that the total future payment of the loan is cheaper than the amount to be borrowed in present terms. The total payment of the loan will amount to UA 71.14 million.

In additional the loan is concessional since its grant element $2%l is higher than the 357o threshold that is recommended by the IMF and the World Bank.

10. ECONOMIC AND FINANCIAL RATE OF RSTURN Overall, the STWSSP is technically feasible and economically viable with an Economic Internal Rate of Return (EIRR) of 43.49 percent that is higher than o the discount rate of IOo/o. The project is also socially desirable and environmentaly sustainable.

11. BUDGETARYIMPLICATIONS The project is not included in the FY 2018/19 approved budget under vote 019- Ministry of Water and Environment. In addition, the project is also not included in the multi-year commitments of government for FY 2ol8ll9- 2O2Ol2I that are indicated in the Public Investment Plan.

12. THE LOAN AND THE CURRENT DEBT SITUATION OF'THE COUNTRY This loan will increase the country's public debt that has been on the rise over the years. The provisional total public debt stock (at nominal value) as at end of t June 2018 stood at Ushs 42,084.7 billion (42.O5o/o of GDP) (Bank of Uganda Annual Report 2Ol7 118). This is an increase of 21.6 percent relative to June 2017. The external debt stock amounted to Ushs 28,164.4 billion (2\.lo/o of GDP) while the domestic debt stock amounted to Ushs 13,920.3 billion (13 of GDP) , NK_- IF\

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-€I 13. COMPLIANCE WITH PARLIAMENTARY APPROVAL GUIDELINES The committee on National Economy developed guidelines to be considered when scrutinizing all loans that require approval of Parliament. The guidelines were adopted by Parliament and require performance information and impact assessment for previous projects by a ministry or government agency; evidence of project appraisal; consistency with the national planning framework; institutional framework for project implementation; procurement plan; evidence of implementation of the Resettlement Action plan; provision of counterpart funding; evidence of project readiness for implementation; and f,tnancing mechanism.

Below are the scores Ministry of Water and Environment received based on o submitted documents.

Table 8: Compliance with Parliamentary Approvat Guidetines

Target Institutional Indicator score score Performance (o/of Performance of previous projects 5 3 6Oo/n

Consistency with the National Planning 3 3 100% Framework Institutional framework 2 2 1000h

Procurement i 0.5 5Oo/o

Resettlement Action Plan 4 2 5Oo/"

Budgetary Implications .) 1 33o/" o Implementation Readiness 8 6 7 5o/"

Financing 6 83Y"

32 23.5 7Oo/o raC,. Total +..- Source: PBO & DRS Stc// *NComputations f ++

15 lP.r6.r 14. PROJBCT IMPLEMENTATION ARRAI{GEMENTS The STWSSP II will be implemented over a period of 5 years (2018119 to 20221231 and will have a life span of 20 years following completion of implementation in 2023. The Executing Agency (EA) will be the Ministry of Water and Environment, who will be responsible for the overall coordination, planning, implementation and monitoring of the programme. The overall project coordinator will be the commissioner for urban water and sewerage services department.

15. OBSERVATIONS AND RECOMMENDATIONS

Government Counterpart Funding. The committee noted that among the t lessons learnt from the implementation of projects especially those financed by externally borrowed funds, is the untimely release of government counterpart funding and the low absorption capacities of project executing agencies.

The Committee recommends that Government ensures that adequate counterpart funds for this project are timely integrated lnto the national budget during the project implementation period.

11 Fulfillment of Loan condltions. The committee also observed that o government has been slow in the fulfillment of loan effective conditions upon signing of loan agreements in order to trigger the disbursement of committed funds for the implementations of debt financed projects. The committee recommends that government ensures the speedy fulfillment of effectiveness conditions of the financing agreement for E this loan in order for the committed funds to be released by the on time guarantee to the timely implementation=G of this projec 16 lpage

\* lu Sector Financing Requirement. The committee noted that the water and environment sector has identified strategic objectives and interventions plus key outcome indicators necessary to measure the progress towards achievement of the overall objectives set out for the NDPIL According to the Second NDP,the 5 year total investment requirement for the sector was estimated at UGX 9.625 trillion. This translates into an average of UGX 1.925 trillion per year.

In addition, the inadequate capacity to oversee sanitation and hygiene promotion within the country more so within the rural areas due to inadequate funding, has been identified as one of the key challenges o hindering the country from achieving sanitation and hygiene for all as per the SDG 6 target. According to the Africa SDG Index and Dashboard Report 2018, the population in Uganda using at least basic sanitation services stands at 19.2%o against the SGD 2030 target of 95Vo. The Conditional Grant that is allocated to districts to oversee this is inadequate that it hardly facilitates the village Health reams to effectively implement Sanitation and Hygiene programs at District and lower levels.

The committee recommends that government should continuously provide adequate funding to the water and environment sector with special focus on amplifying its impact on the economy. In addition, the I sector should review and address key variables that are promoting bilateral project type flnancing which inhibits coordlnation, harmonization and alignment to key sector priorities.

1V Regulation of urban water. The committee noted that one of the major challenges still facing the urban water and sanitation sub-sector is the inadequate r framework to effectively regulate the sub-sector to improve service delivery while protecting the interests of consumers as well as ose 17 f Page np'

\+-\- ) + of the public and private parties. In the unplanned urban setting, weak regulation of water sales persons (middlemen) at Fublic Stand Posts and yard taps selling a jerry can of water at about 2-3 times higher than the average NV/SC domestic tariff of 64 UGX/jerry cans has affected implementation of the 2006 pro-poor strategu.

The commlttee recommends that the Ministry of lllater and Environment should roll-out pre-paid meters in alt informal urban settlements. Regarding regulation of water and sanitation senrices in small towns and Rural Growth ceutres, the Ministry of Slater and Environment should conduct assessments and mapping of the a undersenred, strengthening customer involvement in decision making in regards to tarilf settlng and reduction of Non-Revenue Ulater.

v Performance of debt financed Projects in the lllater and Environment Sector. The committee noted that there has been an improvement in the utilisation of loans in the water and Environment sector. By the end June 2Ol8,67.100/o (US$468.55 million) had been disbursed to the 10 loans; which was an improvement from 40.2o/o (US$170.3miltion) in June 2OIT. Despite the improvement, some projects did not perform well. For example Kampala water Lake victoria wATSAN Project had challenges of court cases and cost variations which took long to conclude. o other challenges faced by debt Iinanced projects in this sector include poor project preparedness through lack of detailed project feasibility studies, lengthy procurement process for goods and services, delays in government counterpart funds, delays in compensations of Project Affected persons ES-, (PAPs), inadequate coordination and information sharing about planned and ongoing community development interventions in the variou sub sect among others L8 -rt> lpage tr tE+ \* (_

",&r The committee recommends that all proposed debt financed proJects in the water and environment sector presented to parliament by governmert should comply with the parliamentary approval guidelines ln order to ensure that preparatory phases such as feaslblllty studles, Compensation of Project Affected Persons (PAPs) have been carried before they are further submitted to Parliament for their approval.

v1 High Dependency on Consultants. The committee observed the high dependency of the project on consultancy services. According to the project procurement plan, a total of UA 7,860,92O (approximately USD 17,162,506.40) will be spent on consultancy services. The majority of I consultancy costs will finance consultancy services for design review and construction supervision for the water supply and sanitation systems for the 10 beneficiary towns estimated at UA 5,289,000 (approximately USD 7,510,3802) and feasibility designs for pilot projects under the Uganda Strategic Program for climate Change resilience in Upper Nile and Kyoga catchment areas estimated at UA 1,272,730 (approximately USD 1,807,277). The committee was informed by the Ministry that deliberate efforts have been taken to ensure that most works are carried out by ministry staff and currently all small project designs are carried out by staff, while big projects have staff attached to designs or works carried out by consultants for l capacity building. In addition, the committee was informed that some Fc- consultancies are conditions by the lenders to enable indepen d t supervision of the projects \w&-

' 1 UA = USD 1.42 , As of January, 2018 (project Appraisal Report)

19 lpage e\\ \''r- 4

L,' The committee recommends that government scales up plans for deliberately butldtng the capacities of MDAs in conducting studies, designing and supenrision of projects in order to cut down on the exorbitant amounts of project funds spent on consultancy senrices towards conducting studies ,designing and supenzision of debt financed projects.

In addltlon, the committee recommends that negotiations for loans should be geared towards reducing the cost of consultancy in view of boosting the local content ofthe projects.

vll Management of Sewage. The committee obserued that poor sanitation and a hygiene has been identified by the public as a concern and cause of various health and sanitation related problems. This is evidenced by the high number of sanitation related diseases such as diarrhoea and cholera which are prevalent in Kampala and the other urban areas. Management of sewage is a key aspect of ensuring that the broader sanitation challenges are addressed. In addition, the committee noted there continues to be more emphasis to water supply infrastructure expansion compared to sewerage infrastructure development. This has caused a great mismatch between water and sewerage infrastructure development in a great number of urban and rural growth centres in the count4r. o The committee recommends that given the fact that access to seurerage senrices is a key aspect of water and sanitation management, there is need for Government to fast track and lmplement the proposed strategies in the management of sewage to ensure incre access to sewage senrices in the country especially among low inco earners. The provision of reglonal feacal sludge management facili es and conventional sewage systems in aome town based on needs asseasment should be expanded to other regions by the Governmen 20 lrlage \w+' v111 Stakeholder coordination. The committee further observed that collaboration is still a major problem for the water and sanitation sector, mostly at district level but also at national level. Sanitation falls in the ambit of a number of ministries and, there is need for better and strong coordination in all the line ministries. Better communication and information sharing is needed between relevant central government ministries, development partners and civil society agencies to ensure coordination, accountability and consolidation of interventions in order to achieve agreed sector targets. o The committee recommends that to get sanitation back on track, there is need to bridge the financing gap with concrete financial commitments from the government. All the three line ministries in charge of promoting sanitation in the country i.e. Health, Education & Sports and flfater & Environment, should adequately finance thelr dedicated sanitation budget lines. However, better sanitation financing should go hand ln hand with smart utilization of available resources.

The committee further recommends for the reviewlng of the sanitation memoranda of understanding between atl line ministries and the establishment of sanitation specific performance contracts in all the o line ministries and district local governments. In addition, the committee also recommends for the need for intersectoral coordination between national and local ministries, and with civil society, to enhance optimal outcome, accountability and avoid duplication of efforts. In addltion, there is need to improve ,atr- coordination and information mauagement between SlVAps, development partners and organizations with a cross cutting po 27 lpage \ffifr G N l- ' to be given opportunities to participate in sanitation decision-making processes.

IX Compensation of affected persons. The committee observed that a number of infrastructure development projects are faced with challenges of compensation of project affected persons which are also likely to affect this project,as it includes permanent land acquisition for construction of infrastructure and temporary access to land.

The Committee recommends that the MotrIE should ersure that it o acquires all the land titles in the areas where construction works for the project are to be implemented before construction works commence. In addition, all other project - affected persons should be adequately and expeditiously compensated.

x National coverage of urban and Rural \llater supply Infrastructure. The committee noted that despite the progress that the water and environment sector has achieved in the last 10 years in establishing urban and rural water supply infrastructure across the country, as pointed out in the sector Performance Report 20 18. o However, a number of small towns, communities and villages (especially in districts like Namutumba,Nakaseke,Sembabule,Nakasongola, Kaabong, Bukeda,Amuria & Gomba, among others) with populations up to 1,500 and Rural Growth centres (RGCs) with populations between 1,500 and 5,000 do not have access to safe water. Even the very few water facilities that exis are at the same time utilized as water for production facilities especially for irrigation and livestock. As a result, the targets under the StrategicSe tre 22 lpage ffie

lI Investment Plan (2018-2030), the second National Development Plan and Presidential Directives (e.g. one water source per village) are unlikely to be met.

The committee recommends that government should priorltize making additional efforts towards resource mobilization for the sector in order to extend the urban and rural water supply infrastructure to others districts that are still grappling with low safe water coverage. This should be coupled with efficient use of available resources, to enable the sector to achieve the water and environment related national targets under the Vision 2O4O and the Sustainable Development Goals G (SDGs). 16. CONCLUSION

The Committee recommends that the request by Government to borrow Unit of Accounts (UA) 44 million (Approx US$ 62.48 million) from the African Development Fund of the African Development Bank (ADB) for financing the Strategic Towns Water Supply and Sanitation Project (STWSSP)be approved, E subject to the above recommendations.

Q- (\ \FX o I beg to Report ${J $/

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"k REPORT OF THE COMMITTEE OF NATIONAL BCONOMY ON THE PROPOSAL BY GOVERNMENT TO BORROW UP TO UNITS OF ACCOUNT (UAl 44 IMILLION FROM THE AFRTCAT{ DEVELOPMENT FUND OF THE AFRICAN DEVELOPMENT BANK (ADBI FOR FTNANCTNG THE STRATEGTC TOWNS rlrATER SUPPLY AND SANTTATTON PROJECT (STWSSPI NAME CONSTITUENCY RE Hon. Bbumba Syda Namirembe C/P Nakaseke North County

Hop. Bategeka Lawrence V/CP Hoima Munictpality

Hon. Tavebwa Thomas Ruhinda North

Hon. Muyanja Johnson Senyonga Mukono South County

Hon. Kamara John Ninzeyrmana Bufumbira North

Hon. Kalule Sengo Emmanuel Gomba East County

Hon. Migadde Robert Ndugwa Buvuma Islands County

Hon. Okello Anthony Kioga County

Hon. Musoke Paul Sebulime Buikwe County North

Hon. Kibalya Henry Morrs Bugabula South

Hon. Guma Gumisiriza David Ibanda North County Hon. Nambeshe John Baptist Manjiya County

Hon. Angura Fredrick Tororo South County

Hon. Katoto Hatwib Katerera County

Hon. Amero Susan Amuria Woman Rep ) NQ NAME CONSTITUENCY SIGNATT'RT t7 Hon. Mandera Amos Buyamba County

18 Hon. Babirye Judith Buikwe Woman Rep

19 Hon Seguyal. John Bosco Mawokota County South

20 Hon.Anne Mary Tumwine Ntoroko Woman Rep

21 Hon. Katwesigre Oliver Koyelryenga Buhweju Woman Rep

nc Hon.Akamba Paul Busiki

Hon.Adeke Anna Ebaju National Female Youth

Hon,Nauwat Rosemary Amudat Woman Rep

25 Hon.Afiku Bernard Ayivu county

26 Hon.Lakot Oruni Susan (Maj) UPDF

27 Hon. Jack Wamanga Wamai

28 Hon. William Nzoghu Busongora North

10 Hon. Herbert Edmund Ariko

30 Hon. Jimmy Akena Lira Municipality

Hon.Ayepa Michael

33 Hon.Lokeris Samson Dodoth East

34 Hon.Kajara Aston Mwenge South

35 Hon. Kabafunzaki Herbert Rukiga County