Business Case and Intervention Summary · Web viewContext and need for DFID intervention 8 Impact and Outcome 15 Appraisal Case 16 Feasible Options & Theory of Change 16 Assessing

Support to transboundary water resource management in SADC

Business Case

February 2012

SADC Water-RSAP3 : Business Case - Final Page 1 of 62

Contents: Business Case

Section Page No:

Contents 2Abbreviations & Acronyms 3

Intervention Summary 6

1. Strategic Case 8A. Context and need for DFID intervention 8B. Impact and Outcome 15

2. Appraisal Case 16A. Feasible Options & Theory of Change 16B. Assessing the evidence 22C. Costs and Benefits 26D. Value for Money 35E. Summary VFM Statement 36

3. Commercial Case 38Direct Procurement

A. Procurement/Commercial requirements 38B. Competition 39C. Market response 39D. Key Cost Elements 39E. Contract Award 40F. Performance management 40Indirect ProcurementA. Proposed Funding Mechanism 41B. Value For Money 43

4. Financial Case 45A. Costs & Forecast 45B. Programme/Administration Budgets 46C. How will funds be paid out 46D. Assessment of Financial Risk 47E. Expenditure Reporting 48

5. Management Case 50A. Management arrangements 52B. Risk Management 53C. Conditions 53D. Monitoring & Evaluation 54

Endnotes 57Appendix 1: List of Design Report Background Papers 60

Logframe Separate file


Abbreviations and Acronyms

AfDB African Development BankAMCEN African Ministerial Council on Environment AMCOW African Ministers Conference on WaterARD African Regional DepartmentAU African UnionAUSAID Australian Government Overseas Aid ProgramBMZ German Federal Ministry for Economic Cooperation and

DevelopmentCBO Community Based OrganisationCSO Civil Society OrganisationCEDAW 1979 Convention on the Elimination of All Forms of

Discrimination against Women CEO Chief Executive OfficerCLP Chars Livelihoods ProgrammeDANIDA Danish AidDFID Department for International DevelopmentDBSA Development Bank of South AfricaDOVVSU Domestic Violence and Victim Support UnitDRC Democratic Republic of CongoDRR Disaster Risk ReductionDV Domestic ViolenceEC European CommissionELMS SADC Environment and Land Management Sector EPA Economic Partnership AgreementES Executive SecretaryEU European UnionFDI Foreign Direct InvestmentFGEF French Global Environment FundGDP Gross Domestic ProductGEF Global Environment FundGES UNDP Gender Equality StrategyGIS Geographic Information SystemGMISA Groundwater Management Institute South AfricaGSIC Gender Steering and Implementation CommitteeGWA Gender Water AllianceGWI Ground Water InstituteGWP Global Water PartnershipGWPSA Global Water Partnership Southern Africa HYCOS Hydrological Observation SystemI&S Infrastructure and ServicesIA Implementing AgentIBRD International Bank for Reconstruction and DevelopmentIBT Inter-basin transfers ICP International Cooperating PartnerIDP Internally Displaced PersonILC International Law Commission


IPCC Intergovernmental Panel on Climate ChangeIPP Independent Power ProducerIWRM Integrated Water Resource ManagementIWRDM Integrated Water Resource Development and ManagementJMP Joint Monitoring Programme JURBS Joint Umbeluzi River Basin StudyJWC Joint Water CommissionKE Key ExpertKfW German Development Bank (Kreditanstalt für Wiederaufbau)LIMCOM Limpopo CommissionM&E Monitoring and EvaluationMDG Millennium Development GoalsME&R Monitoring, Evaluation and ReportingMIC Middle Income CountryMOWAC Ministry of Women and Children AffairsMS Member StateMTR Mid-Term ReviewNAWISA The Network for Advocacy of Water Issues in Southern AfricaNEPAD New Partnership for African DevelopmentNGO Non-governmental OrganisationOKACOM Okavango CommissionORASECOM Orange-Senqu CommissionPANAFCON Pan African Implementation and Partnership Conference on

Water PAP Priority Action Programme PIDA Programme for Infrastructure Development in AfricaPIF Programme Implementation FrameworkPIM Programme Implementation ManualPMSU Programme Management Support UnitPPDF Project Preparation and Development FundPPP Public-Private PartnershipPPR Post-Project ReviewPRSP Poverty Reduction Strategy PaperPSC Project Steering CommitteeRBO River Basin OrganisationREC Regional Economic CommunityRISDP Regional Indicative Strategic Development PlanRSAP Regional Strategic Action PlanRSAP1 Regional Strategic Action Plan, 1998-2004RSAP2 Regional Strategic Action Plan, 2005-2010RSAP3 Regional Strategic Action Plan, 2011-RSWIDP Regional Strategic Water Infrastructure Development

ProgrammeSA South AfricaSADC Southern Africa Development CommunitySADCC Southern African Development Coordinating Conference SAPP Southern Africa Power Pool


SIDA Swedish AidSSR Self Sufficiency RatioTA Technical AssistanceTAC Technical Advisory CommitteeTFCA Trans-Frontier Conservation AreasToR Terms of ReferenceTWM Transboundary Water ManagementTWRM Transboundary Water Resources ManagementUK United KingdomUN United NationsUNCSD UN Commission on Sustainable Development UNDP United Nations Development ProgrammeUNEP United Nations Environment ProgrammeUNGASS UN General Assembly Special Session UNICEF United Nations Children’s FundUNILC United Nations International Law CommissionUNOPS United Nations Office for PartnershipsUSAID United States AidWB World BankWD Water DivisionWHO World Health Organisation WIN-SA Water Information Network – South AfricaWISA Water Institute of Southern AfricaWRC Water Research CommissionWRTC Water Resources Technical CommitteeWSCU Water Sector Coordinating UnitWSRG Water Strategy Reference GroupWSSD World Summit on Sustainable Development ZAMCOM Zambezi CommissionZRA Zambezi River Authority

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Business Case and Intervention Summary

Intervention Summary

Title: Support to transboundary water resource management in SADC

What support will the UK provide?

How much funding does the UK expect to provide?£37.3 Million

Period of funding?4 years (2011/12 – 2014/15)

Why is UK support required?

Some 95 million people live in the 13 shared river basins of Southern Africa. Despite the risk of flooding, access to water for drinking, sanitation, agriculture and industry is already limited, constraining human development and economic growth.1 Many people suffer from floods or droughts on a regular basis.

These problems are likely to worsen as the climate changes. Increasing temperatures in Southern Africa are predicted to change rainfall patterns. Storms are likely to become both more sporadic and more violent, increasing the risk of both drought and flood.

As water supply falls, demand is set to rise as Southern Africa’s population grows and urbanises. Further reduced water resources have potentially severe development impacts, especially on food security: agriculture – the largest water-consumer on the continent – needs to increase output by 3.3% per year just to feed Southern Africa’s growing population. Declining flow rates also threaten the industrial and hydroelectric potential of rivers in the region.

All major river basins in Southern African cross international borders,2 meaning water usage in one country will affect downstream neighbours. This means that national development aspirations of one country potentially conflict with those of another.

Good governance of transboundary rivers can maximise cooperation and manage conflict. But existing international institutions – at both regional and River Basin levels - remain under-strength and need to perform this task better than they have been. Unless international support is able to help improve the effectiveness of these organisations, tensions between riparian states may not be effectively managed, and critical investment in infrastructure will not be forthcoming.

The complex mix of issues involved means that there is no single measure that will have meaningful impact. As a result, the members of the Southern African Development Community (SADC) have set


out a range of approaches, coherently planned and co-ordinated under the Regional Strategic Action Plan for Integrated Water Resource Management and Development.3 We will provide support in three overarching, mutually-supportive and inter-dependent ways through a mix of:

Building the capacity of national and regional institutions to manage transboundary rivers:Different countries managing different sections of a international river typically can lead to inefficient management of the river and tensions between countries. In many international river basins, these problems are overcome through the establishment of River Basin Organisations (RBOs) – international organisations with membership of all riparian states – which advise member states on the impact of their respective decisions on the river as a whole, and can provide a forum for joint decision-making and action. We are supporting the establishment, strengthening and functioning of River Basin Organisations in Southern Africa through a range of activities, including legal and institutional development, training for RBO staff, technical studies and tools for water resource management, and demonstration projects for efficient water use. As states cooperate more closely through the RBOs, the programme will support flood early warning and preparedness interventions (such as dam synchronisation on major regional rivers). This sort of intervention is key to help manage current and future climate risks of extreme flood and drought events.. We are also supporting the SADC Secretariat to monitor the functioning of RBOs, and to facilitate effective interaction of RBOs and their member states.

Facilitating the design and implementation of infrastructure investments: Many potential medium to large scale water infrastructure projects do not attract investment because they are unable to produce pre-feasibility and feasibility studies to the standard required by international financiers. We will provide resources for an expert facility in this field to develop pre-feasibility and feasibility studies for these projects, helping move projects from concept to actual implementation, catalysing climate smart development for member state populations. Prioritised projects are likely to involve aspects such as hydro-electric generation, water storage and flow regulation, hydrological monitoring and water supply enhancement and protection. Direct design and implementation of climate-resilient infrastructure:We will fund a number of small-scale infrastructure projects. This will give our programme the ability to intervene where the need for water security is greatest. An example is protecting and enhancing water supply – in a context of climate change unnecessary wastage and loss of water will be unsustainable. Implementation of such projects in border areas will also help demonstrate to member states the value of transboundary cooperation, building commitment for longer term and more sustainable cooperative management of rivers in Southern Africa

Our partners in this work will be SADC, the German government (GIZ) and the United Nations Development Programme (UNDP).

What are the expected results?

This programme will improve the governance and management of transboundary water resources and support development of essential infrastructure. The following benefits will be realised:

- Improved water management will indirectly benefit at least 95 million people in the shared river basins of the SADC region. For example, more equitable sharing of water resources will help provide water for human consumption, agricultural development, industrial development and hydropower generation;

- At least 9 million people will directly benefit from reduced vulnerability to flooding.

- At least 3.5 million people will directly benefit from improved access to drinking water.


- Trust, partnership and cooperation built between SADC states will lead to improved water management and, through this, reduced risk of conflict, accelerated poverty reduction, greater food security and faster economic growth.


Business Case

Strategic Case

A. Context and need for a DFID intervention

1. Water in Southern Africa: shared rivers and shared problems

International borders in Southern Africa ignore the shape of the region’s river basins. This means most of the rivers in Southern Africa are shared by several countries. The SADC region has 15 major river basins which are shared by two or more countries (see Map 1). Thus one of the defining features in the region is shared watercourse systems, with complex water rights and potential conflicts over the use of the shared resources. This common heritage also presents tremendous opportunities for cooperation in managing the shared resources for regional economic development and regional integration.

The boundaries of all twelve continental SADC States in Southern Africa enclose thirteen major international river basins. In addition, parts of the Congo and Nile river basins fall within the SADC region. All continental SADC countries with the exception of the DRC4 share at least one transboundary river basin with another SADC member State – Mozambique shares nine basins. The entire territories of Botswana, Swaziland and Zambia are in transboundary basins, as are most of Lesotho, Malawi and Zimbabwe.

Map 1: The shared water basins of the SADC region


2. Water in Southern Africa: A policy priority for DFID and the region

DFID This proposed support to SADC’s agenda on Transboundary Water Management aligns well with UK and DFID’s current policy and planning. DFID's overarching aim in the area of Water Resources Management is to increase water security of poor people in developing countries by supporting the efficient use of water to strengthen growth and reduce vulnerability to floods and droughts. This is in recognition that the impacts of climate change on people will be felt mainly through water (Stern Review 2006). Water is not uniformly available, and is concentrated in particular areas and in particular times of the year – necessitating effective management of competing demands for this resource. With a rising population and increasing climate uncertainty this will become more difficult. DFID recognises that good management of water resources, particularly in the face of climate change, is a key factor in providing poor people with sustainable access to clean drinking water, and thus also improving sanitation and hygiene practices and preventing diarrhoea and other illnesses. DFID operates at three levels on water resource management: globally, regionally and nationally.

Key sectors that the UK International Climate Fund will prioritise for investment on adaptation include interventions on Water Resources Management - that can range from initiatives at international level (cooperation between neighbouring countries on a shared, but under threat, resource) to local initiatives such as river basin management, rainwater harvesting and irrigation.

Strengthening Africa’s water security through improved management of transboundary water resources in East and Southern Africa, and national level integrated water resource management is also an adaptation priority for DFID Africa Division’s strategy on Climate Change.5

SADCIn recognition of the urgent and significant need to rectify current inadequate transboundary water management, SADC Member States have engaged in wide ranging and intense consultations since the mid-1990s on development of the water sector in the region, developing policy, strategy and plans. While not underplaying the implementation challenges, this reflects substantive regional and Ministerial endorsement and ownership of this SADC facilitated agenda. It has brought about a heightened awareness of the importance of water for socio-economic development, regional integration and poverty reduction.

Their efforts show recognition of the range of institutional, technical, economic, social and environmental factors which still constrain effective management of the region’s water resources. In planning terms, the principal resulting current initiative is the third Regional Strategic Action Plan (RSAP3) - which this proposed programme would support.

3. Water in Southern Africa: Why it mattersEfforts to meet MDGs, secure economic growth and manage flooding in Southern Africa are heavily constrained by poorly managed waters. Poor water supply and inadequate sanitation is calculated to cost between 3.26% and over 5% of regional GDP, sums which exceed the total flows of aid and debt relief into the region.6 The various links between water and development in the region are examined below.

Water supply for drinking and sanitationAcross SADC over 98 million people lack access to UN-defined ‘improved’ water supplies7 and 175 million lack access to ‘improved’ sanitation8. Whilst SADC estimates low levels of coverage cost member states $11.5 billion or 3.26% of GDP, others estimate that poor sanitation alone costs 5% of


GDP in sub-Saharan Africa – a figure in excess of total annual flows of aid and debt relief9. The human toll through diarrheal disease accounts for 1 in 5 child deaths or 1.5 million deaths per year and has a greater combined impact on the health of under-fifteens than HIV, malaria and tuberculosis combined.10 And with an estimated 40 billion hours spent fetching water each year in Africa, the impact of poor water provision go well beyond health11.

Only 40% of SADC countries are on track to meet the MDG target on water supply. Only 13% of countries are on track to meet the MDG target on sanitation12. Functional water systems are generally a pre-requisite for both.

Water and food securityFood security is one of the most off-track MDGs in Southern Africa. It will not be achieved unless annual agricultural output is increased by at least 3.3 per cent.13 Moreover, the agricultural sector contributes more that 35% of the SADC regional economy, and employs a large majority of the work force.14

The principle constraint on agricultural productivity in the region is the very low level of irrigation coverage. Perhaps as little as 1.7% of agricultural land is irrigated,15 ensuring food production is reliant on regular and reliable rain-fall patterns.16 In turn, the spread of irrigation is constrained by limited water storage capacity. Average per capita storage capacity in Africa is about 200 cubic meters a year, much less than that of countries in other regions.17 Although dams in some SADC countries, such and Zimbabwe and Zambia, hold very large bodies of water, often these are designed for hydroelectric production: topography and human settlement patterns means these dams supply relatively little water for agriculture.18 Overall in Sub-Saharan Africa, countries store only 4% of their annual renewable flows, compared to between 70% and 90% in the developing world.19 Very little water is thus stored in locations where it could be usefully turned to agriculture.

Water and economic growthMuch of SADC’s potential for growth - in mining, agricultural processing and manufacturing - is heavily dependent on intensive water use. Water shortages threaten to be a significant constraint on future growth.

Availability of electrical power is another limiting factor on industry across much of SADC. Although hydroelectricity makes up 32% of Africa’s energy output, sum output remains the lowest per capita globally. The entire generation capacity of the 48 countries of sub-Saharan Africa, at 63 gigawatts (GW), is comparable to that of Spain20. Africa’s exploitable hydroelectric potential is estimated at approximately 1.4 million GW hours/year, sufficient to supply electricity for the entire continent21. But only about 7 % of this economically feasible hydropower potential has been exploited22. In a carbon constrained world, Africa could benefit as a net exporter of clean power if this potential were realised.

FloodingFloods can take a devastating toll on livelihoods and economies in the region. For example, flooding in Mozambique in 2000 destroyed 250,000 homes, 140,000 hectares of agricultural land and the livelihoods of 113,000 small holding families.23 Economic losses from the flood have been estimated at US$419m, whilst the cost to donors of the humanitarian intervention exceeded US$450m.24

Whilst this Mozambique example was particularly severe, many SADC countries suffer flooding on a regular basis. Thousands of hectares of agricultural lands were destroyed during the 2011 rains in Angola, Botswana, Lesotho, Mozambique, Namibia, Zambia, Zimbabwe and South Africa.25 Whilst in many parts of the world the impact of flooding is mitigated using coordinated networks of dams to disperse floodwaters safely, such arrangements are not embedded in SADC practices.

Water and conflictIn international trans-boundary river basins, water usage in one state impacts on users in other


states. Tensions between riparian states can arise when water flows from upstream to downstream states reduce in quantity or quality to the extent that development in the latter is compromised. This can lead to political tensions and even armed confrontation. On a continent where 62% of the land area is drained by shared waters, every continental African state faces the challenge of managing such tensions. The challenge is exacerbated by highly variable climates, resulting in droughts, floods and variable river flows even in normal years.

Southern Africa in particular has been characterised as a hydro-political hot spot, second only to the Middle East. Rapid development of water resources in SADC has outstripped governments’ capacity to collaboratively manage the implications for water users, leading analysts to include six of SADC’s transnational river basins - the Incomati, Kunene, Limpopo, Okavango, Orange and Zambezi - among those most at risk from conflict globally 26 27 28. The risks to stability in the region are also illustrated by the regular violent conflict between water users at a sub-national scale.

4. Water scarcity in Southern Africa: ProjectionsA number of projected water demand and supply factors suggest growing challenges ahead for the SADC region. The key issues are explored below.

Increased water demandPopulation growth: At current rates of population growth, by 2025 Lesotho, Mauritius, Mozambique and Tanzania will join Namibia, South Africa and Botswana in approaching the status of water scarce nations in SADC, defined as when water supplies drop below 1,000 cubic metres per person per year.29 This measure does not reflect the full aridity of the region: large bodies of water in Zimbabwe and Zambia are remote from population centres, meaning in reality that access to water for productive use is limited.

However, an approach which delineates between ‘economic water scarcity’ where resources exist but where investment is required to tap latent capacity to manage those resources, as opposed to 'physical water scarcity’ where the forecast demand cannot be met even after accounting for future adaptation, is more encouraging. These findings suggest that with sufficient investment to improve supply-side infrastructure and enhance irrigation efficiency, all Southern African countries (bar South Africa) will be able to meet projected future demand.30

Urbanisation: Future population growth will take place primarily in urban centres, with 95% of global growth expected there by 2030.31 By 2025 about 56% of the population in SADC is predicted to be urbanized, increasing the domestic demand in direct proportion to the population increase and standard of living32. Rapidly growing cities in Southern Africa already face multiple water challenges. With water demand outstripping reticulated supply, at least a quarter of SADC’s urban population is reliant on informal access to groundwater via boreholes and hand dug wells. These unmanaged urban groundwater resources, the fastest growing form of UN-defined ‘improved’ water source in SADC, face significant risks through degradation and depletion33.

Industrialisation: Much of SADC’s potential for growth, in sectors such as mining and extractive industries, agricultural processing and manufacturing is heavily dependent on intensive water use. Some commentators suggest that rapid economic growth will see industrial demands surpass agricultural by 2025.34 Even if this is not the case, there is a strong and well evidenced correlation between economic / industrial growth and water consumption. For example, South Africa already consumes 50% of water in SADC.35

Diet changes: Whilst food insecurity in SADC remains severe, evidence from China and India suggests that development and urbanisation is often accompanied by changing diets. As SADC urbanises and more Southern Africans emerge from poverty, the projected shift towards European-style diets could mean that more water will be required for each calorie of agricultural output: meat


production is water intensive whilst cereals such as wheat require more water than traditional grains like sorghum. On average, the demand for cereals is expected to grow by 37% between 2000 and 202536.

Decreased water supply - but increased risk of floodingClimate change: There is broad agreement among climate change models that, on average, the south western part of SADC will become dryer and the northern parts of SADC will become wetter. This suggests that those areas currently experiencing or threatened by water stress will receive less rainfall still under climate change scenarios. 37

Throughout the region, rainfall is likely to become more sporadic and characterized by higher intensity events. This will further increase the risk of flooding.38

More sporadic, 39unpredictable and intense rain patterns are likely to have a significant development impact. By 2030, climate variability will impact particularly severely at the household level in Africa, with the poor often having to pay more for food. Without action there will be increased likelihood that household assets will be reduced or liquidated, livestock sold, children (girls first) removed from school and workers will have to migrate – often exacerbating urban squatter/slum dweller stresses and increasing xenophobia and tribal or racial conflict40.

5. Responding to water stress in Southern Africa: Reasons for a multi-country and regional approach

As noted in section 1, river basins in Southern African are transboundary. In order to overcome ‘collective action’ problems in managing transboundary rivers, states across the world have developed River Basin Organisations (RBOs). Globally, the International Network of Basin Organizations currently has 133 member organizations in 50 countries.41 This section examines in further detail the ‘collective action’ problems which states sharing river basins in Southern Africa need to overcome. It also examines the advantages offered by addressing the problem at the regional (SADC) level, as well as at the river basin level. Interventions at the river-basin levelAll of the major river systems in Southern Africa cross international borders. This means changes to water usage in one country will affect downstream riparian states. Any infrastructural intervention in this sector will inevitably be multi-country in impact. The first challenge posed by the interconnected nature of Southern African river systems is to ensure the benefits from any infrastructure investment are shared between all riparian states, or at a minimum that costs are not imposed by one riparian on another without compensation. Failure to adopt this approach will lead to tension between riparian states. This logic puts a strong emphasis on mutual governance of international river basins, with information and decision-making shared by riparian states.

Secondly, the systemic nature of river basins means that many problems – such as flooding – affect more than one country, and often cannot be addressed by one country in isolation. Where, for example, flooding is a problem for more than one riparian, a river-basin approach will allow the costs of disaster risk reduction schemes to be shared. And where flooding in down-stream states can only be addressed through interventions in an up-stream riparian, then a river-basin approach, which can compensate the upstream state for permitting interventions or changing its behaviour, which will crucial.

Recent studies have sought to quantify the economic costs of non-cooperation between states who share river basins where dominant users are irrigation and hydropower. An examination of the Zambezi using this new methodology suggested that the annual average cost of non-cooperation would reach $350 million - around 10% of the total benefits derived from the system.42 In many cases, River Basin Organisations – international organisations deriving expert membership all


riparian states – are the focus for cooperation over transboundary waters.

Interventions at the regional levelA benefit of working at the regional level is the positive role that SADC is able to play in helping member states overcome political barriers to cooperation over transboundary waters. Good management of river basins is inherently vulnerable to the ‘tragedy of the commons’, where different riparian states seeks to maximise the benefits they extract from water resources flowing through their respective territories, given they cannot be sure that others are not doing the same. Electoral cycles reinforce the pressure on riparian states to extract maximum benefit in the short term.

The decision by SADC to embed cooperative governance of transboundary waters as an international norm stretching beyond any given river basin or set of circumstances puts pressure on member states to share benefits from shared waters, even if it may not be in their immediate self-interest. Working with and through SADC also gives a political legitimacy and weight to interventions sponsored by outsiders, helping to overcome some of the challenges which arise in this intensely sensitive field of work.

It should be pointed out that adopting a regional approach does not preclude work with national water authorities. Indeed, in order to encourage long-term engagement of riparian countries with transboundary water management, it is important to demonstrate benefits of effective transboundary management at country level, especially those upstream, for whom the benefits of improved and more equitable management will be less immediate.43

6. Building water security: What works?

A number of approaches to improving water security have been attempted in different areas of the world. This section briefly overviews interventions which the evidence suggests may be effective.

The interventions listed here are not mutually exclusive. The options considered in the appraisal case constitute a range of alternative blends drawing on these different options.

Institutional capacity building interventions44

Strong institutions, designed to manage the competing demands of water users – including across national and international boundaries – and able to help investors secure returns, are critical for building water security. But extensive evidence, drawn from across the sector, indicates such institutions are often not yet able to fulfil their mandates 45 46 47. Poor performance at both the River Basin Organisation (RBO) and national level can result from a lack of knowledge and data, a lack of political support and commitment at the national level, a heavy reliance on donors keen to see quick results, a lack of stakeholder participation, issues of financial viability, and the departure of trained personnel from the region.

But evidence favours adoption of approaches which emphasise detailed analysis of the factors determining institutional performance, in advance of initiating capacity building interventions and institutional reforms.48 Without this, interventions may simply focus on the wrong issues. For example, some expensive sector reforms may have given the illusion of progress, whilst masking and by-passing root issues such as poor public sector pay and a’ brain drain’ from the sector 49.

Properly implemented, such an approach can:

address the root causes of performance rather than symptoms; embed a learning-by-doing approach which empowers practitioners; support workplace autonomy, creativity and leadership skills; bring together duty bearers with rights holders (i.e. practitioners together with those


affected by their decisions and actions); prioritise transparency and accountability, in part by resolving issues of sovereignty

and clear lines of responsibility to build incentives; prioritise long term practitioner-to-practitioner support over short term and expensive

consultant led ‘drop in’ support; take an action-learning approach to build an evidence-base.

Evidence of the success of this approach can be found in DFID Annual Reviews of the current phase of support to SADC Transboundary Water Resource Management. The project scored high (2,1,1) in reviews over the last three years. It has succeeded in institutionalising the role of SADC Water Division in supporting the institutional capacity of River Basin Organisations (RBOs). SADC Water Division staff coordinate a range of RBOs, helping share experiences across the sector, offer technical support to RBOs, and offer joint training opportunities to staff. DFID reviews have found that the advantage of supporting SADC to perform this role on a continual, ongoing basis, rather than using programme funds to purchase discreet capacity-building inputs from service providers, is one of legitimacy and sustainability: Water Division staff operating under SADC’s mandate from member states find it easier to discuss difficult issues with RBO staff over long periods of time than external consultants.

Stake-holder engagement interventionsOne approach to supporting performance in water institutions is through boosting levels of accountability, through enabling citizen, media and political performance monitoring and oversight.

In addition to boosting accountability of water institutions 50, improved stakeholder engagement can help balance priorities between user groups, essential to which is more effective partnering of government and private sectors with civil society. Such an approach can help ensure that decisions made by elites do not collide with the interests of some social groups, leading to potentially violent repercussions.

Large-scale Infrastructure interventionsLarge-scale infrastructure – such as major dams and large water transfer schemes – is often proposed as a solution to problems of water security. Whilst systematic documentation of the social and economic benefits of large-scale infrastructure development in SADC is hard to find, experience elsewhere on the continent indicates potentially significant development gains from the approach.51

For example, the storage capacity behind the High Aswan Dam supplies water to meet the domestic and industrial needs of 60 million people. It is widely considered to have saved Egypt from the disasters that afflicted most of Africa during the great drought of the late 1980s. In India, investments in large-scale water infrastructure bringing water to previously water-scarce areas have resulted in a dramatic economic shift, with once-arid areas becoming the centres of economic growth.52 At the same time, the negative social and environmental impacts of some large dams have been well documented.

Small-scale Infrastructure interventionsSmall-scale infrastructure investments offer the rural poor options to boost water storage through relatively inexpensive measures including systems of small off-stream reservoirs and farm ponds. Such measures are often require little space and few labour inputs.53 While the lifetime delivery costs of large dams are around one third those of small and medium sized dams, benefits of smaller infrastructure include avoiding the environmental costs associated with very large reservoirs. 54 Large-scale studies have demonstrated that the high operational flexibility of small-tanks and the effectiveness of cascade systems can provide substantial benefits over large reservoirs, though it is important to ensure small-tanks do not take up the most valuable agricultural land.55

Agricultural interventionsStrong evidence now exists that improvements in rain-fed agriculture and micro-agricultural water


management technologies have the potential to make a major contribution to improved water and food security56. Rain-fed agriculture – which uses ‘green water’ rather than extending the ‘hydraulic mission’ of large-scale storage infrastructure for ‘blue water’ – can make major contributions to breaking the poverty trap in small-holder African agriculture, improving food security, and promoting broad-based agricultural growth57,58,59. (DFID SA, though our Climate Smart Agriculture Programme, are working with the tripartite to address the policy impediments to successfully scaling-up these technologies at both national and regional levels.)

Water accounting interventionsImproved understanding of how water flows through national and regional economies through the application of ‘water footprinting’ can help decision-makers explore the value of water in their economies the potential for importing and exporting of water intensive products as part of approaches to water security, boosting water security.60

Benefit-sharing interventionsSharing the benefits from infrastructure interventions can pre-empt tensions between riparian states. Most benefit-sharing arrangements involve hydro-electric dams feeding more the one riparian, but the potential for sharing other economic benefits from shared water exists. However, success of such an approach requires complex but effective institutional arrangements at both national and regional levels.

B. Impact and Outcome that we expect to achieve

The proposed intervention Impact is: Climate resilient human development, human security and economic growth in Southern Africa.The Outcome will be:Peaceful and climate resilient management of shared water resources in SADC for the benefit of the poor.As set out in the Strategic Case, we plan to achieve this outcome through three overarching, mutually-supportive and inter-dependent ways through a mix of: Building the capacity of national and regional institutions to manage transboundary rivers:Different countries managing different sections of a international river typically can lead to inefficient management of the river and tensions between countries. In many international river basins, these problems are overcome through the establishment of River Basin Organisations (RBOs) – international organisations with membership of all riparian states – which advise member states on the impact of their respective decisions on the river as a whole, and can provide a forum for joint decision-making and action. We are supporting the establishment, strengthening and functioning of River Basin Organisations in Southern Africa through a range of activities, including legal and institutional development, training for RBO staff, technical studies and tools for water resource management, and demonstration projects for efficient water use. As states cooperate more closely through the RBOs, the programme will support flood early warning and preparedness interventions (such as dam synchronisation on major regional rivers). This sort of intervention is key to help manage current and future climate risks of extreme flood and drought events.. We are also supporting the SADC Secretariat to monitor the functioning of RBOs, and to facilitate effective interaction of RBOs and their member states.

Facilitating the design and implementation of infrastructure investments: Many potential medium to large scale water infrastructure projects do not attract investment because they are unable to produce pre-feasibility and feasibility studies to the standard required by international financiers. We will provide resources for an expert facility in this field to develop pre-


feasibility and feasibility studies for these projects, helping move projects from concept to actual implementation, catalysing climate smart development for member state populations. Prioritised projects are likely to involve aspects such as hydro-electric generation, water storage and flow regulation, hydrological monitoring and water supply enhancement and protection. Direct design and implementation of climate-resilient infrastructure:We will fund a number of small-scale infrastructure projects. This will give our programme the ability to intervene where the need for water security is greatest. An example is protecting and enhancing water supply – in a context of climate change unnecessary wastage and loss of water will be unsustainable. Implementation of such projects in border areas will also help demonstrate to member states the value of transboundary cooperation, building commitment for longer term and more sustainable cooperative management of rivers in Southern Africa


Appraisal Case

Introduction The Strategic Case examined the transboundary nature of river basins in Southern Africa, assessed why water is important to development in region, and reviewed different approaches to transboundary water management. It summarised a broad agreement in the literature that medium- and large-scale infrastructure can have major development impacts. However, it also noted that unless transboundary interventions are agreed and managed through an effective and accountable international governance framework, tensions will be raised as down-stream states receive less water. Effective transboundary water governance can be seen as an essential foundation on which negotiated, mutually-beneficial infrastructure can be built. The Strategic Case also examined the positive impact of small-scale infrastructure, such as farm ponds, and the potentially transformative impact of climate resilient agriculture.

The three options set out in the appraisal case respond to this evidence. Output one builds the institutional capacity of transboundary water governance in Southern Africa, whilst outputs two and three support infrastructure interventions – interventions which will both generate development impact in their own right, but also boost states’ incentives to join together in shared governance of shared waters. Very small-scale infrastructure and climate-resilient agriculture will not be addressed through this Business Case, since DFIDSA is already funding interventions in this area through our Climate Smart Agriculture programme.

4 The DRC shares the Congo basin with three SADC States (Angola, Tanzania and Zambia) and many non-SADC countries. Similarly the DRC shares the Nile basin with Tanzania and many non-SADC countries5 Africa Division Climate Change Strategy - achieving the five wins for Africa. DFID. November 2010.6 WaterAid 2011, A Global Crisis. Website.7SADC/EDF 2010. Economic Accounting of Water Use, ACP-EU Water Facility Grant No 9ACP RPR 39 – 90, Project Report.Final Report8Water for People, 2011. Sanitation Matters, Issue 2, South Africa10 Water for People, 2011. Sanitation Matters, Issue 2, South Africa11WaterAid, 2005.Turning up the Heat, WaterAid London.12WHO/UNESCO Joint Monitoring Programme in, AFRICAN DEVELOPMENT BANK, 2009. Multinational support to SADC Regional Water Supply and Sanitation Programme, Appraisal Report, May 200913 UNEP 201014 SADC 2011, Climate Change Adaptation in SADC: A Strategy for the Water Sector, p. 2315 Extracted from FAO data-set, http://www.fao.org/nr/water/aquastat/irrigationmap/index20.stm16 ActionAid 2010, Climate change, urban flooding and the rights of the urban poor in Africa.17 Grey, David, and Claudia Sadoff. 2006a. “The Global Water Challenge: Poverty Growth andInternational Relations.” Paper presented at Global Issues Seminar Series, World Bank, Washington, DC, January 25.18 Data set available at http://www.fao.org/nr/water/aquastat/data/query/index.html?lang=en 19 SADC 2011, Climate Change Adaptation in SADC: A Strategy for the Water Sector, p. 21 20Woldemichael D T, 2009. Climate change and transboundary water resource conflicts in Africa, Workshop Report Edited and compiled by Dr DebayTadesse 29–30 September 2009, Mombasa, Kenya, Institute for Security Studies21 African Water Development Report 2007, coordinated by UN-ECA, accessed online http://www.uneca.org/awich/ 12/09/08.22World Bank 2010.Water and Development. An evaluation of World Bank support, 1997–2007. IEG/World Bank, Washington DC23 Africa Recovery, Vol.14#3, October 2000, page 13 (part of Mozambique: Country in Focus) 24 Natural Disasters Economic Loss Index (NDELI) cited Relief Web, accessed at: http://www.reliefweb.int/node/36038625 FAO, accessed at: http://www.fao.org/news/story/en/item/50394/icode/


http://www.uneca.org/awich/

http://www.fao.org/nr/water/aquastat/data/query/index.html?lang=en

http://www.fao.org/nr/water/aquastat/irrigationmap/index20.stm

The evidence for the effectiveness of the respective options has been taken from, amongst other sources, 12 background papers specially commissioned for this design. These are referenced, and are available from DFID on request.

A. What are the feasible options that address the need set out in the Strategic Case?

Theory of Change

The overall logic model for this programme may be summarised as follows (Figure 4):i. DFID have identified strengthening Africa’s water security through improved management of

transboundary water resources - and national level integrated water resource management - as a climate change adaptation priority for the African continent.61

ii. As indicated in the Strategic Case, key issues and challenges facing the African water sector include declining water availability in some basins, inadequate governance frameworks, inefficient existing infrastructure and, inadequate levels of infrastructure development. These challenges are exacerbated in the SADC region, which is dominated by river basins that are shared by two or more countries. Any response to the additional water stresses expected from climate change must

9Water and Sanitation Program, 2007. Economic impacts of sanitation in Southeast Asia: summary report, Hutton G, Rodriguez UE, Napitupulu L, Thang P, Kov P, World Bank.26Wolf, A.T.; Yoffe, S.B. and Giordano, M. 2003. International waters: Identifying basins at risk. Water Policy 5(1): 29‐60.27Mbaiwa, J. E. (2004) who flags potential for conflict over shared water given increasing demand in Angola, Botswanna and Namibia28Wolf, A.T.; Yoffe, S.B. and Giordano, M. 2003. International waters: Identifying basins at risk. Water Policy 5(1): 29‐60.29Using the Falkenmark Water Stress Indicator30Hepworth, 201131UNDP 2004.Water Governance for Poverty Reduction – Key issues and UNDP response to Millennium Development Goals, New York.32ECA, 200633AFD/World Bank 2010.Africa’s Infrastructure: A Time for Transformation. EdsVivien Foster and Cecilia Briceño-Garmendia. AgenceFrançaise de Développement and the World Bank34ECA 200635 ?Blignaut and van Heerden (2009). The impact of water scarcity on economic development initiatives.Water SA35(4): 415-420.

36Nyagwambo 200837Lindemann, 2005; Nyong, 200838 Ibid.39 40 DFID 24 April 2009 Memorandum on Urbanisation and Poverty to UK International Development Committee, 53pp.41 Available at http://waterwiki.net/index.php/River_basin_organizations42Tilmant, A, and Kinzelbach, W, The cost of noncooperation in international river basins in WATER RESOURCES RESEARCH, VOL. 48, 201243

44 ‘Capacityis the ability of individuals, institutions and societies to perform functions, solve problems, and set and achieve objectives in a sustainable manner. Capacity Building is the process through which the abilities to do so are obtained, strengthened, adapted and maintained over time.’ UNDP 200645Balancing economic, social and environmental aspects for sustainable outcomes, InWEnt 200746Woldemichael D T, (ed) 2009. Climate change and transboundary water resource conflicts in Africa, Workshop Report, 29–30 September 2009, Mombasa, Kenya, Institute for Security Studies47 AfDB 200948Hepworth 200949Hepworth 2009


be done in an integrated way that also tackles existing water management challenges. iii. Significant technical progress must be made, but set in a context of clear political backing and

mandate. The challenges of transboundary water management in the SADC region are acknowledged by Member States in their SADC Protocol on Shared Water Courses62. This provides an overarching and mandated framework and is augmented by various supporting documents – Regional Water Policy63, Regional Water Strategy64 and Climate Change Adaptation Strategy for the water sector65.

iv. The SADC Regional Strategic Action Plan (RSAP) for Integrated Water Resource Management and Development66 provides a structured plan to implement the Protocol on Shared Water Courses. The implementation of the RSAP is funded through contributions from the SADC Member States and from the International Cooperating Partners (ICPs). Implementation is guided by the Water Resources Technical Committee (comprising SADC Member States) and the Water Strategy Reference Group (comprising the ICPs).

v. Extensive consultation with key regional stakeholders has confirmed the complexity and interconnectedness of the issues. An integrated approach is required. The proposed programme would support the implementation of RSAP 3 and focus on three inter-related groups of activities – capacity development, project preparation and transaction support and the delivery of climate resilient infrastructure.

vi. Capacity building . Low human and institutional capacity in transboundary water resource management leads to both poor understanding of the nature of challenge and threat, and also to an inability to adequately respond. Building on achievements through RSAP 1 and 2, the programme would prioritise enhancing capacity to deliver at the River Basin Organisation level, enabling riparian states to engage effectively.

vii. Project Preparation and Transaction Support : This would co-finance an existing SADC Project Preparation and Development Facility (PPDF) hosted by the Development Bank of South Africa (DBSA) near Johannesburg. A deficit of well-designed and properly costed infrastructure projects within a functioning enabling environment lead to an investment shortfall that runs to many billions each year. The project preparation and transaction support component of the programme would result in a series of well-designed and financed projects at the regional and cross-border level. This would enable the preparation and design of major capital infrastructure schemes over the next 5-10 years – attracting international finance, including for multi-purpose storage investments

viii. Pro-poor Climate Resilient Infrastructure Delivery Facility (CRIDF) for Immediate Project Implementation. This would mean an international consortium to design, manage and pre-finance implementation of a range of SADC priority small-medium scale infrastructure works (within a framework for water security and climate resilient development). The longer-term emergence of

50Centre for Social Accountability, Budget partnership, ShahidiwaMaji 200951WORLD COMMISSION ON DAMS, 2000. DAMS AND DEVELOPMENT, A NEW FRAMEWORK FOR DECISION-MAKING, Earthscan, London and Sterling, VA November 200052Briscoe, J, 2005. India’s water economy: Bracing for a Turbulent Future, World Bank,Washington.53 van Koppen, Barbara, LARGE-SCALE AND SMALL-SCALE INFRASTRUCTURE FOR GROWTH AND DEVELOPMENT, International Water Management InstituteSouthern Africa Regional Program, Pretoria, South Africa54Keller, Andrew; Sakthivadivel, R.; Seckler, David. 2000. Water scarcity and the role of storage in development. Colombo Sri Lanka: International Water Management Institute (IWMI), vii, 20p. (Research report 39).55 Ibid.56Falkenmark and Molden 2008; CA (2007) Water for food, water for life: a comprehensive assessment of water management in agriculture. In: Molden D (ed) IWMI. Earthscan, London, UK57 Merry and Sally (200858Hanjra M, FeredeT,Gutta D G, 2009. Reducing poverty in sub-Saharan Africa through investments in water and other priorities, Agricultural Water Management 96 (2009) 1062–107059HUSSAIN I, GICHUKI F, LOUW A, ANDAH W. 2007. AGRICULTURAL WATER MANAGEMEN: PATHWAYS TO BREAKING THE POVERTY TRAP: CASE STUDIES OF THE LIMPOPO, NILE AND VOLTA RIVER BASINS. IRRIGATION AND DRAINAGE, Irrig.and Drain. 56: 277–288 (2007)

60Dabrowski, et al (2009).


evidence of country-level benefits from cooperation brokered by SADC Water Division and RBOs, makes difficult decisions by African leaders a challenge to justify to citizens. Through the delivery of climate resilient infrastructure to nearly two million people, the programme would enhance mutual cooperation on transboundary water management. Women and girls will directly benefit, such as through household-level improvements which will save time and calories through reducing distances to collect water, better personal health, dignity, and personal security.

ix. Figure 5 (see Box 3 below) illustrates the inter-related way in which the three key design features are mutually supportive and mutually reinforcing. The programme design weaves these threads together to make for a coherence and co-ordinated package responding to and commensurate with the complex multi-faceted challenges.

x. The three key design features would directly deliver a stronger SADC water sector together with climate resilient water infrastructure to nearly two million people. This would ensure increased adaptive capacity and greater productive utilisation of the water resources in the shared river basins that dominate the SADC region. These direct impacts together with the enhanced evidence base generated by the programme would greatly enhance the trust and partnership between the various stakeholders. This in turn would result in indirect benefits for the 95 million people living in the transboundary river basins in the SADC region as these waters will be better managed to meet future demand and address climate change impacts, stimulating increased investment from both within the region and from external sources.

xi. Progress in this way would lead to multi-sector impact on poverty reduction, food security, industrial development, regional integration and regional economic growth.


Key issuesto be addressed

Medium-Large Infrastructure Small scale measures and infrastructure

AFTER

Key Key to shapesII - Impact indicator Document ProcessOCI - outcome indicator Input DataOPI - output indicator Assumption / risk Decision

Ada

ptiv

e ca

paci

ty /

clim

ate

resi

lienc

e st

reng

then

ed

DFID Support to Transboundary Water Management in SADC

Theory of Change

Gen

der m

ains

tream

ing

BEFORE Internaional Cooperating Partners (ICP) coordination via WSRG

Capacity and knowledge development

Infrastructure Facilitation and Provision

Small scale Climate resilient infrastructure

implemented(OUTPUT 3)

(OPI 3.1 and 3.3)

Transaction adviser engages with potential

financers

Transboundary Water Management

Infrastructure Secured(OUTPUT 2)

Trust and Partnership enhanced

(OCI 3)

Peaceful and climate resilient management of shared water resources in SADC for the benefit of poor people (OUTCOME)

Sustainable access to water

(II 1)

Food security e.g. irrigation and

agriculture (II 2)

Regional Integration / co-operation

(II 3 and II 4)

Poverty Reduction and Regional economic growth

Macro (Regional) (OPI 1.1)

Meso (RBO)

Local / National

Inadequate water resource in light of forecast demand

Inadequate governance frameworks

Inefficient existing infrastructure

Inadequate levels of infrastructure development

Input from other partners e.g. GWP

Input from SADC Member States

ICP inputs

PROGRAMME INPUTS

Financing secured (OPI 2.3)

Protocol on shared watercoursesRegional

water policyClimate change

adaptation strategyWater Regional Strategic

Action Plan: RSAP3

Information, generationa

management and communication

Evidence base

enhanced

Regional water strategy

Water resources better available to meet forecast demand

(OCI 2)

Effective Governance Frameworks fully

established (OCI 4)

Project submission by SADC and SADC Member States

(OPIs 2.1)

ProjectApproval

Water Policy

Water Management

.

Climate change impact

Climate change resilience

(OCI 1)

Table 4.Assump. 3

Table 4.Assump. 2

Table 4.Assump. 1

Figure 7Risk 2

Figure 7Risk 3

Figure 7Risk 4

Figure 7Risk 5

Figure 7Risk 6

Figure 7Risk 7

Figure 7Risk 1

Increased investment in SADC water sector (OCI

6 & II 3)

Gender mainstreamed

(OCI 5)

Completion of feasibility and design studies

(OPI 3.2))

Capacity and knowledge development (OUTPUT 1)

Transaction adviser engages with potential

financers

Completion of feasibility studies

Capacity and knowledge development (OUTPUT 1)

RBOs established/ strengthened (OPI

1.2)

Public- Private Partnerships

(OPI 1.3)

Improved levels of development and

functioning of infrastructure

Use of quality information and

guidance by decision-makers

Figure 4: Theory of Change : SADC Water-RSAP 3 support design logic(Original high quality image attached as separate excel file)

1. Option identificationThe SADC Regional Water Policy was designed to provide a framework for the sustainable, integrated and coordinated development of national and transboundary water resources through its nine thematic areas. The RSAP 3 (2011-2015) continues to guide implementation of the policy, with its goal to strengthen the enabling environment for regional water resources governance, management and development through the application of integrated water resources management (IWRM) at all levels. The IWRM pillars of water governance, water management and infrastructure development led this Business Case to the three options selected as the most appropriate for appraisal.

The RSAP is the mechanism adopted by SADC Member States for implementing their regional water policy and strategy; and incorporates the recently approved Climate Change Adaptation Strategy for the SADC water sector. There is no alternative broad-reaching regional plan with such a level of

61 Africa Division Climate Change Strategy - achieving the five wins for Africa. DFID. November 2010.


political mandate and endorsement. Reviews of its first two phases (RSAP1 and RSAP2) have shown satisfactory progress with implementation.

RSAP3 identifies 15 programmes with priority interventions under each programme. There are a total of 70 priority interventions – approximately 5 per programme. These interventions fall into local and national level activities, and cover water policy, water management, and infrastructure development issues.

Table 5 summarises the potential options available and considered to develop a third phase of actions to support RSAP3. The three feasible options are incremental rather than substitutional in character. The incremental approach was taken given the inter-related nature of constituent elements, all of which are required to address the problems identified in the Strategic Case. A do-nothing scenario was also considered (see end of section). Various delivery mechanisms were also considered within main options (see commercial and procurement cases). Feasible options were developed and tested through a mix of quantitative (CBA/economic) and qualitative (political, institutional, social, environmental/climate change) and feasible delivery appraisal criteria (Table 6).

Table 5: Feasible Options Matrix

Option Title Description Output Combination

1 Capacity Building Building the institutional capacity of SADC Secretariat, River Basing Organisations and communities to implement the RASP 3 through Integrated Water Resources Management (IWRM).

Output 1

2 Augmented Capacity Building

Capacity Building + Infrastructure Project Preparation/Transaction Support

Outputs 1+2

3 Full Implementation Capacity Building + Infrastructure Project Preparation/Transaction Support + Infrastructure Delivery

Outputs 1+2+3

4 No DFID support (Counterfactual)

Capacity Building terminated at end of 2011

-

Option 1 looked at just Output 1 objectives –Capacity Building at regional, RBO and national levels. RSAP3 Capacity Building comprises a complex array of activities, with GIZ, GWP and UNDP identified as implementers of various activities.

Option 2 provides Improved Infrastructure Project Preparation and Transaction Support, coupled with Output 1. Within this option consideration was also given to the re-balancing and enhancing of GIZ activities, the allocation of resources to the African Development Bank (IPPF), the creation of a Special Purpose vehicle in DBSA, or the resourcing of DBSA PPDF. Infrastructure support without further enhancement of the enabling environment (via Output 1) was not considered viable. Without improved understanding and skill sets, it was believed that large-scale infrastructure investments would prove exceptionally challenging, expensive and inefficient to deliver. Finally, Option 3 offers (through Output 3) additional direct implementation of smaller-scale climate resilient infrastructure, in combination with outputs 1 and 2.

62 Revised Protocol on Shared Watercourses. SADC. August 2000.


Further detail on the outputs contributing to these options is presented below.

Detail on component Outputs

Output 1: Capacity and climate change knowledge to manage transboundary water at regional, river basin and local level is improved (GIZ Implementation/SADC Water co-ordination)

Key RSAP 3 areas that would receive capacity building support include the development of RBOs, awareness and communication, research and education, stakeholder participation and regional instrument support (monitoring of Protocols, harmonisation of regulations and approaches, development of climate change adaptation strategy).

As a strategic plan, the RSAP needs to be dynamic. While the RSAP 3 goals and objectives should not change over time, the projects and interventions identified at this stage should remain flexible and adjusted as the context changes and results are achieved. The interventions to be implemented at any time will also depend on the funds available.

GIZ has been identified as a strong agency to channel the funds through for capacity building. GIZ has already received funding from DFID and is currently being supported by other bilateral donors. Other agencies like the Global Water Partnership (GWP) and the UNDP (the latter specifically for gender mainstreaming) may be contracted to support specific areas as per their comparative advantage.

Output 2: Transboundary Water Management Infrastructure projects prepared and financing secured (Projects Prepared and Transactions Supported)This proposes to use an established Financing Institution (Development Bank of South Africa - DBSA), providing sufficient resource to develop 2-3 large (tens of £m) transactions to financial closure. It also aims to set up a scheme and framework for receiving additional resources (from multiple sources) should they become available in the future. Overall risk would be mitigated by limiting the initial contribution and through DBSA’s management and scrutiny mechanisms. Scope of activities under the DBSA Project Preparation and Development Facility (PPDF) 67

The activities eligible for financing under the PPDF facility are: pre-feasibility and feasibility studies, design finalisation, finance negotiation and arrangement, other advisory services, environmental and social impact assessment as well as any other activity of an advisory, technical or operational nature related to preparation of projects. See table below for more detail.

Table 7: PPDF Services

Pre-investment Activities: The activities cover provision of technical advice and assistance in analysing projects, including preparation of project proposals, review and revision of project proposals, environmental and social impact analyses. Early stage project assessment (pre-feasibility phase) will also be supported if the project is of regional strategic importance.

Enabling Environment Activities: Enabling environment activities include provision of assistance in programmes aimed at improving enabling environment for delivery of infrastructure services, namely: consensus-building for appropriate policy, regulatory and institutional reforms; identification, promotion and dissemination of best practices in infrastructure development and operations.

Studies: PPDF resources will be applied to undertake the preparation of new studies, pre-feasibility or feasibility studies, update or additional analysis of existing studies, environmental and social impact assessments, design studies and other related studies in order to improve on the project quality and enhance prospects to attract financing for the physical/investment project. The PPDF would also cover baseline data surveys, preparation of technical specifications and revision of project preparation studies that are considered to be incomplete or requiring updating.

Advisory Services & Transaction Support: Advisory & transaction services related to infrastructure


development include activities designed to assess key opportunities for private-public partnerships, where limited and timely assistance in their preparation and implementation is required. They also include advisory services on public-private partnership options; including concessions, due diligence activities, finance, capital markets, project structuring, legal and transaction advice etc.

Technical Assistance: PPDF resources can be applied to promote a participatory approach in project formulation and design. In this regard, technical assistance and the costs of development and presentation of workshops, seminars and conferences involving stakeholders of the targeted project would qualify for assistance under the facility. PPDF grants would also be applied to other unforeseen preparatory activities unique to the targeted project, provided that sufficient justification is made to the satisfaction of the PPDF.

Capacity Building: PPDF resources may also be applied to support targeted capacity building of SADC Member States and Specialised Infrastructure Development Institutions, specifically in connection with activities mentioned. Capacity building initiatives of a general nature (i.e. those not linked to identified projects, processes, and activities) would not be supported by the facility, but can be referred to service providers operating under Output 1.

Output 3: Small scale climate resilient water infrastructure implemented (Climate Resilient Infrastructure Delivery Facility – CRIDF)

An internationally tendered consortium of infrastructure and other specialist skills would provide assistance to SADC Member States, designing, managing and supervising the development of local skills and contractors to build smaller-scale climate-resistant infrastructure at the 1-3 year and £1-6M cost scale. The kind of small to medium scale projects envisaged for delivery include:

Coastal zone protection: sea dikes, river dikes. Water supply infrastructure (for household, agricultural and industrial use) for areas suffering

drought or saline intrusion. Sanitation provision (with appropriate health and hygiene education). Riverine protection such as dikes and dams to prevent flooding and adapt to variability in

runoff.

Overall, the focus would be on ‘no regrets’ or ‘low regrets’ options - investments that are robust under most climate scenarios until better information is available.

Project selection criteria & sustainability

The starting point will be the 66 priority projects identified for the infrastructure conference in Maseru in September 2011. Projects would have to be proposed by a SADC Member State, RBO or SADC themselves. There may be projects being identified and developed through other ICPs work – USAID in Okavango, African Development Bank in Ruvuma, Save and Busi, GWP work on Climate, Water and Development Programme in Africa in Limpopo basin through DFID central funding and in other basins funded by this programme. These could also be considered as long as they were put forward by a SADC Member State, RBO or SADC.

Criteria for selection will be developed by the CRIDF (in association with the World Bank so that the criteria can also be used to mobilise WB funds). Example criteria would be: design and implementation can be under actual implementation before March 2015; the transboundary nature of project (and no objection from other riparian countries in the basin); climate resilience (see next sub-section); and a commitment from institutions of a SADC Member State to take over operation, maintenance and management together with some proof that a budget for this has been allocated or will be allocated. Accepted standard due diligence would apply (economic (CBA), environmental, social, gender, technical etc).


Climate resilience 68

One of the key criteria for project selection would be climate resilience. Given this there will have to be some kind of screening – exactly what this is and how rigorous it is will be decided through programme implementation and stakeholder consultation. Tools exist for climate risk management, screening and vulnerability (especially in the WASH sector) but these are in their pilot stages and it remains to be seen how effective these are in practice. The CRIDF will review tools such as ADAPT and ORCHID for climate risk screening, financial screening tools (these will be used anyway as part of the CBA / economic analysis) and vulnerability assessment tools such as the Water Economy for Livelihoods Approach (WELS) and water safety plans.

Option 4: DFID support finishes at the end of 2011A do nothing scenario was considered – essentially to stop DFID funding and exit at end of 2011. Not all progress would cease, particularly in relation to general capacity building - other partners would still continue with some support at reduced scale and pace. However, there would be a risk of a domino effect as a result of perception of withdrawal due to poor GIZ performance or a lack of confidence in SADC Water Division (when recent evaluation does not support that conclusion).

B. Assessing the strength of the evidence base for each feasible option

In Table 8 below the quality of evidence for each option is rated as either Strong, Medium or Limited

Table 8: Quality of evidence

Option Evidence rating1 Strong2 Limited3 Medium

Option 1 (Capacity Building)

The evidence regarding the effectiveness of capacity-building interventions – both in the water sector and beyond it – is very robust.69 It demonstrates that the effectiveness of interventions has been variable. This is partly related to the complexity and multifaceted nature governance in general, and of water resource management in particular, where success is slow to manifest and attribution is difficult, limiting the incentives for high performance by both institutions and individuals.70 Empirical case studies of capacity building and water management reveal explicit constraints (including limited finances, human resources, equipment, data, and issues of co-ordination and process); and tacit constraints (including issues of power, authority and legitimacy, such as unresolved mandate overlap, low political will and confused sovereignty; issues of integrity, motivation; and low institutional incentives and accountability).71 Countering the latter can be especially hard, underlying the World Bank finding that only ‘half of all projects that aimed to strengthen local capacity and 2/5 of all projects that supported institutional reforms were successful.’72

However, evidence from the previous phase of our intervention, (Annual Reviews, scoring 2, 1, 1 over the life of the programme) demonstrates the programme has indeed succeeded in addressing capacity constraints and institutional reform in-the-round. The reviews note the range of contributions the programme has made towards the development of RSAP III – the policy agreement negotiated by SADC WD and agreed by SADC ministers which acts as a framework to guide member states’ and partners’ approach to transboundary waters in the region for the next 5 years. This includes communicating the success of the previous RSAP; building support for RSAP III from member states


and donors; generating the evidence-base for the policy; supporting drafting; and working with SADC WD to ensure key priorities – on climate change, gender – are integrated into the document. Taken as a whole, the latest AR concludes it is unlikely that RSAP III would have been developed without support from the programme. The RSAP 3 product is assessed to be addressing tacit constraints on capacity, clearly setting out the respective mandates of SADC, RBOs, national and local governments. Through the endorsement by SADC ministers, RSAP 3 also secured an unequivocal statement on the legitimacy of RBOs and a demonstration of high-level political will behind transboundary water management. The intermediary role of SADC was shown to overcome political constraints; and through the small-scale infrastructure component of output 1, the GIZ team were able demonstrate to potential spoilers immediate-term dividends from engaging in transboundary water management. The very close relations with between the GIZ team and their SADC counterparts underlies all of the successes set out in the ARs and above.

The programme has also engaged with shaping the day to day operations of RBOs. It supported SADC WD to develop and publish guidelines on the function of River Basin Organisations – bodies formed of experts from all riparian states which, in international best practice, inform and coordinate policies of their respective governments. Largely through the technical and political support of the programme, riparians have reached accord regarding the status of water resources in the Orange-Senqu basin, and significant progress has been made towards a similar agreement for the Limpopo. The programme team leverage SADC’s political influence to overcome the challenges which development assistance faces in traction River Awareness Kits have been prepared for the Kunene and Orange-Senqu rivers, ensuring key hydrological data and relevant policies are available to all interested parties, including the public, addressing poor incentives for performance by boosting accountability.

In these ways, the previous phase of the programme clearly contributed to the general adherence to the SADC Transboundary Water Protocol.73

The detailed examination of capacity building interventions – both in the water sector and beyond it – available in the literature, combined with our own experience of the previous phase, allows a ‘strong’ evidence rating to be allocated to this option.

Option 2 (Capacity Building + large-scale infrastructure)

The absolute need for infrastructure in order to stimulate economic and human development in Africa has been comprehensively researched and reviewed by the World Bank (endnote for AICD 2008/9) and the AfDB (endnote PIDA 2010/11).

Nonetheless, donor support to project preparation has not been widespread, so the evidence base for the effectiveness of this type of intervention is relatively weak.

Whilst the “bankability” of infrastructure projects in SSA has been targeted by various different donor-funded facilities, most of these facilities appear not to have been designed or resourced to respond to the key challenges of project preparation: (i) the process is more complicated than anticipated; (ii) more “upstream” preparation is required in SSA, where legal, policy, and regulatory reforms are needed for PPPs; and (iii) more professional expertise, and far more funding, is required than anticipated. Existing facilities often have too little grant money, too little expertise, are unable or unwilling to cooperate on big projects, and often do not have sufficient independence from their host institutions to consider all implementation options. To restate: a Project Preparation Facility as envisaged by this Business Case has not been implemented before, meaning evidence is relatively sparse.

Moreover, only 15 major infrastructure PPPs in SSA have been developed, meaning the evidence base here is also rather narrow.74 However, the success of PPPs in other regions demonstrates the clear potential for expanding this model.


http://www.orangesenqurak.com/

http://www.kunenerak.com/

Overall, the strength of evidence for the kind of intervention detailed in option two can only be described as ‘limited’.

Option 3 (Capacity Building + large-scale infrastructure + small-scale more immediate infrastructure)There are instructive examples of more modest preparation facilities that have successfully targeted client needs.75 They include: (i) DFID’s Nigeria Infrastructure Advisory Facility (NIAF), which has helped reform Nigeria’s upstream legal-regulatory environment for infrastructure projects, including PPPs; (ii) the EU’s Infrastructure Projects Facility of the West Balkans (IPF), which funds and manages downstream project preparation needed to attract financing from EU lenders; and (iii) USAID’s Municipal Infrastructure Investment Unit (MIIU), which provided transaction assistance and on-the-job training to South African municipalities, resulting in 45 PPPs and US$900 million in investment over an 8-year period.

Despite historical low usage of PPPs in SSA’s water sector, several kinds of small-scale projects offer the possibility of quick wins, because they employ risk-reduction principles now used in other regions: (i) Utility performance improvement PPPs have already been used in South Africa (and not captured in the statistics mentioned above). They involve work by private partners to improve non-revenue water performance or billing and collection results, with compensation coming as a percentage of revenue savings; (ii) Facility design, construction, and operation PPPs are being developed for waste treatment facilities and water storage in Egypt and Rwanda. They can be done on a performance basis by private partners, if the partners are relieved of the commercial risks associated with these facilities. This is the “PFI approach” used successfully in the UK.; (iii) Improved urban water distribution PPPs have long been implemented in West Africa via management contracts and leases; (iv) Design, build, operate irrigation PPPs are being developed in Egypt, Zambia, Malawi, and Ethiopia; and (v) Output-based aid (OBA) has been used in Kenya to facilitate dozens of micro-PPPs to extend water services to poor communities in peri-urban areas.

Thus, an evidence score of “Medium” is assigned to this Option 3.

What is the likely impact on climate change and environment for each feasible option?

Table 9 below sets out the potential positive and negative impacts and opportunities of each option against climate change and environment criteria. 76

Table 9: Impacts and Opportunities

Option Climate change & environment risks and impacts, Category (A, B, C, D)

Climate change and environment opportunities, Category (A, B, C, D)

1 C A 2 B, A A - but longer term & mitigation required3 C, B (but to A overall since Option 3 is

incremental on Option 2)A- but longer term & mitigation required

Categorise as A, high potential risk / opportunity; B, medium / manageable potential risk / opportunity; C, low / no risk / opportunity; or D, core contribution to a multilateral organisation.

Overall Impact Categorisation: Category B in first 3 years. Probably Category A in year 4 onwards (review status at MTR after year 2).

Overall Opportunity Categorisation: Category A.


Given the breadth and diverse components of the programme, appraisal of climate and environment risks and opportunities has been undertaken at output level first, to inform the aggregate assessment at option level above.

Output 1 (Capacity Built)

Category C/B No/Low Risks – Strong opportunity

What the programme is actually going to deliver through funded activities, and what beneficial improvements in the enabling environment (in a variety of aspects) may facilitate over a longer (5-10year) timescale must be taken into account. The balance of evidence strongly indicates that Capacity Building type interventions are generally low risk (category C). There is the possibility of some very small minor demonstration infrastructure projects that may be initiated under the framework of Output 1 (for example minor water supply and water efficiency works). These are certainly of a manageable scale and risk, and GIZ has applicable due-diligence procedures in such cases.

Output 2 (Pre/Feasibility/Transaction & Implementation of medium/large capital works)

As a demand led facility the specific issues will vary according to factors such as the particular type of project, stage of project cycle and scale of intervention. The PPDF Category may therefore range across C/B/A. Category B & A will be subject to additional DBSA EIA/Climate/Environmental Safeguard processes. Some projects put forward will pose risks so the due diligence process will be important. With suitable risk management, such investment projects can also yield strong Climate-change environmental opportunities and benefits..

As a larger-scale project moves to implementation and completion, so activities move from low impact project preparation and transaction support to potentially significant. Any delivery institution that undertakes detailed design for major capital works will be required to undertake internationally acceptable safeguard assessments and design in mitigatory measures as a matter of course. At the mid-term of the programme the situation regarding risk levels of any prioritised projects will be reviewed to re-confirm appropriate management arrangements are in place.

Output 3 (Small Scale pilot/demonstration & implementation programmes)

Category C/B Impacts – depending on specifics of intervention.

As for output 2, the precise nature of the risks and opportunities will depend on the specifics of the interventions that are put to the CRIDF facility for funding. Given the small scale nature of the envisaged interventions the risk are likely to be commensurately lower. Nevertheless, the tendering and contracting process will be undertaken in a manner to ensure that the winning consortium commits to applying an appropriate level of environmental and social due diligence. By it is design the CRIDF will be proactively promoting climate change beneficial projects.

Table 10: CEA Scoring & Evidence Rating

Output Climate Change & Environmental Risks & Impacts, Category (A,B,C,D)

EvidenceRating

Climate Change & Environmental Opportunities, Category (A,B,C,D)

EvidenceRating

1 C/B Strong A Strong2 C/B/A Limited A Medium3 C/B Medium A Strong

Table 10 above sets out the CEA score. “Limited” categorisation has been assigned not because


there is not a strong body of evidence over potential impacts/effects from various actions that are possible, but because the precise actions are a matter for on-going and more detailed implementation design as the programme proceeds.

In contrast to the variable risks identified, the Climate Change & Environmental opportunities are universally strong and positive in their potential. Output 1 will make a significant difference to the quality of the scientific, management and political debate over key decisions that have to be taken in SADC. Output 2, particularly where hydropower investments result in Carbon emission mitigation, also has the potential to generate substantial co-benefits. And Output 3 has the ability to yield relatively immediate climate adaptive solutions of benefit to a range of affected poor people.

Climate and Environment Sensitivity Analysis

Table 11 sets out the Climate and Environment Sensitivity Analysis. There are no issues that are not predictable and that cannot be addressed through design and implementation.

Table 11: Climate and Environment Sensitivity Analysis

Outputs Positive Impacts Negative Impacts Comment/Mitigation

1. Capacity Built i. Improved stakeholder understanding of wide range of climate & environmental issues.

ii. Establishment & strengthening of institutions & Laws to Protect & Manage transboundary water sustainably.

iii. Adaptation to climate change initiated.

iv. Some CC mitigation through lower energy use.

-

Potential for access to improved and predictable water resource to result in greater use – as a result of minor pilot and demonstration projects – e.g. Drinking Water & Sanitation; commercial & industrial use.

Capacity building process overwhelmingly positive in impact on climate & environment. Adaptive preparation strengthened and rational and better informed choices made.

Variable scarcity of water resource for consumptive use. Impact negligible on water-rich basins, and reduced in water-scarce areas by improved IWRM

2.Pre/feasibility &Transactions completed.

Preparatory work for major investment & “bankable” climate adaptation and climate mitigation projects.

Case-specific consequences. In general, climate and environmental impact and effect will be no more than moderate and manageable when projects eventually built – 4-10yr timescales.

Where finance or co-finance for significant impoundments for hydropower production, a full EIA/EA will be required as part of the project preparation process and through normal DBSA due diligence process.

2. Small to Medium –scale infrastructure implementation

Programme design envisages mostly climate or environment neutral or positive impacts (water and sanitation; small-scale flood and drought control measures; minor irrigation etc).

Growth of human settlements, demographic shifts/migration, and conflict-related concentrations of people may be drawn to areas improved by project activities.

Where finance or co-finance for significant impoundments for hydropower production, a full EIA/EA will be required as part of the project preparation process and through normal DBSA due diligence process.

C. What are the costs and benefits of each feasible option?

This section gives a summary of the results of the economic cost benefit analysis, and methodology.77


Table 6: Criteria for assessing feasible options

Criterion Description

Political

1. High political commitment to water is demonstrated by ongoing support at regional level and by riparian states to the establishment and operationalisation of River Basin Organisations in line with the Protocol on Shared Watercourses.

Institutional

2. Strategic relationships, trust and governance mechanisms are strengthened for individuals, organisations and institutions with responsibility for co-operation in transboundary basins through a better understanding of the complexities of water resource and climate risk management for development within the SADC water sector

Technical

3.

4.

Additional funding for climate-smart water infrastructure is leveraged and infrastructure at small and medium-scale is underway within 2-4 years.

Good Value for Money is achieved, in terms of economy, efficiency and effectiveness.

Social & Gender

5. Water management nationally, cross-border and basin-wide is improved to the optimum benefit of relevant stakeholders and especially women and children and the poorest members of society.

Operational

6. Robust and internationally-accepted water resource, climate and additional relevant evidence is generated and used by SADC Water Division and riparian states to inform decision-making on TWM.

Expected resource costs of the intervention – methodology

For the capacity building component, a breakdown of costs was provided by the implementing agents. For the project preparation and infrastructure delivery components, the cost structures are estimated based on past experience of similar interventions. The total programme costs - admin and portfolio funding - are spread across the programme duration (4 years) and discounted using the social discount rate.

When appropriate the cost effectiveness of measures has been calculated. This involves dividing the discounted economic costs with associated numbers of beneficiaries (thus factoring in the attribution of the intervention to the benefits) – so the notional number of benefits that are attributable to the costs.

Expected benefits of the intervention (all options)

For all the feasible options the incremental benefits were:a) identifiedb) quantified; and when data was available there werec) valued (or monetised)

The expected benefits described below are incremental benefits, i.e. over and above the counterfactual.

a) Identification of benefits


For all options in this intervention, the medium and long term benefits resulting from the interventions have been identified78 at the impact and outcome level. These are summarised below.

Direct benefits (policy, regulatory and decision-making/resource-allocation benefits)

Option 1 address two of the three pillars: water governance and water management by building the capacity of SADC Secretariat and river basin organisations to improve governance and management of water resources within the sector. The focus on option 1 will be to build the institutional and human resources capacity of river basin organisation to apply the IWRM. Option 1 will have the following two direct benefits:

Strengthening of the enabling environment for regional water governance; and Implementation of basin wide planning.

Options 2 and 3 will have option 1 plus other two components on project preparation and financing of small scale water infrastructure and will focus on the other pillar of the IWRM: infrastructure development.

The additional direct benefits of options 2 and 3 (over option 1) will be:

Development of bankable infrastructure projects; and Demonstrating of the positive effects of small water infrastructure pilots.

Other Indirect benefits

To a different degree all three options will generate indirect benefits. As indirect benefits, these are more difficult to quantify and to attribute to the interventions.

Household level benefits

Greater welfare and better health due to lower incidence of diseases and greater hygiene Economic gains due to less time spent collecting water (particularly women) due to better

access) Consumer surplus effects of having more water available (distributional gains to society) Reduced water bills (distributional gain) due to cheaper piped water rather than costly water

supplies through private providers Longer term benefits due to greater human capital accumulation, as children spend less time

collecting water and more time at school; Reduced vulnerability to floods and droughts – effective water management avoids shocks

Economy wide benefits

Gains to industrial and agricultural sector – due to better regional cooperation leading to more optimal implementation of projects. (There are negative benefits too – associated with this).

Protection of water resources – investments in managing the water supply and demand balance can ensure that infrastructure is not over sized compared to optimal needs and can cost effectively help reduce water resource pollution at the source.

Fewer opportunities for corruption - through better managed institutions, organisations, systems and processes.

Avoided costs of water shocks due to hydrologic variability (better climate resilience) - Variable hydrology – high rainfall in the north and lower rainfall in the South needs efficient water management to avoid droughts, - crop yields reduction, costs of imports, famines, food insecurity. These are non-marginal effects. Empirical evidence from Ethiopia indicates that


the impact of varying rainfalls is significant on crop yields such as: cereals, pulses, oilseeds and coffee. Fluctuations in cereal yields are extremely high and closely follow the pattern of the rains. Yields declined by as much as 25% in 1984, 17% in 1994 and 10% in 1997.

Greater energy access both at the household and firm level - greater coordination and hence greater exploitation of hydro power through the construction of large scale dams, thus leading to the benefits of greater clean energy access. This has the added co benefits of carbon mitigation benefits to society. (There are also negative benefits associated with dam construction, which must be factored in).

Job creation benefits through infrastructure projects – thus reducing unemployment, and contributing to economic growth.

Better water efficiency conservation, due to the reduction of non-revenue water (leakages).

Environmental benefits

The linkage between well-functioning aquatic and wetland ecosystems and healthy water resources is increasingly acknowledged. There is growing mutual recognition that the environment is a legitimate water user and that aquatic ecosystems are the basis of a healthy, sustainable water supply.

Ecosystem services are the benefits people obtain from ecosystems. These include provisioning services such as food, water, timber, and fibre; regulating services that affect climate, floods, disease, wastes, and water quality; cultural services that provide recreational, aesthetic, and spiritual benefits; and supporting services such as soil formation, photosynthesis, and nutrient cycling. The human species, while buffered against environmental changes by culture and technology, is fundamentally dependent on the flow of ecosystem services, which are often regional in nature, so must be addressed with a harmonised and regional approach.

Reductions in conflict

There is significant conflict amongst water users due to exceptional variation in rainwater, and sub optimal management of this variation, giving rise to inefficiencies in water supply and a mis-match between supply of water in one country and the demand from downstream beneficiaries in another country. Cooperation in this regard can reduce the probability of such conflicts caused by the demand and supply mismatches. This benefit is considered to be quite significant in IWRM interventions. For example, it has been estimated that the value of the peace dividend for the Kunene water supply project between Namibia and Angola is 50 – 75 Million US Dollars per year.79

Gender benefits

The focus of the RSAP 3 support programme is to meet the needs of the poor and most vulnerable. Water access and quality is a particular burden for women and girls in the SADC region80. The explicit gender mainstreaming focus in this programme will result in approaches and interventions at various levels (policy, plans and projects) which better address the needs of women and children and reduce their vulnerability.

At the policy level, whilst the importance of gender is now recognised in RSAO 3, no water sector specific gender framework has been agreed. This programme will measure development and implementation of such a gender policy at the outcome level. By year 2 we expect the gender framework preparation by SADC Water sector to be completed. By year 3 gender mainstreaming will have been integrated into the institutional framework of TWM in SADC Member States. And by the end to the programme, SADC WD gender policy will be under implementation; RBO gender strategy will be in place; and, RSAP infrastructure projects will produce gender disaggregated data.

In addition, at the institutional level, we are in a position to demand that each organisation receiving DFID funding – at the regional, river-basin or local level - employs at least 0.1 FTE expert on gender-related issues in IWRM annually. We will do so if so advised during the approvals process.


At the field level, the programme is likely to benefit women and girls disproportionately. Anticipated interventions include improving early warning systems – an effective measure to increase disaster preparedness for women and households across the SADC region. Through the small scale infrastructure provision women and girls will benefit directly and will enable them to devote more time to other activities that would result in improved health, education, and productive activities. Planning processes, training and project selection criteria will promote inclusion. The acquisition of new skills and involvement in this manner will lead to increased women’s empowerment and improve power relations.

b) Quantification of benefits

Not all the benefits identified can be quantified and valued. In this cost-benefit analysis, lack of data and (for some indirect benefits) a lack of direct attribution have been constraints. To avoid potential erroneous estimations, no benefits have been valued for the capacity building component (option 1).

For the project preparation and infrastructure components, the following benefits have been quantified. Given that these are a subset of the total benefits likely to occur from the interventions, they are an underestimate of total benefits:

Health benefits from improved hygiene Opportunity costs of time spent collecting water Lifestyle and aesthetic benefits from doubling water intake Household cost savings due to cheaper water access Economy wide cost savings due to non-revenue water Carbon reduction benefits from hydro plants

Methodology used to quantify benefits

Due to the nature of the interventions – demand driven funds for projects yet to be identified - it is not possible to directly quantify these benefits. Instead, a proxy approach has been used by selecting two case studies for project preparation in infrastructure development and valuing them directly. The returns from these case studies were then generalised for the entire fund.

For the project preparation component (Output 2), the Kunene transboundary water project for Angola and Namibia Phase 1 (2010 to 2012) is taken as an example project81 and a CBA was undertaken for this. The returns and impacts of this project are considered indicative as the average for projects of its type for the project preparation component. The results are thus generalised and extrapolated for this component.

For the infrastructure delivery component (Output 3), the Zambia cross border water and sanitation suite of projects from SADC annex project selection have been taken as an example of a project portfolio. The Emfuleni water conservation project was also taken as an example CBA. Both case studies give rise to similar returns.

For both components there is considerable uncertainty surrounding the types of projects that could be funded. The two case studies chosen are a narrow subset of the types of projects that could be funded. Different types of projects are likely to have varying returns, depending on their coverage and focus. For example, projects that work on irrigation, water storage, water monitoring, and hydro power generation are likely to have a different emphasis on the benefits. It is difficult to say how much the actual benefit-cost ratio is likely to deviate from the ones calculated in the two case studies. However, returns for the two case studies were calculated conservatively, as a significant proportion of benefits were not quantified or monetized.


c) Valuation of benefits

In order to value the (indirect) benefits, the following methodologies were used:

Health benefits: To value the health benefits, firstly, the number of beneficiaries is estimated within the river basins. Next the diseases averted attributable to better water and sanitation are estimated, in terms of DALYs averted. This is based on empirical evidence taken from OECD.82 The total DALYs are calculated, and valued using GDP per capita. These benefits accrue over a 20 year lifespan and are discounted at a conventional 3%.

Experience shows that constructing water supply and sanitation facilities is not enough to improve health; sanitation and hygiene promotion must accompany the infrastructure investments to realize their full potential as a public health intervention83. Improved hygiene (hand washing) and sanitation (latrines) can have more impact than drinking water quality on health outcomes, specifically reductions in diarrhoea, parasitic infections, morbidity and mortality, and increases in child growth84. Water supply and sanitation interventions undertaken under this programme will be accompanied by appropriate health and hygiene promotion activities.

Opportunity costs of time spent collecting water: Using the population statistics, assumptions are made on the number of hours spent collecting water per household per year.85 These time savings are valued using appropriate wages that could have been earned instead. This valuation takes place over an average life span of 20 years, discounted at 10%.

Lifestyle and aesthetic benefits from doubling water intake: assumptions are made about the increase in water consumption due to better access using evidence from Whittington et al. As a portion of these benefits will accrue to health gains, such double counting is avoided by reducing this value by 50%. The volumes per household are valued using a local retail tariff86 for water to proxy such welfare gains. This retail tariff proxies the (unavailable) shadow value of water.

Cost savings due to cheaper water access: to value the transfer to beneficiaries from access relatively cheap piped water compared to expensive private providers previously, the difference in price is estimated and used to value the water consumption per household87.

Cost savings due to a reduction in non-revenue water: this measures the reductions in leakages, and revenues achieved due to this. This is valued by applying the bulk water tariff taken from the project documents.88

Environmental benefits in the form of carbon reductions from hydroelectric plants – valued using assumptions on the social cost of carbon, emissions factor, capacity factor.89

Risks and opportunities involved in implementing the intervention

These risks have in part been discussed in Section B, under the Quality of Evidence, but for Option 2 and 3 they are re-stated here for ease of reference.

For Output 2 within option 2 – the project preparation facility, past experience highlights significant risks. “Bankability” of SSA projects has been targeted by various donor-funded facilities, but most of these facilities have not been designed or resourced to respond to the key challenges of project preparation: (i) the process is more complicated than anticipated; (ii) more “upstream” preparation is required in SSA, where legal, policy, and regulatory reforms are needed for PPPs; and (iii) more professional expertise, and far more funding, is often required than anticipated. Existing facilities have too little grant money, too little expertise, are unable or unwilling to cooperate on big projects, and often do not have sufficient independence from their host institutions to consider all implementation


options.

For Output 3 within Option 3 – a number of delivery facilities have successfully targeted client needs. They include: (i) DFID’s Nigeria Infrastructure Advisory Facility (NIAF), which has helped reform Nigeria’s upstream legal-regulatory environment for infrastructure projects, including PPPs; (ii) the EU’s Infrastructure Projects Facility of the West Balkans (IPF), which funds and manages downstream project preparation needed to attract financing from EU lenders; and (iii) USAID’s Municipal Infrastructure Investment Unit (MIIU), which provided transaction assistance and on-the-job training to South African municipalities, resulting in 45 PPPs and US$900 million in investment over an 8-year period.

Results of the cost benefit analyses: Quantification and Valuation

The analysis takes an incremental approach – the options build on each other.

Counterfactual: Capacity building terminated at the end of 2011

For this option, the funding to the GIZ capacity building programme will cease. No costs will be incurred from 2012. An abated programme will continue with AusAID and BMZ support (unless such an apparently adverse signal from DFID causes other sponsors to withdraw too). The negative impacts of limited water resources management will continue:

Weaker institutions in the water division of SADC and the River Basin Organisations; Lower capacity in the organisations in the form of less training and skills upgrading for key

personnel; A number of potentially viable infrastructure delivery projects will not be undertaken, resulting

in a substantial reduction in IWRM benefits as described above, and a potentially lower volume of carbon mitigation in the region;

Due to reduced capacity within the institutions there are likely to be less bankable project preparation documents, thus reducing investor price signals leading to lower infrastructure investment and associated benefits

Lower volumes of additional private sector investment leveraged; Increased constraints on natural resources and ecological heritage including forests,

biodiversity, water catchment areas and water resources, are likely to take place, based on unsustainable water use. This is likely to lead to increasing the vulnerability of poor communities to climate variability and climate change;

Fewer reductions in carbon emissions will take place. A lock-in of carbon intensive technologies could thus be encouraged, accompanied by an increased cost for intervention to reduce GHG emissions in the future.

Option 1: Capacity building

As mentioned above, quantifying (let alone valuing) with any degree of certainty the direct and indirect benefits of a programme that aims to build the institutional capacity of river basin organisations is virtually impossible.

In terms of delivering direct benefits, it is not possible to pin point and directly attribute such benefits to inputs, because the benefits are tenuously linked to the activities. Significant other activities such as political will, infrastructure investment throughout the supply chain, appropriate legislation, coordination and others must take place to ensure that momentum is created to give rise to benefits. For this reason, benefits are not likely to materialise quickly.


The immediate benefits are likely to comprise better human capital, better systems and processes within the RBOs and SADC and national and local institutions of water resources management, which will accrue within and beyond the timescale of the programme. Benefits of improved water management in transboundary river basins will, for example, include equitable sharing of water resources that will ensure water for human consumption, agricultural development, industrial development and hydropower generation. The household- and economy-wide and environmental impacts resulting from these benefits will arise later, alongside other interventions that need to take place.

In isolation, the impact of this programme is hard to calculate. It is useful to document recent Annual Reviews have been very positive, stating that experience elsewhere indicates that sound water management generally has direct positive impacts on target groups. In addition, the contribution to ‘peace and security’ is probably and potentially substantial, although hard to measure: Worldwide experience shows that there are potentially serious negative implications due to the lack of cooperation (regarding transboundary water resources). Based on the current status, the programme’s impact was judged as a 1. The review also states that “The programme is playing a pivotal role in regional water cooperation. It gained unique trust through its close relationship with SADC, RBOs, and Member Countries”.

The following table present the costs and the quantification of indirect benefits to households for option 1:

Table 12: Economic options appraisal summary statistics Option 1Incremental costsTotal Budget (DFID and non DFID) £25m#

DFID budget £13.8mPresent value discounted costs £23mDFID proportion of funding 54%Assumed administrative overhead 20%Assumptions Number of households indirectly benefiting in total 19mNumber of people indirectly benefiting 95mTimescale of benefits horizon 20 years, with benefits emerging

in year 6 after project start date# (Later revisions result in this figure set to £28.9M in Logframe. The same comment applies to Tables 13 and 14.)

In conclusion, there is limited information to conclude whether this option will give rise to high VFM. Whilst the capacity building is likely to give rise to identified benefits, many other investments, political changes and other factors will need to be in place to extract maximum VFM.

Option 2: Summary of results for capacity building + project preparation / transaction support

The results analysis is built incrementally on those from option 1. For the project preparation component, the costs have been estimated from a review of similar initiatives (EEP, NIAFF, DBSA PPDF). In terms of the benefits, the Namibia and Angola cross border Kunene WatSan project case study is used as an indicative example, and those results are generalised for the fund.

The results are summarised in table 13. A 4.8% attribution rate is applied for the intervention to the benefits, based on the average cost contribution of the project preparation documents to the benefits. A failure rate of 50% of projects is factored in. There are likely to be 200,000 direct household beneficiaries for the fund, based on the Kunene case study. A BCR of 2.0 is estimated.

Table 13: Appraisal summary statistics - Option 2 Project Preparation / Transaction Support component only


Option 2: Project preparation DFID Budget allocation £m £5.0mAdmin overheads proportion 20%Total budget £20mTotal economic costs (discounted at 10%/yr) £17.5mAttribution of entire intervention to benefits 4.8%DFID portion of budget for multi- partner intervention 26%DFID staff allocation (FTE) 20%Number of beneficiaries Direct beneficiary households 200,000No. people directly benefiting 1mIndirect beneficiary households levered Not quantifiedEconomic analysis for each option Net Present Value £4.7mBenefit-Cost Ratio 2.0Economic cost per person £267

In terms of cost effectiveness, the cost per person is estimated at £267. Cost effectiveness measures are often benchmarked against GDP per capita, particularly in the field of health. Unit costs that are around the GDP per capita mark or lower are considered cost effective. The GDP per capita figure for the region is £130890. Thus the modelling suggests that this component is cost effective.

The Kunene example does not show any carbon reduction benefits, as it is not a hydro project. In terms of the SADC project list, most of the regional projects involve hydropower generation. There are thus likely to be significant benefits in the form of carbon reductions that are not illustrated in the above cost benefit analysis (for example, as shown by the feasibility studies of the Batoko Gorge91 hydro power station).

Thus, generalising the Kunene returns for the entire fund is a conservative approach and is likely to understate the benefits. Hence project preparation fund is likely to offer good VFM, given its conservative BCR of 2.0.

Option 3: full implementation: capacity building + infrastructure project preparation / transaction support + infrastructure delivery (quick wins)

The returns for this option build incrementally on options 1 and 2. The two case studies (Zambia water and sanitation projects92 and Emfuleni water conservation) give rise to very similar Benefit to Cost Ratios of 2.3 and 2.2 respectively.93 These results are generalised for the entire fund (Table 15).

Table 15: Economic options appraisal summary statistics Option 3Option 3: Capacity building Project preparation Infrastructure

delivery DFID Budget allocation £m

£13.8m £5.0m £18.0m

Admin overheads proportion

20% 20% 20%

Total budget £25m £20m £18.0 mTotal economic costs (discounted at 10%/yr)

£23m £17.5m £15.5m

Attribution of entire intervention to benefits

- 4.8% 100%

DFID portion of budget for multi- partner

54% 25% 100%


interventionDFID staff allocation (FTE)

50% 20% 20%

Number of beneficiariesDirect beneficiary households

Not applicable 200,000 174,000

No people directly benefiting

Key personnel within institutions – not quantified

1m 868,750

Indirect beneficiary households levered

19m Not quantified Not quantified

Economic analysis for each option Net Present Value - £4.7m £18.6mBenefit-Cost Ratio - 2.0 2.2Economic cost per person

- £267 £89

The analysis indicates a BCR ranging from 2.0 to 2.2, and cost effectiveness ratios ranging from £89 to £267.

Cost-Benefit Analysis conclusion

Option 3 shows slightly greater BCRs and cost effectiveness than option 2, indicating that it is likely to offer better VFM. In addition, it has a wider variety of components, thus spreading risk more widely.

It should be noted that all the economic indicators underestimate benefits because they exclude environmental, carbon mitigation, and peace dividend impacts, in addition to excluding leverage gains and indirect beneficiaries, which are likely to be significant.

The environmental benefits include flood and drought avoided for decades, for up to 95 million people living in the SADC continental river basins; agricultural production and economic growth, avoidance of famine and potential forced migration and conflict are other potential benefits.

The Strategic Case has highlighted the energy demand and deficit that Africa/SADC faces over the next 2-3 decades, and the long-term bringing on-line of a range of possible hydropower projects (through PPDF support) will yield very significant benefits in terms of carbon emissions from fossil fuel energy generation systems. Maximising demand management concomitantly with increasing supply is also necessary, as is close attention to environmental and social safeguards.

The overarching, and generally underestimated benefit from Option 1 (capacity building) is an improvement in human development capital and institutional capability. Thus better and more reliable data production and effective transboundary water management decision-making prospects are enhanced, as will be supporting political will.

D. What measures can be used to assess Value for Money for the intervention?

To assess the value for money during the programme duration, the following measures needed to be taken into account for economy, efficiency and effectiveness.

Economy and efficiency

Administrative overhead to portfolio fund ratio (benchmark of 20%94) Key cost drivers within the administrative overheads


Ratio of project preparation documents to implementation costs (benchmarked with other facilities) Degree to which projects achieve bankability Failure rate of bankable projects (in terms of securing investment funding) GIZ arrangements for procurement processes Speed at which inputs are converted to outputs – (measured by time taken for procurement, etc) Effectiveness

Quantification of benefits as outlined in appraisal, and iterative calculations of NPV, BCR, IRR at key points during the programme;

Unit cost measures, in terms of cost per person reached; Unit cost - cost per bankable project documentation Cost per unit of CO2 saved Cost per additional cubic meter of water accessed Cost per DALY avoided

Equity

When collecting data on who benefits from the programme, we will disaggregate the data by gender and by social economic status. That will inform whether the poor, the disadvantaged and women are benefitting from the programme.

Many of the above metrics would be undertaken during an impact evaluation at the end of the programme. The data would not be available earlier in some cases.

The intervention would no longer represent good Value for Money if administrative costs were escalating significantly. A re-evaluation would be needed if administrative costs were around 40-50%. VFM would also be compromised if the failure rate of bankable projects was significantly higher than the predicted 50%.

E. Summary Value for Money Statement for the preferred option

Recommendation Regarding option 1, in terms of cost economy, the administrative overhead of 20% is reasonable. The Evaluation of its existing Phase 2 concluded that the use of resources is highly efficient, and that there are no notable examples of better cost economy within other programmes. In terms of effectiveness, this is the most difficult item to measure, and its impacts on households, environment, and economy are highly uncertain and will need wider initiatives and investments to take place in tandem to be effective.

It is widely acknowledged that institutional performance across the full range of functionalities needed to achieve water security requires very significant improvement. Improving the capabilities of government and non-governmental institutions to develop and implement appropriate plans, policies, decision making frameworks, controls and investments - and to monitor and evaluate their performance - at local, national and regional/transboundary scales lies at the crux of water security in SADC. However, the barriers to this performance are many and root causes are often poorly understood, with politically safe initiatives to ‘build capacity’ masking a range of tacit and systemic constraints. The World Bank meta-analysis of 1,864 water projects over 11 years (1997-2007) is instructive95. Only half of projects that aimed to strengthen local capacity and 2/5ths of projects that supported institutional reforms were successful. Greater leverage and greater success was achieved when activities were associated with lending (and presumably tranche-release conditionality), but overall, weak institutional capability resulted in less effective outcomes.


Option 2 builds on option 1 incrementally. For the project preparation component, in terms of cost economy, the administrative costs are again 20%, which are considered reasonable. In terms of efficiency, if projects reach bankability, through this fund, there is scope for them to be implemented, and this would be an efficient use of funds. However, there are high risks associated with this. In the past, “bankability” of SSA projects has been targeted by different donor-funded facilities, but most of these facilities have not been designed or resourced to respond to the key challenges of project preparation. This intervention specifically aims to overcome these problems.

In terms of effectiveness, the CBA indicates that there is good potential to give rise to good returns; a conservative BCR of 2.0 has been calculated. In terms of cost effectiveness, this option scores well, with a cost per person of £367. This is below the regional GDP per capita of £1308, so is deemed as cost effective.

For option 3, the analysis builds incrementally on option 2. For the infrastructure delivery component, In terms of cost economy, administrative costs are again a reasonable 20%.

In terms of effectiveness, the infrastructure delivery component shows relatively high benefit to cost ratios of 2.2. There is also good cost effectiveness, a figure of £89, which is more cost effective than the project preparation facility.

There are risks associated with infrastructure delivery. The track record of PPPs in the African water sector is not encouraging, with water PPP investment accounting for less than 1 percent of total private infrastructure investment in SSA from 2000-09 (via just 15 projects). But many of the small-scale PPP “quick wins” developed in other regions have not yet made an impact in SSA, and the current GIZ programme support to RSAP is making headway on establishing smaller pilot PPPs. But, as noted earlier, there are instructive examples of success. Also, the success of infrastructure delivery facilities such as NIAF, IPF and MIIU should be noted.

For this reason, the Financial Case has proposed a relatively modest initial allocation to large-scale project preparation through PPDF. Subject to performance and additional resource availability, scaled-up contribution would be considered.

The implementation of Output 3 (within option 3), by an international consortium with vested financial interests in ensuring quality and value for money (since they will be pre-financing interventions from their own resources and will be subject to external monitoring) is part of the risk mitigation that the programme design addresses.

To conclude, all three options are recommended on the grounds of value for money. Option 3 offers the highest VFM in terms of economy, efficiency and effectiveness, and is also likely to have the greatest in-built risk mitigation, and on grounds of operational sustainability and self-reinforcement, transformation and leverage in design. It is presented as the preferred option.


Commercial Case

Direct procurement

A. Clearly state the procurement/commercial requirements for intervention

Intervention title Transboundary Water Management in SADC

Sub-project Capacity development at Macro (Regional), Meso (cross-border) and Micro (local / national level) (GIZ implementation). 13.8 Million Pounds (including £1.1M for GWP SA services under their Water, Climate and Development in Africa programme – contracted via GIZ)

Procurement route Indirect

Sub-project Gender mainstreaming in transboundary water management (UNDP implementation). 1.4 Million Pounds (included in £13.8M total, and possibility of contracting through GIZ financial payment with MoU/Exchange of Letters to DFIDSA to be explored further by DFID).

Procurement route Indirect

Sub-project Regional infrastructure project preparation (DBSA). 5 Million PoundsProcurement route Indirect

Sub-project Climate Resilient Infrastructure Delivery Facility (CRIDF). 18.2 Million Pounds.Procurement route Direct

Sub-project Evaluation (£300,000)Procurement route Both indirect and direct

The option of providing direct funding to the SADC Secretariat for some or all of these activities was considered. Recent EC support has led to significant improvements in the SADC Secretariat processes and systems for planning, financial management, monitoring and evaluation, and human resource management. An institutional assessment of these systems to be completed before the end of 2011 is likely to conclude that the Secretariat is now eligible for budget support from the EC96. Despite this assessment the new systems are not yet fully tested so direct funding to the SADC Secretariat at this stage would be a high risk approach and is not recommended. In addition in all discussions with the SADC Water Division it has been made clear that their perception of their role is in coordination and facilitation rather than implementation.

The Climate Resilient Infrastructure Delivery Facility (CRIDF) will be contracted directly to an international multi-disciplinary engineering company or consortium. The use of regional partners in the consortium will be encouraged. The facility will be hosted by DBSA to ensure synergy with the project preparation activities under output 2 of the programme. The facility will identify and prioritise projects, finalise design and ensure capacity development at local level as well as actually implementing the infrastructure on the ground. Representation in Gaborone will be required. It is recommended that this be co-located with GIZ in close proximity to SADC Water Division.

Impact evaluation of the programme will be led by an external contractor, who may sub-contract additional external members of the evaluation group. In the first instance, we intend to procure the impact evaluation via GIZ under delegated cooperation, subject to confirmation of adequate measures to ensure that the full independence of the impact evaluation is not compromised (see M&E section). If such assurance is not achieved, we would procure directly. Additional discrete targeted pieces of evaluation analysis may also be procured directly.


Procurement of these services will be through competitive open tendering according to OJEU procedures, and selection of contractors will be carried out by the DFID Southern Africa regional office in Pretoria together with DFID Procurement Department and the SADC Water Division.

B. How does the intervention design use competition to drive commercial advantage for DFID?

The use of tendering for the procurement of the CRIDF and evaluation services will ensure that commercial advantage is achieved through competition.

The adjudication of bids and proposals for the CRIDF will primarily be on the basis of ability to identify, finalise design and implement small scale water infrastructure within the life of the programme. Adjudication will also take into account the ability of the contractor to provide on the ground capacity building during the design and implementation of the small scale infrastructure projects. Adjudication will not be on the basis of cost alone: additional considerations such as quality, past performance and the ability to provide capacity development will also be considered, in order to ensure that optimum value for money is obtained.

Impact evaluation will occur after two years and at the end of the programme. For reasons of continuity the same contractor will ideally be used on each occasion; however this will occur under separate contracts, with renewed use of the contractor dependent upon adequate previous performance.

C. How do we expect the market place will respond to this opportunity?

Experience from infrastructure delivery facilities and evaluation services included in other DFID and EC programmes indicates that internationally there is a sufficient supply base for the delivery of these components of the programme, and so it is reasonable to expect that there will be an adequate response to invitations to submit bids or proposals. It is probable that the larger the potential resource envelope being offered for tender, the larger and potentially more capable will be the organisations that will be interested in this international competitive tender.

Whilst it is not clear that there is sufficient capacity within the region to provide the services required, the use of regional companies (perhaps in partnership with one or more international company) will be explored during the procurement process. Potential benefits of this include:

- Greater knowledge of the environment in which the programme is implemented- Strengthening of local capacity, - indirect “trickle-down” economic benefits to local economies; and - Reduced costs.

Initial identification of potential contractors will take place through an invitation for expressions of interest, for which guidelines have been drafted.

D. What are the key cost elements that affect overall price? How is value added and how will we measure and improve this?

The major cost variables for the CRIDF will be professional fees, although the ability to provide capacity development at a local level is likely to represent a further factor. Costs for works contractors and supplies at a local level will not be a major cost variable as it is anticipated that all those that bid will incur similar costs in this respect. Addition of value will be ensured through the use


of international engineering companies, and Terms of Reference will provide the framework within which their performance will be managed. DFID together with the SADC Water Division will select the contractor on the basis of their ability to deliver value for money, will develop the Terms of Reference, and will provide quality assurance.

The major cost drivers for evaluation will be professional services. Addition of value to the programme will be ensured by the use of accredited evaluation contractors with sufficient capacity to perform the tasks required to a high standard. Terms of Reference will be used to define the framework (including key performance indicators) within which contractors will be expected to work: these will provide the benchmark against which satisfactory performance is measured, and payment will be made upon their fulfilment.

67 PPDF Operational Guidelines - PPDF Operational guidelines. SADC. July 2010.68 Climate change, water resources and WASH – a scoping study by Calow, R, Bonsor, H, Jones, L, O’Meally, S, MacDonald, A, Kaur, N. ODI Working Paper 237. September 2007)69 It includes, for example, a World Bank meta-analysis of 1864 water sector interventions between 1997 – 2007, Parker, Ronald, 2010, An evaluation of World Bank support, 1997-2007: Water and development, World Bank Group. See also DFID’s Literature and Evidence Review 70 Teskey, G , 2005. Capacity development and State Building: Issues, evidence and implications for DFID Governance and Social Development Group (www.worldwaterweek.org/); see also Background Paper 2, Political Economy)

71 Hepworth N 2009,CMS Information and Capacity Building, Multilateral Environmental Agreements and the Biodiversity Liaison Group. 72 Parker, Ronald, 2010, An evaluation of World Bank support, 1997-2007: Water and development, World Bank Group.73 See Background Paper 374 See Background Paper 675 See Background Paper 676

77 Additional details underpinning the methodology and assumptions are presented in the Final Design Report, Background Paper 1 (Economic Appraisal). 78 These benefits have been identified using information and evidence from project documents, Copenhagen Consensus 2008 Challenge Paper: Water and SanitationBenefits of investing in Water and Sanitation.79 Conflict prevention and peace dividends through cooperation on TWM in SADC. Prof Dr Jon Martin Trondalen. August 2011.80 http://www.unicef.org/wash/index_womenandgirls.html Water, Sanitation and Hygiene, (UNICEF, 2006).81 Kunene transboarder project presentation, Kunene. Funding request for replacement of canal by pipeline.82 Benefits of investing in Water and Sanitation 2011, also DALY information from WHO.

83 Esrey S, J Potash, L Roberts, C Shiff 1991, Effects of Improved Water Supply and Sanitation on Ascariasis, Diarrhea, Dracunculiasis, Hookworm Infection, Schistosomiasis, and Trachoma, WHO Bulletin 69(5):609¨C621.84 Hutley S, S Morris, V Pisana 1997, Prevention of Diarrhea in Young Children in Developing Countries, WHO Bulletin 75 (2): 163¨C17485 Copenhagen Consensus 2008 Challenge Paper: Water and Sanitation; SADC economic valuation of water methodologies, Water for the Urban poor: water markets household demand and service preferences in Kenya.86 Taken from SADC economic valuation of water methodologies; GWP 2010.87 Whittington D et al, 2008, Copenhagen Consensus 2008 Challenge paper, Water and sanitation.88 May 2011: Emfuleni water conservation project: development partnership proposal. 89 DECC social cost of carbon, emissions factor and capacity factor taken from DFID Energy, Environment Partnership draft business case, South Africa.90 Source: World Bank.


http://www.unicef.org/wash/index_womenandgirls.html

http://www.worldwaterweek.org/

E. What is the intended Procurement Process to support contract award?

Procurement of the CRIDF will take place through a competitive process in which international engineering companies will be invited to submit their methodology, experts and costs for the assignment. Previous experience and performance of operating similar facilities be included amongst the evaluation criteria. The adjudication of submissions will be performed by the DFID Regional Office for Southern Africa in conjunction with DFID Procurement Department and the SADC Water Division in order to provide expert support and quality assurance. In addition to cost, evaluation criteria will include previous performance on operating similar facilities, methodology, experts proposed and their ability and experience of building capacity at local level during the design and implementation of infrastructure.

Impact evaluation will also be procured through a competitive tender process which will be open to contract suppliers, in order to identify the supplier able to deliver this service to a required standard at lowest cost. Previous performance and knowledge of similar programmes and their context be included amongst the evaluation criteria.

Both of these procurement processes will comply with DFID standard procurement procedures. Procurement of the CRIDF should commence immediately on the signing of the agreement and should be operational within the first six months of the programme.

91 Reference: Swaziland regional water infrastructure investment opportunities 2011; pre-conference workshop update. 92 Water for agriculture and investment development: National investment profile, Zamia Nov 2010.93 Further details available in background papers.94 Benchmarks are taken from author’s analysis of challenge funds, DFID Energy, Environment Partnership draft business case, South Africa; NIAF, PPDF.95 World Bank 2008, Water and development: An evaluation of World Bank Support to 1,864 water projects (1997-2007). 96 Verbal communication, European Union Delegation to Botswana.

Appendix 1: List of Design Report Background Papers

ItemIntroduction & OverviewIntroduction, Background & Summary and Notes & ToR for service providers.Background Paper 1#Economic AppraisalBackground Paper 2Political EconomyBackground Paper 3Institutional AppraisalBackground Paper 4Climate Change & Environment AppraisalBackground Paper 5Social Development & Gender AppraisalBackground Paper 6PPPs for SADC TWMBackground Paper 7Regional Integration & Peace DividendBackground Paper 8Literature & Evidence Review and Theory of Change supplementBackground Paper 9Logical FrameworkBackground Paper 10Consultation Record (a) & (b)Background Paper 11Bibliography/ReferencesBackground Paper 12Maseru Sept 2011 Investment Conference Background ReportBackground Paper 13RSAP 3 programme documentBackground Paper 14GIZ Phase 3 programmeBackground Paper 15UNDP PIF (gender mainstreaming)Background Paper 16GWP, Water, climate & development: An African programmeBackground Paper 17DBSA/SADC PPDF MoU# Annexes as separate files.


F. How will contract & supplier performance be managed through the life of the intervention?

Performance management for the CRIDF will be integrated into each element of the contract design and implementation process. This will include specified milestones (reflecting each stage of the facilities operation including project selection, design and implementation) at which performance will be assessed, and payment will be made according to outputs at each of these stages. Management of the infrastructure implementation facility will be carried out by the DFID regional office for Southern Africa, in conjunction with the SADC Water Division which will provide technical support. The DFID ARD Infrastructure Adviser will be consulted over appropriate professional technical advisory oversight requirements for DFID.

The Programme Management Board (see Management Case) will contribute to the contract design, implementation plan and performance indicators for the impact evaluation. Satisfactory performance of the appointed impact evaluation contractor (and eligibility for payment) will be assessed by DFID Southern Africa and the programme management Board. Provided performance is adequate, the preferred option will be to use the same contractor for each evaluation, and the prospect of further work will generate an additional incentive to deliver a high quality product.

Indirect procurement

A. Why is the proposed funding mechanism/form of arrangement the right one for this intervention, with this development partner?

Output 1: The complexity and geographic dispersal of the activities under output 1 of the programme exceeds the capacity of DFID to deliver the interventions directly, and to manage the numerous contracts that this would require. This output of the programme will therefore be implemented through indirect procurement to GIZ, UNDP and GWPSA.

Procuring GIZ activities:

Delegated cooperation to GIZ was used for the previous phase of the transboundary water management programme to SADC. Evaluations have indicated that such an arrangement worked well for the delivery of the capacity building programme. Using an existing funding mechanism will enable our support to deliver early results than choosing an alternative route (direct or indirect) which would require a minimum of six months to set up appropriate management systems and develop a trusting relationship with SADC Water Division which is key for successful implementation. Additionally selecting an alternative procurement route would not only mean our funding would be in direct competition with work undertaken by GIZ (funded by AUSAID) but it would also not offer value for money for DFID’s resources. Additional DFID staff time would be required in managing strained relationships caused by having two delivery models operating in the same region trying to achieve the same objectives.

Approach 1 (preferred):The indirect procurement of output 1 of the programme to GIZ will be managed through a Delegated Cooperation agreement. This is considered to be appropriate for the following reasons:

- a tender and contract process is not considered to be viable for the reasons outlined above- It provides effective means of reducing the management burden to DFID that would be

imposed through the use of commercial contracts- They enable existing activity by GIZ to be harnessed and expanded through the provision of


additional resources.

Delegated cooperation will additionally deliver value of money through the assets that GIZ will bring to the programme, which include technical expertise in water policy, capacity development and transboundary water management, operational capacity in Gaborone, Botswana close to the SADC Water Division, strong and transparent organisational and financial management processes, and engagement with key stakeholders at regional, river basin and national / local levels.

Approach 2:An alternative approach to the utilisation of GIZ would be the indirect procurement of another regional capacity building organisation. The use of the Global Water Partnership Southern Africa was specifically investigated in this respect. Whilst potentially GWPSA could offer the complete range of services required the focus of their work has been at the national / local level; there would be a cost associated with gearing up so that GWPSA could offer the full range of services to be provided by GIZ. In addition GWPSA are not located in Gaborone, Botswana close to the SADC Water Division, and they have not been successfully offering the required services since 2005. This option is therefore likely to represent poorer value for money than the delegated cooperation with GIZ. This having been said there is a clear role for GWPSA in the programme relating to capacity development at the national / local level – this is addressed below.

Procuring UNDP activities:

Approach 1 (preferred):A Memorandum of Understanding between GIZ and UNDP will be developed for the component of the programme to deliver gender mainstreaming in transboundary water management. UNDP have developed a global proposal on this subject and are seeking GEF funding for this initiative. UNDP are currently complementing this proposal to take into account the AMCOW policy and strategy for mainstreaming gender in the water sector in Africa, and focussing a proposal for the SADC region. The indirect procurement of this component of the programme will be managed by an MoU. This is considered to be appropriate for the following reasons:

- a tender and contract process is not considered to be viable because of the unequalled expertise that UNDP have in this area and the proposal that has been developed

- the synergy that will be developed between this component of the programme and the GEF funded global initiative both of which are managed by UNDP

- It provides effective means of reducing the management burden to DFID that would be imposed through the use of either commercial contracts or procurement of UNDP input directly by DFID.

- the assets that UNDP will bring to the programme, which include technical expertise, strong and transparent organisational and financial management processes, and engagement with key stakeholders at regional and national level in the SADC region.

Approach 2An alternative approach for this component of the programme would be for DFID to indirectly procure the expertise of UNDP through an MOU arrangement. Whilst this approach maintains UNDP activities, it would also increase the management burden on DFID. It could also lead to weaker synergies between the GIZ and UNDP activities.

Procuring GWPSA activities:

Approach 1 (preferred)An Accountable Grant Contract between GIZ and GWPSA will be developed for the component of the programme to deliver a Water, Climate and Development programme in the SADC region. GWP have developed a global proposal on this subject (and are seeking central DFID funding for this


initiative). Currently the programme will only cover the Limpopo basin in the SADC region. The SADC TWM programme will fund the extension of this approach into one or more other shared river basins in the SADC region. As GWPSA is a not for profit organisation the indirect procurement of this component of the programme by GIZ will be managed by a grant contract. This is considered to be appropriate for the following reasons:

- the assets that GWPSA will bring to the programme, which include technical expertise, strong and transparent organisational and financial management processes, and the country partnerships they have developed throughout the SADC region.

- using GWPSA for this work will ensure synergies will be developed between this component of the programme and their wider programme on water, climate and development in Africa

- GIZ contractual ownership of this component will ensure maximum possible synergy with the overall direction of the programme.

- This arrangement also provides effective means of reducing the management burden to DFID that would be imposed through contracting GWPSA directly.

Approach 2An alternative approach for this component of the programme would be for DFID to procure the service directly from GWPSA. Whilst this approach maintains GWPSA activities, it would also increase the management burden on DFID. It could also lead to weaker synergies between the GIZ and GWPSA activities.

Output 2:

Approach 1 (preferred)Output 2 of the programme involves the preparation of regional infrastructure projects. SADC have established a project preparation development fund for this purpose. The SADC Secretariat has signed a Memorandum of Understanding with the Development Bank of Southern Africa (DBSA) for “The programme management and provision of corporate services and facilities by the DBSA to the SADC Secretariat to create operational capacity for project preparation and development facility (PPDF).” The European Commission and KfW are providing funds for the PPDF through agreements with the DBSA. Output 2 of the programme will therefore be implemented through indirect procurement to DBSA. DFID are already providing financial support to project preparation facilities that are housed in DBSA.

The indirect procurement of output 2 of the programme to DBSA will be managed through a Memorandum of Understanding. This is considered to be appropriate for the following reasons:

- a tender and contract process is not considered to be viable because SADC have already assigned the programme management of the PPDF to DBSA

- DFID is buying into an existing arrangement which has well established systems in place to enable DFID funds to deliver quick results.

- It provides effective means of reducing the management burden to DFID that would be imposed through the use of commercial contracts

- They enable existing activity under the PPDF to be harnessed and expanded through the provision of additional resources.

Indirect procurement of output 2 to DBSA will additionally deliver value of money through the assets that DBSA will bring to the programme, which include technical expertise in project preparation and project financing, strong and transparent organisational and financial management processes, and engagement with key stakeholders at regional and national level in the SADC region.

Approach 2An alternative approach for the delivery of output 2 of the programme would be the establishment of a new project preparation facility or the use of an existing project preparation facility. This would have the advantage of having a dedicated facility for this programme. However, it would either entail


the cost of setting up a new facility or mean that a facility that was not dedicated to infrastructure in the SADC region was being utilised. In addition there are multiplier effects because the PPDF already has funding from the EC and KfW which means that the overall funds for project preparation are greater. Additionally more DFID staff time would be required in managing strained relationships caused by having two delivery models operating in the same region trying to achieve the same objectives. These options are therefore likely to represent poorer value for money than the indirect procurement of DBSA.

The potential financial risks of using indirect procurement (as opposed to commercial contracts) will be mitigated through the use of breakpoints (pauses) to ensure that the services provided are appropriate and of high quality, and by cross-checking the prices of services against those of similar inputs in the SADC region and elsewhere.

B. Value for money through procurement

The implementation of the majority of output 1 will be assigned to GIZ through a delegated cooperation agreement. When placing orders with consulting firms on behalf of clients, GIZ is contractually obliged to apply the relevant national and European regulations on the award of contracts and public price law.

UNDP Procurement is based on competitive bidding. DFID has signaled confidence in UNDP procurement processes through our core contribution to the organisation.

GWPSA implements its activities through the members of its country partnerships. The procurement of any services by these members will be governed by their procurement procedures which meets DFID’s requirements.

The implementation of output 2 will be assigned to DBSA through a Memorandum of Understanding. A governance structure and operational guidelines have been developed for the PPDF being operated by DBSA; these have been agreed with the SADC Secretariat. As part of this process, given DFIDSA runs a number of other programmes through DBSA, we will be looking for economies of scale and, potentially, a direct DFID/DBSA portfolio relationship. In addition guidelines for the procurement of services have been developed for the PPDF . These are adapted from the African Development Bank Rules and Procedures for the Use of Consultants. May 2008 Edition. While the specific rules and procedures to be followed for procuring service providers depends on the circumstances of the particular case, five main considerations guide the PPDF’s policy on the selection process:

a) the need for high-quality services, b) the need for economy and efficiency, c) the need to give all qualified service providers an opportunity to compete in providing

the services financed by the PPDF, d) the PPDF’s interest in encouraging the development and use of national and regional

service providers, and e) the need for transparency in the selection process.

It will be a key priority to ensure that funds for the programme retain a high value for money. All implementing agencies will be tasked with developing clear guidelines as to evaluating value for money.


Financial Case

A. What are the costs, how are they profiled and how will you ensure accurate forecasting?The overall disbursement that is possible under the current design is set out in Table 16, in £Millions. Any “front-loading” of programmes and appropriate accounting processes for DFID will require very early engagement with potential development partners to set in train the mechanisms that can accept funds against credible plans or existing disbursements. Were additional funds available subsequently, the design could accommodate an increase of £5M to Output 2 (Project Preparation/transaction support – DBSA/PPDF) and £10M to the Output 3 TA and Capital expenditure element for Climate Resilient Infrastructure Delivery. This could be managed through years 2-4. In addition, £300, 000 evaluation funding has been added, to be split between the 3 pillars. This is shown below as split between three pillars

Table 16: Overall disbursement possibilities under different CBA/VFM option scenarios (£Millions)Option 1 Option 2 Option 3Capacity building

Capacity building + project preparation / Transaction Support

Capacity building, project preparation / transaction support and infrastructure delivery

DFID Budget allocation £m (current (2011) total budget envelope of £37m)Capacity building 13.8 13.8 13.8Project preparation/trans. Support - 5 5Infrastructure delivery - - 18.2Total 13.8 18.2 37

Additionally, £300,000 will made available for evaluation.

Other partners’ anticipated contributionsComponent Other donors extra contribution Capacity building Ausaid: £6.35M

GIZ/BMZ: £5.25MTotal: £11.6M

Project preparation/transaction support KfW: £4.27M EC: £10.48MTotal: £14.75M

Infrastructure delivery Although this is not included in the CBA, the World Bank’s conservative estimate for complementary fund allocation is US$50M. The TA element of DFID Output 3 could facilitate targeting and project preparation for this contribution.

In addition, GIZ’s current work is funded as follows:

BMZ: £5M; DFID: £2M AusAid: £1.7M

Total: £8.7M


Annual disbursements against each output are set out in Table 17 below. The year 1 and 2 figures represent what is practicable to manage/scale-up for within implementing partners/agents. If additional adjustments are required, then these can be designed for in year 2.

Table 17: Annual financial flows/disbursementsImplementer Output Year 1 Year 2 Year 3 Year 4 sub-T £M Notes1a. GIZ One 1 2.8 3.5 4 11.3 Appointed by DFIDSA

1b. GWP One 0.1 0.2 0.4 0.4 1.1 Sub-contracted via GIZ

1c. UNDP One 0.1 0.3 0.5 0.5 1.4 MoU with DFIDSA

2a. DBSA/PPDF Two 0 1.5 2 1.5 5 TF payments

3a. CRIDF/TA Three 0 2 2.5 2.5 7 Direct Contract with DFIDSA

3b. CRIDF/Capex Three 0 2.5 3.5 5.2 11.2 Same direct contract

4. Evaluation All 0.1 0.2 0.3Sub-Totals £M 1.2 9.3 12.4 14.1 37.3

The Deputy Programme Manager will ensure accurate forecasting through developing a strong working relationship with all GIZ, DBSA, and CRIDF, enabling effective engagement on programme issues including financial management issues. All delivery institutions will be submitting at least quarterly financial reports (with provision for monthly reporting if required) and more detailed biannual financial and narrative progress report which will also include an assessment of risks associated with delivery. These reports will clearly indicate realistic projection of spend for the current financial year broken down by quarter on all major budget category lines. DFID will require that delivery institutions advise DFID in advance of any unexpected potential significant changes in forecasts. The Deputy Programme Manager will rigorously reconcile these forecasts against (i) relevant data on Aries; (ii) annual work-plans and budget; (iii) previous quarterly reports; and (iv) previous disbursements and past spending trend. Any discrepancies will be quickly raised with implementers and necessary changes to forecasts will be agreed. The Lead Adviser will also be consulted on all financial issues identified as well as any changes to forecasts on Aries that need to be made.

B. How will it be funded: capital/programme/admin?

The programme will be funded from programme resources, and has been budgeted for in the Operational Plan for DFIDSA. This will be R-del, although we are looking into options for converting capital elements of output 2 and 3 to C-del.

There are technically no contingent or actual liabilities. However, if DFID decided not to proceed with the capacity building primary contract with GIZ, then a managed and measured exit would be developmentally desirable.

C. How will funds be paid out?

GIZ and DBSA will administer programme funds through an MOU with DFID. Payments to these institutions will be made in advance on a quarterly or six-monthly basis based upon the liquidity needs of the programme and satisfactory performance. Issuing funds quarterly in advance will hamper delivery primarily due to the fact that DBSA and GIZ require funds to be deposited in their bank account before they are able to commit funds in the form of contracts/agreements for implementation activities.

Both institutions will pass funds on to other implementing agencies (such as GWP and UNDP)


through similar arrangements or by making payments to sub-contractors on a reimbursable basis.

Payments for directly procured services (CRIDF and impact evaluation) will be made directly to the service providers in arrears and will be governed by the terms of the relevant contract. It should be noted that payments for the CRIDF will include pre-financing of small –scale capital works.

The SADC TWM programme will develop and implement an exit strategy. The exit strategy will be based on the stated goals for each of the programmes, and will highlight lessons learnt as well as attempts to ensure long-term GHG mitigation activities and sustainable development goals are continued into the future.

D. What is the assessment of financial risk and fraud?

Overall DFID considers the assessment of financial risk or fraud on the programme to be low. Implementing partners chosen will all have sound financial management, procurement systems and internal/external audit mechanisms in place to mitigate against this risk. In addition DFID-SA will keep track of all audit plans and apply rigour in scrutinising all financial and audit reports. A detailed analysis of risk is summarised in the table below.

Risk Analysis and MitigationFinancial mismanagement or fraud within GIZ

GIZ take their financial management responsibilities very seriously. They are required to do so as they are BMZ’s respected implementation agency and have a lot to lose if their reputational risk is damaged by audit criticisms or allegations of financial mismanagement or fraud. GIZ have excellent financial and procurement systems in place which meets international standards. To date, audit reports on DFID’s previous support to the SADC RSAP reveal no evidence of financial mismanagement or fraud. DFID therefore considers the risk of financial mismanagement or fraud by GIZ to be low. DFID will continue to scrutinise audit reports and ensure feedback mechanisms are in place to ensure GIZ financial controls remain excellent.

Financial mismanagement or fraud within UNDP

UNDP has an institutional strategic relationship with DFD underpinned by a framework MoU with UNDP New York. UNDP has satisfactory standard UN financial management, controls and procurement systems in place. To date, as far as the DFID project team is aware, audit reports on DFID programmes have revealed no evidence of financial mismanagement or fraud DFID therefore considers the risk of financial management or fraud to also be low. To ensure this risk remains low, DFID will rely on GIZ, who have a good team in Gaborone who have a good track record in contract/grant management of other institutions including ensuring audits are carried out and feedback mechanisms in place. DFID will track audits are being carried out on time.

Financial mismanagement or Fraud with GWP

GWP is the recipient of core finds from DFID HQ and has satisfactory corporate institutional financial management, control and procurement systems in place. Audit reports on DFID funded activity reveal no evidence of financial mismanagement or any fraudulent activity. DFID-SA expects GWP to continue to demonstrate sound financial management of DFID resources under this programme. DFID therefore considers the risk of financial mismanagement or fraud by GWP to be low. Like UNDP, we would expect GIZ to manage GWP appropriately and scrutinise GWP audit reports ensuring feedback mechanisms are in place to follow-up on any issue that may be identified. .

Financial mismanagement or Fraud within the DBSA

DBSA is a known and respected development bank within the region. DFID-SA has pre-existing MoU and contractual arrangements in place with DFIDSA. An institutional analysis of DBSA, including financial management aspects, has been undertaken by the EU in Gaborone prior to allocation additional co-financing to the PPDF. This confirmed the suitability of DBSA controls to receive and manage EDF funds. Additionally a recent audit of


the EEP programme carried out by DBSA’s external auditors, KPMG, has revealed no evidence of fraud or poor financial practice. These DBSA audits on DFID funded programmes will take place on an annual basis and will continue to provide assurances that funds have been spent on their intended purpose. DFID will ensure all audit issues identified will be promptly acted upon. DFID therefore considers the risk of financial mismanagement or fraud by DBSA to be low.

Financial mismanagement or Fraud within CRIDF Output

This is probably where the highest risk exists where small-scale infrastructure projects costing between £1m and £6m will be funded from this output. The CRIDF will be contracted to a professional company who has a good track record in managing and implementing similar small-scale infrastructure facilities. It is envisaged that the professional company will issue grants/contracts for the infrastructure projects. Financial capacity and track record will be part of assessment process for selecting implementing partners. Funds will be released in limited tranches against clear expected outputs and financial reporting requirements on all infrastructure projects. External audits will be carried out on a sample of infrastructure projects and funding will be terminated if any evidence of financial mismanagement or fraudulent activities is identified or performance targets not met. These actions should mitigate against any potential risk of financial mismanagement or fraud. DFID considers the risk here to be low to medium.

Financial mismanagement or Fraud by Service Provider undertaking Impact Evalaution.

Acceptable fiduciary capacity will be part of the tender assessment process. Funds will be paid out in instalments against satisfactory progress and financial reporting. DFID considers the risk of financial mismanagement or fraud by the Service Provider undertaking Impact evaluation to be low.

Delays in approval and transfer of funds by DFID and other funding partners

This is a serious risk with large consequences on pace of implementation. Implementing partners, through the supervisory Board if required, will demand timely action from the donor partners. Donor performance will be on the ToR of the evaluations.

E. How will expenditure be monitored, reported, and accounted for?

All delivery institutions will be required to submit quarterly/six-monthly financial expenditure reports along with a narrative report on progress against the annual workplan and budgets. These reports will clearly show detailed expenditure against approved budget lines. The Deputy Programme Manager will rigorously reconcile expenditure reports,(as mentioned in Section A of the Financial Case) against (i) relevant data on Aries; (ii) approved annual workplans and budget; and previous expenditure reports. Any discrepancies will be quickly raised with implementers and where required revisions to expenditure reports will be made. By this rigorous reconciliation, DFID will ensure that no illegitimate or unapproved expenditure will be funded by DFID as well as ensuring that no further tranches will be made if satisfactory performance is not evidenced by the reports.

In addition all delivery institutions will report to the Programme Management Board who will have oversight of monitoring project progress including budgetary planning and expenditure execution against agreed annual workplans and budgets. The Programme Management Board will be responsible for approving all work programmes.

DFID will also undertake sample visits to project sites or recipients to check on physical progress. These will be undertaken particularly during annual review missions.

Exit strategyDuring the course of the programme DFID will ensure there will be clear, concise and timely communication to all institutions on exit strategies, although we will address the issue of exit with particular focus after the midterm review. These communications will help all institutions to predict funding gaps for future years and plan accordingly.

AuditThe Programme will be subject to regular internal and annual external audit mechanisms defined by


requirements of standard DFID MOUs and Accountable Grants. Where appropriate, these will also take advantage of audit processes available through partners or SADC or DBSA.

DFID will also commission an external audit on a sample of projects that are funded by the CRIDF. Organisations benefitting from the CRIDF will have a requirement in their Grant Agreements to submit annual audited statements.

Budget allocation for audit is within the allocations for each respective output.


Management Case

A. What are the Management Arrangements for implementing the intervention?

Overall advisory strategic guidance to the programme will be through interaction with the SADC Water Division at the Water Strategy Reference Group. This group which enables ICP interaction with the SADC Secretariat and SADC Water Division is part of the institutional framework for the SADC Water Sector as illustrated below in Figure 5.

Figure 5: SADC Water Management Institutional Structure

Output 1Management of the majority of Output 1 will be undertaken by GIZ through a Delegated cooperation Agreement. This agreement will define precisely the roles and responsibilities of all parties in the management of the output. The GIZ activities under Output 1 will be jointly funded by GIZ (Euro 6,000,000) and AusAid (AUD 12,500,000). Whilst activities related to gender mainstreaming in transboundary water management will be carried out by UNDP, and activities relating to water, climate and development in the SADC region will carried-out by GWPSA, GIZ will procure these inputs on DFID’s behalf, and will assume ultimate responsibility for them.

Output 2Management of Output 2 will be undertaken by DBSA through a Memorandum of Understanding. This agreement will define precisely the roles and responsibilities of all parties in the management of the output. Since PPDF will also receive funds from the EC and KfW, their views will be sought in defining the MoU.

Output 3For Output 3 a Consortium will establish and manage the Climate Resilient Infrastructure Delivery Facility (CRIDF), selected through direct procurement via an international competitive tender. The facility will be hosted by DBSA to ensure synergy with the project preparation activities under Output 2. Through the contract awarded the roles and responsibilities in the management of the facility will


be clearly defined.

Management entities for respective outputs will have responsibility for successful delivery and robust technical and financial monitoring, progress assessment and reporting on their output. Six monthly and annual reports will be produced, with more frequent financial reporting as required. .

Programme Management BoardAlthough this programme has three areas of activities, it is important that it is managed as ‘one programme’, where synergies between outputs are exploited. A programme management board will be established to ensure integration of the various components of the programme to achieve the overall outcomes and impact. This board will comprise the managers of the different outputs, the DFID programme manager supported by a DFID lead adviser and a representative of the SADC Water Division. AusAid has also expressed interest to join the Board; final arrangements regarding their involvement will be agreed during programme inception during overall finalisation of Board Terms of Reference. The Board will be co-chaired by DFID and SADC Water Division. The board will meet at least six monthly and where possible link timing to the WSRG. These meetings will review the programmes strategy, technical progress and financial status, and discuss and give approval to annual work plans and budgets. Outcome and Impact level monitoring will be captured by RSAP M&E, supplemented by analysis commissioned by the Board as necessary.

This structure is detailed in Figure 7.

Figure 6: Programme Management Reporting Lines

Management processes and structure within DFID

This programme will be managed by a Deputy Programme Manager based in the DFID Southern Africa Regional Office in Pretoria, South Africa supported by the regional climate change adviser. He/she will meet regularly with the managers of each component. There will be approximately 0.3 FTE of DFID advisory input and 0.3 FTE DFID programme management. They will coordinate component reporting as necessary to meet DFID annual review requirements.

Annual Reviews where possible will draw on the cadre 10% contribution of advisors across DFID and would seek input from Research and Evidence Division, Infrastructure and private sector development cardres.

Financial reports, compliance and administrative functions will be managed by the DFID programme manager.

Summary reports will be provided on an annual basis as required for dissemination purposes,


Programme Management

Board

GIZ(output 1)

DBSA(output 2)

CRIDF(output 3)

UNDP GWP-SA

including to update the International Climate Fund Board.

B. What are the risks and how these will be managed?

The key risks internal to the programme are:

- The ability to successfully scale up the capacity building programme of GIZ in line with the additional funds that a becoming available.

- The full operationalisation of the PPDF and the ability of SADC / Member States to propose projects that meet the requirements of the PPDF.

- The identification of projects the preparation of which can be finalised and projects implemented within the life of the programme

Within the programme the reporting structures and evaluation are instituted in order to address these internal risks and ensure sustainability.

The key external risks to the programme are identified in the following Figure 7; mitigation measures are described and an indication of the impact of these measures is given. The fact that the programme is structurally embedded and aligned with RSAPIII, which is the result of extensive consultation amongst SADC Member States (both on it and related foundational policies and strategies), gives it a strong base legitimacy. While this is important and provides a mandated framework to work within, the programme design is also such that it is not overly dependent on SADC secretariat’s internal capacity (either in technical or financial management terms) nor on the state of particular SADC-Member State relationships which may vary over time. SADC has an overall facilitation role which is both appropriate and potentially value-adding but the programme design provides for (and financial resource distribution emphasises) interaction and support directly with various River Basin Organisations and also with Member States, which gives a vital flexibility to help navigate changes in the political landscape and relationships which are bound to occur over the programme lifetime.

Figure 7: Programme Risks and Mitigation

Risks Probability Impact(No mitigation)

Impact(With Mitigation)

Mitigation

1. SADC Political Consensus over approach to water resource negotiations reduces. a. Regionalb. River Basin

Regional Regional RegionalUnlikely to be more than individual Basin-wide. Output 1 supporting RSAP3 mitigates against disagreement between riparian states. Project design addresses need to ratify additional RBO agreements. Part of rationale of both outputs 2 and 3 is deliberately to help build and sustain political momentum.

River Basin River Basin River Basin

2. Weak Individual, organisational and Institutional Capacity fails to deliver.

Pooled ICP resources through GIZ provides coherence to single PoC for SADC support and potential to address issues. Output 1 supports


capacity building at all levels.

3. Larger-scale Project Preparation and transaction support fails to deliver.

Expectation and timescale-management will be part of Output 2 process. DBSA can be proactive in identifying finance.

4. “Dead-weight loss” of Public Funds when there is no funding for prepared projects.

Significant reputational loss issues and threatens finance supply. A risk to be considered when addressing market failure. Interventions under Output 2 will be proactive in identifying finance

5. Medium & Small-scale demonstration and pilot programmes not/poorly implemented.

Programme Programme

This will weaken political support for SADC Water protocol & process. Competent design & delivery agents will be appointed under Output 3 to support Output 1 activities.

Beneficiaries Beneficiaries

6. Demand outstrips resource supply.

This situation already exists – support to the implementation of RSAP3 mitigates & provides a platform for additional resources to be drawn-in. Does not significantly impact programme performance.

7. SADCs infrastructure prioritisation project does not result in the selection of the most appropriate projects.

Programme will support infrastructure prioritisation through both Outputs 1 and 2.Infrastructure delivery will be supported through Output 3.

Key: Red – High. Amber – Medium. Green – Low

Information on the climate change and environmental risks and opportunities are given in the Appraisal Case section.

C. What conditions apply (for financial aid only)?

Not applicable, as the programme does not involve financial aid to government.

D. How will progress and results be monitored, measured and evaluated?


The monitoring and evaluation strategy will include a number of components:

1. Monitoring plan. The Programme Management Board will oversee provision of the relevant monitoring information, in line with the monitoring plan, through annual progress reports from the agencies responsible for the various components, enabling annual review by DFID, including progress against all logframe targets. This plan will be based on the detailed monitoring plan for each of the components, and will prioritise monitoring of the key indicators in the programme logframe.. Monitoring will as far as possible be incorporated into routine monitoring being conducted by the institutions/contractors responsible for the outputs, and integrated into the RSAP3 wide monitoring framework. Utilising and building on the results-based M&E system developed by GIZ for its programme, the RSAP3 and for RBOs like LIMCOM and ORASECOM, a progressively more detailed approach will need to be undertaken. For example, initially number and nature of projects will be tracked but with assumptions to estimate number of beneficiaries, but over time implementing agencies will deepen monitoring and reporting of beneficiaries (including, if appropriate, through sample based approaches) to ensure a robust basis to report on number of beneficiaries by mid/end of project. .

2. Output 1 progress and results will be monitored by GIZ. During the second phase of the Transboundary Water Management in SADC programme GIZ put significant effort into establishing a results-based monitoring system. While the system still requires significant refinement, this is already underway and it provides a firm basis to deliver reporting on progress on indicators for output 1. Transparency is a key theme underpinning the system, with an Internet-based version shortly to go live. GIZ will be responsible for securing the required annual progress information from any major sub-contractors – eg GWP and UNDP.

3. Output 2 progress will be monitored by DBSA. The reporting arrangements for the PPDF are defined in the operational guidelines that have been approved by SADC. DBSA will submit progress reports on the activities of the PPDF, including applications, projects and programs financed out of the resources of the PPDF and the status of financed projects. The PPDF will be audited on an annual basis. The reports shall include the following:

a) a description of each activity approved since the last progress report;b) consultants contracted by the sponsor;c) brief description of the progress of on-going activities;d) brief description of any proposed activities still under consideration;e) a summary, in table form, of all Facility activities;f) data on the approval process (e.g. number of requests received and number

approved, time taken to approve, etc);g) a copy of the final version of each study completed; h) a statement of cumulative receipts and expenditure; andi) a statement of used resources of the Facility.

4. Output 3 monitoring will be carried out by the contractor appointed to operate the CRIDF. Monitoring will be integrated into each element of the contract design and implementation process. This will include specified milestones (reflecting each stage of the facilities operation including project selection, design and implementation) at which performance will be assessed, and payment will be made according to outputs at each of these stages.

5. The current headline targets and results presented in the logframe have been defined to take into account the demand-led and strong process dimensions to the programme. Nevertheless, the results actually achieved will depend on the specific nature of the demand that ultimately materialises during the programme period, especially in relation to the infrastructure support elements, where the facilities are deliberately designed to have a level


of flexibility. Moreover it is appropriate that final investment priorities focus where the greatest gains can be made, and make the most of political momentum and reward evolving demonstration of strong performance. Expected results may therefore need to be adjusted as programme implementation proceeds. Any relevant adjustments will be identified through the annual review process. Logframe adjustments may also be made within programme inception period (up to 4 months) in order to i) review levels of ambition and identify additional milestones where possible to reflect the new DFID scoring system ii) address specific residual definitions and baseline issues (such as relating to improved water supply definition and outcome 3 upstream notification baseline); and iii) to enhance alignment with headline climate change indicators for DFID’s Results Framework (expected to be finalised within 1st quarter 2012). These aspects will all be confirmed by April 2012.

6. The programme will undergo an internal DFID annual review process in each year of the programme. In addition independent review and evaluation will be undertaken at two key points: a mid term review and formative evaluation at the end of Year 2, and an evaluation including assessment of impact at the end of the programme. These will be led by an independent evaluation consultant (or team), and should include expertise from governance, civil society organisations and beneficiaries. The mid term review at the end of year 2 will include:

a. A review of progress against the logframe indicators;b. A review of the logframe indicators based on the M&E system that is being developed

for RSAP3;c. Progress with the PPDF in terms of project selection and securing additional financing

from ICPs;d. An assessment of the risk mitigation plan implementation and a re-assessment of risk

for the remainder of the programme;e. A review of progress on establishing criteria for the selection of small scale climate

resilient water infrastructure projects, and a discussion with the WB on how these criteria need to be revised to meet their requirements;

f. A review of progress on the GWPSA Water, Climate and Development programme;g. Decisions on any reallocations of the funds to ensure efficient and effective spend.

7. In addition, the formative evaluation element at this stage will be designed to learn lessons around the effectiveness, efficiency and relevance of the programme to date, in order to inform and improve the implementation of the programme over its final two years. We suggest external peer scrutiny of the Year 2 review and formative evaluation, with the findings being incorporated into the implementation of the second half of the programme.

8. An independent evaluation will be undertaken at the end of the programme (and/or possibly beyond the end of the programme to test longer term impact, subject to separate approval - see paraqraph 9). Evaluation questions at this stage will focus on assessing the impact of the programme’s key components and their sustainability. (Possible evaluation questions include: What have proven to be key drivers of cooperative management and investment; Do River Basin Organisations lead to increased investment in transboundary water infrastructure?; What role have the infrastructure facilities had in increasing infrastructure delivery and in leveraging investment from various sources?; Has the mainstreaming of gender resulted in the greater involvement of women in planning and delivery as well as them being beneficiaries of the programme?; impact on climate resilience? Sustainability of the capacity built in RBOs through the project?). The final evaluation is also likely to include the other DAC evaluation criteria assessed during the mid term formative evaluation, depending on the strength of evidence it has already provided. We will work with programme partners during the first six months of the programme to identify the most relevant evaluation questions, and establish what type of evaluation design would be most appropriate to assess these, in time to ensure any data needs for evaluation are incorporated into programme monitoring plans. It


will not necessarily be feasible to undertake a rigorous impact evaluation for this project, but we will explore scope for meaningful control groups.

9. An initial allocation of £300,000 has been made to cover M&E for the programme (just under 1% of total programme costs). This is viewed as a minimum amount required to adequately cover the planned evaluations and supporting evidence and analysis for this programme. It includes approximately £60,000 to cover the costs of independent consultant team to lead the formative evaluation at the end of year two; approx £140,000 to fund an independent consultant team to lead an evaluation at the end of the programme, including assessment of impact; and £100,000 to support additional pieces of independent analysis or data collection to help capture evidence during the programme implementation which is identified as important to inform programme strategy and the final evaluation/assessment of impact. If a decision is taken in the first months of the project that rigorous impact evaluation will be feasible, a separate Business Case will be prepared to request additional funding to cover the substantially higher costs of this form of evaluation, including any necessary data collection. It is expected that the additional costs of a rigorous impact evaluation could be up to £2 million (bringing the M&E cost to around 6% of total programme costs). External audit costs?

10. Governance arrangements: We intend to ask GIZ as implementing agent for the programme to manage the process of commissioning the mid and end programme independent evaluations. An Evaluation Reference Group will be set up with representatives from GIZ, funding partners, SADC and one or two River Basin Organisations. The group will have a formal role in identifying the evaluation questions, designing and approving terms of reference, ensuring an appropriate process is followed to select the independent evaluation team amongst bidders, and will be the body to which the independent evaluation team reports. If following more detailed discussions in the inception period, it is determined that the safeguards for independence are insufficient, DFID will contract the evaluations directly (with the same Evaluation Reference Group).

11. A key element of all the components of the monitoring process is the maintenance / expansion of the literature / evidence base. This evidence will be disseminated to programme partners, policy makers and beyond (such as AMCOW, other Regional Economic Commissions, and associations of River Basin Organisations) to maximise uptake and impact of the findings and promote transparency. Results will be published through the DFID website. We believe that through the dissemination of lessons learned on the programme, and the publication of achievements, the potential for leverage of significant additional co-funding from the ICPs for the implementation of the RSAP will be enhanced.

12. Details of impact, outcome and output indicators are provided in the programme logframe together with sources, baselines and targets.

.Logframe

Quest No of Logframe for this intervention: 3374836


ENDNOTES:

(Note: DFID commissioned 12 background papers to inform our design, which are referenced below. We have fully incorporated all key findings into the Business Case, which we intend to be read as a stand-alone document. However, readers in search of additional information can obtain these background papers documents from DFID SA.)

1 UNEP 2010, Assessment of transboundary freshwater vulnerability in Africa to climate change. UN Environment Programme.2 Regional Climate Change Programme: Strategic transboundary Water resources Assessment. Nov 2009.3 Revised Protocol on Shared Watercourses. SADC. August 2000.


Documents

Business Case and Intervention Summary · Web viewContext and need for DFID intervention 8 Impact and Outcome 15 Appraisal Case 16 Feasible Options & Theory of Change 16 Assessing