Input:
early years.

89. **Wind** : Wind regimes in Burkina Faso are not adequate for wind farms. There is no wind
power plant integrated on the network.

90. **Gas turbine** : Burkina Faso cannot rely on its own gas field and LNG is not an easy
option for such a small need. Gas turbines can however operate with Distillated Diesel Oil
(DDO) and some machines can even run on (Heavy Fuel Oil) HFO, leading however to a
reduction in power output, a decrease in performance and availability. Gas turbines are
preferable in terms of performance to diesel engines only if they operate in combined cycle with
a steam turbine, which would require significantly more investments than those available.

91. **Diesel plant** : The two diesel plants will primarily be operated as regional backups to
compensate for any unavailability from the national network and avoid unserved energy whose
cost has been estimated to US$1.5 / kWh by the recent Master Plan report prepared by EDF.


Input:
94. _**Component 2: Increase access to electricity in target areas**_ . The component will adopt
conventional and standard equipment and techniques for rural electrification. There is, therefore,
no major technical issue with the component. However, the project plans to promote the use of
low cost designs and techniques where appropriate, to reduce rural electrification investment and
operating costs. In that context, SONABEL and FDE have already successfully implemented the
SWER (Single Wire Earth Return) and SWS (Shield Wire Schemes) technologies to electrify
numerous localities. The component will implement both technologies, along with connection to
the 33 kV three-phase conventional lines. However, given the challenges that can be linked to
the SWS, particularly as it is associated with 34.5 kV as well as sizing condensers, international
assistance is being considered.

95. In sum, the project has no unusual construction and operational challenges. The technical

23


Input:
parameters and estimated project costs for the power plants and the distribution lines have been
established by feasibility and engineering studies, including land surveys, and checked against
actual unit costs for similar undertakings recently in Burkina Faso and neighboring countries.
The technologies involved in construction and operation of distribution lines and diesel power
plants are well-known and proven. In addition, the project would be implemented according to
internationally accepted technical criteria and standards, with the assistance of IDA. For the
generation capacity, a turnkey contract will be awarded and the design of the power plant uses
well-proven technology. Works would be supervised by SONABEL, with the assistance of IDAfinanced consultants. [4]

**C.** **Financial Management**


Input:
96. In accordance with the Financial Management Manual for World Bank-Financed
Investment Operations that became effective on March 1, 2010, the Financial Management
arrangements of the project have been reviewed to determine whether it is acceptable to the
Bank. At the present time, the PCU is not yet established. The project will be classified as an
“A” type project under the Burkinabe national law regulating project implementation. This
implies that the project will be as much as possible administrated and managed by permanent
government bodies. It is critical that appointment of the project financial team meet
requirements of the Bank.

97. The overall FM risk at preparation is considered as substantial. The proposed financial
management arrangements including the mitigation measures for this project are considered
adequate to meet the Bank’s minimum fiduciary requirements under OP/BP10.00.

a) As a result of the financial management capacity constraints, the dated covenants for this
project are: the appointment of FM staff (composed of a Financial Management
Specialist, an accountant, and an internal auditor) with adequate and relevant experience
and all, familiar with Bank FM procedures within two months of effectiveness.


Input:
Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011; the
“Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and
Grants by World Bank Borrowers” dated January 2011; and the provisions stipulated in the
Financing Agreement. “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 shall also apply to the project.

100. Technical aspects of implementation (including the preparation of bidding) will be
handled by SONABEL for Component 1, FDE for Component 2, and DGE for Components 3
and 4. Both FDE and SONABEL have been involved in implementing IDA financed projects,
and therefore are familiar with the Bank procurement procedures. The PCU to be established in
DGE will be responsible for procurement related information at project level such as project
procurement plan, procurement related information in project monitoring reports.

101. The procurement procedures, thresholds and other detailed procurement information are
found in Annex 3.

**E.** **Environment**


Input:
102. Three main activities of the project are sources of adverse impacts, throughout their
lifecycle: the construction of two turnkey 7.5 MW (15MW) diesel power stations convertible to
heavy fuel oil in the two localities of Ouahigouya and Fada N’Gourma, and the grid expansion
and connections in about 40 communities, through existing and new 33kV distribution lines. The
diesel power plants will be installed in the existing stations operated by the National Electricity
Company (SONABEL); the Ouahigouya site shows no specific environmental concern, in Fada
N’Gourma the site is polluted by the old engine which will be decommissioned and disposed
before the construction of the new 7.5 MW generator. The sites of expansion of the grid in about
40 community areas are not yet identified, and though expected to be minor their impact may
become substantial if appropriate measures are not taken.


Input:
103. In light of the above mentioned, the project is classified category B with three Bank
safeguard policies triggered: OP 4.01 on Environmental Assessment; OP 4.11 on Physical
Cultural Resources; and OP 4.12 on Involuntary Resettlement. Regarding the characteristics of
the sites, the nature and the extent of the activities, the following environmental and social
safeguard instruments were prepared, consulted upon and disclosed prior appraisal: (i) the
Environmental and Social Management Framework (ESMF) for the mitigation of the risks
associated to the expansion of electricity infrastructures to the 40 communities to be selected
during the implementation phase; (ii) the Environmental and Social Impact Assessment (ESIA)
of the Ouahigouya power station; (iii) the Environmental and Social Impact Assessment (ESIA)
of the Fada N’Gourma power station; and (iv) the Resettlement Policy Framework (RPF) for the
management of compensation and/or resettlement issues that may arise during the expansion of
the power grid in the 40 communities to be selected later on.

Environmental and Social Impact Assessment (ESIA)


Input:
104. The ESIA of the Ouahigouya station came out with the following concerns to monitor
and mitigate: dust-induced air pollution in the project site and the vicinity during the construction
including risks of temporary increase in allergies; involuntary destruction of cultural assets
(uncovered wealth, sacred woods, sacred site, etc.) in exploiting quarries and material pits; socio

25


Input:
economic losses and damages in case of explosion and fire during the exploitation; indirect
pollution of the receiving environments by the operation phase wastes (solid and used oil) if
mishandled; security and safety at work of the permanent staff. Finally, maintaining a buffer
zone between the site and the residential areas is an important measure for avoiding further noise
related impact on surrounding populations. In general, the adverse impacts of the construction
phase are found to be minor and manageable; whereas a functional environmental management
system will help to prevent any environmental and social damage during the operational phase.

105. Though the challenges are quite similar on the Fada N’Gourma project side, the
decommissioning of the existing old generator, the cleaning of the site and the disposal of
resulting polluted material are critical issues treated in the the environmental and social
management plan (ESMP). Dioxide of sulfur, carbon dioxide and volatile organic compounds
have been measured in the ambient atmosphere of the station giving evidence of substantial air
pollution in contrast to the Ouahigouya situation. There, the new generator will induce positive
impacts through the decreasing of the emission of these gases and their indirect impacts on the
surrounding populations.


Input:
disposed in accordance or the best known standards during the construction phase; (iii)
exploitation of quarries and borrow pits do not harm sacred sites or uncovered archeological
artifacts; (iv) the quarries and borrow pits are appropriately rehabilitated at the end of works; (v)
a system of monitoring air and noise level within the area of influence of the power generator is
installed on each of the two sites; (vi) the newly created Department of Quality, Safety and
Environment (DQSE) of SONABEL is adequately staffed, equipped and empowered to carry out
regular monitoring of the stations, then proffer recommendations and follow on; and (vii) each
power station operator reflect the DQSE in its own organization through the existence of an
Environment, Health and Safety (EHS) unit which will liaise and report to the DQSE on
environmental and safety at work matters. The Environmental and Social Management Plans
(ESMP) give details on the measures including their implementation periods and planning. The
national electricity company (SONABEL), will carry out these due diligence under the oversight
of the Directorate General of Energy (DGE).


Input:
116. Institutional arrangements for safeguards instruments implementation. The Technical
aspects of implementation (including the preparation of bidding documents and the
implementation of safeguard instruments and measures) will be handled by SONABEL for
Component 1, FDE for Component 2, and DGE for Components 3 and 4. The PCU will ensure,
on behalf of the Government that safeguard measures and recommendations are timely and
appropriately considered and implement throughout the life-cycle of the project. To this end, the
PCU will collaborate with: (i) the _“Bureau National des Evaluations Environnementales et_
_Déchets Spéciaux_ ’’ (BUNEE) for the follow up of the execution of the mitigation measures by
the enterprises; (ii) the FDE for the implementation of the screening procedure; and (iii) the
Regional Committee for Safeguards Implementation (CR-CGES). The PCU will exercise an
oversight and report regularly through the periodic project implementation reports. A mid-term
and a final technical audit will also be carried out.

117. The capacity of the PCU regarding safeguards will be enhanced by the hiring of a
specialist on environmental and social issues to ensure that the safeguards instruments are
properly implemented.

28


Input:
**Annex 1: Results Framework and Monitoring**

**Burkina Faso: Electricity Sector Support Project**

|Project Development Objective (PDO): (i) to increase access to electricity, (ii) improve the reliability of electricity supply, and (iii) improve the efficient
use of energy in target areas.|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|Col10|Col11|Col12|Col13|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|**PDO Level Results Indicators**|**Core**|**Unit of**
**Measure**|**Baseline**
**2012**|**Cumulative Target Values**|**Cumulative Target Values**|**Cumulative Target Values**|**Cumulative Target Values**|**Cumulative Target Values**|**Frequency**|**Data Source/**
**Methodology**|**Responsibi**
**lity for**
**Data**
**Collection**|**Description**
**(indicator**
**definition etc.)**|
|**PDO Level Results Indicators**|**Core**|**Unit of**
**Measure**|**Baseline**
**2012**|**2014**|**2015**|**2016**|**2017**|**2018**|**2018**|**2018**|**2018**|**2018**|
|**Indicator One**: Direct Project
Beneficiaries of which,

 Female project beneficiaries (%)||
Number

Percentage|
0

0%|
5 000

51.7%|
127 804

51.7%|
145 829

51.7%|
158 791

51.7%|
168 291

51.7%|Annual|Agencies
involved in
project
implementation|DGE-PCU
in close
coordinatio
n with
implementa
tion
agencies|Includes the
populations of Fada
and Ouahigouya, an
estimation of the
population in the 40
pre-identified
communities, the
beneficiaries of
solar lamps (three
rotations) and DGE,
FDE and
SONABEL. The
percentage of
female is 51.7% per
the 2008 census.|
|**Indicator Two**: Peak demand
met in each city when standing
alone (islanding)
Fada
Ouahigouya||

%|

15.4
33.5
|

14.4
31.3|

95.5
30|

91.1
85.6|

85.2
83.2|

79.6
77.8|Annual|SONABEL|DGE-PCU
in close
coordinatio
n with
SONABEL|
Peak demand for
each city when
standing alone.
Demand will be
measured in
constant terms|
|**Indicator three:**People provided
with access to electricity under
the project by household
connection
||Number|0|0|3 150|8 550|13 500|18 000|Annual|FDE|DGE-PCU
in close
coordinatio
n with FDE|The people
provided access are
estimated at 6 per
household
connection|
|**Indicator four:** Total capacity
(kW) of installed equipment
replaced by more efficient
equipment.

||kW|0|0|700|1825|2250|2250|Annual|DGE|DGE-PCU
in close
coordinatio
n with FDE|This indicator is
defined on an
estimation of the
capacity of lamps
installed|


Input:
|INTERMEDIATE RESULTS|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|Col10|Col11|Col12|Col13|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **|**Intermediate Result (Component  One****_): Improve generation capacity in two selected cities_ **||
|_Intermediate Result indicator_
_One_: Generation Capacity of
Conventional Generation
constructed under the project

-
Fada
-
Ouahigouya
||

MW|

0.0
0.0
|

0.0
0.0|

7.5
0.0|

7.5
7.5|

7.5
7.5|

7.5
7.5|

Annual|

SONABEL|DGE-PCU in
close
coordination
with
SONABEL|This
indicator
measures the
capacity of
conventional
power
generation
facilities
constructed
under the
project.|
|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|**Intermediate Result (Component Two):****_Increase electricity access in selected areas_**|
|_Intermediate Result indicator_
_One_: Distribution  line
constructed under the project
(km)||Km|0|0|66|179|311|500|Annual|FDE|DGE-PCU in
close
coordination
with
SONABEL
FDE|This
indicator
captures
efforts made
by FDE to
construct
distribution
lines to
provide
electricity to
selected
cities|
|_Intermediate Result indicator_
_two:_Number of communities
connected to electricity||Number|0|0|7|19|30|40|Annual|FDE|DGE-PCU in
close
collaboration
with FDE|The indicator
captures data
relating to
the annual
number of
localities
connected to
electricity
regardless of
the source.|
|_Intermediate Result indicator_
_Three:_Number of households
connected to electricity under the
project||Number|0|0|525|1 425|2 250|3 000|Annual|FDE|DGE-PCU in
close
coordination
with
SONABEL|The indicator
captures data
to show
annual
progress in
terms of
number of
households
connected to
electricity
generated by
thermic
source
|
|_Intermediate Result indicator_
_Four:_Community  electricity||Number|0|0|12|32|40|50|Annual|FDE|DGE-PCU in
close|The indicator
captures data|


Input:
|connections under the project
(conventional grid)|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|Col10|Col11|collaboration
with FDE|to show
annual
progress in
terms of
number of
community
bodies/center
s connected
to electricity
generated by
renewable
source.|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|**Intermediate Result (Component Three):****_Improve energy efficiency in target areas_**|
|_Intermediate Result indicator_
_One_: Number of households
retrofitted with energy efficient
equipment
||Number
|0|0|1,000|2,500|3,000|3,000|Annual|DGE|DGE-PCU in
close
collaboration
with DGE|The indicator
helps to
assess the
impact of
energy
efficiency
measures set
up and
implemented
in terms of
economizing
and reducing
electricity
bills for
different
stakeholders
(Administrati
on buildings,
Households,
private
companies) .|
|_Intermediate Result indicator_
_Two_: Solar lanterns deployed in
public schools (off-grid)||Number|0|5,000|10,000|15,000|20,000|25,000|Annual|DGE|

DGE

|The indicator
is the
number of
lanterns to be
deployed.|
|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **|**Intermediate Result (Component Four):****_Develop institutional capacity of key stakeholders of the project_ **||
|_Intermediate Result indicator_
_One_: Number of public sector
energy staff (including DGE,
FDE and SONABEL’s) and
energy service providers trained
on key thematic areas.||Number|0|0|30|155|167|167|Annual|PCU|DGE|This
indicator
captures data
related to the
overall
capacity
building
activities in
terms of
training on
various
thematic
including
100 service|


Input:
|Col1|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|Col10|Col11|Col12|providers
from 2015.|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|_Intermediate Result indicator_
_Two_: Feasibility studies for Bon,
Bontioli, and Folonzon,
Gongourou dams are available|

|number|0|0|2|4|4|4|Annual|DGE|DGE|This
indicator will
help monitor
progress
made in
terms of
availability
of feasible
studies prior
to organizing
a donors
roundtable to
seek funds
for dams
construction|

32


Input:
4. While the country’s future demand will be mainly met through interconnection lines with
neighboring countries such as Cote d’Ivoire, Ghana and Nigeria, Burkina Faso has to plan for
back-up thermal power generation in view of the delays and limitations in the supply of
electricity from interconnection projects recorded in the implementation of the
interconnection projects and an increasing demand (close to 10% per annum). SONABEL
intends to mitigate such risk, with particular emphasis on fast-growing economic
development in regional growth poles.  Fada N’gourma and Ouahigouya have been selected

33


Input:
from a group of five cities considered in SONABEL’s investment plan: Ouahigouya,
Dedougou, Fada N’gourma, Dori and Gaoua cities.

5. The need for additional generation capacity for the two selected cities is based on an
evaluation of the demand as follows:

**Table 2.1: The Examples of Fada and Ouahigouya**

|FADA|2011|2012|2013|2014|2015|2016|2017|2018|2019|2020|
|---|---|---|---|---|---|---|---|---|---|---|
|Estimated Peak demand
(MW )|7,9|8,43|9,01|9,63|10,29|11,01|11,78|12,6|13,49|14,46|
|Available capacity (MW)|1,2|1,2|1,2|1,2|1,2|1,2|1,2|1,2|1,2|1,2|
|Target (MW)|8,69|9,28|9,91|10,59|11,32|12,11|12,95|13,86|14,84|15,9|
|Deficit (MW)|**7,49**|**8 **|**8,71**|**9,39**|**10,12**|** 10,91**|** 11,75**|**  12,66**|**  13,64**|**14,7**|

|OUAHIGOUYA|2011|2012|2013|2014|2015|2016|2017|2018|2019|2020|
|---|---|---|---|---|---|---|---|---|---|---|
|Estimated Peak demand
(MW )|5,06|11,27|11,64|12,45|13,07|13,7|14,15|14,62|15,13|15,55|
|Available capacity (MW)|4,96|4,96|4,96|4,2|4,2|4,2|4,2|4,2|4,2|4,2|
|Target (MW)|5,57|12,4|12,81|13,69|14,38|15,07|15,56|16,09|16,65|17,1|
|Deficit (MW)|**0,61**|**7,44**|**7,85**|**9,49**|**10,18**|** 10,87**|** 11,37**|**  11,89**|**  12,45**|**12,91**|

6. The proposed 7.5 MW for each regional center would help meet the demand and serve as
back up after the commissioning of the interconnection lines. The examples of Ouahigouya and
Fada (two major remote cities considered in the sample of five) show the additional generation
need for these cities connected to the national grid which is essentially powered by the
interconnection transmission line with Cote d’Ivoire, the hydropower dams of Bagre and
Kompienga and four major thermal plants located in Ouagadougou and Bobo-Dioulasso.


Input:
7. Fada N'Gourma’s thermal power plant has currently two units of about 600 kW operating
rate each. These units are frequently broken and can no longer operate at their nominal capacity.
According to SONABEL’s latest master plan one of these units was planned to be
decommissioned in 2006 while the second should not operate beyond 2013. Ouahigouya’s
thermal currently has three identical units operating at 1300 kW each and a fourth one at 600
kW. The first three are in good condition and are not scheduled for decommissioning before
2025 whilst the fourth is set to be decommissioned in 2013.  The two cities cannot meet its
regional demand when operated away from the national grid.

8. The main activities that will be financed under this component include:

a) The procurement and installation of the plant’s equipment (generator, electro-mechanic
auxiliaries, monitoring consoles, spare parts, supplies and documents)
b) Procurement and installation of the control room equipment (33 kV)
c) Extension of the existing building
d) Supervision of works.

34


Input:
a) Connection to the 33kV grid
b) Within 20 km from the 33kV grid
c) Population’s size no less than 1,500 [5] .

11. Any locality responding to these criteria can substitute to another on the list in the future,
based on an agreement with the project team. As for the technology used to connect these
localities, the Bank and the Government have agreed to give priority to low cost implementation
options. Both SONABEL and the FDE have already successfully implemented the SWER
(Single Wire Earth Return) and the SWS (Shield Wire Scheme) technologies to electrify a
number of localities. The component will implement both technologies, along with connection to
the 33 kV three-phase conventional lines when adequate.


Input:
5
An FDE review of the COOPEL indicates that while some of them play a significant role in the current rural electrification
scheme others (in general those with less than 300 clients) have difficulty surviving financially due to their very small size. Early
recommendations suggest a grouping of the smallest COOPELs into regional entities to ensure economies of scale on
management expenses. The Bank is therefore selective with the COOPELs targeted under its operation and is encouraging the
Government to pursue the study on the COOPELs’ efficiency.

35


Input:
12. _**Strategic implementation approach.**_ The FDE is the main actor in charge of the
promotion of energy access expansion in remote areas. The other actors are: the COOPEL
(Coopérative d’Électrification); the Advisory Engineer (Maître d’Ouvrage/d’Oeuvre Délégué) or
MOOD; and the Supplier/Constructor/ Operator (Fournisseur, Installateur, et Gestionnaire):

a) The COOPEL is a cooperative association, formed under Burkina laws by the future
rate payers, either at village or municipal level. The COOPEL is the guarantor and
owner of the rural electrification assets. It is responsible for the administration,
operation and management of the assets, for managing the finance, for competitively
selecting and recruiting the Supplier/Constructor/Operator, for ensuring the
maintenance and durability of the assets, for determining electricity tariffs, and for the
collecting of the proceeds from the sale of electricity.


Input:
14. Two types of rural electrification projects are developed by the FDE: (i) projects
connected to the national interconnected network; and (ii) isolated systems (diesel generators and
hybrid systems).

a) For projects connected to the national interconnected network, the investment cost
related to the feeder line is fully subsidized (100%), while investments in relation to
distribution grid is subsidized up to 60 percent only. The investment into
transformation and distribution equipment (transformers, poles, conductor, etc.) is
financed through a 10-year (with 3-year grace period) interest-free loan form the FDE
to the COOPEL.

b) The isolated systems receive a global subsidy of 60 percent of the investment cost,
the remaining 40 percent are financed through a 10-year (with 3-year grace period)
interest-free loan to the COOPEL.


Input:
17. The demand-side management and energy efficiency initiatives will include the
acquisition of testing and certification equipment, the recruitment of consultants to support legal
review and capacity building initiatives such as experience sharing and south-south
collaboration, consumer and distributors awareness campaigns. Investments in energy efficient
equipment will include the installation of energy saving lamps in selected households and public
lighting).  To complement these activities, the proposed set of Lighting Africa interventions will
help catalyze the market for solar lanterns, thus providing consumers with cheap and efficient
access to lighting where grid access will not extend. Specific activities include: (i) capacity
building on off-grid lighting in rural electrification strategies; (ii) public service announcements
and awareness campaigns to inform consumers of the benefits of solar lanterns and other good
quality products; (iii) market research for Lighting Africa products; (iv) private and public sector
engagement activities to raise awareness among actors from both sectors about existing solar

39


Input:
market opportunities and connect these actors to have them work together and catalyze the solar
lantern’s market; and (v) the deployment of approximately 25,000 lanterns in public schools
targeting persons in off-grid communities.

18. Interventions in public administration buildings under the Power Sector Development
Project (which closed in July 2012), are showing results and will have a demonstration effect on
the commercial, industrial, and residential sectors. Under the project, energy savings from
initiatives in selected public buildings have been estimated at US$2 million/year. Given the high
energy cost in Burkina-Faso (one of the most expensive in the region), and the heavy reliance on
fuel, energy saving initiatives are highly justified.

a) _**Subcomponent 3.1**_ **-** _**Institutional and Capacity Strengthening**_ _._ To ensure the
sustainability of these activities and enhance the actions already undertaken under the
earlier project, the subcomponent will finance the acquisition of testing and certification
equipment, audits and development of databases from energy audits, energy consumption
surveys, site visits, and analyses of electricity consumption bills. The analyses,
demonstrations and pilot tests would help bring about behavioral changes in electricity
utilization, and demonstrate potential of energy savings to commercial and residential
customers.

analyses of electricity consumption bills


Input:
(ii) the creation and implementation of public service announcements and
awareness campaigns to inform consumers of the benefits of solar lanterns, and educate
them on the characteristics of good quality products. These activities will thus help endusers, along with private and public sector actors, make economically sound decisions
helping them realize to both financial and non-financial benefits;

(iii) market research to analyze distribution networks, assess market trends, and
highlight consumer preferences for Lighting Africa products to be shared with
manufacturers, importers, wholesalers and distributors to help them understand the
Burkinabe consumer, gain market insights and determine appropriate business or
distribution models and pricing; and;

(iv) the deployment of approximately 25,000 lanterns in public schools targeting
persons in off-grid communities. Lanterns will be made available to students in targeted
schools to use for study at night, before returning them to their respective schools the
following day. Relevant households will benefit as a whole and witness the impact on
activities (household chores, business activities, studies, etc.), thereby increasing their
likelihood of purchasing lanterns themselves.


Input:
**Table 2.1: Project Cost**

|Project Cost by Component and/or Activity|Local
US$
million|Foreign
US$ million|Total US$
million|
|---|---|---|---|
|**Component 1 : Improve the reliability of energy supply**|** 0.00**|**   15.39**|
**  15.39**|
|Construction of turnkey power station||14.65|
  14.65|
|Services for construction supervision||0.74|
   0.74|
|Environmental studies ($US27,000 financed under the EAP)||||
|**Component 2: Improve access to electricity in selected areas**|** 0.87**|**   24.72**|
**  25.59**|
|Electrification work in rural areas||24.00|
  24.00|
|Services for supervision||0.72|
   0.72|
|Environmental and social studies|0.20||0.20|
|Compensation|0.60||0.60|
|Awareness campaigns before and during works|0.07||0.07|
|**Component 3: Improve efficient use of energy**|** 0.08**|**    4.62**|
**   4.70**|
|_Component 3.1: Institutional and capacity Strengthening_||_    0.24_|
_0.24_|
|Acquisition and installation of energy efficiency testing equipment||0.08|
0.08|
|Consultant services for information, education or communication||0.03|
0.03|
|Seminars on best practices and south-south collaboration on energy
efficiency||0.13|
0.13|
|_Component 3.2: Installation of energy efficient equipment_|_0.08_|_    2.80_|
_2.88_|
|Acquisition and installation of economic lamps in households||1.00|
1.00|
|Acquisition and installation of public lighting equipment||1.80|
1.80|
|Acquisition of equipment for maintenance|0.08||
0.08|
|_Component 3.3: Information, education and communication_||_    0.48_|
_0.48_|
|Consultant services for information, outreach or communication||0.48|
0.48|
|_Component 3.4: Lighting Africa Activities_||_    1.10_|
_1.10_|
|Public-private initiatives||0.25|
0.25|
|Acquisition and distribution of solar lamps in selected rural schools||0.60|
0.60|
|Coordination activities of Lighting Africa activities||0.25|
0.25|

43


Input:
|Project Cost by Component and/or Activity|Local
US$
million|Foreign
US$ million|Total US$
million|
|---|---|---|---|
|**Component 4: Institutional Strengthening and Capacity**
**Development**|** 1.92**|**    3.57**|

**5.49**|
|_Component 4.1: Capacity building in the public sector_||_    1.75_|
_   1.75_|
|Capacity building in the public sector||1.75|
   1.75|
|_Component 4.2: Capacity building of energy service providers_||_    0.08_|
_   0.08_|
|Capacity building of energy service providers||0.08|
   0.08|
|_Component 4.3: Studies_||_    1.75_|
_   1.75_|
|Feasibility studies for mini-hydro||1.43|
   1.43|
|Energy efficiency audits||0.08|
   0.08|
|Diagnostic study on DGE's organization||0.08|
   0.08|
|Communication Strategy for the Energy Sector||0.10|
   0.10|
|External auditor||0.06|
   0.06|
|_Component 4.4 : Institutional support_|_0.95_||0.95|
|Construction for FDE offices|0.60||0.60|
|Administrative expenses|0.35||0.35|
|_Component 4.5: Project coordination_|0.97||**0.97**|
|
Total Baseline cost|
 2.87|
48.38|51.17|
|Physical and price contingencies|0.00|1.70|1.70|
|**Total Project Costs**|2.87|**   50.00**|
**  52.87**|
|Total Financing Required||||

44


Input:
**Annex 3: Implementation Arrangements**

**Burkina Faso: Electricity Sector Support Project**

1. The Ministry in charge of Energy (MME), through a steering committee, will oversee the
overall supervision and coordination of the Project. The steering committee will be comprised of
representatives of the Ministry of Energy, Ministry of Finance, SONABEL and FDE. Technical
aspects of implementation (including the preparation of bidding documents and the
implementation of safeguard mitigation measures) will be handled by SONABEL for
Component 1, FDE for Component 2, and DGE for Components 3 and 4.


Input:
2. A Project Coordination Unit (PCU) established in DGE will be responsible for carrying
out the fiduciary aspects of the project, in particular the financial management aspects.
SONABEL, FDE, and DGE will be responsible for procurement, monitoring and evaluation, and
implementation of environmental and social safeguard mitigation measures for their respective
components. With regard to procurement, with support from DGE’s procurement specialist, the
PCU’s role will be limited to the consolidation of procurement related information at the project
level (such as procurement plans, procurement related information in project monitoring reports,
etc.). Regarding safeguards, the PCU will ensure, on behalf of the Government, that safeguard
measures and recommendations are timely and appropriately considered and implemented as
necessary throughout the life-cycle of the project. The PCU will also consolidate inputs from all
SONABEL, FDE and DGE to facilitate monitoring and evaluation for all components of the
project. As described in figure 1 of this annex, this involves the creation of one designated
account at the PCU.

**A.** **Financial Management and Disbursement**

**Introduction**


Input:
3. As part of the preparation phase of the proposed Electricity Sector Support Project, a
Financial Management assessment was carried out in accordance with the Financial Management
Manual for World Bank-Financed Investment Operations that became effective on March 1,
2010.

4. The objective of the Financial Management Assessment is to determine whether the
PCU, has acceptable financial management arrangements to ensure that: (i) the funds are used
only for their intended purpose in an efficient and economical way, (ii) the preparation of
accurate, reliable and timely periodic financial reports, and (iii) the entities’ assets are
safeguarded and (iv) the project is subjected to a satisfactory auditing process.

5. The project will be classified as an “A” type project under the Burkinabe national law
regulating project implementation. This implies that the project’s administration and
management will rely heavily on government bodies. In such context, it is critical that the
appointment of the project’s financial team meet Bank requirements.

45


Input:
**Financial Management arrangements**

6. **Staffing and Training** : The financial management team within DGE’s Coordinating unit
will be composed of a financial management specialist, an accountant, and an internal auditor
(already appointed) with adequate and relevant experience with the Bank’s financial
management procedures. The team will have the responsibility to collect and control invoices,
maintain the books, enter data in the accounting software, manage project’s bank account, keep
the books of account and prepare the financial reports as well as the withdrawal and direct
payments applications. The internal auditor will maintain a sound control environment in
accordance with the Project’s Implementation Manual. In addition, a financial controller will be
appointed by the Ministry of Finances to insure the ex-ante control in expenditure circuit.

7. A training program will be drawn up every year. Training is mainly conducted through
the Bank’s local or sub regional training institutions. Before disbursement, the Bank’s loan and
financial management units will provide adequate training on report-based disbursement
procedures and IFR elaboration.


Input:
8. **Budgeting** : The Project Implementation Manual will define the budget preparation and
monitoring process. It will also describe the budgeting arrangements. The project’s Steering
Committee will adopt the budget before project implementation, and thereupon, the financial
management specialist or the accountant will be in charge of its monitoring. Budget execution
will be examined on a quarterly basis with the help of an accounting software.

9. **Accounting Policies and Procedures** : The Project Implementation Manual will also
include charts of accounts (to be developed, if needed, with the help of a consultant together with
a customized software). The Project Implementation Manual will provide all the required details
on accounting and financial procedures. In particular, it will set out: (i) the planning and
budgeting arrangements, (ii) the treasury procedures, (iii) the procurement procedures, reporting
format and arrangements.


Input:
10. The PCU within the DGE through its financial team will have the overall responsibility
of the project management system. An accounting software with all modules (general
accounting, cost accounting, monitoring and evaluation, fixed assets management, preparation of
withdrawal applications interim financial reports and annual financial statements) will be used.
Training on the accounting software for staff will be provided by a consultant. As per the
Integrated External Funding Circuit (CIFE) procedures, the project accounting transactions will
be reflected into the national financial statements [6] . Steps will be taken to shift to CIFE after: (i)
reconciling the outputs from CIFE and the project accounting software and (ii) the
decentralization of CIFE at the project level.

11. The PCU will apply the existing private accounting system in Burkina (SYSCOA).

12. **Internal Control and Internal Auditing** : the Project Implementation Manual will also
describe the control mechanism system that the team is expected to follow to maintain a sound
financial management system. In particular, the manual will point out some procedures relating

---
[6] This will improve reliability of the national financial statements.


Input:
15. For the first year, the project will use the transactions based disbursement procedures.
Upon effectiveness, an initial advance up to the ceiling of the DA will be disbursed to the
designated account. Subsequently, withdrawal applications will be supported with statements of
expenditures (SOE), or records, reporting on the use of the previous amounts advanced to the
designated account. Records will be used as supporting documentation for payments under
contracts valued at US$300,000 or more for works; US$150,000 or more for goods; US$100,000
or more for consulting services provided by a firm and US$50,000 for consulting services
provided by an individual consultant; all other expenditures below the thresholds will be
supported with SOEs providing summary information on the use of credit proceeds for eligible
expenditures as well as a DA reconciliation statement. The frequency of reporting on the use of
advances made to the DA is monthly.


Input:
16. After the first year and following an assessment of the project implementing entity’s
capacity to prepare reliable IFR for the purpose of disbursements, the project will use the reportbased disbursement procedures. Each funding request prepared by the project will be
accompanied, by the relevant quarterly Interim Financial Report, the designated account activity
statement, the operations accounts activity statement and anup-to-date bank statement.

17. The project FM staff will be trained on the requirements of designated account funding.
Upon receipt of each application of withdrawal of an amount, the Bank shall, on behalf of the
recipient, withdraw from the account and deposit into the designated account an amount equal or
lesser of a) the amount so requested on basis of the cash forecast and IFR. And b) the amount
which the Bank has determined, based on the IFR accompanying the said application.

18. Subsequently, the requested amount will be deposited into the designated account in

47


Input:
order to meet the cash needs of the project based on the approved annual work program for every
six months period following the date of such report. The authority to sign the withdrawal
applications is vested on the Ministry of Economy and Finance.

**Figure 3.1: Disbursement Mechanism**

**Legend** :
_Transfers of funds_
_Flow of documents (Interim financial reporting,)_
_Payment to suppliers_

48


Input:
19. Disbursements by category. The table below sets out the expenditure categories to be
financed out of the Grant/Credit proceeds.

**Table 3.1: Expenditure Categories**

|Category|Amount of the Financing
Allocated (expressed in
SDR)|Percentage of
Expenditures to be
Financed
(inclusive of Taxes)|
|---|---|---|
|(1) Goods, works, non-
consulting services,
consultants’ services,
operating costs and
training under the Project|33,400,000
|100%|
|**TOTAL AMOUNT**|33,400,000||

20. Financial Reporting and Monitoring. The project team will prepare quarterly Interim
Financial Reports during project implementation. The reporting format and procedures will be
documented as an annex to the Project Implementation Manual. The reports will include:

a) Sources and uses of funds by funding source and
b) Uses of funds by activities of the project;
c) Projected expenditures and cash forecast for the next semester (six months);
d) Bank reconciliation statement for the Designated Account and
e) The Operations Account, showing the cash balance available at end of the
semester under review.

21. The Interim Financial Reports will cover all activities financed through the Bank funds.
Each interim financial report shall be furnished to the World Bank not later than 45 days after
each subsequent calendar quarter, and shall cover such calendar semester.


Input:
audited annual financial statements. In line with the new access to information policy, project
will comply with the Bank disclosure policy of audit reports (e.g. make publicly available,
promptly after receipt of all final financial audit reports (including qualified audit reports) and
place the information provided on its the official website within one month of the report being
accepted as final by the team

25. As a result of the financial management capacity constraints, the dated covenants for this
project are: the appointment of FM staff (composed of a financial Management Specialist, one
accountant, an internal auditor) with adequate and relevant experience and all, familiar with
Bank FM procedures within two months of effectiveness.

26. It is also recommended to train the FM staff, to appoint a financial controller by the
Ministry of Economy and Finance; to amend the terms of reference and the contract of the
external auditor by the supreme audit court; and to purchase accounting software with all
modules (general accounting, cost accounting, monitoring and evaluation, fixed assets
management, preparation of withdrawal applications interim financial reports and annual
financial statements) at an early stage of implementation.

50


Input:
**Table 3.2 Financial Management Action Plan**

|Significant
Weaknesses or risks|Action|Responsible
body|Completion|
|---|---|---|---|
|PCU with
adequate financial
management
capacity to be
established.

|1)  Recruit a Financial Management
Specialist, an accountant7, an
internal auditor8 with adequate and
relevant experience with Bank
financial management procedures

2) Develop a Project Implementation
Manual to ensure appropriate
implementation of activities in line
with Bank general framework
related to the project

3) Train staff at the bank’s local or sub
regional training institutions; and
before disbursement, provide
adequate training units will on
report-based disbursement
procedures and IFR elaboration
(through the Bank CTRLO and
FM)

4) Purchase the accounting software

5) Amend the TOR of external auditor
by the supreme audit institution
|PCU|Within two months of
effectiveness

Before negotiations

Recommended at an early
stage of implementation

Recommended at an early
stage of implementation

Recommended at an early
stage of implementation
|
|Risk of fraud and
corruption|**Ex-ante**: Financial controller will
pursue the ex-ante control as per the
national public financial management
arrangements.

**Ex post controls:**External audit and
integrated fiduciary review will be
performed.
|PCU|During project
implementation|

27. Conclusions of the FM Assessment: The overall residual FM risk at preparation is
considered Substantial. The proposed financial management arrangements for this project are
considered adequate to meet the Bank’s minimum fiduciary requirements under OP/BP10.00.


Input:
**C.** **Procurement**

28. With regard to procurement, the implementation agencies will have the primary function
with the preparation of bidding documents, which will be handled by SONABEL for Component
1, FDE for Component 2, and DGE for Components 3 and 4. The role of the PCU established
within DGE will be limited to consolidating procurement related information at the project level
(such as procurement plans, procurement related information in project monitoring reports, etc.).

29. **Guidelines** : Procurement for the proposed project will be carried out in accordance with
the World Bank’s “Guidelines for Procurement of Goods, Works and Non-Consulting Services
under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” dated January 2011;
and “Guidelines for Selection and Employment of Consultants under IBRD Loans and IDA
Credits & Grants by World Bank Borrowers” dated January 2011, and the provisions stipulated
in the Financing Agreement.


Input:
30. **Procurement Documents** : Procurement will be carried out using the Bank’s Standard
Bidding Documents or Standard Request For Proposal (RFP) respectively for all International
Competitive Bidding (ICB), for goods and selection of consultants. For National Competitive
Bidding (NCB), the Borrower could submit a sample form of bidding documents to the Bank for
prior review and will use this type of document throughout the project once agreed upon. The
Sample Form of Evaluation Reports published by the Bank will be used.

_**Procurement Assessment**_

31. The Bank procurement Team conducted a procurement capacity assessment at each
implementation agency and the team’s findings are summarized below:

- **SONABEL** ’s newly restructured procurement department (Direction des Marchés
Publics et du Patrimoine) is now composed of three units: the purchases unit, the
procurement unit and the administration and management unit. The procurement unit is
in charge of procurement of works, goods and consultants’ services. The unit is
composed of three staff who have acquired substantive knowledge of Bank procurement
processes and procedures through the implementation of the Power Sector Development
Project and the Energy Access Project.


Input:
- **FDE** ’s procurement unit was established in 2007 and its manager holds a master’s degree
in law. He has carried out some procurement activities under the Energy Access Project
and has benefited from training under the same project. FDE’s manager/procurement
specialist is seconded by an assistant who holds a degree in law, but with little experience
in procurement.

- **DGE**, the General Directorate of Energy of the Ministry of Energy is supported by the
Ministry’s Procurement Department (Direction des Marchés Publics – DMP) in the
implementation of its activities. The DMP has limited staff who has not been exposed to
the Bank’s procurement procedures.

52


Input:
33. The 2005 CPAR Action Plan was adopted by the Council of Ministers in March 2006.
The 2003 National Procurement Act, evaluated in light of the OECD Benchmark Indicators
system, has been found unsatisfactory – indicating a strong need to improve the institutional
framework - even if major progress had been achieved to date. Based on the progress made from
2000-2005 (from 31 percent to 55 percent of requirements for international procurement
benchmarks were met), the system at that time was found acceptable for National Competitive
Bidding processes. It was agreed that the implementation of the action plan included in CPAR
2005 would help to achieve 76 percent of the requirements by 2010. One of the major actions
currently under implementation is the updating of a 2003 version of National Procurement Act in
light of a WAEMU Regional Guidelines, an action that is also endorsed by the World Bank and
included in the CPAR recommendations.


Input:
34. The Procurement System has been strengthened again in 2008 by: (i) the adoption of new
procurement procedures, (ii) the creation of Autorité de Régulation des Marchés Publics
including the Commission de Règlement des Litiges à l’Amiable (CRAL) transformed in 2010 to
CDR (Commission de Règlement des Différends) who is in charge of procurement policy and
complaints, and (iii) the deployment of procurement specialists to key ministries away from a
centralized approach.

35. The national standard bidding documents were finalized and published on July 2009.
The Bank is working with the government to identify the inconsistencies with the Bank’s
standard bid documents in order to recommend some exceptions to the NCB method, to facilitate
Bank investment operations. Until the NCB documents are finalized and acceptable to the Bank,
the Bank ICB documents should be adapted for all NCBs, and the adapted version should be
cleared by the Bank.

_**Procurement risk at Project level**_


Input:
assessment revealed that SONABEL and DGE’s filing systems could be improved to ensure
efficiency. An action plan to improve the filing system, an appropriate procurement planning and
a pro-active contract management system will be particularly important given the delays in
procurement reviews at the Ministry of Finance. Finally the assessment identified the need for
confidentiality, fraud and corruption clauses in the implementation manual.

37. **Mitigation Measures** . The mitigation measures proposed have been discussed with all
stakeholders, and comprise: additional procurement capacity in SONABEL and DGE, training
to FDE’s procurement assistant in Bank procurement processes and procedures; action plan
from SONABEL and DGE to improve their respective filing systems; the creation of contract
management teams in each implementation agency; the inclusion of acceptable fraud and
corruption provisions in the project implementation manual; and the identification of a focal
point at the Ministry of Finance for documents requiring prior review.

**Table 3.3 Action Plan for Strengthening Procurement Capacity**


Input:
|Ref.|Tasks|Responsibility|Comments /
Due date|
|---|---|---|---|
|1|Recruitment of a procurement specialist
with strong knowledge of Bank
procedures to complement SONABEL’s
current procurement team;|SONABEL|Recommendation for
such specialist is being
considered in the
context of SONABEL’s
current restructuring and
would be a plus.|
|2|Recruitment of a procurement specialist
within DGE to carry out procurement
related activities under components 3 and
4 and ensure a coordination function for
procurement related activities at project
level such as procurement plans,
procurement related information in project
monitoring reports, etc.;|DGE/PCU|Although the activities
of component can be
initiated prior to
recruitment, the
additional capacity
would be a plus.
Recommendation for
such specialist to be
recruited at early stage
of implementation|
|3|Preparation of annual procurement plans
acceptable to the Bank|PCU (with inputs from
SONABEL/FDE/DGE)||
|3|Propose an action plan to improve filing
system|SONABEL/DGE|Implementation of
action plan on an
ongoing basis.|
|4|Creation of contract management teams in
each implementation agency|SONABEL/FDE/DGE|Teams to be established
for first approved
contract|
|5|Inclusion of fraud and corruption
provisions in the project implementation
manual acceptable to the Bank|PCU|Project implementation
manual was approved at
negotiations|
||Designation of a focal point at the
Ministry of Finance for the prior review of
procurement documents|PCU / DG-CMEF|Expected three months
after  effectiveness (not
a covenant)|

54


Input:
**Overall Procurement Risk Assessment:**

**Low**

**Moderate**

**High**

38. _**Procurement Filing.**_ Procurement documents must be maintained in the project files and
archived in the safe place until at least two years after the closing date of the project. The ESSP
Procurement Unit will be responsible for the filing of procurement documents, with support from
the FM expert.

39. _**Anti-Corruption.**_ The Client will ensure that the Project is carried out in accordance with
the provisions of the Anti-Corruption Guidelines of the Bank: “Guidelines on Prevention and
Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and
Grants”, dated October 15, 2006 and updated January 2011.


Input:
**Table 3.4: Procurement and Review Thresholds**

|Expenditure
Category|Contract Value
(Threshold)
US$|Procurement
Method|Contract Subject to
Prior Review
US$|
|---|---|---|---|
|**1. Works**
|≥ 5,000,000|ICB|All contracts of $US10
million and more
|
|**1. Works**
|< 5,000,000|NCB|NCB|
|**1. Works**
|< 200,000|Shopping|None|
|**1. Works**
|No threshold|Direct contracting|All|
|**2. Goods**
|≥ 1,000,000|ICB|All contracts of $US5
million and more
|
|**2. Goods**
|< 1,000,000|NCB|NCB|
|**2. Goods**
|< 100,000|Shopping|None|
|**2. Goods**
|No threshold|Direct contracting|All|
|**3. Consultants**
**_Firms_**
|
No threshold|
QCBS; LCS; FBS|
All contracts of
US$500,000 and more|
|**3. Consultants**
**_Firms_**
|< 100,000|CQ||
|**Individuals**
|No threshold|IC (at least 3 CVs)|All contract of
US$200,000 and more|
|**Individuals**
|No threshold

|Single Source
(Selection Firms &
Individuals)|All

|
|**All TORs regardless of the value of the contract are subject to prior review**|**All TORs regardless of the value of the contract are subject to prior review**|**All TORs regardless of the value of the contract are subject to prior review**|**All TORs regardless of the value of the contract are subject to prior review**|


Input:
The proposed Electricity Sector Support Project is a Category B project, which suggests that the
environmental and social impacts of the project will be limited, site-specific, and manageable to
an acceptable level. Three safeguards policies are triggered as indicated in the table below.

**Table 3.5: Safeguard Policies Triggered by the Project**

**Safeguard Policies Triggered by the Project** Yes No
Environmental Assessment (OP/BP 4.01) [X] [ ]
Natural Habitats (OP/BP 4.04) [ ] [X]
Pest Management (OP 4.09) [ ] [X]
Physical Cultural Resources (OP/BP 4.11) [X] [ ]
Involuntary Resettlement (OP/BP 4.12) [X] [ ]
Indigenous Peoples (OP/BP 4.10) [ ] [X]
Forests (OP/BP 4.36) [ ] [X]
Safety of Dams (OP/BP 4.37) [ ] [X]
Projects in Disputed Areas (OP/BP 7.60) [ ] [X]
Projects on International Waterways (OP/BP 7.50) [ ] [X]

**OP/BP 4.01 - Environmental Assessment**


Input:
45. This policy is triggered because of potential environmental impacts associated with
components 1 and 2; construction of power stations and extension of distribution lines. These
activities will have direct impacts on soils, vegetation, and the human population in the project
areas. These impacts will not be significant and will be mitigated by accompanying measures to
minimize adverse impacts. The Borrower has prepared an Environmental and Social
Management Framework (ESMF) to guide the screening, analysis, and safeguards approval of
future activities, for which the exact sites are not yet defined (Component 2).

**OP/BP 4.11 – Physical Cultural Resources**

46. Although the project is not likely to affect physical resources, the ESMF will include a
“chance finds” procedure. When the location of the works is known, detailed Environmental and
Social Management Plans (ESMP) will be prepared, consulted upon and disclosed.

**OP/BP 4.12 - Involuntary Resettlement**


Input:
**Annex 4: Operational Risk Assessment Framework (ORAF)**

**BURKINA FASO: Electricity Sector Support Project**

**Stage: Board**

|Project Stakeholder Risks|Col2|Rating|SUBSTANTIAL|Col5|Col6|Col7|Col8|
|---|---|---|---|---|---|---|---|
|**Description:**Delayed implementation of project components
could affect populations’ expectations which need to be
managed to avoid civil unrest.

|**Description:**Delayed implementation of project components
could affect populations’ expectations which need to be
managed to avoid civil unrest.

|**Risk Management:**It is expected that this risk will be mitigated through the combination of several
measures including early and upstream project preparation actions; early finalization of the procurement
plan and bidding documents, and an early start to procurement activities; as well as the preparation of an
appropriate communication strategy.|**Risk Management:**It is expected that this risk will be mitigated through the combination of several
measures including early and upstream project preparation actions; early finalization of the procurement
plan and bidding documents, and an early start to procurement activities; as well as the preparation of an
appropriate communication strategy.|**Risk Management:**It is expected that this risk will be mitigated through the combination of several
measures including early and upstream project preparation actions; early finalization of the procurement
plan and bidding documents, and an early start to procurement activities; as well as the preparation of an
appropriate communication strategy.|**Risk Management:**It is expected that this risk will be mitigated through the combination of several
measures including early and upstream project preparation actions; early finalization of the procurement
plan and bidding documents, and an early start to procurement activities; as well as the preparation of an
appropriate communication strategy.|**Risk Management:**It is expected that this risk will be mitigated through the combination of several
measures including early and upstream project preparation actions; early finalization of the procurement
plan and bidding documents, and an early start to procurement activities; as well as the preparation of an
appropriate communication strategy.|**Risk Management:**It is expected that this risk will be mitigated through the combination of several
measures including early and upstream project preparation actions; early finalization of the procurement
plan and bidding documents, and an early start to procurement activities; as well as the preparation of an
appropriate communication strategy.|
|**Description:**Delayed implementation of project components
could affect populations’ expectations which need to be
managed to avoid civil unrest.

|**Description:**Delayed implementation of project components
could affect populations’ expectations which need to be
managed to avoid civil unrest.

|
**Responsible: Implementing agencies**
**/Bank**|
**Responsible: Implementing agencies**
**/Bank**|
**Responsible: Implementing agencies**
**/Bank**|**Stage: Throughout**|**Due Date :**
**Ongoing**|**Status:**
**Ongoing**|
|**Capacity**|**Capacity**|**Rating:**|**SUBSTANTIAL**|**SUBSTANTIAL**|**SUBSTANTIAL**|**SUBSTANTIAL**|**SUBSTANTIAL**|
|**Description:**Lack of institutional capacity of the Project
Coordination Unit (PCU) located in DGE to carry out Project
management,
monitoring
and
evaluation,
including
procurement,
disbursement,
financial
management
and
safeguards could slow project implementation.

This risk is compounded by extremely long national
**_procurement procedures_** which affect the speed of project
implementation. The delays result from the low threshold for
prior review and the centralization of notices and results
publication at DGMP. A survey conducted in 2010 showed that
the procurement process could take anywhere between nine to
fourteen months.|**Description:**Lack of institutional capacity of the Project
Coordination Unit (PCU) located in DGE to carry out Project
management,
monitoring
and
evaluation,
including
procurement,
disbursement,
financial
management
and
safeguards could slow project implementation.

This risk is compounded by extremely long national
**_procurement procedures_** which affect the speed of project
implementation. The delays result from the low threshold for
prior review and the centralization of notices and results
publication at DGMP. A survey conducted in 2010 showed that
the procurement process could take anywhere between nine to
fourteen months.|**Risk Management:** As the Ministry of Energy is encouraging capacity building within national
institutions, it is expected that capacity building efforts to support project implementation will be done by
establishing a small fiduciary unit equipped with procurement, financial management and safeguard skills
at the Ministry and strengthen SONABEL staff.  Building on the experience of previous projects, the
existing PIU’s involvement in project preparation has been instrumental in advancing preparation.
Similarly, the PIU will play a coaching role in the early implementation (until April 2014 when the EAP
project under implementation will close).
Regarding the mitigation of procurement delay risk, the identification of a focal point at the DGMP will
help accelerate the process.|**Risk Management:** As the Ministry of Energy is encouraging capacity building within national
institutions, it is expected that capacity building efforts to support project implementation will be done by
establishing a small fiduciary unit equipped with procurement, financial management and safeguard skills
at the Ministry and strengthen SONABEL staff.  Building on the experience of previous projects, the
existing PIU’s involvement in project preparation has been instrumental in advancing preparation.
Similarly, the PIU will play a coaching role in the early implementation (until April 2014 when the EAP
project under implementation will close).
Regarding the mitigation of procurement delay risk, the identification of a focal point at the DGMP will
help accelerate the process.|**Risk Management:** As the Ministry of Energy is encouraging capacity building within national
institutions, it is expected that capacity building efforts to support project implementation will be done by
establishing a small fiduciary unit equipped with procurement, financial management and safeguard skills
at the Ministry and strengthen SONABEL staff.  Building on the experience of previous projects, the
existing PIU’s involvement in project preparation has been instrumental in advancing preparation.
Similarly, the PIU will play a coaching role in the early implementation (until April 2014 when the EAP
project under implementation will close).
Regarding the mitigation of procurement delay risk, the identification of a focal point at the DGMP will
help accelerate the process.|**Risk Management:** As the Ministry of Energy is encouraging capacity building within national
institutions, it is expected that capacity building efforts to support project implementation will be done by
establishing a small fiduciary unit equipped with procurement, financial management and safeguard skills
at the Ministry and strengthen SONABEL staff.  Building on the experience of previous projects, the
existing PIU’s involvement in project preparation has been instrumental in advancing preparation.
Similarly, the PIU will play a coaching role in the early implementation (until April 2014 when the EAP
project under implementation will close).
Regarding the mitigation of procurement delay risk, the identification of a focal point at the DGMP will
help accelerate the process.|**Risk Management:** As the Ministry of Energy is encouraging capacity building within national
institutions, it is expected that capacity building efforts to support project implementation will be done by
establishing a small fiduciary unit equipped with procurement, financial management and safeguard skills
at the Ministry and strengthen SONABEL staff.  Building on the experience of previous projects, the
existing PIU’s involvement in project preparation has been instrumental in advancing preparation.
Similarly, the PIU will play a coaching role in the early implementation (until April 2014 when the EAP
project under implementation will close).
Regarding the mitigation of procurement delay risk, the identification of a focal point at the DGMP will
help accelerate the process.|**Risk Management:** As the Ministry of Energy is encouraging capacity building within national
institutions, it is expected that capacity building efforts to support project implementation will be done by
establishing a small fiduciary unit equipped with procurement, financial management and safeguard skills
at the Ministry and strengthen SONABEL staff.  Building on the experience of previous projects, the
existing PIU’s involvement in project preparation has been instrumental in advancing preparation.
Similarly, the PIU will play a coaching role in the early implementation (until April 2014 when the EAP
project under implementation will close).
Regarding the mitigation of procurement delay risk, the identification of a focal point at the DGMP will
help accelerate the process.|
|**Description:**Lack of institutional capacity of the Project
Coordination Unit (PCU) located in DGE to carry out Project
management,
monitoring
and
evaluation,
including
procurement,
disbursement,
financial
management
and
safeguards could slow project implementation.

This risk is compounded by extremely long national
**_procurement procedures_** which affect the speed of project
implementation. The delays result from the low threshold for
prior review and the centralization of notices and results
publication at DGMP. A survey conducted in 2010 showed that
the procurement process could take anywhere between nine to
fourteen months.|**Description:**Lack of institutional capacity of the Project
Coordination Unit (PCU) located in DGE to carry out Project
management,
monitoring
and
evaluation,
including
procurement,
disbursement,
financial
management
and
safeguards could slow project implementation.

This risk is compounded by extremely long national
**_procurement procedures_** which affect the speed of project
implementation. The delays result from the low threshold for
prior review and the centralization of notices and results
publication at DGMP. A survey conducted in 2010 showed that
the procurement process could take anywhere between nine to
fourteen months.|**Responsible: Implementing agencies**|**Responsible: Implementing agencies**|**Responsible: Implementing agencies**|**Stage: Throughout**
**and hiring of selected**
**staff before**
**effectiveness**|**Due Date :**
**Ongoing**|**Status:**
**Ongoing**|
|**Governance**|**Governance**|**Rating:**|**MODERATE**|**MODERATE**|**MODERATE**|**MODERATE**|**MODERATE**|
|**Description :**The proposed change from the existing PIU to
the proposed PCU within the Ministry may create frictions
between the PIU’s project coordinator and the new team within
the Ministry.|**Description :**The proposed change from the existing PIU to
the proposed PCU within the Ministry may create frictions
between the PIU’s project coordinator and the new team within
the Ministry.|**Risk Management:**A delimitation of responsibilities during preparation and early implementation will
help ensure a smooth transition.|**Risk Management:**A delimitation of responsibilities during preparation and early implementation will
help ensure a smooth transition.|**Risk Management:**A delimitation of responsibilities during preparation and early implementation will
help ensure a smooth transition.|**Risk Management:**A delimitation of responsibilities during preparation and early implementation will
help ensure a smooth transition.|**Risk Management:**A delimitation of responsibilities during preparation and early implementation will
help ensure a smooth transition.|**Risk Management:**A delimitation of responsibilities during preparation and early implementation will
help ensure a smooth transition.|
|**Description :**The proposed change from the existing PIU to
the proposed PCU within the Ministry may create frictions
between the PIU’s project coordinator and the new team within
the Ministry.|**Description :**The proposed change from the existing PIU to
the proposed PCU within the Ministry may create frictions
between the PIU’s project coordinator and the new team within
the Ministry.|**Responsible:       Implementing agencies**|**Responsible:       Implementing agencies**|**Responsible:       Implementing agencies**|**            Stage: Throughout**|**Due Date :**
**Effectiveness**|**Status:**
**Ongoing**|
|**Project Risks**||||||||
|**Design**|**Design**|**Rating:**|**Rating:**|**LOW**|**LOW**|**LOW**|**LOW**|
|**Description:**The design of the project is a simple investment
project following up on previous similar projects.
|**Description:**The design of the project is a simple investment
project following up on previous similar projects.
|**Risk Management**:  The design is modular and can be easily adapted if conditions warrant it.   The Bank
worked with the Government (prior to appraisal) to establish a schedule of implementation of the 33kV
lines, and will monitor implementation and agree with the government on changes that may be necessary.|**Risk Management**:  The design is modular and can be easily adapted if conditions warrant it.   The Bank
worked with the Government (prior to appraisal) to establish a schedule of implementation of the 33kV
lines, and will monitor implementation and agree with the government on changes that may be necessary.|**Risk Management**:  The design is modular and can be easily adapted if conditions warrant it.   The Bank
worked with the Government (prior to appraisal) to establish a schedule of implementation of the 33kV
lines, and will monitor implementation and agree with the government on changes that may be necessary.|**Risk Management**:  The design is modular and can be easily adapted if conditions warrant it.   The Bank
worked with the Government (prior to appraisal) to establish a schedule of implementation of the 33kV
lines, and will monitor implementation and agree with the government on changes that may be necessary.|**Risk Management**:  The design is modular and can be easily adapted if conditions warrant it.   The Bank
worked with the Government (prior to appraisal) to establish a schedule of implementation of the 33kV
lines, and will monitor implementation and agree with the government on changes that may be necessary.|**Risk Management**:  The design is modular and can be easily adapted if conditions warrant it.   The Bank
worked with the Government (prior to appraisal) to establish a schedule of implementation of the 33kV
lines, and will monitor implementation and agree with the government on changes that may be necessary.|
|**Description:**The design of the project is a simple investment
project following up on previous similar projects.
|**Description:**The design of the project is a simple investment
project following up on previous similar projects.
|**Responsible:    FDE/Bank**|**Responsible:    FDE/Bank**|**Responsible:    FDE/Bank**|**                                Stage: Throughout**|**Due Date :**|**Status:**|
|**Social & Environmental**|**Social & Environmental**|**Rating:**|**Rating:**|**MODERATE**|**MODERATE**|**MODERATE**|**MODERATE**|
|**Description:**The project isa CategoryB project that would
trigger two policies: (a) Environmental Assessment (4.01); (b)
Physical and Cultural Resources (4.11), and (c) Involuntary|**Description:**The project isa CategoryB project that would
trigger two policies: (a) Environmental Assessment (4.01); (b)
Physical and Cultural Resources (4.11), and (c) Involuntary|**Risk Management :**Three instruments will be prepared to mitigate these risks:

An Environmental & Social Impact Assessment (ESIA):  This is considered under component 1 because
the two plants would be added within the fence of the existing plants operated by SONABEL; no people|**Risk Management :**Three instruments will be prepared to mitigate these risks:

An Environmental & Social Impact Assessment (ESIA):  This is considered under component 1 because
the two plants would be added within the fence of the existing plants operated by SONABEL; no people|**Risk Management :**Three instruments will be prepared to mitigate these risks:

An Environmental & Social Impact Assessment (ESIA):  This is considered under component 1 because
the two plants would be added within the fence of the existing plants operated by SONABEL; no people|**Risk Management :**Three instruments will be prepared to mitigate these risks:

An Environmental & Social Impact Assessment (ESIA):  This is considered under component 1 because
the two plants would be added within the fence of the existing plants operated by SONABEL; no people|**Risk Management :**Three instruments will be prepared to mitigate these risks:

An Environmental & Social Impact Assessment (ESIA):  This is considered under component 1 because
the two plants would be added within the fence of the existing plants operated by SONABEL; no people|**Risk Management :**Three instruments will be prepared to mitigate these risks:

An Environmental & Social Impact Assessment (ESIA):  This is considered under component 1 because
the two plants would be added within the fence of the existing plants operated by SONABEL; no people|


Input:
**Annex 5: Implementation Support Plan**

**BURKINA FASO: Electricity Sector Support Project**

1. **Strategy and approach for implementation support:** The strategy for
implementation support (IS) was developed based on the nature of the project and its risk
profile. Its aim is to make IS to the client more flexible, efficient, and focused on the risk
mitigation measures defined in the ORAF.


Input:
2. **Implementation capacity:** Technical aspects of implementation (including the
preparation of bidding documents and the implementation of safeguard mitigation measures)
will be handled by SONABEL for Component 1, FDE for Component 2, and DGE for
Components 3 and 4. The Project Coordination Unit (PCU) established in DGE will be
responsible for carrying out the fiduciary aspects of the project including financial
management and procurement process review, and monitoring of the implementation of
safeguard mitigation measures. With regard to procurement, the PCU’s role will be limited to
the consolidation of procurement related information at the project level (such as
procurement plans, procurement related information in project monitoring reports, etc.)
Regarding safeguards, the PCU will ensure, on behalf of the Government, that safeguard
measures and recommendations are timely and appropriately considered and implemented
throughout the life-cycle of the project. The PCU will also consolidate inputs from
SONABEL, FDE and DGE to facilitate monitoring and evaluation for all components of the
project. As described in Annex 3 (figure 1), the proposed institutional arrangement will
involve the creation of one designated account at the PCU.


Input:
3. **Procurement:** Implementation for procurement will include: (a) providing training
to PCU staff; (b) reviewing procurement documents and providing timely feedback to the
Client; (c) providing detailed guidance on the Bank’s Procurement Guidelines to
procurement specialists who are responsible for preparing the procurement documents; and
(d) monitoring procurement progress against the Procurement Plan, which will be updated as
required to reflect project implementation needs and improvements in institutional capacity.

4. **Financial management:** The team will review the project’s financial management
system including, but not limited to, accounting, reporting and internal controls. The Bank
team will also work with the PCU in improving financial management and reporting.

5. FM implementation support missions will be consistent with a risk-based approach,
and will involve a collaborative approach with the entire Task Team.

6. A first implementation support mission will be performed six months after the project
effectiveness. Subsequently, missions will be conducted with a risk based approach and will
include the following diligence:

(i) monitoring of the financial management arrangements during the supervision
process at intervals determined by the risk rating assigned to the overall FM
Assessment at entry and subsequently during implementation (ISR);

61


Input:
(ii) integrated fiduciary review on key contracts,
(iii) review the IFRs;
(iv) review the audit reports and management letters from the external auditors and
follow-up on material accountability issues by engaging with the task team leader,
Client, and/or Auditors; the quality of the audit (internal and external) also is to be
monitored closely to ensure that it covers all relevant aspects and provide enough
confidence on the appropriate use of funds by recipients;
(v) physical supervision on the ground specially; and
(vi) assistance to build or maintain appropriate financial management capacity.

7. **Environmental and social safeguards:** Compliance with environmental and social
safeguards will be the primary responsibility of the SONABEL, FDE and DGE with support
from the PCU which monitors the process. The PCU will ensure that all relevant
participatory processes embedded within various national legal regulations and the EIA, RAP
and other relevant project documents are followed. The PCU will recruit a qualified
environmental and safeguard specialist to support the implementation of safeguards
mitigation measures within two months of effectiveness. And over the life of the project, the
Bank team will provide guidance to the team in place to address any issues as they may arise _._


Input:
10. **Technical inputs:** Technical knowledge of thermal generation, energy access and
energy efficiency are required for proper assessment of technical specifications and other
aspects of bids and contracts. During project implementation, technical supervision is
required to ensure contractual obligations are met. The Bank’s project team and the
implementing agency and PCU staff will conduct site visits to project sites on a regular basis
throughout the duration of the project.

11. **Fiduciary requirements and inputs:** The Bank project team will help the PCU
identify its capacity building needs to strengthen its project financial management capacity
and improve procurement management efficiency. The Bank’s regular FM and procurement
supervisions will provide timely advice on budget planning and related matters. The PCU
will be responsible for the timely compilation of annual project financial statements for the
independent external audit. Project financial statements will be audited by an independent

62


Input:
auditor acceptable to the Bank.

12. **Audit:** The team will continue its diligent attention to the timing of audit report
preparations to ensure that the audit reports are prepared and submitted on schedule.
External auditors are expected to identify any internal control deficiencies and accounting
issues. The audit reports, audited financial statements and management letter will be
delivered to the Bank within six months of the end of each fiscal year.

13. **Monitoring and evaluation** : The M&E system will be based on the agreed Results
Framework (Annex 1). The PCU will be the unit responsible for furnishing the required
quarterly implementation progress status report as validated by the Steering Committee
convened by the MEM for forwarding to the Ministry of Finance and the Bank. Finally, DGE
will be responsible to undertake in a participatory way the process to elaborate an M&E
manual that will guide the overall M&E activities. Project-specific data will be collected by
SONABEL, FDE and DGE for the activities associated with each component.  It is expected
that the project will build the capacities of staff within DGE, FDE and SONABEL so that
they can adequately lead M&E activities.

**Figure 5.1: Implementation Support Plan**


Input:
**Annex 6: Team Composition**

|Team Composition|Col2|Col3|
|---|---|---|
|**Bank Staff**|**Bank Staff**|**Bank Staff**|
|**Name**|**Title**|**Unit**|
|Fatouma Toure Ibrahima-Wane|Senior Financial Specialist, Task Team Leader|AFTG2|
|Elisabeth Marie Bambara|Program Assistant|AFMBF|
|Begnadehi Claude Bationo|Operations Officer|AFMBF|
|Fabrice Karl Bertholet|Senior Financial Analyst|AFTG2|
|Maman-Sani Issa|Senior Environmental Specialist|AFTN2|
|Roch Levesque|Senior Counsel|LEGAM|
|Paivi Koskinen-Lewis|Social Development Specialist|AFTCS|
|Marie-Paule Ngaleu|Program Assistant|AFTG2|
|Christopher Saunders|Operations Officer|AFTG2|
|Leopold Sedogo|Energy Specialist|AFTG2|
|Mamata Tiendrebeogo|Senior Procurement Specialist|AFTPW|
|Melissa Olga Basque|Consultant, Lighting Africa|AFTG2|
|Boubacar Diallo|Consultant, Procurement|AFTPW|
|Edith Atioumoutio Zannou Tchoko|E T Consultant, Financial Management|AFTME|

65


Input:
and past decisions to adjust electricity tariffs in response to higher oil prices. In spite of the
preponderance of oil-based generation, SONABEL stood apart from other utilities in the subregion as having maintained positive operating and net incomes year after year over the last
decade. In 2010, the existing interconnection with Côte d’Ivoire helped reduce the cost of
power, but has since experienced disruptions following the political crisis in Côte d’Ivoire. As a
result, SONABEL has had to put in place emergency thermal generation. Given the cap on the
annual fuel subsidy, the Bank forecast indicates that it could lead to SONABEL posting unusual
lower results in 2011-2012. The evolution of SONABEL’s financial situation (in particular
accounts receivables) needs to be monitored. The forecast indicates that without additional
measures SONABEL would not achieve adequate financial performance indicators before 2015.
The Bank team urges SONABEL to put in place measures to ensure that its financial situation
improves. The improvement would be the result of increased volumes of imports from Cote
d’Ivoire, and from Ghana starting in 2016.


Input:
**Table 7.1: SONABEL’s Financial projections (in CFAF millions)***

|Objectifs financiers (suite)|2011|2012|2013|2014|2015|2016|2017|2018|2019|2020|
|---|---|---|---|---|---|---|---|---|---|---|
|**Net results**|-15,171|-14,608|-5,096|-6,284|-4,983|14,058|9,719|12,136|14,301|17,700|
|**Cashflow available for debt service**|21,656|14,630|20,334|20,646|25,923|47,312|50,014|49,816|50,772|57,867|
|**Debt payment**|11,692|14,784|18,366|22,648|23,980|26,759|29,216|28,431|26,528|27,855|
|Debt service coverage ratio**( X >1,2 for**
**2012-2015 and X> 1,4 for 2016-2025 )**|**1.9**|**1.0**|**1.1**|**0.9**|**1.1**|**1.8**|**1.7**|**1.8**|**1.9**|**2.1**|
|Debt to equity ratio** (X < = 2,5 for 2012-2015**
**and X<=2 for 2016-2025 )**|**2.1**|**2.8**|**3.3**|**4.3**|**4.5**|**3.4**|**2.8**|**2.6**|**2.1**|**1.6**|

*Assumptions

- Imports from Cote d’Ivoire 469 GWh in 2012, 600 in 2013, 700 in 2014 and 800 beyond

- Imports from Ghana46 GWh in 2012, 48 in 2013, 50 in 2014, 200 in 2015 and 527 beyond

- Interconnection Han, Bobo, Sikasso, Bamako: 586 from 2017

- Kompienga, Bagre and Tourni-Niofila 110 GWh from 2013

- Subsidy: CFA francs 21 billion 2012-2015

- Tariff increase: 8% in July 2013

68


Input:
Policy Research Working Paper 8486

### **Abstract**

The literature suggests a wide range of impacts of improved transport connectivity on agricultural growth. Still, the infrastructure-growth nexus remains somewhat mysterious, particularly in the African context, because many rural farmers do not have their own transport means.
Using data from Madagascar, the paper reexamines the important roles of agrobusinesses. By applying the spatial autoregressive model, it is shown that proximity to input-oriented agrobusinesses, such as input dealers and equipment suppliers, is particularly important to increase rice production. Fertilizer and irrigation use is also found important, indicating the needs for intensification in rice production. Market accessibility is always found as a significant determinant: transport infrastructure connecting farmers and markets, especially the capital city, Antananarivo, is therefore important to develop and maintain.

This paper is a product of the Transport and Digital Development Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world.
Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/research. The authors may be contacted at aiimi@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development_ _issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the_ _names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those_ _of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and_ _its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team


Input:
- 3

The current paper casts light on agrobusinesses. The roles of input- and output-oriented agrobusinesses may be different. While input prices are likely to be reduced by improved transport infrastructure (Khandker et al., 2009), output prices can either increase (Khandker et al., 2009) or decline (Shively and Thapa, 2016). This may indicate a particular challenge for farmers to take advantage of accessibility to output markets. Even though transport infrastructure is improved, good market opportunities may not be available. Some studies suggest the importance of access to information and communication technology to obtain market information (Zanello 2012; Kiiza and Pederson, 2012). Clearly, agrobusinesses can play an important role to commercialize agricultural produce. In Madagascar, rice productivity is highly correlated with the presence of agrobusinesses even in a simple correlation diagram with district-level data ( **Figure 1** ).

Source: World Bank estimate based on government data.

The paper distinguishes input- and output-oriented agrobusinesses and examines their relative importance for farmers. Despite the relatively rich literature, there are only a few studies that compare the possible impacts of transport accessibility to input and output markets systematically. Negatu and Roth (2002) indicate that transport infrastructure is critical for output commercialization, but not for utilization of fertilizer in northern Ethiopia.

Other institutional factors, such as plot size and access to credit, are more important constraints. Data availability is of course a challenge. The paper combines various spatial data and develops different indicators representing the economic proximity of farmers to input- and output-oriented agrobusinesses, using the case of Madagascar.

government data
district-level data
spatial data


Input:
- 4

The remaining sections are organized as follows: Section II develops our empirical strategy and describes our data, including key transport connectivity variables. Section III discusses the main estimation results and some policy implications. Then, Section IV concludes.

**II.** **EMPIRICAL MODEL AND DATA**

Following the literature (e.g., Gyimah-Brempong, 1987; Bravo-Ortega and Lederman, 2004), a simple production function is considered with transport connectivity included as one of the production inputs: ln �� ��� ���ln �� �∑�� �ln ��� �∑�� �ln ��� ��� (1) where _Y_ is the volume of rice produced in location _i_ .

Our primary source of data is the spatial production allocation model (SPAM) developed by the International Food Policy Research Institute (IFPRI) for generating geographically highly disaggregated crop production data. [1] The SPAM is a spatial model to allocate crop production derived from large statistics reporting units, such as country, province and district, to a raster grid at a spatial resolution of 5 minutes of arc (approximately, at a resolution of 10km x10km pixel). See You and Wood (2006) and You _et al._ (2009) for details.

While the model covers 42 crops, the current analysis is only focused on rice, which is the most common and important crop in Madagascar. The country’s total rice production amounts to about 4 million tons or US$1 billion per annum ( **Figure 2** ). About 85 percent of farmers engage in rice production. Using the spatial distribution of rice production based on the 2010 SPAM, the latest district-level rice production data for the period of 2013-15 are disaggregated into 3,198 locations or pixels. This is our dependent variable, _Y_ ( **Figure 3** ).

1 It is available on the Internet at MapSpaM.info.

spatial production allocation model
2010 SPAM


Input:
- 5

**Figure 2. Madagascar: Main crop production** **Figure 3. Rice production areas**

Source: FOASTAT Source: World Bank estimate based on SPAM.

_Y_ is assumed to be dependent on agro-climatic potential _A_, usual agricultural inputs _X_ as well as transport connectivity _Z_ . Since land fertility differs across locations, it is important to control for crop suitability, _A_, which represents the amount of rice that can potentially be cultivated at each location (kg/ha).

Four traditional production inputs are considered for �� ���, �, �, ��. _L_ denotes labor, which is calculated by the population estimate based on high-resolution global population distribution data, WorldPop, multiplied by the average share of households who engage in agriculture. [2] Land is divided into two types: rain-fed ( _R_ ) and irrigated ( _I_ ). _F_ is measured by the total amount of fertilizer. While the land area where high inputs are used is estimated by SPAM, it is assumed that the average dose of fertilizer is 4.5 kg per ha, including all elements of N, P2O5 and K2O (Randrianarisoa et al., 2017). In Africa, agriculture production is generally labor- and land-intensive. The fertilizer and irrigation use remains limited (Bravo-Ortega and Lederman, 2004). However, a growing literature indicates their important 2 The agricultural employment share is calculated at the district level, using a recent household survey in 2010.

high-resolution global population distribution data


Input:
- 6

impacts: In Zambia, timely availability of fertilizer could increase maize yields by 11 percent on average (Xu et al., 2009). Improved availability of irrigation could nearly double agricultural productivity in Mali (Dillon, 2011).

In Madagascar, transport connectivity has long been considered as a critical constraint for rural farmers. World Bank (2016) identifies two important factors that decreased households’ agricultural income in recent years: distorted domestic rice prices and deteriorated transport infrastructure. Farmers, especially poor people, are shouldering significant costs and times to transport their produce to markets ( **Figures 4 and 5** ). The current paper considers three types of transport connectivity for _Z_ : (i) proximity to the official road network (denoted by _KM_ ), (ii) market access index ( _MAI_ ), and (iii) agrobusiness accessibility index ( _AGAI_ ). The last is also disaggregated into two cases: proximity to input- and output-oriented agrobusinesses, denoted by AGAI_i and AGAI_o, respectively.

Source: World Bank (2016) Source: World Bank (2016) To account for not only transport connectivity but also significance of economic density at each relevant location, the accessibility indices are defined as follows: ���� ��∑�� �⁄����max� ���� (2)

agrobusiness accessibility index
market access index


Input:
- 7

This is the sum of purchasing power or market capacity, _m_, inversely weighted by the degree of impediment ( _d_ ) between two locations. [3] For _m_, the city population is used as a proxy of the market capacity. _d_ is measured by estimating transportation costs from pixel _i_ and large city _k_ . [4] Given the georeferenced road condition data, transport costs to bring one unit of goods to a major market are calculated by spatial software minimizing the total road user costs. In principle, the costs would likely be higher when the road distance is longer and the condition is poor. For instance, **Figure 6** shows estimated transport costs from each SPAM pixel to the nearest major city (with more than 40,000 population). Then, the index is normalized to zero to one.

**Figure 6. Transport costs to major cities ($/ton)** **Figure 7. Market Access Index (0 to 1)**

Source: World Bank estimate. Source: World Bank estimate.

The MAI clearly shows that in Madagascar, the north and the south are disconnected to the primary domestic market, Antananarivo, which is important for everyone ( **Figure 7** ). In addition, the primary national roads, such as RN2, RN4, RN6 and RN7, are critical to connect those disconnected areas to Antananarivo. Not surprisingly, rice productivity is 3 This is based on a conventional gravity framework. The literature also uses the negative exponential weights.
See for instance Elbadawi, Mengistae and Zeufack (2006) and Lall and Mengistae (2005).
4 In this paper, 60 cities and towns that have more than 20,000 population are considered.


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highly correlated with MAI even in a simple correlation diagram ( **Figure 8** ). Of course, there is considerable variation, which needs to be controlled by other factors.

**Figure 8. Correlation between rice production and MAI**

0 .2 .4 .6 .8 Market Access Index Source: World Bank estimate.

The AGAI is defined in the same way, with the market capacity replaced with the number of agrobusinesses, _s_, that exist in each location (commune). _d_ is measured by estimating transportation costs from pixel _i_ and location _h_ .

����� ��∑�� �⁄����max� ����� (3) According to the official firm registry database, as of 2017, there existed 1,309 agrobusinesses in the country. Output-related agrobusinesses, including large plantations, collectors, processing companies, and exporters, are dominant, which amount to 902 companies in the database. On the other hand, 399 input-related agrobusinesses, also exist, such as fertilizer and other input dealers and equipment suppliers. [5] The spatial distribution of agrobusinesses is highly skewed ( **Figure 9** ). 569 firms or nearly half of the total agrobusinesses are located in three districts: Antananarivo, Fianarantsoa and Ambatondrazaka. While the first two are the largest two urban areas in the middle of the 5 This classification may be ambiguous. In the database, each agrobusiness is categorized as either an input- or output-related firm based on the description of its primary business activity. In practice, however, some of them are likely to engage in both activities.