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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 65109-MZ
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 78.2 MILLION
(US$120 MILLION EQUIVALENT)
TO THE
REPUBLIC OF MOZAMBIQUE
FOR THE
CITIES AND CLIMATE CHANGE PROJECT
February 15, 2012
This document is being made publicly available prior to Board consideration. This does not imply
a presumed outcome. This document may be updated following Board consideration and the
updated document will be made publicly available in accordance with the Bank‟s policy on Access
to Information.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective as of February 1, 2012)
Currency Unit = New Meticais (Mtn)
US$1.00 = 27.06 Mtn
US$1.53 = SDR 1.00
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AIAS Administration for Water and Sanitation Infrastructure (Administração de Infra-
estructuras de Água e Saneamento)
ANAMM National Association of Municipalities in Mozambique (Associação Nacional dos
Municípios em Moçambique)
BASS Beira Autonomous Sanitation Services
CPS Country Program Strategy
CRA Water Regulatory Council (Conselho de Regulação do Abastecimento de Água)
CUT Unique Account of Treasury (Conta Unica do Tesouro)
DAF Department of Management and Finance (Direcção de Administração e Finanças)
DINAPOT National Directorate for Territorial Organization
DNA National Water Directorate (Direcção Nacional de Águas)
DNDA Directorate for Local Governance Development
DUATS Rights of Use and Access to Land (Direito de Uso e Aproveitamento da Terra)
ESMF Environmental and Social Management Framework
EU European Union
FIIL Local Investment Funds (Fundo de Investimento para Inciativa Local)
FIPAG Water Supply Investment Fund (Fundo de Investimento e Patrimônio de
Abastecimento de Água)
FM Financial Management
GDP Gross Domestic Product
GFDRR Global Facility for Disaster Reduction and Recovery
GIS Geographic Information System
IBRD International Bank for Reconstruction and Development
IDA International Development Association
IFR Interim Financial Report
INGC National Disaster Management Institute (Instituto Nacional de Gestão de Calamidades)
IGF General inspection of finance (Inspecção Geral das Finanças)
IPRA Property Tax (Imposto Predial Autárquico)
ISA International Standards on Auditing
M&E Monitoring and Evaluation
MAE Ministry of State Administration (Ministério da Administração Estatal)
MAF Financial Management Manual (Manual de Administração Financeira)
MCA Millennium Challenge Account
iii
MCC Millennium Challenge Corporation
MDG Millennium Development Goals
MDP Municipal Development Project
MICOA Ministry for Coordination of Environmental Affairs (Ministério para
Coordenação Ambiental)
MINAG Ministry of Agriculture (Ministério da Agricultura)
MINFIN Ministry of Finance
MMDP Maputo Municipal Development Program
MMO Municipal Monitoring Officer
MOPH Ministry of Public Works and House (Ministério de Obras Públicas e Habitação)
MTR Mid-Term Review
NAPA National Adaption Program of Action
NDF Nordic Development Fund
O&M Operation and Maintenance
P4R Project for Result
PARPA Poverty Reduction Action Plan
PDO Project Development Objectives
PEFA Public Expenditure and Financial Assessment
PGM Project Grant Manual
PIM Project Implementation Manual
PIU Project Implementation Unit
PROL Program for the Reform of Local Public Administration
RAP Resettlement Action Plan
RPF Resettlement Policy Framework
SASB Beira‟s Autonomous Sanitation Services (Serviços de saneamento autônomos da
Beira)
SDR Special Drawing Rights
SISTAFE Government Financial System (Sistema de Administração Financeira do Estado)
SPCR Strategic Program for Climate Resilience
TA Technical Assistance
UGEA Procurement Management Unit (Unidade Gestora e Executora das Aquisições)
WB World Bank
Regional Vice President: Obiageli Ezekwesili
Country Director: Laurence C. Clarke
Sector Director:
Acting Sector Manager:
Jamal Saghir
Alexander Bakalian
Task Team Leaders: Paula Pini and Uri Raich
iv
REPUBLIC OF MOZAMBIQUE
CITIES AND CLIMATE CHANGE
Table of Contents
I. Strategic Context .............................................................................................................................. 5
A. Country Context ............................................................................................................................ 5
B. Sectoral and Institutional Context ................................................................................................ 6
C. Higher Level Objectives to which the Project Contributes .......................................................... 8
II. Project Development Objectives ...................................................................................................... 9
A. Project Development Objectives (PDO) ....................................................................................... 9
B. Project Beneficiaries ..................................................................................................................... 9
C. PDO Level Results Indicators ....................................................................................................... 9
III. Project Description ......................................................................................................................... 10
A. Project components ..................................................................................................................... 10
B. Project Financing ....................................................................................................................... 12
C. Lessons Learned and Reflected in the Project Design ................................................................ 13
IV. Implementation ............................................................................................................................... 15
A. Institutional and Implementation Arrangements ........................................................................ 15
B. Results Monitoring and Evaluation ............................................................................................ 16
C. Sustainability ............................................................................................................................... 17
V. Key Risks and Mitigation Measures .............................................................................................. 18
VI. Appraisal Summary ........................................................................................................................ 18
A. Economic and Financial Analysis .............................................................................................. 18
B. Technical ..................................................................................................................................... 19
C. Financial Management ............................................................................................................... 21
D. Procurement ................................................................................................................................ 22
E. Social and Environment (including safeguards) ......................................................................... 23
Annex 1: Results Framework and Monitoring .......................................................................................... 26
Annex 2: Detailed Project Description ..................................................................................................... 30
Annex 3: Implementation Arrangements ................................................................................................. 49
Annex 4: Operational Risk Assessment Framework (ORAF) .................................................................. 67
Annex 5: Implementation Support Plan .................................................................................................... 70
Annex 6. Economic and Financial Analysis ............................................................................................ 73
1
PAD DATA SHEET
Mozambique
Cities and Climate Change (P123201)
PROJECT APPRAISAL DOCUMENT .
AFRICA
AFTUW
.
Basic Information
Date: 02/15/2012 Sectors: Sub-national government administration (50%),
General water, sanitation and flood protection sector
(50%)
Country Director: Laurence C. Clarke Themes: Climate change (40%), Other urban development
(10%), Municipal finance (25%), Municipal
governance and institution building (25%) Acting Sector
Manager/Director: Alexander
Bakalian/Jamal Saghir
Project ID: P123201 EA Category: B - Partial Assessment
Lending
Instrument: Specific Investment
Loan
Team Leader(s): Paula Dias Pini/Uri
Raich
Does the Project include any CDD component? No
Joint IFC: No .
Recipient: Republic of Mozambique
Responsible Agency: Ministry of State Administration
Contact: Orlanda Rafael Title: National Director
Telephone No.: +258 21 426666 Email: [email protected]
Responsible Agency: Administration of Infrastructure for Water and Sanitation (Administração de Infra-Estructuras
de Água e Saneamento-AIAS)
Contact: Olinda de Sousa Title: Director
Telephone No.: 258823137450 Email: [email protected] .
Project Implementation
Period: Start Date: April 3, 2012 End Date: December 15, 2017
Expected Effectiveness Date: August 15, 2012
Expected Closing Date: December 15, 2017
.
2
Project Financing Data(US$M)
[ ] Loan [ ] Grant [ ] Other Credit Term: standard IDA terms, with a maturity of 40 years
including a grace period of 10 years.
[ X ] Credit [ ] Guarantee
For Loans/Credits/Others
Total Project Cost (US$M): 120.00
Total Bank Financing (US$M): 120.00 .
Financing Source Amount(US$M)
BORROWER/RECIPIENT 0.00
International Development Association (IDA) 120.00
Total 120.00 .
Expected Disbursements (in USD Million)
Fiscal Year 2013 2014 2015 2016 2017 2018
Annual 1.20 10.20 30.70 30.80 28.10 19.00
Cumulative 1.20 11.40 42.10 72.90 101.00 120.00 .
Project Development Objective(s)
The PDO is to strengthen [the Recipient‟s] municipal capacity for sustainable urban infrastructure provision and
environmental management which enhance resiliency to climate related risks. .
Components
Component Name Cost (USD Millions)
Component 1 - Strengthening the municipal sector 35.00
Component 2 - Enhancing resilience of strategic coastal cities 85.00 .
Compliance
Policy
Does the Project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] .
Does the Project require any exceptions from Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy exception sought from the Board? Yes [ ] No [ X ]
Does the Project meet the Regional criteria for readiness for implementation? Yes [X] No [ ] .
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
3
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X .
Legal Covenants
Name Recurrent Due Date Frequency
Effectiveness Condition August 15, 2012
Description of Covenant
The Project Implementation Manual has been adopted by the Recipient in a manner satisfactory to IDA.
Name Recurrent Due Date Frequency
Effectiveness condition August 15, 2012
Description of Covenant
The PIUs have been established and duly staffed in a manner satisfactory to IDA
Name Recurrent Due Date Frequency
Other Covenants
Description of Covenant
The Recipient shall continue to make FIIL transfers to Eligible Municipalities during each year of Project
implementation.
Name Recurrent Due Date Frequency
Other Covenants
Description of Covenant
The Recipient shall ensure that no contracts in respect of civil works shall be entered into until IDA shall have
approved the relevant RPA and ESMP for each such contract.
Name Recurrent Due Date Frequency
Other Covenants
Description of Covenant
The Recipient shall ensure that no SubProjects shall be eligible for financing under Component 1.A (Local level
support for improved municipal governance) of the Project if they are to be carried out in connection with an
International Waterway or one of its tributaries.
Name Recurrent Due Date Frequency
Withdrawal Conditions
4
Description of Covenant
No withdrawal shall be made for payments under Category 3 (Municipal Performance Grants under Part A(i)(a) of
the Project) of the table in Section IV of Schedule 2 to the Financing Agreement until the Recipient has submitted to
IDA the Project Grants Manual (PGM) in a manner satisfactory to IDA.
.
Team Composition
Bank Staff
Name Title Specialization Unit
Luiz Claudio Martins
Tavares Lead Water and Sanitation
Specialist Lead Water and Sanitation
Specialist AFTUW
Harvey D. Van
Veldhuizen Lead Environmental
Specialist Lead Environmental
Specialist OPCQC
Jean-Christophe
Carret Senior Environmental
Economist Senior Environmental
Economist AFTEN
Kristine Schwebach Operations Analyst Operations Analyst AFTCS
Rildo Santos Language Program Assistant Language Program Assistant AFTUW
Paula Dias Pini Senior Urban Development
Specialist Senior Urban Development
Specialist AFTUW
Ivo G.P. Imparato Sector Leader Sector Leader AFTUW
Luz Meza-Bartrina Senior Counsel Senior Counsel LEGAF
Jose C. Janeiro Senior Finance Officer Senior Finance Officer CTRLA
Antonio L. Chamuco Senior Procurement Specialist Senior Procurement
Specialist AFTPC
Uri Raich Sr Urban Specialist Sr Urban Specialist AFTUW
Furqan Ahmad
Saleem Sr Financial Management
Specialist Sr Financial Management
Specialist AFTFM
Nilsa Ricardina Joao
Come Team Assistant Team Assistant AFCS2
Arlete Quiteria
Comissario Program Assistant Program Assistant AFCS2
Elvis Teodoro
Bernado Langa Financial Management
Analyst Financial Management
Analyst AFTFM
Non Bank Staff
Name Title Office Phone City
Louis Helling Consultant Consultant AFTUW
Luz Maria Gonzalez Consultant Consultant AFTUW .
.
Mozambique
5
I. Strategic Context
A. Country Context
1. Mozambique‟s development is severely handicapped by natural disasters. It is one of the
world‟s most vulnerable countries and ranks third among African countries in exposure to risks
resulting from climate variability. Mozambique also continues to be one of the poorest countries
in the world. It ranks 172 out of 177 countries in the 2007/2008 Human Development Index (a
composite index combining indicators for income, education and life expectancy).1 A major
natural disaster has struck the country at least every five years, translating to an average loss in
GDP growth of over 1% per year. Multiple studies predict that climate change will have important
implications for the country by increasing coastal storms, droughts, saline intrusion, and flooding.
Mozambique‟s vulnerability to climate related impacts is aggravated by its large infrastructure
deficit, among the highest in the region according to the 2009 Africa Infrastructure Diagnostic.
2. Mozambique‟s cities, which are particularly vulnerable to flood and erosion risks, play a
critical role in the country‟s development by providing essential transport and supporting services
to the agriculture, tourism and extractive sectors which are the main sources of the country‟s
wealth. The proposed Project will reduce the risks and vulnerabilities associated with climate
related impacts in selected cities. This responds to one of the four priorities identified by the
Government of Mozambique‟s (GoM) 2007 climate-related National Adaptation Program of
Action (NAPA). Since 2003, GoM‟s Disaster Risk Reduction Strategy, partially funded by the
World Bank, which incorporates climate change concerns, has also guided GoM‟s risk adaptation
measures in urban areas. The proposed Project is also consistent with the World Bank‟s „Strategy
for Making Development Climate Resilient in Sub-Saharan.
3. In addition, the proposed Project is aligned with the Mozambique‟s Strategic Program for
Climate Resilience (SPCR), which was developed in the context of the Pilot Program for Climate
Resilience (PPCR) and endorsed in June 2011. It will also support the achievement of climate
resilience related objectives in the forthcoming World Bank Country Partnership Strategy for
2012-1-5. The PPCR is expected to finance pilot investments to reduce future weather induced
impacts on poor populations and on Mozambique‟s fragile economy. One of the pilots identified
in the SPCR will provide support for building climate resilience into investment design and
planning in coastal cities. And this is likely to focus on the highly vulnerable transnational port
city of Beira. It is anticipated that the PPCR will aimed at the enhancement of climate resilience of
urban infrastructure by financing investments that integrate resilience to climate risks into the
design and provision of infrastructure in the cities targeted by the Project. Investments in Nacala,
Maputo and other cities included in this Project will also seek to build on planning and piloting
experience from proposed PPCR investments in Beira. This process will contribute to a gradual
1 Watkins, K., 2007. Human Development Report 2007/2008: Fighting climate change: Human solidarity in a divided
world. New York: UNDP.
Mozambique
Cities and Climate Change
PROJECT APPRAISAL DOCUMENT
6
scaling-up of climate resilient urban planning and investment across the urban sector. Also,
building on synergies with the proposed Project, the Nordic Development Fund (NDF) will
support institutional capacity strengthening on climate change issues, in particular in urban and
environmental planning in coastal cities.
B. Sectoral and Institutional Context
4. Mozambique‟s cities represent a significant developmental challenge for the Government.
Cities and towns are increasingly being seen as key for both economic growth and poverty
reduction, through a combination of improved urban living conditions, a more competitive
platform for investment by the private sector, and increased productivity of both people and assets.
However over half of Mozambique‟s urban population can be considered poor using consumption-
based indicators and core social indicators. Urban population is growing faster than the country as
a whole, and is expected to double by 2030. High urban population growth has been accompanied
by a notable lack of corresponding investments in basic infrastructure: as a result deficits in urban
services have been worsening. Environmental degradation has accelerated in many cities due to
unplanned development and poorly regulated land use, often including growth of low income
residential settlements in vulnerable areas without associated infrastructure investments. Flooding
and erosion are increasing threats in many cities and towns, both on the coast and along
economically important river basins and inland corridors.
5. Urban management in Mozambique has been decentralized to municipal Authorities since
approval of the 1998 Local Government Framework legislation which allocates political and
financial powers to elected Municipal Councils. The 33 initial municipalities, now 43, are
expected to gradually increase in number during the coming years. Newly created municipalities
often inherited the low functioning remnants of centralized colonial and socialist administration.
At the same time, with accelerating urbanization and economic growth, municipal responsibilities
are increasing and the country is undergoing an asymmetrical process of decentralization. In spite
of a broadly enabling legal and political framework (albeit with some remaining ambiguities and
constraints), few Municipal Councils have the institutional capacities needed to effectively
mobilize and manage resources and to sustainably provide adequate services to meet the social,
environmental, and economic challenges they face. From initially being providers of such local
facilities as local roads, markets, parks, cemeteries, public lighting, and solid waste services,
existing legislation is gradually increasing municipal responsibilities to provide more complex
services like health and education, as well as responding to climate related environmental
challenges.
6. Large, complex, and capital intensive urban investments in Mozambique typically remain
in the purview of national Government, while operation and maintenance for urban facilities and
public services are delegated either to municipalities or public utility companies. Surface drainage
to control urban flooding and erosion, including those exacerbated by climate impacts, often
require these sorts of investments. Where drainage infrastructure is inadequate, storm water
contamination is more severe and the health effects of floods are more dramatic. Urban flood
events are frequently associated with cholera outbreaks; this problem is most chronic and grave in
the city of Beira where large populous informal settlements are located in low lying flood prone
neighborhoods. Some neighborhoods in Maputo also face this chronic flooding and sanitation
challenge. In other cities such as Nacala where slopes are severe, rains are intense, and soils are
fragile, intense runoff from increasingly violent storms, including tropical cyclones, results in
erosion damage which threatens both public infrastructure and private assets. These are cities
7
highly exposed to the impact of natural disasters and climate change. Coastal erosion, flooding
and sea water intrusion are already severely affecting them, and it will worsen, perhaps
dramatically, depending on eventual sea-level rise resulting from polar ice melt. Permanent
inundation of the coast and surrounding low-lying areas could affect up to 500 meters inland from
the coast line. The high vulnerability of these cities to climate change impacts has been flagged by
numerous studies. Increasing the resilience of these cities to climate impacts, such as flood and
erosion, is amongst the priorities raised by these studies.
7. Mozambique‟s urban drainage infrastructure, mostly constructed by Portuguese Authorities
during the 1950s and 60s to serve colonial elites in central cities, is degraded, under-capacity, and
much more limited in coverage than the extension of contemporary cities with their vast periurban
neighborhoods. The country is gradually gaining capacity to address major urban flooding and
erosion. A specialized central agency, the Administration for Water and Sanitation Infrastructure
(AIAS) was created in 2009, under the authority of the Ministry of Public Works and Housing‟s
National Water Directorate (DNA/MOPH), to manage urban water2 and sanitation investments,
including drainage. DNA and AIAS have commissioned, with support from several aid agencies,
the technical and institutional studies on which the proposed Project‟s drainage investments in
Beira and Nacala have been identified and appraised. AIAS will also manage the drainage and
sanitation master plan for greater Maputo to be financed by the proposed Project.
8. Mozambique‟s National Sanitation Sector Policy not only sets policy objectives and
technical standards, it also defines an institutional and financial model for sustainable operation
and maintenance of urban sanitation and drainage systems. This model is based on the creation by
each municipality of a legally autonomous sanitation entity which would be financed by a
combination of a sanitation fee linked to the water bill, a drainage fee linked to municipal property
taxes, and assorted service-related user fees. These ring-fenced dedicated revenues are to provide
the basis for sustainable Operation and Maintenance (O&M) by the autonomous municipal
sanitation entity, with central Government to provide bridging subsidies during the start-up phase
of each municipal investment and the associated managing entity. DNA and AIAS have begun
implementing this model in Beira.
9. While large-scale drainage infrastructure may be required as a basis for urban flood and
erosion control in some areas of Mozambique‟s largest cities, other approaches may be more
appropriate for smaller municipalities and those confronting less acute risks from climate related
impacts. Smaller scale surface drainage investments are typically planned, financed and managed
directly by municipal infrastructure departments and their operation and maintenance is undertaken
on the same basis as municipal road maintenance. In many cases, limited municipal financial
capacity and underfunded infrastructure maintenance budgets are critical constraints to improving
the performance of the small and simple surface drainage and erosion control structures typically
used by Mozambican municipalities. In order to improve urban drainage under the existing regime
of limited interGovernmental fiscal transfers, municipalities must generate increased own source
revenues, must allocate these resources more consistently to infrastructure maintenance, and must
manage small infrastructure investments and maintenance operations more efficiently. The
proposed Project will provide capacity building to address these institutional constraints to more
sustainable urban management.
2 Water infrastructure investments in the large cities are managed by another agency, FIPAG, also partially financed
by the World Bank.
8
10. In many cities and towns, environmental and spatial planning complemented by improved
land use management are also critical elements of municipal adaptation to minimize the impacts of
climate related flooding and erosion. In some cities, areas of unregulated development and
informal settlements may cover as much as 90 percent of municipal territory. Many informal
settlements which developed during the almost two decade civil war and in the period of rapid
urbanization since the Peace Agreement of 1992 are located in low-lying or erosion prone areas.
Improved environmental planning and land use regulation, based on such instruments as
vulnerability maps and urban adaptation plans, will assist municipalities in reducing or minimizing
flooding and erosion risks. Drainage master plans will assist municipalities in targeting scarce
investment capital budgets to fund strategic investments which will reduce vulnerability of higher
risk neighborhoods. Land registration and regularization3 will support better land use regulation
and strengthen incentives for municipal-community partnerships to better maintain drainage flows
-- whether through fallow areas, roadside gutters, or dedicated drainage canals -- in the collective
interest of neighborhood risk reduction.
11. Mozambique‟s intergovernmental system has not kept pace with these evolving demands
for urban development and service provision, which are in many cases exacerbated by increased
risks resulting from climate change. Municipal financial capacities are extremely low in relation to
municipal responsibilities. Total municipal spending per capita in Mozambique is around US$12
(2006), which is significantly less than the average in Sub-Saharan Africa. Fiscal transfers are
highly constrained; legally capped at 1.5% of total national public revenues and currently
amounting to less than 1 percent. Municipalities remain dependent on the state budget for much of
their operating costs and on external funding managed by central institutions for urban
infrastructure investments. This dependency is compounded by weaknesses in municipal own-
source revenue collection, due both to policy constraints and low municipal capacity for resource
collection. Thus in order to increase the capacity of municipalities to ensure adequate operation
and management of climate-resilient infrastructure and to competently manage the urban
environment and effectively regulate use of urban land, the public sector systems for decentralized
planning, finance, infrastructure provision, infrastructure maintenance, and service delivery require
reform and strengthening at both central Government and municipal levels. This Project will
strategically invest in several elements of this intergovernmental system to address key municipal
constraints to climate resiliency and sustainable urban development.
C. Higher Level Objectives to which the Project Contributes
12. The proposed Project will contribute to the achievement of higher level objectives of the
World Bank, Government of Mozambique, and Millennium Development Goals (MDG). The
Country Partnership Strategy (CPS) of FY12-15 has two strategic pillars, (i) Vulnerability and
Resilience, and (ii) Governance and Public Sector Capacity, being directly supported by program
activities. These same pillars are being supported by the new Africa Strategy. Similarly,
numerous Project activities in the sanitation and municipal development sectors are aligned with 2
pillars of the Government‟s Poverty Reduction Action Plan (“PARPA III”): Fostering Human and
Social Development and Good Governance. Also, the Project will be instrumental to the
attainment some of the MDGs linked to Environmental Sustainability such as integrating the
principles of sustainable development into national policies and programs; reducing the number of
3 Land registration, while linked to environmental regulation, will also provide the information required to broaden
each municipality‟s land and property registry. This registry provides essential data for the Property Tax (IPRA)
Cadastre that is a major underexploited source of municipal revenues.
9
people without access to sanitation; and improving the standard of living of slum dwellers.
Strongly aligned with pillars I and II of the CPS, the proposed Project also recognizes the key role
of municipalities to reduce vulnerabilities and manage climate related impacts.
13. The Government‟s last Five Year Plan referred to the ongoing decentralization in the
country as “one of the pillars of the process of modernization of the state”. The Plan also sets as
an objective the consolidation of the municipalities. It also aims to improve access to land and
housing by ensuring the approval of urban land use plans and to promote the effective coordination
of institutions involved in urbanization and the provision of infrastructure. Soon after the new
Government took office in early 2010, the official emphasis was on continuity in terms of the
priorities set out in the previous Government‟s Five Year Plan and the PARPA II, with an
additional emphasis by the new Government on job creation and urban poverty. This new and
increasing focus on reducing urban poverty relates directly to this Project‟s objectives and
activities.
14. Mozambique has developed a number of strategies to address climate risks. At the macro-
level, the Government of Mozambique (GoM) addressed disaster risk in the Action Plan for the
Reduction of Absolute Poverty 2006-20010 (PARPA II). GoM is currently preparing the next Five
Year Development Plan and the PARPA III approved in early 2011 that address climate risks. One
of the strategic objectives of PARPA 3 is to support the adoption of measures to „prevent and adapt
to climate change‟. This document assigns responsibility for leading progress on this objective to
the Ministry of Agriculture (MINAG). Meanwhile, the Ministry for Coordination of
Environmental Affairs (MICOA) has prepared a NAPA in 2007 that laid the foundations for a
multi-stakeholder adaptation agenda with four priorities: (i) strengthening early warning systems,
(ii) strengthening the capacity of farmers to deal with climate change; (iii) reduction of the impacts
of climate change along the coastal zone; (iv) water resources management. However, GoM
recognizes that improved coordination and strategic planning is still needed – in particular to
clarify institutional roles and responsibilities between line ministries (including those relating to
Disaster Risk Management) and to set-out effective priorities for adaptation investment. To this
end, the MICOA is coordinating the development of a National Strategy and Action Plan for
Climate Change and Disaster Risk Management, scheduled for completion in 2012.
II. Project Development Objectives
A. Project Development Objectives (PDO)
15. The PDO is to strengthen municipal capacity for sustainable urban infrastructure provision
and environmental management which enhance resiliency to climate related risks.
B. Project Beneficiaries
16. The direct Project beneficiaries are persons living in the selected municipalities
participating in the Project. Because in Mozambique most urban areas susceptible to flooding and
erosion are occupied by informal settlements, the benefits from reduced environmental
vulnerability resulting from Project financed investments will accrue especially to low income
households.
C. PDO Level Results Indicators
10
17. The results indicators at the PDO level are:
(i) Number of Project beneficiaries, of which female (%) [core indicator]
(ii) Percentage annual increases in aggregate municipal own-source revenues
(iii) Area of participating municipalities benefitting from reduced flooding or erosion
III. Project Description
A. Project components
18. The proposed Project will assist Mozambique in developing appropriate institutions, and
infrastructure improvements to strengthen the resilience of selected cities to climate related
impacts. Infrastructure investments will consist of the rehabilitation of drains, conduits,
embankments, levees and surface water storage facilities. Institutional investments will include
improved urban environmental planning and land use management; increased own-source revenue
capacity, more effective and transparent municipal financial management; and a sustainable
service delivery model for operation and maintenance of urban sanitation and drainage systems.
Component 1 – Strengthening the municipal sector (US$35 million)
19. The objective of this component is to increase municipal capacity to sustainably plan,
manage and finance climate resilient urban development, including through the strengthening the
Recipient‟s institutions underpinning its municipal system in order to improve sustainable
decentralized financing and management of the urban environment and infrastructure
20. Subcomponent 1A: Local level support for improved municipal governance (US$27.5
million) will provide support for 20 municipalities to enhance municipal resiliency to
environmental risks and municipal capacity for sustainable decentralized urban management. The
20 municipalities to be supported under Component 1 with capacity building, technical assistance
and performance grants include (with their respective 2007 populations):
in Maputo Province - Manhiça (56,165), Matola City (671,556), and Namaacha (12,725);
in Gaza Province - Chibuto (63,184), Chokwé (53,062), Macia/Bilene (27,795),
Mandlakazi (10,317), and Xai-Xai (115 752);
in Inhambane Province - Inhambane City (65,149), Massinga (20,930), Maxixe City
(108,824), and Vilankulo (37,176);
in Sofala Province - Gorongosa (18,761);
in Manica Province - Catandica (22,271), Chimoio City (237,497), Gondola (33,877), and
Vila Manica (36,124); and
in Tete Province - Moatize (38,924), Tete City (155,870), and Ulongue (13,620).
21. Subcomponent 1A activities include:
(a) Municipal Performance Grants: Support Municipalities: Support Eligible
Municipalities through the financing of Sub-Projects, by providing Municipal
Performance Grants;
(b) Improved Urban Planning and Land Use Management: Support including through the:
(A) the carrying out of climate vulnerability assessments, basic spatial planning
studies and development and implementation of urban land management instruments
in all Municipalities as well as urban environmental and surface water management
11
instruments in those Municipalities vulnerable to climate related flooding and erosion;
(B) the development and dissemination of methodologies for urban planning and land
use and environmental management; and (C) carrying out of training sessions for
municipal staff and technicians;
(c) Enhancement of Municipal Financial Sustainability: Support to improve financial
management and enhanced municipal revenues, including through the: (A)
development and dissemination of methodologies for revenue administration; (B) the
carrying out of training sessions in revenue administration and financial management
for municipal staff; (C) provision of advisory services and equipment to strengthen the
institutional capacity of the municipalities; and (D) development and implementation
of financial and management systems
22. Subcomponent 1B: National Level Support for Improved Municipal Governance (US$
7.5 million) will strengthen key national institutions which regulate and support the municipal
system. It includes:
(a) Capacity strengthening of the Ministry of State Administration and the Ministry of
Finance to monitor the performance of the municipalities and develop improved
intergovernmental and municipal policies and systems including through the
development and implementation of the national policy and regulatory framework for
municipal governance.
(b) Strengthening of ANAMM to provide services to its member municipalities including
through capacity building support activities and policy and regulatory advocacy on
municipal and intergovernmental issues.
(c) Establishment and operation of a PIU in DNDA to support the coordination and
management of Component 1 of the Project including through the provision of
technical assistance, training, audits, goods and operating costs.
Component 2 – Enhancing resilience of strategic coastal cities (US$85 million):
23. This component will support the enhancement of selected municipalities, including those in
Beira, Nacala and Maputo metropolitan area for sustainable resilience to weather-related
environmental threats. The component will focus on:
(a) Identification of key investment priorities in selected cities to strengthen resilience to
climate related floods and erosion through the carrying out of: (a) an assessment of
current needs, including the selection of the cities to be targeted, and Projecting trends
and scenarios taking into account climate change considerations; and (b) training
sessions for the technical teams of AIAS on climate change impacts on sanitation.
(b) Strengthening Resilience of the City of Beira to Control Floods including through the:
(a) development of a comprehensive study on integrated urban water management; (b)
design and supervision of drainage rehabilitation works; (c) carrying out of drainage
rehabilitation works including the relining of the primary channel (central) of Beira‟s
drainage system; (d) carrying out of rehabilitation works affected by the works
referred to in (c) of this sub-paragraph including fences, latrines, verandas, side-walks
as well as provision of resettlement houses provided with basic infrastructure; and (e)
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provision of advisory services and equipment to strengthen the institutional capacity of
Beira‟s Autonomous Sanitation Service.
(c) Strengthening the resilience of the City of Nacala to control erosion including through
the: (a) design and supervision of erosion control and drainage rehabilitation works
including associated environmental and social support; (b) carrying out of erosion
control and drainage rehabilitation works including those related to the three primary
channels of Nacala‟s drainage system; and (c) provision of advisory services and
equipment to strengthen the institutional capacity of Nacala municipality for
managing drainage infrastructure and erosion control
(d) Strengthening the resilience of Maputo metropolitan area to control floods including
through the development of a master drainage and sanitation plan for the Great
Maputo area.
(e) Establishment and operation of the PIU in AIAS to support the coordination and
management of Component 2 of the Project including through the provision of
technical assistance, audits, goods and operating costs.
B. Project Financing
24. Lending instrument: The proposed lending instrument is a standard Specific Investment
Loan (SIL) comprising an International Development Association (IDA) Credit of US$120
million, Special Drawing Rights (SDR) equivalent to be implemented over six years. During
Project formulation the possibility of employing the Project for Result (P4R) lending instrument
was assessed, but due to ongoing definition of P4R policies and procedures and prior comments of
the Project‟s delivery date, this option was deemed not viable. Selection of the SIL was premised
on the flexibility and its suitability to incorporate financing for a broad range of activities including
a number of specific investments across the country, technical assistance and capacity
enhancement measures.
25. Project Cost and Financing
Project Components Project
cost
IDA
Financing
% Financing
1. Component 1 – Strengthening the municipal sector
1.1. Local level support for improved municipal governance
1.2. National level support for Improved Municipal Governance
2. Component 2 – Enhancing resilience of strategic coastal cities
2.1. Identification of key priorities in selected cities to strengthen
resilience to climate related floods and erosion
2.2. Strengthening resilience of the City of Beira to control floods
2.3. Strengthening resilience of the City of Nacala to control erosion
2.4. Strengthening resilience of Maputo metropolitan area to control
floods
2.5. Establishment of and operation of the PIU in AIAS to support the
coordination and management of Component 2 of the Project
Total Baseline Costs
Physical contingencies
Price contingencies
Total Project Costs
Interest During Implementation
35.0
27.5
7.5
85.0
0.6
61.9
6.4
12.3
3.8
35.0
85.0
100
100
13
Front-End Fees
Total Financing Required
120.0
120.0
100
C. Lessons Learned and Reflected in the Project Design
26. There have been five urban Projects in Mozambique with World Bank financing: Urban
Rehabilitation Project (PRU, 1988-1996), Program for the Reform of Local Public Administration
(PROL, 1994-1999), the Municipal Development Project (MDP, 2003-2007) and the Maputo
Municipal Development Program I and II (MMDP, 2006-2010, 2011-2015). While PRU focused
mainly on physical rehabilitation of neglected urban infrastructure, PROL and MDP contributed
significantly to the establishment of the legal framework for local Government in Mozambique and
to the introduction of good municipal management practices such as fair, transparent procurement
procedures and regular municipal audits. MMDP I aimed at strengthening the institutional and
financial capacity of the country‟s capital to support service delivery and priority investments.
MMPD II aims at completing the reforms initiated during MMDP I with a focus on sustainability.
The World Bank‟s approach in Mozambique has balanced policy support to the municipal system
with capacity building support to specific municipalities, with a focus on the largest city, where
much of the economic base of the country is concentrated. In addition, the World Bank led two
multi-donor sponsored Economic and Sector Work Projects: one concerning the lessons learned
from 10 year of municipal development in Mozambique and the second on municipal revenue
potential. Based on this work and comparable experience in similar countries, key lessons learned
include:
27. Systemic bases of municipal development require improvement: Although the demands for
service delivery are frequently articulated on a sectoral basis (urban land management, water
supply, sanitation, transportation, solid waste management, etc.), municipalities' ability to deliver
in any sector is strongly influenced by a number of elements that work as a system. Only by
strengthening the institutional bases of municipalities can they become effective and sustainable
governing and service provision entities. However, institutional change is a slow and difficult
process that often meets significant resistance and therefore needs substantial commitment from
borrowing countries. Many World Bank and development partner financed Projects have shown
that sustainability of Project results is often limited because new roles and responsibilities have not
been institutionalized.
28. Urban planning and land use management should be priorities in municipal Projects:
Establishing proper spatial planning and land management systems is critical to aligning incentives
for public and private investment and to improving security of tenure, particularly in informal
settlements. These instruments also support sustainable urban environmental management. In
Maputo and in the municipalities supported by the P13/PDA, important steps to improve urban
planning are being taken, but in other municipalities more effective implementation of local
planning laws and investments in improved security of tenure are needed. This lesson has been
taken into account in the design of the Project‟s urban planning component which will increase the
coverage of spatial development planning and land titling.
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29. Municipal finance improvement requires significant political commitment and
organizational effort: In order to ensure sustainability of governance, environmental management,
and service provision in cities, municipal finances must be strengthened. Both intergovernmental
transfers and own source revenues must be increased in keeping with the demands for urban
infrastructure and services. To complement resource increases, major investments are needed to
strengthen financial management systems. To improve their overall performance, experience
shows that there is no substitute for complete, yet simple, financial management systems that allow
municipalities to perform financial transactions in a standardized and controlled manner. Moving
to integrated systems (that are by and large computerized) implies a drastic change in
municipalities‟ organization, culture, skills, and operational routines, so Authorities must be
committed to enable such profound changes. In addition, own-source revenue mobilization
requires significant political commitment, administrative effort, and public mobilization.
30. Performance incentives stimulate increased municipal demand for capacity building and
greater impacts on urban governance and service provision: The Bank has gathered substantial
experience in the use of performance grant programs in countries such as Ghana, Tanzania,
Ethiopia, Cambodia, Bangladesh, etc. These experiences indicate that supply-side capacity
building measures aimed at local Governments in the absence of demand-side incentives often
produce limited results. Conversely, there is growing evidence that capacity building initiatives,
such as systems development (in areas like financial management and planning), institutional
reform, and training, are considerably more effective when they are linked with a system which
strengthens demand on the part of targeted local Governments. Performance based
intergovernmental grants can provide appropriate incentives, to which local Governments are
likely to respond. As a result municipalities are supported to take advantage of capacity building
activities and commit themselves to inculcating them into their ongoing operations. This is the
logic that will be adopted in component 1 of this Project.
31. Regarding improving infrastructure to control floods and erosion, the Project also draws on
lessons from water and sanitation Projects implemented in Mozambique and from successful
operations in other regions focused on the strong integration of the urban and water sectors.
32. Strong ownership from municipalities provides the basis for infrastructure sustainability:
Although Project financed works are executed through a central Government agency,
municipalities should demonstrate strong ownership of infrastructure created through the Project as
a basis for assuming their role in ensuring appropriate operation and maintenance. This foundation
has already been established in the Municipality of Beira, where a sanitation Project employing
this institutional arrangement is under execution. Similar commitment has also been indicated by
the Municipality of Maputo during preliminary discussions related to the formulation and
implementation of the Metropolitan Drainage/Sanitation Master Plan.
33. Investment Projects also provide opportunities for hands-on training of municipal staff:
Participation of municipal staff in management of works contracts, including construction
supervision activities, allows them to increase their technical capacities and sense of ownership by
working jointly with the construction contractor and supervising engineers. As part of their
training, municipal staff should also review the reports on works execution submitted by the
constructor, as part of the works approval process. During contract execution, municipal staff
should also receive training to operate the equipment that will subsequently be transferred from the
contractor to the municipality, or more precisely, to the municipal autonomous sanitation agency.
15
Accordingly to the technology used for the works and the equipments used, the municipal staff
may have access to training provided by manufacturers as well as to visit to similar interventions
in other cities within the country or in another country to learn from the practical experience of
their peers.
34. Packaging works in large contracts facilitates economies of scale and effort: Lessons from
similar Projects indicate that packaging infrastructure works in large contracts is realistic and
appropriate. Both the Government and the private market respond positively to this method, which
reduces the transactions costs, allow Project teams to focus on the quality of the results pursued,
and has contributed to timely Project implementation.
35. Lessons from INGC, World Bank and GFDRR supported analytical work is that
Mozambique‟s urban environments will face increasing climate variability and uncertainty, a
likelihood of more frequent and more intense rainfall event and greater risks from coastal storms
and cyclones.
IV. Implementation
A. Institutional and Implementation Arrangements
36. The Project will be implemented by two specialized agencies, each of which has the
governmental mandate to manage policies and programs which correspond to the Project‟s two
components. The Ministry of State Administration (MAE), and specifically its DNDA is
responsible for the regulation and strengthening of the municipal system; MAE/DNDA will be the
implementing agency for Component 1. The national AIAS, a specialized semiautonomous
agency under the supervision of the MOPH, is responsible for provision of urban water
infrastructure in all but the largest cities and urban sanitation infrastructure, including drainage, in
all cities and towns; AIAS will be the implementing agency for Component 2. Each of these
implementing agencies will be directly and fully responsible for resource management,
procurement, operational management, safeguard and fiduciary compliance and monitoring and
reporting related to the activities of their respective component.
37. Management of Component 1 will be centralized in the DNDA, including planning,
implementation management, monitoring, fiduciary controls, safeguard compliance, and reporting.
A Project Implementation Unit (PIU) will fulfill these responsibilities, led by a contracted Project
Coordinator supported by dedicated PIU technical and administrative personnel. With the
exception of Municipal Performance Grants, all component resources and contracts will be
managed directly by the PIU. Beneficiary institutions for Component 1 include: 20 municipalities,
the ANAMM, the Ministry of Finance, and the DNDA itself as the recipient of capacity building
support. Based on their approved annual workplans, goods and services will be procured and
purchased by the PIU and provided in-kind to these beneficiary institutions at central and local
levels. For Municipal Performance Grants, based on the conditions and procedures specified in the
Project Grants Manual, municipalities will each manage and report on use of their annual
allocation for capital investments based on approved grant investment plans and budgets.
Monitoring, and reporting will be the responsibility of the PIU.
38. Management of Component 2 will be centralized in the AIAS. A PIU will be established in
AIAS to create additional capacity to implement Project funded activities. Procurement and
16
financial management will be carried out by AIAS in Maputo, with support from contracted
specialists. Implementation support to the AIAS will be funded by the ongoing Bank financed
WASIS Project and related Millennium Challenge Corporation (MCC) Project, and will be in
place and functional when the Project becomes effective. Once the MCC and the WASIS Projects
conclude, the proposed Project will take over the cost of this implementation support team. In
addition, the Project will finance the services of an Executive Coordinator to support to the AIAS
Director and ensure the technical and operational coordination of component activities at central
and local levels. To ensure an appropriate capacity to manage the execution of the works in the
cities of Beira and Nacala, the Project will finance a small unit based in each of these cities,
including an engineer, a technical assistant, an administrator, and a secretary, who will work with
municipalities, consultant engineers, and construction contractors in each city. Monitoring and
reporting will be the responsibility of the Project‟s Coordinator under the authority of AIAS.
B. Results Monitoring and Evaluation
39. The Implementing Agency for each Component will be wholly and solely responsible for
monitoring and evaluation of that component: the DNDA for Component 1 and AIAS for
Component 2. Each Implementing Agency will include a Monitoring and Evaluation Officer who
will be responsible for collecting and presenting all monitoring data and reports as specified in the
Operations Manual.
40. Component 1 monitoring will be carried out in direct collaboration with beneficiary
institutions at central and local level for all capacity building activities. Additional monitoring
data regarding capacity building activities will be collected from technical assistance providers
contracted by the PIU, as part of consultants‟ reporting requirements. Component 1 monitoring of
Municipal Performance Grants will be carried out in close collaboration with beneficiary
municipalities through Municipal Monitoring Officers (MMOs) to be nominated by each
participating municipality. Training and oversight of MMOs will be provided by the PIU through
its Monitoring and Evaluation (M&E) Officer. PIU contracted technical assistance providers
working with municipalities will assist the PIU to validate monitoring data provided by
municipalities. Supervision visits by PIU staff will also allow validation of municipal monitoring
data. These monitoring arrangements will also provide the data required for annual performance
assessments of municipalities, on the basis of which annual allocations of Municipal Performance
Grants will be established.
41. Component 2 monitoring data will be collected and presented by the local Project
management offices to be established and staffed by AIAS in each municipality where
infrastructure investments are to be carried out. These local Project management offices, under the
supervision of the PIU, will collaborate with municipalities, construction firms, and supervising
engineers to collect relevant information regarding progress implementing works. Data regarding
the institutional and financial sustainability of institutional arrangements for operation and
maintenance will be collected in collaboration with each municipality. Component 2 activities to
be undertaken at central level or in cities where local Project management offices will not be
established will be monitored directly by the PIU, through its M&E Officer.
42. An external evaluation of the Project will be undertaken as an input to the Mid-Term
Review (MTR). On the basis of the evaluation report and the MTR, GoM and the Task Team may
17
consider adjustments in the Project design or implementation arrangements as well as possible
preparation of follow-up activities to those financed by the Project.
C. Sustainability
43. Institutional sustainability is a core objective of the Project which emphasizes the
strengthening of institutional capacity for planning, management and mobilization of municipal
revenues to sustain municipal administration and service delivery. The institutional dimension of
sustainability rests on improved organizational systems and greater human capacity. The technical
assistance (TA) that will be provided by the Project will finance a number of capacity building
activities (methodology manuals, training courses, peer to peer learning, etc.) that will strengthen
the municipalities‟ human resources. Institutional support in the area of operation and maintenance
will also be offered to either strengthen or help to establish the entities in charge of sanitation on
the three large coastal cities.
44. Environmental Sustainability will be a key outcome of the Project. Urban plans and land
use management will contribute to reduced risks to environmentally vulnerable lowland and
coastal areas within municipalities. Improved drainage systems will also protect valuable
infrastructure assets throughout municipalities and reduce runoff damage to soil and vegetation
along slopes and coastal areas.
45. Financial sustainability will also be strengthened by the Project. Enhancement of own
source revenues is key to improve accountability between citizens/tax payer and their elected
Governments. However, because some of the municipalities still have a very weak tax base, in
addition to own source revenue enhancement the Project will also continue a policy dialogue with
the Ministry of Finance on the intergovernmental fiscal structure as a whole. The piloting of
performance grants in the Project will illustrate how small capital allocations could be used to
leverage local-level reform efforts. Also, the Government‟s interest in the implementation of a
financial management system at the local level shows recognition of the need to improve the basic
financial management functions that are a necessary condition for decentralized governance.
46. Operation and Maintenance (O&M) sustainability of Project financed municipal
infrastructure to control floods and erosion will be ensured by the municipal autonomous sanitation
services, which will be strengthened by the Project. The first of such agencies has been created by
the Municipality of Beira. This institutional solution is one the main elements of Mozambique‟s
Water and Sanitation Policy. It responds principles including: (i) consistence with the municipal
mandate with respect to sanitation/drainage services provision, (ii) financial sustainability, which
is ensured through the collection of sanitation/drainage services fees, combined with the adoption
of legal mechanisms allowing to segregate the sanitation agency financial resources from general
municipal revenues, (iii) fiscal compliance through annual independent financial audits, (iv)
performance monitoring through the water, sanitation/drainage regulatory agency (CRA), and (v)
creation of medium/long term plans for investments and/or O&M assistance agreed between the
municipality and the central Government, financed through a mix of local revenues and transfers
from the central Government‟s annual budget.
18
V. Key Risks and Mitigation Measures
A. Risk Ratings Summary Table
Stakeholder Risk Rating
Implementing Agency Risk
- Capacity Substantial
- Governance Moderate
Project Risk
- Design Substantial
- Social and Environmental Moderate
- Program and Donor Substantial
- Delivery Monitoring and Sustainability Moderate
- Technical Risk Substantial
Overall Implementation Risk Substantial
B. Overall Risk Rating Explanation
47. The principle risk is associated with implementation agency risks; given GoM
implementation agency for Component 1 has little Project management capacity and has lost past
personnel who understood Bank procedures through work on prior Bank Projects. The propose
mitigation measure to this risk is the creation of a PIU staffed by contracted personnel with Project
management and World Bank (WB) Project experience to compensate for low ministerial
capacities.
48. Another major implementation agency risk relates to the low municipal capacities for
planning, management, and technical functions related to focal areas in urban planning and
municipal finances. The proposed mitigation measure consists of providing strong support to local
Government management and reporting systems as well as staff training, in order to strengthen
municipalities‟ management and technical capacities.
49. Municipal capacities for operation and maintenance of urban infrastructure may not be
adequate to ensure sustainability of investments. The proposed measure to this risk is the Project
support to the municipal sanitation entities to ensure dedicated revenue stream, and equipment for
infrastructure O&M.
VI. Appraisal Summary
A. Economic and Financial Analysis
50. Project benefits consist of reduction of frequency and intensity of floods that will occur in
Beira and of reduction of erosion that will occur in Nacala. A cost benefit analysis was carried out
for Beira; and a cost effectiveness analysis was carried out for Nacala. Both analyses were based
on the results presented in the feasibility studies.
19
51. Economic benefits for Beira were estimated based on the reveal preference approach,
which relies on data from observed transactions in the market, such as the costs associated with the
floods. The avoided cost method was used to estimate the economic benefits that different
stakeholders will have with the Project. This calculation corresponded to the difference between
damage costs under two scenarios: “with” and “without” the implementation of the investments.
The associated damage costs vary with the intensity and duration of the flood, which imply
different water levels, and extension of flooded areas.
52. These costs were calculated in probabilistic terms, based on collected data and a hydrologic
mathematical model for storm simulation. Several alternatives of investment were evaluated
according to different number of years of recurrence (2, 5, 10, and 20 years). The avoided damage
cost for Beira drainage investment, was estimated for (i) the industrial sector, (ii) the formal
housing; (iii) informal housing; (iv) agriculture; (v) roads infrastructure; (vi) electricity
infrastructure; (vii) loss of life; (viii) transport; and (ix) tourism. The results of the economic
analysis of the drainage investment show that the Beira Project is economically feasible with a
NPV of US$49.5 million and an economic rate of return of 18%.
53. The sensitivity analysis for the Project in Beira shows the soundness of the Project. The
switching value of the investment costs is 100%, which means that the investment cost could
increase up to 100% and the Project would still show positive economic returns. Regarding the
benefit variables, the sensitivity analysis shows that if the assumptions made for the benefits are
cut by half, the Project would still be economically viable. The cost effectiveness analysis for
Nacala shows that the chosen alternative of building gabions baskets is economically rationale.
54. Financial benefits were estimated based on the drainage fee applied since 2008, following
the approval of the Law no1/ 2008 of January 16, 2008. This charge consists of an additional 15%
on property tax. The financial analysis shows that current revenues from drainage fee are not
enough to cover the operating costs of the drainage investments to be financed by the Project.
Therefore to make the Project sustainable either the drainage revenues have to increase, or the
Government has to transfer subsidies for the operation. In both municipalities there is ample room
for improving the collection and billing of property tax, given that, they currently collect only 4%
in Beira and 0.1% in Nacala of what they could potentially charge. To cover operating expenses
when investments are completed at year five, Beira municipality would have to increase 22% per
year its revenues from property tax in order to be able to make available US$130,000 per year, the
estimated amount that will be needed to maintain the investments financed by the Project. Nacala
will need to increase its revenues in 82% per year, to make available US$7,000 per year for the
estimated maintenance activities.
B. Technical
55. Urban Planning: The Project will finance activities to strengthen the urban planning
capacities of participating municipalities. Support to municipalities will focus on three kinds of
instruments for urban spatial management: (i) Basic Spatial Planning Instruments (e.g. urban
structure plans and sub-municipal urbanization plans); (ii) Urban Environmental Management
Instruments (e.g. ecological zoning plans, drainage and erosion control plans); (iii) Urban Land
Management Instruments (issuing of documents formalizing effective land tenure (DUATs) and
establishment of land and property cadastres). Methodologies employed in these three domains
will be based on GoM regulations and developed in coordination with the MICOA and its National
Directorate for Territorial Organization (DINAPOT) which is the GoM agency responsible for
20
normative aspects of urban environmental and land use management. Project promoted methods
will also be based on good practices developed by other relevant initiatives in other regions of
Mozambique, including the P13/PDA and the MCA urban land component. Support to all these
activities will require provision of higher level training and technical assistance by the Faculty of
Architecture and Urban Planning of Eduardo Mondlane University, who possess unique
knowledge and experience in implementing Mozambique‟s urban planning regulations in the local
social and institutional context.
56. Financial Management: In order to create human, technical and institutional capacity to
improve financial management at the municipal level, the program will finance the implementation
of an appropriate computer based financial management system adapted for municipal
management (IFMIS). The track record in Africa of IFMIS at the sub-national levels is mixed.
Thus, support to this activity will carefully review the technical and institutional aspects of the
activity to ensure technical viability and sustainability in the low-capacity environment of
Mozambique. In addition to affordability, importance will be given to the compliance with the
system with national legislation for public financial management (SISTAFE) and to the simplicity
for its operation and maintenance. Also, in addition of establishing an institutional “home” for the
system at the central Government level, the Project will ensure enough local capacity for system
implementation, operation, and maintenance. Significant technical capacity to provide technical
support to such systems, both the financial management and information technology aspects, exists
in Mozambique‟s private sector; part of the technical viability of any system will depend on
engaging these private sector capacities appropriately in support of public sector system
management, operation, and maintenance.
57. Technical Solutions for the Flood and Erosion control works: Mozambique priority needs
with respect to flood and erosion control were identified through comprehensive Sanitation
Strategy Plans developed for seven selected cities in 2007. Based on the finding of these studies,
investment programs were initiated, which financed technical feasibility studies for improving the
sanitation and drainage infrastructure in these cities. These programs also financed initial
assessments on the institutional, legal, financial and technical aspects to ensure the sustainability of
the infrastructure services expected to be created by the Project. Although a large stock of
feasibility studies and some engineering designs were prepared, investment funds for the
construction of the works have only been made available for some of the cities. This creates an
opportunity for the Project to leverage existing investment plans, which are already GoM
priorities, as a basis for relatively rapid financing.
58. These technical studies were prepared by international consulting firms, whose solid
experience in flood control and sanitation is acknowledged by the public and private sectors. The
designs followed national technical norms, which were formally established in Mozambique only
in 2003. Existing feasibility studies included an analysis of technical alternatives, preliminary
environmental and social assessments, as well as economic and financial analyses. Based on the
results of a cost-benefit analysis, the preferred technical alternative was selected based on
definition of an appropriate return period for flood events. The infrastructure works proposed for
Project financing have benefited from the development process described above. As part of the
engineering design packages financed by the proposed Project, key technical inputs such as the
hydrological analyses will be updated, incorporating climate considerations as appropriate.
21
59. Mozambique has developed experience in procuring large package of consulting services
and works, as well as capacity in managing the implementation of large contracts. Although the
Government still needs additional technical support to manage these contracts, this arrangement is
preferred given the opportunities it generates for economies of scale and for compliance with
planned timetables.
60. Drawing on the technical studies available and on additional technical support, AIAS has
already prepared preliminary Terms of Reference for a large consulting package (engineering
designs, environmental and social support, and works supervision) for the drainage rehabilitation
works in Beira. Also, they have prepared preliminary Terms of Reference for the Maputo
Drainage/Sanitation Master Plan. It is envisaged to launch the expression of interest for these two
consultancies as soon as the Decision Meeting confirms the Project content.
C. Financial Management
61. The Financial Management (FM) arrangements for the Project have been designed keeping
in view the need to support both fiduciary and developmental needs. The proposed FM
arrangements of the Project will satisfy the Bank‟s minimum requirements under OP/BP 10.02.
The FM assessment benefited from the experience of P13 in addition to the recently concluded
PEFA for Mozambique. This involves review of FM arrangements at both DNDA and AIAS as
well as 20 participating municipalities under component 1. Nevertheless, the expectations with
regards to the state of existing FM capacity of these 20 municipalities is kept low and therefore,
adequate FM capacity building will be provided under the Project in order to pass the audit
eligibility criterion as well as to ensure that Bank funds are used for intended purposes. Based on
the preliminary FM assessment, the overall financial management risk is rated Substantial.
62. Suitably qualified and experienced accountants will be contracted in order to make-up the
FM capacity gap in both DNDA and AIAS.
63. The Project will be budgeted as part of the GoM‟s budgetary processes and releases of
funds and accounting will follow established Government systems which are considered adequate
as far as DNDA and AIAS are concerned. Two separate on-CUT sub-accounts will be established
for the Project into which the proceeds of the Credit will be received. The account will be
denominated in US Dollars and will have subordinate local currency accounts to finance local
currency expenditures. The on-CUT sub-accounts form part of the Government treasury single
account of the GoM. Both DNDA and AIAS will maintain separate accounts to cater for the
implementation of all Project activities for their respective components under the Project.
64. The Project will use report-based disbursements through the use of quarterly Interim
Financial Reports (IFRs) on the sources and uses of Project funds for both Project components. A
forecast of the first 6 months expenditures will form the basis for the initial withdrawal of funds
from the Credit, and subsequent withdrawals will equally be based on the net cash requirements
for the subsequent 6 months. Specifically for the performance-based grants to municipalities
under component 1, annual forecasts will be based on the latest performance information available
on their meeting the performance indicators.
65. The Project will follow a cash basis of accounting and financial reporting. Separate annual
audited financial statements with respect to each component of the Project shall be submitted to
IDA within 6 months of the end of the GoM‟s fiscal year (i.e. by June 30 each year). Auditors
22
satisfactory to IDA will conduct the audits on the Project financial statements on terms of
reference to be agreed within two months of Project effectiveness. The Project auditors in relation
to component 1 will make use of municipality audit reports in order to get assurance over the use
of funds under the performance grants allocated to the respective municipalities. Hence, each
municipality will be required to (a) submit to DNDA its annual budgets and procurement plans for
Project funded Municipal Performance Grants as well as in-year grant implementation reports in
form and substance as would have been agreed between DNDA and the respective municipality;
and (b) annual audited financial statements in form and substance as would be agreed between the
DNDA and respective municipality. These reports will form part of the due diligence reviews that
the Bank‟s fiduciary team will conduct during the year.
D. Procurement
66. Procurement for the proposed Project will be carried out in accordance with the World
Bank‟s “Guidelines: Procurement of Goods, Works and Non-consulting Services under
International Bank for Reconstruction and Development (IBRD) Loans and IDA Credits and
Grants by World Bank Borrowers” published by the Bank in January 2011 and the World Bank‟s
“Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and
Grants by World Bank Borrowers,” published by the Bank in January 2011. Anti-corruption
guidelines which applies to this Project: “Guidelines on Preventing and Combating Fraud and
Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15,
2006 and revised in January 2011” per the FA appendix. The procurement risk associated with the
Project is rated as Substantial.
67. The procurement activities for the proposed Project will be managed by two separate
implementing agencies, the MAE/DNDA for component 1 and by the MOPH/AIAS for the
component 2. While DNDA will create a new implementation unit for the Project, activities
managed by AIAS will be through the use of their internal procurement unit, the Unidade Gestora
e Executora das Aquisições (UGEA), which is under the frameworks of the local procurement
legislation.
68. The UGEA under AIAS has been reviewed during preparation and found to possess limited
capacity, both in terms of available resources and knowledge of World Bank fiduciary
requirements. The MAE/DNDA and AIAS have agreed to enhance existing, MAE/DNDA through
the establishment of a unit with staff with experience and qualification satisfactory to IDA prior to
Effectiveness and the MOPH/AIAS unit through the hiring of a technical assistance, as the UGEA
members have not yet been exposed to Bank procurement procedures. AIAS is in the process of
recruiting a qualified procurement technical assistance consultant, through the on-going Bank
funded Water Sector Institutional Support Project, who should be proficient in Bank procurement
and will strengthen available capacity as well as providing training to AIAS‟s UGEA current and
future staff. MAE‟s PIU will have a procurement officer, experienced in Bank procurement, and
an additional seasonal consultant for complex procurement. Both staff should be hired prior to
Project effectiveness.
69. The key issues and risks concerning procurement for implementation of the Project have
been identified and these include: i) availability of qualified procurement staff to implement
procurement activities; ii) poor quality procurement and outcomes due to limited procurement and
23
contract administration capacity; and iii) delays caused by Government‟s own review process prior
to contract signature.
70. Corrective measures were discussed and AIAS and MAE should: i) establishment of the
procurement functions at MAE/DNDA prior to Effectiveness and strengthening of available
capacity at AIAS, ii) ensure that the procurement decision making is fully covered in the
Procurement Manual, to be prepared, and is available/known to staff in charge of the Project, iii)
ensure that qualified staff is retained in the implementing agencies; and, iv) the procurement
planning process taking into account the steps and associated timeframe for Government‟s own
internal approval processes. Furthermore, MAE and MOPH management should ensure that these
implementing agencies are resourced with qualified personnel throughout the life of the Project.
71. The Project will also provide performance grants to municipalities, aimed at financing
strategic municipal investments linked to technical assistance in municipal planning and finance.
The associated procurement procedures applicable to these grants will be detailed in a separate
Grants Manual to be prepared by MAE/DNDA, prior to effectiveness of the Grant scheme.
72. The preliminary procurement plan for the Project was received by the Bank and found to be
acceptable. It will be updated at least annually (or as required) to reflect Project implementation
needs. A brief summary of the procurement capacity assessment and procurement arrangements
for the Project are provided in Annex 3. More details are available in the Project files.
E. Social and Environment (including safeguards)
73. The overall environmental and social impact is expected to be positive, especially in
periurban areas where flooding during heavy rains is a serious health and safety issue. Negative
impacts, however, may arise during cleaning and rehabilitation of existing drainage channels, or
improvements of natural drainage channels through targeted periurban areas.
74. In Beira the proposed drainage works will be along existing canals or natural drainage
channels that eventually drain directly to the sea. In Nacala, the physical works will include the
implementation of key components of a drainage master plan by installing erosion control
structures (gabions) on three of the steep-sloped primary drainage channels in the city that drain
directly to the sea. Most of these works can be managed through good engineering practice for
design and construction, and disposal of sludges and solid wastes removed during cleaning
operations, especially in Beira. The most sensitive environmental issue will be the disposal of
polluted sludges dredged from the existing drainage channels in Beira.
75. The most sensitive social issue will be compensation for impacts on fences, latrines, fruit
trees, and similar structures or assets that may need to be temporarily removed or relocated in
order to improve drainage in periurban areas. In Beira, preliminary census work identified from 50
to 80 structures that might be impacted, depending on the final width of the drainage right-of-way
in the periurban area and whether a retention basin will be built. The majority of these structures
are fences and latrines around household lots. Preparation of a draft RPF occurred subsequent to
this preliminary census, and notes up to 50 residences in the Beira periurban area may have
potentially impacted structures. Efforts will be made to further minimize the number of potentially
impacted structures and impacted households during final engineering design, and before
production of a RAP. In Nacala, approximately 10 households are located near the three gullies
24
that need stabilization against erosion, but preliminary design indicates no resettlement or
compensation is expected because all investments will be stabilization of existing gully walls on
steep slopes with sandy soils, to prevent further erosion. Therefore, the works will occur within
the existing gullies, and are expected to be done with primarily manual labor. In the unlikely event
that compensation for disturbance of a structure near a gully is required; the RPF is designed to
cover all Component 2 investments. Component 1 will not be covered by the RPF because works
investments that triggers OP 4.12 Involuntary Resettlement are not eligible for the grant financing.
76. Feasibility and preliminary design engineering studies are being financed by the European
Union in Beira and by MCC in Nacala. Until the final engineering designs for the rehabilitation
and improvements are completed during the Bank Project, the site-specific environmental and
social impacts are uncertain, especially at Beira. Therefore, an Environmental and Social
Management Framework (ESMF) and a Resettlement Policy Framework (RPF) have been
prepared for the civil works at Beira, and these will be the basis for producing an Environmental
Assessment and an Environmental Management Plan, once engineering designs are completed, and
a Resettlement Action Plan. These Safeguards documents would need to be reviewed, approved,
and disclosed by the Bank before those works could proceed. The ESMF and RPF for Beira will
also be useful in guiding the Master Plan and to scope the appropriate Safeguards documents for
any works that may be carried out in the Greater Maputo area once the Master Plan is completed.
These Safeguards documents also would need to be reviewed, approved, and disclosed by the
Bank before those works could proceed.
77. Based on the technical pre-feasibility studies (which include preliminary environmental
and social screening), it has been confirmed that no physical cultural resources have been
identified to be at risk for impacts by the pre-feasibility studies in Beira and Nacala. In addition,
the ESMF for Component 2 includes chance finds procedures. The Master Plan in Greater Maputo
will take into consideration this potential issue as well and identify known cultural resources near
the existing drainage system as well as establish chance finds procedures, but it is unlikely that any
significant cultural resources would be located within existing drainage systems in Greater
Maputo. It is possible that physical cultural resources such as worship sites are located adjacent to
the drainage system, especially in periurban areas. The Project is unlikely to adversely affect such
nearby sites; rather, the installation of improved drainage reduces risk of adverse impacts on them
caused by flooding during heavy rains. In determining which components of the Greater Maputo
Master Plan can be funded by the current Project, once the Master Plan is prepared and adopted,
criteria for selection of priority works can include deferment of any components that might have
potentially significant adverse impacts on sensitive resources.
78. Any proposed Municipal Performance Grant under Component 1 will not be eligible for
Bank financing if it involves displacement of peoples, loss of access to assets, adverse impacts on
significant cultural resources, or civil works within a river that is classified as an International
Waterway (under OP7.50, International Waterways) or a tributary to such a river. The Municipal
Performance Grants are expected to be small-scale in nature, involve repair or rehabilitation of
existing city infrastructure (offices, sidewalks, streets, etc.) because of their small size, and most of
them may be considered Category C sub-Projects. The most appropriate Safeguards instrument, if
any, for these works would be Environmental Management Plans (EMPs) for construction, which
will be part of a Grants Manual prepared by the PIU. Therefore, a separate ESMF has been
prepared for Component 1 activities that describes the institutional arrangements, training, and
capacity building that will be provided by the PIU, a description of environmental issues of
25
concern during small-scale construction activities and appropriate mitigation measures, and
checklists and reporting forms for each Municipality to use in developing its respective EMP. As
noted above, the civil works anticipated in Nacala are also expected to have minimal adverse
environmental and social impacts related to construction. Therefore, the ESMF for Component 1
activities, some of which may require EMPs, is also the guiding document for preparing an EMP
for construction of the Nacala Project, once final engineering designs are completed.
79. The Project is defined as Category B. The Bank Safeguard Policies OP 4.01
(Environmental Assessment) and OP 4.12 (Involuntary Resettlement) are triggered.
26
Annex 1: Results Framework and Monitoring Results Framework
Project Development Objective (PDO):
To strengthen municipal capacity for sustainable urban infrastructure provision and environmental management which enhance resiliency to climate related risks.
PDO Level
Results
Indicators*
Co
re
Unit of
Measure
Baseline
2011
Cumulative Target Values** Frequ
ency
Data
Source/
Methodolo
gy
Responsibilit
y for Data
Collection
Description
(indicator
definition etc.) 2012 2013 2014 2015 2016 2017
(i) Number of
Project
beneficiaries, of
which female
(%) [core
indicator]
Number
of
persons
% female
0 100,000
51
1,000, 000 1,500, 000
51
2,000, 000
51
annual Survey DNDA/AIAS People in the 20
Municipalities
targeted by
Component 1 and
people directly
benefiting from
the direct
investments under
Component 2.
Percentage of
females based on
national
demographic data.
(ii) Percentage
annual
increases in
aggregate
municipal own-
source
revenues4
% 257 million 2 5 20 50 75 100 annual Annual
Municipal
Financial
Statements
MAE/DNDA
PMU
Real increases
aggregated across
all participating
municipalities.
(iii) Area of
participating
municipalities
benefitting from
reduced
flooding or
erosion
Ha 0 0 0 0 100 600 1100 annual Reports
from
supervising
consultants
AIAS Measures
catchment of
improved
drainage
INTERMEDIATE RESULTS
4 Disaggregated data will be available at the Project level by municipality for this and for other indicators where data is being aggregated; this will allow a
detailed monitoring to assess which municipalities are meeting their targets and making progress and which ones will require further support to improve their
performance.
27
Intermediate Result (Component One): Increased municipal capacity to sustainably plan, finance and manage climate resilient urban development.
Intermediate Result
Indicator One:
Disaggregated list
of investments by
type and/or sector:
Physical
count
NA since
grants is
demand
driven.
__km __km Km annual Annual
Municipal
Grant
Execution
Reports
Municipalitie
s via
DNDA/PMU
Aggregate across
20 munis of
physical results
from Municipal
Performance
Grants. Annual
targets not
predefined
because demand
driven.
Investments may
include roads,
trucks, buildings
etc.
If reported
investments relate
to core indicators,
these will be
captured in the
ISR as part of
Project
monitoring
Intermediate Result
Indicator Two:
Number of
municipalities
which have
achieved at least
70% financial
execution of their
annual Municipal
Performance Grant
by 31 Dec.
Number
(of 20
munis)
0 0 0 5 8 11 15 annual Annual
Reports
from
municipalit
ies verified
by auditor
MAE/DNDA
PMU
Grant funds
available for
approved muni-
cipal investment
plans. Financial
execution is funds
disbursed to pay
valid contracts.
Intermediate Result
Indicator Three:
Percentage annual
increases in
aggregate number
of land plots titled
(DUATs)
% To be
available
at
Effective
ness 2
0 0 10 20 30 40 annual Annual
Reports
from
municipalit
ies and TA,
verified by
auditor
MAE/DNDA
PMU
Increases
aggregated across
all participating
municipalities.
Assessments
during yr 1 will
provide baseline
28
data
Intermediate Result
Indicator Four:
Percentage annual
increases in
aggregate number
of properties in
municipal cadastre
% To be
available
at
Effective
ness 2
0 0 10 20 30 40 annual Annual
Reports
from
municipalit
ies and TA,
verified by
auditor
MAE/DNDA
PMU
idem
“Properties in
municipal
cadastre” defined
as properties
which have
sufficient
information for
IPRA billing.
Intermediate Result
Indicator Five:
Number of
municipalities
which have
implemented a
municipal financial
management
system
(cumulative)
Number
(of 20
munis)
0 0 0 1 2 6 12 annual Progress
Reports
from
municipalit
ies and TA,
verified by
auditor
MAE/DNDA
PMU
“Implemented”
defined as
employing a
computer based
system to execute
the municipal
budget and
produce
accounting
statements.
Intermediate Result
indicator Six:
Number of
municipalities with
approved
environmental and
drainage plans
(cumulative)
Number
(of 20
munis)
0 0 0 0 1 2 4 annual Progress
Reports
from
municipalit
ies, verified
by auditor
MAE/DNDA
PMU
Urban Risk
Assessments will
identify priority
municipalities
where drainage
and environmental
mgmt plans are
required to
improve climate
resiliency
Intermediate Result (Component Two): Increased municipal capacity to sustainably provide drainage services to at risk urban neighborhoods.
Intermediate Result
Indicator One:
Beira - drainage
channels
rehabilitated to
control flood
Kms 0 0 0 0 2 7 9.5 annual Progress
Report
from
AIAS
AIAS Extension of civil
works to
rehabilitate
drainage channels
Intermediate Result
Indicator Two:
Nacala – drainage
Kms 0 0 0 0 1 3 4 annual Progress
Report
from
AIAS Extension of civil
works to
rehabilitate
29
ditches
rehabilitated to
control erosion
AIAS drainage ditches
converted in
major erosion
gullies
Intermediate Result
Indicator Three:
Population
benefiting from
reduced flood and
erosion in Beira
and Nacala
Numbe
r
0 0 0 0 50,000 250,000 300,000 annual Progress
Report
from
AIAS
AIAS Population in risk
of flooding and
erosion
Intermediate Result
Indicator Four :
Increase in the
drainage fee
amount transferred
to Beira - SASB
% US$
70,0000
0 0 10 20 30 40 annual Progress
Reports
from TA
and
municipa
lities
AIAS Increase in the
amount
transferred by the
Municipality
Intermediate Result
Indicator five:
Nacala
Autonomous
Sanitation Agency
created
Yes/no no no No no no -Yes annual Progress
Reports
from TA
and
municipa
lities
AIAS Define who needs
to approve or
create it.
Approved by the
Municipal
Council.
Intermediate Result
Indicator Six:
Maputo
metropolitan area
drainage and
sanitation master
plan approved by
the Municipal
Councils
Yes/N
o
no no No no no Yes Annual Progress
reports
from
AIAS
AIAS Drainage and
Sanitation Master
Plan formally
accepted by
Maputo
Municipal
Council
30
Annex 2: Detailed Project Description
1. The proposed Project will assist Mozambique in developing appropriate institutions, and
infrastructure improvements to strengthen the resilience of selected cities to climate related
impacts. The proposed combination of both institutional and physical investments will enhance
the sustainability of municipal adaptation to minimize the adverse impacts of flooding and
erosion, and will provide a model for adaptation in other vulnerable cities. Infrastructure
investments will consist of the rehabilitation of drains, conduits, embankments, levees and
surface water storage facilities. Institutional investments will include improved urban
environmental planning and land use management; increased own-source revenue capacity, more
effective and transparent municipal financial management; and a sustainable service delivery
model for operation and maintenance of urban sanitation and drainage systems.
COMPONENT 1 – STRENGTHENING THE MUNICIPAL SECTOR (US$35 MILLION)
2. This component will increase municipal capacity to sustainably plan, manage and finance
climate resilient urban development, including through the strengthening the Borrower‟s
institutions underpinning its municipal system in order to improve sustainable decentralized
financing and management of the urban environment and infrastructure. To this end, the
component supports a number of activities under two subcomponents: (A) local level support to
improved municipal governance in 20 municipalities, and (B) national level support for
improved municipal governance.
Subcomponent 1A: Local level support for improved municipal governance (US$27.5 million)
3. This subcomponent will provide support for 20 municipalities to enhance municipal
capacity for sustainable decentralized management of the urban environment and urban services.
Participating municipalities have been selected to complement existing bilateral funded PDA
(Municipal Development Project) which is concentrated in Mozambique‟s northern and central
provinces; thus the IDA-financed Project will provide assistance to all municipalities in the
central and southern provinces which do not benefit from PDA or similar support.5
4. This subcomponent will promote increased municipal capacity through performance
grants to finance strategic municipal investments. Performance criteria for the grant system will
reinforce incentives for municipalities to enhance their financial sustainability and land use
management. Institutional development will be linked to the Project‟s supply of technical
assistance while municipal demand for specific public investment subProjects will determine the
use of grant funds. Because the grant amount for each municipality will be determined by that
municipality‟s demonstrated commitment to improvement in municipal finances and urban
planning, the Project will establish clear synergies between its supply-driven and demand-driven
elements. Following this logic, this subcomponent will finance three main initiatives: Municipal
Performance Grants to Finance Strategic Urban Investment Sub-Projects, Improvement of Urban
Planning and Land Use Management and Enhancement of Municipal Financial Sustainability
through improved financial management and enhanced municipal revenues.
5 Maputo is excluded from 3CP support since similar activities are already financed as part of the ongoing, more
comprehensive assistance under MMDP Phase II.
31
(i) 1A.1 Municipal Performance Grants (US$13.5 million)
5. This activity will support Eligible Municipalities through the financing of Sub-Projects,
by providing Municipal Performance Grants.
6. The objective of this activity is to provide to municipalities supplementary capital grants
which incentivize improved performance in core municipal land use planning and financial
management functions. These grants will not only provide additional resources for
municipalities to address their capital deficits, they will also encourage municipalities to engage
with the capacity-building support provided by the Project in priority sectors. The grants will
enable municipal Authorities to demonstrate the benefits of improved institutional performance
through expanding their portfolio of investments. Use of the grants will assist in triggering a
virtuous circle of citizen–municipal interaction that ultimately contributes to improved local
governance and urban service delivery.
7. Grants provided in this sub-component are designed to complement the basic design of
the GoM‟s system of intergovernmental transfers to municipalities (general purpose grants
(FCA) and capital grants (FIIL)). Although the current transfer system is well-structured, the
overall quantum of resources remains small and does not provide incentives for improved
performance by municipalities. The Project-financed performance grant system will be managed
directly by the PIU, under the authority of MAE. Since this performance grant will not go to all
43 municipalities and will not employ the same allocation formula of existing GoM grants, it will
be treated as a Project grant with the expectation that its performance focus will produce a
demonstration effect that could latter on be scaled up at national level. Core design features of
the grant, which will be detailed in an operational manual for the grant, are:
a. Universe and eligibility
8. The grant will be available only to the 20 municipalities selected for participation in the
Project. This avoids duplication with municipalities supported by other initiatives (notably the
PDA and ProMaputo). In order to be eligible to receive the grant in any year a municipality
must comply, amongst others, with the following conditions, which are minimum requirements
for receiving IDA-financed grant funding:
a. A signed Grant Participation Agreement for the Project period, in form and
substance acceptable to the Bank, being in place at the outset of the Project6,
b. Submitted its audited financial statement related to its most recent Financial Year
supported by an “acceptable auditor‟s opinion, defined as an opinion that has not
been disclaimed and is not adverse,
c. Submitted its Annual Grant Investment Plan and Budget, and
6 This will confirm their willingness to participate, and set out the grant objectives, terms and conditions, including
all eligibility and disbursement conditions, performance incentives, grant calculation methods, sanctions for non-
performance and implementation responsibilities. It will bind each municipality to general compliance with the
Grant Operational Manual as well as to specific compliance with the ESMF, financial management and procurement
rules of the Project and the anti-corruption guidelines of the World Bank.
32
d. Submitted quarterly progress reports including information on implementation of
SubProjects, as well as compliance with the ESMF and RPF and procurement
plans (expect for the first year of the grant allocation)
b. Performance criteria
9. The allocation of the grant in each year will be adjusted based on the annual performance
of each participating municipality in the prior year with respect to a set of pre-determined
performance indicators. Performance criteria focus on the core areas of capacity support that are
targeted by the Project, i.e. urban land use management and municipal finances, thus providing a
complementary incentive for absorption of this support. Each municipality shall be required to
obtain a passing score. Process indicators will be used in the early stages of implementation,
followed by results indicators in those municipalities where improved systems have been
implemented. Independent auditors will verify the accuracy of the data provided by each
municipality to evaluate the achievement of targets and indicators. The performance of each
municipality will be jointly reviewed by the Recipient and the Association who will determine
the continued eligibility of each Eligible Municipality in the next year. Other detailed criteria,
weightings and scoring systems will be presented in a grant manual for municipalities and be
widely disseminated. Performance criteria will be reviewed at mid-term.
c. Grant financing
10. The total funding of the Municipal Performance Grant will be US$13.5 million, or about
US$3 million per year for all the 20 participating municipalities The total size of the grant pool
available for distribution in each year takes into account two key factors, namely: (i) the need to
introduce real increases in grants to municipalities to account for inflation and the Projected
increases in their absorption capacity; and (ii) the need to ensure that a sufficient incentive is
provided to municipalities to strive for ongoing performance improvement, which requires
sufficient funding both in absolute terms and relative to other sources of finance.
d. The distribution of grants across municipalities
11. The grant will be distributed based on a formula that is biased towards rewarding
performance, but that accounts for the need to protect the incentives of both very small and
larger municipalities to participate in the program. Factors to be included in the formula for
calculation of the annual grant allocation7 will include: the performance score obtained by each
municipality in the annual assessment, the population of the municipality, and the total grant
funds available for that year. Data regarding the indicators on which annual municipal
performance assessments will be reported by municipalities and technical assistance providers.
Annual municipal performance assessments will employ data verified by independent auditors
contracted by DNDA to ensure an objective and accurate basis for measurement of each
Municipality‟s achievement of targets related to (i) timely disbursement of grant funds and (ii)
improvements to municipal finances and urban planning and land use management. Specifics of
the grant allocation formula, including the calculation of base allocations and for performance
adjustments, will be detailed in the Project‟s Grants Manual, to be approved by GoM and IDA
before the first grant disbursement. Although the specific allocations may vary depending on the
7 Consideration was given to including area and other variables, but rejected due to data weaknesses, the
comparative efficacy of a population weighting as a proxy for expenditure need and the additional complexity this
would introduce relative to benefits. In addition, it should be noted that all municipalities already receive
government grant allocations from the FCA and FIIL.
33
performance scoring, the following table presents a preliminary allocation of the Grant by
municipality. As can be seen, the average per capita allocation would be of US$2.3 per capita
and only three municipalities may receive more than US$150,000 per year.
e. Grant allocation and disbursement arrangements
12. Indicative grant allocations, exclusive of the effect of performance scores, will be made
know to each municipality at the outset of the Project for a four year period. An approved
allocation for each year, incorporating performance-related adjustments, will be defined by
October of the preceding year for incorporation in the municipal budget process. This approach
balances the need to provide longer term predictability in allocations with the uncertainty
implicit in a performance-based grant mechanism. Grant allocations will be advanced in
tranches to municipalities, with subsequent disbursements based on demonstration by
municipalities of expenditures against the approved Grant Investment Plan and Budget, as
discussed in the Financial Management section below. Detailed procedures for the release of
installments to municipalities will be provided in the Grants Manual and governed by Project
covenants. Municipalities must maintain eligibility for each annual grant disbursement and
compliance with all grant requirements during each year.
13. Initial disbursement of the first cycle of Grants will require the following: (i)the Eligible
Municipality has entered into a Grant Participation Agreement (GPA), (ii) the Eligible
Municipality has complied with the mandatory entry criteria set forth in the PGM; (iii) the
Eligible Municipality has submitted its Annual Grant Investment Plan and Budget; and (iv) the
Eligible Municipality has submitted its audited financial statement related to its most recent
Fiscal Year supported by an acceptable auditor's opinion.
Municipality Pop
(2007)
Indicative Allocations based on
Total of $12 million 4 years
Total
allocation
($)
Alloc
/ cap
($)
% of
alloc
% of
FIIL
(2011)
Catandica 22 271 45,504 2.04 1.90 54.2
Chibuto 63 184 90,519 1.43 3.77 37.5
Chimoio City 237 497 282,308 1.19 11.76 50.0
Chokwé 53 062 79,382 1.50 3.31 33.2
Gondola 33 877 58,273 1.72 2.43 34.7
Gorongosa 18 761 41,642 2.22 1.74 21.5
Inhambane City 65 149 92,681 1.42 3.86 15.5
Macia (Bilene) 27 795 51,582 1.86 2.15 31.1
Mandlakazi 10 317 32,351 3.14 1.35 28.7
Manhiça 56 165 82,796 1.47 3.45 24.2
Manica 36 124 60,746 1.68 2.53 30.9
Massingaa 20 930 44,028 2.10 1.83 31.1
Matola City 671 556 759,884 1.13 31.66 53.0
Maxixe City 108 824 140,734 1.29 5.86 30.7
Moatize 38 924 63,826 1.64 2.66 28.8
Namaachaa 12 725 35,001 2.75 1.46 19.1
Tete City 155 870 192,497 1.23 8.02 37.0
Ulonguea 13 620 35,986 2.64 1.50 35.3
Vilankulo 37 176 61,903 1.67 2.58 34.2
Xai-Xai City 115 752 148,357 1.28 6.18 33.5
Project Total 1 780 818 2,400,000 1.33 100.00 36.4
34
14. An overview of the process for planning, approval, disbursement and reporting of the
annual cycle of the Municipal Performance Grant follows. Further details will be included in the
Grants Manual:
Indicative Summary of Municipal Performance Grant Cycle8
Month Grant Planning and Approval Cycle Grant Reporting and Audit Cycle
Jan Municipalities begin local planning process-
Project identification with cost estimates for
next year Grants
DNDA makes initial annual disbursements of
grant funds to municipalities
Municipalities begin to sign contracts for
Grant financed investments
Mar Municipalities present to DNDA complete
Annual Report of use of Grants (financial
and physical execution) for prior year
April DNDA auditors begin visits to municipalities
re: use of Grant funds from prior year and
verification of indicators and performance
scores
Municipalities submit to DNDA Q1 Grant
Implementation Report
June Municipalities complete local planning process
– define shortlist for Grant Project selection
with safeguard prescreening
July DNDA defines and communicates preliminary
grant allocations to municipalities
Municipalities submit to DNDA Q2 Grant
Implementation Report
Aug Municipalities begin technical design and
procurement process of short-listed Projects for
next annual Grant cycle
DNDA auditors submit report on use by
municipalities of grant funds in prior year
Sept DNDA validates eligibility of municipalities
based on received audit reports
DNDA provides safeguard screening and
impact mitigation planning support to
municipalities as needed
Municipalities and TA consultants submit
preliminary Annual Progress Reports for
Project activities
Oct DNDA prepares proposed Annual Performance
Assessment for each municipality based on
Progress Reports
Municipalities submit proposed Annual Grant
Investment Plan to DNDA
Municipalities submit to DNDA Q3 Grant
Implementation Report
Nov DNDA submits to IDA validation of municipal
eligibility and proposed annual Grant
allocations per municipality
DNDA clears Municipal Annual Grant
Investment Plans
Dec IDA clears proposed annual Grant allocations
per municipality
Municipal Assemblies approve Municipal
Budgets including Annual Grant Investment
Plans
Municipalities submit to DNDA Q4 Grant
Implementation Report/ Preliminary Annual
Report for use of Grant funds and physical
execution
8 Details of documentation requirements, decision criteria, and procedures will be fully presented in the Municipal
Performance Grants Manual, to be prepared by DNDA and cleared by IDA as a condition for disbursement of the
Grants.
35
f. Conditions for use of grant funds
15. The proceeds of grant funds may only be utilized to fund capital investments by
municipalities subject to: a short negative list of excluded items, being within their legal
competencies, not being connected with an International Waterway or one of its tributaries, and
subject to approval of planned investments by the Municipal Assembly (normally as part of
annual budget approval). Capital investments should be limited to those with a public benefit
within the functional mandate of the municipalities. Typical capital investments to be financed
my MPGs include: improvement to existing roads, bridges, drainage strictures, public buildings,
markets structures, etc; construction and/or urban service provision equipment such as refuse
trucks, tractors, and associated trailers; and rehabilitation, furnishing and working equipment for
offices. Consulting services related to the design or supervision of eligible Grant finance capital
investments may also be financed.
16. Grant funded investments must remain compliant with IDA social and environmental
safeguards (using a screening checklist detailed in the Environmental and Social Management
Framework-ESMF for Component 1), and procurement procedures as specified in Project
agreements and municipal grant participation agreements with detailed procedures defined in the
Grants Manual. The negative list will stipulate that no grant funds may be used for any of the
following: payment of salaries, wages, allowances, per diems or any other benefits to municipal
staff, councilors, or assembly members; recurrent costs for the purchase of non-durable goods or
services; expenditures on vehicles (excluding equipment for service delivery – e.g. tractors and
trucks); the construction of new administrative buildings; any construction or maintenance of
residential buildings; investments in loans, other micro Credit schemes and other securities; and
the acquisition of land or any compensation to private parties related to property damage,
takings, or resettlement costs. Also, no grant may be used to finance civil works that occur
within the waters of a transboundary river or a tributary to such river.
g. Reporting, assessment and oversight procedures
17. Municipalities will be required to submit a quarterly progress report to the PIU using a
reporting format will be provided in the Grants Manual, and will include information of progress
with sub-Projects relative to procurement plans and compliance with the ESMF. Compliance
with this requirement will be a trigger for the release of subsequent grant installments. All 20
municipalities will be subject to an on-site annual audit. In addition to performing a standard
financial audit this activity will: (i) verify annual eligibility for the grant; (ii) review performance
against defined indicators and propose performance scores; (iii) verify compliance with grant
conditions. Should any municipality spend grant funds on an ineligible expenditure, it shall lose
eligibility for additional access to Project financed grants until all funds for ineligible
investments are reimbursed to the DNDA‟s Project account. Once such reimbursements have
been received and certified by DNDA, municipal eligibility will require clearance by IDA of
DNDA‟s proposal for reinstatement of eligibility.
(ii) 1A.2 Improved Urban Planning and Land Use Management (US$7 million)
18. This activity will improve Urban Planning and Land Use Management, through support
in the: (A) the carrying out of climate vulnerability assessments, basic spatial planning studies
and development of urban land management Instruments in all Municipalities as well as urban
environmental and surface water management Instruments in those Municipalities vulnerable to
climate related flooding and erosion; (B) the development and dissemination of methodologies
36
for urban planning and land use and environmental management and (C) carrying out of training
sessions for municipal staff and technicians.
19. This activity will improve the quality of urban planning and land use management in
participating municipalities. Technical assistance will be provided to develop of municipal
capacity to effectively manage the urban space; to improve urban environmental management,
including appropriate adaptation measures in light of possible climate-related risks; and to
transparently regularize land occupation, regulate land use, and administer land registration.
20. Support to municipalities will focus on several kinds of instruments for urban spatial
management:
(a). In all participating municipalities
(i.) Basic Spatial Planning Instruments, including urban structure plans (“master
plans”), urbanization plans, and strategic development plans9;
(ii.) Urban Land Management Instruments, including: procedures for plot demarcation
and land registration, issuing of documents formalizing effective land tenure
(DUATs), and establishment of land and property cadastres.
(b). In municipalities vulnerable to climate related or similar environmental risks
(i.) Urban Environmental Management Instruments, including: climate risk
assessments, land use plans, ecological zoning plans and regulations, adaptation
plans in response to potential adverse climate impacts, etc,
(ii.) Surface Water Management Instruments, including: drainage and erosion control
plans, developed in coordination with AIAS.
21. In order to promote the use of these instruments across participating municipalities, a
consulting contract for technical assistance will finance the development and dissemination of
three standard “packages” for municipal physical planning and land use management: one for
larger cities, one for medium sized cities, and one for municipal towns. Each package will
provide instruments which meet the requirements of Mozambican law and regulations and are
adapted to the needs and capacities which characterize each city or town.10
Consultant TA teams
will employ these packages as a basis for capacity building adapted to the specific conditions of
each participating municipality.
22. Project-financed technical assistance will develop practical manuals for each “package”
supporting the formulation and implementation of each of these planning and management
instruments. A cycle of periodic training courses will be organized by the consultant TA
provider for municipal officials and technical staff. Training courses will be complemented by
9 Urban plans developed and approved by participating municipalities with the financial and
technical support of the Project do not imply IDA responsibility for the impacts of subsequent
municipal discussions which may be taken on the basis of such plans. 10
Technical aspects will be coordinated with the Ministry of Environmental Coordination (MICOA) through its
Directorate for Territorial Organization and Planning (DINAPOT) which is responsible for normative urban
planning instruments. With relation to drainage plans for flood and erosion control, the Project will coordinate its
technical assistance with AIAS and employ the technical standards and methodologies to be strengthened under
Component 2.
37
periodic field visits to each municipality by travelling TA consultants who will provide on-the-
job training and advice to urban planning personnel. To complement municipalities‟ own
technical capacities and the capacity building assistance provided by the consultant TA provider,
additional Project-funded consultancies may provide for the preparation specific urban plans or
management instruments which require higher level technical capacity.
23. The Project will fund vocational training for mid-level municipal technicians who
undertake the day-today tasks of urban planning, land use management, and land administration
through the two public sector technical institutes11
offering courses with content specifically
developed for the national regulations and context. The Project will also finance, based on
specific service delivery agreements to be formulated after initial needs assessments at municipal
level, the provision of higher level training and technical assistance by the Faculty of
Architecture and Urban Planning of Eduardo Mondlane University, whose staff possess unique
knowledge and experience in implementing Mozambique‟s urban planning regulations in the
local social and institutional context.
(iii) 1A.3 Improved Municipal Financial Sustainability (US$7 million)
24. This activity will improve financial management and enhance municipal revenues,
through support in: (A) development and dissemination of methodologies for revenue
administration; (B) carrying out of training sessions in revenue administration and financial
management for municipal staff; (C) provision of advisory services and equipment to strengthen
the institutional capacity of the municipalities; and (D) development and implementation of
financial and management systems.
25. The objective of this activity will be to improve the financial sustainability of
municipalities by enhancing their capacities to exploit its own revenue sources and improving
expenditure management.
1. Enhanced Municipal Revenues:
26. The objective of this activity will be to increase the collection of municipal own-source
revenues. Municipal budgets in Mozambique are very small (US$12 per capita), and less than
60% come from own sources of revenue. A recent study on municipal revenue potential in
Mozambique shows that own sources of revenue still have great potential. Thus the component
will support consultant TA for enhancing municipal collection of own-sources of revenue such
as property taxes, fees for economic activity, and the vehicle tax, amongst others.
27. Out of all own sources of revenue, the property tax (IPRA) is the one that shows the
greatest potential. Property tax rates are capped by national legislation so the potential comes
from expansion in the tax base (both by expansion in the tax net and by property reassessment).
A recent Decree from December 2010 unlocks the potential for IPRA by simplifying the
assessment of property values. In order to increase tax collection, support must also be given to
improving property tax administration. Thus, though the focus of this activity will be on IPRA,
it will not be limited to only that source.
28. The Project‟s provision of Technical Assistance in the area of revenue enhancement will
entail a number of specific activities, starting with and based upon a rapid appraisal of the
11
Instituto Médio de Planeamento Físico and Instituto de Formação em Cadastro e Administração de Terra.
38
revenue and expenditure structure of each municipality. The TA consultant will have an
extensive inception phase where it will profile each municipality via a revenue needs and
capacity assessment; on the basis of these assessments the consultants will propose a capacity
building strategy and packages for municipalities of various scales. Focus will be given to areas
such as fee schedules, data collection, revenue calculations, billing, collection and enforcement
for both municipal taxes and fees. Training by the consultant TA provider will also include areas
such as tax legislation, tax administration, and related accounting. It is envisioned that a cycle of
periodic training courses will be organized; complemented by field visits of TA staff to each
municipality to provide on-the-job support to municipal finance staff.
29. Because the Ministry of Finance‟s National Tax Authority possesses unique knowledge
of Mozambican tax law and systems, technical input from this unit may be financed by the
Project to support specialized capacity building activities. Finally, acquisition and installation of
IT equipment for municipal revenue administration is also envisioned. This activity will be
closely articulated with support provided by the Financial Management and Urban Planning
activities since they will provide inputs to the consolidation of cadastres and establishment of
databases to be used for fiscal purposes.
2. Improved municipal financial management:
30. The objective of this activity is to create human, technical and institutional capacity to
improve financial management at the municipal level. It will do so by providing technical
assistance to streamline business processes in municipal finance departments and to implement
an appropriate computer based financial management system adapted for municipal
management. Given the endemic weakness of financial management and controls in many
municipalities, improvement in human capacity and provision of an adequate technological
solution will be critical not only for municipal management but also as a key input to other
Project supported activities related to revenue administration, urban land registration, and capital
investment management.
31. Technical assistance will be provided to improve municipal financial management
processes including rationalizing procedures and documentation within municipal finance
departments in keeping with regulations for public sector financial management (SISTAFE) in
order to increase administrative efficiency, improve transaction controls, and enhance
transparency of accounting and reporting. All process improvements will be supported by
provision of training courses for municipal finance staff. These improvements will also lay the
foundation for subsequent introduction of computer-based financial management systems.
32. Several options are currently being considered by the GoM as the foundation for
computer based financial management in municipalities. Long-term plans of the Ministry of
Finance‟s Center for Development of Systems for Financial and Information Management
(CEDSIF) indicate that a municipal version of the national FM system e-SISTAFE will only take
place after 2020. Because this governmental solution is not expected for at least ten years, the
donor funded P13/PDA Project has developed a “Municipal Management System” (SGM) that
brings together three interlinked functionalities: (i) an accounting system with modules for
budgeting, transaction processing/registration, asset management, etc. in accordance with
SISTAFE ii) specific modules on municipal management (e.g. land, markets, municipal taxes
and fees and (iii) production of a series of monthly, quarterly and annual reports required for
internal and external control of municipal resource management, including provision of
39
information to both Government auditors (Tribunal Administrativo) and to the Municipal
Assembly.
33. Although PDA plans to continue implementation of SGM beyond the two municipalities
where it is currently installed, the Government of Mozambique, including both MAE and
MF/CEDSIF, have not yet clarified their level of support for the adoption of SGM as a de facto
interim solution for municipal financial management until the planned municipal e-SISTAFE is
implemented. Legal, technical and institutional issues have been identified by Government, with
significant concern expressed regarding sustainable support for system operation and
maintenance across a large number of widely distributed municipalities. At present, these issues
remain unresolved. Depending upon their resolution, SGM may become a potentially viable
option as an interim, locally sustainable solution for municipal financial management.
34. MAE/DNDA in its role as the GoM‟s lead municipal policy counterpart of this
component will be in charge of institutional coordination with the Ministry of Finance and other
donors around support for municipal IFMIS/e-SISTAFE/SGM. Predicated on the definition a
viable clarified strategy and a rigorous assessment of technical and institutions requirements for
its implementation, the Project has allocated resources to finance specialized consultant inputs to
the development/further development and implementation of the GoM‟s preferred municipal FM
system. This support may include the possible provision of consultants and other inputs to
CEDSIF in order to enable system development or support. Based on assessment of needs to
support system implementation, Project financed consultants may also advise municipalities in
preparation of financial data for system entry, population of data bases, and follow-up training
and support in system operation and use. Once a secure option for system implementation is
verified, the needs for system development and field implementation will be reviewed annually,
and workplans and budgets adjusted accordingly to provide required inputs.
35. Inputs to be funded under Subcomponent 1A include:
a) Consultant services, including individual, firms and institutional12
consultancies to
support capacity building of municipal finance and urban planning departments;
b) Goods, including purchase of office furniture, technical instruments, and IT
equipment for municipal finance and urban planning departments;
c) Works, including minor improvements to existing municipal facilities housing
municipal finance and urban planning departments;
d) Training, including technical short courses and mid-level vocational training for
municipal staff in fields related to municipal finance and urban planning;
e) Grants to municipalities to finance goods and works for urban infrastructure
improvement and urban service delivery equipment purchases;
f) Operating costs, mainly recurrent costs and consumables related to improving the
performance of municipal finance and urban planning departments.
12
As discussed above, these may include financing for technical assistance and capacity building services from
specialized public sector entities such as Mid-level Institutes for Physical Planning and Land Administration, the
Architecture and Urban Planning Faculty of UEM, CEDSIF, the Administrative Court, and/or the National Revenue
Authority.
40
Subcomponent 1B: National Level Support for Improved Municipal Governance (US$7.5
million)
36. This subcomponent will strengthen key national institutions which regulate and support
the municipal system, including central Government agencies and the ANAMM. Beneficiary
institutions of this subcomponent include: DNDA/MAE, Ministry of Finance (MINFIN), and
ANAMM. This activity will be designed and implemented in close coordination with the PDA,
with which it shares objectives and target institutions.
37. Subcomponent 1B. will be administered directly by the PIU, under the authority of the
MAE/DNDA. All contracts for goods, services, and works will be procured by the PIU in
coordination with beneficiary institutions. Beneficiary institutions will prepare annual work
plans and budgets for inclusion by the PIU in the overall Project work plan, budget and
procurement plan. Additional activities not included in the work plan or adjusted work plans
may be granted specific no objections during the annual implementation cycle. Beneficiary
institution will prepare quarterly progress reports and annual results reports and present them to
the PIU.
(i) 1B.1 Improved National Policy and Regulatory Framework for Municipal
Governance (US$1 million)
38. This activity will strengthen the capacity of MAE and MINFIN to monitor the
performance of the municipalities and develop improved intergovernmental and municipal
policies and systems, including through the development and implementation of the national
policy and regulatory framework for municipal governance.
39. Support will be provided to strengthen the capacity of the DNDA and of relevant units
within MINFIN to fulfill their statutory mission as tutelary institutions of the municipal system.
Continuing development and implementation oversight of decentralization and
intergovernmental policies will be a focus of this support, through monitoring the performance of
the municipal system. In addition, the Project will support analysis contributing to the updating
of municipal policies and regulations; and when necessary the formulation of additional
legislation, regulatory instruments, and methodological guidance; to ensure that the
intergovernmental framework continues to address evolving demands for improved urban
governance, service provision and environmental management.
40. Key activities to be supported include:
1) Support to the municipal framework: Policy analysis, policy development, policy
implementation planning and monitoring including related consultation workshops
w relevant municipal stakeholders. Specific policy domains to be addressed include:
a. Functional decentralization of regulatory and service delivery domains from
central to municipal Governments
b. Intergovernmental finance policy and resource utilization, including both
transfers and own source municipal revenues
c. Governance improvement including strengthened downward and upward
accountability of municipalities to civil society and legal institutions
41
2) Capacity building of MAE and MINFIN: training (short courses and local
scholarships) and provision of necessary equipment for ministerial technical staff
who monitors and regulate municipalities and the local Government system.
(ii) 1B.2 Increased Capacity of the National Municipal Association (US$1.5 million)
41. This activity will strengthen the capacity of ANAMM to provide services to its member
municipalities, including through capacity building support activities and policy and regulatory
advocacy on municipal and intergovernmental issues.
42. Specific activities to be supported by the Project include:
1) Development and implementation of a strategic business plan for ANAMM
emphasizing its comparative advantages as a service provider to member
municipalities;
2) Development of a peer learning network among municipal and urban management
professionals based on exchange of experience and sharing of good practices;
3) Development of a long-term twinning relationships with a well-performing
municipal association in another country which has similar characteristics and
challenges to ANAMM, including exchange visits and sharing of experience among
association staff and members;
4) Drafting, publication and dissemination of a “Guide for Municipal Governance”
which will serve as a practical reference for municipal political officials, municipal
professional staff, central Government officials, and civil society members;
5) Organization of seminars, workshops and conferences among municipal officials to
increase their level of knowledge regarding municipal laws, policies and systems.
(iii) Support for Project Management (US$5 million)
43. This activity will support the establishment and operation of a PIU in DNDA to support
the coordination and management of the component 1 of the Project, including through the
provision of technical assistance, training, audits, goods and operating costs.
44. The Project Management activity will provide the technical and administrative resources
required to effectively manage and monitor Project-financed activities and to ensure compliance
with IDA fiduciary and safeguard standards.
45. The Ministry of State Administration‟s National Directorate for Local Government
Development (MAE/DNDA) is the implementing agency for Component 1. The Project will
provide MAE/DNDA with the human and financial resources to staff and operate a PIU. The
PIU will ensure adequate technical and administrative capacity to implement the procedures
defined in the Project Operations Manual, including resource management and reporting, activity
and output monitoring and reporting, and compliance with environmental and social safeguards.
The PIU will procure the services and manage the contracts of technical assistance providers
who will strengthen the capacities of municipalities under Subcomponent 1A and central level
institutions under Subcomponent 1B.
46. The PIU will also serve as the Grants Administrator for the Municipal Performance
Grants to be funded under the program. The PIU will disburse these grants directly to municipal
42
grant accounts according to defined policies and procedures as defined in the Grants Manual,
will collect required reports and supporting documents provided by beneficiary municipalities,
will monitor grants usage as required, and ensure municipal level audits and other forms of field
inspection related to the use of grant resources.
47. The PIU will provide guidance, oversight and training to MAE and to participating
municipalities in fiduciary and safeguard requirements as detailed in the Project Operations
Manual. Annual training courses in social and environmental safeguard standards and
procedures will be managed by the PIU. Additional resources will be allocated for the PIU to
provide specialized safeguard assistance as required, depending upon the nature of activities to
be undertaken by municipalities with Project funding.
48. The PIU will be responsible for all Project monitoring and reporting to meet IDA
requirements, including the collection and presentation of relevant information from all
beneficiaries of Project resources whether at central Government or municipal level. The PIU
will provide training to participating municipalities in monitoring and reporting for Project
activities.
49. Inputs to be funded under Subcomponent 1B to support beneficiary institutions MAE,
MINFIN, and ANAMM include:
a) Consultant services, including individual and institutional consultancies to support
analytical work and capacity building of beneficiary institutions;
b) Goods, including purchase of office furniture, IT equipment, and vehicles to be used by
beneficiary institutions for support and monitoring of municipalities;
c) Training, including technical short courses, local degree scholarships, international
exchange visits, and conference participation by staff and members of beneficiary
institutions;
d) Operating costs, including purchase of goods and services and travel expenses for field
visits related to support and monitoring of municipalities by staff of beneficiary
institutions.
COMPONENT 2 – ENHANCING RESILIENCE OF STRATEGIC COASTAL CITIES: (US$85 MILLION)
50. This component will enhance municipal capacities in selected cities, including those in
Beira, Nacala and Maputo metropolitan area, for sustainable resilience to weather-related
environmental threats. Beneficiary cities are selected on the basis of their strategic economic
importance and their vulnerability to climate related environmental risks.
51. The component will focus on: (i) strategic analytical work in selected urban areas related
to climate related risks of greater flooding and erosion, to support the outlining of investment
programs addressing the increased vulnerability of these cities; (ii) investments on essential
urban infrastructure which address adaptation deficits to reduce urban floods and erosion in
selected cities; (iii) ensuring the sustainability of Project financed investments and associated
drainage systems by supporting the implementation of municipal autonomous sanitation agencies
in Project-supported cities. This institutional model for sustainable O&M of urban drainage
systems will also contribute to the further development of sanitation/drainage services in
Mozambique. By focusing in selected municipalities of high economic importance, the
43
component addresses the Government request to maximize its impact through the concentration
of large investments in few cities.
52. Other important issues related to climate change both at the national level as well as in
the cities participating on this component are being financed by a number of development
partners supporting Mozambique. There are numerous ongoing and planned activities
supporting the development of strategies and plans for climate change adaptation, disaster risk
management, and early warning systems both at the national and local levels. A broad range of
approaches has been adopted, a large number of stakeholders are involved, and the achieved and
expected results are some time not clear. In particular in Beira, Maputo and Nacala, which are
climate change hot spots, many development partners have offered support to the development of
planning tools to improve their resilience to climate impacts. As a result, many studies,
workshops, Geographic Information System (GIS), community awareness campaigns, private
sector participation assessments, small scale community Project on disaster management, etc,
have been produced, other are ongoing or planned. The municipal governments, which are
deeply involved in these activities, have indicated to the Bank the importance of financing
investments to reduce the municipal infrastructure adaptation deficit. This will complement the
support to improve the municipal capacity to develop plans related to climate impacts that the
most of the donor are already supporting. The only ongoing investments related to climate
impacts are the rehabilitation of the coastal protection infrastructure in Beira (by the Swiss
Cooperation) and Maputo (by the Arab Development Bank). In parallel to this Project, the
Nordic Development Fund (NDF) is financing a broad range of studies and plans to support the
Municipalities of Beira and Nacala to develop adaptation and disaster risk management plans.
53. The strategic analytical work to be financed by the proposed Project includes: (i) an
assessment of future needs for flood control within the context of the likely impacts of climate
change, aiming at to outline a national investment strategy constituted of integrated key priority
actions consistent with the national sectoral policies but also reflecting the variety of specific
local conditions; (ii) a focused review of the extensive stock of studies and information on water
management in Beira (ground water table, storm water, sea water intrusion) incorporating
climate changes considerations to develop un updated assessment of possible long term impacts
on the city and its key economic assets such as the port and railway, leading to the identification
of key information that stakeholders in the city‟s development should take into account in order
to manage the climate related risks that appear to be increasing in intensity and frequency.
54. The investments on critical urban infrastructure which address adaptation deficits to
reduce urban floods and erosion in Beira. The feasibility studies carried out for the drainage
works in Beira has assessed three technical designs alternatives. The alternative 1:5 year return
period is the option recommended by the national technical norms for urban infrastructure works.
However, given Beira‟s high vulnerability to climate related impacts, the Government, following
the recommendations from a number of studies on the impacts of climate change in
Mozambique, has opted for the 1:20 years return period alternative. This increases in 18% the
costs of the drainage rehabilitation works in Beira. These analyses were carried out based on the
feasibility studies available for the rehabilitation of the drainage infrastructure in Beira. As
expected from a feasibility studies, these provide guidance to the selection of technical solutions
at a concept stage, not the specific technical information that allow to know details of works the
future works, such as the different width and depth of channel along its whole extension, or the
quality of the sludge along the channel extension. Following the conceptual guidance of these
44
feasibilities studies, detailed engineering designs will be prepared. These will provide the
information with the appropriate level of details needed for preparing the associated
environmental impact assessment and the resettlement action plan for these civil works.
55. The investments in Beira and Nacala will also build on technical studies and institutional
capacity building being supported by national sanitation investments programs, some of which
were initiated over five years ago. These programs reflect the Government decision, supported
by major development partners, to raise sanitation/drainage to the national priority agenda.
Today, these programs have begun to show concrete results both in terms of national and local
institutional capacity, as well as on improved infrastructure. They have also generated a stock of
technical and institutional studies to leverage new investments programs. The starting point was
the preparation of Sanitation Strategies for seven cities in 2005.
56. The sanitation Project in Beira, a US$100 million operation financed by the European
Union (EU) concluding in December 2011, has rehabilitated the central city‟s separate sewerage
and drainage networks, built a waste water treatment plant, and supported the establishment of
the Municipal Autonomous Sanitation Agency. The EU Project has also funded feasibility
studies for the rehabilitation of the open air drainage system to control floods, which will be the
basis for investments to be financed by the proposed Project. Surface drainage in Beira was also
supported by the EU Project due to its direct impact on the functioning of the sanitation system.
The Nacala feasibility studies for the rehabilitation of the drainage system to control erosion,
which will inform investments by the proposed Project, were financed by the MCC. The
existing Sanitation Strategy for Maputo will provide the basis for the development by the
proposed Project of a Metropolitan Drainage/Sanitation Master Plan, which in addition to
providing a macro-diagnostic and strategic system design technical assessment will also prepare
technical designs for priority investments.
57. Project support will consolidate the institutional model adopted by Mozambique to
ensure sustainable sanitation/drainage services in four cities: Beira, Nacala, Maputo and Matola.
The model aims to create municipal sanitation entities with dedicated revenues and financial
management segregated from general municipal accounts. So far, this institutional model has
been implemented only in Beira. The Beira Autonomous Sanitation Service (BASS) established
by the municipality in 2008 currently has its own management and technical staffs that have
been trained on the job and its sources of financial revenue are gradually becoming more reliable
based on transfers of the sanitation fee by Water Supply Investment Fund (FIPAG), the water
authority. CRA, the national water and sanitation regulatory agency has begun to work with the
BASS. Maputo municipality‟s dialogue with central Government regarding creation and funding
of its autonomous sanitation entity has not yet resulted in any approved plan, but the issue is now
linked to the elaboration of the Drainage/Sanitation Master Plan to be funded by the proposed
Project. In Nacala and in Matola the institutional and financial arrangements for sustainable
O&M of sanitation and drainage systems will also be addressed by the Project.
58. This institutional model at the local level has been complemented by the creation in 2009
of the national urban water and sanitation agency AIAS. AIAS, although its capacity is still
being built, has already assumed a leading role in promoting the Mozambique‟s institutional
model for developing the sustainability of urban drainage/sanitation services.
45
2. Component 2: Enhancing Resilience of Strategic Coastal Cities (US$85million)
(i) Identification of key investment priorities in selected cities to strengthen resilience to
climate related floods and erosion. (US$0.6 million)
59. Assessment of the future needs, including the selection of the municipalities to be
targeted, of urban areas on flood control, sanitation and water supply linked to the likelihood of
increasing impacts associated with climate changes. This will include carrying out an
assessment of current needs and Projecting trends and scenarios taking into account several
variables including: rainfall Projections, urbanization patterns, population growth, infrastructure
deficits and planned investment programs, the natural environment including manmade
environmental changes, and institutional capacities. A scaling of Projected regional climate
impacts will be simulated to model likely future climate impacts at the local level. This will also
allow for identifying deficiencies in information that constraint local level modeling and
planning. A main result pursued will be the identification of no-regret actions to be integrated as
proposed priority investments to increase cities‟ resilience. Estimated costs of this consultancy:
US$0.3 million.
60. Strengthening the technical capacity of AIAS on urban water issues, in particular flood
and erosion control linked to the likelihood of increased rain storms or droughts associated with
climate change. This activity will support well targeted training opportunities allowing the
technical team of AIAS to have access to knowledge developed in other regions. Knowledge
transfer will focus on supporting infrastructure improvements and capacity building related to
flood control, erosion and sanitation, in particular based on programs that have incorporated
climate change considerations. Estimated operational costs to support these training activities:
US$0.3 million.
(ii) Strengthening resilience of the City of Beira to control floods (US$61.9 million)
61. Development of a comprehensive study on integrated urban water management (coastal,
underground, superficial and storm water) incorporating the impact in Beira of: ongoing urban
growth, increases in sizeable economic investments, generalized environmental degradation, and
climate change considerations. This consultancy will carry out an updated assessment, building
on existing studies, of the complex hydrological and hydraulic setting in Beira, incorporating
climate change considerations along with the impacts of urban sprawl as well as important public
and private infrastructure investments in national economic assets such as the port, the railway
and oil pipeline, which have significantly increased over recent years. The study will focus on
the integrated dynamics of coastal and meteomarine conditions, the ground water table, rainfall,
and surface water in the current urban development and climate change contexts. Also, the study
will include consultation with key stakeholders, which include the port, the railway and
municipal Authorities as well as the private sector. The main expected result will be the
availability of a strategic master plan for costal protection and floods control to provide a
comprehensive technical support for the numerous stakeholders that are introducing significant
changes in the city‟s development patterns. Estimated costs of this consultancy: US$0.2 million.
62. Drainage rehabilitation design and supervision: This consultancy will (i) update the
feasibility study for the rehabilitation of the city-wide drainage system, (ii) develop the
engineering designs of the city-wide drainage system, (iii) carry out the works supervision
46
according to the Project investment plans, (iv) develop the bill of quantities and bidding
documents, (v) prepare the environmental impact assessment, and (vi) provide social support
during the design and construction phases. The feasibility study update will confirm the
appropriate technical solutions and refine the proposed investments seeking optimized solutions.
The update will entail revising technical parameters and variables considered in the hydrological
studies, taking into account climate change considerations. It will also include revising hydraulic
studies to incorporate more detailed analysis of alternatives as well as revised structural designs
of the works. Following the recommendations from the updated feasibility study, this
consultancy will prepare the engineering designs for the city-wide drainage system. Supervision
tasks will focus on controlling time, costs and quality of the works in compliance with the
designs and the works contract. It will contribute to the proper and timely execution of the
works, verifying materials used, checks during the course of works, measuring and accounting
for completed sections of the works. The social support will ensure the appropriate undertaking
of activities including: communication campaigns, community information, and all social
activities related to the undertaken of activities associated with the resettlement policy. This
consultancy also includes the activities for complying with the national environmental
regulation. Estimated costs of this consultancy: US$6.3 million.
63. Drainage rehabilitation works: The Project will finance the rehabilitation of part of the
Beira drainage system, consisting of the primary channel known as „central‟. Built on the 50 and
60‟s, the „central‟ channel is constituted by the channels A, AII and AIV of Beira‟s drainage
network, totaling a continuous channel of about 9.3kms, which drains approximately 2,600
hectares. It protects about 60% of city territory from floods, including high density informal
neighborhoods in which most of Beira‟s poor are located. The territory protected by this channel
is also where most of the city public and private assets are located, and constitutes the core area
of the city. Directly, about 60% of the city inhabitants will benefit from these works and,
indirectly, it will benefit 100% of the city inhabitants. This channel, together with the beaches
along the coast, constitutes the city‟s most relevant hydraulic features. Its rehabilitation will
make an extraordinary difference for the city‟s economic viability as well as for the living
standards in Beira. Project financed works will involve rehabilitation and relining of the existing
canal. Costs have been estimated by detailed technical feasibility studies, and a 10% price
contingency has been budgeted. The estimated costs have also been compared to the costs
incurred by the large sanitation Project that is coming to closure, and findings indicate that the
cost estimates are realistic. These works will generate a significant number of jobs for unskilled
labor during the construction phase. Estimated costs of these works: US$52.3 million.
64. Reconstruction of structures affected by the infrastructure works. This works contract
will reconstruct any structure affected by the drainage rehabilitation works. This includes
rebuilding small structures such as fences, latrines, verandas, side-walks, etc., as well as
provision of resettlement houses provided with basic infrastructure as appropriate. It is estimated
that between 50 and 80 existing structures might be affected by Project financed works.
Estimated costs of these works: US$2.0 million.
65. Strengthening technical and operational capacity of Beira‟s Autonomous Sanitation
Services (SASB) for drainage operation and maintenance. This will involve specialized capacity
building consultancies and providing targeted equipment. The consultancies will carry out
updated institutional assessments to tailor the assistance needed. Because the operation phase of
EU financed sanitation system will begin soon, demand for O&M services by the SASB will
47
become more significant. SABS also operates the surface drainage outlets (also rehabilitated by
the EU sanitation Project) which are fundamental elements of the drainage system, designed to
impede sea water intrusion at high tide which causes the rise of the ground water table and
subsequent floods, even in the absence of rains. Thus the SASB already has significant
operational responsibilities, which will increase with the implementation if the proposed Project,
that require increased technical and management capacities. Estimated costs of the
consultancies, operational costs, and equipments to carry out these activities: US$0.9 million.
(iii) Strengthening the resilience of the City of Nacala to control erosion (US$6.4 million)
66. Design of erosion control, drainage works as well as environmental and social support
and works supervision. This consultancy will (i) develop the engineering designs, (ii) carry out
the works supervision accordingly to the Project investment strategy, (iii) develop the bill of
quantities and bidding documents, (iv) prepare the environmental impact assessment, and (v)
provide the social support for the design and construction phases. The feasibility study update
will confirm the appropriate technical solutions and refine the proposed investments seeking
optimized solutions. The update will entail revising technical parameters and variables
considered in the hydrological studies, taking into account the current urban trends as well as
climate change considerations, and the development of the engineering designs for, in principal,
three primary channels severely affected by erosion. The supervision will focus on controlling
time, costs and quality of the works in compliance with the designs and the works contract. The
social support will ensure the appropriate undertaking of activities including: communication
campaigns, community information, and all social activities related to the undertaken of
activities associated with the resettlement policy. This also includes the activities for compliance
with the national environmental legislation. Estimated costs of this consultancy: US$0.9 million
67. Erosion control and drainage works. The proposed Project will finance the rehabilitation
of main erosion and drainage problems; priority has been assigned to three primary open air
channels (6kms). The city of Nacala experiences significant erosion caused by drainage
problems resulting from severe topographic relief (drop of more than 140 meters from the city‟s
highest areas to the coast), vulnerable sandy soils, and the lack of adequately designed drainage
channels. Erosion is aggravated by unplanned urbanization which has denuded slopes of
stabilizing vegetation. The preferred technology alternative for reducing erosion along drainage
channels is the use of such structures as gabions baskets, which have been widely employed by
the municipality due to the availability of materials and the relatively low cost of installation.
This might be combined with grading and planting on the upper portion of the cross sections, for
establishing vegetation to increase stability and reduce sediment deposition within the channel.
Widening of the channels will not be considered to avoid conflict with existing buildings,
gardens, utilities and infrastructure. The preferred construction technology alternative is labor
intensive, and will generate substantial number of jobs for unskilled labor during the construction
phase. Estimated costs of these works: US$6.2 million.
68. Strengthening capacity for operation and maintenance. This will entail providing support
of capacity building consultancies and targeted equipment for the Nacala municipality‟s entity
for managing drainage infrastructure and erosion control. The consultancies will carry out
updated institutional assessments to tailor the assistance needed. The institutional solution for
ensuring the maintenance of the investments financed by the Project will have to be carefully
assessed taking into consideration the organizational characteristics of the municipality, as well
48
as the maintenance requirements associated with the investments, since the preferred
construction technology alternative requires very limited technology. Estimated costs of
consultancies, operational costs, and equipments: US$0.2 million.
(iv) Strengthening the resilience of Maputo metropolitan area to control floods (US$12.3
million)
69. Development of a Master Drainage and Sanitation Plan for the Great Maputo area. The
objective of this consultancy is to review, update and broaden the scope and content of the
existing Maputo Strategic Sanitation Plan (2004). It will provide and make available a Drainage
and Sanitation Master Plan that describes the content and priorities of interventions to be
undertaken in drainage and sanitation systems within the next 15 years in the metropolitan region
comprised by Maputo and Matola municipalities and neighboring districts in Maputo Province
(approximately two million inhabitants). Identified interventions will be prioritized as short,
medium and long term interventions. This consultancy will include the detailed design of
emergency works and engineering specifications for works to be implemented in the short and
medium terms. This will also include the elaboration of Terms of Reference for the detail design
of larger scale and more complex works to be implemented in longer term, and will carry out the
supporting studies to implement the legal and institutional components identified in the Strategic
Sanitation Plan as well. Estimated costs of this consultancy: US$4.5 million.
70. Priority drainage works identified in the Greater Maputo Drainage Master Plan might be
financed by the Project depending on the availability of financial resources. Estimated costs of
this works: US$7.8 million.
(v) Technical support to the coordination and management of the component implementation
(US$3,8 million)
71. Support to the Coordination and Management of the Component Implementation:
Establishment and operation of the PIU in AIAS to support the coordination and management of
Part B of the Project including through the provision of technical assistance, audits, goods and
operating costs.
72. Independent financial audit of the component. The Project will finance all required
audits of the use of Project funds by AIAS and its contractors.
49
Annex 3: Implementation Arrangements
A. Project Administration Mechanisms
1. The Project will be implemented by two specialized agencies, each of which has the
governmental mandate to manage policies and programs which correspond to the Project‟s two
components. The MAE, and specifically its DNDA is responsible for the regulation and
strengthening of municipalities and the municipal system; MAE/DNDA will be the
implementing agency for Component 1. The national AIAS which is under the supervision of
the MOPH is responsible for provision of urban water infrastructure in all but the largest cities
and urban sanitation infrastructure, including drainage, in all cities and towns; AIAS will be the
implementing agency for Component 2. Each of these implementing agencies will be directly
and fully responsible for resource management, procurement, operational management,
safeguard and fiduciary compliance and monitoring and reporting related to the respective
component.
2. Given the different nature of the activities to be implemented through the Project‟s two
components, specific implementation arrangements for each are presented in the figure below.
Implementation arrangements for Component 1: Support for the Municipal Sector
3. Management of Component 1 will be centralized in the PIU to be established by DNDA.
The National Director of the DNDA will be responsible for Component 1 implementation,
monitoring, and reporting. Operational and administrative management will be the responsibility
of the Project Coordinator contracted by the DNDA as head of the PIU. The Coordinator will
oversee all procurement, financial management, and operational oversight of PIU personnel and
of all consultants contracted by the PIU, both firms and individuals. The DNDA through the PIU
Credit Agreement
Project Implementation Arrangent
Project Agreement
Subsidiary Agreement
World
Bank
MAE / DNDA
(Component 1 -Executing
MOPH / AIAS
(Component 2 :
MPD
PIU
Component1 (coordination, technical, procurment , FM,
environment, social)
PIU
Component 2 (coordination, technical,
procurement, FM, environment, social )
50
will also be responsible for ensuring compliance with all procurement, environmental, and social
safeguard requirements.
4. With the exception of Municipal Performance Grants and the inputs purchased by
municipalities from Grant proceeds, all Credit resources allocated to Component 1 of the Project
and contracts will be managed directly by the PIU. Based on approved plans and budgets, goods
and services will be procured and purchased by the PIU and provided in-kind to Project
beneficiary institutions at central and local levels. Beneficiary institutions for Component 1
include: 20 municipalities, the ANAMM, the Ministry of Finance, and the DNDA itself as the
recipient of capacity building support. Beneficiary institutions will provide the PIU with the
specifications of the inputs they require, and may participate in the selection of suppliers as
appropriate based on procurement procedures; however all contracts will be signed and
administered by the PIU under DNDA. In the case of operating costs, beneficiary institutions
may receive funds from the PIU to cover authorized expenses, however beneficiary institutions
may also advance their own funds for the payment of planned and authorized operating cost
expenditures and be reimbursed by the PIU upon the presentation of adequate documentation.
Specific procedures for the administration of operating costs will be detailed in the Operations
Manual and provided to beneficiary institutions.
5. Municipal Performance Grants will employ a different procedure. Based on the
conditions and procedures specified in the Grants Manual, municipalities will receive an annual
allocation for capital investments to be made based on an approved grant investment plan and
budget. These funds will be additional to the existing intergovernmental capital grant (FIIL) to
municipalities, and will be managed through separate bank accounts and using specific
procedures stipulated in the Project Grants Manual. Grant procedures have been harmonized to
the maximum extent possible with existing GoM and municipal systems to minimize
administrative burdens on the municipal staff who will manage grants. In nearly all cases, the
scale of grant-financed purchases or works will be relatively small (i.e. less than US$100,000),
therefore procurement and safeguard demands will be minimal. Municipal staff will be trained
by the PIU to apply approved procurement methods and to employ approved screening
procedures for identifying potential environmental and social safeguard concerns. In cases
where the scale, complexity, and/or potential impacts of grant funded investments are beyond
existing municipal capacities, the PIU will provide technical support as needed to ensure
compliance with the fiduciary and safeguard standards and procedures detailed in the Grants
Manual.
6. Implementation planning, monitoring, and reporting will be the responsibility of the PIU
under the authority of MAE. Draft annual workplans for the following calendar year will be
prepared based on guidelines provided by the PIU and presented by participating municipalities
and other beneficiary institutions during October of each year. These will be analyzed by the
PIU and DNDA, and after revision as needed will be compiled as a draft annual workplan and
budget for review and approval by MAE and IDA before 31 December. On the basis of these
approved plans, municipalities and beneficiary institutions will have access to required resources
during the following year. Implementation reports from beneficiary institutions at central level,
municipalities receiving Performance Grants, and technical assistance providers contracted by
the Project will be submitted to the PIU on a quarterly basis, on the basis of which quarterly
progress reports will be prepared. This information will also serve as the basis for preparation by
the PIU of the quarterly FMR/IDR to be submitted to the Bank by DNDA.
51
Implementation arrangement for Component 2: Enhancing Resilience of Strategic Coastal
Cities
7. A Project Implementation Unit will be established in AIAS to create additional capacity
to implement Project funded activities. Although AIAS‟ limited organizational capacity has
significantly improved since its creation two years ago, additional expertise remains necessary
due to the scale and complexity of Project financed investments compared to other activities
being implemented. To face increasing demands on the agency, AIAS institutional capacities are
currently being strengthened with the support of the MCC funded Project and the ongoing Bank
financed WASIS Project. Implementation support funded by these other AIAS managed
Projects will be in place and functional when the proposed Project becomes effective, including
the following specialists: engineering, financial management, procurement, and environmental
and social safeguards. Once the MCC and the WASIS Projects conclude, the proposed Project
will take over the cost of this implementation support team.
8. In addition, the proposed Project will finance the services of a Coordinator to support to
the AIAS Director and ensure the technical and operational coordination of component activities.
Also, this Coordinator will assist particularly with the institutional dialogue between AIAS and
the municipal councils with respect to the integrated management of works execution, and the
development of municipal capacity to operate and maintain the infrastructure financed by the
Project.
9. To ensure an appropriate capacity to manage the execution of the works in the cities of
Beira and Nacala, the Project will finance a small unit based in each of these cities. The creation
of these units will be undertaken in accordance with the timetable for executing the works in
these cities. These units will be staffed by specialists with proven experience in the management
of sizeable infrastructure works contracts, particularly important in the case of Project activities
planned for Beira. The constitution of these units will build on the experience of the EU
financed sanitation Project in Beira, which has successfully executed an US$100 million Project
financing infrastructure works and institutional capacity building. The decentralized
management units will each include an engineer, a technical assistant, an administrator, and a
secretary and will be part of the PIU for Component 2 coordination and management.
Project Implementation Unit - Component 2
MOPH / AIAS
PIU - Executive
Coordinator
FinancialTecnical
Special
Procurement
Committee
Procurement
Technical team from suppliers carring out the component activities
52
10. Procurement and financial management will be carried out by AIAS in Maputo, with
support from contracted specialists. The decentralized units in Beira and Nacala will carry out
the management of the infrastructure works contract.
B. Financial Management
11. Overall, the residual financial management risk for the Project is assessed as Substantial.
MAE, through the DNDA will take the lead responsibility for overseeing FM arrangements of
component 1 of the Project, while component 2 will be under the responsibility of the recently
created AIAS. MAE has received financial assistance from several donors, including the Bank,
on the closed Municipal Development Project and the active Market-led Smallholder
Development Project and is also currently responsible for handling the Project Preparation
Advance. Its FM performance on past Projects is considered adequate. Although AIAS has not
managed the funds for implemented a Bank-financed operation, it has the minimal requirements
to ensure that funds will be used for the intended purposes, in an efficient and economical
manner as well as guarantee the safeguard of the assets.
12. A key FM issue experienced under the closed Municipal Development Project was late
submission of the final audit report due to winding-up of the PIU. This risk will be mitigated for
the proposed Project by ensuring the closer involvement of the Ministry‟s Permanent Secretary
and Department of Administration and Finance (DAF) in overseeing and supporting the PIU.
13. Additional measures to strengthen the FM arrangements of the Project also include the
hiring of (currently underway) an individual Financial Management Specialist (consultant) for
each of the key implementing agencies (DNDA and AIAS). These consultants will assist the
Implementing Agencies‟ PIUs to manage component resources and coordinate finance related
reporting of component activities. These consultants will also be responsible to, help monitor
and prepare consolidated reports for the municipal grants, and help evaluate the performance of
the participating municipalities. To ensure that disbursements and Project activities can begin as
soon as possible, appropriate actions will be taken to ensure that these consultants will have
access to e-SISTAFE, and client connection prior to effectiveness of the Project.
Country and Sub-national issues: Summary of Municipality FM Assessment
14. An assessment of the municipalities FM arrangements also took place to evaluate the
arrangements of their financial reporting, adequacy for their safeguarding of assets, compliance
with laws and regulations. The assessment took into consideration the current municipal law,
their relationship with the MAE, the Tribunal Administrativo (TrAdm), local inspectorates such
as IGAE and the Ministry of Finance.
15. The municipal assemblies play a role in the approval of their annual municipal budgets.
The budgets have to be approved by December 15 of year N-1. As such, planned activities to be
financed from the Grants will also be incorporated into each municipalities budget and the
Grants budgets will be shared with the PIU.
16. The accounting transactions of municipalities are largely through manual processes and
through spreadsheets and the mix of competencies and skills at municipal level are weak.
53
However, each municipality will be responsible for the maintenance of appropriate internal
controls, including compliance with policies of Law 9/2002.
17. The municipalities still mainly rely on the transfers from the central Government, which
are transferred from the CUT to the municipalities main revenue/bank account and subsequently
sent to other municipality accounts and suppliers of goods and services. Such bank accounts are
to be monthly reconciled and reviewed. However, a separate bank account will be opened to
receive and expend Project provided grant funds and will be subject to the internal control
policies and procedures used by the municipalities and subject to audits.
18. All municipalities have to report on a quarterly basis the use of their funds to the Ministry
of Finance; however, not all municipalities fully comply with this legal requirement.
Participating municipalities will be required to report on the use of Grants‟ funds to MAE on a
quarterly basis for MAE‟s consolidation and reporting to the Bank.
19. As per law 1/2008, municipalities have to prepare the Contas de Gerências by March 31
of each year, and submit for their municipal assemblies approvals by April 30 of each year. They
must then submit the approved Contas de Gerências to the TA and IGF by May 30 of each year.
The IGF then needs to provide an opinion on these by July 31 of each year. Therefore, in
addition to the external auditors of the Project, IGF will play a key role in helping in follow up
with audit recommendations and ensuring compliance with policies, procedures and other legal
requirements.
20. Budgeting and Flow of Funds. As soon as the Financing Agreement will be signed, the
Project will need to be registered through the National Directorate of Budget (DNO), as without
this taking place, no funds may be channeled through the Government IFMIS (e-SISTAFE).
Upon completion of preparation of the Project budget and on a yearly basis, both Project
implementing units will need to ensure that yearly budgets are inserted into MEO following the
Government of Mozambique procedures, including the calendar for such. This will ensure
celerity in the implementation of Project activities at the beginning of every fiscal year. Both
components will have an initial budget, which will be used to prepare a procurement plan, and
the basis for the initial advance request from the Bank.
21. The funds will flow through the Government‟s single treasury account (CUT). Both
MAE and AIAS will open a Designated Account in the Banco de Moçambique and through
which the funds will flow to a FOREX account and transferred to the CUT on demand by the
implementing entities. Under Component 1, MAE will transfer the Municipal Performance
Grant funds from the CUT directly to a separate bank account held by the participating
municipalities, which will solely receive funds from the Project. For simplification of FM
arrangements and robust internal control environment, payments for Works conducted in Beira,
and Nacala under component 2 will be paid directly by AIAS in Maputo.
22. Accounting and Reporting. Project transactions at MAE/DNDA and AIAS will be
recorded directly on e-SISTAFE and reports extracted from the IFMIS and through excel
spreadsheets. Activities from the municipalities will be recorded through their existing
mechanisms such as excel spreadsheets, until improved accounting/management system(s)
(municpal IFMIS such as SGM) is rolled out to each. The civil servants at both MAE/DNDA
and AIAS already have access to e-SISTAFE as Agentes de Execução Orçamental, Agentes de
54
Controle Interno, Agentes de Execução Financeira and other key access codes required to ensure
that they can execute funds through the IFMIS and CUT.
23. MAE/DNDA and AIAS will report separately on Project transactions to the Bank on a
quarterly basis through IFRs, which will be submitted to the Bank no later than 45 days after the
end of each calendar quarter. The reports will include a (i) Designated Account Activity
Statements, (ii) Summary Statements of DA expenditures subject to Prior Review, as well as (iii)
DA expenditure not subject to prior Review; (iv) Sources and Uses of Funds by disbursement
categories; (v) Detailed Use of Funds by Project Component/Activity with comparison of
budgets and actual and explanation of variances; and short-term forecasts of expenditure. A
narrative summary of implementation highlights for the quarter will also be the key to help the
readers understand the financial statements better. Based on a simplified report to be submitted
by the participating municipalities, MAE will include a separate report on the uses/transfers of
funds by/to the municipalities, for which the format is yet to be agreed upon.
24. The IFRs will be reported in USD. As the funds are transferred in tranches into the CUT,
the exchange rate to be used will be based on the date of the transfer into the CUT using a
„FIFO‟ concept in that. That is until all funds of a certain advance have been fully
used/documented; the subsequent reporting‟s exchange rates will be based on the exchange rates
of the days in which the funds are transferred from the DA to the Government‟s CUT, and so on.
This will facilitate the reporting for the PIUs.
25. Internal Control. Both, MAE/DNDA and AIAS have adequate internal controls in
place for preparation and approval of transactions and segregation of duties, which is enhanced
by the use of the Government IFMIS. The Project will use internal control policies and
procedures laid out on the Manual de Administração Financeira (MAF), which are based on the
Law 9/2002. In addition to the MAF, reporting and disbursement procedures and other relations
with the Bank will be documented and used as an annex in conjunction with the MAF.
26. Internal control procedures all participating municipalities are also based on Law 9/2002
and on-going monitoring of their controls will take place to ensure compliance with other laws
and regulations. The Inspeção Geral das Finanças (IGF) and other OCIs will play a role in
following up on the implementation of recommendations by audits of either Tribunal
Administrativo (TrAdm) and/or other OCIs. In addition, there will be a Grants Manual laying
out all procedures to be followed with regards to use and reporting of the municipal grants. The
Grant Manual should be presented by MAE for review and cleared by IDA as a condition for
Category 2 disbursement for Grant Disbursement.
27. Staffing. As the Project will use the country FM systems, it will also rely on personnel
from the Direção de Administração e Finanças (DAF) of both implementing entities. While
some of the staff is not experienced in handling Bank financed operations, this will be mitigated
through the on-going recruitment of FM and procurement Specialists and Project accountants–
one each for the PIU in DNDA and for AIAS – who will provide assistance to the civil servants,
particularly in the issues regarding Bank procedures. AIAS is currently in the process of
recruiting additional personnel (including an FM Specialist) in its FM department to enhance its
capacity. Training in Financial Management and Disbursement for World Bank financed
Projects is recommended for staff of both implementing entities by May 2012.
55
28. Audit. All Project accounts, including those referring to the Municipal Performance
Grants accounts, will be audited by an independent auditor in accordance to International
Standards on Auditing (ISA). There has been coordination between the Bank and the
Recipient‟s Tribunal Administrativo to improve the quality of the audits and ensure compliance
with ISAs with respect to other Projects, but involvement of 20 municipalities in this Project
introduces added complexity which Tribunal Administrativo may not be able to cater on a timely
basis given the limited availability of staff and logistical constraints.
29. A copy of the audited Project financial statements, along with the auditor‟s opinion will
be submitted to the Bank not later than six months after the end of each financial year. The audit
report will also contain a management letter, indicating any weaknesses, deficiencies or
reportable conditions on the Project‟s systems of internal controls and accountability, as well as
management‟s response.
30. The Project auditors in relation to Municipal Grant funds provided under Component 1
will make use of municipality audit reports to be undertaken by auditors acceptable to IDA in
order to get assurance over the use of funds under the performance grants allocated to the
respective municipalities. Hence, each municipality will be required to (a) submit to DNDA its
annual budgets, procurement plans and in-year financial statements showing all sources and uses
of funds consistent with their respective approved budgets and in form and substance as would
have been agreed between DNDA and the respective municipality; and (b) annual audited
financial statements in form and substance as would be agreed between the DNDA and
respective municipality. These reporting and oversight requirements will be detailed in the
Grants Manual and will compliance with them will form part of the due diligence reviews that
the Bank‟s fiduciary team will conduct during the year.
31. Both DNDA and AIAS will provide the auditors with full access to the related documents
and records. The Bank will monitor compliance with the audit requirements as per the table
given below:
Audit Report Due Date
1. Project Annual Financial Statements for the year
ending December 31 for Component 1
June 30 each
year
2. Project Annual Financial Statements for the year
ending December 31 for Component 2
June 30 each
year
32. The following action plan was agreed with the implementing entities: FINANCIAL MANAGEMENT ACTION PLAN
Action
1. Recruitment of two FM Consultants by effectiveness
2. Preparation of a Grants Manual before beginning grant disbursements 3. Agreed on formats of quarterly reports during negotiations
56
Disbursement Arrangements
33. Both implementing entities will access the Bank funds at least quarterly based on Interim
Financial Reports. Upon effectiveness of the Financing Agreement, an initial advance will be
disbursed into the DA to cover eligible expenditures based on an estimate of six months forecast
financing requirements. Subsequent withdrawals will equally be based on the net cash
requirements for the subsequent 6 months. Specifically for the performance-based grants to
municipalities under component 1, annual forecasts will be based on the latest performance
information available on their meeting the performance indicators.
34. The Project may also use the (i) Reimbursement disbursement method whereby eligible
expenditures paid for by GoM will be reimbursed by the Bank from the Credit account; (ii)
Direct Payment method by making direct payments to suppliers and contractors from the Credit
account at the request of the Project; this method is particularly encouraged to be used by AIAS
for the payment of their relatively large Works contracts; (iii) the Special Commitment method,
whereby the Bank will issue special commitment to commercial banks for payment of eligible
expenditures.
World Bank
Component 1
Designated Account in
Banco de Mozambique
DA (USD)
Participating
Municipalities
separate Bank
Account
CUT -
Subaccount
(MAE)
Suppliers/Service Providers
Component 2
Designated Account in
Banco de Mozambique
DA (USD)
CUT -
Subaccount
(AIAS)
57
35. Financing plan/Disbursement Table:
Category
Amount of Credit
Allocated
[SDR million]
Percentages of
Expenditures to be
Financed
(Including taxes)
(1) Goods, works, non-
consulting services,
consultants‟ services,
Training and Operating
Costs under Parts A(i) (b)
and (c) and (ii) of the
Project
13,879,000
100%
(2) Goods, works, non-
consulting services,
consultants‟ services,
Training and Operating
Costs under Part B of the
Project
55,400,000 100%
(3) Goods, works and
consultants‟ services
financed through
Municipal Performance
Grants under Part A(i)(a)
of the Project
8,490,000
100%
(4) Refund of Preparation
Advance
431,000
Amount payable
pursuant to Section 2.07
of the General
Conditions
TOTAL 78,200,000
36. After receipt of disbursement with respect to the performance grants allocation for
municipalities, DNDA will subsequently disburse these amounts to the eligible municipalities in
the dedicated Project accounts opened by each participating municipality for this Project. These
performance based grants allocation will be used by the municipalities in accordance with the
Grants Manual and other procedures consistent with the use of country systems. Expenditures
made by the municipalities will be captured by their respective accounts personnel and reported
to the DNDA on a quarterly basis. DNDA will compile a consolidated report on quarterly
sources and uses of funds under this sub-component of the Project. Any unspent balances by
municipalities from the Performance Grants allocation disbursed to them will be carried forward
to subsequent periods; but systems already exist and are being implemented to monitor that such
balances are kept to the barest minimum. In addition, performance grants allocation not utilized
by the municipalities at Project closure will be refunded to the Bank as part of the lapsed
loan/Credit refund arrangements.
37. Additional instructions are laid out on the „Disbursement Letter‟.
58
D. Procurement
38. Procurement provisions and review thresholds. Procurement for the proposed Project
will be carried out in accordance with the World Bank‟s “Guidelines: Procurement of Goods,
Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World
Bank Borrowers” published by the Bank in January 2011 and the World Bank‟s “Guidelines:
Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by
World Bank Borrowers,” published by the Bank in January 2011.
39. For National Competitive Bidding, the locally issued bidding document may apply.
However, these bidding documents will need to be satisfactory to the Bank and subject to the
additional procedures and modifications stipulated below and as reflected in the Financing
Agreement.
(a) General. The procedures to be followed for NCB shall be those set forth in the
Regulation, with the modifications described in the following paragraphs:
(b) Eligibility. No restriction based on nationality of bidders and/or origin of goods shall
apply. Foreign bidders shall be allowed to participate in NCB without restriction and shall not
be subject to any unjustified requirement which will affect their ability to participate in the
bidding process such as, but not limited to, the proof that they are not under bankruptcy
proceedings in the Recipient‟s territory; have a local representative; have an attorney resident
and domiciled in the Recipient‟s territory; form a joint venture with a local firm. In cases of
joint ventures, they shall confirm joint and several liabilities. Prior registration, obtaining a
license or agreement shall not be a requirement for any bidder to participate in the bidding
process. Recipient‟s Government-owned enterprises or institutions shall be eligible to
participate in the bidding process only if they can establish that they are legally and
financially autonomous, operate under commercial law, and are not dependent agencies of the
Recipient.
(c) Bidding Documents. Standard bidding documents acceptable to the Association shall be
used for any procurement process under NCB.
(d) Preferences. No domestic preference shall be given for domestic bidders and/or for
domestically manufactured goods.
(e) Applicable Procurement Method Under the Regulation. Subject to these NCB
exceptions, procurement under NCB shall be carried out in accordance with the Regulation‟s
public competition (Concurso Público) method.
(f) Bid Preparation Time. Bidders shall be given at least twenty eight (28) days from the
date of the invitation to bid or the date of availability of bidding documents, whichever is
later, to prepare and submit bids.
(g) Bid Opening. Bids shall be opened in public, immediately after the deadline for their
submission in accordance with the procedures stated in the bidding documents.
(h) Bid Evaluation. Qualification criteria shall be clearly specified in the bidding documents,
and all criteria so specified, and only such criteria so specified shall be used to determine
59
whether a bidder is qualified; the evaluation of the bidder‟s qualifications should be
conducted separately from the technical and commercial evaluation of the bid. Qualification
criteria shall be applied on a pass or fail basis.
(i) Evaluation of bids shall be made in strict adherence to the criteria declared in the
bidding documents; criteria other than price shall be quantified in monetary terms.
(ii) A contract shall be awarded to the qualified bidder offering the lowest-evaluated and
substantially responsive bid.
(iii) Bidders shall not be eliminated on the basis of minor, non-substantial deviations.
(h) Rejection of All Bids and Re-bidding. All bids shall not be rejected and new bids
solicited without the Association‟s prior concurrence.
(i) Complaints by Bidders and Handling of Complaints. The Recipient shall
establish an effective and independent complaint mechanism allowing bidders to
complain and to have their complaint handled in a timely manner.
(j) Right to Inspect/Audit. In accordance with paragraph 1.16(e) of the Procurement
Guidelines, each bidding document and contract financed from the proceeds of the Financing
shall provide that: (i) the bidders, suppliers, and contractors and their subcontractors, agents,
personnel, consultants, service providers or suppliers, shall permit the Association, at its
request, to inspect their accounts, records and other documents relating to the submission of
bids and contract performance, and to have them audited by auditors appointed by the
Association; and (ii) the deliberate and material violation by the bidder, supplier, contractor or
subcontractor of such provision may amount to obstructive practice as defined in paragraph
1.16(a)(v) of the Procurement Guidelines.
(k) Fraud and Corruption. Each bidding document and contract financed from the proceeds
of the Financing shall include provisions on matters pertaining to fraud and corruption as
defined in paragraph 1.16(a) of the Procurement Guidelines. The Association may sanction a
firm or individual, at any time, in accordance with prevailing Association sanctions
procedures, including by publicly declaring such firm or individual ineligible, either
indefinitely or for a stated period of time: (i) to be awarded an Association-financed contract;
and (ii) to be a nominated sub-contractor, consultant, supplier or service provider of an
otherwise eligible firm being awarded an Association-financed contract.
(l) Debarment Under National System. The Association may recognize, if requested by
the Recipient, exclusion from participation as a result of debarment under the national system,
provided that the debarment is for offenses involving fraud, corruption or similar misconduct,
and further provided that the Association confirms that the particular debarment procedure
afforded due process and the debarment decision is final.
40. The overall implementation of the envisaged procurement activities for the proposed
Project will be managed by two separate implementing agencies, the MAE/DNDA for
component 1 and by the MOPH/AIAS for the component 2. While the MAE has previously
implemented Bank funded operations, the Municipal Development Project, there has been no
capacity created within MAE as the previous operation was fully implemented by consultants
who are no longer with MAE. AIAS is a recently created institution that has some experience
with Bilateral financing, but no experience with the World Bank.
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41. The capacity of the two implementing agencies has been reviewed during the preparation
phase. It is found to be limited for the case of AIAS and to be established, for the case of
DNDA. Both units will be resourced with experienced and qualified procurement consultants,
who will provide technical assistance and training to permanent staff of MAE and AIAS
UGEAs. The key issues and risks concerning procurement for implementation of the Project
have been identified and these include: (i) availability of qualified procurement staff to
implement procurement activities; (ii) poor quality procurement and outcomes due to limited
procurement and contract administration capacity, and (iii) delays caused by Government‟s own
review process prior to contract signature.
42. Corrective measures were discussed and AIAS and MAE should: (i) establishment of the
procurement functions at MAE/DNDA prior to Effectiveness and strengthening of available
capacity at AIAS, (ii) ensure that the procurement decision making is fully covered in the
Procurement Manual, to be prepared, and is available/known to staff in charge of the Project, (iii)
ensure that qualified staff is retained in the implementing agencies; and, (iv) the procurement
planning process taking into account the steps and associated timeframe for Government‟s own
internal approval processes (the Tribunal Administrativo, the Comissão das Relações
Económicas Exteriores (CREE), and Ministry of Finance “Departamento de Divisas”). MAE
and MOPH management should ensure that these implementing agencies are resourced with
qualified personnel throughout the life of the Project.
43. In view of the overall experience and current capacity of MAE and AIAS to carry out
procurement activities related to the proposed Project, the procurement risk associated with the
Project is rated as Substantial. The risk will be closely monitored by Bank team during the
regular implementation support missions.
44. Prior-Review Thresholds. Prior-review and procurement method thresholds for the
Project are indicated in Table below.
Procurement Thresholds Procurement Method Thresholds Proposed (USD million)
ICB NCB Shopping QCBS CQS Least Cost DC / SSS ICS
Works ≥5.0 <5.0 <0.10 All
Goods ≥0.50 <0.50 <0.10 All
Consulting
Services
Firms ≥0.20 <0.20 <0.20 All
Individuals All ≥0.10
45. The Project is expected to finance large value Works contracts that will be subject to pre-
qualification procedures, such as the Drainage rehabilitation works for the city of Beira. Other
large value works, not requiring pre-qualification, include the Erosion control and drainage
works in Nacala. Furthermore, large value consultants services are expected for the
Development of a Master Drainage and Sanitation Plan for the Great Maputo area; the Design of
erosion control, drainage works in Nacala; Strengthening technical and operational capacity of
Beira‟s Autonomous Sanitation Services and the design of the Beira Drainage rehabilitation
measures. Small value goods such as office and information technology equipment are also
expected.
46. Procurement Plan and Procurement Arrangements. The Procurement Plan for the
first 18 months of Project implementation was prepared by MAE/DNDA and MOPH/AIAS,
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reviewed and approved during negotiations. This plan will be updated annually or as required to
reflect the Project implementation. Works contracts expected to be procured through ICB under
the Project will include the drainage works for the cities of Beira and Nacala. The drainage
works for the city of Beira shall be subject to Prequalification in accordance to Bank Procedures.
Goods to be procured will include vehicles, information technology and office equipment,
among others. Consulting services to be financed will include studies associated with the design
of the rehabilitation measures in both cities and the Development of a Master Drainage and
Sanitation Plan for the Great Maputo area, the integrated urban water management for Beira,
Analysis of the future needs of urban areas on the likelihood of increasing impacts associated
with climate changes, among others. Furthermore, the Bank will conduct semi-annual
procurement supervision mission and carry out Post Procurement Review at least once per year.
47. The World Bank Standard Bidding Document for Works and Goods and the Standard
Request for Proposals as well as NCB documents satisfactory to the Bank will be used for the
contracts to be procured. These documents will be prepared jointly by MAE and AIAS and
included in the procurement section of the Project‟ Implementation Manual. The Manual is
expected to be made available prior to Effectiveness.
48. A separate Manual, the Project Grants Manual, will be prepared by MAE/DNDA on the
Municipal Performance Grants that will support sub-Projects intended to enhance municipal
capacity for sustainable decentralized management of the urban environment and urban services.
The manual will contain the applicable procurement procedures for the participating
municipalities as well as the reporting mechanisms to the unit to be created under DNDA to
manage the Project. The procurement officers from the DNDA PIU will provide support and
guidance to the procurement activities within the municipalities. The Grants Manual will be
prepared and approved by the Bank prior to commencement of the Grant scheme.
Environmental and Social Safeguards
49. The overall environmental and social impact is expected to be positive, especially in
periurban areas where flooding during heavy rains is a serious health and safety issue. Negative
impacts, however, may arise during cleaning and rehabilitation of existing drainage channels, or
improvements of natural drainage channels through targeted periurban areas.
50. In Beira the proposed drainage works will be along existing canals or natural drainage
channels that eventually drain directly to the sea. In Nacala, the physical works will include the
implementation of key components of a drainage master plan by installing erosion control
structures (gabions) on three of the steep-sloped primary drainage channels in the city that drain
directly to the sea. Most of these works can be managed through good engineering practice for
design and construction, and disposal of sludges and solid wastes removed during cleaning
operations, especially in Beira. The most sensitive environmental issue will be the disposal of
polluted sludges dredged from the existing drainage channels in Beira.
51. The most sensitive social issue will be compensation for impacts on fences, latrines, fruit
trees, and similar structures or assets that may need to be temporarily removed or relocated in
order to improve drainage in periurban areas. In Beira, preliminary census work identified
between 50 to 80 structures that might be impacted, depending on the final width of the drainage
right-of-way in the periurban area and whether a retention basin will be built. The majority of
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these structures are fences and latrines around household lots. Preparation of a draft RPF
occurred subsequent to this preliminary census, and notes up to 50 residences in the Beira
periurban area may have potentially impacted structures. Efforts will be made to further
minimize the number of potentially impacted structures and impacted households during final
engineering design, and before production of a RAP. In Nacala, approximately 10 households
are located near the three gullies that need stabilization against erosion, but preliminary design
indicates no resettlement or compensation is expected because all investments will be
stabilization of existing gully walls on steep slopes with sandy soils, to prevent further erosion.
Therefore, the works will occur within the existing gullies, and are expected to be done with
primarily manual labor. In the unlikely event that compensation for disturbance of a structure
near a gully is required. The RPF is designed to cover all Component 2 investments. Component
1 will not be covered by the RPF because works investments that triggers OP 4.12 Involuntary
Resettlement are not eligible for the grant financing.
52. Feasibility and preliminary design engineering studies are being financed by the
European Union in Beira and by Millennium Challenge Corporation in Nacala. Until the final
engineering designs for the rehabilitation and improvements are completed during the Bank
Project, the site-specific environmental and social impacts are uncertain, especially at Beira.
Therefore, an Environmental and Social Management Framework (ESMF) and a Resettlement
Policy Framework (RPF) have been prepared for the civil works at Beira, and these will be the
basis for producing an Environmental Assessment and an Environmental Management Plan,
once engineering designs are completed, and a Resettlement Action Plan. These Safeguards
documents would need to be reviewed, approved, and disclosed by the Bank before those works
could proceed. The ESMF and RPF for Beira will also be useful in guiding the Master Plan and
to scope the appropriate Safeguards documents for any works that may be carried out in the
Greater Maputo area once the Master Plan is completed. These Safeguards documents also
would need to be reviewed, approved, and disclosed by the Bank before those works could
proceed.
53. No physical cultural resources have been identified to be at risk for impacts by the pre-
feasibility studies in Beira and Nacala. The Master Plan in Greater Maputo will take into
consideration this potential issue as well and identify known cultural resources near the existing
drainage system as well as establish chance finds procedures, but it is unlikely that any
significant cultural resources would be located within existing drainage systems in Greater
Maputo. It is possible that physical cultural resources such as worship sites are located adjacent
to the drainage system, especially in periurban areas. The Project is unlikely to adversely affect
such nearby sites; rather, the installation of improved drainage reduces risk of adverse impacts
on them caused by flooding during heavy rains. In determining which components of the
Greater Maputo Master Plan can be funded by the current Project, once the Master Plan is
prepared and adopted, criteria for selection of priority works can include deferment of any
components that might have potentially significant adverse impacts on sensitive resources.
54. Any proposed Municipal Performance Grant under Component 1 will not be eligible for
Bank financing if it involves displacement of peoples, loss of access to assets, adverse impacts
on significant cultural resources, or civil works within a river that is classified as transboundary
or a tributary to such a river. The Municipal Performance Grants are expected to be small-scale
in nature, involve repair or rehabilitation of existing city infrastructure (offices, sidewalks,
streets, etc.) because of their small size, and most of them may be considered Category C sub-
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Projects. The most appropriate Safeguards instrument, if any, for these works would be
Environmental Management Plans (EMPs) for construction, which will be part of a Grants
Manual prepared by the PIU. Therefore, a separate ESMF has been prepared for Component 1
activities that describes the institutional arrangements, training, and capacity building that will be
provided by the PIU, a description of environmental issues of concern during small-scale
construction activities and appropriate mitigation measures, and checklists and reporting forms
for each Municipality to use in developing its respective EMP. As noted above, the civil works
anticipated in Nacala are also expected to have minimal adverse environmental and social
impacts related to construction. Therefore, the ESMF for Component 1 activities, some of which
may require EMPs, is also the guiding document for preparing an EMP for construction of the
Nacala Project, once final engineering designs are completed.
55. The Borrower has implemented several Bank financed Projects and the Bank's safeguard
policies. The institution responsible for urban interventions has demonstrated an adequate
capacity to apply the safeguard policies through their Projects. The cities that will be financed
through this Project will need additional capacity on safeguards. AIAS, which will be the
implementing agency for component 2, will benefit from the assistance of environmental and
social specialists from FIPAG, a sister agency that has extensive capacity and experience with
Safeguards procedures and requirements as an implementing agency for WB financed Projects in
the water supply and delivery sector, as well as MCC-financed Projects, which follow WB
Safeguard Policies as well.
56. Mozambique has a well established culture of consultation as set forth in the Directive
for the General Case on Public Participation in the EIA Process (Ministerial Directive no. 130/
2006 of July 19) and the Regulation on the Process of Environmental Impact Assessment
(Decree 45/2004). Mozambique requires that public consultation includes all interested and
affected parties. During consultation people are provided with Project information and provided
an opportunity to comment, ask questions, and express concerns. The Directive established a
general methodology that should govern the public participation process to ensure effective
consultation. The five steps for participation include: (1) identification of stakeholders and
affected persons, (2) dissemination of information, (3) dialogue with stakeholders and affected
persons, (4) incorporate comments raised during consultations, and (5) provide feedback.
57. The EIA Regulation also requires that public consultations are advertized 15 days prior to
the meeting. In addition presentation of studies published announcements on the eve of the
consultation meeting date and made copies available to impacted and interested parties of
relevant documents to be discussed at these meetings. Although meetings must be announced at
least 15 days in advance, it is recommended that the announcement, especially radio
announcements, include information on where people can access documents that have been
prepared and will be discussed during consultation meetings.
58. Extensive consultations with stakeholders and directly affected people have already
occurred as part of the prefeasibility and feasibility studies financed by the European Union
and the MCC. Although these consultations included a broader range of investments in the
water, sanitation, and drainage sector, they included consultations on alternative drainage
schemes. These consultations were held to present Project objectives, explain main Project
activities, and describe potential impacts identified based on biological and socio-economic
64
environment. The presenters then noted main issues rose by stakeholders so that their concerns
could be addressed in final documents.
59. In Nacala two focus groups of special interest were identified - women and community
leaders. Focus group meetings were held in Nahua, Nachicuva, and Muconia neighborhoods.
Open public meetings were also held in these same neighborhoods. Two different consultation
topics were held involving the focus groups and public meetings for presentation of the Pre-
Feasibility Study and Scoping Phase, and presentation of the Preliminary Report of the
Environmental Impact Study. These meetings presented the main findings arising from visits to
the Project area; potential impacts identified, and study findings. These consultations continue
during preparation of the ESMF and RPF, and subsequent EMPs and RAPS.
60. Based on site visits, where adverse environmental and social impacts are most likely to
occur, the scale and significance of the risks and likely impacts are localized and readily
managed with appropriate mitigation measures, and therefore the Project is appropriately
defined as Category B. Of the World Bank Safeguard Policies, OP 4.01 (Environmental
Assessment) and OP 4.12 (Involuntary Resettlement) are triggered.
F. Project Monitoring and Evaluation
61. Monitoring and evaluation will be carried out by each of the implementing agencies for
Components 1 and 2. The PIUs will collect and organize the information necessary for activity
monitoring and results monitoring. Each PIU will prepare quarterly FMRs/IFRs, Annual
Progress Reports including presentation of KPIs from the Project Results Framework,
comprehensive Project assessments as inputs for Mid-term Review and Project Implementation
Completion Review, and other supporting documentation that may be required for supervision
missions and other program review activities as agreed between the Bank Task Team and the
GoM implementing agencies. MAE and AIAS, the implementing agencies, will each review and
approve this documentation and will provide to the Bank the consolidated data for the
monitoring and evaluation of each respective component. Each component will follow a specific
methodology to producing the data for the monitoring and evaluation.
Component 1 – Monitoring and evaluation procedures
62. Component 1 M&E will be managed by the DNDA with the support of its PIU. A
Monitoring and Evaluation Officer will be part of the DNDA PIU team, to assist the Project
Coordinator in collecting and managing the information required for the Projects M&E system,
as well as in the preparation of the technical (i.e. non-financial). The PIU will develop reporting
formats and provide them to beneficiary institutions. Each beneficiary institution will submit
quarterly progress reports detailing activities undertaken in relation to their annual workplan,
outputs produced, difficulties encountered, and recommendations to improve implementation.
Additional data will be provided quarterly by municipalities receiving Municipal Performance
Grants regarding procurement, contract execution, and financial disbursement in order to allow
the PIU to monitor Grant implementation. Each October all beneficiary institutions will present
provisional annual reports along with their proposed workplan for the following year. These
annual reports will then be finalized in January following the close of the prior year.
65
63. Special attention in monitoring will be dedicated by the DNDA and PIU to the collection
of data related to the performance indicators used to calculate the allocation of the Municipal
Performance Grant. Because each of these Grant performance indicators is aligned with the
“supply driven” capacity building provided under Component 1 in the areas of urban planning,
municipal finance management, and municipal revenue enhancement, the technical assistance
providers associated with these activities will assist the PIU and the collection and/or validation
of performance data for each of the 20 participating municipalities. Details of requirements and
timing for monitoring data required for the annual municipal performance assessments
associated with the performance grants will be provided in the Grants manual. On this basis, the
PIU‟s M&E Officer will assist the Coordinator in preparing the annual performance assessment
report document according to these specifications and calendar.
Component 2 – Monitoring and evaluation procedures:
64. Component 2 M&E will be managed by the AIAS. The capacity in AIAS to collect data
on the Project outcome and results indicators will be strengthened through the creation of a PIU
to address the Project implementation specific needs, and through consultant contracts to carry
out works supervision. No additional costs will be required related to support M&E. Data
produced for M&E will be used to stirs the component execution accordingly with the
implementation timetables agreed with the Bank.
65. Progress reports will be prepared on a quarterly basis by the teams responsible for all
major component activities. The PIU will prepare and disseminate data collection forms and
consolidate the information directly managed by its staff as well as the information obtained
through the reports produced by the consulting firms supervising the works execution. Also, the
PIU will interact with participating municipalities in order to obtain the information associated
with the implementation of the technical assistance and institutional development activities.
These will be used to prepare the activity monitoring section of quarterly IFR/FMRs. Results
monitoring will be carried out on an annual basis, collecting and reporting information relevant
to the status of all Component 2 KPIs.
G. Role of Partners
66. Component 1 and Component 2 each have different collaborating arrangements with
other development partners. In relation to Component 1, at the moment there are two municipal
Projects with which the proposed Project will have a substantive engagement. German
Cooperation KfW/GIZ is preparing a new 4 year Project (2012-2015) for the financing of
economic infrastructure investments in six municipalities in the central region, four of which are
among the 20 Project supported municipalities. The KfW/GIZ Project seeks to provide
sustainable infrastructure and services to the urban, peri-urban and rural population in the six
municipalities, with a total budget of EUR 15 million. The IDA funded Project will work in
complementary sectors, urban planning and municipal finance, and so will coordinate to
maximize synergies with the KfW/GIZ Project in those municipalities where they are both
working.
67. Both Components have a significant relationship to the Municipal Development Project
(PDA) financed by a consortium of Danish (DANIDA), Swiss (SDC) and Austrian (ADC)
Cooperation and being implemented in 13 cities of the central and northern regions of the
66
country. Component 1 is seen by Government as a “sister” Project to the PDA, bringing many of
the same elements of assistance to 20 municipalities which are beyond the PDA‟s geographical
scope. Since both Component 1 and the PDA are supervised by the DNDA, coordination
mechanisms between the two Projects will be secured through their shared GoM institutional
base. Component 1 will have a significant technical relationship with the PDA; each will provide
its methodological tools and share its implementation experience with the other regarding
capacity building for municipalities. An even closer relationship is seen in the area of financial
management: the PDA-funded Municipal Management System (SGM) remains a promising basis
for a municipal IFMIS to be supported by Component 1. Finally, both Component 1 and PDA
will both provide capacity-building assistance at central level to the DNDA and ANAMM: these
complementary elements of support will each contribute to a single work program for each
institution, ensuring that their respective efforts contribute coherently to a clear set of
institutional development objectives.
68. Component 2 also has a significant relation to the PDA, as well as to several other
partner-funded initiatives in Beira and Nacala. Because Beira and Nacala are key participants in
the PDA (as they were in its predecessor Project P13 between 2007 and 2011), both
municipalities are engaged in significant initiatives to improve their capacities in financial
management, urban planning, environmental management, and solid waste management. All of
these initiatives complement the investments to be made under Component 2 in sustainable
provision of drainage infrastructure. Together the two initiatives will enhance the capacities of
these municipalities manage climate related environmental risks. Coordination of Component 2
activities with the PDA will largely take place at the municipal level, led by the respective
municipal Authorities of Beira and Nacala to ensure strategic and operational synergies with
PDA activities in order that the two Projects jointly contribute to sustainable municipal resilience
in response to potential climate impacts.
69. In addition to this coordinating relationship, the NDF is developing an approximately 4.5-
5 million USD proposal to finance activities contributing to further extend the impact of the
Project, in particular with respect to the activities proposed under Component 2. The NDF grant
will be in the form of parallel cofinancing through a grant agreement with the Ministry of
Finance based on NDF‟s existing country agreement with the GoM. This agreement will be
linked to the IDA Project and one of the preconditions for disbursement will be that the IDA
Project is effective. AIAS will be the implementing agency for the NDF Project and will be
provided with consultant support to improve methods employed for drainage planning and
management with a focus on adjusting technical standards and procedures to accommodate the
expected impacts of climate change on urban flooding and erosion.
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Annex 4: Operational Risk Assessment Framework (ORAF)
1. Project Stakeholder Risks Rating: Moderate
Description :
a. Possible coordination issues among donors funding municipal
Projects could lead to multiple standards for municipal systems
Risk Management :
a1. Devt Partner (DP) Decentralization Working Group has been in place and will continue to
exist through the life of the Project aiming to facilitate coordination and support to local
Authorities.
a2. Bank and DPs provide support to relevant GoM agencies to take the lead in establishing
technical standards and common systems for application at municipal level.
Resp: Bank, Partners
and GoM Stage: Prep and Impl
Due Date : Project
Closing Date Status: Ongoing
b. Central Government institutions responsible for
decentralization programs often face conflicting incentives;
this may lead to weakened or inconsistent support for
strengthening municipal governance.
b1. Policy dialogue with central government will strengthen the regulatory and institutional bases
which enable dynamic municipal governance.
b2. Capacity building for municipalities to improve performance and sustainability will increase
their legitimacy as institutions for local governance and urban management.
Resp: Municipalities Stage: Implementation Due Date : Project
Closing Date Status: Ongoing
2. Implementing Agency Risks (including fiduciary)
3.1. Capacity Rating: Substantial
Description :
a. GoM implementing agency for Comp 1 has little Project
management capacity and has lost past personnel who
understood Bank procedures through work on prior Bank
Projects.
b. Low municipal capacities for planning, management, and
technical functions related to focal areas in urban planning ns
municipal finances
c. Municipal capacities for operation and maintenance of
urban infrastructure are not adequate to ensure sustainability
of investments
Risk Management :
a1. PIU staffed by contracted personnel with Project management and WB Project experience
will compensate for low ministerial capacities.
b. Strong emphasis on local govt management and reporting systems and staff training will
strengthen municipalities‟ management and technical capacities.
c. Project will support establishment and strengthening of municipal sanitation agency with
dedicated revenue stream, staff, and equipment for infrastructure O&M.
Resp: GoM Stage: Prep/Implem Due Date: N/A Status: Ongoing
3.2. Governance Rating: Moderate
Description :
a. Municipal sector is characterized by limited technical
Risk Management :
a. Project will support not only strengthening of municipal management capacities but also external
controls through transparency of reporting and municipal audits as well as the establishment of
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capacity, lack of systematic monitoring data and analysis,
weak systems for ensuring fiduciary compliance, and absence
of performance incentives.
performance based incentives for improved management.
Resp: MAE and AIAS Stage: Implementation Due Date: N/A Status: Ongoing
4. Project Risks
4.1. Design Rating: Substantial
Description :
a. Strong focus on drainage investments managed by central
govt may reduce incentives for sustainable O&M by
municipalities.
b. Complexity of implementing municipal capacity building in
19 diverse municipalities may lead to dilution of effort and
limited impact.
c. Lack of clarity regarding technical standards for municipal
financial management systems (IFMIS) may lead to multiple
systems and duplication or wasted effort.
d. Municipal officials frequently focus on maximizing inputs
rather than on service provision often limits Project results and
public benefits
Risk Management :
a. GoM policy for autonomous municipal agencies for O&M w specific revenue base defines
foundation for sustainability of drainage infrastructure, following the example of Beira.
b. Use by Project TA of standard technical packages for multiple municipalities will facilitate
economies of effort and horizontal learning among municipal staff , officials and communities.
c. Policy dialogue with Ministry of Finance and support for MoF leadership will provide basis for
a clear technical standard for municipal IFMIS; if adequate framework for municipal IFMIS is
not established, funds may be reallocated for other activities.
d. Performance element in municipal grants will strengthen incentives for producing measurable
results and visible benefits to the public
Resp: GoM and
municipalities Stage: Implementation Due Date: N/A Status: Ongoing
4.2. Social & Environmental Rating: Moderate
Description :
a. Rights of way for drainage channels may involve
compensation for private structures and property affected
(latrines, fences, part of a veranda), or the loss of an entire
construction used for residential or commercial purposes.
b. Low municipal capacities for identifying and mitigating
environmental and social risks and impacts.
c. Possible conflicts among private parties or between private
parties and municipalities over land may result from
municipal efforts to increase municipal land registration and
titling.
Risk Management :
a. The few large infrastructure investments will include funding and TA for safeguard
compliance. ESMF and RPF provide adequate procedures for impact mitigation and
compensation. Adequate Project support to the resettlement process (as outlined in the RPF and
to be followed up by a RAP) to ensure its satisfactory implementation and compliance with Bank
policies.
b1. Investments funded by Municipal Performance Grants will be small and technically not
complex. Simple safeguard screening procedures will identify any investments which present
significant risks.
b2. Training for municipal staff in safeguard compliance will be provided by PIU; PIU staff will
also monitor safeguard compliance by municipalities in use of Project financed grants.
c. Land registration and titling methodologies to be employed will include extra-judicial conflict
resolution mechanisms, including informal mediation and potentially arbitration mechanisms.
Resp: IAs, PIUs,
Municipalities Stage: Prep/Implem Due Date: N/A Status: Ongoing
4.3. Program & Donor Rating: Substantial
Description :
a. Sustainable impact of drainage investments in Beira and
Nacala requires broader municipal capacity building than
sectoral issues supported by AIAS, especially for urban
environmental management and general municipal finances.
b. Potential proliferation of multiple municipal IFMIS systems
through various aid-supported Projects leading to
Risk Management : a. Coordination with PDA Project, as well as with several other donors assisting on climate
change related issues, to ensure that Project‟s TA to Beira and Nacala municipalities in
environmental management and municipal finances do ensure broader institutional performance
improvements which enhance local capacity for resilience to climate related risks.
b. Support for leadership by Ministry of Finance to define policy and national standard for
municipal IFMIS, linked to potential Project financed TA for system devt and/or implementation.
69
inefficiencies and threats to system sustainability.
c. Aid-financed assistance for municipal capacity building
through multiple aid-supported Projects risks coverage gaps
and inconsistent technical approaches across various
municipalities.
c1. Participation in GoM Decentralization Working Group to coordinate support for
municipalities and harmonize technical methodologies
c2. Technical coordination between Bank-funded Project and donor funded PDA Project
facilitates harmonization of technical approaches and sharing of technical instruments for
municipal capacity building.
Resp: GoM Stage: Prep/Implem Due Date: N/A Status: Ongoing
4.4. Delivery Monitoring & Sustainability Rating: Moderate
Description :
a. Slow pace of municipal reform and capacity development
may constrain the capacity of municipalities to achieve
sustainability targets during Project period
b. Weak local private sector market for TA in municipal
financial management and urban planning
Risk Management :
a. Modest and gradually increasing performance targets tied to incremental implementation of
technical assistance activities allow adjustment of the ambition of Project targets to low level of
institutional capacity among many beneficiary municipalities and enhance sustainability of
performance gains
b1. Major Project-funded TA will be bundled in larger contacts to make them more attractive for
international providers who offer greater expertise in urban planning and municipal finances.
b2. Project design foresees engagement of university faculty members from the well-respected
Architecture and Urban Planning Faculty who have extensive professional experience with urban
planning and environmental management in the legal, institutional, physical and social contexts
of Mozambican municipalities.
b3. Project will also support the contributions of public sector specialists from the GoM Revenue
Authority (under MF) and Administrative Court to enhance the quality of municipal finances.
Resp: MAE Stage: Implementation Due Date: N/A Status: Under
preparation
4.5. Other: Technical Risk Rating: Substantial
Description :
a. Municipal IT systems, including IFMIS, require complex
technical solutions for system design, implementation,
operation, and maintenance/support. There may be significant
risks of unsustainable IT based systems at municipal level.
Risk Management :
a1. Bank financed consultancy during preparation provided independent technical assessment of
PDA-supported IFMIS “SGM”
a2. Dialogue with GoM (MAE and MF) and PDA regarding establishing technical and
institutions preconditions for SGM rollout will reduce risks of further investments. If necessary,
Project support will be delayed until these issues are clarified and adequately addressed
a3. Close collaboration with MF technical unit (CEDSIF) will ensure technical adequacy and
regulatory compliance of any Project-supported IFMIS (SGM or other), supplemented as needed
by independent Project financed consultants.
Resp: MAE Stage: Implementation Due Date: N/A Status: Under
preparation
5. Overall Risk Following Review
5.2 Implementation Risk Rating: Substantial
Comments: A substantial risk rating was selected for both preparation and implementation due to the various challenges at the state level that affect preparation
efforts, and due to implementation difficulties experienced by other on-going IDA Projects in the urban sector in Mozambique.
70
Annex 5: Implementation Support Plan
1. The objective of the Implementation Support Plan (ISP)17 is to outline the Bank‟s key
operational support for successful realization of the Project Development Objectives (PDO).
The approach involves strong and close monitoring of technical, safeguard, procurement and
financial management aspects. Thereby, identified risks can be managed through provision of
support in key areas such as: urban planning, local revenues raising, grant transfer management,
municipal financial management system, hydraulic engineering, fiduciary due diligence,
environmental and social management, and monitoring and evaluation. The team also includes
expertise in Bank operations backed up with the essential administrative support.
2. IS approach. The ISP will build upon regular mission to Mozambique, starting with
twice per year and include staff located at both headquarters, in the region and in the Bank‟s
country office in Maputo. The ISP will be revised annually during Project implementation
thereby adaptation to any changing circumstances. On a need basis, additional input will be
provided. M&E performed by the client, in accordance with the Project Implementation Manual
(PIM), will be concurrent to the oversight through the Project‟s Results Framework and provide
guidance for the implementation of the ISP.
3. Providing adequate technical support will be important to ensuring timely
implementation of key activities. A large part of the financial resources under the Project is
allocated for the rehabilitation of the drainage system in Beira. To ensure efficient management
of the funds, the preparation of the Term of Reference and Selection Documents for this activity
has already initiated. A draft Term of References for this activity has been prepared, as well as
for the preparation of the Drainage Master Plan for Maputo. AIAS informed that the initiation of
the consultant selection process for these two activities will be lunched after the Decision
Meeting, which will confirm the proposed Project activities and funds. Strengthening contract
oversight and day-to-day management to address issues identified during the preparatory
assignments will be supported by the Project Implementation Units in MAE and in AIAS.
4. The Project will require intensive supervision support in the initial year of
implementation given the challenges and the capacity of the sector‟s financial management
staffing. During Project implementation, the Bank will review: (a) the Project IFRs and audited
financial statements, including the budget execution report, together with the management
letters; and (b) the Project‟s financial management and disbursement arrangements to ensure
compliance with the agreed requirements. With the implementation of the sound financial
management and monitoring system by the professional staff proposed for the DNDA and AIAS,
the Bank‟s normal implementation review procedures will suffice.
71
What will be the main focus in terms of support to implementation during:
Time Focus Skills Needed Resource
Estimate
(US$)
Partner Role
Before
effectiveness
Finalize PIM
Launch procurements
Verify if the risk mitigating
measures implemented by
Project effectiveness
functioning as intended.
Identification of any potential
problems early in the life of
the Project
Team Leader
Municipal
development specialist
Engineering
Safeguards
Procurement
Financial Mgmt
Legal
Operations
60,000 N/A
First twelve
months Procurements/Contract
Mgmt;
Appointment of Technical
Assistance; Design & Spvn
Consultants; Grant
management ; Env & Soc
Mgmt
Team/Program.
Conclude procurements;
Initiate additional
procurements
Review the continuing
adequacy of the financial
management arrangements
Team Leader
Municipal
development specialist
Engineering
Safeguards
Procurement
Financial Mgmt
Legal
Operations
200,000
12-48
months
(Yr 2, 3 &
4)
Supervision; refine
monitoring Component 1;
performance grant evaluation;
Beira and Nacala works
supervision; launch
procurement for works in
Maputo metropolitan area;
Carrying out activities
supporting O&M
Team Leader
Municipal
development specialist
Engineering
Safeguards
Procurement
Financial Mgmt
Legal
Operations
600,000
48-72
months
(Yr 5 & 6)
Supervision; Contract
Mgmt;
Monitoring component 1
results;
Env & Soc Mgmt
Team/Program;
Concluding support to
O&M
Team Leader
Municipal
development specialist
Engineering
Safeguards
Procurement
Financial Mgmt
Legal
Operations
400,000
72
5. Resource Requirements. The team estimates that the overall resources requirement for
the Implementation Support Plan is in the order of US$200,000.00 annually for the six-year
implementation period.
6. Skills Mix Required
Skills Needed Number of Staff
Weeks
Number of
Trips
Comments
TTL 12 2
Co TTL 12 - CO Based
Hydraulic engineer (consultant) 7 2
Institutional development specialist (consultant) 7 2
Environmental specialist 5 2
Financial Management Specialist 8 Field trips as
required
CO Based
Social specialist 5 2
Performance grant specialist 5 As required
Municipal finance system specialist 5 As required
Procurement specialist 10 - CO Based
Team assistant 7 - CO Based
Lawyer 1 As required
Disbursement officer 1 As required
73
Annex 6. Economic and Financial Analysis
1. The results of the economic analysis of the drainage investments show that the Nacala
Project is economically rational. The Project in Beira is also economically feasible with NPV of
US$49.5 million and economic rate of return of 18%. The investment cost could increase as
much as 100% and the Project would still show economic benefits. The same occurs when the
values assumed to estimate the benefits are reduced by half.
2. The economic analysis was based on the results presented in the feasibility studies carried
out for prioritizing needs with respect to flood and erosion control13
. The discount rate used for
the analysis was 8%.
3. The results of the financial analysis show that current revenues from drainage fee are not
enough to cover the operating costs of the drainage investments. Therefore to make the Project
sustainable either the drainage revenues have to increase or the Government has to transfer
subsidies for the operation. In both municipalities there is ample room for improving the
collection and billing of property tax, given that they currently collect only 4% in Beira and 0.1%
in Nacala of what they could potentially charge. To cover operating expenses when investments
are completed at year five, Beira municipality would have to increase 22% per year its revenues
from property tax, and Nacala 82% per year.
Economic and Financial Analysis of the Project
A. Methodology
4. Objective. The proposed Project will assist Mozambique in developing appropriate
policies, procedures, institutions, and infrastructure improvements to enhance the municipal
systems and strengthen resilience of selected cities to climate related impacts. It includes two
components. Component 1 – Strengthening the municipal sector: this component will
strengthen systems and capacities at national and local levels to improve the sustainability of
municipal service provision in context of building resilience to tackle debilitating effects of
climate-related impacts. Component 2 – Enhancing resilience of strategic coastal cities: This
component will enhance municipal capacities in selected cities for sustainable resilience to
weather-related environmental threats. To achieve this objective, the Project will finance
investments in drainage in Beira and Nacala. The drainage investments in Beira are meant to
control flooding, while in Nacala they are meant to control erosion. On the basis of these
objectives a cost benefit analysis was carried out to determine the financial and economic
feasibility of the drainage works to be implemented in each of the cities.
5. Methodology. Two methodologies were used in the evaluation: (i) Cost benefit analysis
for Beira; and (2) Cost effectiveness method for Nacala, as there was no information to quantify
13
Direccao Nacional de Aguas-DEPARTAMENTO DE SANEAMENTO DE MOZAMBIQUE. City of Beira “Storm Water
Drainage System Rehabilitation and Extension in Central and North parts in the Beira Area. Economic Impact of Mitigation
against various levels of Storm Damage in the Beira Area. And R.J. Burnside International Limited and Austral-COWI and
Consultec. Feasibility Study, Environmental & Social Impact Assessment, Design and Supervision of Water Supply, Sanitation
and Drainage Improvements in Nacala, Mocuba and Gurue and Water Supply Improvements in Monapo and Montepuez. Final
Feasibility Study Report-Nacala QCBS MCA-MOZ-WS 03-08-46. Volume II-Drainage and Erosion Control. December 2010.
74
the benefits. In Beira, the cost benefit analysis was carried out from two perspectives: financial,
and economic. From a financial perspective the flow of costs and benefits were appraised in
market prices in the same way the entities in charge of implementing and operating the Project
will pay and get from it. From an economic perspective the flow of costs were appraised taking
out taxes and including subsidies, as they are Government transfers. The economic benefits were
measured as the total welfare to be obtained within the influence area of the Project. Finally, the
economic analysis was tested against real world uncertainties by conducting a sensitivity
analysis.
6. The net benefit of the Project equals the difference between the incremental benefits and
incremental costs of two scenarios: “with” and “without” Project. The “with” Project scenario
reflects the proposed investment program and so the benefits of flooding reduction in the Project
areas. The “without” Project scenario assumes that current poor flooding protection remains and
so the damages that come along. The Project was appraised measuring the flow of costs and
benefits for the lifetime of the Project estimated at 30 years. Costs and benefits were expressed in
constant prices of June 201014
. The opportunity rate used was 8%.
7. Project. Both cities, Beira and Nacala, have a very incipient drainage system with
insufficient capacity, lack of maintenance, and low coverage. Additional problems make more
difficult the operation of the systems as they are now: the city of Beira is low-lying, most of the
city is located less than 10 meters above sea level and is flat. The nature of the terrain means
that large parts of the city are flooded during periods of heavy rainfall. In addition, the water
table is very close to surface, and the seawater intrusion directly causes the rise of the water
table, which may produce flooding even in the absence of intense rainfall. The drainage system
in Beira consists of approximately 81 kms of pipes and 33 kms of open air channels built on the
50‟s and 60‟s. This Project proposes to rehabilitate an approximately 10 kms primary open air
channel. The city of Nacala experiences drainage and significant erosion problems due to severe
topographic relief and a lack of adequately designed and maintained collection systems;
moreover the drainage channels reached their lifetime as they were built on the 60‟s. Examples
of the system failure range from plugged storm sewer inlets to washed-out streets and exposed
services, to evidence of localized flooding in some neighborhoods, to eroded ditches and gullies
and finally, buildings and infrastructure on the verge of collapse in the major erosions.
8. The proposed drainage investments consist of (i) the rehabilitation and relining of an
approximately 10 kms primary open-air drainage channel in Beira, and (ii) the rehabilitation of
three primary open air drainage channels combined with erosion control technology in Nacala.
9. The cost of the drainage investments in Beira is estimated as US$62 million and the
annual operation and maintenance at US$150,000 (assumed to be 0.25% of the investment cost
plus 2% of investment in institutional strengthening). In Nacala the cost of the Project is US$7
million; and the operating cost is estimated as US$7,000 per year (it is assumed 0.06% of
investment cost and 1% of institutional strengthening. The operating costs are lower in Nacala
than in Beira because the works require less maintenance and no operation).
14
Exchange rate of Mozambique Metical MT 26.80:1 USD
75
10. Benefits. Project benefits consist of reduction of frequency and intensity of floods that
occur in Beira and of reduction of erosion in Nacala. Economic benefits in Beira were estimated
based on the reveal preference approach, which relies on data from observed transactions in the
market, such as the costs associated with the floods. The avoided cost method was used in Beira
to estimate the economic benefits that different stakeholders will have with the Project. In
Nacala the cost effectiveness analysis. Financial benefits were estimated based on the drainage
fee applied since 2008, following the approval of the Law no1/ 2008 of January 16, 2008. This
charge consists of an additional 15% on property tax.
B. Financial Analysis
11. From a financial perspective the flow of costs and benefits were appraised in market
prices in the same way the entities in charge of implementing and operating the Project will pay
and get from it. Hence, the costs include the taxes and exclude subsidies given by the
Government or other donors; while the benefits include all the fees the entity in charge of the
Project is going to apply once the Project is implemented.
12. During preparation, the Authorities of the GoM explained that the investment will be
fully financed by transfers made by the Government; while the operation will be financed
through the drainage fee. In the case of Beira the operation will be responsibility of the entity in
charge of the sanitation services (which includes storm water drainage), that is the Serviço
Autonómo de Saneamento da Cidade da Beira (SASB), which has administrative and financial
autonomy and is linked to the Municipality of Beira. In Nacala the municipality will be in
charge of the operation.
Table 1. Investment and Operating Costs (000 US$)
Investment O&M
A. City of Beira (Drainage) 61,919 150
A.1 Flood Control 58,969
A.1.1 Study of urban water management in Beira (coastal,
underground, surface) in the context of climate change 250
A.1.2 Revision and updating of design studies for the rehabilitation
and improvement of the proposed drainage system; Detailed engineering
designs; Construction Supervision; and Environmental & Social Support
(Beira)
6,361
A.1.3. Implementation of drainage works, in Beira (Channels A,
AII and AIV) 52,357 131
A.2.Beira Autonomous Sanitation Entity - Capacity building (training
and equipment for O&M) 950 19
A.3.Support for the resettlement of the population (Housing units
Beira) 2,000
B. City of Nacala (Drainage) 7,430 7
B.1. Erosion Control and Drainage channels 7,163
B.1.1. Detailed engineering designs; Works Supervision and
Environmental & Social Support (Nacala) 934
B.1.2 Civil Works of the primary drainage channels in Nacala
(PC1, PC3 e PC5) 6,228 4
B.2 Institutional Strengthening 267 3
B.2.1. Nacala Autonomous Sanitation Entity - Capacity building 150
B.2.2. Equipment for operation and maintenance (Nacala) 117
76
13. The financial analysis was done comparing annual costs and revenues. The costs consist
only of operating costs, as the Government will pay for investments. The revenues were
Projected based on the drainage fee to be charged once the Project is implemented in each of the
cities.
14. Revenues at the Municipality of Beira. During the period 2005-2009, the Municipality of
Beira has doubled its own tax revenues. Property taxes, which account for 9% of revenues
generated by the Municipality increased from MT 3.8 million in 2005 to MT 8 million in 2009
(Table 2).
15. Drainage fees. At present, Beira is the only city that has established a payment for
operation and maintenance of the drainage system. Nacala will start charging it when the Project
starts implementation. Drainage fee is a separate charge imposed on properties throughout the
entire Project area at a uniform rate. This charge shall be used for the operation, maintenance
and general administration of the storm water drainage system. Based on the provision of Law
N°1/2008 of January 16, 2008, the drainage fee is an additional charge of 15% on top of property
taxes.
16. For 2010, revenues from property tax are Projected in Beira at about MT 10 million,
which represents a drainage fee of approximately MT 1.5 million per year or US$55,000. This
charge is far below (37%) of the operating cost of the Project estimated at US$150,000 per year
(Table 3). The situation in Nacala is worse as the drainage charge is only 5% of the operating
expenses estimated for the Project at US$7,000 (Table 4).
Table 2. Revenues Beira (MT 000)
2,005 2,006 2,007 2,008 2,009
Operating Revenues
Property Tax 3,807 4,914 5,816 5,850 8,158
Other Taxes 44,573 48,261 64,055 81,619 82,833
Total Operating revenues 48,379 53,174 69,870 87,468 90,991
Transfers 41,830 47,552 53,688 77,232 77,730
Donations 2,214 21,474 4,754 9,229 10,152
Total Revenues 92,423 122,200 128,312 173,930 178,874
% 2,005 2,006 2,007 2,008 2,009
Operating Revenues
Property Tax 8% 9% 8% 7% 9%
Other Taxes 92% 91% 92% 93% 91%
Total Operating revenues 100% 100% 100% 100% 100%
Transfers 45% 39% 42% 44% 43%
Donations 2% 18% 4% 5% 6%
Total Revenues 100% 100% 100% 100% 100%
77
17. The municipalities of Beira and Nacala have to increase the drainage revenues in order to
pay for the operating costs of the drainage investments. To achieve this, some efficiency gains
have to be attained, as it is expected with component 1 of the Project. There is an ample room
for improvement in the municipalities‟ revenues as shown by the study carried out by the
MICOA with cooperation of the World Bank15
. Specifically for the property tax, the study found
that current revenues are, in Beira, just 4% and, in Nacala, 0.1% of what they could be if
15
Ministerio para a Coordenacao da Accao Ambiental (MICOA). Republica de Mocambique. Programa Conjunto de Apoio a 13
Muniicpios do Centro e Norte de Macambique. Componente C: Financas Municiapies. Estudio sobre o Potencial Tributario no
Municipio da Beira. Outubro de 2010. And Ministerio para a Coordenacao da Accao Ambiental (MICOA). Republica
de Macambique. Programa Conjunto de Apoio a 13 Muniicpios do Centro e Norte de Macambique. Componente C:
Financas Municiapies. Estudio sobre o Potencial Tributario no Municipio da Nacala. Outubro de 2010
Table 3. Beira. Property Tax and Drainage Charges (15% of property tax)
2,005 2,006 2,007 2,008 2,009
2,010
(estimated)
(MT 000 )
Property Tax (MT 000) 3,807 4,914 5,816 5,850 8,158 9,871
Drainage Fees (15% of property tax) 1,224 1,481
USD 000
Property Tax (USD 000) 152 197 233 234 304 366
Drainage Fees (15% of property tax) 46 55
Operating costs of drainage investments 150
% Drainage fees/operating costs 37%
Source:
Property Tax: Ministerio para a Coordenacao da Accao Ambiental (MICOA). Republica de
Macombique. Programa Conjunto de Apoio a 13 Municpios do Centro e Norte de Mocambique.
Componente C: Financas Municiapies. Estudio sobre o Potencial Tributario no Municipio da Beira.
Outubro de 2010.
Drainage fees: Own calculation.
Table 4. Nacala. Property Tax and Drainage Charges (15% of property tax)
2,005 2,006 2,007 2,008 2,009
2,010
(estimated)
(MT 000 )
Property Tax (MT 000) 28 14 44 - 51 59
Drainage Charges (15% of property tax) 8 9
USD 000
Property Tax (USD 000) 1.13 0.55 1.76 - 1.89 2.18
Drainage Charges (15% of property tax) 0.28 0.33
Operating costs of drainage investments 7
% Drainage charges/operating costs 5%
Source:
Property Tax: Ministerio para a Coordenacao da Accao Ambiental (MICOA). Republica de
Mocambique. Programa Conjunto de Apoio a 13 Muniicpios do Centro e Norte de Mocambique.
Componente C: Financas Municiapies. Estudio sobre o Potencial Tributario no Municipio da
Nacala. Outubro de 2010.
Drainage fees: Own calculation.
78
properties‟ database were updated, appraisal values were at correct market prices, and the
collection efficiency were 100% (Table 5).
18. The calculations for potential revenues from property taxes are based on the following
assumptions (Tables 6 and 7).
Table 5. Current and Potential Revenues from Property Tax and Drainage Fees (2010 Est)
(000 MT) Beira Nacala
Revenues from Property taxes
Current revenues collected (estimated 2010) 9,871 59
Potential revenues 251,522 114,120
Current/Potential 4% 0.1%
Drainage fees
Current revenues collected (estimated 2010) 1,481 9
Potential revenues 37,728 17,118
Source: ibid.
Table 6. Potential Values from Property Taxes in Beira
# dwellings Appraisal value Property tax Property tax Total
Residential hh (MT) % MT (000 MT)
Low Income 65,550 400,000 0.40% 1,600 104,880
Medium income\ 17,480 800,000 0.40% 3,200 55,936
High Income 4,370 3,500,000 0.40% 14,000 61,180
Total 87,400 221,996
Non residential dwellings
Low income 2,713 1,000,000 0.70% 7,000 18,991
High Income 301 5,000,000 0.70% 35,000 10,535
Total 3,014 29,526
Total Residential and non residential 251,522
Source: Property Tax: Ministerio para a Coordenacao da Accao Ambiental (MICOA). Republica de
Mocambique. Programa Conjunto de Apoio a 13 Muniicpios do Centro e Norte de Mocambique.
Componente C: Financas Municiapies. Estudio sobre o Potencial Tributario no Municipio da Beira.
Outubro de 2010..
79
19. When drainage fee is estimated as 15% of potential revenue from property taxes, the
result would be US$1.4 million for Beira and US$634,000 for Nacala. In this ideal situation, the
drainage fee would be enough not only for covering operating expenses but also for partially
funding investment. To cover operating expenses it would be required just 11% of the maximum
attainable in Beira and 1% in Nacala (Table 8).
20. Given that the maximum attainable is an ideal situation and that the GoM is paying for
investment, the municipalities have to set realistic goals of collecting rates for property taxes and
of updating the database in order to cover at least the operating costs of the drainage investments.
The efforts have to start now until the Project is fully implemented, which is expected by year
five. By setting full recovery of operating costs as a goal by year five, Beira would have to
increase its property tax revenues and so its drainage fee revenues by 22% per year, while Nacala
by 82% per year (Table 9).
Table 7. Difference between Current and Actual Data for Property taxes in Nacala
Number of Dwellings
Actual number of dwellings 63,400
Municipality‟s Data base of properties 3,080
Actual # property/Current database 5%
Real Estate Appraisal
Current Value Residential Property on file at Municipality (MT) 280,000
Market Value of Residential Dwellings (MT) 450,000
Current value/Actual Vale of Residential Properties 62%
Current Value Non-Residential Property Value on file at Municipality (MT) 280,000
Market Value of Residential Dwellings (MT) 1,500,000
Current value/Actual Vale of Non-Residential Properties 19%
Table 8. Current and Potential Revenues from Drainage Fees and Operating costs
(000 USD) Beira Nacala
Revenues from Drainage Fee (USD 000)
Current revenues from drainage fees collected 55 0.3
Potential revenues from drainage fees 1,408 634
Current/Potential 4% 0.1%
Operating expenses of Drainage Investments 150 7
Operating expenses /potential drainage revenues 11% 1%
Table 9. Required Growth of Drainage Fee to cover operating expenses of Drainage Inv by year Five
USD 000
Estimated
2010 Year 1 Year 2 Year 3 Year 4 Year 5
Beira
Property Taxes 366 447 547 668 817 999
Drainage fee (15%) 55 67 82 100 123 150
Required growth 22% 22% 22% 22% 22%
Nacala
Property Taxes 2.2 4.0 7.2 13.2 24.0 43.8
Drainage fee (15%) 0.3 0.6 1.1 2.0 3.6 6.6
Required growth 82% 82% 82% 82% 82%
80
21. This increase will also be facilitated by the intense ongoing economic growth in Beira
associated with the significant ongoing and planned investments in the port expansion and the
railway rehabilitation. These are also attracting significant private investments in the city in the
form of new industries, housing units and services such as hotels, restaurants, supermarkets,
schools, health clinics, etc. These new investments generate high property tax revenues given
that they are appraised based on the market value, while the official appraisal of the residential
and industrial buildings built on the 50‟s and 60‟s have a distorted value artificially imposed by
the national laws regulating the nationalized assets. In Nacala an economic growth is expected
as well, given all the activities the Government is planning to attract investment, such as the free
trade zone, the new international airport, and new economic activities that have being developed
along the port.
C. Cost Benefit Analysis for Beira
22. Economic Analysis. For the drainage investments in Beira, the economic benefit stream
was calculated in the feasibility study carried out by the Department of Sanitation in
Mozambique for various levels of storm16
. This study estimated the benefits through the avoided
damage cost method, measured as the cost of direct flood damage that the drainage investments
will avoid. This calculation corresponded to the difference between damage costs under two
scenarios: “with” and “without” the implementation of the investments. The associated damage
costs vary with the intensity and duration of the flood, which imply different water levels, and
extension of flooded areas. These costs were calculated in probabilistic terms, based on
historical data and a hydrologic mathematical model for storm simulation. Several alternatives of
investment were evaluated according to different number of years of recurrence (2, 5, 10, and 20
years). The avoided damage cost was estimated for (i) the industrial sector, (ii) the formal
housing; (iii) informal housing; (iv) agriculture; (v) roads infrastructure; (vi) electricity
infrastructure; (vii) loss of life; (viii) transport; and (ix) tourism17
.
23. From the hydrologic mathematic model it was possible to draw the flood map, and
calculate the percentage of properties damaged in the affected areas with and without drainage
investments, according to frequency of storm events. As table 10 shows, the percentage of
properties to be affected in a 100 year flood will be 100% in all the Project areas, while in a 10
year flood 4% of properties in area A, 90% in area AII, and 17% in area A IV will be affected.
16
Direccao Nacional de Aguas-DEPARTAMENTO DE SANEAMENTO DE MOZAMBIQUE. City of Beira “Storm Water
Drainage System Rehabilitation and Extension in Central and North parts in the Beira Area. Economic Impact of Mitigation
against various levels of Storm Damage in the Beira Area” 17
More detail in the Feasibility Study. Direccao Nacional de Aguas-DEPARTAMENTO DE SANEAMENTO DE
MOZAMBIQUE. City of Beira “Storm Water Drainage System Rehabilitation and Extension in Central and North parts in the
Beira Area. Economic Impact of Mitigation against various levels of Storm Damage in the Beira Area
Table 10. Beira. Impact of Floods according to Storm Recurrence Period
Occurrence 2nd Year 5th Year 10th Year 20th Year 100th year
Probability 50% 20% 10% 5% 1%
Impact of Floods (% area)
Area A 1% 3% 4% 30% 100%
Area AII 78% 82% 90% 90% 100%
Area IV 5% 11% 17% 18% 100% Source. Feasibility Study. Economic Impact of Mitigation against various levels of Storm Drainage in the
Beira Area
81
24. The direct beneficiaries per economic sector and area are presented in Table 11. The
number of houses is about 12,000 or 73,000 people, of which 78% corresponds to informal
sector, and the remaining 22% to the formal sector. The houses (and people) beneficiaries
correspond to 14% of total houses in Beira, estimated at 87,400 (Table 6). The number of
indirect beneficiaries includes the entire population of Beira.
25. The damage costs consisted of capital costs and surplus value. The capital cost measured
the impact of flooding on capital infrastructure; and the surplus value referred to loss of profits or
earnings due to cessation of business during flooding. The economic analysis of the drainage
investments in Beira was carried out estimating the costs and benefits of the selected alternative,
which corresponded to works that will prevent floods caused by storms with intensity and
duration occurring every 10 years (10% probability of occurrence). The actual damage caused to
physical infrastructure was estimated based on; (i) values of property of affected areas (damages
to commercial properties, industry property, housing18
, roads and utility delivery systems)19
; (ii)
impact on economic activity (affectation on informal sector as well as formal sector, trade can be
affected due to transport difficulties); and (iii) welfare impacts such as increased illness and
diseases such as malaria, cholera, tuberculosis, etc.
26. The impact caused by flood in each of the sectors and areas affected with the storms was
estimated as follows and results are shown in table 12.
For housing, the capital value was based on number of dwellings and property damage
cost; the surplus value was based on the contribution to GDP;
In the case of agriculture, capital values were not calculated, as the damage to capital
caused by inundation is minimal, given that most of the farming is subsistence and not
capital intensive, it is assumed, additionally that land is not damaged by storm. The main
damage is the loss of products and so a surplus value was calculated estimating yield per
hectare, multiplying by market price of a generic product
18
The average value per house included in this evaluation was: (i) for the formal housings, US$ 84,000/house, which
corresponded to the value presented in the feasibility study; (ii) for the informal housing, US$ 14,815/house (MT400,000),
which corresponded to the market value for low income housing presented in the study of potential revenues for the municipality
of Beira (Table 6). In the economic section of the feasibility study the Consultant worked with US$ 2,400/house. 19
Direccao Nacional de Aguas-DEPARTAMENTO DE SANEAMENTO DE MOZAMBIQUE. City of Beira “Storm Water
Drainage System Rehabilitation and Extension in Central and North parts in the Beira Area. Economic Impact of Mitigation
against various levels of Storm Damage in the Beira Area”
Table 11. Beneficiaries in the Flooding Areas
AREA A AREA AII AREA IV TOTAL
RESIDENTIAL
Number of Formal Houses 17 2,687 - 2,704
Number of Informal houses 948 8,159 360 9,467
Total number of houses 965 10,846 360 12,171
EQUIVALENT POPULATION 5,790 65,076 2,160 73,026
INDUSTRIES (Number of industries) - 35 1 36
AGRICULTURE (Number of Hectares) 11 31 - 42
ROADS (km) 14 72 24 110
Lives that can be lost 1 13 0 15
Tourists per day 1,400 1,400 - 2,800
82
In the case of road infrastructure, only the damage of capital value was estimated as well
as the replacement costs. The surplus charge was not included in this sector since it was
included in housing.
Electricity. Not much damage to infrastructure is expected but on surplus value based on
the opportunity cost;
Water and Sanitation, the damage was calculated based on the impact on human activity,
by counting the population of the affected areas and the impact on diseases due to
sanitation overspill, and the loss of work hours.
Loss of life, Transport and Tourism. The impact of loss of life as a result of floods was
based on estimates of lives lost multiplied by the value of human lives20
. In transport was
taken the estimation of stoppages of commercial traffic due to storms, and in tourism the
impact on lose of tourism days.
20
In the economic section of the feasibility study it is assumed that 15 lives can be lost by flooding and the cost of life was based
on the income level.
Table 12. Flood Impact according to Economic Activity and Area (000 USD)
Flood Impact (USD 000)
Area A Area AII Area IV
Industry
Capital value - 339 22,575
Surplus Value - 527 1,003
Formal Housing
Capital value 71 11,285 -
Surplus Value 9 1,354 -
Informal Housing
Capital value 228 1,958 86
Surplus Value 15 125 6
Agriculture
Capital value - - -
Surplus Value 5 15 -
Road Infrastructure
Capital value 6 378 60
Surplus Value - - -
Electricity
Capital value - - -
Surplus Value 0 75 -
Water & Sanitation infrastructure
Capital value - - -
Surplus Value 55 618 21
Loss of Life
Capital value - - -
Surplus Value 20 225 7
Transport
Capital value - - -
Surplus Value 4 23 8
Tourism
Capital value 1 1 -
Surplus Value 5 5 -
83
27. After the impact cost is estimated, the expected damage cost per year is calculated using
the probability of occurrence of the storms. The total damage cost corresponds to the present
value of annual flows of expected damage cost during a 30-year period. The difference between
the expected damage cost with Project scenario, and the expected damage cost without Project
scenario corresponds to the expected avoided damage costs, or expected benefits of the drainage
investment (Table 13). If nothing is done, a damage cost of about US$ 331 million is expected.
With the implementation of the Project, the cost is reduced to US$207 million, which equals to
an expected benefit of about US$124 million.
Table 13. Total Damage Costs without investments and with investment
Present Value of Expected Damage Costs (US$ 000)
With Drainage
Investment
Without Drainage
Investment Difference
1 Industry 7,101 20,041 12,940
Surplus Value 2,419 4,993 2,575
Capital Value 4,682 15,047 10,365
2 Formal Housing 114,924 167,156 52,232
Surplus Value 12,313 17,910 5,596
Capital Value 102,611 149,247 46,636
3 Informal Housing 70,297 123,824 53,527
Surplus Value 4,228 7,448 3,220
Capital Value 66,069 116,376 50,307
4 Agriculture 2,177 2,240 63
Surplus Value 2,177 2,240 63
5 Roads Infrastructure 5,502 7,086 1,584
Surplus Value - - -
Capital Value 5,502 7,086 1,584
6 Electricity Infrastructure 686 998 312
Surplus Value 686 998 312
Capital Value - - -
7 Water & Sanitation 3,935 6,503 2,568
Surplus Value 3,935 6,503 2,568
Capital Value - - -
8 Loss of Life 1,448 2,369 920
Surplus Value 1,448 2,369 920
9 Transport 336 433 97
Surplus Value 336 433 97
Capital Value - - -
10 Tourism 246 270 23
Surplus Value 224 245 21
Capital Value 22 24 2
Total 206,652 330,919 124,267
84
28. Results of the Economic Analysis. The net benefit of drainage investment was obtained
as the difference between benefits and costs. Costs consist of Projected investment and
operating expenses. The investment will be implemented during 5-year period. The benefits
will be obtained along with works implementation: for areas A and AIV, the benefits are
expected on year 4, while the benefits in area AII and therefore the benefits start on year 6. The
results show a net benefit is US$49.5 million, and returns of 18%.
29. Sensitivity Analysis. A sensitivity analysis was carried out to measure the impact on the
economic results when a variable change while the others remain constant. The sensitivity
analysis shows the soundness of the Project as the investment could twofold and benefits cut by
half and the Project would still be economically viable.
D. Cost Effectiveness Analysis for Nacala
30. The proposed Project in Nacala consists of rehabilitating part of the primary drainage
channels in the city. They are seven open channels, which drainage runoff from the city‟s
interior and higher areas and deliver it to the Fernao Veloso Bay. Priority has been assigned to
three primary open air channels (Channels 1, 3, and 5, which account for 6 kms). The city of
Nacala experiences significant erosion caused by drainage problems resulting from severe
topographic relief (drop of more than 140 meters from the city‟s highest areas to the coast),
vulnerable sandy soils, and the lack of adequately designed drainage channels. Erosion is
aggravated by unplanned urbanization, which has denuded slopes of stabilizing vegetation.
31. Five suitable options for reducing erosion along drainage channels were studied21
. All
the alternatives corresponded to a 1:10 year design storm, and they were calculated for channel
types with sufficient capacity to convey the flow. Table 14 shows the costs for the five
alternatives studied: (i) option A. gabion baskets, rip rap on bottom; (ii) option B. loose rip rap;
(iii) option C. cable-concrete; (iv) option D. storm sewer; and (v) option E. hand-placed stone
and mortar.
21
R.J. Burnside International Limited and Austral-COWI and Consultec. Feasibility Study, Environmental & Social Impact
Assessment, Design and Supervision of Water Supply, Sanitation and Drainage Improvements in Nacala, Mocuba and Gurue and
Water Supply Improvements in Monapo and Montepuez. Final Feasibility Study Report-Nacala QCBS MCA-MOZ-WS 03-08-46.
Volume II-Drainage and Erosion Control. December 2010.
Table 14. Economic Results for Beira’s Drainage Investments (Present Value of Flows)
(US$ 000)
Costs
Investment 45,612
O&M 1,290
Total 46,902
Avoided Damage Cost 96,481
Net Benefit 49,579
IRR 18.1%
85
32. The following conclusions are drawn from the costs:
Option B, the loose rip rap is the most cost-effective solution.
Option C cable-concrete and Option E. hand placed stone and mortar are the least
cost-effective. Cable-concrete has a high unit cost as materials are not produced
locally. Hand placed stone and mortar is also expensive because of the labor factor
needed.
Option D. the storm sewer is more expensive than both Option A and Option B. It is
almost maintenance free if constructed properly however it has a high unit costs due
to manufacturing, delivery and equipment costs.
33. Option A. gabion baskets are about 7% more costly than loose rip; however it is
preferred. It will provide superior stability under high flow conditions due to the fact that they
are interlocked with one another. This makes this system the preferred choice to be implemented
for erosion protection in Nacala. Additionally, the gabion baskets have been widely employed
by the municipality due to the availability of materials and the relatively low cost of installation.
This solution combines grading and planting on the upper portion of the cross sections, for
establishing vegetation that increase stability and reduce sediment deposition within the channel.
The preferred construction technology alternative is labor intensive, and will generate substantial
number of jobs for unskilled labor during the construction phase.
34. The cost effectiveness analysis for Nacala indicates that, the chosen alternative of
building gabions baskets is economically rationale.
Table 14. Investment Costs of Alternatives for Drainage Investments. Nacala
(US$ 000) Option A Option B Option C Option D Option E
Gabion
Baskets
Loose Rip
Rap Cable-Concrete Storm-sewer
Hand placed
stone and mortar
Channel 1 1,298 1,200 2,558 2,002 2,558
Channel 3 1,838 1,725 3,928 2,623 3,928
Channel 5 3,092 2,911 6,101 4,028 6,101
Total 6,228 5,836 12,588 8,653 12,588
Comparison 1.07 1.00 2.16 1.48 2.16 Source: Feasibility Study. City of Nacala
Montes NamuleMontes Namule(2,419 m)(2,419 m)
Mo
za
mb
iq
ue
Pl a
i n
M o z a m b i q u e
P l a t e a u
MAPUTOMAPUTO
G A Z AG A Z A
S O F A L AS O F A L A
T E T ET E T E
Z A M BZ A M B É Z I AZ I A
N A M P U L AN A M P U L A
C A B OC A B OD E L G A D OD E L G A D O
N I A S S AN I A S S A
Limpopo
INHAMBANEINHAMBANE
MANICAMANICA
GuijaGuija
MassingirMassingir
ChicualacualaChicualacuala
MapaiMapai
MoambaMoamba
EspungaberaEspungabera
ChiguboChigubo
MachaílaMachaíla
PandaPanda
GorogosaGorogosa
SenaSena
ChangaraChangara
CatandicaCatandica
InhamingaInhaminga
MontepuezMontepuez
MuedaMueda
MarrupaMarrupa
CaturCatur
MetangulaMetangula
Alto MolócueAlto Molócue
RibáuRibáuè
GuruGurué
CuambaCuamba
NamacurraNamacurra
MocubaMocuba
MoatizeMoatize
SongoSongoZumboZumbo
FíngoFíngoè
FurancungoFurancungo
MualadziMualadzi
MilangeMilange
LichingaLichinga
ChimoioChimoio
TeteTete
NampulaNampula
ChibitoChibito
MatelaMatela
Monte BingaMonte Binga(2,438 m) (2,438 m)
To To LusakaLusaka
To To PetaukePetauke
To To LilongweLilongwe
To To MangocheMangoche
To To MtwaraMtwara
To To ZombaZomba
To To BlantyreBlantyre
To To ChipataChipata
To To MutokoMutoko
To To HarareHarare
To To MasvingoMasvingo
To To MasvingoMasvingo
To To RutengaRutenga
To To MessinaMessina
To To NelspruitNelspruit
To To MbabaneMbabane
S O U T HS O U T HA F R I C AA F R I C A
SWAZILANDSWAZILAND
Z I M B A B W EZ I M B A B W E
Z A M B I AZ A M B I A
T A N Z A N I AT A N Z A N I A
MALAWIMALAWI
LakeLakeMalawiMalawi
Zitundo
Manhica
Guija
Massingir
Chicualacuala
Mapai
Moamba
Nova Mambone
Espungabera
Inhassôro
Vilanculos
Chigubo
Machaíla
Inharrime
Panda
Chibito
Gorogosa
Sena
Changara
Catandica
Inhaminga
Pebane
Angoche
Nacala
Montepuez
MuedaMocimboada Praia
Marrupa
Catur
Metangula
Alto Molócue
Ribáuè
Gurué
Cuamba
Namacurra
Mocuba
Moatize
SongoZumbo
Fíngoè
Furancungo
Mualadzi
Milange
Moçambique
Xai-Xai
Matela
Beira
Chimoio
Quelimane
Tete
Nampula
Inhambane
Pemba
Lichinga
MAPUTO
S O U T HA F R I C A
SWAZILAND
Z I M B A B W E
Z A M B I A
T A N Z A N I A
MALAWI
MAPUTO
G A Z A
S O F A L A
T E T E
Z A M B É Z I A
N A M P U L A
C A B OD E L G A D O
N I A S S A
INHAMBANE
MANICAINDIAN OCEAN
Lago deCahora Bassa
LakeMalawi
Lugenda
Messalo
Lúrio
Ligonha
Licungo
Zambeze
Buzi
Save
Changane
Zambeze
Limpopo
To Lusaka
To Petauke
To Lilongwe
To Mangoche
To Mtwara
To Zomba
To Blantyre
To Chipata
To Mutoko
To Harare
To Masvingo
To Masvingo
To Rutenga
To Messina
To Nelspruit
To Mbabane
Mo
za
mb
iq
ue
Pl a
i n
M o z a m b i q u e
P l a t e a u
Monte Binga(2,436 m)
Montes Namule(2,419 m)
30° E 35° E
30° E 35° E 40° E
25° S
20° S
15° S
10° S
25S
20° S
15° S
10° S
MOZAMBIQUE
0 50 100 150
0 50 100 150 Miles
200 Kilometers
IBRD 33451R1
JANUARY 2007
MOZAMBIQUESELECTED CITIES AND TOWNS
PROVINCE CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
PROVINCE BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.