Language : ENGLISH Original : FRENCH

PROJECT : Semi-Urban Drinking Water Supply and Sanitation COUNTRY : CAMEROON PROJECT APPRAISAL REPORT Date: September 2008

Appraisal Team

Team Leader : I. A. TRAORE, Principal Water and Sanitation Engineer, OWAS 1 Team Members : K. BA, Principal Financial Analyst, OWAS.1 P.HORUGAVYE, Senior Socio-Economist, OWAS 1; S. BARA, Senior Gender Expert, OWAS1; R. COFFI, Principal Procurement Expert, ORPF.1; D. KOUASSI, Principal Disbursement Officer, FFCO.3; M. M. M. DEME, Principal Legal Counsel, GECL.; S. MBA, Infrastructure Expert, CMFO; M. EL-GHALI, Consultant/Financial Analyst, OWAS1; I. SAMBA, Consultant/Environmentalist, OWAS1. Sector Division Manager : S. WASSEL, OWAS.1 Resident Representative : A. GAHUNGU, CMFO Sector Director : A. R. RAKOTOBE, Director, OWAS Regional Director : J.M.GHARBI, Director, ORCE

Peer Reviewers

M. MOUMNI, Chief Water and Sanitation Engineer, OWAS 1; M. NZAU, Chief Socio-Economist, OSHD.3; M. DIENE, Chief Infrastructure Expert, ORQR.3; B. TRAORE, Chief Transport Engineer, OINF.1; H. KAMOUN, Consultant, Financial Analyst, OWAS.1; O. SOMALI, Consultant, Financial Analyst, OINF.3

FONDS AFRICAIN DE DEVELOPPEMENT AFRICAN DEVELOPMENT FUND

TABLE OF CONTENTS I. Strategic Orientation and Rationale 1 1.1 Project Linkages with Country Strategy and Objectives 1 1.2 Justification for Bank Intervention 1 1.3 Aid Coordination 2 II Project Description 3

2.1 Project Components 3 2.2 Technical Options and Alternatives Considered 4 2.3 Project Type 4 2.4 Project Cost and Financing Arrangements 5 2.5 Project’s Target Area and Beneficiaries 6 2.6 Participatory Approach 7 2.7 Consideration of Bank Group Experience and Lessons Learnt in Project Design 7 2.8 Key Performance Indicators 7

III Project Feasibility 8

3.1 Economic and Financial Performance 8 3.2 Environmental and Social Impacts 8

IV Implementation 10

4.1 Implementation Arrangements 10 4.2 Monitoring 13 4.3 Governance 13 4.4 Sustainability 14 4.5 Risk Management 14 4.6 Knowledge Development 15

V Legal Framework 15 5.1 Legal Instruments 15 5.2 Conditions for Bank Intervention 15 5.3 Compliance with Bank Policies 16 VI Recommendation 16 Appendix I Comparative Socio-Economic Indicators 1 Appendix II Table of Ongoing ADB Portfolio in the Country 1 Appendix III Key Related Projects Financed by the Bank and Other Development Partners 1 Appendix IV Map of the Project Area 1

CURRENCY EQUIVALENTS

(August 2008)

UA 1 = CFAF 681.074 UA 1 = EUR 1.03829 UA 1 = USD 1.62088

FISCAL YEAR

1st January – 31 December

WEIGHTS AND MEASURES

m = metre lm = linear metre m3 = cubic metre km = kilometre l/d/inhab. = litre per day per inhabitant 1 kg = 1 kilogramme

LIST OF ABBREVIATIONS DWS : Drinking Water Supply DWSS : Drinking Water Supply and Sanitation SP : Standpipe CAMWATER Cameroon Water Utilities Corporation CAA Autonomous Sinking Fund CDE Camerounaise des Eaux (Cameroon Water Company) CGT : Gender-Sensitive Washroom Complex DCET Directorate of Economic and Technical Cooperation DHH : Directorate of Water Resources and Hydrology CSP Country Strategy Paper PRSP Poverty Reduction Strategy Paper FEICOM : Special Capital Development and Inter-Communal Intervention Fund IWRM : Integrated Water Resource Management IEC : Information, Education and Communication MINEE : Ministry of Mines, Energy and Water MINEPAT Ministry of Economy, Planning and Regional Development MINPROFF : Ministry of Women’s Affairs and the Family MSP : Ministry of Public Health MINDUH Ministry of Urban Development and Housing PEFA : Public Expenditure and Financial Accountability PEMFAR : Public Expenditure Management and Financial Accountability Review ESMP : Environmental and Social Management Plan SNEC : Cameroon National Water Company PCU : Project Coordinating Unit VIP : Ventilated Improved Pit

ii

Project Information Sheet

Client Information BORROWER : Government of Cameroon EXECUTING AGENCY : Ministry of Energy and Water Financing Plan

Source Amount (UA) Instrument

ADF 40,000,000

Loan

Government 4,480,000 Beneficiaries (Communes) 1,100,000 TOTAL COST 45,580,000

ADB Key Financial Information

Loan Currency

Euro

Interest Type NA Interest Rate Margin NA Commitment Fee 0.50% on the undisbursed

loan amount over a period starting 60 days after signature of the loan agreement

Service Charge 0.75% per year on the amounts disbursed and outstanding.

Maturities Every 6 months, from the 11th to the 50th year

Grace Period 10 years IRR, NPV (baseline scenario) 11.94%, CFAF 3.02 billion ERR (baseline scenario) 18.5%, CFAF 15.8 billion

Timeframe- Main Milestones (expected)

Concept Note Approval

August, 2008

Project Approval January, 2009 Effectiveness June, 2009 Last Disbursement June, 2013 Completion December, 2013 Last Repayment December 2059

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EXECUTIVE SUMMARY

1. The Semi-Urban Drinking Water Supply and Sanitation (DWSS) Project will cover 19 Communes, in six Provinces of Cameroon, namely Centre, Far North, Littoral, West, South and South-West. The 19 Communes will be supplied from 16 water supply schemes managed by CAMWATER. The Project will help meet the drinking water requirements of, and provide adequate sanitation services to the inhabitants of these Communes. The implementation duration is 60 months. Its total cost of UA 45.58 million will be financed from an ADF loan of UA 40 million, a Government contribution of UA 4.48 million and from beneficiaries to the tune of UA 1.10 million. The Project will benefit the 1.15 million inhabitants of these Communes, 51% of whom are women. It will also benefit CAMWATER, Camerounaise des Eaux, the decentralised structures of the Directorate of Water Resources and Hydrology, the municipalities, SMEs, women’s associations and other NGOs that will be involved in its implementation. In addition, the Project will build the capacity of MINEE, MINEPAT, MINPROFF and FEICOM. 2. The Project will improve the living environment of the inhabitants of the 19 Communes. It will contribute significantly to reducing the outbreak and spread of water-borne diseases as well as the infant and maternal mortality rates. Financing by the Project of social connections will enable poor households to access drinking water at affordable prices. The Project will also permit the creation of jobs through local private micro-enterprises. 3. The 19 Communes targeted have not benefited from any investment in the drinking water and sanitation sector for more than two decades, leading to a severe deterioration of the DWSS systems. In this regard, the Bank’s strategy for the 2008-2009 period, following the mid-term review of the 2005-2009 CSP, conducted in September 2007, confirms the need to pursue support to strengthen drinking water supply and sanitation (DWSS) during ADF-11. This support falls under Pillar II of the CSP relating to infrastructure development to combat poverty. In light of the foregoing, and to meet the expectations of the population, the Government considered that the rehabilitation and extension of the existing drinking water supply systems was a better option than the construction of new networks. Furthermore, the building of latrines was preferred to that of more costly sewage systems that are not guaranteed to be self-cleaning. Finally, the option of separating hospital waste from the other waste of the Communes was considered more suitable for preserving the population’s health. 4. In terms of comparative advantage, the Bank provided support to the Cameroonian Government in the preparation of the DWSS studies in the 19 Communes in 2004. Its experts therefore familiarised themselves with all the Project data, its environment and the concerns of the beneficiaries. Moreover, the Bank has solid experience in the implementation of drinking water supply and sanitation projects in semi-urban areas. In addition to experts at its Headquarters, the Bank will mobilise the expertise of its Regional Office and appropriate technical assistance to help the country manage the Project. The Project will help generate new knowledge in: (i) the monitoring of water resources and its effects on climate change in Cameroon; (ii) the installation and management of Gender-Sensitive Washroom Complexes (CGT) and (iii) the strengthening of Public-Private Partnership in the water sector in order to improve the well-being of the Project beneficiaries, particularly women and the most disadvantaged.

iv VII. Results-Based Logical Framework

HIERARCHY OF OBJECTIVES

EXPECTED OUTCOMES REACH

(Beneficiaries)

PERFORMANCE INDICATORS

BASELINE, INDICATIVE

TARGETS AND TIMEFRAME

ASSUMPTIONS/RISKS

PROGRAMME GOAL Reduce poverty among the Cameroonian population through achievement of the water and sanitation MDGs

LONG-TERM OUTCOMES (Impact) By 2015 1) Incidence of poverty is reduced 2) Morbidity and mortality are reduced 3) The MDGs for drinking water in Cameroon are achieved; 4) The MDGs for sanitation are achieved;

Beneficiaries Cameroonian Population

Impact Indicators 1) Poverty Indicator 2.1) Infant and child mortality rate 2.2) Maternal mortality rate 2.3) Incidence of malaria 3) Rate of access to drinking water 4) Rate of access to sanitation Sources: INS statistical data and reports of health facilities

Baseline and Long-Term Progress Expected By 2015 1) Drop in poverty index from 40.2% (currently) to at least 30% (-12.2%) 2.1) Drop in infant and child mortality rate from 87.5 per thousand (currently) to 43 per thousand (- 51%); 2.2) Drop in maternal mortality rate of 430 per 100,000 births (currently) to 107.5 per 100,000 births (-75%); 2.3) Drop in incidence of malaria from 11%, currently, to 3% (-78%); 3) Increase in rate of access to drinking water from 58% to 79% (+21%) 4) Increase in rate of access to sanitation from 17% to 59% (+42%)

Implementation of national health programme planned in the PRSP Satisfactory implementation of programme of access to drinking water and sanitation Continued support from donors

PROJECT OBJECTIVE Improve the living environment of the communities through better access to drinking water and sanitation in the 19 Cameroonian Communes (Akono, Bafia, Ngoumou, Kousseri, Loum, Manjo, Mbanga, Nkonsamba, Bafan, Banka, Bana, Banganté, Bangou, Bansoa Penka-Michel, Foumban, Ebolowa, Sangmélima, Kumba and Mamfé).

MEDIUM-TERM OUTCOMES By 2013 (Impact) 1) The prevalence of water-borne diseases, faecal peril and other pollution-related diseases, such as malaria, is reduced in the 19 Communes concerned Intermediate Impact 2) Communities’ access to drinking water and sanitation in the 19 semi-urban Communes is improved; 3) The communities’ awareness of hygiene and health is increased; 4) The participation of masons and artisans in the construction and maintenance of the facilities is increased; 5) The involvement of women’s associations in the Project is improved; 5) The number of pupils educated in hygiene and health is increased; 6) Creation of micro-enterprises in water and health.

Beneficiaries -Communities served in the towns targeted by the Project, i.e. 1.15 million people, for drinking water, and 0.56 million people for sanitation; - The population of the 19 Communes. - Idem; - Masons and artisans; - Women’s associations in the 19 Communes ; - Sector stakeholders

Impact Indicators 1) The average prevalence rate of water-borne-diseases and faecal peril in the 19 Communes. Intermediate Impact Indicators 2.1- Rate of access to drinking water; 2.2- Level of average per capita daily water consumption; 2.3- Reduction of water rates in deprived neighbourhoods; 2.4- Rate of access to sanitation; 2.5 Reduction of time spent by young people, mainly girls, to fetch water 3.- Number of people sensitised; 4 – Number of masons and artisans involved; 5.-Number of women’s associations involved; 6.- Number of pupils (girls and boys) receiving lessons in hygiene and health; 7- Number of micro-enterprises in the drinking water and sanitation sectors created through the Project.

Baseline and Medium-Term Progress Expected By 2013 1.1) Drop in average prevalence rate of water-borne diseases from 2% (currently) to 1% in the 19 Communes ; 1.2) Drop in poor hygiene-related malaria from 2% (currently) to 1% in the 19 Communes and in HIV/AIDS 2.1- Increase in average rate of access to drinking water in the 19 Communes from 24% (currently) to 80% (+56%); 2.2- Increase in average water consumption from 13l/per capita/daily (currently) to 20l/ per capita/daily, for all facilities; 2.3- Price of water per m3 drops from CFAF 1000 to about CFAF 368; 2.4- Increase in average rate of access to sanitation services in the 19 Communes from 13% (currently) to 40% ; 2.5 At least 1 hour saved on water fetching chores 3- 50% of the population, no baseline situation; 4. The number of masons and artisans increase by at least 20% 5- At least 19 women’s associations; baseline situation to be established; 6- All public primary school children (boys and girls) in the 19 Communes; 7. A minimum of 16 water and sanitation micro-

-Institutional capacity building of central, provincial, divisional and sub-divisional structures; - Improved governance in the sector; - Involvement of existing women’s associations.

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HIERARCHY OF OBJECTIVES

EXPECTED OUTCOMES REACH

(Beneficiaries)

PERFORMANCE INDICATORS

BASELINE, INDICATIVE

TARGETS AND TIMEFRAME

ASSUMPTIONS/RISKS

enterprises created of which at least 7 belong to women

INPUTS/ACTIVITIES 1. Works 1.1- Rehabilitation and construction of DWS facilities in the 19 semi-urban Communes and extension of the water supply network; 1.2- Family and public sanitation facilities put up in Project area; 2. Capacity Building 2.1. Training of DHH, FEICOM and CAMWATER officials in Bank’s procurement rules and procedures, including the members of the Special Procurement Commission; 2.2. IEC campaigns in schools and within the councils of the 19 Communes; 2.3. Logistical support to Municipal Councils of semi-urban Communes; 2.4. Training and equipping of artisanal masons; 2.5 Logistical support to the 19 MINPROFF branch offices; 3. Recruitment of Service Providers

OUTPUTS 1.1.1 DWS facilities rehabilitated or built in the 19 semi-urban Communes; 1.1.2 Standpipes built/rehabilitated; 1.1.3 Private connections, including social connections made; 1.2.1 Gender-sensitive washroom complexes (CTG) built in central markets and stations; 1.2.2 Solid waste dumps; 1.2.3 Incinerators in public hospitals; 1.2.4 Latrines in public schools; communal latrines in other public places; 2.1.1 DHH officials trained; 2.1.2 CAMWATER officials trained; 2.1.3 FEICOM officials trained 2.2.1 Teachers sensitised and teaching hygiene and health modules to pupils 2.2.2 Awareness of mayors and municipal councillors raised about linkage between hygiene, sanitation and health; 2.3.1 Municipal Councils and Town Halls equipped; 2.4.1 Artisanal masons trained and equipped with kits; 2.5.1 Officials of MINPROFF branch offices in the 19 Communes equipped with training and outreach tools;

Beneficiaries Entire population of the 19 semi-urban Communes targeted by the Project (1.2 million people) 51% of whom are women, i.e. 613,000 individuals; Population of the 19 Communes.

DHH, CAMWATER and FEICOM officials; -Primary school teachers and pupils -Members of Municipal Councils. Municipal and Town Councils. Artisanal masons. Officials of MINPROFF

branch offices in the

Output Indicators 1.1 Number of new DWS facilities installed and existing facilities rehabilitated; 1.2 Number of standpipes installed; 1.3 Number of social connections made; 2.1 Number of CTGs built; 2.2 Number of waste dumps installed; 2.3 Number of incinerators built; 2.4 Number of latrines built and operational in public places; Source: (DHH, CAMWATER, CDE, Ministries and Communes involved).

2.1.1 Number of DHH officials trained; 2.1.2 Number of CAMWATER officials trained 2.1.3 Number of FEICOM officials trained 2.2.1 Number of teachers sensitised; 2.2.2 Number of Municipal Councils sensitised and taking over awareness raising activities in the communities; 2.3.1 Number of municipalities equipped; 2.4.1 Number of artisanal masons trained and equipped; - Staff of MINPROF offices trained;

Short-Term Progress Expected: 1.1 Rate of installation of new DWS facilities, (100%) in the 19 semi-urban Communes in 2013 ; 1.2 160 standpipes; 1.3 14000 private and social connections (100%); 2.1 20 Gender-Sensitive Washroom Complexes (CTG) built; 2.2 16 waste dumps installed; 2.3 20 incinerators built; 2.4 200 latrines and hand-wash basins built; 2.1.1 10 DHH officials trained in procurement and operational by end 2010 ; 2.1.2 5 CAMWATER officials trained in procurement by end 2010; 2.1.3 5 FEICOM officials trained by 2010 2.2.1 320 teachers sensitised; 2.2.2 190 relay Municipal Councils for mobilisation and awareness raising on hygiene, water and health trained; 2.3.1 19 municipalities equipped; 2.4.1 150 artisanal masons trained; 2.5.1. 19 officials equipped with training tools

- Institutional capacity building of DHH, CAMWATER, MINPROFF branch offices and Communes; - Ownership by MINEE; - Maintaining hygiene and health module in lessons dispensed; -Involvement of Town Halls and Municipal Councils; - Steady increase in maintenance budgets of Communes. - Setting up of a specialised procurement commission for all amounts; - Effective monitoring/evaluation mechanism put in place.

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HIERARCHY OF OBJECTIVES

EXPECTED OUTCOMES REACH

(Beneficiaries)

PERFORMANCE INDICATORS

BASELINE, INDICATIVE

TARGETS AND TIMEFRAME

ASSUMPTIONS/RISKS

3.1 Recruitment (i) of PCU experts, (ii) consultants for works supervision and control, and for audits; and (iii) of Consultant for water resource assessment 3.2 Recruitment of service providers (NGOs) of IEC; 3.3 Recruitment of contractors for works. FINANCIAL RESOURCES ADF Loan: UA 40 000 000 Government: UA 4 480 000 Beneficiaries: UA 1 100 000 TOTAL : UA 45 580 000 DWS Facilities: UA 33 220 000 Sanit. Facilities: UA 7 550 000 Inst. Support: UA 2 250 000 Management & Coord.: UA 2 560 000

3.1.1 Baseline socio-economic and gender indicators updated (through monitoring and evaluation); 3.1.2 Quality of works ensured through supervision and control; 3.1.3 Project audits conducted; 3.1.4 Water resources of Cameroon assessed. 3.2.1 Awareness of population of 19 Communes raised 3.3.1 DWS works executed; 3.3.2 Sanitation works executed

19 Communes.

MINEE, MINHDU ; - MINEE, Communes

and other Ministries involved;

NGOs and other service providers Local contractors Major DWS construction companies;

-Gender and socio-economic indicators available and up to date; - Socio-economic impact indicators drawn up. - Water resources assessed. Sources: PCU, MINPROFF, Communes, associations, consultancy firms and other service providers.

3.1.1 Mid-term update of socio-economic and gender indicators. 100% in 2010 ; 3.1.2 Satisfactory quarterly activity reports available 3.1.2 Audit reports available each year, from 2009 to 2013; .3.1.4 Water resource assessment report available by end 2010;

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Sept Oct Nov Déc Janv Feb. Mar Avr Mai Juin Juil Août Sept Oct Nov Déc Janv Fév Mar Avr Mai Juin Juil Août Sept Oct Nov Déc Janv Feb. Mar Avr Mai Juin Juil Août Sept Oct Nov Déc Janv Feb. Mar Avr Mai Juin Juil Août Sept Oct Nov Déc Janv Feb. Mar Avr Mai Juin Juil Août Sept Oct Nov Déc

PREPATORY PHASEProject AppraisalPeer Review Country Team Review AD F Loan ApprovalSigning of 'Loan AgreementLoan EffectivenessCompliance with Disbursement Conditions

A DWS COMPONENTA.1 TECHNICAL ASSISTANCE

Recruitment of ConsultantMobilisation of ConsultantPrep. of Engineering Designs' Works Control & Supervision

A.2 WORKS IMPLEMENTATIONRecruitment of ContractorMobilisation of ContractorWorks Implementation

A.3 SOCIAL CONNECTIONS

A.4 SUPPLY OF EQUIPMENTSelection of SupplierPreparation of lotsDelivery & Installation of Equipement & Materials

B. SANITATION COMPONENTB.1 TECHNICAL ASSISTANCE

Recruitment of ConsultantMobilisation of ConsultantEngineering Designs ' Works Control & Supervision

B.2 WORKS IMPLEMENTATIONRecruitment of ContractorMobilisation of ContractorImplementation of Works

C. INSTITUTIONAL SUPPORT C.1 STUDIES

Procurement Impl. of Studies

C.2 TRAININGProcurementTraining of Staff

D. PROJECT MANAGEMENT Recruit of PMU Tech Asst. l ' Firm Tranchee Conditional Tranche

Mobilisation of ConsultantPMU Tech.' Assistance l ' Project Monitoring by DHH and CAMWATERAudit Environmental & Social Impact Monitoring

E. PROJECT COMPLETION Gov’s Completion Report ' omPreparation of Bank' Completion Report

' 2008 2009 2010 2011 2012 2013

Report and recommendation of the Bank Group Management to the Board of Directors for a proposed loan to Cameroon for the supply of drinking water and sanitation in

semi-urban areas Management hereby submits this report and recommendations for a proposed loan of UA 40 million to the Government of Cameroon for financing the Semi-Urban Drinking Water Supply and Sanitation (DWSS) Project. I. STRATEGIC ORIENTATION AND RATIONALE

1.1 Project Linkages with Country Strategy and Objectives 1.1.1 The Government confirmed in the PRSP II, which is being finalised and covers the 2008-2012 period, that the drinking water and sanitation sector remains one of its priorities. The Results-Based Country Strategy Paper (RBCSP) was the subject of a mid-term review for the 2007-2009 period and confirmed the pillars adopted in the previous paper. The Bank will continue to focus on two pillars: (i) promoting good governance and (ii) supporting infrastructure development. With regard to the second pillar, the Bank intends to continue its support to the strengthening of the DWSS sector and the implementation of electrification programmes as well as programmes for the extension of the primary and feeder road networks. 1.1.2 This project is in line with Pillar 2 of Cameroon’s RBCSP on infrastructure development. It will improve the living conditions of the people by rehabilitating and extending the drinking water supply and sanitation systems of 19 semi-urban Communes. 1.2 Justification for Bank Intervention 1.2.1 The water and sanitation sector is beset with institutional, technical and financial problems including a multiplicity of actors, overlapping of roles and responsibilities, weak capacity of the national structures in charge of the sector and very little coordination among the various actors. The dilapidated state of facilities and equipment has resulted in poor production performance and low rates of access to drinking water and sanitation (24% and 17% respectively) in the Communes, all this due to the lack of investment for infrastructure development and maintenance. A further effect of this is a high prevalence of water-borne diseases – up to 2% in the project’s 19 target Communes. Between 2005 and 2008, the Government of Cameroon undertook extensive restructuring of the sector and developed a medium-term intervention plan in a bid to improve this situation. 1.2.2 This restructuring is fairly well advanced. There exists currently a rural and urban water supply policy and strategy, a private water company, ‘ la Camerounaise des Eaux’ (CDE) in charge of the management of water distribution in urban areas, and an asset-holding public company, the Cameroon Water Utilities Corporation (CAMWATER) to manage the development of the drinking water supply sub-sector in urban areas. All these measures have created an enabling environment for investments in the DWSS sector which donors have begun to support. Having helped the Government of Cameroon to prepare DWSS studies in the 19 Communes in 2004, the Bank was subsequently requested to finance this top priority project that emerged from the study. The Government’s choice was prompted by the Bank’s experience in the implementation of drinking water and sanitation projects in semi-urban areas.

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1.3 Aid Coordination 1.3.1 The coordination of donors is illustrated in the table below:

Importance

Sector or sub-sector*

GDP Exports Labour

Drinking Water and

Sanitation 0.003% 0.01% 0.01%

Stakeholders – Annual Public Expenditure (Average)***

Government Donors

[UA 5.43 million] [UA 126 million ] World Bank [42.1%]

[4%] [96%] Exim Bank of China [11.1%]

AFD [27%]

ADB [19.8%]

Level of Aid Coordination Existence of thematic working groups [yes] Existence of an overall sector programme [yes] Role of ADB in aid coordination****

[M]

* as most appropriate ; ** Years [Y1 to Y2] ; *** for this sector or sub-sector **** L: Leader; M: Member, but not Leader; None: No involvement

1.3.2 The drinking water supply sub-sector in urban areas is financed basically through external funds. The principal donors in this sub-sector are the World Bank, AFD and Chinese Cooperation. Recent major projects are: (i) World Bank, US$ 45 million for the rehabilitation of production facilities and improved access to drinking water in Douala and Yaoundé; (ii) Eximbank of China, US$ 21 million for enhancing drinking water production in Douala; and (iii) AFD, through financing urban planning and sanitation projects in Douala with funds provided under the Debt Relief and Development Contract (C2D), which represent part of the country’s debt relief by the French Government. It must be mentioned that the C2D funds cover various sectors including stormwaterr drainage in Douala, education, health, agriculture and forestry. In addition, the AFD and EIB are planning to finance DWSS projects in Yaounde, Douala, N’Gaoundere, Bertoua and Edea at an estimated cost of Euro 80 million in 2009. 1.3.3 The donors have created a Multi-Donor Coordination Committee whose activities were, until recently, focused on Governance. At the instigation of the Bank and other partners, the Committee decided to create a “Water, Energy and Sanitation” Sub-Group with the World Bank as lead agency. This was a recommendation by the Bank’s appraisal mission for this project. Coordination among the various DWSS sector partners is thus gradually improving. However, the MINEE, which is supposed to take the lead in the formulation, implementation and monitoring of policies, lacks the required technical and institutional capacity. The World Bank thus intends to invest in capacity building for MINEE to enable it perform this function.

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II. PROJECT DESCRIPTION 2.1 Project Components

Component Cost of Component

Description of Components

A1 Drinking Water Supply (DWS) Facilities

UA 33.22 million

DrinkingWater Supply: • Construction of one borehole with a flow rate of 535 m3/d, two intakes with a

capacity of 6,500 m3/d, two treatment plants with 6,500 m3/d capacity, seven 6,000 m3 reservoirs, 35,810 ml of pipelines for the primary network, 95,146 ml of pipelines for the secondary and tertiary networks, 16 store/workshops and 14 000 private social connections;

• Rehabilitation of 286,500 ml of existing water supply networks, 295 standpipes and 9,732 private connections..

• Supervision and control of DWS works; • Behaviour change communication (BCC) campaigns for school teachers, women’s

associations, community advisors and urban dwellers on health and hygiene, cleanliness and maintenance of water points, clean water at the consumption point, prevention of diarrhoea, typhoid and STI/HIV/AIDS; and

• Environmental and social monitoring of works; A2

Sanitation Facilities

UA 7.55 million

Collective Sanitation in Urban Communities and Public Buildings. • Construction of : 20 gender-sensitive washroom complexes; 18 dump sites, 36 ha with 11,900 m fencing; 43 incinerators in 43 hospitals and community health centres; 43 septic tanks in 43 hospitals and community health centres; 42 sanitary facilities for 42 community health centres 640 latrines in 79 public schools; 200 communal latrines in other public places ; 33 tractors; 161 tipper trucks ; 18 kits of waste collecting tools ; 18 motor cycles; 36 km of access road to rubbish dumps; • Supervision and control of sanitation works; • Behaviour Change Communication (BCC) campaigns for school teachers,

women’s associations, community advisors and urban dwellers on health and hygiene, cleanliness and maintenance of water points, clean water at the consumption point, prevention of diarrhoea, typhoid and STI/HIV/AIDS ;

• Environmental and social monitoring of sanitation works; B Institutional

Support for Structures Involved in the Project

UA 2.25 million

Capacity Building for Structures Involved in the Project • Procurement of laboratory and workshop equipment kits, 4x4 vehicles for the

DHH branch offices and generators for the 19 Communes; • Procurement of field equipment (water analysis kit, GPS equipment and

piezometric probes) for CAMWATER’s 16 offices; • Procurement of 29 computers and 29 printers for DHH and the 19 Communes; Capacity building for Beneficiaries and Private Operators • Training of 190 community advisors, and FEICOM technical staff ; • Training of 150 artisanal masons and 320 school teachers ; • Establishment and training of associations of care-takers of standpipes and gender-

sensitive washrooms; • Training of MINPROFF staff in the towns involved. Water Resources Assessment Study Comparative analysis of river flow rates and daily samples and assessment of climate

change parameters and effects on water resource renewal C Project

Management and Coordination

UA 2.56 million

• General project coordination (allowances, per diem and operating costs of the Project Coordinating Unit) ;

• Audit of project accounts (financial audit, audit of procurements and technical audit to reconcile physical outputs and expenditure)

4

2.2 Technical Options and Alternatives Considered 2.2.1 The proposed improvements to drinking water supply were retained after a study of the current technical and financial situation. Despite the dilapidated condition of the existing drinking water supply systems in the Communes, rehabilitating and extending them was a better option than building new networks. Apart from Kousseri, which is fortunate enough to have sufficient quantities of underground water, all the other Communes get their water from nearby rivers. The equipment to be used and the quality of water to be supplied will comply with the appropriate international standards. The intake capacity has been verified and compared against the water needs for the duration of the Project, and the works have been scaled accordingly. For the sake of good management and standardisation, the proposed pumps should preferably be the same model as the ones already in use by CAMWATER. 2.2.2 With regard to sanitation, several options were considered: construction of a stormwater drainage system, choosing between collective (sewage systems) and autonomous waste-water sanitation systems, and combining or separating household and hospital waste. Constructing a stormwater system would be expensive, considering that practically none of the Communes have an urban planning programme. Moreover, the Government did not retain it as top priority, therefore funding will be provided at a later date. Latrines were preferred to sewage systems, which are expensive and not guaranteed to be self-cleaning considering the low water consumption rate of the people. Lastly, it was deemed more appropriate to separate hospital waste from other waste for health reasons.

Table 2.2 Project Alternatives Considered and Reasons for their Rejection

Alternative Brief Description Reasons for Rejection. For DWS, construction of new systems

In view of the highly dilapidated state of existing systems, construct new ones

Could not be reasonably considered because of excessive cost

For sanitation, construction of a collective drainage system

Construct a sewage drainage system instead and in place of latrines

Excessive cost of alternative and no guarantee that sewage pipes will be self-cleaning

Construction of stormwater systems

Construction of stormwater drainage pipelines

Absence of master plans for Communes, expensive and not Government’s top priority

Treat all solid waste together

Treat all solid waste together Presents a serious health hazard for the people – hospital waste will be treated separately

2.3 Project Type This operation is in the form of a project loan. Considering the relative weakness of the sector’s institutional organisation at both local and central levels, as well as the weakness of the internal control of public expenditure, neither a Sector-Wide Approach (SWAp) nor budget support is appropriate. The project loan is, for now, the most appropriate instrument, given that a part of the loan will be used to support the ongoing DWSS sector reform and to build the capacities of the structures responsible for the sector at the central and local levels.

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2.4 Project Cost and Financing Arrangements 2.4.1 The total project cost, excluding taxes, is estimated at UA 45.58 million, of which 33.95 million (74.48%) is in foreign exchange and 11.63 million (25.52%) in local currency. ADF is contributing up to UA 40 million of this amount, which accounts for 87.76% of the total cost of the Project. The Government’s contribution is UA 4.48 million while the beneficiaries (urban communes) are contributing UA 1.10 million in cash. These amounts were determined on the basis of detailed and up-to-date engineering studies, and include a 12.5% provision for physical contingencies to cover eventualities arising from the rehabilitation of obsolete drinking water supply systems, and a 4% annual provision for price escalation.

Table 1 Project Cost by Component (UA million)

Components

Foreign Exchange

Cost

Local Currency

Cost

Total Cost

% Foreign Exchange

Rehabilitation and Extension of DWS Facilities 20.90 6.96 27.86 75 Construction of Sanitation Facilities 4.62 1.98 6.60 70 Capacity Building 1.50 0.38 1.88 80 Project Management and Coordination 0.70 0.18 0.88 80 Base Cost 27.72 9.50 37.22 74.48 Provision for Physical Contingencies 3.46 1.19 4.65 74.40 Provision for Price Ecalation 2.77 0.94 3.71 74.66 TOTAL PROJECT COST 33.95 11.63 45.58 74.48

Table 2

Project Cost by Source of Finance (UA million) Cost in % of Total Source of Finance FE LC Total

ADF 39.20 0.80 40.00 87.76 GOVERNMENT - 4.48 4.48 9.83 BENEFICIARIES - 1.10 1.10 2.41 TOTAL PROJECT COST 39.20 6.38 45.58 100

Table 3

Project Cost by Expenditure Category (UA million)

Cost in % foreign exchange Expenditure Categories

FE LC Total 1. Works 22.16 7.61 29.77 74.44 2. Goods 2.11 0.84 2.95 71.53 3. Services 2.87 0.90 3.77 76.13 4. Operation 0.58 0.15 3.73 79.45 Base Cost 27.72 9.50 37.22 74.48 Provision for Physical Contingencies 3.46 1.19 4.65 74.41 Provision for Price Escalation 2.77 0.94 3.71 74.66 TOTAL PROJECT COST 33.95 11.63 45.58 74.48

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Table 4 Expenditure Schedule by Component

Components

2009 2010 2011

2012 2013

TOTAL

Rehabilitation and Extension of DWS Facilities - 12.278 13.302 6.82 1.71 34.11 Construction of Sanitation Facilities - 2.904 3.146 1.62 0.40 8.07 Institutional Support to Structures involved in the Project

0.35 0.69 0.69 0.46 0.12 2.31

Project Management and Coordination 0.16 0.33 0.33 0.22 0.05 1.09 TOTAL PROJECT COST 0.51 16.202 17.468 9.12 2.28 45.58

2.4.2 The Government will have to budget for its annual participation from 2009. The PCU will make the necessary arrangements for this budgeting. The beneficiaries, i.e. the Communes concerned, will be granted loans by FEICOM to enable them meet their obligations. The formalities have already begun to mobilise the loan and come to an agreement on the modalities. The portion of the loan earmarked for the DWS facilities will be onlent to CAMWATER by the Borrower under the same conditions as the Bank loan. This onlending will be a loan condition. 2.5 Project’s Target Area and Beneficiaries 2.5.1 The DWSS Project covers the following 19 semi-urban Communes: Kousseri, Ebolowa, Sangmelima, Akono, Ngoumou and Bafia (Far North, Centre and South provinces); Bangangte, Bongou, Bafang, Banka, Bana, Bansoa Penka-Michel and Foumban (West); Nkongsamba, Loum, Manjo, Mbanga, Kumba and Mamfe (Littoral and South-West). These Communes are serviced by 16 CAMWATER water supply systems, one each for the Communes except for Bana and Banka, which are serviced by the Bafang water system, and Bangou Commune, serviced by the Bangangte system.

2.5.2 The Project will benefit the 1.15 million residents of these Communes, 51% of whom are women. It will also benefit CAMWATER, the CDE, the DHH branch offices, the municipalities, SMEs, and the women’s and youth associations that will be involved in its implementation. The Project will increase the average rate of access to drinking water in the towns involved from 24% to 80% and access to sanitation services from 13% to 40% by 2013. The average prevalence rate of water and sanitation-related diseases will decline by half during this period. The project will create employment during its implementation and after its completion in the form of micro-enterprises in the water and sanitation sector. 2.6 Participatory Approach in Project Identification, Design and Implementation 2.6.1 The project design is based on a Bank-funded study during which surveys were conducted in the field with the support of the authorities of the Communes concerned. These surveys provided opportunities for a wide dissemination of information and awareness raising among the people. The MINEE organised a national seminar to validate the results of the aforementioned study, with the participation of all the Ministries involved in the management of the water and sanitation sector. The local authorities (mayors and MP’s) participated in the project preparation and appraisal.

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2.7. Consideration of Bank Group Experience and Lessons reflected in Project Design

2.7.1 The following are the observations made from previous Bank interventions and those of other donors in the water supply and sanitation sector in Cameroon : (i) concentration of investments in the large cities to the detriment of secondary towns, a situation which has contributed to the deterioration of water supply facilities in such localities; (ii) weak capacities of stakeholders from the central administration and the urban communities, which prevents them from fully performing their new roles of contracting authority assigned them through the decentralisation policy; iii) slow purchasing and disbursement procedures and lack of transparency; and (iv) inadequate coordination among the different stakeholders in the sector.

2.7.2 On the basis of the lessons learned from the above observations, the Bank decided, for this Project, to : (i) invest more in the neglected towns where the drinking water and sanitation needs are the greatest; (ii) build the capacities of the structures involved in project implementation; (iii) institute appropriate measures to ensure a more fluid and transparent procurement system; and (iv) put in place and support mechanisms for enhancing coordination among DWSS sector partners through regular participation in the meetings of the “Water, Energy and Sanitation” Sub-Group. 2.8 Key Performance Indicators 2.8.1 Various indicators will serve as the basis for monitoring project performance and outcomes. These indicators can be classified as follows: (a) output indicators which will be measured during project implementation; (b) intermediate impact indicators will be measured during project implementation and after completion, if need be; (c) impact indicators to be measured after completion, during the ownership phase by the beneficiaries. The key output indicators are: (i) number of DWSS facilities built or rehabilitated such as standpipes, treatment plants, pumping stations, reservoirs, latrines, dumps, etc. and the operational quality of such facilities ; (ii) number of professionals and artisans trained ; (iii) number of people whose awareness has been raised. The intermediate impact indicators are: (i) rate of access to drinking water and the level of consumption; (ii) rate of access to sanitation; (iii) number of artisanal masons trained, number of micro-enterprises set up; (iv) number of women’s associations involved in water management; and (v) number of pupils educated in hygiene and health matters. Lastly, the key impact indicator to monitor is the average prevalence rate of water-related diseases and the faecal peril. 2.8.2 A baseline study will be conducted at project start-up and will provide supplementary data that will serve as the basis for monitoring. The project monitoring and evaluation expert will centralise the data collected by the decentralized services of the Ministries involved, CAMWATER, associations and municipalities. The expert will process the data and distribute it to the project officers and to the Bank. Support to the Communes, to MINEE and to the DCET will enable them to sustain the monitoring/evaluation system.

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III. Project Feasibility 3.1 Economic and Financial Performance Key Economic and Financial Data IRR : 11.94 % - NPV: CFAF 3.02 billion ERR : 18.5% - NPV: CFAF 15.8 billion 3.1.1 The results of the financial analysis show that the financial internal rate of return of the drinking water supply component is 11.94%. The assumptions are in Annex B7. The net present value (NPV) of the component is CFAF 3.02 billion at a 10% discount rate. Right from the first year, the project will generate enough cash flow to repay its debt and the loan financing charges and achieve a net positive income. From 2012, the selling price will be increased by an average 2% every two years to ensure financial equilibrium in the sector. This increase was discussed during the appraisal mission and agreed by the Cameroonian party; its impact on the social tranche of the tariff will be negligible. 3.1.2 Based on these assumptions in Annex B7, the project’s economic rate of return (ERR) was estimated at 18.5%. At a discount rate of 10%, the net present value (NPV) of the water supply component is CFAF 15.8 billion – proof that the project is economically cost-effective. 3.1.3 The project’s financial rate of return is sensitive to the cost of investment and the average selling price of water. On the other hand, the economic rate of return is especially sensitive to economic benefits such as the savings on health care expenditure. The sensitivity tables are in Annex B7. 3.2. Environmental and Social Impact Environment 3.2.1 The project has been classified under environmental category 2. It has major positive impacts on the environment, namely, the health of the population and cleanliness of the environment. It also has temporary negative or easily controllable impacts, namely, noise and dust and the presence of pools of water – potential breeding grounds for mosquitoes and contamination of underground water by the latrines (See Annex B8). Measures will be taken to minimize the project’s negative impacts on the environment. The cost of these measures is estimated at UA 0.55 million for the DWS component and UA 0.15 million for the sanitation component. To enhance control, an environmental data sheet has been drawn up to monitor the project from preparation to implementation. The sheet shows the implementation of the mitigation measures and monitoring of the Environmental and Social Management Plan (ESMP), validated by the Government and the Communes. The Government and ADF will closely monitor the implementation of the ESMP. Climate Change 3.2.2 Government is currently conducting a baseline study, under the Global Water Partnership (GWP). The study will cover aspects on resource replenishment capacities, in the

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light of climate change and water abstractions. In addition, the MINEE database on Cameroon’s water resources will be updated, to serve as a basis for the integrated management of these resources. Gender 3.2.3 The population of the Project area is estimated at around 1.15 million inhabitants, 51% of whom are women. The infant mortality rate increased by 12 points from 1991 to 1998 and was around 7.5 per 1,000 in 2001. The rate of chronic malnutrition (including from water scarcity in the Far North) among 12 to 23-month-old children rose from 23% to 29%. The rate of deliveries assisted by a qualified birth attendant dropped by 5 points during the same period. The HIV/AIDS prevalence rate escalated alarmingly from 2% to 11.8% for the 15-49 years age bracket, from 1991 to 2002. In education, only 56% of children enrolled in primary 1 finish primary school and only 60% of them manage to enter secondary school. Girls are the first victims, because of their daily domestic chores, including fetching of water. 3.2.4 The construction of 20 complexes equipped with washrooms known as “gender-sensitive” (CTG), complete with day-care centres, restaurants and hair salons, will create temporary jobs during project implementation and permanent jobs, during the use of the facilities; with at least 50% of such permanent jobs going to women and the youth. It will help curb the unemployment rate, which affects about 8% of the working population. The women and youth associations that will run these CTGs, could generate significant excess income which could be ploughed back into the project to (i) create new income-creating activities (petty trading, market gardening, small-scale livestock rearing, cottage industry, etc.) and jobs in the target towns; and (ii) build new socio-economic infrastructure that would contribute to improving the living conditions of women and the youth in the Communes concerned. Social 3.2.5 The project will help improve the living environment of the population of the 19 Communes, by affording them better access to safe drinking water and proper sanitation services. It will contribute to significantly reduce (i) the risk of outbreaks and spread of waterborne diseases (at least 50% of typhoid, cholera, dysentery, amoebic dysentry and diarrhoea cases); (ii) the malaria incidence rate (from 11% currently to 3% by 2015); (iii) the infant mortality rate (from 40% to 10% by 2015); and (iv) the maternal mortality rate (from 430 to 107.5 per 100,000 live births by 2015). 3.2.6 The financing of 14,000 private social connections by the Project, under a revolving credit system will eventually benefit many poor households, which will receive direct water supply at affordable prices (from CFAF 1,000/m3 now to an average CFAF 368/m3 in 2013). The Project will assist local private businesses (including 15 SMEs to be created), associations, artisanal masons (150 people to undergo training) and national NGOs through works, services and goods supply contracts. The Project will further encourage new behaviour, better living conditions through social mobilisation and awareness campaigns in hygiene and sanitation, which will focus on themes such as hygiene and health, the benefits of drinking safe water, waste management, etc. (Details in Annex B8).

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Forced Resettlement 3.2.7 The Project will cause no displacement of the population. The network to be rehabilitated exists already and the extension will be to the new neighbourhoods with alloted but unserviced plots. The water harvesting sources are isolated and situated outside the towns, far from houses. No production plant or social infrastructure will be destroyed. IV. Implementation 4.1 Implementation Arrangements 4.1.1 The Ministry of Energy and Water will be the Executing Agency of the Project, through the Project Coordination Unit (PCU), attached to the General Secretariat. The technical implementation will be carried out by CAMWATER, for the “DWS” component and the Directorate of Water Resources and Hydrology of the MINEE, in conjunction with the decentralized Local Authorities for the “sanitation and capacity building” component.

4.1.2 The PCU will be headed by a Coordinator, a Water and Sanitation Engineer, who will be appointed by the Government, following the Bank’s no-objection. The Coordinator will be assisted by three experts, namely: (i) A monitoring-evaluation expert; (ii) a finance and accounting expert; and (iii) a procurement expert. These experts will be recruited following a call for expressions of interest. The PCU will carry out the following tasks: (i) ensure that Government meets its commitments stated in the Bank’s loan agreement; (ii) prepare documents for Government to fulfil its loan conditions; (iii) ensure, in collaboration with CAMWATER and DHH, programming and monitoring of all project activities; (iv) ensure consolidation of quarterly activity reports prepared by CAMWATER and DHH and submission to the Bank; (v) prepare counterpart budgets and ensure their availability within the time-frame; (vi) recruit the audit firm and ensure the financial management of the Project; and (vii) ensure monitoring-evaluation of the Project. To this end, the PCU will be provided with three technical assistants as follows: (i) a monitoring-evaluation expert; (ii) an administrative and financial management expert; and (iii) a procurement expert. Arrangements will be made to provide the PCU with computers and accounting software. It will have an annual budget for its operations. The establishment of the PCU and secondment of DHH and CAMWATER staff to the unit will be a loan condition. 4.1.3 CAMWATER and DHH will each be responsible for the following activities: (i) ensure the implementation of their components; (ii) prepare and implement the operational plan (procurement, disbursements) and ensure their monitoring; (iii) ensure adherence to the timetable for the implementation of studies and works relating to their component; and (iv) for CAMWATER only, prepare statements to be transmitted to CAA (with copy to the PCU) for the disbursement of ADF resources. 4.1.4 CAMWATER, which will be implementing the DWS component, already has a wealth of experience in project management. Although it was only established in 2005, it has hired a good number of the employees of the now defunct SNEC, whose responsibilities it took over until its liquidation in May 2008. It is currently working on two projects: one with World Bank financing, and the other financed by Exim Bank of China. It will therefore use its current human resources and will not require capacity building for implementation of the Project. Its organisation comprises a Management and a 12-member Board of Directors appointed by Presidential decree. The Director General is supported by five departments

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including the Works and Rehabilitation Department and the Administrative and Financial Department, which will be involved in the implementation of the DWS component of the Project. The Works and Rehabilitation Department has experienced engineers to monitor project implementation and check the detailed costs presented by construction companies and approved by the consulting engineer. The Department can handle procurement in accordance with Bank rules and procedures. The Administrative and Financial Department is headed by a Chartered Accountant and has qualified staff to handle the accounts, in line with Bank requirements. The Department will be responsible for checking the financial aspects of the detailed costs before submitting them to the Autonomous Sinking Fund to prepare the disbursement requests. CAMWATER may use direct payment and reimbursement methods. Its internal audit was deemed satisfactory and its accounts will be audited during the audits commissioned by the PCU.

Tasks Evaluation Comments Cash flow/Disbursement Satisfactory Good grasp of procedures Accounts Staff Satisfactory Management beefed up Accounting Policies and Procedures Satisfactory Procedures Manual available Internal Audit Satisfactory Control of budget execution Computerisation Satisfactory Availability of satisfactory software Overall Evaluation Satisfactory

4.1.5 On the other hand, because of management weaknesses at DHH, the Project will have to finance training in project management for the staff. For procurement, the DHH will benefit from the services of a procurement expert from the PCU. At the central level, DHH has two sub-departments (for urban and rural areas), and representations at the provincial and divisional levels. At the central level, a team made up of an engineer, assisted by three officers, has been assigned to the Project. The team will initiate the actions needed to carry out the “sanitation and capacity building” component and at the local level, will rely on the deconcentrated services of DHH. DHH lacks equipment, and the Project will thus provide the team and the deconcentrated institutions with vehicles and computers to carry out the activities. The officers concerned will also receive allowances for their intervention. 4.1.6 At each decentralised local authority, a technician will be mobilised (on secondment or recruited) to monitor the works, serving as backup for MINEE staff. The Project will pay salaries, allowances and other costs related to the activities of these technicians. At the end of the Project, the local authorities will arrange to keep these technicians on their staff to ensure maintenance of the works and equipment. 4.1.7 DHH has drawn up a manual of administrative, financial and accounting procedures, which, among others, presents the modalities for managing the special accounts opened and the implementation of the works under the Project. Steering Committee 4.1.8 A project Steering Committee will ensure linkage between the Project’s activities and its consistency with prevailing sectoral policies. The Steering Committee will comprise all the Ministries and institutions involved in the Project and will be chaired by the MINEE or its representative. Specifically, the Steering Committee will (i) approve planning and budgeting documents; (ii) ensure that the annual budgets approved are consolidated and included each year in the Budget Law; and (iii) monitor the general progress of the Project,

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based on status reports provided by the Project Executing Agency. It will comprise MINEE, CAMWATER, DHH, MINATD, MINSANTE, FEICOM, MINEP, MINDUH, MINDUB, MINPROFF, MINEPAT (DCET), CAA and two representatives of the decentralised local authorities concerned. The Steering Committee will be chaired by the Secretary General of MINEE and its secretariat will be run by the Project Coordinator. Procurement 4.1.9 All procurement of goods and works and of consultancy services for the Project will be in accordance with Bank Rules and Procedures for the Procurement of Goods and Works, or as appropriate, the Rules of Procedure for the Use of Consultants, using the relevant Bank Standard Bidding Documents. The Water Supply and Hydrology Department (DHH) will be responsible for the procurement of goods and services under the “sanitation and capacity building” component; and procurement for the “drinking water” component will be carried out by CAMWATER. Procurement for the Project and the resources and capacities of the two institutions are described in Annex B5. 4.1.10 CAMWATER has the human resources and capacities needed to handle the procurement under its responsibility. Furthermore, it is supported by the World Bank. Given DHH’s inadequate capacities, expertise and experience, the Project will (i) recruit a procurement expert for the Project Coordinating Unit; (ii) set up at the MINEE, a special commission on procurement, which will be competent to handle all contracts irrespective of their amounts. The special procurement commission at CAMWATER will have the same competence for the Project. Financial Management 4.1.11 The PCU will set up a private accounting unit for the Project. It will select an accounting system that meets OHADA standards, and is adapted to the specific features of the Project. The manual for administrative, financial and accounting procedures should state the duties and responsibilities of each actor in the Project, especially the internal audit mechanism. The PCU should purchase computer equipment and train financial experts. The PCU shall be the sole body responsible for producing financial reports. CAMWATER, in its capacity as the asset-holding company, will keep separate accounts for the DWS component. The PCU and CAMWATER will use the same accounting software, which will be what is currently in use at CAMWATER, to facilitate the work of the external auditor. These arrangements should be made at the start of the Project and will be checked by the Project launching mission. 4.1.12 The loan resources will be disbursed in accordance with Bank rules and procedures. Four disbursement methods may be used, namely: (i) the direct payment method – for paying contracts with large amounts for works, goods and services signed with firms, suppliers and service providers; (ii) repayment method to be used for paying eligible expenses under the loan, made by the Borrower on its own resources; (iii) the special account method or revolving fund – for contracts for works in small amounts paid monthly to companies, the procurement of goods and services in small amounts, the PCU’s operating account, training costs, field mission costs, etc.; and (iv) method of guaranteeing repayment for imported goods. The funds will be disbursed by the Bank in the form of advances to a special account opened by CAA for the Project. However, to facilitate the implementation of activities by the PCU, it will open a second special account, which it will manage. The opening of the special account and second special account, managed by the PCU will be a loan condition.

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4.1.13 The Project’s financial statements and the special account will be audited by the independent external auditors deemed acceptable by the Bank. The auditor’s Terms of Reference should be established according to the Bank’s standard model and submitted to the Bank for its no-objection. The Terms of Reference must include the audit of accounts of the DWS component, also kept by CAMWATER. The Terms of Reference will also cover in detail the financial, organisational management and internal audit aspects as well as those related to the procurement of goods, works and services. The Terms of Reference will further state that in addition to the financial report, the auditor will prepare a letter to the management, in which it will give its comments, identify any specific flaws and draw the Borrower’s attention to any matter it may deem relevant. The audit reports should reach the Bank before 30 June of each year. 4.2 Monitoring 4.2.1 The Project will be implemented over a period of 60 months from January 2009. Works will start in February 2010 and will last 24 months. The Bank will carry out (i) a launching mission; (ii) half-year supervision missions, in accordance with the provisions in force; and (iii) a mid-term review mission in December 2011. The indicative implementation schedule is summed up in Annex B9. In the country, monitoring-evaluation will be handled by MINEE and the Cooperation Department of the ADB, as well as by the Technical and Economic Cooperation Directorate of MINEAPAT. The Project will provide support to this department to enable it to carry out its duties. The CMFO, which participated in the entire bidding process, will play a vital role in providing support to the PCU, in the supervision missions and in monitoring the implementation of the relevant recommendations. 4.3 Governance 4.3.1 Cameroon’s governance problems in project implementation pertain to procurement and disbursements. In the main, the Government’s programme is developing in line with the sequence stated in the PRSP, having completed five reviews under the Poverty Reduction and Growth Facility (PRGF) of the IMF, which supports this Programme. In this connection, the Government has enhanced dialogue on public finance with the development partners. To this end, the idea of a dialogue platform was mooted in 2005. The Steering Committee of the platform was set up in 2007 and became operational in March 2007. This dialogue draws on the conclusions of the PEFA and PEMFAR1. reports. Alongside this dialogue to improve the management of public contracts, the development partners, including the Bank, have been assisting the Government through institutional support projects, with a view to improving procedures such as the procurement system. To this end, activities to improve the management of public contracts are currently being implemented under several projects, including the national governance support project and the capacity building project for transparency and financial control by the Bank and the World Bank, respectively. On behalf of the partners, the Bank plays the lead role on the Sectoral Committee on Public Finance, which is responsible for monitoring the implementation of the public finance modernisation plan, one of whose components has to do with the procurement system for public contracts.

1 PEFA: Public Expenditure and Financial Accountability; PEMFAR: Public Expenditure Management and

Financial Accountability Review

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4.3.2 The procurement process is very slow and transparency is often lacking. The CAA’s management of the special account has also proved to be a slow process. To address these issues, it was agreed with the Government that all procurement would be handled by the two special commissions responsible for all contracts. Publication of the results on the Bank’s website and that of the Project at each stage of the procurement process, the use of a Manual of Administrative and Financial Procedures upon project start-up and supervision and monitoring by the Regional Office (CMFO) and DCET (MINEPAT) will all contribute to enhancing speed and transparency in the Project’s management. For the revolving account disbursements, the PCU will open a second special account and manage it. With regard to delays in the management of the special accounts, it is worth mentioning that with the assistance of the Bank’s Country Office in Yaoundé, CAA has significantly reduced its processing time for documents submitted to the Bank – from over 21 days to a period not exceeding 10 days, since June 2008. This progress was also facilitated by capacity building of CAA staff. The Bank’s documents are now processed by four CAA officers compared to only one in 2007. 4.4 Sustainability 4.4.1 The participatory process used for project preparation and ownership by local stakeholders, elected representatives, the administration, CAMWATER and the MINEE makes for sustainability of the Project’s outputs. The Project will contribute to building the institutional capacities of the institutions concerned (MINEE, DHH, MPROFF, CAMWATER, urban communes, NGOs and associations, etc.) to monitor and maintain the Project’s outputs. As a sign of its goodwill, on 1 August, the Government set up the Coordination Unit, complete with the requisite local staff and offices. Through FEICOM, the Communes have expressed their intention to pay their contribution, and modalities for mobilising these funds are ongoing. 4.4.2 To ensure the maintenance of equipment and sustain the Project’s outputs, it will be necessary to train the Project staff and provide financial resources. The income generated through the sale of water and running of the standpipes and sanitation facilities in public buildings will cover recurrent and maintenance costs. The allocation earmarked for social connections will help to cope with the demand for private connections from the beneficiaries, especially the under-privileged, well beyond the end of the Project. Staff training at the local and central level and strengthening of the public-private partnership planned under the Project will help ensure good management of the Project’s facilities. 4.5 Risk Management 4.5.1 Delays and lack of transparency in the procurement process constitute risks for the Project. These risks will be reduced by (i) drawing up a procurement plan prior to loan effectiveness; (ii) setting up a special procurement commission at MINEE, with competence for all contracts, irrespective of their amounts; (iii) recruiting a procurement expert, who will be in charge of the secretariat of this commission; (iv) training the MINEE and CAMWATER coordination team in Bank Rules and Procedures; and (v) carrying out an annual technical audit on procurement. 4.5.2 Delays and lack of transparency in disbursements are another risk that the Project seeks to reduce by opening a special account to be managed by the PCU. Furthermore, the CMFO disbursement assistant will be entitled, under the decentralisation process, to review

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and process disbursement requests in the SAP system and will only transmit the electronic version of disbursement documents processed for approval by the Division Manager, and disbursement by the Bank’s Temporary Relocation Agency (ATR), thereby reducing the delays. 4.5.3 A possible major risk during the Project could stem from the lack of support for restructuring and for the Government’s medium-term investment programme in the sector. In order not to stifle the development expected of the sector, it must receive donor funding for the medium to long term. The African Water Facility contributes to the financing of the preparation of the national drinking water and sanitation programme in rural areas. Furthermore, the Bank participates actively in the implementation of a water thematic group that should help attract donors to the sector. 4.6 Knowledge Development 4.6.1 The Project will be an avenue for improving knowledge on the state of water resources in Cameroon and how climate change impacts on these resources and their replenishment potential. This will contribute to the optimal use of the water sources harnessed for the Communes covered by the Project. This exercise will improve monitoring of possible negative impacts of climate change on the renewal of water resources. The general approach to build gender-friendly washroom complexes in all public buildings will be a new experience in the multidimensional character of water and sanitation projects. Indeed, the design of future projects in the sector will draw on these positive impacts. V. Legal Framework 5.1 Legal Instrument The Project will be financed with an ADF loan. 5.2 Conditions for Bank’s Intervention A Conditions Precedent to Loan Effectiveness Effectiveness of the loan shall be subject to fulfilment by the Borrower of the conditions stipulated in Section 5.01 of the General Conditions. B. Conditions Precedent to First Disbursement of the Loan In addition to the effectiveness of the loan agreement, first disbursement of the loan shall be subject to the Borrower fulfilling the following conditions, to the satisfaction of the Fund: (i) provide evidence of establishing a Project Coordination Unit and assigning DHH and CAMWATER staff to this Unit (para 4.1.2); (ii) provide evidence of opening a special account to receive the ADF loan resources; (iii) provide evidence of opening a counterpart fund account in a Bank acceptable to the Fund; (iv) provide evidence of opening a special sub-account in a bank acceptable to the Fund, which shall be entrusted to the Project Coordinating Unit for administration (para 4.1.12); and (v) submit to the Fund an acceptable onlending agreement, of an amount not exceeding UA 29.44 million, between the Borrower and CAMWATER (para 2.4.2).

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C. Undertaking: According to the terms of the loan agreement, the Borrower undertakes to effect, as from January 2012, a minimum water rate increase of 2%, every two years. 5.3 Compliance with Bank Policies

This Project complies with all applicable Bank rules. VI. RECOMMENDATION It is recommended that an ADF loan not exceeding a total amount of UA 40 million be awarded to the Government of the Republic of Cameroon to finance the Semi-Urban Drinking Water Supply and Sanitation Project, as described in this report.

Appendix I

Appendix II Table of Ongoing ADB Portfolio in the Country

N° Project Name Type2 Amount Approved

Approval Date

Disburs. Rate %

Agricultural Sector 1 FAMILY INCOME IMPROVEMENT PROGRAMME L 14,000,000.00 28-Jun-01 0.64 2 GRASSFIELD PARTICIPATORY & DECENTR. RURAL DEV. L 15,000,000.00 26-May-03 0.24

RUMPI PARTICIPATORY DEV. PROJECT (Loan) L 15,000,000.00 13-May-03 0.17 3 RUMPI PARTICIPATORY DEV. PROJECT (Grant) G 1,500,000.00 13-May-03 0.30

Sub-Total Agriculture 45,500,000.00 0.34 Multi-Sector 4 SUPPORT TO NATL GOUVERNANCE PROGRAMME G 3,180,000.00 25-Oct-01 0.70 5 SUPPORT TO GOVERNANCE REFORM PROGRAMME L 25,000,000.00 4-Dec-06 0.50 SUPPORT TO GOVERNANCE REFORM PROGRAMME L 4,000,000.00 4-Dec-06 0.00 Sub-Total Multi-Sector 32,180,000.00 0.46 Social Sector 6 HEALTH PROJECT I : HEALTH SYSTEM DEVELOPMENT L 8,050,000.00 7-Jun-00 0.56

SUPPORT TO VOCATIONAL TRAINING REFORM (Loan) L 14,000,000.00 3-Dec-03 0.06 7 SUPPORT TO VOCATIONAL TRAINING REFORM (Grant) G 1,000,000.00 3-Dec-03 0.77 SUPPORT TO REPRODUCTIVE HEALTH PROGRAMME (Loan) G 10,230,000.00 16-Jun-04 0.10 8 SUPPORT TO REPRODUCTIVE HEALTH PROGRAMME (Grant) G 1,900,000.00 16-Jun-04 0.66

Sub-Total Social Sector 35,180,000.00 0.24 Transport Sector 9 BATIBO-BACHUO-AKAGBE ROAD DEVELOPMENT PROJECT G 44,700,000.00 15-Nov-06 0.16 Sub-Total Transport 44,700,000.00 0.16 Public Utilities Sector

10 YAOUNDE SANITATION PROJECT G 25,600,000.00 14-Dec-05 0.25 Sub-Total Water and Sanitation 25,600,000.00 0.25 GRAND TOTAL 183,160,000.00 0.29

2 L: Loan G: Grant

Appendix III Key Related Projects Financed by the Bank and other

Development Partners in the Country Sector Issues Project Status Summary of Sector Projects

World Bank Financing Drinking Water Supply

Urban and Water Development Support Project

Procurement of goods, works and services ongoing

Intended to reduce urban poverty and revive the development of water services towards attainment of the MDGs

Private Sector Development

Public-Private Partnership for Growth and Poverty Reduction

The project is soon due for completion. It essentially supported the SNEC privatisation process

It is intended to promote the participation of the private sector in providing essential urban water, electricity and telecommunications services

Exim Bank of China Financing

Drinking Water Supply

Drinking Water Production Capacity-Building Project in Douala

The project recently started its activities in 2008

It aims at stepping up the capacity of the water treatment plant and reservoirs as well as rehabilitating the supply network

European Union Financing Urban Development

Programme of Support to Decentralised Urban Development (PACDDU)

The programme has already enabled drafting of regulatory instruments and training on the planning and programming process

The project is intended to activate the mechanism for the mobilisation of participatory financing for local urban community development activities

African Development Bank Financing Sanitation Yaoundé Sanitation

Project (PADY) A disbursement rate of about 25%. However, physical implementation has not reached this stage as most of it consists of the mobilisation fee for works start-up

It aims to reduce poverty and improve the living environment in Yaoundé through rainwater drainage. It also aims to build the capacity of the Urban Community of Yaoundé

Appendix IV Map of the Project Area