Client – World Bank and PPP Node Implementing Agency - Ilala Municipal Council Project - PPP pre-feasibility study for 8 municipal Projects in Dar-es-Salaam Deliverable - Buguruni Market Final Pre-feasibility Report October, 2018 Abbreviations Abbreviation Full-form AfDB African Development Bank BOQ Bill of Quantities BRELA Business Registration and Licensing Agency CA Contracting authority CAPEX Capital expenditure CBD Central business district CCTV Closed circuit television CRB Contractors Registration Board DBMO Design, build, maintain and operate DBFOMT Design, build, finance, operate, maintain, and transfer DPR Detailed project report DSCR Debt-service coverage ratio EOI Expression of interest EIRR Economic internal rate of return ELR Employment and labor relations EPC Engineering, procurement and construction EMA Environmental Management Act ENPV Economic net present value ERB Engineers Registration Board ESIA Environmental and social impact assessment ESMP Environmental and social management plan ESMS Environmental and social management system FRF Fire and Rescue Force FY Financial year (April-March) GHG Greenhouse gas GoT Government of Tanzania IAS International accounting standards ICMS International construction market survey IFC International Finance Corporation IFRIC International Financial Reporting Interpretations Committee IMC Ilala Municipal Council IRR Internal rate of return KPI Key performance indicators LCC Lifecycle cost LGA Local government authority LGDA Local government district authority LGFA Local Government Finance Act 2 Abbreviation Full-form LTPP Long-term Perspective Plan MIC Municipal investment corporation NEMC National Environment Management Council NPV Net present value O&M Operation and maintenance OP Operational policy OPEX Operational expenditure OSHA Occupational Safety and Health Authority PO-RALG President's Office - Regional Administration and Local Government PPP Public-private partnership Project Co Project company PS Performance standards PV Present value PST Project screening tool QCBS Quality and cost-based selection RFQ Request for qualification RFP Request for proposal SCF Standard conversion factor Sq m Square meter TDFC Tanganyika Development Finance Company TIN Tax identification number TRA Tanzania Revenue Authority TZS Tanzanian shillings USD United States dollar VAT Value added tax VGF Viability gap funding WACC Weighted-average cost of capital WB World Bank 3 Contents 1. Project summary ..................................................................................................................................... 8 2. Background and objective .................................................................................................................... 11 3. Strategic case ........................................................................................................................................ 14 4. Economic case ...................................................................................................................................... 22 5. Commercial case ................................................................................................................................... 28 6. Financial case ........................................................................................................................................ 42 7. Management case .................................................................................................................................. 58 8. Next steps ............................................................................................................................................... 65 9. Annexure 1: Bill of Quantities (BOQ) ................................................................................................. 71 10. Annexure 2: Willingness to pay ........................................................................................................... 74 11. Annexure 3: Demand study .................................................................................................................. 77 12. Annexure 4: Legal due diligence ......................................................................................................... 78 13. Annexure 5: Social and environmental aspects ................................................................................. 82 14. Annexure 6: Revenue Collection ......................................................................................................... 91 15. Annexure 7: City infrastructure assessment ...................................................................................... 92 16. Annexure 8: Municipal finance assessment ....................................................................................... 97 17. Annexure 9: Institutional review of the IMC ...................................................................................... 101 18. Annexure 10: Social due diligence by World Bank ......................................................................... 107 19. Annexure 11: Project screening tool values ..................................................................................... 109 20. Annexure 12: Conceptual drawings of the market .......................................................................... 112 4 List of tables Table 2.1: Main deliverables and the progress ............................................................................................... 12 Table 3.1: Similar markets in IMC ................................................................................................................... 16 Table 4.1: Summary of technical options ........................................................................................................ 24 Table 4.2: Economic indicators ....................................................................................................................... 25 Table 4.3: Sensitivity analysis ......................................................................................................................... 26 Table 4.4: Distributional impact on various stakeholders ................................................................................ 26 Table 5.1: Summary of responsibilities of the ProjectCo and IMC .................................................................. 32 Table 5.2: Risk allocation matrix ...................................................................................................................... 33 Table 5.3: Risk mitigation matrix ..................................................................................................................... 34 Table 5.4: Output specifications of the Project ................................................................................................ 35 Table 5.5: Minimum design specifications of the Project ................................................................................ 37 Table 5.6: Technical components and area statement ................................................................................... 38 Table 6.1: Benchmarking study ....................................................................................................................... 42 Table 6.2: Financial assumptions .................................................................................................................... 44 Table 6.3: Area statement and capex .............................................................................................................. 45 Table 6.4: Opex of the market ......................................................................................................................... 46 Table 6.5: Annual revenue statement .............................................................................................................. 47 Table 6.6: Financial pre-feasibility assessment ............................................................................................... 49 Table 6.7: Capex calculation for roof-top solar ................................................................................................ 49 Table 6.8: Savings in electricity expense and returns from rooftop solar ........................................................ 50 Table 6.9: Sensitivity analysis ......................................................................................................................... 50 Table 6.10: Equity IRR under different scenarios ............................................................................................ 52 Table 6.11: Change in Project cost under this scenario .................................................................................. 52 Table 6.12: Change in Project configuration under this scenario .................................................................... 53 Table 6.13: Occupancy of floors under the scenario ....................................................................................... 53 Table 6.14: Weighted impact on PV ................................................................................................................ 55 Table 6.15: VfM calculation ............................................................................................................................. 56 Table 7.1: Project under the Jurisdiction of IMC ............................................................................................. 58 Table 8.1: Procurement plan ..........................................................................................................................