AFRICAN DEVELOPMENT FUND

Language: English Original: English

KENYA

EWASO NG’IRO NORTH NATURAL RESOURCES CONSERVATION PROJECT (ENNNRCP)

APPRAISAL REPORT

AGRICULTURE AND RURAL DEVELOPMENT DEPARTMENT ONAR NORTH EAST AND SOUTH REGION FEBRUARY 2005

TABLE OF CONTENTS Page

PROJECT INFORMATION SHEET, LIST OF TABLES, LIST OF ANNEXES, CURRENCY AND MEASURES, LIST OF ABBREVIATIONS, EXECUTIVE SUMMARY, LOGICAL FRAMEWORK, BASIC DATA SHEET i-xi

1. ORIGIN AND HISTORY OF THE PROJECT 1 2. THE AGRICULTURE SECTOR 2 2.1 Overview of the Sector 2 2.2 Land Use and Land Tenure 3 2.3 Poverty, Health and Gender Aspects 4 2.4 Sector Development Constraints 4 2.5 Sector Development Policy and Strategy 5 3. WATER AND FORESTRY SUB-SECTORS 6 3.1 Water Sub-sector 6 3.2 Forest Sub-sector 9 3.3 Donor Interventions 12 4. THE PROJECT 13

4.1 Concept and Rationale 13 4.2 Project Area and Project Beneficiaries 14 4.3 Strategic Context 15 4.4 Project Objective 16 4.5 Project Description 16 4.6 Production, Market and Prices 20 4.7 Environmental Impact 21 4.8 Project Costs 23 4.9 Sources of Financing 24

5. PROJECT IMPLEMENTATION 25

5.1 Executing Agency 25 5.2 Institutional Arrangements 25 5.3 Supervision, Implementation and Expenditure Schedule 27 5.4 Procurement Arrangements 29 5.5 Disbursement Arrangements 30 5.6 Monitoring and Evaluation 31 5.7 Financial Reporting and Auditing 32 5.8 Aid Coordination 32

6. PROJECT SUSTAINIBILITY AND RISKS 33

6.1 Recurrent Costs 33 6.2 Project Sustainability 33 6.3 Critical Risks and Mitigating Measures 34

7. PROJECT BENEFITS 35

7.1 Financial Analysis 35 7.2 Economic Analysis 36 7.3 Social Impact Analysis 36 7.4 Sensitivity Analysis 37

8. CONCLUSIONS AND RECOMMENDATIONS 37

8.1 Conclusions 37 8.2 Recommendations and Conditions for Loan and Grant Approval 38

This Appraisal Report was prepared by a team comprising Messrs. Alex Mend (Principal Agronomist); Ken B. Johm (Chief Agricultural Economist), Charles Omoluabi (Senior Forestry Expert) and Mekuria Tafesse, Consultant Water Resources Management Expert following a mission to Kenya in November/December 2003. The Report was subsequently updated by a team comprising Messrs. Alex Mend (Principal Agronomist); Ibrahim Amadou Senior Agricultural Economist; and Louis Philippe Mousseau, Senior Environmental Expert, following a mission undertaken by Mr. Mend to Kenya in November/December 2004. Inputs were received from Ms. Sunita Pitamber (Senior Gender Specialist). Enquiries should be addressed to Mr. Abdirahman Beileh, Division Manager, ONAR.1 Extension 2139 and the authors.

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AFRICAN DEVELOPMENT FUND Temporary Relocation Agency

B.P. 323, 1002 Tunis Belvedere, Tunis, TUNISIA Tel: (216 71) 333 511 Fax: (216 71) 351 933

Website: www.afdb.org

PROJECT INFORMATION Date: February 2005 The information provided hereunder is intended to provide some guidance to prospective suppliers, contractors, consultants and all persons interested in the procurement of goods and works for projects approved by the Boards of Directors of the Bank Group. More detailed information and guidance should be obtained from the Executing Agency of the Borrower. 1. COUNTRY : Kenya

2. PROJECT TITLE : Ewaso Ng’iro North Natural Resources Conservation Project (ENNNRCP)

3. LOCATION : The project is located in the 12 districts of the

Ewaso Ng’iro North River (ENNR) basin. 4. THE BORROWER : Government of the Republic of Kenya. 5. EXECUTING AGENCY : Ewaso Ng’iro North Development Authority, P.O. Box 203, Isiolo, Kenya; Tel: 254-645 2002;

Fax: 254-645 2507. 6. DESCRIPTION : The project comprises three components: (A) Water

Resources Development and Management; (B) Participatory Catchment Conservation, (C) Project Coordination and Capacity Building. The approach is demand-driven, with implementation of specific activities based on the active involvement of local communities.

7. TOTAL COST : UA 20.74 million Foreign Cost : UA 12.05 million Local Cost : UA 8.69 million 8. BANK GROUP LOAN/GRANT

ADF Loan : UA 13.59 million ADF Grant : UA 2.89 million 9. OTHER SOURCES Government of Kenya : UA 2.93 million Beneficiaries : UA 1.33 million

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PROJECT INFORMATION (Cont’d) 10. ESTIMATED STARTING DATE AND DURATION: September 2005 for 6 years. 11. PROCUREMENT OF GOODS AND WORKS: Procurement of Goods and Works

will be in accordance with Bank’s Rules of Procedures. National Competitive Bidding (NCB) shall be adopted for procurement of (i) Civil works, (ii) Trucks and Motor Cycles, (iii) Equipment, and (iv) Agricultural Inputs. Procurement of equipment for river gauging and Meteorological stations will be through limited International competition.

12. CONSULTANCY SERVICES REQUIRED AND STAGE OF SELECTION: Selection

of Consultants/Technical Assistance will be through Limited Competition on the basis of a shortlist. Twenty three person months of consultancy services will be required to undertake studies and surveys, including design and supervision of water works, design and implementation of an M&E system and training of district technical staff.

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LIST OF TABLES No. Page 4.1 Summary of Cost Estimates by Component 23 4.2 Summary of Cost Estimate by Category of Expenditure 24 4.3(a) Sources of Finance 24 4.3(b) Sources of Finance (Loan) 25 4.3(c) Sources of Finance (Grant) 25 5.1 Expenditure Schedule by Component 28 5.2 Expenditure Schedule by Source of Finance 28 5.3 Summary of Procurement Arrangements 29 LIST OF ANNEXES No. No. of Pages 1. Map of the Project Area 1 2 Management Structure for ENNDA (Page 1) 1 2 Project Organisation and Management (Page 2) 1 3 List of Goods and Services – Categories of Expenditure (Page 1) 1 3 ADF/GOK Financing of Recurrent Costs (Page 2) 1 4. Summary of Financial and Economic Analysis 5 5. Project Implementation Schedule (September 2005 – December 2011) 1 6. Kenya: Summary of Bank Group Operations 1 7. Environmental and Social Management Plan Summary 4 8. Supervision Schedule during Implementation 1 9. Highlights on the Project Preparation and Review Process 2 10. Kenya: Status of Audit Reports and Project Completion Reports 1

CURRENCY EQUIVALENT (December 2004)

1 UA = 121.809 Ksh 1 UA = 1.53590 USD

GOVERNMENT FISCAL YEAR

July 1 – June 30

WEIGHTSAND MEASURES

1 Metric Ton (mt) = 2,200 lbs. (pounds) 1 Kilogram (kg) = 2.2 lbs. (pounds) 1 Meter (m) = 3.28 ft (feet) 1 Kilometre (km) = 0.62 miles 1 Hectare (ha) = 2.471 acres

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ABBREVIATIONS ADB/F African Development Bank/Fund ALRMP Arid Lands Resource Management Project ASAL Arid and Semi-Arid Lands CAAC Catchment Area Advisory Committee CAP Community Action Plan CBO Community-Based Organization CSP Country Strategy Paper DDC District Development Committee DFO District Forest Officer DFRD District Focus for Rural Development DPT District Project Team ENNDA Ewaso Ng’iro North Development Authority ENNR Ewaso Ng’iro North River ENNNRCP Ewaso Ng’iro North Natural Resources Conservation Project ERS Economic Recovery Strategy for Employment & Wealth Creation 2003-2007 FAO Food and Agricultural Organization FD Forest Department GDP Gross Domestic Product GOK Government of Kenya GTZ German Technical Cooperation IFAD International Fund for Agricultural Development KEFRI Kenya Forestry Research Institute KRDS Kenya Rural Development Strategy KSh Kenya shilling KWS Kenya Wildlife Service MOA Ministry of Agriculture MENR Ministry of Environment and Natural Resources MLFD Ministry of Livestock and Fisheries Development MRDA Ministry of Regional Development Authorities MWI Ministry of Water and Irrigation NGO Non-Governmental Organization PC Project Coordinator PCT Project Coordination Team PSC Project Steering Committee RWUA River Water Users’ Association UNDP United Nations Development Programme UNICEF United Nations Children’s Emergency Fund USD United States Dollar WRMA Water Resources Management Authority WSB Water Services Board WSRB Water Services Regulatory Board WUA Water Users’ Association

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EXECUTIVE SUMMARY 1. Project Background The Ewaso Ng’iro North River Basin epitomizes the increasingly common situation in Kenya of population pressure resulting in excessive abstraction of river water in the humid highlands leaving little water for downstream users in the arid and semi arid lands (ASAL). A combination of increased water extraction by middle catchment farmers and deterioration in the vegetative cover of the upper catchment have combined to reduce water flows in the Ewaso Ng’iro North River and its tributaries throughout most of their length. The issues are already critical along a number of tributaries where violent conflicts have broken out between downstream and upstream water users. With increased demand for water, the need to regulate river recharge upstream, so as to reduce the severity of floods and droughts downstream, has become ever more important. Improved management of forest land, for wood and grazing, and increased tree cover in the upper catchment are important elements in achieving a better regulated flow. Better forest management will also lead to increased supplies of timber, fuelwood and fodder, the strong demands for which underlie the continuing forest degradation. In the lower catchment, the project will help to relieve pressure on the natural vegetation by contributing to the increased availability of fuelwood and fodder. It will also contribute significantly to achieving the Millennium Development Goals of (i) halving the proportion of people living in extreme poverty by 2015, (ii) ensuring environmental sustainability through increase in the area under forest cover and land area protected to maintain biological diversity, and halving the proportion of people without sustainable access to safe drinking water by 2015, and (iii) promoting gender equality and empowerment of women through their involvement in project activities. 2. Purpose of the Loan: The ADF loan of UA 13.59 million will be used to finance part of the investment and recurrent costs of the project. In addition, an ADF grant of UA 2.89 million will be used to finance the hydrological monitoring, strengthening of Water Users Association, and part of the cost of the Participatory Catchment Conservation and Capacity Building components. 3. Sector Goal and Project Objective: The sector goal is to contribute to poverty reduction through sustainable natural resources conservation and management. The project’s specific objective is to improve water resources management, agricultural land use, and forest resource conservation in the Ewaso Ng’iro North river (ENNR) catchment. 4. Brief Project Description: In order to achieve the stated objective, the project will focus on:

a) Water resource development and management including: development of water points; feasibility studies of large storage reservoirs for river flow regulation; improved hydrological monitoring of the river flow; support to Water Users Associations.

b) Participatory catchment conservation covering: agro-forestry nurseries in both uplands and ASAL areas; participatory forest management; community fuelwood plantations; capacity building for Department of Forestry staff to enable them to support the preceding activities; group training in soil and water conservation; and promotion of non-extractive, forest-based income generating activities such as bee-keeping and gum and resin collection.

c) Capacity Building covers the strengthening of the Ewaso Ng’iro North Development Authority (ENNDA) and districts required to enable them to exercise

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their envisaged role in project coordination and management; extensive training in participatory methods at various levels – ENNDA and district staff, community leaders; about 300 community appraisals; and strengthening of early warning system capacity.

5. Project Costs: The total cost of the project, including contingencies, is estimated at UA 20.74 million of which UA 12.05 million or 58.0% will be foreign exchange, and UA 8.69 million or 42.0% will be in local costs. 6. Sources of Finance: The ADF, the Government of Kenya and the beneficiaries will finance the project. The ADF loan of UA 13.59 million, will finance the majority of civil works, motor cycles and equipment. The grant of UA 2.89 million will cover over 90% of the costs of training, as well as the hydrological monitoring. The Government’s share will cover 14.1% of total costs including incremental salaries of national staff, part of civil works, equipment, training as well as studies and part of the operating costs. Beneficiaries will contribute 6.4% of total project costs as their share of the costs of development of water points and participatory catchment conservation. 7. Project Implementation: The project will be implemented over a period of 6 years. It is demand driven with the main focus of project activities at the district level in line with the government’s District Focus for Rural Development (DFRD) strategy. Most activities are community based and would be derived from Community Action Plans (CAPs) developed out of a participatory appraisal process. The participatory development approach proposed should bring about a high degree of ownership of facilities developed through the project and provide some guarantee of sustainability. Further guarantees are provided by the technically unsophisticated nature of the majority of interventions and their simple maintenance requirements. The project will be implemented through the existing government structures in the Districts, service providers and other private contractors. CAPs and community projects will be approved by the District Development Committee prior to funding of activities. Day-to-day management and coordination will be carried out by a Project Coordination Team located in the Ewaso Ng’iro North Development Authority (ENNDA). 8. Conclusion and Recommendations: The project is participatory in its design and decentralized in its implementation with a significant beneficiary input intended to ensure sustainability. The project area hosts the poorest districts in Kenya. While about 20% of the project area’s population is expected to benefit directly from project activities, a much larger proportion is likely to benefit from the longer-term impact on natural resource conservation. Women are expected to make up about 20% of the beneficiaries. The project will have a specific impact on women in several ways. They will be involved as members of the different groups and associations to be supported by the project. Women are also particularly concerned with raising tree nurseries and are expected to be the main participants in this activity. The increased availability of firewood and water will have a clear impact on reducing women’s labour in procuring these commodities. Many gum gatherers and beekeepers are women, and they will benefit directly from the increased production and revenue. The project meets the government objective of improving the quality of life for the population in the ASALs and is in line with the Bank’s strategy of promoting the efficient management of natural resources with the objective of reducing poverty. It is recommended that a loan of UA 13.59 million and a grant of UA 2.89 million be granted to the Government of Kenya for the purpose of implementing the project as described in the report and subject to the conditions specified in the loan agreement.

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Kenya: Ewaso Ng’iro North Natural Resources Conservation Project Logical Framework (Loan Resources)

NARRATIVE SUMMARY OBJECTIVELY VERIFIABLE INDICATORS MEANS OF VERIFICATION ASSUMPTIONS/RISKS Sector Goal Contribute to poverty reduction through sustainable natural resources conservation and management.

1. Poverty in the ENNR basin reduced from 60% in

2005 to 55% in 2010 2. Water deficit in the ENNR catchment is reduced

from 50% to 30% in 2010 3. Improve water quality by reducing sediment load at

Archer’s Post of 2.9 million ton/annum in 2005 by 50% in 2010

- National statistics on poverty - Report of impact study of beneficiaries - Project Mid-Term Review Report 2008 - Bank Mid-Term Review Report 2008 - Project Completion Report 2011

Objective Improved water resources management, agricultural land use and forest resource conservation in the ENNR basin

1. Tree cover of 14,290,200ha in the ENNR increased

by 4,355ha by 2008, and by 10,475 ha by 2010. 2. Unauthorised abstraction of water reduced as a

result of functional RWUAs and river flow increased from 0.9 m3/sec to 5 m3/sec by 2010

3. Mortality of livestock reduced from 20% to 10% in ASAL districts and from 8% to 4% in higher rainfall districts by 2010 as a result of new water points.

- District Quarterly Progress Reports - Bank supervision reports - Catchment Area Advisory Committee hydrological

data (sediment and flow) and reports - Project Participatory Monitoring & Evaluation

Report - Project Quarterly Progress Reports - Project Mid-Term Review Report 2008 - Bank Mid-Term Review Report 2008 - Project Completion Report 2011

− Forest Bill passed and implementation started during

the project life − Upstream users do not appropriate the additional

water − HIV/AIDS infections do not increase in the project

area

Outputs 1. Development and management of water resources improved 2. Participatory Catchment Conservation improved

1.1 By 2008, 142 water pans, 49 boreholes, 39 roof

catchments, 3 springs, 3 small storage reservoirs rehabilitated & constructed,

By 2010, 263 water pans, 101 boreholes, 73 roof catchments, 5 springs, 4 small storage reservoirs rehabilitated & constructed 1.2 4 automatic river gauging stations installed

downstream of Archer’s Post, 6 upgraded to automatic readings by 2007.

1.3 Access to domestic reduced from 5km in 2005 to 1.5 km in 2010

1.4 Access to water by livestock reduced from 14km in 2005 to 5km in 2010

2.1 By 2008, 3.756 million seedlings produced (60% by

women) and planted by farmers giving forest cover equivalent to 3,130ha. By 2010, 8.220 million seedlings (50% by women) produced and planted by farmers giving forest cover equivalent to 6,850ha

2.2 225 ha of fuelwood and poles planted by 2008 and 1,300ha by 2010 (20% produced by women)

2.3 By 2008, 9,600 ha and by 2010, 24,000ha of indigenous forests under participatory management (20% managed by women)

− District Community Action Plans − District Quarterly Progress Reports − District Development Committee reports − Bank Supervision Mission Reports − Project Quarterly Progress Reports − Project Participatory Monitoring & Evaluation

Report − Catchment Area Advisory Committee hydrological

data (sediment and flow) and reports − Project Mid-Term Evaluation Report (2008) − Bank Mid-Term Review Report (2008) − Project Completion report (2011)

− Participatory approach adopted by the communities − Livestock populations do not increase drastically as a

result of increased availability of water

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2.4 Annual production of gums increase from 302 tons to 336 tons in 2006 and 367 tons from 2007 to 2010 as a result of improved harvesting techniques

2.5 Annual production of resins increase from 1,296 tons to 1,425 tons by 2006 and 1,555 tons from 2007 to 2010 as a result of improved harvesting techniques

2.6 Annual income per producer (men and women) from gums increase from 9,408 Ksh to 15,456 Ksh in 2006 and 25,536 Ksh from 2007 to 2010 as a result of improved product sorting and storage

2.7 Annual income per producer (men and women) from resins increase from 8,904 Ksh to 18,480 Ksh in 2006 and 35,112 Ksh from 2007 to 2010 as a result of price premium from improved product sorting and storage

Activities 1. Development of water points 2. Participatory Forest Planning & Management 3. Community Fuelwood Plantations 4. Agroforestry in the Uplands and ASAL areas 5. Gums and Resins and Bee-keeping Development

Resources: ADF Loan: UA 13.59 million GOK: UA 2.78 million Beneficiaries: UA 1.33 million Total: UA 17.70million

− District Community Action Plans − District Quarterly Progress Reports − District Development Committee reports − Bank Supervision Mission Reports − Project Quarterly Progress Reports − Project Monitoring & Evaluation Report − Catchment Area Advisory Committee hydrological

data (sediment and flow) and reports − Project Mid-Term Evaluation Report 2008 − Bank Mid-Term Review Report 2008 - Project Completion report 2011 - Annual audit reports of project financial accounts

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Kenya: Ewaso N’giro North Natural Resources Conservation Project Logical Framework (Grant Resources)

Narrative Summary Objectively Verifiable Indicators Means of Verification Important Assumptions Sector Goal: To contribute to poverty reduction through sustainable natural resources conservation and sustainable use.

1. Poverty in the ENNR basin reduced from 60% in

2005 to 55% in 2010 4. Water deficit in the ENNR catchment is reduced

from 50% to 30% in 2010 2. Improve water quality by reducing sediment load at

Archer’s Post of 2.9 million ton/annum in 2005 by 50% in 2010

- National statistics on poverty - Report of impact study of beneficiaries - Project Mid-Term Review Report (2008) - Bank Mid-Term Review Report (2008) - Project Completion Report (2011)

Project Objective: Improved water resources management, agricultural land use and forest resource conservation in the ENNR basin through improved institutional capacity

1. Vegetation cover increased by 2% and catchment degradation reduced by 5% by 2011. 2. Unauthorised abstraction of water reduced as a result of functional RWUAs and river flow increased from 0.9 m3/sec to 5 m3/sec by 2011. 3. Mortality of livestock reduced from 20% to 10% in ASAL districts and from 8% to 4% in higher rainfall districts by 2011 as a result of new water points.

- District statistics and Progress Reports - Bank supervision mission reports - Catchment Area Advisory Committee

hydrological data (sediment and flow) and reports

- Project Monitoring & Evaluation Report − Project Mid-Term Evaluation Report (2008) − Bank Mid-Term Evaluation Report (2008) - Project Completion report (2011)

- Forest Bill passed and implementation started

during the project life - Upstream users do not appropriate all the

additional water - HIV/AIDS infections do not increase in the

project area

Outputs: 1. Water Resources Development & Management: 1.1 Monitoring of rainfall and river flows improved and intensified. 1.2 Monitoring of river water resources intensified and participatory management of water resources enhanced 1.3 Soil and water conservation capacity enhanced. 1.4 Sustainable storage facilities to improve river flow studied and viable recommendations made 2. Participatory Catchment Conservation: 2.1 private sector capacity to produce tree seedlings developed in the uplands 2.2 environment in lower catchment improved through increased tree cover near rural centres 2.3 community participation in forestry management enhanced

1. 300 participatory appraisals & CAP completed by 2007 2. 4 additional automatic river gauging stations installed, downstream of Archer’s Post and 6 upgraded to automatic readings by 2007. 3. 6 additional meteorological stations installed and functioning by 2007. 4. 112 RWUAs (1,500 persons – 10% are women) trained and participating in decisions on management of water resources by 2010. 5. 290 initial training and 580 follow-up training in soil & water conservation given by 2010. 6. Feasibility study of 3 large water storage reservoirs completed and report submitted by consultants by 2006. 7. 11 producers groups of tree seed collectors and seedling producers, (330 producers - 60% are women) formed, registered, trained and selling tree seedlings by 2007. 8. By 2008, 600 producers (50% are women) and by 2011, 800 producers (60% are women) trained and established nurseries for producing and selling tree seedlings for agro-forestry in ASALs 9. By 2008, 24 community forest associations (2,400 producers - 20% are women) formed and trained in participatory forest management and protection and given responsibility for the management of 4,800 ha of forest

− District Community Action Plans − District Progress Reports − District Development Committee reports − Bank supervision mission Reports − Project Quarterly Progress Reports − Project Monitoring & Evaluation Report − Catchment Area Advisory Committee

hydrological data (sediment and flow) and reports

− Project Mid-Term Evaluation Report (2008) − Bank Mid-Term Evaluation Report (2008) − Project Completion report (2011)

− Participatory approach adopted by the

communities − Livestock populations do not increase drastically

as a result of increased availability of water

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Kenya: Ewaso Ng'iro North Natural Resources Conservation Project Logical Framework (Grant Resources)

Narrative Summary Objectively Verifiable Indicators Means of Verification Important Assumptions Outputs: 2.4 Community participation in fuelwood production increased 2.5 Quality of the gums and resins improved leading to higher incomes 2.6 Bee keepers associations formed/or strengthened 3. Project Coordination & Capacity Building 3.1 Staff of ENNDA, Forestry Department and Extension Services trained & equipped to support community and private sector initiatives 3.2 Drought Early Warning System capacity strengthened

By 2010, 60 community forest associations (6,000 producers – 20% are women) formed and trained in participatory forest and protection and given responsibility for the management of 24,000 ha of forest. 10. By 2008, 65 community associations (5,200 producers - 30% are women) formed and trained and producing fuelwood over some 520ha By 2010, 65 community associations (5,200 producers – 30% are women) formed and trained and producing fuelwood over some 1,300ha 11. By 2008, 60 groups (600 producers – 40% are women), and by 2010, 150 groups (1,500 producers – 40% are women) formed and trained in improved harvesting and storage techniques and increased production and income 12. 100 feasibility studies on honey production undertaken by 2010 starting from 2006 13. 60 new communities and 123 existing ones (1,830 producers – 50% are women) trained in improved production techniques and storage techniques and increased production and income by 2010 14. 139 training in participatory development approaches targeting 1790 staff of ENNDA, FD and MOA from 2006 to 2008 (33% of trainees are women) 15. 192 community leaders (33% are women) trained in community appraisal by 2010 starting from 2006 16. 4 EWS units equipped and trained in Wajir, Samburu, Mandera and Garissa in 2006 17. Pilot H/F borehole EWS with 10 monitoring stations set up in Wajir district by 2006 and evaluated in 2008

Lack the capacity to plan and manage the implementation of project activities.

Activities 1. Development of water points 2. Intensification of Hydrological Monitoring 3. Irrigation & soil & water conservation group training 4. Participatory Forest Planning & Management 5. Community Fuelwood Plantations 6. Agroforestry in the Uplands and ASAL areas 7. Gums and Resins and Bee-keeping Development 8. Support to ENNDA

Resources: ADF Grant: UA 2.89 million GOK: UA 0.15 million Total: UA 3.04 million

− District Community Action Plans − District Progress Reports − District Development Committee reports − Bank Supervision Mission Reports − Project Quarterly Progress Reports − Project Monitoring & Evaluation Report − Catchment Area Advisory Committee

hydrological data (sediment and flow) and reports − Mid-Term Evaluation Report (2008) - Project Completion report (2011) - Annual audit reports of project financial accounts

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Year Kenya AfricaDevelo-

pingCountries

Develo-ped

CountriesBasic Indicators Area ( '000 Km²) 580 30 061 80 976 54 658Total Population (m illions) 2002 31.5 831.0 5,024.6 1,200.3Urban Population (% of Total) 2002 34.4 38.6 43.1 78.0Population Density (per Km²) 2002 54.3 27.6 60.6 22.9GNI per Capita (US $) 2002 360 650 1 154 26 214Labor Force Participation - Total (% ) 2002 52.1 43.1 45.6 54.6Labor Force Participation - Female (% ) 2002 47.1 33.8 39.7 44.9Gender -Related Development Index Value 2001 0.488 0.484 0.655 0.905Human Develop. Index (Rank among 174 countries) 2001 146 n.a. n.a. n.a.Popul. Living Below $ 1 a Day (% of Population) 1994 26.5 46.7 23.0 20.0

Dem ographic IndicatorsPopulation Growth Rate - Total (% ) 2002 1.5 2.2 1.7 0.6Population Growth Rate - Urban (% ) 2002 4.3 3.9 2.9 0.5Population < 15 years (% ) 2002 42.6 43.2 32.4 18.0Population >= 65 years (% ) 2002 2.9 3.3 5.1 14.3Dependency Ratio (% ) 2002 82.0 86.6 61.1 48.3Sex Ratio (per 100 female) 2002 97.9 98.9 103.3 94.7Female Population 15-49 years (% of total population) 2000 … 24.0 26.9 25.4Life Expectancy at B irth - Total (years) 2002 44.6 50.6 62.0 78.0Life Expectancy at B irth - Female (years) 2002 45.6 51.7 66.3 79.3Crude Birth Rate (per 1,000) 2002 32.5 37.3 24.0 12.0Crude Death Rate (per 1,000) 2002 16.7 15.3 8.4 10.3Infant Mortality Rate (per 1,000) 2002 69.3 81.9 60.9 7.5Child Mortality Rate (per 1,000) 2002 118.0 135.6 79.8 10.2Maternal Mortality Rate (per 100,000) 1999 570 641 440 13Total Fertility Rate (per woman) 2002 4.0 4.9 2.8 1.7W omen Using Contraception (% ) 1998 39.0 40.0 59.0 74.0

Health & Nutrition IndicatorsPhysicians (per 100,000 people) 1999 3.6 57.6 78.0 287.0Nurses (per 100,000 people) 1995 90.1 105.8 98.0 782.0Births attended by Trained Health Personnel (% ) 1998 44.0 38.0 56.0 99.0Access to Safe W ater (% of Population) 2000 49.0 60.3 78.0 100.0Access to Health Services (% of Population) 1992-98 … 61.7 80.0 100.0Access to Sanitation (% of Population) 2000 86.0 60.5 52.0 100.0Percent. of Adults (aged 15-49) Living with HIV/AIDS 2001 15.0 5.7 1.3 0.3Incidence of Tuberculosis (per 100,000) 2000 209.2 198.0 144.0 11.0Child Immunization Against Tuberculosis (% ) 2002 91.0 76.4 82.0 93.0Child Immunization Against Measles (% ) 2002 78.0 67.7 73.0 90.0Underweight Children (% of children under 5 years) 1998 22.1 25.9 31.0 …Daily Calorie Supply per Capita 2001 2 059 2 444 2 675 3 285Public Expenditure on Health (as % of GDP) 1998 2.4 3.3 1.8 6.3

Education Indicators Gross Enrolment Ratio (% ) Primary School - Total 2000 94.0 89.2 91.0 102.3 Primary School - Female 2000 93.0 83.7 105.0 102.0 Secondary School - Total 2000 38.0 40.8 88.0 99.5 Secondary School - Female 2000 36.0 38.2 45.8 100.8Primary School Female Teaching Staff (% of Total) 1998 42.1 49.9 51.0 82.0Adult Illiteracy Rate - Total (% ) 2002 15.8 37.9 26.6 1.2Adult Illiteracy Rate - Male (% ) 2002 10.0 29.2 19.0 0.8Adult Illiteracy Rate - Female (% ) 2002 21.6 46.4 34.2 1.6Percentage of GDP Spent on Education 1998 6.5 3.5 3.9 5.9

Environmental IndicatorsLand Use (Arable Land as % of Total Land Area) 2002 7.0 6.2 9.9 11.6Annual Rate of Deforestation (% ) 1995 0.3 0.7 0.4 -0.2Annual Rate of Reforestation (% ) 1990 1.0 4.0 … …Per Capita CO2 Emissions (metric tons) 1998 0.3 1.1 1.9 12.3

Source : Compiled by the Statistics Division from ADB databases; UNAIDS; World Bank Live Database and United Nations Population Division.Notes: n.a. Not Applicable ; … Data Not Available.

COM PARATIVE SOCIO-ECONOM IC INDICATORSKenya

Infant Mortality Rate ( Per 1000 )

0102030405060708090

100

1994

1995

1996

1997

1998

1999

2000

2001

2002

Kenya Africa

GNI per capita US $

0

200

400

600

800

1994

1995

1996

1997

1998

1999

2000

2001

2002

Kenya Africa

Population Grow th Rate (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1994

1995

1996

1997

1998

1999

2000

2001

2002

Kenya Africa

111213141516171

1994

1995

1996

1997

1998

1999

2000

2001

2002

Kenya Africa

Life Expectancy at B irth (Years)

1. ORIGIN AND HISTORY OF THE PROJECT 1.1 The Ewaso Ng’iro North River (ENNR) catchment make up 36% of the Kenya’s total land area with a population of about 1.7 million people. The middle and lower parts of the catchment, which are mostly Arid and Semi-Arid Lands (ASALs), cover about 80% of the total catchment area. Given their fragile nature, the ASALs can only support a low-density pastoral and nomadic mode of life, though some agro-pastoralism has sprung up in the middle catchment. Crop production, from irrigated export-oriented large-scale horticulture farms is concentrated mainly in the more humid highlands of the upper catchment. Poverty is a serious problem in the ENNR catchment. On average about 60% of the people in the catchment live below the poverty line compared to the national average of 57%. However, poverty levels between the twelve districts which form part of the catchment vary from 30% in Nyeri in the upper catchment to 90% in Isiolo, Marsabit and Samburu in the ASALs. Overall, the seven ASAL districts are the poorest with poverty levels varying from 50 to 90%. The frequency of drought in the 1980s and mid-1990s was the main contributing factor to the increasing poverty in the catchment, when on average each household lost 40% of its cattle and 20% of its sheep and goats. 1.2 The Kenyan Government’s objective as stated in its Economic Recovery Strategy for Employment and Wealth Creation 2003-2007 (ERS) is to reduce poverty level by at least 5% from the current 56.8% level by 2007. The ERS also recognises that adequate quantity and quality of water is a basic requirement for Kenya’s economic growth and performance. However, water is becoming a scarce commodity because of limited national endowment, the growing needs of a rapidly growing population, as well as serious water resources degradation. In order to ensure availability of adequate water resources, government has developed the National Policy on Water Resources Management and Development and Water Resources Management Strategy and passed the Water Act (2002) which regulates the use, management, development, conservation and control of water resources in Kenya. A Water Resources Management Authority (WRMA) has been established under the Water Act (2002) to manage all water resources in the country. However, the government also acknowledged that, besides the establishment of the WRMA, catchment development and management activities, investments in rehabilitation/expanding water resources management infrastructure and sustainable storage facilities are urgently needed to reverse the current decline. 1.3 The government’s development objective for the ASALs as stated in the ERS is to promote sustainable rural livelihoods and fight against the rampant poverty in these areas. Inadequate water is considered the main obstacle to development, income generation and food security in the ASAL areas. Government efforts in these areas will focus on the maintenance and rehabilitation of existing community water pans, dams and boreholes and construction of new ones, and the rehabilitation of deforested water catchments. 1.4 Forestry is important not only because of the direct consumable products such as timber, but also because of the impact that its exploitation has on the bio-physical environment and productivity of other sectors (e.g. agriculture and water resources). The forest cover of Kenya has been overexploited and is now estimated at about 1.7% of total land area, which is much less than the minimum required forest coverage of 10%. The government’s stated policy for the forest sub-sector is to promote the development of agro-forestry and to encourage community participation in the efficient management of forests, to be complemented with continued re-afforestation, including private sector participation to ensure that the minimum required forest coverage of 10% is achieved by the end of 2007.

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These policy provisions are captured in the Forest Bill which government presented to Parliament in May 2004 to replace the existing Forest Act. The Bill was not passed and will be presented again to Parliament in 2005 following the mandatory six months from the last presentation. 1.5 The ENNR catchment is considered a highland-lowland system with limited water and forest resources as result of over-abstraction of water for irrigation and encroachment of the forests. As a result, the ENNR, which is the main source of water for the ASAL areas has been affected by high variation in seasonal flows. During the dry season, the volume of water reaching the ASALs in the lower parts of the catchment is currently low and is further decreasing. This has led to less available water for the downstream population and their livestock and wildlife which are plenty in the lower catchment. The growing migration of human beings and animals to the upper catchments is a source of conflicts between farmers and pastoralists. 1.6 Perceiving the need to address the continuing degradation of the river’s catchment area, the Government of Kenya (GOK) requested the Bank to support a study called the “ENNR Catchment Conservation and Water Resources Management”. The study, costing UA 1.35 million, commenced in 2001 and was completed in December 2002. Based on the recommendations of the study, the GOK requested the Bank’s assistance to finance the Ewaso Ng’iro North Natural Resources Conservation Project (ENNNRCP). The FAO Investment Centre prepared the present project in July 2003. The project was initially appraised in November/December 2003 by a Bank Group mission. Due to shortage of ADF IX resources, the project could not be presented to the Board in 2004. A mission visited Kenya in November/December 2004 to collect information to update the appraisal report. The ENNNRCP as outlined in this report is rooted on the priorities of the Government and is in line with the Bank Group’s Vision Statement on poverty reduction. It will considerably extend the modest activities proposed under the Drought Management and Food Security Initiatives component of the Bank-funded ASAL-Based Livestock and Rural Livelihood Support Project.

2. THE AGRICULTURE SECTOR 2.1 Overview of the Sector Overall, the smallholder sector accounts for 75% of the value of agricultural output, 60% of arable land and 85% of agricultural employment. Although subsistence crops account for over 50% of the agricultural output, tea and coffee remain dominant export commodities. Production of non-traditional exports such as fresh fruit, vegetables and flowers has improved significantly in recent years. Growth in the smallholder sector has lagged in recent years due to poor incentives, drought, inadequate extension and research services and an insufficient rural road network. Since 1980, the whole agriculture sector has faced major crises due to declining public sector investment aggravated by the inability of the private sector to take over functions previously performed by the state. Fluctuation in prices of key agricultural commodity exports, such as tea and coffee, high cost of inputs and unstable weather patterns have also impacted negatively on agriculture sector growth. Growth rates have declined from over 6 percent in the early 1970’s to a negative 2.4 percent in 2000 and 1.5 percent in 2003. These difficulties are reflected in the decline of the relative importance of the agriculture sector from 37 percent of GDP in the early 1970s to only 24 percent in 2002. However, the sector remains of critical importance because 65 percent of the population living in rural areas depend on agriculture for their livelihood.

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2.2 Land Use and Land Tenure

2.2.1 Land Use: In general, the shortage of high-quality arable land and the rapidly increasing population are major factors threatening natural resource conservation and constraining the future development of the agricultural sector in Kenya. Only about 16 percent of Kenya’s land mass of 576,000 km2 is considered to be high and medium potential land favourable to agricultural development, the rest is classified as arid and semi-arid lands (ASALs). Crop and grazing lands occupy 31 percent and 30 percent respectively of the high and medium potential land, with forests (22%), game parks (12%) and urban areas, homesteads and infrastructure covering the rest. Out of the dominant land-use types in the high and medium potential areas, only forests and game parks are gazetted for water catchment conservation. The ASALs are characterised by pastoral livestock production systems with large tracts of communal grazing land and ranches. They have over 50% of the livestock population and produce over 67% of the red meat consumed in Kenya. Only 19% of the area is capable of supporting some agriculture - drought tolerant food crops and some tree crops such as gum arabic, while 31% is suitable for ranching or some other form of sedentary livestock keeping. The remaining 50% can only support nomadic pastoralism. 2.2.2 Over 80% of land in the ENNR basin is ASALs where economic activity is constrained by several factors most of which are associated with aridity. Rainfall is limited (ranging from 380 mm to 1,500 mm annually) and often occurs in short, erratic, wet seasons where the majority of rainwater is lost as evaporation and runoff with little being stored for crop production. The bulk of ASAL soils have low natural fertility and are vulnerable to erosion. The combination of aridity and poor soils makes rainfed cropping risky. Despite these constraints, the ASALs within the ENNR basin are undergoing accelerated degradation on account of over-exploitation of natural resources. There has been a steady influx of settlers who not only occupy what were formerly the dry season grazing grounds for local pastoralists but also introduced intensive land-use systems that compete for the limited water resources available. This expansion into the semi-arid environment has brought about a rapid increase in the demand for irrigation. Pressure on grazing lands continues to grow rapidly in the semi-arid rangelands; small-scale farmers and pastoralists suffer from reduced access to grazing grounds. The consequences of reduced vegetation cover are loss of precious water by surface run-off and increased erosion. 2.2.3 Land Tenure: Three systems of land tenure are found in Kenya, namely: (i) individual (freehold), (ii) public and (iii) communal (customary). Individual title confers security of tenure by registering the absolute rights of ownership to the holders after adjudication, encourage investment on land, make farmers more credit worthy, create land market, minimize land disputes, and promote intensification of agriculture. The public tenure system applies to land owned by the government or associated statutory bodies. Under this tenure system, the right to control, apportion and use of such land is vested with the state, who may confer right of occupation and use for a given period, usually 99 years, and is generally subject to conditions of use and of payment of rent. Communal land tenure is found mainly in the ASALs. This is land held in trust by the respective county councils for different ethnic groups. Trust lands are governed by customary law, which does not provide for subdivision of land among individuals of the user communities or alienation and transfer for individualised use.

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2.3 Poverty, Health and Gender Aspects 2.3.1 Kenya ranks as the 22nd poorest country in the world and has the 3rd most skewed distribution of income amongst low-income economies. More than 50% of the population live on less then US$ 1 a day. Poor water and sanitation facilities continue to severely affect many women and men in terms of their health, and that of their children, resulting in lost farming time and productivity. Only 50% of the rural population have access to potable water and in some areas safe water is only available to 20% of the population. In some rural areas, water collection can consume up to 40% of a woman's time, averaging from 3 to 5.25 hours daily. 2.3.2 Women are key to agricultural production in Kenya, They contribute up to 80% of all labour in food production and 50% in cash crop production: while receiving only 7% of agricultural extension information. In addition to labour contribution, women are increasingly becoming farm managers and heads of farm households, with estimates that over 40% of all smallholder farms are managed by women in Kenya. In both agricultural and pastoral communities, women's position remains secondary to their husbands in decision-making, including those on productive resources (i.e. land and livestock), labour allocation, mobility and on children. It is however noted that, with migration of men into urban centres, women are increasingly making vital decisions. Even in urban centres, decision-making by females is increasing considerably. 2.3.3 Although the number of boys and girls in school is roughly equal at the primary level, boys substantially outnumber girls in higher education. Rural families are more reluctant to invest in educating girls, especially at the higher levels. Around 70% of illiterate persons in the country are female. About 47% of the basin’s population do not have formal education. Access to education as indicated by Gross Enrolment Ratios (GER) at different levels of schooling is lowest for Wajir District which has a primary school enrolment of only 18.7% implying that over 80% of school going children do not attend school. The low levels of education in the ENNR basin have an important and more so negative impact on natural resource conservation and management. The total fertility rate has fallen dramatically over the past 20 years, from an estimated 8.1 to 4.7 children per women between 1976 and 1998. AIDS has become a tragedy of devastating proportions in Kenya. HIV prevalence among adults (male and female) aged 15 to 49 has risen from 4.8% in 1990 to close to 14% in 1998. Almost 50% of confirmed cases of AIDS among women are found in the 20-29 year age group and among adolescents infected with HIV. Over 80% of children are delivered at home in the basin. Infant Mortality Rates are double the national average of 74 for every 1000 births.

2.4 Sector Development Constraints

2.4.1 Major constraints to agricultural development include rapid population growth, unpredictable weather conditions (drought and floods), ecological degradation, poor and inadequate infrastructure, inadequate extension services, poorly organised markets and inadequate marketing information. The natural potential of the highlands characterised by fertile soils and good rainfall has not been fully realized. While this is an ideal climate for the production of high value crops for export, and Kenya has made significant export efforts in this area, the ASALs still suffers from neglect, inadequate natural water potential, substantial saline soils, frequent droughts and heavy floods. About 84% of the country's landmass is ASALs, receiving less than 500mm of rainfall in most years. These are major hindrances to

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development of irrigation potential, and will require substantial capital investment and technology transfer. With proper management and promotion, potential exists for increasing the offtake of livestock in the ASALs, whose inhabitants are traditional pastoralists who depend on livestock production for their livelihoods. Besides, livestock keeping is the main industry that is quite suitable for the prevailing circumstances in the ASALs. 2.4.2 Water for both human and livestock needs remains the most critical challenge in the ENNR basin. The average access to safe water is estimated at 37.1% compared to the national average of 67.4%. Only 29.6% of the population use piped water, 52.3% use water from rivers, lakes, ponds or dams, unprotected springs and wells, and 16.4% used water from roof catchments and protected wells or boreholes. The total water deficit for human and livestock needs in the ASALs is estimated at 45,953 m3 per day for 2000 and is projected to increase to 59,537 m3 per day by 2010. Most of the districts in the ASAL experience critical water shortages because of low rainfall (frequent drought), low density and poor maintenance of existing water points, and conflicts. This situation is compounded by the risk of environmental degradation around existing water points due to an influx of huge livestock populations. During the dry season, especially in the lowlands, the distances covered for water collection can increase up to 5km for domestic water and 14km for livestock. Hence a major proportion of the day’s time is spent on this activity. There is, thus, need to intervene to provide water, which is an indispensable part of life and food security, to meet the growing needs of the people of the ASALs and their agricultural production.

2.5 Sector Development Policy and Strategy 2.5.1 The GOK launched, in June 2003, its “Economic Recovery Strategy (ERS) for Wealth and Employment Creation” for the period 2003-2007. The strategy identifies key policy actions necessary to spur the recovery of the Kenyan economy. The four priority areas that form the core of the macro-economic framework are: (i) maintaining revenues above 21 percent of GDP, (ii) strengthening governance institutions, (iii) rehabilitation of physical infrastructure and (iv) investment in human capital. The main objective is to restore the economy to an accelerated and sustainable growth path by increasing the GDP growth rate from 2.3% in 2003 to 7% in 2006; generate employment for 500,000 persons annually and reduce poverty levels from current 56.8% to 51.8% by 2007. The ERS recognises the need to reverse the declining agricultural performance, accelerate the expansion of forest cover to bring it to the minimum required forest coverage of 10% of total land area, ensure the availability of adequate water resources for the population and to strengthen rural livelihoods in the ASALs through support to livestock and range management. 2.5.2 The Kenya Rural Development Strategy (KRDS) covering the period 2001 – 2016, was developed in 2001 as a blueprint to assist the Government, private investors, civil society, NGOs and development partners in defining development interventions to improve the overall well being of the rural people of Kenya. The principal objectives of the KRDS are to (1) increase agricultural productivity, (2) expand farm and non-farm income earnings to attain food security for all, (3) reduce disease and ignorance, and (4) achieve sustainable natural resource management. The KRDS will facilitate participatory rural development through equitable and improved access to productive assets and services to promote food security, employment, higher incomes and welfare. Thus, these two main strategies support agricultural development as a means of poverty alleviation.

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2.5.3 The District Focus for Rural Development (DFRD) is a strategy, dating from 1983, with the objective of giving districts autonomy in setting their priorities. While final decision-making remains centralized, co-ordination at district level is achieved through various levels of development committee, the topmost of which is the District Development Committee (DDC). This committee is chaired by the District Commissioner and its wide membership includes, among others, the district heads of all ministries, representatives of local authorities and parastatals and NGOs. 3. WATER AND FORESTRY SUB-SECTORS

3.1 Water Sub-sector Water Resources 3.1.1 Water plays a key role in the economy of Kenya as a resource for urban and rural consumption, for energy generation, for agricultural development, for industry, and tourism development. Kenya’s surface water resources are distributed within five principal river drainage basins, Tana, Athi, Ewaso Ng'iro North, Rift Valley and Lake Basin. The estimated surface water potential in Kenya (lakes, wetlands, rivers) is 19,500 million cubic meters, which represents about 18% of the national annual rainfall. The groundwater potential is estimated at 619 million cubic metres, 31% of which is in deep seated aquifers exploitable through boreholes, and 69% located in shallow aquifers exploitable through shallow wells. 3.1.2 Kenya’s renewable supply of fresh water is less than 650 cubic metres per capita per year, making it one of the most “water-scarce” countries in the world (threshold of less than 1000 cubic metres /capita is considered water scarce). This per capita availability is projected to fall to 235 m3 by 2025 as the population increases, and could be less if the resource base continues to deplete. Therefore, Kenya needs to promote the efficient use and judicious management of its water resources. In spite of constraints in the water resource base, Kenya’s water demand is expected to increase from 3,874 cubic metres in 2000 to 5,817 million cubic metres per year in 2010 requiring substantial investments. The country has experienced extremes of climate with floods and droughts severely impacting on the livelihood of people and health of animals as well as national economy. This is exacerbated by limited storage capacity of 60 cubic metres/capita (for all uses, reducing to 4.3 if energy is excluded) compared to 746 for South Africa indicating the large level of investment required. 3.1.3 In the project area, the ENNR and its tributaries is the principal source of water for all communities within its reach. The 650km long ENNR, the main perennial river in the project area, originates from the northeastern slopes of Mt. Kenya. The lowest gauging station on this river is located at Archer’s Post at a distance of 250 km where mean annual runoff of the river averages 630 million cubic metres. However, in places far removed from the channel of the ENNR, especially in the semi-arid and arid middle and lower catchment, the principal source of water supply particularly in the dry season is groundwater, which is accessed either through boreholes or shallow wells. The total potential for groundwater is estimated at 1,183 million cubic metres per year, with 1,022 million from boreholes and 160 million from shallow wells. The groundwater abstraction rate in the ENNR catchment is estimated at 4.3 million cubic metres per year which is much less than the estimated safe abstraction rate of the ground water of 228 million m3 per year

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3.1.4 The waters of the Mt. Kenya tributaries of ENNR, which provide over 80% of the river flow at Archer’s Post in the dry season, have been tapped extensively to supply rural and urban settlements, small scale irrigation by small holder settlers and, lately, to support commercial horticulture for the readily available markets. Abstraction from the rivers during the dry season for irrigation of food crops and flowers is estimated to be as high as 60% to 80% of available water, much of it unauthorized. As a result of the water over abstraction, the flow of the ENNR reduces drastically during the dry season before getting into the ASAL areas, leading to growing hardship in areas that are already drought prone. The dry season flow of the ENNR at Archer’s Post has reportedly dropped from 9.0 m3 per second in the 1960s to 0.9 m3 per second in the 1990s. This is a lot less than the estimated residual flow of 5 m3/sec needed to maintain a permanent flow past Archer’s Post. In fact, over the past two decades, the river has frequently dried up 50km upstream of Archer’s Post.

Water Resources Policy, Strategy and Legislation 3.1.5 Kenya has been undertaking reform programs in the water sector starting with the issuing of the 1999 National Policy on Water Resources Management and Development that articulated sound water resources management. The policy calls for the decentralisation of operational activities from the central government to local authorities, private sector, and increased involvement of communities in order to improve efficiency in service delivery. This was followed by the draft Water Resources Management Strategy (prescribing the principles, objectives, procedures and institutional arrangements for the management, protection, use, development, conservation, and control of water resources) and draft National Water Services Strategy (framework for achieving decentralisation, achieving efficiency, and increased sustainable access to improved water services). 3.1.6 The Water Act (2002) regulates the use, management, development, conservation and control of water resources of Kenya. It provides for the decentralisation of water management decision making to the catchment/river basin level and broadens the participation of River Water Users Associations (RWUAs) in water resources management. The Act details clear separation of functions between water resources management by a Water Resources Management Authority (WRMA) and water supply development by a Water Services Regulatory Board (WSRB). Nonetheless, the government recognises that, besides the establishment of the WRMA, catchment development and management activities and investments in rehabilitation/expanding water resources management infrastructure as well as sustainable storage facilities are urgently needed to reverse the current decline.

Institutional Framework

3.1.7 Ministry of Water and Irrigation (MWI): In accordance with the Water Act (2002), the overall control of water resource lies with the MWI. The Ministry has the duty to promote the investigation, conservation and proper use of water resource throughout Kenya and is responsible for policy making including the formulation of and gazetting a national water resources management strategy. It discharges its responsibilities through the Water Resources Management Authority (WRMA) for water resources management and the Water Services Regulatory Board (WSRB) for water services. 3.1.8 Water Resources Management Authority (WRMA): The Water Resources Management Authority (WRMA) is a corporate body functioning under the direction of a Governing Board, with responsibility for the overall regulation and management of water resources of Kenya. The day to day running of the WRMA is the responsibility of a Chief Executive Officer.

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3.1.9 Catchment Area Advisory Committee (CAAC): The CAAC provides advice to the WRMA on water resources conservation, use and apportionment and granting of permits. Its membership consists of Government Officials, Regional Development Authorities, Stakeholders and Communities. CAACs have been established in the seven catchment areas of Kenya. For the purposes of water resources management, the ENNR catchment is divided into 9 sub-catchment areas with nine focal points instead of following district boundaries. 3.1.10 River Water Users Association (RWUA): The RWUA is an association of water users, riparian landowners and other stakeholders within a sub-basin. It is registered under the Societies Act which confers a legal status on the RWUA to sue or be sued, to enter into contracts, and to own assets. The primary role of the RWUA is to represent the interests of the river water abstractors and to channel community participation in such a way as to complement the Government in the management of the relevant river water resources. RWUAs are proving to be effective in streamlining water abstraction and allocation. Under the Water Act (2002), it is envisaged to introduce a system of self-regulation based on RWUAs, who are also seen as a forum for conflict resolution and cooperative management of the water resources in catchment areas. 3.1.11 Water Services Regulatory Board (WSRB): The Water Services Regulatory Board (WSRB) is a another corporate body functioning under the direction of a Governing Board, with responsibility for issuance of licenses to water service providers through Water Service Boards, and to determine standards, procedures and tariffs for water supply. The day to day running of the WSRB is the responsibility of a Chief Executive Officer. 3.1.12 Water Service Boards (WSB): Each WSB is responsible for the efficient and economical provision of water services within its area of jurisdiction. The country is covered by seven WSBs which will ensure that every part of the country is provided for. A WSB shall enter into an Agreement with a Water Service Provider in writing for the purposes of providing water services in specified areas. The ENNR catchment falls under the Central and Northern Water Services Boards. However, it is yet to be established whether communities who manage water points for livestock are considered as Water Service Providers, thereby falling under the jurisdiction of the WSB. 3.1.13 Ewaso Ng’iro North River Basin Development Authority (ENNDA). ENNDA, based in Isiolo, was established by an Act of Parliament in 1989 “to plan and coordinate the implementation of development projects in the ENNDA Basin and catchment areas and for connected purposes.” It currently falls under the Ministry of Regional Development Authorities. ENNDA’s management board includes representatives from each of the 12 districts within the basin, four Provincial Commissioners as ex-officials and six Permanent Secretaries from line ministries. The Managing Director is the Chief Executive and is appointed by the relevant Minister. There are two main departments, namely Research and Planning and Corporate Affairs. Below each division there are sections. According to its administrative structure (see page 1 of Annex 2), ENNDA is supposed to have a senior staff complement of 20. But the current staffing is only 13. Recruitment to fill the vacant positions is underway. During the appraisal of the project, Government gave its firm commitment that the necessary staff for the PCT would be made available to ENNDA. 3.1.14 The Act specifies twelve statutory functions of the Authority covering regional development planning and coordination, generation of strategic data and information and project implementation. ENNDA participates in the management of water resources as a

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member of the Ewaso Catchment Area Advisory Committee. Between 2001 and 2002, it coordinated, with the line ministries and district authorities, the implementation of the two-year “ENNR Catchment Conservation and Water Resources Management” study that not only produced baseline data base for the catchment, but the current project as well. ENNDA also coordinated the preparation of the present project by the FAO Investment Centre in July 2003. Under the Bank’s ASAL-Based Livestock and Rural Livelihoods Support Project ENNDA has been designated the implementing agency for the improvement of water points and its Managing Director is a member of the Project Steering Committee (PSC).

3.2 Forest Sub-sector 3.2.1 The total gazetted forest area in Kenya is 1.7 million hectares, which is approximately 1.7% of the total land area. Broadly, forests are grouped into three broad categories namely natural forests in the highlands, plantations and dry land forests. The natural forests covering an area of approximately 1.2 million hectares are located in the relatively more humid highlands. They are critical for the conservation of biological diversity and watershed protection. Kenya has also raised extensive forest plantations in the past, now estimated to be about 120,000 ha. These are also located in the most productive highlands and primarily comprising of species like Cypress, Pines and Eucalypts. The main role of the forest plantations is to supply raw material to the wood based industries, especially saw milling and pulp and paper. Dry land forests occupy about 30% of the country. Although these are poor in density, species diversity and growth rate, they form an important source of livelihood to the rural communities. In addition to supplying most of the tree fodder, firewood and charcoal, these forests provide a whole range of non-wood forest products. 3.2.2 Forests rank high as one of the important national assets for economic, environmental, social and cultural values. They provide utility products such as timber, transmission poles, fuel wood and pulpwood. Forests also provide a wide variety of non-wood products and enhance the ecological functions of the five critical water sources in Kenya which include Mt. Kenya, Aberdares, Mau complex, Mt. Elgon and the Cherangani hills. Forests are the sources of the major rivers in the country, which provide water for hydroelectric power generation, irrigation schemes that are important for agricultural sector development, and water for both domestic and industrial use. They are also critical ecosystem for the conservation of biological diversity and constitute a major habitat for wildlife, which is one of the major foundations for tourism development in Kenya. 3.2.3 Despite their major role in environmental, social and economic development of the country, sustainable development and management of forests continues to be hampered by a number of factors, including inadequate resources and lack of an enabling policy and legislation. In addition, increasing population and poverty continue to exert pressure on the country's forest resources. Farms and settlements are encroaching upon remnants of the natural forests at an estimated annual rate of 5,000 ha and upon woodlands at a rate of 55,000 ha/year. The degazettement of forestland has also contributed a lot to the excision and conversion of forest land to agricultural settlements. Over 228,000 ha, or nearly 15 percent of the former total area of forest reserve, has been degazetted since 1960. These problems have undermined the Government's efforts in undertaking sustainable forest management. 3.2.4 The Rural Afforestation Extension Scheme (RAES) was launched by the Government in 1971. Through the Scheme, the Forest Department was mandated to promote and develop forestry-based activities that have an impact in natural resource management. Activities that

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have been initiated and supported under this programme include agro-forestry, catchment protection, commercial farm forestry, energy conservation and production of wood and non-wood forest products. Today, farmlands are a major source of forest products that include building materials, fuel wood, charcoal as well as non-wood forest products such as medicinal herbs, fodder, fruits, gums and resins. Already in 1999, studies have shown that on-farm income from tree crops amounted to 51% in the high potential areas, 40% in the medium potential areas and 18% in the low potential areas. Studies undertaken on household energy supply and demand indicate that, between the years 1980 and 2000, farmlands have overtaken forests as the main sources of fuel wood supply to households and cottage industries. Thus alongside gazetted forests, agro-forestry plays a crucial role in both provision of wood products as well as for stabilization of erosion-prone areas. 3.2.5 The natural vegetation in the dry lowland part of the ENNR catchment consists of a patchwork of Acacia woodland and rangeland. Both are used as a source of grazing by the pastoral inhabitants. The Acacia woodland serves also as a source of fuelwood and of gums and resins, which provide income to the population who gather the products. High forest occurs only in the montane part of the catchment between 1,450m and 3,000m. As elsewhere in Kenya, the montane forests in the project area have been steadily eroded over time by agricultural encroachment, often associated with illegal logging and/or inappropriate management of the shamba system. Livestock grazing and fire are also major factors in forest degradation. Reduced vegetation cover has brought about soil erosion and river sedimentation, further reducing the flow to the lower parts of the catchment. Currently, the main district for apiculture in the project area is Laikipia. However, the western districts of the project area have excellent prospects for honey production. Forestry Policy, Strategy and Legislation 3.2.6 The current Forestry Policy dates back to 1968, while the current forest legislation, the Forests Act Cap. 385 was adopted in 1964. Since then, Kenya has experienced a rapid population growth. The weaknesses in the current forest legislation are related to its incapacities to address the threats facing forest cover, such as excisions, over-exploitation and encroachments. This has negatively affected the biophysical environment and the economy, including availability of wood supply, degradation of water catchments, accelerated soil erosion and monetary losses from forest resources and services. 3.2.7 To address the weaknesses of the Forest Policy and Forests Act Cap. 385, a draft Forest Policy and a draft Forests Bill were prepared in 2004. The Draft Forests Bill was presented to Parliament for debate in May 2004. It has, however, not passed and has now been revised to address the concerns raised by Parliament. It will be presented again to Parliament in early 2005, after the mandatory six months. The Draft Forests Bill provides for the establishment, development, sustainable management, and utilization as well as conservation of forest resources for the sustainable development of the country. The Bill makes degazettement and excisions considerably more difficult by subjecting any excisions to approval by Parliament. 3.2.8 The draft Forests Bill also makes provisions for the “involvement of adjacent forest communities and other stakeholders in forest management and conservation”. These communities are defined as being traditional forest users (for livelihood, cultural or religious purposes) living within 5 km of the forest. They depend upon the forests for a wide range of goods and services. Principal among these are fuelwood and grazing but other important

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products include building materials, ropes and basket materials, bushmeat, honey and medicinal plants. The draft Forests Bill requires that, to be recognized, a user group or community should be registered as a “forest association”. On the recommendation of the local conservation committees the new Forest Service can enter into agreements with registered associations for the joint management of the forest. 3.2.9 Other key elements of the draft Forest Policy and Forests Bill include: a) transformation of the Forest Department into a semi-autonomous Kenya Forest Service that will formulate policies and regulations pertaining to all forests, b) expansion of the mandate in the management of all types of forests, c) provision of appropriate incentives to promote sustainable use and management of forest resources and d) addressing local and global forestry issues and challenges to ensure fair contribution of the forestry sector to the economic development of Kenya.

Institutions 3.2.10 Forest Department: The Forest Department falls under the Ministry of Environment and Natural Resources. The overall responsibility of the Department covers the protection of all aspects of forest exploitation, regulation of forests and forest products for commercial purposes, provision of extension services for reforestation promotion of the development of forest plants, and regulation of community-related uses of forests and forest resources, e.g. honey harvesting, grazing, firewood collection, etc. The District Forest Officer (DFO) is responsible for all Forest Department activities at the district level. Reporting to the DFO are Foresters who work in extension with local communities or have normal forest station (or “territorial”) duties associated with natural or plantation forest in forest reserves and the local application of forest laws and regulations. 3.2.11 The Kenya Wildlife Service (KWS), established in 1990, is a parastatal under the Ministry of Tourism and Wildlife. It is responsible for managing national parks and manages national reserves jointly with the Forest Department. In 2000, Mt. Kenya Forest Reserve was gazetted as a national reserve. Management of the national reserve is currently under the two institutions with the KWS taking care of the indigenous forest and Forest Department responsible for the plantation forests. 3.2.12 The Kenya Forest Research Institute (KEFRI) is part of the Ministry of Environment, and Natural Resources and undertakes commissioned research in various aspects of forestry, including socio-economics and non-wood forest products such as gums and resins. Its “Service Programme” includes the provision of consultancy and training services and the sale of seed from its Kenya Forestry Tree Seed Centre. KEFRI will be involved in the project as a source of expertise and training in all aspects of forestry, including participatory forest management, agro-forestry and non-wood tree products. It will also be important as a supplier of high quality germplasm and a collaborator in tree genetic improvement.

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3.3 Donor Interventions 3.3.1 The projects and programmes most relevant to the present project, in terms of complementarities and/or active in the project area, are mentioned in the following table.

Donor Project Target Areas African Development Bank ASAL-Based Livestock and Rural Livelihoods

Support Project ASAL districts of Garissa, Isiolo, Mandera, Marsabit, Samburu, Tana River, Turkana, Wajir, West Pokot, Baringo, Ijara, Kajiado, Laikipa, Mbeere, Machakos, Makueni, Malindi, Mwingi, Narok, and Taita Taveta

World Bank

Arid Lands Resources Management Project Phase II

21 ASAL districts of Mandera, Marsabit, Tana River, Turkana, Samburu, Isiolo, Baringo, Garissa, Moyale, Wajir, Narok Transmara, Kajiado, Makueni, Kitui, Mwingi, Tharaka, Mbeere, West Pokot and Laikipia.

IFAD/GEF IFAD

Mount Kenya East Pilot Project for Natural Resources Management Central Kenya Dry Area Smallholder and Community Services Development Project

Tana River Catchment on eastern slopes of Mount Kenya in the districts of Embu, Meru Central , Meru South, Mbeere and Tharaka Central Province districts of Nyeri, Nyandarua, Kirinyaga, Maragwa, and Thika

USAID Mokogodo Forest Project Laikipia European Union (near completion)

Bio-diversity Conservation Programme – 4 Community conservation projects

Laikipia and Samburu

Italian Government (implemented by FAO)

Gum arabic production Isiolo and Marsabit

Swiss Development Corporation (completed)

Laikipia Research Programme Laikipia

SIDA (completed) Water Sector Reform Project Water Sector SIDA/DANIDA (under preparation) Water and Sanitation Programme Water Sector GTZ Water Sector Reform Project Water Sector

3.3.2 In general, these interventions seek to address issues related to food security and poverty reduction through empowerment of rural communities, natural resources degradation through support to sector reforms, community involvement in natural resources management and diversification of income sources, delivery of essential services through capacity building at the local level in support to the decentralisaton process, improved access to water by the human, livestock and wildlife population and improved crop and livestock husbandry practices. 3.3.3 Lessons learned: Experience from past interventions has shown that the participatory process increases the ownership by communities of project activities and contributes to the creation of capacity amongst them. Strengthened planning approaches to natural resource management and specific investments in regeneration or protection of fragile natural resources will result in reduced degradation. Conditions which require revision of existing laws for approval by the country’s Parliament prior to first disbursement, often lead to delays in the fulfilment of such conditions, and hence project startup. In the past, Government financial regulations required that all special account funds be disbursed through the Treasury. This procedure resulted in delays in the transmission of funds to the projects and also in the justification of expenditures to the Bank and consequently, replenishment of the special accounts. Districts could not always access funds at the times when they were required. As a result, the rate of project implementation was severely hampered. Current financial regulations now permit the opening of project special accounts in commercial banks, even at the district level. This is expected to speed up the rate of project implementation.

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4. THE PROJECT

4.1 Concept and Rationale 4.1.1 In the Kenyan context, water is a very scarce natural resource and catchment conservation plays a critical role in its protection and sustainable use. The Ewaso Ng'iro North River Basin presents an acute example of the water scarcity prevalent in Kenya. A combination of increased water abstraction by upper and middle catchment irrigated farms and a deterioration in the vegetative cover of the upper catchment as a result of encroachment of forest areas for timber, crop growing and collection of fuelwood, have combined to reduce water flows in the Ewaso Ng’iro North River (ENNR) and its tributaries throughout most of their length. In fact, over the past two decades the river has frequently dried up for more than half of its 650km length. Irrigated agriculture, the single most important water user in the upper reaches, is believed to consume as much as 60 to 80 % of available water, substantial part of which is unauthorized. Currently there are insufficient provisions to compensate the abstracted flow for this purpose. 4.1.2 While the disappearance of the ENNR is itself a major ecological calamity, it has the potential to trigger other adverse impacts, including impaired recharge into the Merti beds, thus affecting local groundwater supply. In the ASAL areas of the Ewaso Ng’iro catchment, a shortage of water is the main constraint affecting rural livelihoods and economic development. The significant reduction in water availability into the already water stressed area will greatly diminish the catchment’s carrying capacity. Resource over-exploitation and degradation are likely consequences, while pastoralists will increasingly incur more losses of livestock due to inadequacy in water supply. Downstream communities are forced to seek alternative water sources which may be of poorer quality, thereby increasing health risks, and/or furthering distance, increasing the labour and cost required to fetch the water. Nomadic pastoralists and their livestock, and the wildlife in the lowlands, who depend for their livelihood on water generated upstream, are drastically affected and are forced to move upstream in the search for water and grazing land. As a result, conflicts with farmers are increasing. 4.1.3 The forest zone in the highlands is critical for regulating water discharge as it exercises a stabilizing function, vital to cultivators who depend on the water. Pressure from the growing population is greatest in those humid areas where most of the project’s gazetted forest is located. This pressure leads to encroachment of forest areas for timber, crop growing, collection of fuelwood on the one hand and, on the other, a strong interest in tree planting around private farms to compensate for the scarcity of wood resources. With increased demand for water, the need to regulate river recharge upstream, so as to reduce the severity of floods and droughts downstream, has become ever more important. Improved management of forest areas, for wood and grazing, and increased tree cover in the upper catchment are seen as important elements in achieving a better regulated flow of the river. In the lower catchment, the project will help to relieve pressure on the natural vegetation by contributing to the increased availability of fuelwood and fodder. Moreover, there is general understanding among the waters users that more equitable ways of sharing water will be needed. In the future, the proposed solution is to establish strong River Water User Associations, such as those on the Ngushishi and Isiolo rivers, that are able to regulate and monitor abstraction, together with the introduction of better technology through farmer training.

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4.1.4 Community participation, through water and forest users association, is a key element in project activities in the management of the water resources and gazetted forests. By improving local people’s responsibility for the management of water resources and access to and responsibility for forest and tree resources, the project will contribute directly to enhancing river flow and forest conservation as well as helping to reduce poverty. The key management role of the water and forest users association is acknowledged respectively in the Water Act 2002 and Draft Forest Bill. The development of non-wood forest products, such as apiculture and gums and resins, in an environmentally sustainable way would enhance natural resource conservation in the area while at the same time helping to reduce poverty. Therefore, a project for investments in water resources and forest conservation would be timely and would support the ongoing Government reforms. 4.1.5 Design Considerations: The project design takes into consideration a number of factors, namely: (i) water resources and forests are managed on the basis of catchments and conservancies and not along administrative boundaries, as provided under the Environmental Management and Coordination Act (1999) and the Water Act (2002); (ii) increased decentralization of management authority and accountability which is consistent with Government policies; (iii) application of cost recovery for activities where benefits to the farmer will allow him/her to pay for services in order to contribute to recurrent expenditure; (iv) supporting sustainable institution building by not creating separate project structures and minimizing the amount of technical assistance and additional permanent staff in order to reduce the strain on Government’s future recurrent budget; and, (v) supporting the participation of the communities in water and forest resources management. These approaches and design considerations are in line with Bank Group strategies for poverty reduction.

4.2 Project Area and Project Beneficiaries 4.2.1 The project area (see Annex 1) of 209,576 km2 (36% of the national territory) encompasses the entire ENNR catchment and covers 12 administrative districts in four (4) provinces. These are Garissa, Mandera, and Wajir in North Eastern Province; Marsabit, Isiolo, Meru Central, Meru North and Moyale in Eastern Province; Nyandarua and Nyeri in Central Province and Laikipia and Samburu in Rift Valley Province. The catchment extends from the high uplands of Mt Kenya, whose peak is 5,199 m above sea level to the Lorian Swamp, which is only 150m above sea level. Most of the catchment area lies below 1,000m in altitude and the high uplands account for only 3 per cent of the total catchment area. The climate varies from sub-humid to semi-humid in the upper catchment to semi-arid to arid in the middle and lower catchment. The middle and lower catchment account for over 80 percent of the total catchment with high annual evaporation rates in excess of 2,300 mm. Annual rainfall in the basin varies from 380mm in the lowlands to 1,500mm in the highlands and exhibits a bimodal pattern. 4.2.2 The basin’s population density is low (9.1 persons/km2), and unevenly distributed. Twenty-five (25%) per cent of the population live on 2.7 per cent of basin’s land area where most of the project area’s high potential lands and gazetted forest are located and where 80% of the water flow of the ENNR is generated. This pressure of a growing population leads to forest destruction and encroachment, on the one hand and, on the other hand, a strong interest in tree planting around private farms.

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4.2.3 The poverty level in the ENNR catchment is about 60% and is higher than the national average, which is approximately 57%. Poverty levels ranges from 30% in Nyeri in the upper catchment to 90% in Isiolo, Marsabit and Samburu in the ASALs. Poverty is highest in the seven ASAL districts where poverty levels vary from 50% to 90%. Drought occurrence within the last three years is the main factor behind accelerating poverty within the ASAL areas where, on average, each household has lost 40% of cattle and 20% of sheep and goat. Incidence of poverty is manifested by low access to food, education, medicare, low household food security, low quality housing and a generally poor supply of water and sanitation. 4.2.4 About 20% of households in the ENNR basin are female-headed due to single motherhood (especially in the highlands), distant working stations for the husbands and widowhood. In the ASALs, women are heavily involved in herding even though they still have to ensure the basic family responsibilities, such as, cooking, baby-sitting and fetching water. Women in the highlands are important contributors in the realisation and management of farm-based activities at the household level. 4.2.5 There are a number of Community Based Organisations (CBOs) present in the project area. These include River Water Users’ Associations (RWUAs) formed along specific water sources such as a river or a dam in the upper areas catchment, Tree Nurseries Groups which raise and sell tree seedlings in both upper and lower catchment, Groups carrying-out bee keeping activities, and in the more arid districts Pastoral Associations whose operations touch virtually all spheres of the community life. In Wajir District, the PAs support certain Water Users Associations- to manage specific water points such as boreholes or water pans and are organised under a district umbrella association. Generally, the CBOs are open to both men and women members. Women make up between 10%, like in some River Water Users Association, to 100% of the membership, like in tree nursery groups, bee keeping groups and gums and resins. 4.2.6 The project will directly benefit an estimated 70,000 households or about 20% of the population of the project area. The beneficiaries will include river water users associations, water and forest users associations, tree nursery groups, pastoralists, agro-pastoralists, beekeepers, ENNDA and district line ministry staff. Women are expected to make up about 20% of the beneficiaries.

4.3 Strategic Context

4.3.1 The government’s development strategy as stated in the Economic Recovery Strategy for Wealth and Employment Creation 2003–2007, is to restore economic growth, generate employment and reduce poverty levels by at least 5% from the current 56.8% level. The ERS also recognises that adequate quantity and quality of water is a basic requirement for Kenya’s economic growth and performance. Yet, water is becoming a scarce commodity because of limited national endowment, the growing needs of a rapidly growing population, as well as serious water resources degradation. However, the government acknowledges that besides institutional reforms in the water sector, catchment development and management activities and investments in rehabilitation/expanding water resources management infrastructure as well as sustainable storage facilities are urgently needed to reverse the current decline. With regards to the ASALs, government’s stated development objective is to promote sustainable rural livelihoods and fight against the rampant poverty in these areas. Inadequate water is considered the main constraint to development, income generation and food security in the

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ASAL areas. Government efforts in these areas will focus on maintenance and rehabilitation of existing community water pans, dams and boreholes and construction of new ones, and also rehabilitation of deforested water catchments. The stated objective for the forest sub-sector is to promote development of agro-forestry and encourage community participation in efficient management of forests, to be complemented with continued re-afforestation including private sector participation to ensure that the minimum required forest coverage of 10% is achieved by the end of 2007. 4.3.2 Because of the focus on critical constraints to development, such as insufficient water and catchment degradation and income generating activities, the project is expected to have a significant impact on poverty alleviation, in accordance with the Government’s strategy as articulated in the ERS. It will also contribute significantly to achieving the Millennium Development Goals of (i) halving the proportion of people living in extreme poverty by 2015, (ii) ensuring environmental sustainability through increase in the area under forest cover and land area protected to maintain biological diversity, and halving the proportion of people without sustainable access to safe drinking water by 2015, and (iii) promoting gender equality and empowerment of women through their involvement in project activities. These actions are also consistent with the proffered areas of Bank intervention in the Country Strategy Paper (CSP) and the Bank’s policy on Integrated Water Resources Management (IWRM). The Ewaso Ng’iro project’s focus on improvement in water supply is also in line with the Bank’s Water Initiative and will considerably extend the modest activities proposed under the enhancement of rural livelihoods component of the Bank-funded ASAL-Based Livestock and Rural Livelihood Support Project. The overall sector goal of the project is to contribute to poverty reduction through sustainable natural resources conservation and management.

4.4 Project Objective The project specific objective is to improve water resources management, agricultural land use and forest resource conservation in the ENNR catchment. 4.5 Project Description 4.5.1 The project comprises three components with the following major outputs: (A) Water Resource Development and Management, including improvement in water supply points in the basin, (rehabilitation of 229 water pans and 54 boreholes, construction of 34 new water pans, 47 new boreholes, construction of four water retention structures (50,000 cubic metres capacity), rehabilitation of 5 springs; construction of 73 roof catchments; upgrading of six river gauging stations to automatic readings and installation of four supplementary stations to cover the area downstream of Archer’s Post; 6 sub-meteorological stations established, improved water availability for 870,000 TLU, annual loss of livestock reduced from 20% to 10% in the ASAL and 8% to 4% in higher rainfall districts. (B) Participatory Catchment Conservation, including support for agro-forestry and community fuelwood plantations in the uplands and ASAL (private production of 2.7 million seedlings supplying 81,200 households for planting of an area of 700 ha, an additional 1300 ha of community fuelwood established); 24,000 hectares of indigenous forests protected through participatory forest management; support to enhance incomes and food security, focusing on support to beekeeping and gums and resins (increased annual production of 280 tons of honey, 60 tons of gums and 260 tons of resins); training of staff of technical line ministries and other government organisations and beneficiaries.

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(C) Capacity Building, including 139 training in participatory development approaches targeting 1790 staff of ENNDA, FD and MOA; 192 community leaders (including 64 women) trained in community appraisal; one Pilot high frequency borehole EWS with 10 monitoring stations established in Wajir district. and 4 EWS units equipped and trained in Wajir, Samburu, Mandera and Garissa. A. Water Resource Development and Management 4.5.2 This component involves (i) the development of water points in ASAL regions and (ii) intensification of hydrological monitoring, (iii) support to Water Users Associations, and (iv) irrigation and soil and water conservation capacity development. 4.5.3 Development of Water Points: Water for both human and livestock consumption is the most critical requirement in the ASAL areas and is the major need identified by communities in these areas. Under the programme proposed, priority has been given to the rehabilitation and upgrading of existing structures (76 percent of envisaged projects) rather than the construction of new facilities Activities under this component would include rehabilitation of 229 water pans and the construction of 34 new ones, rehabilitation of 54 boreholes and establishment of 47 new ones. In addition provision has been made for 4 small flood water storage structures (50,000 cubic metres capacity), together with 73 roof catchments, mainly on schools, and also site protection of five springs. The actual number and location of water points constructed will depend on the number of community appraisals approved and their choice of projects. Works can be packaged into lots depending on their nature, access and geographical spread to ensure efficiency in supervision and economies of scale. The consultant preparing the designs would be required to recommend such packaging after proper consultation with all stakeholders. The borehole rehabilitation and construction programme, which will be subject to strict environmental and operational criteria, is expected to be mainly located in the drier eastern parts of the project area. 4.5.4 The most important intervention will be rehabilitation of pans that have either silted up or have been breached. These pans are generally situated in well selected sites that maximise surface runoff collection and have good discharge capacity for excess flows in the time of floods. These pans are recharged during both the long and short rains, and, if well maintained and not over-used, can provide water for a dedicated community throughout the dry periods between the rains, and during drought periods. Typically a full pan can store 10-25,000 cubic metres of water. The rehabilitation requirements will vary from pan to pan. Almost all will require: de-silting of up to 2 metres of accumulated silt, the reconstruction of spillways and/or embankments that have been washed out by floods, the construction of a perimeter fence to keep livestock out, and the installation of a pipe reticulation system and drinking trough to facilitate access to water by cattle and people downstream of the actual dam perimeter. In addition a small tree nursery would be established within the perimeter of the pan to provide a small income to the community responsible for the pan maintenance in addition to charges levied for water use. 4.5.5 This sub-component will also include a number of studies. These will comprise feasibility studies, including environmental impact assessment studies, for three water storage reservoirs for downstream water regulation. The aim of downstream water regulation is to harvest part of the substantial flood water runoff during the rains, and releasing it during dry periods, to provide a secure way of keeping streams flowing throughout the year and facilitating the provision of water to both up and downstream users. In addition standard designs and documents will be prepared for the water points and detailed designs for small retention structures.

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4.5.6 Intensification of Hydrological Monitoring: A more comprehensive, systematic and well coordinated monitoring of water resources is required to facilitate protection of the basin’s shrinking water resource base. However, the existing river flow gauging stations on key rivers are inadequate. While the network in Laikipia is fairly intense, as a result of the interventions of the Swiss-funded Laikipia Research Project, stations elsewhere suffer from imperfections of manual readings. Also, there are no stations in the critical area downstream of Archer’s Post. Under the project, six existing river manual gauging stations will be upgraded to automatic readings and four supplementary stations will be established downstream of Archer’s Post in order to be able to monitor in a more comprehensive way the entire hydrological system of the river. In addition, to improve the coverage for hydrological data collection, six sub-meteorological stations will be installed in Isiolo, Merti, Habasweni, Marsabit, Moyale and Mandera. Rating curves will be established and a regional hydrological database initiated from the data collected. 4.5.7 Support to Water Users Associations: There will be two types of water users associations (WUAs) in the project area – those responsible for water points developed under the project and others associated with rivers. The associations responsible for water points would receive training in the preparation of Community Action Plans (CAPs), community management and the operation and maintenance of the water points for their long-term operation. The community appraisal concerned with the construction or rehabilitation of water points will include provision for training of the community in the establishment and operation of Water User Association. RWUAs are expected to play a major role in managing water abstraction by self-regulation through the Ewaso Catchment Area Advisory Committee. This requires detailed preparation and familiarization with new tasks, functions and responsibilities by all parties, water users and representatives of governmental bodies, in order to gain a new understanding about the division of functions. The project will support an intensive training programme for 112 RWUAs based to a large extent on the achievements to date of the Ingushishi and Isiolo RWUAs. The overall aim of the training would be to generate a mutual understanding for new division of responsibilities in natural resource management, to induce an understanding for consequences of own actions on others (especially downstream water users) and to contribute to modifications in the behavioural pattern when dealing with water resources. The training would also cover aspects such as conflict resolution and group dynamics. 4.5.8 Irrigation and Soil and Water Conservation Capacity Development: While the project will not promote the expansion of irrigation in the upper catchment, there is scope for improving the efficiency of irrigation through the introduction of better technology. Propagation of tested soil and water conservation practices would also promote better water resource management. The proposed training would be undertaken within the broad framework of the recently adopted National Agricultural and Livestock Extension Programme (NALEP). B. Participatory Catchment Conservation 4.5.9 The participatory catchment conservation component of the project is essentially concerned with forestry activities, namely: (i) agro-forestry and community fuelwood plantations, (ii) participatory forest management; and (iii) non-wood forest products development.

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4.5.10 Agro-forestry and Fuelwood Plantations: This sub-component contributes to catchment conservation in both the upper catchment and the ASAL areas. In the upper catchment the activities will be geared towards promoting private sector capacity to meet the demand for tree seedlings. The sub-component will provide extension support to tree planters, mainly through the vehicle of the nursery associations and school programmes. The project will build on nursery technology already known to farmers in order to assist them to run their own tree nurseries on a commercial basis, while also upgrading the genetic quality of the planting stock used and raise farmers’ awareness of the importance of the genetic quality of what they plant. The sub-component will also contribute to the protection of the upper catchment of the Ewaso Ng’iro North River by reducing the pressure on the forest for fuelwood and poles through the establishment of fuelwood plantations by registered community associations. It is envisaged that the community and forestry associations will establish plantations of 2,000 ha during the project life. Communities will receive support over two years, with more limited follow-up thereafter. In the ASAL areas, agro-forestry is rendered problematic by the lack of private land ownership and the prevalence of pastoralism as a means of livelihood. Project activities in these areas will therefore focus on rural centres where there are schools, and registered groups such as women’s groups or water user associations, serving generally small but more or less sedentary populations. The objective will be to contribute to environmental improvement in the lower catchment through increased tree cover. Groups at the identified institutions will be assisted to raise agro-forestry tree nurseries. The project will also provide extension advice to tree planters, who in many instances are likely to be synonymous to those raising the seedlings. 4.5.11 Participatory Natural Forest Management: The sub-component will promote participatory forest planning and management in natural forests covering some 24,000 ha. Participating communities will be drawn from an area up to 5 km from the edge of the forest reserve. The major participants will be the members of forest user groups registered as community forestry associations. A total of about 60 associations are envisaged, each having 50 to 100 members and participating in the management of, on average, 400 ha. A participatory socio-economic survey of the community will be undertaken in order to identify the most important ways in which the various sections of the community already depend upon the forest. Subsequently, a participatory resource assessment will be undertaken to provide the minimum level of information which the community members and those assisting them need in order to prepare a conservation-oriented management plan acceptable to the Forest Department. The project will also provide training of the community forestry associations in various practical aspects of forest and biodiversity conservation. This sub-component will also strengthen the capacity of the Forest Department and the Ministry of Agriculture (in the ASAL areas) to support community and private sector initiatives in forest management, plantation and nursery development and tree planting. Provision has been made for training, initially in participatory methods of community appraisal and subsequently in specific activities related to the other project sub-components such as: participatory resource assessment and forest management planning, community fuelwood management, nursery development and silvicultural practices for both upland and ASAL areas. All training will carry a strong emphasis on the development of social and participatory skills for field staff, and would also include gender mainstreaming and sensitisation, reflecting the people-oriented nature of the project activities.

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4.5.12 Non Wood Forest Products Development: This sub-component would be used to increase the incomes of small holders through (i) the encouragement of Bee-keeping and (ii) Gums and Resins. In bee-keeping, some 100 field surveys will be undertaken over the first 4 years of the project out of which it is estimated that about 60 communities would be selected and their members trained. Key criteria for the support to a community apiculture enterprise, to be taken into account in the feasibility study, include: reliable supplies of pollen and nectar; settled communities; adequate number of people willing to keep hives (minimum production capacity of 2 tons/season); good accessibility; and ability of community to raise 30 percent contribution to investment costs. These new producers would require an intensive 5-day practical course, followed by a 2-day refresher course towards the end of the first year of operations. About 115 communities of existing beekeepers would be assisted to upgrade from log hives to KTBH and receive a two-day training course. With respect to gums and resins, project activities will aim to overcome identified constraints of inadequate extension services, inappropriate harvesting technology, lack of post-harvest facilities and poor market intelligence. The emphasis will be on ameliorating collection techniques and improving post-harvest conservation with a view to raising yields and the quality of production, thus enabling collectors to capture higher prices. C. Capacity Building

4.5.13 The Project will provide resources for management and coordination, including equipment for project and district coordination, training, monitoring and evaluation, supervision, preparation of audit and progress reports and studies. Annual training programmes as well as recruitment of individual trainers and institutions will be reviewed and approved by the Bank before implementation. The project will train 1790 staff from ENNDA, Forestry Department and Extension Service in participatory approaches and 192 community leaders of whom, 64 will be women, in community appraisal. The project will assist communities in conflict resolution by providing funding for awareness campaigns and in building trust and confidence amongst communities. The project will provide equipment and training to the Early Warning System (EWS) units in Wajir, Samburu, Mandera and Garissa. A pilot High-Frequency radio service will be set up in Wajir District and reviewed at the time of the project’s midterm review. The objective will be to establish links with remote boreholes so that timely information could be received, when problems arise. A base station would be established at Isiolo and 10 monitoring stations would be located at boreholes considered particularly at risk or critical to pastoral groups, these would be equipped with solar kits for power generation. At the time of the installation, training would be provided to at least three people from each unit.

4.6 Production, Market and Prices 4.6.1 Under the Participatory Catchment Conservation Component, tree seedlings will be produced in both uplands and ASALs as a result of the promotion of nurseries for agro-forestry. At full development about 1.7 million seedlings will be produced annually in the uplands, sufficient to supply planting stock to over 21,000 households, about 12% of the area’s population. Current market prices for seedlings in the project area range from KSh 8 for eucalyptus to KSh 50 for ornamentals. Grevillea sells for KSh 10. Seed prices vary from KSh 200 to KSh 2,000 per kilogram, depending on species, the size of seed and the difficulty of collecting it. Grevillea usually sells for KSh 400. Demand for seed and seedlings is high in the light of the shortage of fuelwood and the ban on logging.

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4.6.2 The strong demand for fuelwood will also provide a ready market for production from the community fuelwood plantations, which might reach about 45,000m3/yr at full development. Wood produced under the project would be cut and split by the association and sold as stacked fuelwood either within the community or outside. Estimates of return from the plantations value the fuelwood at KSh 500/stack, which is the rate for lower quality material. In practice, a proportion of the fuelwood produced may meet the standards of the Kenya Tea Development Agency (KTDA), who pay 60 per cent more at site or 100 per cent more delivered to factory. 4.6.3 Good markets exist for both poor quality honey, which is used mainly for beer making, and for good quality honey, within Kenya and internationally. Kenya is actually a net importer of honey. The 300 tons estimated annual incremental production under the project should be easily absorbed by the national market. There are national organisations such as ‘The Honey Exchange’ in Nairobi that can buy and process honey throughout the country. The price of honey depends on its quality, ranging from KSh 40/Kg for honey used for local beer making, including the wax which is not separated, to KSh 70-100/Kg for good quality, unrefined honey and KSh 250/kg for refined honey. In addition, there is potential for export as local producers have received enquiries from the European Union. 4.6.4 The collectors of gums and resins sell the raw product to local intermediaries who, in turn, sell to processors in Kenya or overseas. The farmgate price for raw, unsorted gum arabic is currently about KSh 30/kg, after cleaning and sorting by an intermediary, it can be sold at KSh 65/kg for the top grade. The limited incremental production envisaged by the project (about 60 tons per year) could easily be absorbed by the domestic market, but there is potential to substantially increase production if overseas markets become profitable. 4.6.5 Small quantities of frankincense and myrrh are processed in Kenya, achieving a tenfold increase in value, but the majority is exported raw. The farmgate price for resins is KSh 40/kg. Unprocessed resins go to the Far East for a price of about $1.20/kg. Kenyan products have a good reputation there. Estimated project incremental annual production of the order of 260 tons could be easily absorbed by existing overseas markets.

4.7 Environmental Impact 4.7.1 In accordance with the Bank’s Environmental and Social Assessment Procedures (ESAP), the project is classified as Environmental Category II. This implies that the adverse environmental and social impacts of the project and its sub-projects are site-specific and minor and, thus, can be mitigated during the project’s design and its implementation. The protection and sustainable use of the natural resources of the upper and middle catchment of the Ewaso Ng’iro North River (ENNR) will maintain and enhance its carrying capacity. Protection of the natural (“gazetted”) forests, promotion of agro-forestry practices and establishment of tree nurseries and fuel wood plantations in the upper and middle catchment will improve rainfall infiltration. As a result, reduction of surface runoff and associated soil erosion will occur, thus reducing river sediment loads, downstream siltation and water treatment costs. It will also enhance the availability of water flow in the water scarce ASALs of the lower catchment A well regulated and monitored river regime, devoid of devastating flash floods but with markedly regular dry season flows beyond the ecological flow, will greatly reduce hardships for downstream water users and will provide a new lease of life for ecological systems which are currently endangered by the documented disappearance of ENNR downstream of Archer’s Post.

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4.7.2 Controlled and community-driven fuel wood plantations and agro-forestry activities will increase the availability of scarce fuel and woods. Protection and sustainable use of biological resources, especially forest and vegetation cover are pre-requisites for the sustainable livestock production. Such availability of fodder reserves will greatly reduce overgrazing around permanent sources of water, thus eventually enhancing soil and water conservation. Encouragement of beekeeping and best available technology for collection and post-harvest conservation of gums and resins will promote one of the most environmentally friendly, non-extractive use of the forest resources while providing a sustainable source of economic revenues to the local communities. 4.7.3 Institutional strengthening of the national departments, regional development authorities, district authorities and finally, communities in the ENNR watershed will improve governance over natural resources management and ensure the enforcement of the legal provisions outlined in the Environmental Management and Coordination Act (1999) and its Environmental (Impact Assessment and Audit) Regulations (2003), the Water Act (2002) and the yet to be enacted Forest Bill. 4.7.4 Support to the decentralisation and institutional strengthening of natural resource management at the District level and greater involvement of communities will increase governance accountability of District officials and related institutions, including the Ewaso Catchment Area Advisory Committee (CAAC) and the River Water Users Associations. It will also improve equitable sharing of water rights and its enforcement. Finally, intensification of hydrological monitoring of the river flow, of the abstraction structures and promotion of efficient irrigation technologies will optimize water efficiency use so as to reduce pressure on available water and ultimately, release more water for downstream users. The net impact of the project will be to improve the water quality and quantity in the ENNR at Archer’s Post and beyond so as to ensure the minimum ecological flow to the ASALs. 4.7.5 Despite the overall positive contribution of the project towards environmental sustainability, mitigation measures will have to be mainstreamed into the design of the proposed community projects identified through the Community Action Plans (CAPs). In accordance with the Kenyan’s Environmental Management and Coordination Act (1999) and the Water Act (2002), an environmental screening review procedure has been established for all these sub-projects before their approval. Priority has been given to rehabilitation and upgrading of the existing water structures rather than construction of new ones (more than 76 percent of envisaged projects). For the construction of new water pans and boreholes, strict environmental (e.g. impact on surrounding vegetation and the distance from other water points), health (e.g. water and vector-borne diseases) and operational criteria for the siting and design will be mainstreamed into the assessment of the viability of the sub-project, especially in the drier eastern parts of the project area. It is worth mentioning that the safe abstraction rate for groundwater in the project area has been estimated to 228 million m³/year while the current groundwater abstraction is estimated at 4.3 million m³/year. In addition, specific provisions for the undertaking of a detailed environmental impact assessment studies have been provided during the technical design of the four (4) small-scale water retention structures and the feasibility studies of the three (3) large-scale water storage reservoirs. 4.7.6. Environmental sustainability in the project area will depend as much on the institutional sustainability as on specific mitigation measures being proposed. This assumption underlines the importance in strengthening the District Environmental Committees (DECs) in the development of a coherent vision of environmental sustainability

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in the targeted districts. Investment in this area of activity would yield significant and positive long-term benefits. Costs for mainstreaming the environmental mitigation measures into the community project design and the implementation of the institutional strengthening program have been estimated to US $400,000 over the six-year implementation period.

4.8 Project Costs The total project cost is estimated at UA 20.74 million, including contingencies. The foreign exchange component would amount to UA 12.05 million, representing 58.0% of the total cost, while local cost would be UA 8.69 million, or 42.0% of total cost. Summaries of cost estimates by components and by category of expenditure are in Tables 4.1 and 4.2 respectively.

Table 4.1 Summary of Cost Estimates by Component

%

(KSh '000) (UA) Foreign Local Foreign Total Local Foreign Total Exchange

A. Water Resources Development & Management 1. Development of Water Points in ASAL Regions 381,183 921,912 1,303,095 3,129,349 7,568,502 10,697,852 712. Intensification of Hydrological Monitoring 9,087 18,287 27,374 74,604 150,125 224,729 673. Support to Water Users Associations 26,866 11,514 38,380 220,558 94,525 315,083 304. Group Training in Irrigation & Soil & Water Conservation 5,964 2,556 8,520 48,962 20,984 69,946 30Subtotal 423,100 954,268 1,377,369 3,473,473 7,834,136 11,307,609 69B. Participatory Catchment Conservation 1. Participatory Forest Planning and Management 77,561 36,599 114,160 636,741 300,464 937,205 322. Community Fuelwood Plantations 66,638 30,226 96,864 547,070 248,141 795,211 313. Agroforestry in the Uplands 54,953 26,898 81,850 451,137 220,817 671,954 334. Agroforestry in Arid and Semi-Arid Areas 33,298 12,368 45,666 273,364 101,534 374,898 275. Forestry Capacity Building 13,298 21,128 34,425 109,167 173,448 282,615 616. Gums and Resins 10,301 21,210 31,511 84,564 174,128 258,692 677. Bee-keeping 25,313 62,308 87,621 207,809 511,518 719,328 71Subtotal 281,361 210,736 492,097 2,309,853 1,730,050 4,039,903 43C. Project Coordination & Capacity Building Support to ENNDA 60,858 46,433 107,292 499,620 381,197 880,818 43District Arrangements 85,869 59,281 145,150 704,948 486,670 1,191,618 41Early Warning System 3,062 5,204 8,267 25,140 42,725 67,864 63Subtotal 149,790 110,918 260,708 1,229,708 910,592 2,140,300 43Total BASELINE COSTS 854,251 1,275,922 2,130,173 7,013,034 10,474,778 17,487,812 60Physical Contingencies 58,918 103,493 162,411 483,695 849,630 1,333,326 64Price Contingencies 145,454 87,902 233,356 1,194,113 721,637 1,915,750 38Total PROJECT COSTS 1,058,623 1,467,317 2,525,940 8,690,842 12,046,045 20,736,887 58

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Table 4.2 Summary of Cost Estimates by Category of Expenditure

(KSh '000)

(UA)

Local Foreign Total Local Foreign Total

% Foreign Exchange

I. Investment Costs A. CIVIL WORKS 330,398 770,930 1,101,328 2,712,430 6,329,004 9,041,434 70B. GOODS Equipment 7,954 66,331 74,285 65,300 544,548 609,848 89Field Trucks 2,700 24,300 27,000 22,166 199,493 221,658 90Motorcycles 2,120 19,080 21,200 17,404 156,639 174,043 90Agricultural Inputs 59,849 35,214 95,063 491,337 289,089 780,426 37Subtotal 72,623 144,925 217,548 596,207 1,189,769 1,785,976 67C. SERVICES Training 175,750 79,383 255,133 1,442,835 651,698 2,094,533 31Technical Assistance 20,134 181,210 201,344 165,295 1,487,654 1,652,948 90Surveys and Studies 1,890 15,886 17,776 15,517 130,414 145,930 89Contractual Services 30,420 27,180 57,600 249,735 223,136 472,871 47Subtotal 228,195 303,658 531,853 1,873,382 2,492,902 4,366,283 57Total Investment Costs 631,217 1,219,512 1,850,729 5,182,019 10,011,674 15,193,693 66II. Recurrent Costs A. Salaries 92,826 - 92,826 762,062 - 762,062 -B. OPERATION AND MAINTENANCE Trucks O&M 13,365 31,185 44,550 109,721 256,016 365,737 70Motorcycles O&M 1,488 2,352 3,840 12,216 19,309 31,525 61Subtotal 14,853 33,537 48,390 121,937 275,324 397,261 69C. GENERAL OPERATING CHARGES Office O & M 5,036 4,547 9,583 41,339 37,331 78,670 47Miscellaneous 110,320 18,326 128,646 905,677 150,449 1,056,126 14Subtotal 115,355 22,873 138,228 947,016 187,780 1,134,796 17Total Recurrent Costs 223,034 56,410 279,444 1,831,015 463,104 2,294,119 20Total BASELINE COSTS 854,251 1,275,922 2,130,173 7,013,034 10,474,778 17,487,812 60Physical Contingencies 58,918 103,493 162,411 483,695 849,630 1,333,326 64Price Contingencies 145,454 87,902 233,356 1,194,113 721,637 1,915,750 38Total PROJECT COSTS 1,058,623 1,467,317 2,525,940 8,690,842 12,046,045 20,736,887 58

4.9 Sources of Financing

4.9.1 The project will be financed by the ADF and the Government of Kenya (GOK), including contributions from the Beneficiaries. Table 4.3 (a) shows the sources of finance for the project as a whole.

Table 4.3 (a): Sources of Finance

KSh '000 UA Foreign Local Total Foreign Local Total PercentADF Loan 1,304,179 350,774 1,654,953 10,706,754 2,879,704 13,586,458 65.5ADF Grant 135,659 216,135 351,794 1,113,706 1,774,374 2,888,081 13.9Beneficiaries 4,212 157,843 162,055 34,580 1,295,821 1,330,401 6.4GOK 23,266 333,871 357,138 191,005 2,740,942 2,931,948 14.1 Total 1,467,317 1,058,623 2,525,940 12,046,045 8,690,842 20,736,887 100.0

4.9.2 An ADF loan amounting to UA 13.59 million or 65.5% of total costs will be used to finance 71% of the investment costs, as well as 30.7% of recurrent costs (parts of all categories excluding studies and engineering, training and personnel). An ADF Grant amounting to UA 2.89 million or 13.9% of total costs will finance studies and surveys, training and technical assistance representing 15.8% of the investment costs. The GOK contributions amounting to UA 2.93 million, or 14.1% of total costs, will finance salaries of national staff except for the District Project Officers, part of civil works, equipment, training as well as studies and part of the

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operating costs. The beneficiaries will contribute UA 1.33 million or 6.4% of the total costs towards their share of the costs of development of water points and participatory catchment conservation. Tables 4.3(b) and 4.3 (c) show the sources of finance for the loan and the grant. Page 1 of Annex 3 gives the sources of finance by categories of expenditure (list of goods and services).

Table 4.3(b): Sources of Finance (Loan)

KSh '000 UA Foreign Local Total Foreign Local Total PercentADF Loan 1,304,179 350,774 1,654,953 10,706,754 2,879,704 13,586,458 76.8Beneficiaries 4,212 157,843 162,055 34,580 1,295,821 1,330,401 7.5GOK 23,266 315,449 338,716 191,005 2,589,705 2,780,710 15.7 Total 1,331,657 824,066 2,155,723 10,932,339 6,765,230 17,697,569 100.0

Table 4.3(c): Sources of Finance (Grant)

KSh '000 UA Foreign Local Total Foreign Local Total PercentADF Grant 135,659 216,135 351,794 1,113,707 1,774,374 2,888,081 95.0GOK 0 18,422 18,422 0 151,237 151,237 5.0 Total 135,659 234,557 370,216 1,113,707 1,925,611 3,039,318 100.0

5. PROJECT IMPLEMENTATION

5.1 Executing Agency

The Executing Agency of the project will be the Ewaso Ng’iro North Development Authority (ENNDA). The project is multi-sectoral, multi-disciplinary and the project area cuts across several administrative units (four provinces and twelve districts). Unlike ministries which operate on a district basis, ENNDA operates in all the provinces and districts of the project area and it is therefore better suited to coordinate the project activities. Moreover, ENNDA has had previous experience of coordination with line ministries and district authorities during the implementation of the “Ewaso Ng’iro North River Catchment Conservation and Water Resources Management Study”. It is also an Implementing Agency for water points under the ASAL-Based Livestock and Rural Livelihoods Support Project whose executing agency is the Ministry of Livestock and Fisheries Development.

5.2 Institutional Arrangements

5.2.1 Project Steering Committee: At the national level, a Project Steering Committee (PSC) would be established to oversee project implementation. The PSC would be chaired by the Permanent Secretary, MRDA, or his/her representative, and comprising the Permanent Secretary, or his representative, of the Ministry of Finance, Ministry of Environment and Natural Resources, Ministry of Water and Irrigation, Ministry of Agriculture, Ministry of Livestock and Fisheries Development, Ministry of Gender, Sports, Culture and Social Services, Director-General of National Environment Management Authority (NEMA), Chief Executive of the Water Resources Management Authority, Chief Executive of the Water Services Regulatory Board, the Managing Director of ENNDA and the Project Coordinator. The Project Coordinator shall be the Secretary of the PSC. The Committee will meet twice a

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year and its mandate will include approval of the annual project work plan and budget and the annual training programme before submitting these to the Bank for review. The PSC will also monitor performance of the project and advise it on policy issues. 5.2.2 Project Co-ordination: ENNDA will appoint a Project Coordination Team (PCT) for the day-to-day coordination and monitoring of implementation of the project activities. In this regard, the PCT will ensure that project activities are initiated and are adequately budgeted for, consolidate project records, submit all procurement documents to the Bank for review and approval, compile and submit all disbursement applications and quarterly progress reports, and undertake annual audits of all project accounts and submit the audit reports to the Bank. The PCT will comprise a Project Coordinator (PC), Training and Participatory Officer, Forestry and Conservation Officer, Environmentalist, Water Resources Officer, Monitoring and Evaluation Officer and an Accountant and Procurement Officer. In view of the district focus in implementation, the size of the PCT has been kept small. During the appraisal of the project, Government gave its firm commitment that the necessary staff for the PCT would be made available to ENNDA. The PCT staff will be appointed by ENNDA subject to ADF approval and will be a condition for the loan. 5.2.3 Project Coordination at the District Level: The main focus of project activities will be at the district level and their implementation would be carried out through the existing structures at the District level. The project coordination process adopted is in line with the government’s District Focus for Rural Development (DFRD) strategy. The District Development Committee (DDC) in each of the twelve districts in the project area will be responsible for the overall coordination of project activities as well as the review and the approval of CAPs and proposals for funding from communities before transmittal to the PCT, and the monitoring of the implementation of approved projects. A District Project Team (DPT) will be responsible for the day-to-day implementation of project activities. Membership of the DPT will include the following: District Forest Officer; District Livestock Production Officer; District Agricultural Officer; District Finance Officer, District Development Officer; District Environment Officer. One of the officers will be designated to head the DPT. 5.2.4 The Ewaso CAAC will take the lead in the intensification of hydrological monitoring, and strengthening of River Water Users Association and feasibility studies for water storage reservoirs. The District Extension Service will take the lead role for the irrigation and soil and water conservation capacity development. The District Livestock Production services will take the lead role in the development of livestock water points and the beekeeping activities. The District Forestry Services will take the lead in all agro-forestry and forestry activities. The lead institutions would work closely with the communities in order to prepare realistic annual work plan and budget proposals for the respective activity to be presented to the PCU. The PCT will review and consolidate the different proposals into the project annual work plan and budget for approval by the Project Steering Committee and submission to the Bank for final approval. The PCT would also submit an initial training programme covering the first year of project life to the Bank for review and approval. It would subsequently present a training programme on an annual basis covering the rest of the project period for Bank review and approval. 5.2.5 Funding of Community Activities: To qualify for funding, communities would have to meet certain conditions, such as presence of a democratically elected project committee, owning a bank account, and registration with social services. The groups concerned will first

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agree with the relevant line Ministry at the District level (Agriculture, Forestry, Livestock Development) on the details of a proposal. Proposals will conform to the criteria set by the PCT. Acting in conjunction with the line department, the group or (in the ASAL areas) institution will then submit its project proposal for approval to the DDC. 5.2.6 The next steps will be as follows: i) A team of at least three persons (experts in participatory development planning,

including the community leaders trained under the project) will then conduct the community appraisal, which would produce a Community Action Plan (CAP) focussed on development and management of forestry or water resources and a costed project.

ii) The CAP would then be forwarded to the DPT, who would arrange for it to be

reviewed by the DDC which could approve, modify (in consultation with the community) or reject the proposal. Explanations will always be given to the community if the project is rejected.

iii) Once the DDC has approved a project, it would be forwarded to the PCT with

supporting documents. The PCT would then undertake a final review of the project to ensure conformity with budget and implementation provisions, before releasing funds.

5.2.7 With respect to the water resources development and management component, the PCT will prepare an annual basin-wide CAP comprising all the CAPs prepared by the 12 Districts. This basin-wide CAP will be submitted to the approval of the WRMA and/or WSRB, whichever is appropriate, as provided under the Water Act (2002). Funding will be made available to the districts concerned following approval of the WRMA and/or WRSB. 5.2.8 In the execution of certain activities, such as the initial design of structures, communities are likely to require external assistance. It is anticipated that much of the design and supervision work of the construction or rehabilitation of water points will be commissioned from private sector consulting engineers operating in the region. Similarly, much of the construction work will have to be contracted out to local contractors. 5.2.9 Environmental review of community projects: Each community project will have to respect the environmental laws and regulations currently in force. Each district has an Environment Committee comprised of line ministry representatives. Since the members of this Committee are also represented in the DPT, the DPT will undertake the environmental review of projects whose impact are minimal and do not require a detailed Environmental Impact Assessment study. The environmental review of community projects that require full scale Environmental Impact Assessment would follow the review process in force in Kenya.

5.3 Supervision, Implementation and Expenditure Schedules

5.3.1 In view of the fact that the project area is very large, the Bank will closely supervise the project twice a year. When the Bank’s Kenya Country Office will be opened, it will also contribute actively to the overall supervision of the project. At the District level, the District Project Team (DPT) will report to the DDC. It will assemble quarterly reports from communities’ project management committees and technical information on a quarterly basis from line ministries involved in technical supervision of project activities. This information will also be submitted to the Project Coordination Team (PCT) who will be responsible for

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reporting to the Project Steering Committee (PSC). Through the project’s monitoring system, project management will monitor progress of all three components. A Mid-Term Review (MTR) will be undertaken by end of PY3 and a Project Completion Report (PCR) will be prepared by both the Borrower and the Bank by PY6. The project implementation schedule is given in Annex 5. 5.3.2 The project has been designed to be implemented over a period of six years given the nature of the activities and the remoteness of the project sites. This time period will also provide sufficient time for the capacity building to take effect and for water users associations and communities to assume responsibility for the operation of the activities. It is planned that the first year of project implementation will be focussed mainly on organizational aspects and training in participatory approaches and the number of community projects will be accordingly limited. Where community appraisals are carried out and CAPs produced, some activities may start in PY1. The bulk of project activities will take place in PY 2 to 5. Fewer community appraisals have been scheduled for PY6, in order to ensure that identified activities can be implemented before project closure. 5.3.3 The expenditure schedule by component and by category of expenditure over the project period is projected to be as shown in Tables 5.1 and 5.2 below.

Table 5.1. Expenditure Schedule by Component (UA)

Totals including contingencies

2005 2006 2007 2008 2009 2010 Total A. Water Resources Development & Management Development of Water Points in ASAL Regions 1,158,752 3,189,851 2,944,116 2,810,517 1,837,509 797,279 12,738,024Intensification of Hydrological Monitoring 80,484 70,005 72,287 12,641 13,094 13,566 262,076Support to Water Users Associations 14,611 71,741 87,788 91,523 70,688 40,542 376,893Group Training in Irrigation & Soil & Water Conservation 27,286 33,760 11,093 5,782 - - 77,922

Subtotal 1,281,133 3,365,357 3,115,285 2,920,463 1,921,290 851,387 13,454,915

B. Participatory Catchment Conservation Participatory Forest Planning and Management 77,831 196,737 211,106 226,440 242,801 168,643 1,123,558Community Fuelwood Plantations 135,479 177,170 131,259 152,782 167,608 182,330 946,628Agroforestry in the Uplands 24,425 88,832 157,900 193,484 177,071 176,693 818,406Agroforestry in Arid and Semi-Arid Areas 20,643 48,451 68,131 89,511 112,710 117,630 457,075Forestry Capacity Building 112,261 96,233 42,668 26,106 19,335 20,163 316,766Gums and Resins 44,322 62,370 57,478 61,526 60,176 11,096 296,968Bee-keeping 211,854 207,430 176,105 121,151 63,076 26,832 806,448

Subtotal 626,816 877,223 844,646 871,000 842,777 703,386 4,765,848C. Project Coordination & Capacity Building Support to ENNDA 229,894 168,429 164,619 151,182 157,412 159,503 1,031,039District Arrangements 279,903 311,011 191,993 200,156 208,692 217,620 1,409,375Early Warning System 51,884 1,125 1,179 1,236 18,927 1,359 75,710Subtotal 561,681 480,565 357,792 352,574 385,031 378,482 2,516,124

Total PROJECT COSTS 2,469,630 4,723,145 4,317,722 4,144,038 3,149,098 1,933,255 20,736,887

Table 5.2. Expenditure Schedule by Source of Finance(UA)

2005 2006 2007 2008 2009 2010 2011 Total ADF Loan 814,887 2,533,243 3,218,769 2,902,325 2,327,333 1,357,661 432,240 13,586,458 ADF Grant 293,762 619,498 600,405 509,436 446,756 315,107 103,117 2,888,081 Beneficiaries 8,067 77,391 173,615 242,895 292,685 344,914 190,834 1,330,401GOK 118,099 366,256 527,644 576,224 579,794 523,494 240,436 2,931,948Total 1,234,815 3,596,387 4,520,433 4,230,880 3,646,568 2,541,177 966,627 20,736,887

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5.4 Procurement Arrangements 5.4.1 Procurement arrangements are summarized in Table 5.3 below. All procurement of goods, works and acquisition of consulting services financed by the Bank will be in accordance with the Bank's Rules of Procedure for Procurement of Goods and Works or, as appropriate, Rules of Procedure for the Use of Consultants, using the relevant Bank Standard Bidding Documents.

Table 5.3. Summary of Procurement Arrangements (UA ‘000)

National Competitive Consulting

Bidding Services Other N.B.F. Total 1. CIVIL WORKS 10,807 - - 10,807 (9,420) (9,420)2. GOODS 2.1 Equipment - - 759 759 (723) (723)2.2 Trucks 250 - - 250 (250) (250)2.3 Motorcycles 189 - 189 (189) (189)2.4 Agricultural Inputs 859 - - 859 (364) (364)3. SERVICES 3.1 Training - 2,451 - 2,451 (2,410) (2,410)3.2 Design, Studies & Supervision - 2,028 - - 2,028 (1,954) (1,954)3.3 Technical Assistance - 693 693 - (693) (693)3.4 Audit (60) (60)4. MISCELLANEOUS 4.1 Personnel \a - - 733 7334.2 Motorcycle O & M - - - 37 37 4.3 Trucks O&M - - 426 426 (312) (312)4.4 Office O & M - - 45 - 45 (37) (37)4.5 Other operating costs - - 918 482 1,400 (63) (63)Total 12,105 5,232 2,148 1,252 20,737 (10,223) (5,117) (1,135) - (16,475)

Note: Figures in parenthesis are the respective amounts financed by ADF Loan and Grant Other refers to International Shopping, National Shopping, Direct Negotiation.

5.4.2 Goods: Contracts for goods will be procured and awarded under NCB procedures. Three such contracts will be awarded, viz. trucks (UA 0.25 million), motor cycles (0.189 million) and agricultural inputs (0.859 million), and valued in total UA 1.298 million. Equipment for river gauging and meteorological stations valued at UA 0.759 million will be procured through Limited International Competition, since suppliers for such special equipment are limited. Other miscellaneous goods such as, trucks O&M and office O&M, where the amounts are small and estimated to cost less than UA 50,000 will be procured using National shopping procedures.

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5.4.3 Consulting Services and Training: Procurement of consulting services (UA 2.028 million), technical assistance (UA 0.753 million) and service providers for training (UA 2.451 million), as detailed in Table 5.3 above, total valued at UA 5.232 million will be on the basis of short list, in accordance with the “Bank’s Rules of Procedure for the Use of Consultants”. The selection procedure will be based on technical quality with price consideration, except for procurement of audit services where the selection procedure will on the basis of the lowest price for comparable services. Consulting services and technical assistance valued in total at UA 2.781 million will include preparation of standard designs and tender documents for water points, elaboration and works supervision for water points and feasibility studies for large storage reservoirs, technical assistance in participatory rural appraisal, policy review and monitoring and evaluation, legal expert in water, water engineer and audit services. For services costing less than UA 100,000, for individuals and UA 350,000, for consulting firms, the Borrower may limit the publication of the advertisement to national/regional newspapers. However, any eligible consultant, being regional or not, may express his desire to be short-listed. Training services valued at UA 2.451 million in aggregate will cover training and workshops for the development of agro-forestry associations (1.041 million), training of honey and gums and resins groups (0.592 million), training of groups in irrigation, soil and water conservation (0.339 million), training of agro-forestry groups (0.380 million), training of water users associations (0.078 million). The above-mentioned trainings will be undertaken all 12 districts of the project area. 5.4.4 Miscellaneous items, including personnel costs, operation and maintenance of equipment, and other administrative costs, will be procured through existing GOK procedures which are acceptable to the Bank. 5.4.5 National Procedures and Regulations Kenya’s national procurement laws have been reviewed and determined acceptable. 5.4.6 Executing Agency: ENNDA will appoint a Procurement Officer to the Project Coordination Unit with responsibility for seeing that the Bank's procurement rules and procedures are followed. The Districts have their own individual tender committees through which the respective procurement units would pass their recommendations for local purchases for components being directly implemented in the districts. 5.4.7 General Procurement Notice: The text of a General Procurement Notice (GPN) will be discussed and agreed with the Borrower at negotiations and this will be issued for publication in the UN Development Business, upon approval by the Board of Directors of the loan proposal. 5.4.8 Review Procedures: The following documents are subject to review and approval by the Bank before promulgation: Specific Procurement Notices; Tender documents/Requests for Proposals; Tender evaluation/Evaluation of Proposals' reports, including recommendations for contract award; Draft contracts, if these have been amended from drafts included in the tender invitation documents.

5.5 Disbursement Arrangements 5.5.1 The direct payment method and the special account method will be used. Two Special Accounts (SAs) and two local currency accounts (LCAs) will be opened at the Central Bank of Kenya and in a commercial bank respectively, into which part of the ADF loan resources and ADF grant resources will be deposited respectively. Funds coming from the Bank will be

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deposited into the two Special Accounts at the Central Bank of Kenya. The ADF will replenish the SAs after the Executing Agency had provided valid justifications for the use of at least 50% of the previous deposits. The SAs will be used to finance training, community appraisals, minor civil works, specialist services, minor consultancy services, capacity building and operating expenses whereas the direct payment method will be used to finance major contracts. 5.5.2 In each of the 12 districts, two District Project Accounts (one for the ADF loan resources and the other for the ADF grant resources) will also be opened in a commercial bank acceptable to the ADF. Thereafter funds will be withdrawn from the respective commercial Bank project accounts to be deposited in the District Project Accounts prior to the commencement of any project sponsored activities in the districts. The PCT will replenish the DPAs after the DPT has provided valid justifications for the use of at least 50% of the previous deposits. The opening of the two SAs and the two commercial project bank accounts will be a condition precedent to the first disbursement of the loan and grant respectively. This system is already functional in the Bank’s ASAL-based Livestock and Rural Livelihoods Support Project.

5.6 Monitoring and Evaluation 5.6.1 Monitoring would be an integral part of project management activities. A team of consultants will carry out a mid-term review in the third year of project implementation. A consultant would be recruited for three months in the first year of the project to assist with the establishment of a comprehensive monitoring and evaluation system. The consultant would come back every year starting from the end of the second year for the same period to assist with the analysis of the data collected. The monitoring and evaluation system would include, at the community level, a system of Participatory Monitoring and Evaluation. The M&E Unit will undertake a baseline study in PY1 and follow it up with annual surveys to assess performance and impact of project activities. It will be responsible for compiling the quarterly and annual progress reports for submission to the PSC, the Treasury and the Bank. 5.6.2 The basis for the overall project monitoring and evaluation system will be the logical frameworks of both the loan and the grant, and the key performance indicators contained therein and the project appraisal report and preparation report. The monitoring indicators will compare project performance each year with the target set in the Annual Work Plan and Budget (AWP/B) for that year. The monitorable and verifiable indicators for the participatory monitoring of project activities will include: water abstraction rates, river flow, poverty levels, irrigation efficiency measures, per capita water availability, time spent in fuelwood gathering and water collection by women, involvement of women in project activities, livestock population density, forest density, per capita household incomes from honey and gums and resins, fuelwood and nursery activities, and average household income. The M&E Officer will co-ordinate all monitoring and evaluation activities and ensure the production and publication of the necessary reports. 5.6.3 In addition to the Fund supervision missions, a mid-term review would be undertaken in the third year of project operations. A team of consultants will be recruited to carry out a mid-term review in the third year of project implementation. The report of this evaluation would assess the progress of the project and identify major problems and constraints. Recommendations would be made with respect to modifications to project design or maintenance of the original focus.

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5.7 Financial Reporting and Auditing 5.7.1 The Project Accountant will ensure the maintenance, at all times, of satisfactory and professionally acceptable accounting records, and in accordance with Bank guidelines. He/She should also maintain adequate internal control systems for the project. The Project Accountant will prepare regular accounting reports for management, which will include expenditure reports from the districts, as well as produce consolidated annual financial statements. The project will recruit a consultant financial accountant for six months to assist in the establishment of financial management guidelines/accounting manual for the project and also train the ENNDA and project accounting staff (both at PCT and district level) in the first year of the project. The District Finance Officers who are responsible for the District Project Accounts, will submit monthly returns of expenditure to the PCT to enable it closely monitor and consolidate the expenditures for the timely submission of request for replenishment of the Special Accounts. 5.7.2 The project accounts will be audited annually by reputable private auditors recruited using Bank-approved terms of reference (TOR) and shortlist under the supervision of the Controller and Auditor General. The audit report will be reviewed by the Controller and Auditor General to ascertain conformity with the TOR before certification. Budgetary provisions have been made under the loan resources for the recruitment of auditors. GOK will submit the project’s annual audited accounts to the Fund, not later than six months after the end of the financial period to which they relate. Moreover, ENNDA’s Internal Audit will undertake periodic checks on the PCT and District accounts. 5.7.3 Reporting by subordinate agencies/departments would be set against agreed annual work plans and organised by components. They would report about their progress on a quarterly and annual basis (no later than one month after the end of the quarter or year), in physical and financial terms, to the Project Coordination Team (PCT). The PCT will consolidate the above reports into summary quarterly and annual reports and forward copies to the Fund within 2 months of the end of the reporting period. These same reports will be shared with the Project Steering Committee. Six months after the end of the project, GOK would submit a Project Completion Report (PCR) to the Fund.

5.8 Aid Coordination 5.8.1 There exists a regular GOK/Donor sectoral coordination mechanism in Kenya to discuss the co-ordination of on-going and pipeline donor supported programmes. There is an Agriculture/Rural Development Donor’s Group composed of the different donors present in Kenya which are involved in the agriculture and rural development sector. The Natural Resources Group, under which the present project falls, is co-chaired by the Permanent Secretary of MENR and UNDP Resident Representative in Kenya. It is composed of representatives from multilateral and bilateral donors present in Kenya and who are involved in natural resources development. When the Kenya Country Office (KECO) it will be possible for the Bank to participate in these groups. For natural resources, apart from the water sector strategy, the Water Act (2002) and the yet to be enacted Forest Bill, there is currently no overall sector investment programme agreed among the different donors, and consequently no sector wide formal coordination mechanism. However, the group ensures peer review, information sharing and exchange of intelligence to ensure programme synergy and compliance with Kenyan policies.

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5.8.2 In the process of formulating the project, the various missions interacted with the donor community to inform them about the project and to gather their own experiences. The key issues raised during the update mission related to the implementation arrangements. Concerns were raised on the fact that in designating ENNDA as the executing agency of the project, it could be firstly, taking over the role of the Water Resources Management Authority in water resources management and secondly, also taking over the role of the districts in decision making. During the update mission, the draft appraisal report was discussed with the management of the WRMA, WRSB and the Ewaso CAAC. They were satisfied that the coordination role to be played by ENNDA did not infringe on their responsibilities. The Ewaso CAAC will be responsible for all activities related to water resources management. Moreover, the activities of the project involving development of water points for livestock, agroforestry, bee-keeping and gums and resins may not be within the purview of the WRMA or WRSB. The approach adopted for district implementation is the one recommended by the DFRD, i.e. the projects would emanate from the communities and be approved by the DDC before project funding is made available. Reports of project implementation will be made available to the donor group and to visiting missions. 6. PROJECT SUSTAINIBILITY AND RISKS

6.1 Recurrent Costs 6.1.1 The total recurrent costs of the project are estimated at UA2.83 million or KES 279.44 million, equivalent to 11.0% of total project costs. These recurrent costs comprise in the main the operation and maintenance of the water points to be developed. They also include equipment and office maintenance and operation costs as well as field allowances for district project staff. The recurrent costs will be financed mainly by the Government of Kenya (42.9%) and the project beneficiaries (24.3%) as well as by the ADF Loan (32.8%) towards the operation of new equipment and software to be introduced during the project life. 6.1.2 The project beneficiaries will meet the maintenance costs of the water points to be developed through the cost recovery mechanism to be introduced by the Water Users Associations. This system has been introduced by the IFAD-funded Mount Kenya East Pilot project for Natural Resources Management, as well as the World Bank-funded Arid Lands Resource Management Project Phase II, as one of the lessons learned from Phase I.

6.1.3 The GOK contributions to the recurrent costs arise mainly from the salary payments for existing and recruited staff of the PCT at ENNDA and at the district level as well as for office and equipment maintenance costs. These budgetary allocations are already in place through the annual subsidies made to ENNDA. However, additional assurances will be obtained from the GOK to provide adequate budget to meet its recurrent costs contribution. Given the commitment and priority attached to the project and the magnitude of the recurrent costs, the GOK should not have any difficulty in meeting its share of the recurrent costs.

6.2 Project Sustainability 6.2.1 The high degree of community participation in project implementation together with the focus on intensive training of staff and beneficiaries should favour project sustainability. The community appraisal process and preparation of CAPs prior to initiation of investment should ensure the commitment of beneficiaries to the activities. The communities will also be assisted to manage their projects, particularly after the construction phase is completed.

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Recurrent costs of all community projects will be borne by the beneficiaries themselves, who will not have to depend on government resources to operate and maintain facilities provided by the project. 6.2.2 The training of River Water User Associations should prepare them for their role in managing the water resources of the catchment through the Catchment Boards under the Water Resources Management Authority. Greater awareness of the consequences of excessive upstream water abstraction, together with better information generated by the amplification of river flow gauging stations and improved abstraction structures, should have a positive and lasting impact on the downstream availability of water. 6.2.3 As indicated above, recurrent costs to the government after the closure of the project will be minimal. The operation and maintenance of the hydrological monitoring stations and meteorological stations falls within the Ewaso CAAC’s remit and will, in any case, require minimal additional resources. Similarly, continuation of diffusion of early warning information will essentially involve operation of existing equipment and maintenance of agreements established under the project. The institutional experience gained in natural resource management, should enable ENNDA to play a more valuable role in the development of water resources and catchment management strategies through the Ewaso CAAC.

6.3 Critical Risks and Mitigating Measures 6.3.1 The passing of the Forest Bill by Parliament within the first year of the project life will be essential for the smooth implementation of the participatory forestry activities. The Forest Bill has been presented in May 2004 to Parliament who requested some revisions. The revisions have been made but the Bill can only be presented after the statutory six months period following its previous presentation to Parliament. It is expected to be presented to Parliament for approval during the course of 2005. 6.3.2 Effective participation of local communities will be essential to achievement of the long-term benefits of natural resource conservation and sustainable use which are envisaged to be the major impact of the project. Every effort has been made in project design to encourage such participation, including training in participatory methods, community leadership in the preparation of CAPs and frequent local consultation. 6.3.3 The increased flow of water resulting from the project’s activities upstream may encourage upstream users to increase their use of additional water leaving little for downstream flow. The water users are represented in the Ewaso Catchment Area Advisory Committee (CAAC) and therefore have a say in the decision on the granting of new water abstraction permits or the increase of the volume to be abstracted and also on the volume of water to be allowed to flow downstream. With the intensified system of water gauges and meteorological stations, the Ewaso CAAC would have more accurate data on which to base decisions regarding management of the water resources. The integration of the River Water Users Associations within the water resources management structure provides an effective way for the water users themselves to address all issues relating to water management with regard to the river or stream for which the association is responsible. The water users would also assist in the policing of the rivers and streams for any unauthorised water abstraction.

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6.3.4 The greater availability of water associated with the development of water points might encourage pastoralists, in particular, to increase herd size to the detriment of the absorptive capacity of surrounding ecosystems. The project design attempts to mitigate this risk in two ways. Firstly, project activities will be predominantly concerned with rehabilitation rather than construction of new water points. Secondly, the whole process of community appraisal and subsequent training in operation and management of the facilities is intended to make communities more aware of the negative impact of increased livestock population. It is likely that the sedentary, or semi-nomadic, populations in charge of the water points will discourage excessive grazing nearby the water points. 6.3.5 Some districts may lack the capacity to plan and manage the implementation of project activities. This will be mitigated by the provision of adequate training to the staff of all implementing agencies. Proper financial management guidelines/accounting manual will be established for the project within PY1 and the project accounting staff (both at PCT and district level) will receive training in these procedures. The District Finance Officers will be required to submit monthly returns of expenditure to the PCT to enable it closely monitor and consolidate the expenditures for the timely submission of request for replenishment of the Special Accounts. Disbursement of funds to each district will be based strictly on annual and quarterly work plans and budgets approved by the PSC. In addition, the project accounts will be audited annually to ensure the compliance of project accounts with the Bank’s guidelines. Furthermore, the Bank will ensure that the project is supervised two times a year. When KECO will be established, it will also assist in the monitoring of the project. 6.3.6 Group members may not show continued commitment to maintain the groups formed if their associations are based on poorly defined problems or problems not shared by group members. The participatory approach to group formation adopted will ensure that these groups are based on the need to address shared problems. 6.3.7 Increase in the prevalence and infection rates of HIV/AIDS in the project area will impact negatively on the productivity of the population. All training organised under the project will include awareness of the perils of the disease. 7. PROJECT BENEFITS

7.1 Financial Analysis 7.1.1 Financial analysis has been carried out for those activities where marketable output is produced. Certain important activities of the project, such as rehabilitation/construction of water points and participatory forest management will not have a direct impact on livestock or crop/tree production levels. Within the community based activities, the beneficiaries’ contribution amounts to 30 percent of the financial cost in the first year of project operations. The analysis is carried out over a period of 20 years. 7.1.2 For agro-forestry, an activity model has been prepared for a nursery operation consisting of a population of 5,000 plants as well as for an agro-forestry enterprise on an individual farm, assuming the farmer purchases seedlings from a nursery and then plants 70 trees mainly on the edge of the family land holding. These would be cropped for timber under a 15 year rotation, while some fuelwood could be obtained in certain intervening years. A one-hectare model for a community fuelwood plantation has been developed showing the returns from production of both fuelwood and poles.

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7.1.3 Enterprise models have been prepared for individual harvesters of gum arabica and resins assuming that while the main project benefit would be a quantitative increase in the gums and resins harvested there would also be a substantive price increase due to improvement in the quality of the gum and resins marketed. Enterprise activity models taking a core production unit of 80 hives have been prepared for both new and existing bee-keepers. Producer-level benefits would be an increase in the quantity and quality of the honey harvested and marketed. 7.1.4 The results of the models are summarised in Annex 4. Financial results, either in the form of return to family labour or of rates of return to investment capital are attractive, but the models underline the importance of the project subsidy of 70 percent in the first year as an incentive for the community based activities.

7.2 Economic Analysis 7.2.1 Economic analysis has been carried out separately for the two productive components: Water resource development and management and Catchment conservation and then combined with the Capacity building component to provide an overall assessment of the project’s economic viability. The overall economic rate of return (ERR) is 20%. 7.2.2 Quantification of benefits from the development of water resources was based on a reduction in loss of livestock, currently estimated to be of the order of 20-25% per year. Under the project, it was assumed that the loss at the water points developed would be reduced by 10-15% of the herd in the ASAL districts and by 4% in the higher rainfall districts, averaging about 160 livestock units saved per year per water point. Under these assumptions, the water component alone had an ERR of 34%. 7.2.3 For the participatory catchment conservation component it was necessary to limit calculation of benefits to tangible outputs, such as fuelwood, gums, resins and honey. Such production is secondary to the main impact of the component on natural resource conservation through restoration of forest cover and protection of the water resource, where the benefits are long-term in nature and difficult to quantify. For example, sustainable management and conservation of the indigenous forest and of its biodiversity will serve to protect the upper catchment of the Ewaso Ng’iro and thereby assist in regulation of the water flow. The extent to which improved management results in an increment in production will depend on the initial quality of the forest concerned. The low economic rate of return of only 8% for this component should be seen in this context. 7.2.4 There are no immediately quantifiable benefits to the Capacity building component, but the costs were included in the overall economic analysis of the project as these activities are essential to the successful implementation and sustainability of the two productive components.

7.3 Social Impact Analysis 7.3.1 At the regional and community level, the project will make a significant contribution to poverty reduction. It is estimated that over 70,000 households or almost 20% of the project area’s population will benefit directly from the project activities, while indirect benefits will be more widespread. Through the CAPs and other community training, beneficiaries are expected to have a high degree of ownership and control of project activities affecting their lives.

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7.3.2 There are several ways in which the project will have a specific impact on women. One of the three community leaders selected for special training in participatory appraisal techniques in each division will be a woman. Women are also particularly concerned with raising tree nurseries and are expected to be the main participants in this activity. They will also benefit from the increased availability of firewood as they traditionally spend more time collecting firewood than men. Many gum gatherers are women, and they will benefit directly from the increased production and revenue. Finally, the water points will have a clear impact on reducing women’s labour in procuring water.

7.4 Sensitivity Analysis

7.4.1 The results of sensitivity analysis are summarised in Annex 4. The results show that returns are robust and the analysed project activities would be moderately sensitive to shifts in both costs and benefits. However, a combination of significant increases in costs and a reduction in benefits would make the project economically marginal, reducing the ERR to 12%. Further sensitivity analysis involving reduction of the benefits of the water resources component by 25% reduced the overall project ERR to 15%. Both scenarios are unlikely and, in any case, yield returns over and above the prevailing opportunity cost of capital. 8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions 8.1.1 The project is technically feasible, economically viable, environmentally sound, and socially desirable. It is in line with the Bank’s strategy of promoting the suatainable management of natural resources with the objective of alleviating poverty. The project area hosts the poorest districts in Kenya. The project will be complementary to and enhance the impact of the other current major Bank-funded initiative in the agricultural sector, namely the ASAL-Based Livestock and Rural Livelihoods Support Project, as well as donor activities in adjacent districts. It also meets the Kenyan government’s objective of improving prospects for the population in the ASALs by addressing the major constraints of water shortage and natural resource degradation. Attention has been given to prepare communities for their new role in water resource management envisioned under the Water Act (2002) with a view to laying the foundation for long term improvements in water resource conservation. 8.1.2 The project is demand-driven as there was considerable participation of stakeholders in the preparation process. The participatory development approach proposed, with specific activities being determined, through the community appraisal process, should bring about a high degree of ownership of facilities developed through the project and provide some guarantee of sustainability. Further guarantees are provided by the technically unsophisticated nature of the majority of interventions and their simple maintenance requirements and by the use of existing government structures for project implementation. 8.1.3 While about 20% of the project area’s population is expected to benefit directly from project activities, a much larger proportion is likely to benefit from the longer term impact. Women are expected to make up about 20% of the beneficiaries. Users of water points, mainly the large population of nomadic pastoralists in the ASAL areas, will benefit from the greater availability of water and, eventually, the ASAL areas may experience less water scarcity as regenerated forest areas and fairer regulation of water flow increase the water discharge to downstream areas. Inhabitants of the more densely populated humid areas will

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also benefit from the greater availability of fuelwood both through the community plantations and the agro-forestry activities. The project will also contribute significantly to achieving the Millennium Development Goals of (i) halving the proportion of people living in extreme poverty by 2015, (ii) ensuring environmental sustainability through increase in the area under forest cover and land area protected to maintain biological diversity, and halving the proportion of people without sustainable access to safe drinking water by 2015, and (iii) promoting gender equality and empowerment of women through their involvement in project activities.

8.2 Recommendations and Conditions for Loan and Grant Approval 8.2.1 It is recommended that an ADF loan not exceeding UA 13.59 million and an ADF Grant not exceeding UA 2.89 million be granted to the Republic of Kenya for the purpose of implementing the project as described in this report, subject to the following specific conditions: A. Conditions Precedent to Entry into Force of the Loan Agreement The entry into force of the Loan Agreement shall be subject to the fulfillment by the Borrower of the provisions of Section 5.01 of the General Conditions of the Fund.

B. Conditions Precedent to First Disbursement of the Loan

The first disbursement shall be conditional upon the entry into force of the Loan Agreement and the fulfillment of the following conditions: (i) provided evidence of the opening of a special account at the Central Bank of Kenya

and a local currency account in a commercial bank acceptable to the Fund into which part of the ADF loan resources shall be deposited on the request of the executing agency; (para. 5.5.1);

(ii) provided evidence of the establishment of a Project Coordinating Team (PCT) within

ENNDA, and designated a Project Coordinator, Accountant, Procurement Officer, Training and Participatory Officer, Water Resources Officer, Forestry and Conservation Officer, Environmentalist, Monitoring and Evaluation Officer, whose qualifications and experiences shall be acceptable to the Fund (para. 5.2.2);

(iii) provided evidence of the establishment of a Project Steering Committee (PSC)

chaired by the Permanent Secretary, MRD, or his/her representative, and comprising the Permanent Secretary of the Ministry of Finance, Ministry of Environment, Natural Resources and Wildlife, Ministry of Water Resources Management and Development, Ministry of Livestock and Fisheries Development, Ministry of Gender, Sports, Culture and Social Services, Director-General of National Environment Management Authority (NEMA), Chief Executive of the Water Resources Management Authority, Chief Executive of the Water Services Regulatory Board, Managing Director of ENNDA. The Project Coordinator shall be the Secretary (para. 5.2.1).

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Other Conditions: The Borrower shall have: (i) opened, within six months of entry into force of the loan, 12 District Project Accounts

in commercial banks acceptable to the Fund, and on terms and conditions acceptable to the Fund, into which part of the ADF loan resources shall be deposited prior to the commencement of any project sponsored activities in the districts (para. 5.5.1);

(ii) submitted to the Fund the project’s annual work plan and budget (para. 5.2.2); and,

C. Conditions Precedent to Entry into Force and First Disbursement of the Grant The Grant shall enter into force on its signature. The conditions precedent to first disbursement of the Grant shall be subject to the conditions precedent to first disbursement of the Loan as above, and in addition, the Recipient shall have, to the satisfaction of the Fund: (i) provided evidence of the opening of a special account at the Central Bank of Kenya

and a local currency account in a commercial bank acceptable to the Fund into which part of the ADF grant resources shall be deposited on the request of the executing agency; (para. 5.5.1);

(ii) submitted for approval, its PY1 training programme (para. 5.2.3)

Other Conditions: The Recipient shall have:

(i) opened within six months of entry into force of the grant, opened 12 District Project

Accounts in commercial banks acceptable to the Fund, and on terms and conditions acceptable to the Fund, into which part of the ADF grant resources shall be deposited prior to the commencement of any project sponsored activities in the districts (para. 5.5.1);

(ii) beginning in PYII, submitted to the Fund for approval, its annual training programme

(para. 5.2.3)

Annex 1

Map of the Project Area

This map was provided by the African Development Bank exclusively for the use of the readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank and its members any judgement concerning the legal status of a territory nor any approval or acceptance of these borders.

Annex 2 Page 1 of 2

Kenya – Ewaso N’giro North Natural Resources Conservation Project

Management Structure of ENNDA

Annex 2 Page 2 of 2

Kenya – Ewaso N’giro North Natural Resources Conservation Project

Project Organisation and Management

Permanent Secretary

Project Steering Committee PS MRD (chair), Rep. Finance, NEMA, etc

Other Stakeholders to be Co-opted as Necessary

ENNDA Project Coordination Team

District Development Committee District Project Team

Divisional Offices

Front Line Extension/Animal Health/Water/Forestry Workers

Community Project Committees

ADF

Annex 3 Page 1 of 2

Kenya: Ewaso N’giro North Natural Resources Conservation Project

List of Goods and Services – Categories of Expenditure

ADF Loan ADF Grant Beneficiaries The

Government Total Amount % Amount % Amount % Amount % Amount % A. CIVIL WORKS 9,281,060 85.9 138,492 1.3 167,117 1.5 1,220,467 11.3 10,807,137 52.1B. GOODS Equipment 715,629 94.3 7,405 1.0 26,891 3.5 9,070 1.2 758,995 3.7Vehicles 189,028 100.0 - - - - 0 - 189,028 0.9Trucks 250,357 100.0 - - - - - - 250,357 1.2Agricultural Inputs 363,547 42.3 - - 438,980 51.1 56,567 6.6 859,095 4.1Subtotal GOODS 1,518,562 73.8 7,405 0.4 465,871 22.6 65,638 3.2 2,057,476 9.9C. SERVICES Training - - 2,409,601 98.3 - - 41,206 1.7 2,450,807 11.8Specialist Services 1,679,375 82.8 274,502 13.5 8,910 0.4 65,553 3.2 2,028,341 9.8PCU Staff 753,652 100.0 - - - - - - 753,652 3.7Subtotal SERVICES 2,433,027 38.0 2,684,103 53.3 8,910 0.2 106,759 8.5 5,232,800 25.3D. OPERATING COSTS Personnel 732,629 100.0 732,629 3.5Office O & M 7,040 15.8 - - - - 37,512 84.2 44,552 0.2Trucks O&M 291,389 63.0 - - - - 171,038 37.0 462,427 2.2Other operating costs 55,379 4.0 58,080 4.1 688,502 49.2 597,905 42.7 1,399,866 6.8Subtotal OPERATING COSTS 353,808 18.6 58,080 3.0 688,502 36.1 1,539,084 42.3 2,630,474 12.7Total PROJECT COSTS 13,586,458 65.5 2,888,081 13.9 1,330,401 6.4 2,931,948 14.1 20,736,887 100.0

Annex 3 Page 2 of 2

Kenya: Ewaso Ng’iro North Natural Resources Conservation Project

ADF/GOK Financing of Recurrent Costs (UA) 2005 2006 2007 2008 2009 2010 2011 Total % ADF 54,618 184,035 171,783 157,429 144,728 124,105 94,441 931,140 32.8 Beneficiaries - 2,651 34,885 97,698 165,750 243,902 143,616 688,502 24.3Government 42,889 94,378 132,126 196,271 266,934 317,846 166,545 1,216,989 42.9Total Recurrent Costs 42,889 97,029 167,011 451,398 577,412 685,853 404,602 2,836,631 100.00

Annex 4 Page 1 of 5

Kenya – Ewaso Ng’iro North Natural Resources Conservation Project

SUMMARY OF FINANCIAL AND ECONOMIC ANALYSIS

A. FINANCIAL ANALYSIS

1. Methodology and Assumptions

1.1 Financial analysis has been carried out for those activities where marketable output is produced. Certain important activities of the project, such as rehabilitation/construction of water points and participatory forest management will not have a direct impact on livestock or crop/tree production levels. The indirect impact via natural resource conservation is difficult to quantify in financial terms although an effort has been made to assess the economic benefits. In all the community based activities, the beneficiaries’ contribution amounts to 30 percent of the financial cost in the first year of project operations. 1.2 Water Points (small dams, pans and boreholes). No modelling has been done for these investments, but it has been assumed that the provision of water facilities would reduce livestock mortality rates and reduce the distances animals have to trek in search of water which would have an impact of reducing animal weight losses as a result of walking long distances. This is further elaborated in the economic analysis section below. There will be a full cost recovery of the operation and maintenance of the water facilities though charging user fees. This is a normal practice in the area; the charges are levied and collected by the Water Users Associations who look after the water facilities. 1.3 For the directly productive interventions of the project, models have been drawn up to indicate their financial impact and viability at the level of the farm or enterprise. The analysis is carried out over a period of 20 years, unless otherwise indicated. 1.4 Agro-forestry. An activity model has been prepared for a representative agro-forestry nursery operation consisting of a population of 5000 plants. While the nursery is an enterprise in its own right, analysis has also been carried out for an agro-forestry enterprise on an individual farm, assuming the farmer purchases seedlings from a nursery and then plants 70 trees mainly on the edge of the family land holding. These would be cropped for timber under a 15 year rotation, while some fuelwood could be obtained in certain intervening years. 1.5 Community fuelwood plantation. A one hectare model has been developed showing the returns to the plantation. In addition to fuelwood, some poles would also be produced. These are fast growing species and the initial crop would be in year 8, while subsequent crops would become available every 6 years. As an incentive, in addition to 70 per cent of the investment cost for the first year of the plantation, the project would finance a two-strand electric fence to protect from elephants. 1.6 Gums and Resins. Enterprise models have been prepared for individual harvesters of gum Arabica and resins. The analysis has assumed that the main project benefit would be a quantitative increase in the gums and resins harvested (a volumetric increase of about 20% over a 2 year period). The other significant benefit would be in the improvement of the quality of the gum and resins the gatherers would put on the market which would result in a substantive price increase.

Annex 4 Page 2 of 5

1.7 Bee Keeping. The main project inputs at individual/group enterprise level would be the provision of technologically improved bee-hives, tools, honey harvesting refining kits and training. Producer-level benefits would be an increase in the quantity and quality of the honey harvested and marketed. Enterprise activity models taking a core production unit of 80 hives has been prepared. The model for the community which chooses to upgrade its hives provides a comparison with returns under the previous unimproved situation. The analysis is carried out over a period of 10 years, equivalent to the working life of an improved hive. 2. Results of the Analysis 2.1 The results of the models are summarised below. All figures for the with project situation in the table refer to full development. There are no annual with project net income or return to labour figures for the forestry activities as these investments are long-term in nature and low/negative returns in early years are compensated by high returns at harvest time, as is shown by the positive results of the financial rate of return.

Summary Benefits and Returns

Without Project

With Project

FRR

Return/MD Net Income

Return/MD Net Income

(%)

KSh Agro-forestry - Nurseries * * 130 31,240 N/A - Upland Tree Planting * * 25 Community Fuelwood * * 35 Gums 56 9,460 152 25,570 N/A Resins 53 11,400 209 45,085 N/A Bee-keeping - New Producers * * 442 199,000 69 - Existing Producers 198 39,500 442 199,000 85 N/A: The producers would attain a positive cashflow in the first year of operations. * No without project situation

2.2 Agro-forestry. The model of the nursery demonstrates the importance of the project’s contribution in the first year of operations as, without the financing, the return to family labour would fall as low as KSh 47/day. At full development which occurs from year 3, the return at KSh 130/day provides an attractive alternative to hired labour, where the wage ranges from KSh 80 – 100/day. The tree planting model, on the conservative assumption of an average annual growth rate of only 20m3/ha, shows a satisfactory return on investment of 25 percent. In this case, no project subsidy is provided to the individuals purchasing seedlings from the nurseries. 2.3 Community Fuelwood. The financial return of 35 percent is calculated on the basis of the total investment. With the 70 percent subsidy, the financial return to the farmer would be significantly higher. However, there is a significant contribution in terms of labour in the first two years of activities.

Annex 4 Page 3 of 5

2.4 Gums and Resins. The models assume an increase in price of KSh5/kg in the first year and another KSh5/kg from year 2 onwards. In these circumstances, the return to labour increases almost threefold in the case of gum Arabica and almost fourfold for resins. Without the price increase, the return to labour would increase to KSh 80/day for gum Arabica, the equivalent to a day’s wage in an area where there is little paid work available and almost double to KSh 101/day for resins. 2.5 Bee-keeping. The models for the with project situation are the same for existing and new producers, but producers with existing hives have an easier transition as they have the income from the previous year’s sales from the old hives in the first year of investment in the new hives. The financing provided by the project is particularly important for the new producers, as, even with financing, the return to labour is slightly negative in the first year. However, the financial rates of return for this activity are very high, as is the return to labour at full development.

B. ECONOMIC ANALYSIS

1. Methodology and Assumptions 1.1 All costs are expressed in constant July 2003 prices and a foreign exchange rate of KES 121.809 per UA, has been used. As the Kenyan economy is fairly open and the currency fluctuates freely on the international market, no shadow value has been placed on foreign exchange. Because of the scarcity of wage labour in the project area, family labour has been costed using a conversion factor of 0.6. All taxes and duties have been excluded and parity prices have been developed for the main project outputs. The economic analysis has been carried out over a 20 year period. 1.2 The analysis has been carried out separately for the two productive components: Water resource development and management and Participatory catchment conservation and then combined with the capacity building component to provide an overall assessment of the project’s viability. 1.3 It is difficult to quantify the benefits from investment in water points and related water-based activities. Aspects such as the reduction in time required to fetch water are highly dependent on the value ascribed to labour. The main benefit is likely to be derived from the increased availability of drinking water for both humans and livestock. Although quantifiable data regarding drought/water scarcity-related losses are scarce, it is estimated that in the ASAL districts, livestock farmers lose 20 - 25% of their herd annually because of water shortages and more during drought years. In the more humid parts of the project area, losses are estimated to be of the order of 8%. The extent to which project activities will reduce these losses is difficult to quantify, but the impact of the incremental number of water points as well the rehabilitation of the existing ones is likely to be significant. For the analysis, it has been assumed losses will be reduced by 10-15% of the herd in the ASAL districts and by 4% in the higher rainfall districts. The average impact would be the saving of about 160 livestock units per water point developed per year. In the light of the significant number of livestock in the project area, this is a fairly conservative estimate.

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1.4 The participatory catchment conservation activities will have an impact on natural resource conservation in terms of restoring forest cover and protecting the water resource that will be long term in nature and again, are difficult to quantify. Quantification of benefits has been restricted to tangible outputs, mainly in the form of fuelwood, gums and resins and honey. This necessarily underestimates the total benefits due to the activities. 1.5 There are no immediately quantifiable benefits to the Capacity building development although these activities are essential to the successful implementation and sustainability of the two productive components.

2. Results of the Analysis 2.1 The results of the analysis are set out in Table 13. They show that water development activities would be economically rewarding, with a rate of return of 34%, while, in purely productive terms, catchment conservation activities would be marginal with a return of only 9%. The project as a whole would attain an ERR of 21%.

3. Sensitivity Analysis 3.1 The results shown in paragraph 2.1 have been tested for sensitivity due to shifts in cost and benefits as well as to lags in implementation. The results are summarised below.

Costs up by 10% 19% Costs up by 20% 17% Benefits Down by 10% 18% Benefits Down by 20% 16% Costs up by 20% and Benefits Down by 20% 13% Benefits lagged by 1 year 20% Benefits lagged by 2 years 14%

3.2 The results show that the analysed project activities would be moderately sensitive to shifts in both costs and benefits. However, a combination of increases in costs and a reduction in benefits by 20% would make the project economically marginal, reducing the ERR to 13%. However, this is an unlikely scenario. A delay in project benefits by two years would also have a significant impact, reducing the ERR to 14%. In order to minimize the possibility of such an occurrence, the project design envisages the recruitment of seven District Project Officers to expedite project implementation at the field level. Also, the income generating activities are front loaded in order to generate greater participation. 3.3 As the methodology used to estimate the benefits for the water resources component is not standard and the project appears rather more sensitive to benefits than costs, further sensitivity analysis was carried out by modifying the benefits to the water resources component. Even with a 25% reduction in livestock benefits, the overall project ERR remains viable at 16%.

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Kenya: Ewaso Ng’iro North Natural Resources Conservation Project

Economic Benefits Calculations

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Kenya: Ewaso Ng’iro North Natural Resources Conservation Project Project Implementation Schedule (September 2005 – December 2011)

Activity Period Responsibility

1 Loan/Grant Approval March, 2005 ADF Board

2 Loan/Grant Signature April/May 2005 ADF/GOK

3 Establish PCU and Identify and Nominate Core PCU Members

April/July 2005 EA

4 Set Up Project Steering Committee and hold 1st Meeting

April/May 2005 GOK

5 Open Special Accounts – Foreign and Local April/July 2005 EA 6 Recruit District Project Officers May/August 2005 EA 7 Set up District Community Assistance

Committee June – September 2005 EA

8 Loan/Grant Disbursement Effectiveness September 2005 ADF

9 Project Launching November, 2005 ADF/GOK

8 Develop and Finalise Procurement Plan and Documents

December 2005 – January, 2006 EA

9 Recruit TAs December 2005 – March, 2006 EA

10 Develop Training Curriculum December 2005 – January, 2006 PCU Training Officer/DAO/DFO/DLPO 11 Develop Reporting, M&E Arrangements August - September, 2005 PCU/M&E Specialist

12 Develop and Finalise Training Plan December, 2005 PCU Training Officer/DAO/DFO/DLPO

14 Conduct District and Divisional Level Training

May, 2006/Continous PCU Training Officer/DAO/DFO/DLPO

15 Conduct Awareness Creation Campaigns December /January, 2006 PCU Training Officer/DAO/DFO//DLPO

16 Conduct Stakeholder Workshops February, 2006 EA

17 Identify & Nominate Stakeholders into Committees at District and Divisional level

February, 2006 DALEO/DVO

18 Conduct PRA in Identified Sites May, 2006 PCU Training Officer/DAO/DFO/DLPO

12 Recruit contractors July - November 2006 PCU /DAO/DFO/ DLPO

19 Procure Relevant Programme Inputs February – March, 2007 EA

20 Procure Equipment and Other Goods May/December 2006 EA

21 Implement District Level Activities May 2005 – Continuous PCU Training Officer/DAO/DFO/DLPO

22 Monitoring and Reporting/Quarterly Reports 15 Days After end of Each Quarter EA 23 Audit Report 6 Months end of Each Fin. Year EA

24 Mid Term Review September 2008 EA and ADF

25 Project Completion Report December 2011 Ea and ADF

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Annex 7 Page 1 of 4

Kenya: Ewaso Ng’iro North Natural Resources Conservation Project

Environmental and Social Management Plan Summary

ProjectTitle: Ewaso Ng’iro North Natural Resources Conservation Project (ENNNRCP)

Project Number:

Country: Kenya Environmental Category: 2 Department ONAR Division: ONAR.1 a) Brief description of the project and key environmental and social components

The project’s goal is to contribute to poverty reduction through improved natural resources conservation and management. The project’s specific objective is to improve water resources management, agricultural land use and forest resources conservation in the Ewaso Ng’iro North river catchment. The project has three (3) components: 1) Water Resource Development and Management with four sub-components (1.1) Development of water points in Arid and Semi-Arid Lands (ASALs), including feasibility studies of three (3) large storage reservoirs for river flow regulation, (1.2) Improvement and intensification of hydrological monitoring of the river flow, (1.3) Support to River Water Users Association, and (1.4) Irrigation and soil/water conservation capacity development; 2) Participatory Catchment’s Conservation with three sub-components (2.1) Agro-forestry and community fuel wood plantations, including agro-forestry nurseries in uplands and ASAL areas, (2.2) Participatory natural (“gazetted”) forest planning and management, including the strengthening of the Forest Department and the Ministry of Agriculture (in the ASALs areas) and the establishment/strengthening of community forestry user associations, (2.3) Promotion of non-wood forest products development, such as bee-keeping and gum and resin collection; 3) Capacity-Building, including training of community leaders in participatory approaches, support to ENNDA and strengthening of Early Warning System. The project is highly participatory in its design and decentralized in its implementation with a significant beneficiary input to ensure sustainability. The project area of 209,576 km² (36% of the national territory) encompasses the entire ENNR catchments and covers 12 administrative districts in four (4) provinces (Garissa, Mandera and Wajir in the North Eastern Province, Marsabit, Isiolo, Mreu Central, Meru North and Moyale in Eastern Province, Nyandarua and Nyeri in Central Province, and, Laikipia and Samburu in the Rift Valley Province). The ENNR watershed hosts the poorer districts in Kenya and its land is characterised by over 90% by ASALs. The project will directly benefit an estimated 70,000 households or about 20% of the population of the project area. The beneficiaries will include ENNR’s communities and related Water and Forest Users Association, River Water Users Associations, tree nursery groups, pastoralists, agro-pastoralists, beekeepers, ENNDA and District line ministries staff. b) Major environmental and social impacts

The following positive impacts are anticipated: • Maintenance and/or enhancement of the carrying capacity of the ENNR’s watershed ecosystem and protection and

sustainable use of its natural resources (e.g. water and forest); • Protection of the upper catchment of the Ewaso N’Giro North River would enhance the water flow downstream

and contribute to the recharge of the groundwater and increase surface water availability in the water scarce’s ASALs areas;

• Easy access to water points will minimize overgrazing and degradation of soils by livestock, especially during the dry seasons and/or droughts periods;

• Fences built around the water reservoirs, water pans, wells and boreholes will protect surface and groundwater from pollution sources, including from livestock;

• Rehabilitation and well functioning of additional wells and boreholes will increase the availability of water resources and, consequently, will reduce the excessive withdrawal from existing water points. Drainage facilities (platforms, suck pits, etc.) for trough and tap posts will protect underground waters from pollution;

• Intensification of hydrological monitoring will ensure a more comprehensive, systematic and integrated monitoring of water resources of ENNR and the maintenance of its estimated ecological flow;

• Improved water resources management and monitoring, and introduction of more efficient irrigation practices should bring greater water efficiency use;

• Improved forest planning and management and establishment of Forest User Groups would have a beneficial and sustainable impact on the reduction of soil erosion, floods and the restoration of forest coverage;

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• Controlled and community-driven fuel wood plantations and agro-forestry activities will increase the availability

of scarce fuel and woods, existing demand which is presently leading to the destruction and encroachment of indigenous forests and will promote biodiversity conservation;

• Rehabilitation of the vegetative cover through improved management and protection of “gazetted” forest and increased tree cover in the upper catchment through agro-forestry practices will increase buffer effect of soil’s water absorption and minimize the occurrence and severity of flash floods;

• Encouragement of beekeeping and collection of gums and resins will promote one of the most environmentally friendly, non-extractive use of the forest resources while providing a source of economic revenues to local communities;

• Institutional strengthening of the national (e.g. Ministry of Water and Irrigation and related Water Resources Management Authority and Water Services Regulatory Board, Ministry of Agriculture, Ministry of Livestock, Ministry of Regional Development Ministry of the Environment, Natural Resources and Wildlife and its Forestry Department, National Environmental Management Authority, etc), regional development authorities (Ewaso Ng’iro North Development Authority (ENNDA) and the Ewaso Catchment Area Advisory Committee (CAAC), District authorities (e.g. the District Development Committee (DDC) and the communities in the ENNR Watershed will improve governance over natural resources management and ensure the enforcement of the legal provisions outlined in the Environmental Management and Coordination Act (1999) and its Environmental (Impact Assessment and Audit) Regulations (2003), the Water Act (2002) and the Forest Bill (yet to be enacted by Parliament);

• Support to the decentralization of natural resource management to the District level and greater involvement of communities within the ENNR watershed will increase the governance accountability of District officials and related institutions (River Water Users Association, District Development Committees) and improve equitable sharing of water rights.

The following potential negative impacts and/or risks could be foreseen: • Rehabilitation/construction of permanent water points and greater water availability might generate an

intensification of the migration process and permanent settlements in the project area, with its subsequent problems such as land degradation due to increase herd size and related overgrazing around existing water points, land clearing for cultivation, tree cutting for building materials and firewood, setting deliberate bush fires, excessive abstraction of water resources for unauthorized irrigation of horticulture in the upper catchment’s areas, etc.;

• Excessive water abstraction from the ENNR beyond its estimated ecological flow could negatively impact on the replenishment of the Merti underground waters (Note: it is worth mentioning that the safe abstraction rate for groundwater in the project area is estimated to 228 million m³/year while the current groundwater abstraction is estimated at 4.1 million m³/year in 2000);

• Limited and/or lack of inter-ministerial cooperation concerning control of activities within the catchment’s areas (due to contradictory legal provisions of the Water Act (2002) and Forest Bill);

• Limited institutional capacities of the newly established institutions and non-enforcement of legal provisions under the Water Act (e.g. Water Resources Management Authority (WRMA) and the Water Services Regulatory Board (WSRB), the Ewaso Catchment Area Advisory Committee (CAAC), River Water Users Association (RWUA) and the draft Forest Bill (e.g. proposed Kenya Forest Service);

• Risks of conflict between upstream and downstream water users; • Potential increase of incidence and prevalence of water-borne/related diseases in the absence of appropriate

mitigation measures, including public health campaigns.

c) Enhancement and mitigation program

The following measures for enhancing positive impacts of the project will be included:

• Development of environmental management manuals and ESIA training courses to the 12 District Development Committees (DDC) and to the seven (7) district officers;

• Strengthening the institutional and operational capacities of the 12 District Environmental Committees (DECs) and Officers in the development of a coherent vision of environmental sustainability in each district (ref: institutionalization of the environmental screening review procedure and promotion of community-based natural resources management (CBNRM) and IWRM);

• Facilitation of the development of alternative livelihood sources not dependent on harvesting natural resources; • Formation of Water River Users Associations (WRUAs) for water resources management.

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Mitigation measures given below for eliminating or minimizing negative impacts have been incorporated into the project design:

• Environmental screening review procedure established for the community-level projects, including strict environmental, health and operational criteria for the siting and design of the water points will be mainstreamed into decision-making process, especially in the drier eastern parts of the project area;

• Provisions for the undertaking of ESIA Studies for the technical design of the four (4) small-scale water retention structures and for the feasibility studies of the three (3) large-scale water storage reservoirs, in accordance with the

Kenyan’s Environmental Impact Assessment Regulation (ref: National Environmental Management Authority – NEMA) and the AfDB’s Environmental and Social Assessment Procedures (ESAP);

• Contractors and/or project beneficiaries will undertake environmental restoration for all excavations; • Adequate human and livestock watering facilities will be developed downstream of water points perimeter; • Water River Users Associations (WRUAs) will be established and assumed management responsibility prior to

rehabilitation of dam boreholes and wells; • Enforcement of water rights for irrigation of commercial horticulture; • Development of irrigation water management skills and introduction of technologies; • Training on the appropriate use of pesticides and fertilizers, and soil fertility management practices not requiring

application of agro-chemical fertilizers; • Public health education aimed at controlling water-borne/related diseases will be organised.

d) Monitoring program and complementary initiatives

ENNDA will have the overall responsibility to monitor compliance and implementation of the ESMP to ensure that the design criteria, mitigation measures, and monitoring requirements for the rehabilitation and/or construction of the water points are implemented.

NEMA will have an overall function of ensuring that the monitoring is well conducted and that the developer takes all the necessary mitigation actions to implement any recommendations arising out of any such screening and/or assessment reviews. An independent annual audit of the ESMP will also be programmed. Bank supervision missions will also follow-up on the implementation of the ESMP.

e) Institutional arrangements and capacity building requirements

ENNDA the Executing Agency of the project will set up a Project Coordination Team (PCT) for the day-to day management and implementation of the project’s activities. An environmentalist will be assigned to the PCT for overall environmental coordination. Finally the District Project Team to be set up by the District Development Committee (DDC) will ensure the coordination between ENNDA and related head of all line Ministries in the project’s targeted Districts.

The Water Resources Management Authority (WRMA) and the Ewaso Catchment Area Advisory Committee (CAAC) will take the lead in the implementation of water resource development and management authorities, especially the feasibility studies for the water storage reservoirs, the intensification of the hydrological monitoring, and the strengthening of River Water User Associations. The District level Extension Service will take the lead role for the irrigation and soil and water conservation capacity development. The District level Livestock Production services will take the lead role in the development of livestock water points. Finally, the District Forestry Officer will have the responsibility for the Participatory Catchment’s Conservation Component Each District Environmental Officer will have the responsibility for the environmental screening of the small-scale water projects. NEMA will be responsible for the ESIA studies for the proposed four (4) water retention structures and the feasibility studies of three (3) large-scale water storage reservoirs.

f) Public consultation and disclosure requirements

The project planning and design have been highly participatory and the implementation will be decentralised with a significant beneficiary input intended to ensure project sustainability and to increase the community ownership over the project activities, including the EMSP. Therefore, key stakeholders, such as the Ministry of Water and Irrigation (MWI), the Forest Department of the Ministry of Environment and Natural Resources (MENR), the Ewaso Ng’iro North Development Authority (ENNDA), the National Environmental Management Authority (NEMA), local NGOs, the district councils and line ministries staff and the local communities were consulted during project preparation and appraisal on the potential environmental and social impacts of the project. Their views have been incorporated in the final project design, including the development of the ESMP.

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g) Estimated cost

All measures for enhancing benefits and mitigating negative impacts, implementing the monitoring program, and building the institutional and human resource capabilities to successfully implement the ESMP have been incorporated into the project design and the related cost of the ESMP’s measures (estimated at $400,000 U.S.) have been mainstreamed into the project budget.

h) Implementation schedule and reporting

The measures outlined in the ESMP will be implemented following the same project schedule as all activities were mainstreamed into the project design and implementation. Achievements/problems will be reported in the project quarterly/annual progress reports and should be timely addressed by the project management and the Bank.

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Kenya: Ewaso Ng’iro North Natural Resources Conservation Project

Supervision Schedule during Implementation November 2005 Launching of the project May 2006 Supervision November 2006 Supervision May 2007 Supervision November 2007 Supervision May 2008 Supervision November 2008 Mid-Term Review May 2009 Supervision November 2009 Supervision May 2010 Supervision November 2010 Supervision July 2011 Project Completion Report

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Kenya: Ewaso Ng’iro North Natural Resources Conservation Project

Highlights on the Project Preparation and Review Process 1. Project Identification: The Bank was identified during the course of a Bank-financed study in the Ewaso N’giro North river Catchment. A Stakeholders’ Workshop, held in March 2002, led to the identification of priority investment packages for which detailed feasibility studies were prepared, namely: Lower Ewaso Ng’iro North River Small Scale Irrigation Project; Integrated Catchment Conservation and Management Programme; Rural Water Resource Development and Management Project; Regional Research, Information and Training Centre; Rationalisation and Institutional Capacity Building Project. In view of the urgency of addressing the water resources degradation the project combines the Lower Ewaso Ng’iro North River Small Scale Irrigation Project and Integrated Catchment Conservation and Management Programme, but excluded the irrigation and gums and resin enterprise components. 2. Project Preparation: The project was prepared in August 2003 by a multidisciplinary team of experts from the FAO Investment Centre comprising an Agricultural Economist, an Agronomist, a Project Analyst, an Irrigation Engineer, a Forester and a Community Development/Institutions Specialist. The mission met stakeholders in both the public and private sectors including District personnel of line ministries, community based organizations (CBOs), NGOs and other private sector representatives. In order to assist the Preparation Mission, the Government established an inter-ministerial technical steering committee. This committee prepared a Concept Paper which provided guidance to the mission in the selection and development of project components. In the course of the mission, the three components identified in the Concept Paper, namely: water resources management, catchment conservation and capacity building for resource conservation provided the base around which the project was constructed. 3. Project Appraisal: The project was appraised in November/December 2003 by a team comprising of an Agronomist, Agricultural Economist, Forester and a Consultant in Water Resources Management. The mission visited Kenya and continued its broad consultative and participatory process that was commenced at preparation. Public and private interest groups, as well as donors involved natural resources management activities in Kenya. A systematic review and verification of all aspects of the project was conducted by the mission. Due to shortage of resources for Kenya and subsequently, to commitment capacity, the processing of the report was slowed down. 4. Internal Working Group: The internal review meeting that considered the project appraisal report was held on 4 March 2004. The report was carefully revised based on all comments received and processed further in accordance with the requirements of the Bank Group’s Operations Manual. 5. Interdepartmental Working Group Review: The project appraisal report was reviewed at the interdepartmental level on 19 March 2004. The report was fully revised based on the comments received and peer reviewed before submission to the Senior Management Committee.

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6. Senior Management Committee: The report was cleared for presentation to the Board by the Senior Management Committee on 3 June 2004. However, in view of the fact there were no resources under Kenya’s ADF IX to accommodate the project, the report was not distributed to the Board. A mission was undertaken in November/December and on the basis of the information gathered the Report was subsequently updated by a team comprising an Agronomist; Agricultural Economist; and Environmentalist. 7. Interdepartmental Working Group Review: The project appraisal report was reviewed at the interdepartmental level on 6 January 2005. The report was fully revised based on the comments received and peer reviewed before submission to the Senior Management Committee. 8. The report was cleared for presentation to the Board by the Senior Management Committee on 7 January 2005.

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Kenya: Status of Audit Reports and Project Completion Reports

There are no PCRs or audit reports outstanding for Kenya in the agriculture sector.