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AFRICAN DEVELOPMENT BANK GROUP

CENTRAL AFRICAN REPUBLIC

CENTRAL AFRICA FIBRE-OPTIC BACKBONE PROJECT (CAB) – CAR COMPONENT

PITD/PGCL DEPARTMENTS

May 2018

Public Disclosure Authorized Authorized Authorized Public Disclosure Public Disclosure

Translated Document

CENTRAL AFRICAN REPUBLIC (CAR): CENTRAL AFRICA FIBRE-OPTIC BACKBONE PROJECT (CAB) – CAR COMPONENT

ADDENDUM

I. Introduction

1.1 The purpose of this Addendum is, first of all, to seek the approval of the Boards of Directors on the readjustment of the use of the African Development Fund (ADF) (country and regional envelop) and the Transition Support Facility (TSF) –Pillar I) allocations to Central African Republic in connection with the Central Africa Backbone (CAB) project – CAR component (the “Project”).

1.2 In fact, after reviewing the resources available for the Central African Republic under ADF-14, it was found that there was an excess of UA 3 million in grant on ADF allocations (PBA and ER) while there is an underutilization of an equivalent amount on the country TSF (Pillar I) resources. In order for the use of Central African Republic resources to be in line with the ADF-14 operational guidelines, the aforementioned excess of ADF grant use must be reallocated as a TSF grant (Pillar I). To this end, it is proposed to amend, by this addendum, the allocation of the Bank financing for the Project.

1.3 In addition, the Boards of Directors will recall the approval, on 12 July 20171, of the framework arrangement between the European Commission (EC) and the Bank, referred to as the "Pillar Assessed Grant or Delegated Agreement (PAGoDA)". PAGoDA is an agreement concluded within the framework under the African Investment Facility (AfiF) under the 11th European Development Fund (EDF - 2014-2020).

1.4 Thus, the purpose of this addendum is also to seek the approval of the Boards of Directors for the use of the resources mobilized under the AfIF for the Project. 1.5 It should be recalled that the EU is expected to co-finance the Project with 17.048 million Euros (UA 13.531 million). The resources thus mobilized from the AfIF will be paid to, administered and managed by the Bank.

II. The Project

2.1 It will be recalled that on 15 December 20172, the Board of Directors approved an ADF grant of UA 13.216 million to the Central African Republic for the financing of its component of the Project.

2.2 Description of the Project. The Government of Central African Republic had requested the Bank’s assistance to finance the Project consisting in: (i) the laying of 1,050 km of fibre-optic cable on the interconnection roads with Cameroon and Congo as well as (ii) the establishment of a local urban loop comprising a national data centre (Datacentre) and a Digital Training Centre in Bangui. The project also provides for the establishment of an e-government platform as well as institutional support comprising, in particular : (i) feasibility studies for further phases of the project (ii) technical assistance to the Electronic Communications and Postal Regulatory Authority (ARCEP) ; (iii) support to educational establishments (Bangui University and

1 Resolution N° B/BD/2017/16 - F/BD/2017/08 2 Resolution N°F/CF/2017/128 1

Vocational High School) ; (iv) support for the establishment and operationalisation of a National ICT Agency (ANTIC) and (v) capacity building for environmental protection organisations (DGE and WWF). The Project executing agency is the Ministry of Posts and Telecommunications (MPT).

The total estimated Project cost is 26.412 million Units of Account (UA). The Bank’s contribution to the project’s financing has been approved through the ADF window for an amount of UA 13.216 million. The EU is co-financing the Project through the AfIF for an amount of EUR 17.048 million (UA 13.531 million). The Project implementation period will be four (4) years

III. The New Proposal

The ADF financing

3.1 The proposal below to readjust the utilization of ADF and TSF allocations to the Central African Republic in financing the Project is submitted to the Boards for approval of:  UA 10.216 million ADF grant (ABP and RO envelop)  UA 3 million TSF (Pillar I) grant

Through this readjustment, UA 3 million will be reallocated from ADF grant to TSF (Pillar I) grant.

3.2 This financing plan will align the use of resources allocated to the Central African Republic on ADF-14 operational guidelines.

AfIF Cofinancing

3.3 As part of the signing of the PAGoDA agreement referred to in point 1.3, on December 13, 2017, the Bank and the EC signed a delegation agreement in the amount of EUR 17.048 million (UA 13.531 million) relating to the Project. This delegation agreement defines the activities entrusted to the Bank for the implementation of the Project. It lays down the implementing arrangements, sets out the rules governing the payment of the EU contribution and defines the relations between the Bank and the EC. To carry out the activities, the Bank: (i) applies its own accounting, internal control and auditing procedures, which have been positively assessed in the ex-ante evaluation of the pillars by the EC; and (ii) applies its own procedures, including its procurement procedures. This delegation agreement was signed by the Bank in order to secure the AfiF funds intended for the Project. The resources mobilized from the AfiF will be disbursed and managed by the Bank.

3.4 Implementation. To carry out the Project activities financed by the AfiF grant, the Bank: (i) applies its own accounting, internal control, financial management, and auditing rules, which have been positively assessed during the ex-ante evaluation of the pillars by the EC; and (ii) applies its own procedures, including its procurement procedures.

3.5 Rules on financial management, disbursement, accounting and financial auditing The rules on financial management, disbursement, accounting and financial auditing, as set out in the appraisal report and the technical annexes, will apply to the AfiF grant.

3.6 Procurement rules

Rule of origin: It is planned to seek from the Boards a waiver to the Bank's rule of origin, for the acquisition of goods, works and services financed from the resources of the AfiF grant to be open to countries that are not member states of the Bank.

Procurement Procedures: Procurement provisions for goods, services and works as provided for in the appraisal report, the technical annexes and the procurement plan will also apply to the AfiF grant.

3.7 Legal framework for the AfIF cofinancing

Legal instruments: The delegation agreement mentioned in point 3.3 has been signed by the Bank in order to secure the AfiF funds intended for the Project. However, it contains a condition precedent expressly providing that its entry into force is subject to the approval of the co-financing of the AfiF by the Bank's Boards of Directors.

It should be noted that all the obligations entered into by the Bank vis-à-vis the EC, both under the framework agreement between the Bank and the EC approved by the Boards on 12 July 2017, the PAGODA General Condition and the delegation agreement related to the Project mentioned above and its annexes (in particular financial management, disbursement, financial and accounting audit, visibility or communication, etc.) will be fully transferred to the Central African Republic.

A grant agreement will be signed for this purpose between the Central African Republic and the Bank (the "Grant Agreement").

Conditions and obligations. The conditions precedent to entry into force, to first disbursement of the resources, the other conditions and commitments provided for in the Grant Agreement shall be identical to the conditions and commitments provided for in the protocol of agreement that has already been signed between the Central African Republic and the Fund as part of the ADF financing.

3.7 Changes in the Project appraisal report resulting from the change in the amount of the ADF allocation and the use of TSF resources as well as the confirmation of EU co-financing are set out in the Annex to this Addendum.

IV. Conclusion

4.1 In light of the foregoing, Management recommends that the Boards of Directors:

(i) decide that procurement of goods, works and services financed by the resources of the Grant shall be open to countries that are not member states of the Bank;

(ii) approve a) the proposal to adjust the amount from UA 13.216 million to UA 10.216 million of the grant awarded to the Central African Republic (CAR) and the proposal of a grant of UA 3 million out of the TSF under the Supplementary support window (Pillar I) to the Central African Republic for the financing of the Project; and b) the proposal for an EU AfIF grant of UA 13,196 million to the Central African Republic (CAR) for the Project under the conditions stipulated in this Addendum, its annexes, the appraisal report, and the General Conditions Applicable to Protocols of Agreement for Grants of the African Development Fund.

ANNEX

PROPOSED MODIFICATIONS TO THE APPRAISAL REPORT

In light of the new distribution proposed regarding the ADF grant (UA 10.216 million) and TSF grant (UA 3 million), the changes made to the project appraisal report approved on 15 December 2018 are presented below:

 Cover Page UA 10.216 MILLION ADF GRANT UA 3 MILLION TSF (PILLAR I) GRANT EUR 17.048 MILLION EU AFRICAN INVESTMENT FACILITY (AfIF) GRANT

 Page iii: Financing Plan

Source Amount in Amount in Amount in Instrument CFAF Billion EUR Million UA Million ADF (Loan) 8,444 12.873 10.216 ADF grant (CAR PBA and RO envelop) ADF (Loan) 2,480 3.78 3 TSF grant (Pilar I) EU (AfIF) 11,183 17.048 13.531 Project grant TOTAL 22,107 33.701 26.747

 Page iv: Executive Summary (Paragraph 1: Project Overview) (…) The Bank's contribution to the financing of the project is through an ADF grant of UA 10.216 million and a FAT (Pillar I) grant of UA 3 million (…). The European Union’s co-financing the project through the Africa Investment Facility for an amount of EUR 17,048,140 million.

 Page 1: (…) A PROPOSAL TO GRANT A UA 10.216 MILLION ADF GRANT, A UA 3 MILLION TSF (PILLAR I) GRANT AND AN EU (AFIF) GRANT OF UA 13.196 MILLION TO THE CENTRAL AFRICAN REPUBLIC (…)

 Page 6: Paragraphs 2.3.1 and 2.4.1 The ADF grant will finance components A, C and D and TSF grant components B and C of the project (….). (…)The provision for physical contingencies is 3% of the base cost on the ADF and TSF funding. The provision for price escalation equals 2% of the base cost plus physical contingencies, on the ADF and TSF funding as well (…).

 Page 7: Paragraph 2.4.3 (…)The Bank is providing a global financing, through grants, of UA 13.216 million from: (i) Performance Based Allocation (PBA) of UA 5.716 million and Regional Operations (RO) envelope of UA 4.5 million; complemented with (ii) Transition Support Facility (TSF)-Pilar I of UA 3 million (…)

 Page 7: Table 2.5 – Estimated Project Cost by Source of Financing EUR Million UA Million Sources of Financing Percentage F.E. L.C. Total F.E. L.C. Total ADF grant (PBA and RO 10.298 2.575 12.873 8.173 2.043 10.216 38.2% envelop) TSF grant (Pilar I) 3.024 0.756 3.78 2.4 0.6 3 11.22% EU (AfIF) 13.638 3.41 17.048 10.835 2.706 13.351 50.58% TOTAL 26.96 6.741 33.701 21.398 5.349 26.747 100%

 Page 8: Table 2.6 – Summary of Project Components by Source of Financing (in UA million)

ADF Grant (PBA EU Grant Components TSF Grant (Pilar I) Total & RO Envelop) (AfIF) Component A: Optical Fibre 7.631 0 10.679 18.31 Infrastructure Component B: ICT Applications 0 2.918 0 2.918 and Services Component C: Institutional Support 1.572 0.082 2.036 3.690 and Capacity Building Component D: Project Management 1.013 0 0.816 1.829 TOTAL 10.216 3, 000 13.351 26.747

 Page 8: Table 2.7: Expenditure schedule by source of financing (UA million) 30% 40% 20% 10% 100% Components 2018 2019 2020 2021 Total Component A : FO infrastructure 5.383 7.177 3.588 1.794 17.942 Component B : ICT applications and 0.833 1.111 0.556 0.278 2.778 services Component C : Institutional Support and 1.083 1.444 0.722 0.361 3.61 Capacity Building Component D : Project management 0.534 0.712 0.356 0.178 1.78 BASE COST 7.833 10.444 5.222 2.611 26.11 Physical contingencies 0.113 0.151 0.075 0.038 0.377 Financial contingencies 0.078 0.104 0.052 0.026 0.26 TOTAL 8.024 10.699 5.349 2.675 26.747

 Page 17: Legal instrument

5.1. Legal Instrument

The Project will be financed through a grant from ADF resources, a grant from the TSF (Pillar I) grant, and a grant from EU (AfIF) awarded to the Central African Republic. Protocols of agreements for the ADF and TSF grants will be signed between the Central African Republic and the Fund; and a grant agreement for the AfIF grant will be signed between the Central African Republic and the Bank.

5.2. Conditions Associated with ADF’s Intervention

5.2.1. Conditions Precedent to Effectiveness

The ADF and TSF protocols of agreement and the EU (AfIF) grant agreement will each become effective on the date of their respective signature by the parties.

5.2.2. Conditions Precedent to First Grant Disbursement

In addition to effectiveness of the ADF protocols of agreement, the TSF Grant agreement and the EU (AfIF) grant, the first disbursement of each grant resources shall be conditional on fulfilment by the Donee, to the satisfaction of the Fund, […]

5.2.3. Other Conditions

For each of the ADF grant, the TSF grant and the EU (AfIF) grant, the Donee undertakes, to the satisfaction of the Fund, to provide: […]

 Page 18: Recommendation Management recommends that the Boards of Directors approve the proposal of an ADF grant of UA 10.216 million and award a TSF (Pillar I) grant of UA 3 million; and an EU (AfIF) grant of EUR 17.048 million to the Central African Republic to finance the Central Africa optical fibre Backbone (CAB) Project – CAR Component, under the terms and conditions set forth in this report.

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