Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3252-SO STAFF APPRAISALREPORT SOMALIA SECOND MOGADISHUWATER SUPPLY PROJECT March 26, 1982 Energy & Water Supply Division EasternAfrica Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contentsmay not otherwisebe disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 3252-SO
STAFF APPRAISAL REPORT
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
March 26, 1982
Energy & Water Supply DivisionEastern Africa Regional Office
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
Currency Unit = Somali Shilling (So Sh)1 Somali Shilling = US$0.07943US$1 = So Sh 12.59
WEIGHTS AND MEASURES
1 Imperial gallon (Ig) = 1.2 US gallons (gal) = 4.55 liters (1)1 cubic meter (cu m ) = 220 Ig, 264.2 US gal, or 1 kiloliter (K1)1 Megaliter (Ml) = 1000 cu m1 liter per capita per day = lcd1 million Imperial gallons
per day (Imgd) = 4,546 cu m per day = 4.546 Mld = 52.6 litersper second (lps)
1 meter = 3.28 feet = 39.37 inches
1 millimeter (mm) = 0.039 inches1 kilometer (km) 2 = 0.62 miles (mi)1 square kilometer (km ) = 0.386 sq mi = 247 acres (ac) = 100 hectares (ha)
ABBREVIATIONS AND ACRONYMS
Arab Fund = Arab Fund for Economic and Social DevelopmentEDF European Development FundFAO = Food and Agriculture OrganizationFRG = Federal Republic of GermanyGIBB = Sir Alexander Gibb & Partners (Africa)MMWR = Ministry of Mineral & Water ResourcesMCC - Mogadishu City Council
MWA = Mogadishu Water Agency
NWC = National Water CommitteeSDR = Special Drawing Rights
USAID = United States Agency for InternationalDevelopment
UK = United Kingdom of Great BritainWDA = Water Development AgencyWHO - World Health Organization
FISCAL YEAR
January 1 to December 31
FOR OFFICIAL USE ONLYSTAFF APPRAISAL REPORT
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
TABLE OF CONTENTS
Page No.
I. THE WATER SUPPLY AND WASTE DISPOSAL SECTOR .... ............ 1
Country Background ........................................ 1Water Resources ..............., 1Population . ................................................. 1Public Health ........... ................................... 1Sector Legislation ........................................ 2Sector Organization ....................................... 2Cost Recovery ............................................. 4Manpower and Training ..................................... 4Service Levels ............................................ 5Sector Objectives ......................................... 5Sector Development ........................................ 5Possible Constraints .Previous Bank Group Projects .............................. 7
II. POPULATION, SECTOR SERVICES AND DEMAND IN PROJECT AREA .... 8
Location and Regional Development Prospects .... ........... 8Sector Agencies ........................................... 8Existing Water Supply and Waste Disposal Facilities .... ... 8Population Served and Standards of Service .... ............ 9Population Projections and Demand for Service .... ......... 10
III. THE PROJECT ............................................... 12
This report was prepared by Messrs. E. Greenwood, E. LaBahn and G. Steinkeand is based upon information obtained during a mission to Somalia in Juneand July 1980.
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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TABLE OF CONTENTS (Cont'd)
Page No.
IV. THE BORROWER AND THE IMPLEMENTATION AGENCY ................ 20
Organization .......... . ............................. 20Management and Personnel ......... .. . .................................*.. 21Scope of MWA's Activities . ................................ 22Accounting Practices and Procedures ...... ................. 22Billing and Collection so... ... ... *.o .. .. o ....... **. .* ...* 23Audit ...................................................... 23Manpower Development and Training ......................... 24
V. FINANCIAL ANALYSIS ......... ............................... 24
Past History and Present Financial Position ............... 24Tariffs . ................................................... 25Proposed Financing .... .................................... 26Future Performance ... ......... . ...... ............................. 28
VI. ECONOMIC AND SOCIAL ANALYSIS .............................. 28
Project Benefits .................................... 28Least Cost Solution to...... so..... so.......o....o... a.................. 29Rate of Return and Pricing Considerations ................. 29Impact on Poverty Group ... ..... .......................... ......... 29Affordability ....................................... . ..... 30Project Merit and Risk ... .................................... 30
VII. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATIONS ......... 31
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LIST OF ANNEXES
1 - Mogadishu Water Demands2 - Description of Physical Elements of Proposed Project3 - Project Cost Estimates4 - Project Implementation Schedule5 - Schedule of Disbursements from Credit6 - Water Resources of Mogadishu Area7 - Project Monitoring Guidelines8 - Organization Chart of Mogadishu Water Agency9 - Cash Flow Projections10 - Income Statement Projections11 - Balance Sheet Projections12 - Notes to Financial Statements13 - Average Incremental Costs and Internal Financial Rate of Return14 - Selected Documents and Data Available in the Project File
Maps
Second Mogadishu Water Supply Project
IBRD 15171 - Hydrogeology of Southern SomaliaIBRD 15172 - Water Supply Facilities
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
I. THE WATER SUPPLY AND WASTE DISPOSAL SECTOR
Country Background
1.01 Somalia, with a land area of 637,700 sq km, is situated in the Hornof Africa, bordered on the north by the Gulf of Aden and the Arabian Peninsula,on the east by the Indian Ocean, and on the west and southwest by Ethiopiaand Kenya. The northern and some of the eastern areas are mountainous, butSomalia is largely plateau land sloping easterly from the Ethiopian highlandsto the Indian Ocean, with a broad coastal plain to the south.
1.02 Central and northern Somalia are arid and the southern part ofthe country, between the two perennial rivers, the Juba and Shebelli, is semi-arid, with rainfall ranging from 50 mm to 600 mm annually. Annual rainfall isirregular and drought has been widespread over the last decade. The rainyseasons are from April to June, and from September to November. The economyof the country is predominantly agricultural. With a per capita income ofabout US$185, Somalia is one of the least developed countries in Africa.
Water Resources
1.03 Water resources in Somalia are unevenly distributed and scanty.The Juba and Shebelli rivers rise in Ethiopia and cross southern Somalia.Although generally limited in quantity and quality, groundwater is Somalia'sprincipal source of water supply. In the Juba and Shebelli river basins,groundwater and surface water supplies are used. Fair records of surfacewater exist, but records of groundwater resources are deficient.
Population
1.04 The population of Somalia was estimated in mid-1976 at 3.8 million,increasing at a rate of 2.3% per year. Urban population was estimated at 1.1mi:Llion and has been growing at about 5% annually, whereas the rural popula-tion has been growing at a rate of about 1.2% per year. Mogadishu, with anestimated 584,000 inhabitants (1980), or about 45% of the urban population, isthe country's capital and largest city and is growing at about 6.5% per year,whereas the rate of growth of other urban areas is estimated to be less than4% per year. Drought and the border dispute with Ethiopia have caused a verylarge influx of refugees, many of whom have settled in Mogadishu.
Public Health
1.05 Morbidity and mortality due to common enteric and parasitic diseasesare known to be exceptionally high throughout the country, although documen-tation is extremely poor. Tuberculosis, malaria, diarrheas, dysenteriesand parasitic infections directly attributable to environmental deficienciesare the more commonly observed of the important communicable diseases. Rural
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areas, small urban centers and fringe areas of the larger towns are par-ticularly vulnerable to these diseases, because they are often isolated andlack convenient medical facilities and the basic needs of safe water andsanitation. However, basic health services are improving and centers fortreating communicable diseases are being established at the district level.Six WHO projects, two UNICEF projects, and two UNDP projects totalling aboutUS$3.3 million are underway to further strengthen health services, to eradicatecommunicable disease, and to improve environmental health. These have beensupplemented by a US$15.2 million USAID-financed Rural Health Delivery projectfor the period 1980-85.
Sector Legislation
1.06 Little sector legislation exists. There is no agreement betweenEthiopia and Somalia on the sharing of Juba and Shebelli waters, nor is therespecific legislation in Somalia governing water ownership and rights of use.Although some unsuccessful attempts have been made to enact a water law, atpresent the main items of legislation associated with the water sector are:(a) a decree of April 20, 1963 providing for more effective use of cultivat-able lands and irrigation waters; (b) Law No. 26 of 1971 establishing theWater Development Agency; and (c) Decree No. 18 of April 6, 1978 concerningthe "Establishment of Mogadishu Water Agency". A Presidential Decree in 1978extended MWA's jurisdiction to include sewerage and drainage (para. 2.02).Although there is need for a national water plan, the proposed project is notaffected by the lack of one. However, in the mid-1980s when water resourceswill be more fully utilized than at present, a water resources plan willassume greater importance (para. 3.27 and Annex 6).
Sector Organization
1.07 Although six different ministries, several autonomous agencies andnumerous organizations of the central Government are active in the sector, noone organization is in charge of overall planning and programming of communitywater supplies and waste disposal. At the central Government level, however,three organizations.- the National Water Committee (NWC), the Ministry ofMineral & Water Resources (MMWR), and, potentially the most important, theWater Development Agency (WDA) - have key roles in water development. 1/ TheMinistry of Health (MOH), municipal water utilities and central Governmentbodies are responsible for activities in addition to water supply.
1.08 The NWC (formerly known as the Water Resources Development Committee)is a national advisory group consisting of representatives of the Ministry ofPlanning and other ministries and organizations active in the sector. Itsresponsibilities include advising sector organizations, principally WDA andthe municipal water utilities, in project selection and budget preparation.
1/ The MMWR and WDA are mainly concerned with groundwater while surfacewater development is under the jurisdiction of the Department of Landand Water Resources of the Ministry of Agriculture.
The NWC was created as a coordinating body with respect to all water resourceprojects and, theoretically, helps to shape sector policies. However, inpractice, they have usually only met in response to water supply crises.
1.09 MMWR, through its Hydrogeology Department which was established in1978, is responsible for research and hydrogeological studies, the collectionand assessment of hydrometeorological data, the design and implementationof groundwater exploration projects, and advising on water legislation.Shortage of staff has hampered its support from UNDP and reduced its effec-tiveness. However, improvement is expected in the longer term through train-ing included in UNDP and USAID technical assistance. WDA is one of fourautonomous agencies under the MMWR, the other three being the Mogadishu WaterAgency (MWA), and the Hargeisa and Kismayu water utilities. WDA was establishedin 1971 and is empowered to assist rural and urban communities through sevenregional offices and a headquarters office located in Mogadishu. Shortage ofstaff has limited its activities to minor construction. Design and construc-tion of piped water supply systems, financed through bilateral assistance,generally are carried out by foreign consultants and contractors. Under thefirst Mogadishu Water Supply Project (Credit 822-SO) WDA recently carried outtest drilling and, as part of a joint venture, also is participating in acontract for construction of the project's production wells. A water supplyextension program for ten principal towns financed by the Federal Republic ofGermany (FRG) is at-an early stage of development. 1/
1.10 WDA is headed by a General Manager appointed by the President onthe recommendation of the Minister of Mineral & Water Resources. Four majorbut extremely understaffed departments exist: drilling, engineering, admin-istration and hydrogeology. WDA is partially funded through Governmentbudgets and partially through revenue-producing activities such as construc-tion for other ministries. Various development agencies are supporting WDA.The German Agency for Technical Cooperation (GTZ) is supplying training andtechnical assistance, and the United States Agency for International Devel-opment (USAID), under a grant to MMWR for development of national waterresources, will provide WDA with commodity aid and the drilling requiredin several ongoing Bank Group-financed agricultural projects.
1.11 MOH's responsibility in the sector has been limited mainly toexercising control and surveillance over water quality and advising urban andrural communities on environmental sanitation. Mogadishu-s Municipal CityCouncil has a Health Department nominally responsible for health education,environmental sanitation, port and airport sanitation, communicable diseasecontrol and training. Although MOH is attempting to assist in improving water
supply and sanitation in rural areas each of which has a hygiene office, theirefforts remain primary health care and communicable disease control 1/.
1.12 Other organizations are also active in the sector. The Ministryof Agriculture, through its Department of Land & Water Resources, SettlementAgency and the Banana Board, implements irrigation schemes using surface waterand/or groundwater. The Ministry of Livestock, through the Livestock Devel-opment Agency and the National Rangeland Agency, is also committed to well-drilling programs. The Ministry of Industry is involved in water developmentto meet irrigation water needs on its sugar plantations and to meet processwater and potable water needs at various plant sites. Local government bodiesare responsible for sanitation and solid waste disposal.
Cost Recovery
1.13 No national water tariff policy exists. Tariffs are levied in bothurban and rural areas although they normally do not reflect the full costs ofproviding service. In urban areas, water tariffs are determined by theindividual water utilities, subject to confirmation by the Government. Inrural areas, fees charged for potable water vary from region to region andaccording to the nature of the source of supply. A flat rate tariff is usedfor water for human consumption, whereas fees for water for animals arenormally levied per watering and vary according to the type of animal. Forirrigation water, no direct charges are levied and cost recovery is derivedsolely from land taxes. This has made for inefficient use of land and waterwhich, in the Shebelli valley, has caused a decline in agricultural productivity.
Manpower and Training
1.14 A severe shortage of technically-trained manpower, which derivespartly from Somalia's generally low education participation rates, exists inall sectors and at all levels. The largest single factor, however, is theemigration of skilled manpower (including secondary teachers) to neighboringoil-exporting states. Other factors are the extremely low level of remunera-tion throughout the public sector (the largest single employer) and theinability to attract sufficient numbers of students to technical and vocationalschools. Industrial training is provided in ten technical schools and aboutsix vocational training institutions, which in 1978/79 had a combined enroll-ment of about 3,500 students. Relatively little change has occurred sincethat time.
1.15 Despite the establishment of a National Commission for Technical andVocational Training, there is a lack of overall coordination of the varioustechnical and vocational institutes operated by several different ministries.This lack of coordination, however, is being addressed in the Fourth EducationProject (Credit 1105-SO).
1/ Only US$179,000 (less than l%) of a total of US$18.45 million scheduledas assistance to the health sector by the UN agencies (1978-81) andby USAID (1980-85) was slated for water supply and sanitation.
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1.16 Problems also exist in post-secondary education. The NationalUniversity in Mogadishu will not produce enough qualified graduates, particu-larly in civil and mechanical engineering, to meet Somalia's needs. In part,this is due to the low number of students who qualify for entrance into theSc:hool of Engineering. In 1979/80, there was a failure rate of 58% in GradeXII mathematics and science examinations.
1.17 The manpower situation in Somalia's water supply and waste disposalsector follows the overall pattern of all sector organizations in sufferingfrom shortages of technically-trained manpower. An on-the-job training com-ponent of a USAID-financed Mogadishu water supply project in the early 1970swas relatively ineffective due to the inability to retain trained staff andthe lack of a self-sustaining training element. A training component in thefirst Mogadishu Water Supply Project is intended to address these needs in twostages, the first being an overall assessment of sector training needs and thedesign of a training program for MWA, the second, implementation of MWA'straining program (para. 4.16). The FRG-financed, GTZ-administered project tostrengthen WDA (para. 1.10), which presently is underway, has a substantialtraining component which includes teacher training. Attracting sufficientqualified candidates for training has been difficult. The training com-ponent of the first project is being closely coordinated with the GTZ project.The well drilling component of the USAID project also would strengthen WDAthrough training of WDA staff (para. 1.25).
Service Levels
1.18 Approximately 20% of the rural population and 58% of the urbanpopulation (represented by the cities of Berbera, Burao, Hargeisa, Kisimayu,Merca and Mogadishu) had reasonable access to safe water in 1976. It isprobable that, due to the slow pace of water system extensions and recentin-migration, this percentage has declined. There is no public seweragein Somalia and sanitation facilities consist of individual disposal systems(septic tanks and pit latrines) serving an estimated 35% of the rural,and about 77% of the urban population (1976).
Sector Objectives
1.19 The Government's objectives for the sector are now being developedthrough a cooperative program administered by WHO/Geneva and financed by GTZ.This program, which was initiated in 1979 at Government's request, wouldprovide preparatory assistance and formulate a work program that wouldfacilitate Somalia's meeting sector objectives corresponding to the recom-mendations adopted for the International Drinking Water Supply and SanitationDecade (1980-89) at the 1978 UN Water Conference in Mar del Plata. Theprogram also would provide the means by which improved sector coordination ofprojects could be achieved and would provide the basis for preparing sectorproposals relative to the next Five Year Development Plan (1982-86).
Sector Development
1.20 In the early 1970s USAID provided technical assistance and financefor construction of water supply systems for the cities of Kismayu and Mogadishu.The People's Republic of China provided similar assistance in the mid and late-1970s for the construction of water supply systems in Hargeisa and Baidoa.
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1.21 The Five Year Development Program for 1974-78 allocated So Sh 344million for water supply out of a total planned public investment program ofabout So Sh 7.0 billion. Sector projects included were for water supply onlyand, with the exception of the Mogadishu water supply, were administered byWDA. About 31% of planned investment was for urban water supply projects 1/(mainly Mogadishu, Berbera and Burao), 49% was for rural water supply compo-nents 2/ (boreholes, shallow wells and basins), while the balance of 20% wasfor equipment, supplies and research. Due to Somalia's drought of 1973 to1975, poor performance in project preparation, and financial problems accen-tuated by the international energy crisis, planned expenditure levels were notachieved (total expenditures during 1974-78 amounted to only So Sh. 4.3 bil-lion while sector expenditures were So Sh 106 million). A 1976 water supplyand sewerage sector study carried out as part of the WHO/IBRD CooperativeProgram recommended that the balance of the 1974-78 FYDP be reformulated andsuggested a revised sector investment program of approximately So Sh 534million for the period 1976-83.
1.22 Somalia's Three Year Development Plan, 1979-81, which was launchedin January 1979, was mainly a composite of projects carried over from the1974-78 Plan, although some new projects were added. The planned expenditure,based upon 1979 price levels, was So Sh 7.1 billion of which about So Sh 0.4billion was for the water supply and waste disposal sector. Donor assistancewas committed for So, Sh 267 million, or about 68% of the total program costfor the sector. The Three Year Development Plan emphasized improving urbanwater supply and sanitation and gave somewhat lower priority to rural watersupply and supporting research. Because of Mogadishu's high rate of populationgrowth, its importance as Somalia's center of government and its conspicuousdeficiencies in water supply and sanitation, the Government places a particu-larly high priority on sector improvements in Mogadishu. Accordingly, theBank's ongoing first water project (para. 1.24) is in Mogadishu, directedmainly to the urban poor, living in low-cost and temporary houses. Theinitial phase of a Mogadishu sewerage and drainage project 3/, modified fromits original scope, will serve a portion of those areas in Mogadishu whichhave individual water connections.
1/ Financed mainly by the FRG and IDA.
2/ Some of this was included as water supply components of agricultural andlivestock projects.
3/ Funded by the African Development Fund, Islamic Development Bankand the OPEC Special Fund.
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Possible Constraints
1.23 The Three Year Development Plan places increased demands uponSomalia's financial and manpower resources. Donor financing is available forapproximately 70% of planned water sector expenditures, but the large scale ofthe water supply sector program and Government's other commitments meansfinance may still be a problem. Moreover, without removal of the fundamentalconstraints on management and staffing, which are long term problems, technicalassistance although necessary would not be fully effective.
Previous Bank Group Projects
1.24 A US$6 million Credit was made in 1978 for the first MogadishuWater Supply Project (Credit 822-SO) to increase the water supply capacity ofthe Mogadishu Water Agency (MWA), to strengthen MWA, and to assist in thepreparation of the proposed Second Mogadishu Water Supply Project (para.3.07). From the first project we have gained a fuller realization of theextent of institutional weaknesses; and of the difficulties of estimatingproject costs in Somalia's environment which is relatively unstable for con-tracting civil works. Finally, we have learned to schedule project implemen-tation more realistically. In the proposed project we are attempting toaddress these difficulties by requiring NWA to appoint additional advisors,while improved accuracy of cost estimates has been assured by basing them onbids recently received on all major contracts to be included in the project.
1.25 Four other ongoing Bank Group projects in agricultural and livestockdevelopment also are assisting sector development through significant watersupply components. 1/ The first of these, the Trans-Juba Livestock Project,includes a borehole construction component being carried out by the Govern-ment's Water Development Agency (WDA) and is substantially complete. Animportant lesson learned in this project was the inability of WDA to providewell drilling services satisfactorily without direction and close super-vision by expatriate experts. The results of this lesson were applied in thedesign of the three remaining agricultural and livestock development projectshaving water supply components. These components are being planned, directedand supervised by expatriate well drillers and advisors while training alsois being provided as a long-range benefit (para. 1.10).
1/ These projects consist of: a) the Trans-Juba Livestock Project (Credit462-S0, February 20, 1974); b) the Northwest Region Agricultural Develop-ment Project (Credit 635-S0, July 7, 1976); c) the Central RangelandsDevelopment Project (Credit 906-SO, May 10, 1979); and d) the Bay RegionAgricultural Development Project (Credit 972-S0, December 27, 1979).
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II. POPULATION, SECTOR SERVICES AND DEMAND IN PROJECT AREA
Location and Regional Development Prospects
2.01 The proposed project would benefit Mogadishu, the capital city ofSomalia, which is located on the Indian Ocean in southern Somalia. Mogadishu,the largest urban area in Somalia, is the center of government and a principaltrade center. Although the Mogadishu municipality has jurisdiction over allBenedir Province, which is an area substantially larger than the presentlydeveloped urban area, an improved water supply system resulting from theproposed project will only affect the urban area in the immediate vicinity.
Sector Agencies
2.02 Water supply and, to a lesser extent, surface drainage in Mogadishuare provided by the Mogadishu Water Agency (MWA), an autonomous agency underthe Ministry of Mineral & Water Resources (MMWR). A few production wells alsoare owned and operated by individual industries and by the military in theMogadishu area. Sanitation and solid waste management currently is theresponsibility of the Mogadishu City Council although, upon the completion ofthe ongoing Mogadishu sewerage and drainage project (para. 1.22), the Govern-ment intends to give MWA the responsibility for operation and maintenance ofsewerage.
Existing Water Supply and Waste Disposal Facilities
2.03 MWA's water supply system, most of which dates back to 1973 whenthe USAID project was commissioned (para. 1.20), consists of about 26 activewells, collection and supply mains, chlorination facilities, two distributionsystem reservoirs, a booster station and a distribution system with about10,000 individual water connections and 250 public taps (Map IBRD 15172).
2.04 As originally planned, the 1973 improvements were sized to meetmaximum-day demands of 31.5 Mld forecast for 1980. Due to a subsequentreduction in the number of production wells provided at the Balad Road well-field 1/ and the inability to achieve planned unit well yields, the wellfieldonly produced a maximum of 24 Mld when commissioned. Although four wellswere recently replaced 2/, the failure of five of the original 19 wells anddeclining production at the remaining wells have reduced total productioncapacity from MWA's Balad Road wellfield to about 23 Mld, equal to 85% ofMWA's total production capacity of 27 Mld.
1/ The Balad Road wellfield, MWA's principal source of supply, is locatednorth of Mogadishu about 10 km inland from the coast.
2/ Three of the replacement wells are active.
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2.05 The rapid expansion of Mogadishu since 1973 (from an estimated350,000 to about 580,000 persons in 1980), has meant that less than 50% of thepresently developed area has reasonable access to the water distribution gridand most of the population depend upon water delivery by vendors or on watertransported from public taps by other means. To supplement its productionfrom the Balad Road wellfield, MWA completed an emergency drilling program in1980 resulting in the construction of 17 additional, low-capacity (averageunit capacity less than 20 cu m per hour) wells within the city, about half ofwhich are in service. Most of these wells serve as individual water pointsfor domestic water users and for livestock and are not connected to thedistribution grid. Due to poor siting, questionable construction practicesand low well capacities, these recent additions are not expected to assist inmeeting Mogadishius long-term water supply needs. To minimize possibleproblems of public health, production from these emergency wells will bediscontinued when supplemental supplies of improved quality become availablefrom inland areas. Eight production wells, which will be connected to theexisting grid, are scheduled for construction under the first project at thenew Afgoi Road wellfield and are expected to provide about 11 Mld of additionalcapacity by mid-L982.
2.06 No public sewer system exists in Mogadishu and water-borne wastedisposal is limited to only a few institutions such as hospitals and militaryinstallations. Even in the latter instances, waste disposal is inadequate andgroundwater pollution is occurring. 1/ There are no regulations relative tosanitation and the extent of waste disposal facilities to be provided is leftto the discretion of the householder. In practice, householders generallyhave elected to use on-site, individual waste disposal systems consistingmainly of a covered soakage pit. These units, although simple in design andconstruction, are relatively expensive (average cost reportedly is aboutSo Sh 6,000) and difficult to maintain. This problem will be addressed by thelow-cost sanitation component under the proposed project (para. 3.09).
Population Served and Standards of Service
2.07 Very little socio-economic statistical information is available forMogadishu. No public health indicators relating specifically to the incidenceof water-related disease in Mogadishu are available (para. 1.05). However,due to the size of transient populations (estimated at 70,000 to 80,000 personsin 1980) and the lack of housing and facilities for water supply, sanitationand solid waste disposal available to these populations, the risk of diseaseis known to be high.
2.08 About 510,000 persons (or 87%) were estimated to be served bypublic water supplies in Mogadishu in 1980 - about 50,000 persons (10%) ofthese through individual connections and an estimated 460,000 persons (90%)directly from public taps or from water vendors. The balance of the populationrelies upon private or institutional well supplies.
1/ Pollution has occurred in Mogadishu but not at the Balad Road wellfield,MWA's principal source.
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2.09 MWA's water system is only partly metered and satisfactory recordsof production and consumption are limited to the period 1974-76 when mostwater meters were still operative and when water production capacity stillexceeded demand. Although most borehole supplies are individually metered,only about half of these meters operate. Due to faulty customer metersand an insufficient stock of replacement parts, only about 70% of MWA watersales are metered. 1/ Because of MWA's inability to meet water demands, theinland and southwesterly areas of the city are frequently without water and theaffected areas are growing. Many public taps are continuously dry and house-holders in these areas have had to buy water from vendors at relatively highprices, reaching a price level of So Sh 150 per cu m (US$45 per thousand USgal) by late in 1981. Despite this, water quality is not monitored and onlythe Balad Road supply is disinfected. Although there have been no recentreports of ill effects caused by poor water quality, such reports werefrequent before 1973 when aquifers underlying the city were Mogadishu's solesource of supply.
2.10 The proposed project would further supplement Mogadishu's presentsources of supply and all consumers would benefit. It would have a substan-tial impact on the low-income group by increasing the availability of waterand improving pressure and quality. The population served is expected toincrease from 700,000 persons (in 1983) upon full utilization of the firstproject to 870,000 (in 1987). Similarly, average per capita supply is expectedto increase from 41 lcd to 51 lcd during the same period. Further, it wouldreduce the cost of water service to consumers without individual water connec-tions, since they would have increased opportunities to purchase water directlyfrom public taps, rather than depend upon water vendors who levy higher watercharges.
2.11 Only institutions have access to sewers in Mogadishu while theremaining population depends upon on-site waste disposal systems. The ongoingsewerage and drainage project (para. 1.22) was designed to provide sewerservice to a portion of areas (totalling about 15 sq km) which have individualwater connections.
Population Projections and Demand for Service
2.12 The most recent census was taken in 1975 and the next full censusis scheduled for 1985. Migration of nomads from inland areas, resultingfrom droughts and the Ogaden war, have made population projections forMogadishu even more uncertain. Although a UN-assisted census survey recentlywas undertaken, the results of this survey are not yet available. For thesereasons, MWA's engineering consultants (Sir Alexander Gibb & Partners) wereunable to improve on projections of Mogadishu population which they hadpreviously developed in 1977 during the preparation of the first project.These projections, based upon a natural rate of increase of 3% compoundedannually and an annual net in-migration of 20,000, are:
1/ The problem of metering was less severe in 1977 when the first projectwas appraised and, consequently, system improvements mainly were limitedto increases in water supply capacity.
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Mogadishu Population Estimates
1976 1980 1985 1990
Most Probable Population 445,000 584,000 784,000 1,015,000
Growth Rate,, % - 7.0 6.5 6.1
2.13 The proposed project is relatively insensitive to these forecasts,since a lower population growth rate would only enable a slightly betterwater supply service, which is in any case of a low standard (para. 2.10),and a higher than forecast population in growth would worsen the alreadypoor service, requiring supplementary works to be undertaken more urgentlythan presently envisaged.
2.14 Demand forecasts, which are an extension of the consultants' earlierwork, have been prepared based upon the following main categories of consump-tion: residential; government and institutional; and commercial and indus-trial (Annex 1). Growth of consumption is constrained by MWA's limited supplycapacity and, although the completion of the first project will help, thisproblem is not expected to be resolved until the commissioning of physicalcomponents of the proposed project now scheduled for mid-1984. In recognitionof the seriousness of the present deficiency in supply capacity, a moratoriumon new water connections is in effect which limits new private connections tono more than 70 per year. 2/
2.15 As the consultants' forecast of future water consumption appearshigh, Bank staff prepared a revised forecast on the assumption that growth insales for the period 1980-84 is likely to be constrained by the supply capacityof the system. Future increases in water tariffs are unlikely to depressconsumption significantly since a large proportion of the water supplied (52%in 1979) is used by Government and institutions. The forecast also assumesthat the ongoing sewerage and drainage project (para. 1.22) would have littleeffect on water consumption. Unaccounted-for-water, the difference betweenconsumption and production, has been assumed to be at about 20% of productionalthough confirmation of this is not possible due to MWA's incomplete metering
1/ The project is designed to meet water demands projected for the year1987.
2,' Based upon Supplemental Letter of June 30, 1978 of Credit 822-SO.
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records. This comparatively low level of losses is acceptable in a systemof this age and size and further efforts to reduce losses significantly wouldbe impracticable and uneconomic. Annual demands have been projected for theperiod through 1992. They appear reasonable and closely approximate similarestimates through 1985 which were made during the appraisal of the firstproject.
III. THE PROJECT
Genesis
3.01 Water supply studies for Mogadishu date back to 1963 when, withUSAID assistance, investigations to supplement inadequate local sources ofsupply were begun. These and succeeding investigations carried out late inthe 1960s culminated in the construction of MWA's Balad Road wellfield and thereplacement of Mogadishu's deteriorating water distribution system in 1973.These improvements, also financed by USAID, were designed to meet Mogadishu'swater needs through 1980 but, due to the failure of several production wellsat the Balad Road wellfield and increases in water demand, the need for fur-ther additions soon became apparent (para. 2.04).
3.02 The Government first expressed interest in Bank Group financing ofa Mogadishu water supply project in 1975 when water demands were approachingsupply capacity. A project to increase water production capacity through theextension of Mogadishu's Balad Road wellfield was originally envisaged but,due to declining yield and deterioration of water quality, it was recog-nized that effective augmentation would have to be preceded by water resourceinvestigations to identify the optimum locations and yields of other, moresuitable alternative sources of supply. The first project (Credit 822-SO),which was prepared by Sir Alexander Gibb & Partners (Gibb), in the employ ofMWA, was designed as an interim project to assist in the preparation of theproposed project through the inclusion of investigations of groundwaterresources of the Afgoi-Balad Mogadishu triangle (Maps IBRD 15171 and 15172).These investigations were completed in November 1979. A March 1980 report bythe Institute of Hydrology (UK) summarizing the results of the investigationsand Gibb's "Stage II Final Report of Feasibility Study for Mogadishu WaterSupply Expansion" (May 1980) formed the basis of the appraisal.
3.03 The first project, which includes a modest increase in water supplycapacity, also has attempted to develop MWA through the provision of advisorsand consultants for training, and for the design and implementation of account-ing systems and tariff studies. Although progress in this institutionaldevelopment effort has been slower than anticipated, advisor posts were filledbeginning in 1979, while the accounting consultants have completed theirassignments, and the work of tariff and training consultants is underway.Contracts for all major water supply additions have been awarded and work onthese contracts is approaching completion. Efforts under the first project to
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improve the organization, management and general effectiveness of MWA would becontinued and strengthened under the project (paras. 3.05, 3.07(d), 4.10, and5.04). During the course of the first project, in addition to a fullerrealization of difficulties in the implementation of physical components ofthe project (para. 1.24), a clearer perception of the length of time required,and of the problems of effecting institutional reforms in the Somali environ-ment, has emerged. The second project, and the Association's continuedinvolvement in the water sector, would provide an opportunity to overcomethese difficulties and to achieve significant institutional improvements.
3.04 Construction work under the first project is expected to be com-pleted by mid-1982, about two years behind schedule. Slippage in projectimplementation has been caused mainly by administrative delays by MWA andby the Government. These delays, together with a change in the siting ofproposed production wells and the resulting need for additional transmissionmain capacity, have caused a cost overrun of about US$7 million. Assuranceshave been received from the Government that it will provide additional fundsto complete the project. In addition the Government recognizes the importanceof the proposed project to Mogadishu and has given it a high priority.
Objectives
3.05 In summary, principal objectives of the project are to: (a) con-tinue efforts being made under the first project to strengthen MWA as aninstitution through the continuation of the employment of advisers and thedevelopment and achievement of financial goals; (b) increase MWA's firmproduction capacity by 31 Mld to about 57 Mld; (c) extend Mogadishu's existingwater distribution system; (d) develop an appropriate program for meetingMogadishu's future needs for sanitation; (e) assist in preparation of a futureMogadishu water supply project; and (f) provide for its detailed engineeringdesign.
Technical Alternatives and Service Standards
3.06 The proposed project represents the least costly of several tech-nical alternatives (para. 6.02). The majority of future consumers will beresident in low-cost and temporary houses located in peripheral areas of thecity. Water service to most of these consumers would be from public taps.
Description of Project Components
3.07 The project consists mainly of distribution system extensions andan extension of source of supply works associated with the new Afgoi Roadwellfield being developed under the first project (Annex 2 and Map IBRD15172), the preparation of.a future water supply project, and a continuationof institution building. Components consist of the following:
(a) Civil works including: (i) test drilling in support of waterresource investigations for a future Mogadishu water supply
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project; (ii) an extension to MWA's Afgoi Road power generatingstation; (iii) an extension of source of supply works at theAfgoi Road wellfield consisting of access roads, fencing, pro-duction wells, observation wells and collector mains; (iv) distri-bution system reservoirs; (v) a treated water pump stationand (vi) trunk mains, distribution mains and public taps;
(b) Mechanical and electrical equipment including: (i) a diesel-drive electric generator set; (ii) transformers and switchgear;(iii) power supply lines and appurtenances; (iv) pumping plantfor wells and boosters; and (v) chlorinators;
(c) Miscellaneous equipment and supplies including: i) vehicles,ii) workshop, tools and equipment; iii) office furniture andequipment; iv) customer meters; and v) other miscellaneousequipment and supplies;
(d) The services of expatriate advisory staff; and
(e) Consulting services for: i) accounting assistance; ii) waterresource investigations and engineering design of a futureMogadishu water supply project; (iii) low-cost sanitationstudies; and (iv) construction supervision of the proposedproject.
3.08 Water resource investigations included in the first project haveindicated that the sustainable yield of groundwater underlying the Afgoi-Balad-Mogadishu triangle approximates 25 million cu m per year. Current demandforecasts indicate that this would be sufficient to meet Mogadishu's totalwater supply needs until the early 1990s at which time supplemental suppliesfrom new sources 1/ would be required. Unfortunately, little detailedinformation is available concerning these possible supplemental supplies.Additional water resource investigations are included in the proposed projectto optimize investment planning required for a future water supply project(Annex 6).
3.09 A low-cost sanitation component also is included in the project inview of Mogadishu's sanitation needs and to maximize the benefits of improvedwater supply. This component would complement the ongoing Mogadishu sewerageand drainage project (para. 1.22).
Cost Estimates
3.10 The estimated project cost exclusive of duties and taxes and interestduring construction, is So Sh 532 million (US$42.3 million). Foreign exchangecosts would amount to US$33.4 million equivalent, or 79% of total projectcosts. A summary of the project cost estimates (Annex 3) follows:
1/ These new sources consist of a surface water supply from the ShebelliRiver and groundwater from coastal areas located to the northeast andsouthwest of the Afgoi-Balad-Mogadishu triangle.
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Summary of Project Cost Estimates
(US$1.0 = So Sh 12.59)
So Sh (millions) US$ (millions) TotalLocal Foreign Total Local Foreign Total %
TOTAL PROJECT COSTS 111.4 420.7 532.1 8.9 33.4 42.3 100
Rounded off to millions: 111 421 532 9 33 42
3.11 The cost estimates are based on bids received from contractorson five main contracts (three civil works contracts and two mechanical andelectrical plant contracts) late in 1981. Although the two plant contractsare being retendered in conformance with European Development Fund procurementprocedures, the cost estimates for these two components are based on the pre-viously received bids which appear to be reasonable. Base costs are expressedin January 1982 price levels. Allowances for physical contingencies have beenadded for the various project components, ranging from 10% to 30% for civilworks, 15% for plant, equipment and supplies, 20% for engineering, and 10% foradvisors and accounting consultants. Annual price contingency factors (shownbelow) were applied to base costs and to physical contingencies. Similarprice contingencies have been used for both civil works and equipment. TheGovernment has waived duties and taxes on all imported goods and servicesrequired for the first project and a similar waiver would be provided on theproposed project.
Price Contingencies
(%)Period Local Foreign
1982 30 8.51983 25 7.51984 20 7.51985 15 7.5
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3.12 Consultants charges, which are likely to be time-based, aretabulated below by component. Estimated base costs and average man-monthcosts, including salary costs, fees, international travel, and localsubsistence cost, together with required efforts in man-months, are shownbelow. All of these charges are reasonable when considered in the light ofworking and living conditions in Somalia and the high level of expertiserequired.
Base Cost Average CostComponent US$ million Man-months US$/man-month
Engineering design 1.27 133 9,500
Construction supervision 0.77 84 9,000
Water resource investigations 0.54 44 12,300
Low-cost sanitation studies 0.45 48 9,300
Accounting 0.07 6 11,200.
Project Financing
3.13 Approximately 90% of the project costs, including 100% of theforeign exchange costs, would be co-financed by IDA, the Arab Fund forEconomic and Social Development (Arab Fund), and the European Development Fund(EDF). The proposed IDA credit of SDR 13.4 million (US$15 million) wouldcover about 35% of the project total costs and 40% of the foreign costs. TheIDA credit would be used to help finance civil works contracts, advisors,technical assistance (accounting services and water resource investigations)and engineering. Arab Fund finance of US$17.5 million equivalent would beused to help finance the cost of civil works contracts, advisors andengineering. IDA and the Arab Fund would jointly finance one of the civilworks contracts and foreign costs associated with advisors and supervision ofconstruction. EDF finance of about US$5.5 million equivalent would beused to finance the two main plant contracts, a supply contract and low-costsanitation studies. Remaining finance would be provided from a Governmentloan and from MWA's internal cash generation. As a condition of crediteffectiveness, all conditions precedent to the effectiveness of the Arab Fundagreement and the EDF agreement must be met. The project financing plan,expressed in millions of US$, is summarized below.
Proposed Financing SourcesMWA
InternalProject IDA Arab Cash
Allocated to: Costs Credit Fund EDF Government Generation
MWA 41.7 15.0 17.5 5.0 0.9 3.3
Government 0.6 0.0 0.0 0.5 0.1 0.0
Total Costs 42.3 15.0 17.5 5.5 1.0 3.3
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3.14 To help provide for the prompt availability of local funds for theproposed project, it was agreed at negotiations that the Government would opena special bank account for the Project in the name of MWA and deposit aninitial amount of So Sh 6 million by September 30, 1982 and deposit theremainder of the So Sh 12.5 million (US$1 million) Government loan (para 3.13and 5.07) promptly when requested.
Implementation
3.15 Detailed engineering design, which is being financed under thefirst project, began in October 1980 and was substantially completed bySeptember 1981. Bids were received and awards of the three civil workscontracts are expected by mid-1982. The awards of the two main plant contractsare expected to be delayed until late in 1982 following retendering accordingto EDF procurement procedures. The completion of construction and the commis-sion of plant are expected by mid-1984 (Annex 4). This is reasonable comparedwith the first project in which implementation was delayed by a need forinformation from the water resource investigations.
3.16 MWA would be responsible for overall administration of the proposedproject through their Project Management and Planning Unit (PMPU) which wasformed for implementation of the first project. Based upon the experience ofthe first project, however, MWA will continue to require considerable supportfrom its consultants and expatriate advisors. MWA has retained Gibb (para.3.02) as engineering consultants on the proposed project and this is acceptable.Engineering services to be provided consist of the supervision of construction,assistance in preparation of, and the detailed design and documentation for afuture water supply project. It was agreed during negotiations that MWA wouldretain engineering consultants whose qualifications, experience, and terms andconditions of employment are acceptable to the Association.
3.17 Due to their previous participation in the water resource investi-gations under the first project, MWA plan to retain Gibb, in association withthe Institute of Hydrology (UK), to direct the water resource investiga-tions included under the proposed project as part of the preparation for afuture project. This is acceptable. Other consultants would be retained toassist MWA in carrying out the low-cost sanitation component to be financed bythe EDF (para. 3.13).
3.18 MWA will be responsible for maintenance and operation of the projectupon completion. Present standards of maintenance and operation by MWA arenot satisfactory and the extension of the MWA system under the first andproposed projects will place increased demands on MWA training provided underthe first project. Increased emphasis on technical advisors under the proposedproject is designed to meet this need (para. 4.06).
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3.19 Before completion of the proposed project, substantial progressshould be made on the preparation of a future Mogadishu water supply project(para. 3.17). Substantial efforts also are necessary at this time by theGovernment to facilitate timely completion of planning for extensions of theMWA water system, particularly those extensions associated with the develop-ment of the Shebelli River as a source of supply (para. 3.28).
Land Acquisition
3.20 Land will be needed by the project as sites for reservoirs, wells,access roads, and pipeline alignments. Since most of the land concernedalready is owned by the Government, any land acquisition costs are likely tobe negligible. Land required for extension of the Afgoi Road wellfield iseither within or adjacent to a military reservation, however, and specialpermission for its use would be required. It was agreed during negotiationsthat the Government would promptly acquire all land and rights of way'requiredunder the project.
Procurement
3.21 General. The project includes five main contracts (three civilworks and two plant) and one or more minor goods contracts totalling aboutUS$36.5 million including contingencies, or about 86% of total project costs,to be financed by IDA, the Arab Fund and the EDF.
3.22 Works. IDA and the Arab Fund would each separately finance onecivil works contract and jointly finance the remaining civil works contract.These three contracts, for which prequalification was required, are estimatedto total about US$30.6 million, about 72% of total project costs, includingcontingencies and would be awarded on the basis of international competitivebidding in accordance with Bank Group procurement guidelines.
3.23 Goods. Power plant, pumping plant and associated equipment togetherwith vehicles, tools and miscellaneous equipment and supplies, totalling aboutUS$5.9 million equivalent including contingencies and to be financed by theEDF, would be grouped in two main plant contracts and one or more minor supplycontracts and procured according to EDF competitive bidding procedures.
3.24 Contract Review. Bid documents relating only to the two civil workscontracts, which have an estimated total value of about US$16.8 million andare to be financed by IDA either wholly or jointly with the Arab Fund, wouldbe subject to the Association's prior review. Remaining contracts for physicalcomponents are to be financed by the Arab Fund and the EDF and therefore wouldnot be subject to the Association's review.
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Disbursements
3.25 Retroactive finance of up to US$100,000 equivalent is proposed forpayments made after March 1, 1982 to finance the initial cost of consultingservices for water resource investigations. 1/ The Credit would be disbursedto meet selected portions of the project costs as follows: a) for civilworks: (i) 100% of total expenditures for well construction and test drilling,and (ii) 32% of total expenditures for construction of roads, mains and otherwellfield works and the construction of reservoirs, a pump station, trunkmains and other works in Mogadishu; (b) 40% of foreign expenditures foradvisors; (c) for consulting services: (i) 100% of foreign expenditures foraccountants, (ii) 50% of foreign expenditures for construction supervision,and (iii) 100% of foreign expenditures for water resource investigations anddesign engineering. Any undisbursed funds remaining from the Credit at theend of the project would be cancelled. The proposed closing date for theCredit would be December 31, 1985. This allows a period of about 18 monthsafter the scheduled completion of project facilities and approximately 6months after the scheduled completion of detailed engineering for the futureMogadishu water supply project.
3.26 A schedule of disbursements, which differs from average country-wideand region-wide disbursement profiles, is shown in Annex 5. A disbursementperiod 24 months shorter than the country-wide average has been assumed, whichis mainly due to the advanced state of procurement.
Water Resource Aspects
3.27 The findings of the water resource investigations included under thefirst project indicate that substantially all of the region's groundwater isderived from recharge from the Shebelli River during high river stages. Theinvestigations also concluded that: a) the sustainable yield of groundwaterbodies located within the Afgoi-Balad-Mogadishu triangle (Maps IBRD 15171 and15172) is about 25 million cu m per year, and b) in order to maximize safeyield, total annual production would have to be carefully regulated throughoutthe basin. (As an example of this, to avoid overdraft, annual production fromMWA's existing Balad Road wellfield would have to be reduced from presentlevels of about 8.4 million cu m to about 4.4 million cu m. Similarly,production from wells in and immediately adjacent to Mogadishu should bediscontinued). Present indications are that such a production rate would besufficient to meet Mogadishu's average water demands through the early 1990s.After that time, MWA would have to secure supplemental supplies directly fromthe Shebelli River and/or from more distant groundwater sources.
1,/ Although these water resource investigations are required for a futureproject, since their duration exceeds that of the construction worksunder this project it is essential that they be started as early aspossible so that they are completed during the supervision of construc-tion works.
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3.28 Although uninterrupted abstractions from the Shebelli River wouldnot be possible due to the intermittent nature of its flow 1/ and the lack ofsuitable reservoir sites that would permit provision for adequate carryoverstorage, the river represents a potentially important source of supply forconjunctive use with MWA's groundwater supplies. However, numerous problems 2/need to be resolved before the Shebelli River can be developed as an effectivesource of supply for Mogadishu (Annex 6).
Environmental and Health Aspects
3.29 The project would have a significant, though non-quantifiable,environmental impact through improvements in public health anticipated through:a) provision for more ready access to public water supplies to consumerspresently dependent upon water vendors or distant public taps; b) abandonmentof local, interim sources producing water of doubtful quality; and c) prepara-tion of a future project having low-cost sanitation as a principal component.No adverse environmental impact would result from the project.
Project and Evaluation Criteria
3.30 The progress of the project would be monitored through semi-annualand annual reporting requirements covering: (a) physical and technicalprogress; (b) cost estimates, expenditures and disbursements; (c) waterconsumption; (d) management and staff development; and (e) financial opera-tions.
3.31 Suitable monitoring indicators have been developed (Annex 7). It wasagreed that, within one year of project completion, MWA will submit a comple-tion report to the Association, based on an outline to be agreed with theAssociation.
IV. THE BORROWER AND THE IMPLEMENTATION AGENCY
4.01 The Borrower would be the Government of the Somali DemocraticRepublic who would relend the SDR 13.4 million (US$15 million) IDA Credit toMWA, the project implementation agency, on the terms stated in para. 5.07.
Organization
4.02 MWA was established to provide public water supplies in Mogadishuin 1967 shortly before the signing of a loan agreement by the Government, MWAand USAID. In 1970, together with Kismayu Water and Electric Utility,
1/ Streamflow records of the Shebelli River at Afgoi indicate that, forthree months (January through March) of a typical year, uninterruptedabsttactiotns could not be assured.
2/ Principal of these problems are the need for: a) water rights legisla-tion; b) the establishment of a Shebelli River development authority;c) the registration of Shebelli water users; and d) the allocation ofwater rights.
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MWA was merged into the National Water Agency (NWA). In 1971 NWA was replacedby the Water Development Agency (WDA) and MWA was reestablished and becameresponsible for Mogadishu water supply operations. In 1978, a law was passedwhich officially established MWA as an autonomous agency of the Governmentsubject to the general supervision of the Ministry of Mineral and WaterResources (para. 1.06). An organization chart for MWA is shown in Annex 8.
Management and Personnel
4.03 MWA is headed by a Director General (also referred to as GeneralManager) who, together with MWA's Directors, is appointed by the President onthe advice of the Minister of Mineral and Water Resources. Most other staffare recruited through the Ministry of Labor and Social Affairs. MWA'ssalaries and wages are on the same scale as those of the Government civilservice, but MWA's staff receive additional professional responsibility andaccommodation allowances, which is the practice for employees of autonomousagencies. Government ministries, with the approval of the Office of thePresident, allocate key personnel to Government departments and autonomousagencies.
4.04 MWA has four departments each headed by a Director (Annex 8). Thedepartments are responsible for: (i) water supply operations and maintenance;(ii) finance and administration (including accounting, purchasing and person-nel); (iii) project planning and management; and (iv) sewerage and drainage.The latter department is presently monitoring the progress of the ongoingsewerage and drainage project but, with the exception of carrying out thelow-cost sanitation studies, it is unlikely to have any operational respon-sibilities for some time (para. 4.09).
4.05 MWA's management performance during the implementation of thefirst project has so far been weak, as evidenced by such matters as delaysin procurement and in the appointment of personnel and consultants, andinadequate provision for the repair and replacement of water meters. Further-more, staff morale and motivation seem low and there appears to be a lack ofdisciplined effort. However, this condition appears to extend to other partsof the Government service and it seems unlikely that there is an immediateand completely satisfactory remedy.
4.06 In the case of MWA, the retention and appointment of advisors andthe implementation of a training program are expected to bring about improve-ments in the longer term. During the last three years MWA has had threeGeneral Managers. The present General Manager, formerly MWA's Director ofFinance and Admininstration, was appointed in July 1980. Under the firstproject, to strengthen MWA's management capability, it was agreed that MWAwould appoint a Technical Advisor and a Financial Advisor having experience,qualifications, duties and responsibilities acceptable to the Assocation tosupport the Director of Technical Operations and the Director of Finance andAdministration in carrying out their duties. It was further agreed that theemployment of such advisors would be extended until Government and theAssociation agreed that the advisors were no longer required. Following somedelays, both advisors were appointed and are helping to improve MWA'sfinancial and technical operations. The need for expatriate advisors to
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support MWA continues to be important and during negotiations it was agreedthat the covenant under the first project should be extended to also includethe appointment, by December 31, 1982, of a Management Adviser to assist theGeneral Manager and an additional Technical Advisor to provide support in theeffective development and management of MWA's water resources and, possibly,to provide assistance in the carrying out of low-cost sanitation studies. Thecosts of these advisors are included in the project.
4.07 Under the first project, it was also agreed that the Governmentwould establish and maintain a Project Management and Planning Unit (PMPU) tomonitor and report on the progress of the project, to process payment certifi-cates and disbursements for the project, and to participate in the planning,design and supervision of construction. It was also agreed that MWA wouldemploy a duly qualified, experienced and competent person as the head of thePMPU. The foregoing requirements have been met and it was agreed duringnegotiations that they would be repeated for the the proposed project.Also, to ensure the continuation of MWA's management capability during projectimplementation, it was agreed during negotiations to repeat the covenant underCredit 822-SO under which future appointments to the positions of GeneralManager, Director of Technical Operations, Director of Finance and Admin-istration and head of the PMPU will only be made after the Association hasbeen given a reasonable opportunity to comment on the qualifications,experience and competence of the persons proposed to fill the positions.It was also agreed that this covenant would be extended to cover the positionof Director of Sewerage and Drainage.
4.08 MWA's manpower is adequate in number, and has declined slightlyover the last three years. Although there is a need to improve management,operation, maintenance and accounting skills through training, the currentnumber of MWA staff appears adequate to meet short-term needs (paras 4.10and 4.16).
Scope of MWA's Activities
4.09 The Government intends that MWA would eventually take over theoperation of the sewerage and drainage project which it plans to constructthrough the Ministry of Works. Project implementation has been postponed,however, because of projected cost overruns and a possible change in projectscope is being considered (para. 1.22). To help ensure that MWA does notextend the scope of its activities without adequate plans, it was agreedduring negotiations that the covenant under the first project whereby MWA willnot extend its activities outside water supply without informing the Associa-tion of the managerial, staffing and financing effects and without giving theAssociation a reasonable opportunity to comment thereon, would be repeated.
Accounting Practices and Procedures
4.10 MWA's financial reporting and accounting is on a cash basis. Cashoutlays are not adequately classified between capital and operations nor areadequate data maintained on creditor levels or inventories. Inventory recordsare maintained in quantity only. The first project provided for the appointmentof accounting consultants to design and assist in implementing a commercialaccounting system, conduct staff training and identify additional staffing
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needs. After appointment delays, the consultants started their assignment inJanuary 1980 and completed the accounting system design and the preparation ofan accounting manual by October 1980. After considerable difficulty inattracting a Financial Advisor, one was eventually appointed in April 1980 andhe is expected to be able to carry out the required training and implement theaccounting system without further assistance from the accounting consultants.However, he has been hampered in his task by MWA delays in approving thesystem design proposed by the consultants, by the long delivery period forprinting forms and by staff shortages and turnovers. Nevertheless, someprogress has been made and full accounting staffing is expected shortly. MWAhave prepared a training and implementation program and it is now expectedthat the system will be in operation by mid-1982. During negotiations it wasagreed that the accounting system would be implemented by December 31, 1982.MWA may need further accounting assistance and it was therefore agreed duringnegotiations that MWA will employ by December 31, 1982, or such other dateas the Association may agree, accounting consultants whose selection, qualifi-cations, experience and terms and conditions of employment are acceptable tothe Association.
Billing and Collection
4.11 Meters are installed for recording and billing all water suppliedto consumers, but metering is not fully effective (para. 2.09'. Meters areread monthly and meter readers are employed at seven district offices. Billsare prepared at the Head Office for sales to Government, embassies, and publictaps and at district offices for private consumer sales. All bills arechecked at the Head Office and deliveries are made by hand. Disconnectionsare made if bills are unpaid within about two months of the billing date.The accounting system for billings has worked reasonably well, but improvementsare expected when the consultants' recommendations are implemented.
4 12 Outstanding accounts have deteriorated to an unsatisfactory leveland, at the end of 1980, were equal to about 111 days annual sales compared toabout 80 days at the end of the previous year. This is mainly due to the slowpayment of Government accounts which accounted for 72% of receivables atDecember 31, 1980. During negotiations, it was agreed that Governmentwould reduce its indebtedness to MWA to a level not exceeding 60 days annualsales by September 30, 1982 and would not permit future indebtedness to exceedthis level.
Audit
4.13 There are no private audit firms in Somalia. Audits of Governmentdepartments and agencies are conducted by the Magistrate of Accounts (MOA) whois responsible to the Presidency of the Supreme Revolutionary Council. MOA'saudit of MWA-s accounts has been largely concerned with the examination ofrecords relating to receipts and disbursements, with the verification of cashand inventories, and with compliance with Government laws and regulations.These audits are of a satisfactory standard.
4.14 Commercial audits are conducted by a special department of MOA knownas the State Autonomous Agencies' Audit Department. When MWA is able toprepare commercial accounts, in 1982, the audit requirements will be more
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complex and involve the expression of an opinion on the annual financialstatements. Probably only limited reliance could be placed on this part ofthe audit work because of the lack of trained auditors in MOA's office.Therefore, the reliability of commercial accounts will primari'ly depend uponiMWA developing an effective commercial accounting system.
4.15 MOA's audit performance would be reviewed annually by Bank missionsto ensure that audits are of an acceptable standard. In the meantime, GTZ hasearmarked DM 1.2 million (US$0.65 million) to cover studies to recommend stepsfor improving accounting and auditing in Somalia. It was agreed that thecovenant under the first project requiring that MWA have its accounts auditedannually by auditors acceptable to the Association would be repeated. Auditedaccounts would be submitted to the Association not later than four monthsafter the end of MWA's fiscal year.
Manpower Development and Training
4.16 The first project includes a substantial training component, theprimary objectives of which are to strengthen MWA's operational and main-tenance performance and to enable MWA to develop a permanent training cap-ability. Under the first project it was agreed that, by January 31, 1979,Government would employ training consultants to assess water supply sectortraining needs and to prepare and carry out a training program for MWA. Dueto delays in appointing the consultants, they did not commence their work untilJune 1981. However, a draft report on the training program was submitted inMarch 1982 and a second report covering the assessment,of sector trainingneeds is expected shortly.
V. FINANCIAL ANALYSIS
Past History and Present Financial Position
5.01 MWA's accounting records are prepared on a cash basis and areinadequate for the determination of MWA-s financial performance and position(para. 4.10). Although MWA's revenue growth has been constrained by limitedproduction capacity, available information suggests that MWA-s revenuesbetween FY1977 and 1980 were adequate to cover cash operating expenses anddebt service as well as finance a small amount of capital spending and inventoryadditions. However, if it had been possible to measure MWA's annual rate ofreturn performance on revalued assets in recent years, the rate of returnwould have been negative. Accumulated cash of So Sh 10.5 million (US$0.84million) at December 31, 1980 appears more than adequate to meet currentliabilities.
5.02 MWA's fixed assets consist largely of assets constructed under theUSAID project completed in 1973 at a cost of So Sh 68.5 million and, althoughrecords of additions since then are inadequate, they probably have not exceeded18 % of the cost of the USAID project. MWA does not maintain fixed assetrecords and part of the accounting consultants' work (para. 4.10) was todevelop procedures for establishing such records. Fixed assets have beenrevalued taking into account the recent devaluation of the Somali shilling and
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the General Index of the Mogadishu Consumer Price Index published by theCentral Statistical Department of the Ministry of National Planning and,during negotiations, it was agreed that, for the purpose of the rate of returncovenant, fixed assets will be revalued December 31, 1981 at a replacementcost of So Sh 371.28 million less accumulated depreciation So Sh 150.09million. Although revaluation methods will be refined in future, the foregoingmethod of establishing a value for fixed assets at December 31, 1981, espe-c.ially in view of the large increments to assets after that date, is accept-able. During negotiations it was agreed that future revaluations of fixedassets would be made annually on the basis of a price index satisfactory tothe Bank and MWA which would take into account fluctuations in the replacementvalue of these assets as well as fluctuations in the value of the Somalishilling.
Tariffs
5.03 MWA's tariff for water supplies was at a uniform metered rate ofSo Sh 3 (USd24) per cu m 1/ (US$0.90 per thousand US gal) and remainedunchanged since MWA commenced operations in 1973 until May 1981 when theuniform metered rate was increased to So Sh 4.50 (USd36) per cu m. There is aminimum water charge of So Sh 10 (US$0.40) per month and a fixed meter rentalcharge of So Sh 2.50 (US$0.20)per month. About 23% of the quantity of watersold by MWA is through public taps. The concessionaires who operate publictaps are allowed a commission of So Sh $2.25 per cu m (US$0.68 per thousand USgal) and the net cost of water to them is So Sh 2.25 per cu m. The concession-aires pay the costs of maintaining the public taps. Much of the water pur-chased from public taps is distributed to consumers by vendors at pricesvarying according to the distance the water is carried, but substantiallyhigher than the public tap price of So Sh 4.50 per cu m (para. 2.09). It isnot considered practical to impose controls over the price charged. However,the proposed project would increase the number of public taps and, thus, thequantity of water sold directly to consumers through public taps, which wouldtend to reduce the price to these consumers.
5.04 It was recognized at the time of appraisal of the first projectthat changes to the present tariff would be needed to take into account MWA'slong-term financial needs and long-term marginal water supply costs. Underthe first project, MWA was to employ consultants to complete a study bySeptember 30, 1979 to recommend such changes to MWA-s tariff structure andlevel as were considered necessary. The study was delayed because of lack ofinformation about the cost of MWA's future capital spending as well as lack ofMWA staff to assist the consultants in their task. However, local consultantswere appointed in the latter part of 1981 and, with some preliminary guidancefrom Bank staff, have prepared a draft report. Completion of the study wouldbe a condition of Credit effectiveness. The covenant under the first projectconcerning the employment and timing of the consultants appointments would berescinded. It was agreed during negotiations that the covenant under the
1/ Some recent water rates for other countries in the Eastern AfricaRegion, expressed in USJ per cu m, are: Burundi 28w; Kenya (Mombasa) 48iand (Nairobi) 474; Lesotho 38i; Malawi (Blantyre) 55i; and Sudan 40&.
- 26 -
first project requiring that, before taking any action to modify the level orstructure of MWA's tariff, both the recommendations of the study and theAssociation's comments were to be taken into account by Government and MWAwould be repeated.
5.05 To ensure that MWA earns a reasonable rate of return on its netfixed assets, taking into account the low income level in Mogadishu, it wasagreed during negotiations that MWA would maintain its tariff at levelssufficient to provide a minimum annual rate of return on average revalued netfixed assets of not less than 2% in 1983 and 1984, 3% in 1985 and 1986, and 4%thereafter. It was further agreed that, before October 1 each year, MWA should,on the basis of its forecasts, review the adequacy of its tariffs to producethe foregoing annual rates of return and furnish to the Association the resultsof its review and promptly take such measures as may be required to meet therate of return requirements. This covenant would replace that under Develop-ment Credit Agreement 822-SO, which requires that MWA will not reduce itstariff below the current level and will maintain the tariff at a level no lessthan is adequate to cover cash operating expenses and depreciation or debtservice, whichever is the larger. The following table indicates the nominaltariff increases that would be required if adjustments were made annually tomeet the minimum rate of return requirements. The 1983 tariff increase islargely required to meet the increases in MWA's costs caused by recent highinflation in Somalia and the devaluation of the Somali shilling.
Average tariff per m3 1982 1983 1984 1985
So Sh 4.50 8.90 11.84 15.04
US dollars 0.36 0.71 0.94 1.19
Nominal increase, % 96 33 27
Proposed Financing
5.06 Forecast 1982-88 cash flow projections, income statements andbalance sheets are presented in Annexes 9, 10 and 11 followed by explanatorynotes in Annex 12. It is estimated that MWA's capital requirements during theproject disbursement period 1982-85 would amount to So Sh 782.6 million(US$62.1 million). During this period, it is expected that capital spendingto complete the first project would amount to So Sh 92.5 million (US$7.3million), about 12% of total capital spending and additions to working capital.Under the tentative financing plan shown below, MWA would provide 14% of itscapital requirements from internal cash generation, 41% from loans and 45%from equity.
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Proposed Financing Plan, 1982-1985
So Sh US$Requirements -----millions…-----
Capital Expenditures
Ongoing Works 3.18 0.25 1First project 92.45 7.34 12Interest During Construction 3.66 0.29 1Proposed Project 523.94 41.66 67Interest During Construction 26.79 2.12 3Phase IIB 81.00 6.43 10Interest During Construction 3.24 0.26 1
a/ Excludes interest during construction.millions of
So Sh US$
b/ IDA Credit 189.00 15.00Government 12.50 1.00Interest during construction 26.89 2.14
228.39 18.14c/ Equity
Government 71.15 5.65Arab Fund 220.50 17.50EDF 62.83 5.00
354.48 28.15
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5.07 During negotiations it was agreed that Government and MWA wouldenter into a subsidiary loan agreement which would provide that Governmentwould relend the proceeds of the Credit to MWA together with a further amountof SoSh 12.5 million (US$1 million) at a 10% interest rate over 20 years,including a 3 year grace period during which interest would be capitalized.The loan terms are those set by Government for bank loans to public enterprises.The execution of the subsidary loan agreement would be a condition of Crediteffectiveness. Arab Fund and EDF project finance would be provided by Govern-ment to MWA as equity, as would Government finance provided to meet the costoverrun on the first project.
5.08 Similar loan terms to the above have been assumed for unarrangedfinance for a future Mogadishu (Phase 2B) water supply project, the expendituresfor which are expected to commence in 1985.
Future Performance
5.09 Based on the agreed rates of return (para 5.05) and the aboveassumptions, MWA's 1982-88 financial performance would be satisfactory.During this period, revenues would increase by about 6.4 times, water con-sumption by 2 times, and expenses (including depreciation) by 3.4 times.Allowances for inflation in the financial projections more than doubled the1982 level of expenses over the same period. It is expected that MWA'soperating ratio would decline favorably, from 149% in 1982 to 79% in 1988.
5.10 To help ensure a sound financial structure, a covenant under thefirst project requires that MWA will not incur debt without the approval ofthe Association unless future debt service, including that of proposedborrowings, is covered at least 1.4 times by internal cash generation and that,until project completion, MWA will not incur annual capital expenditures,other than for the proposed project, in excess of US$250,000 equivalentwithout a financing plan agreed with the Association. It was agreed atnegotiations that this covenant will be repeated.
VI. ECONOMIC AND SOCIAL ANALYSIS
Project Benefits
6.01 The proposed project would meet Mogadishu's water requirements until1987. It would resolve the city's present water supply shortages by increasingMWA's firm production capacity about 80% (from 31 Mld to 57 Mld) and wouldextend MWA's distribution grid from a gross service area of approximately 20sq km to about 45 sq km thus making potable water more accessible to Moga-dishu's population. The project also would continue efforts begun underthe first project to strengthen MWA by continuation and expansion of supportfor MWA's advisory staff (para 3.03). The health benefits of improved watersupply facilities will not be fully effective without corresponding improvementsin sanitation and hygiene and, as the ongoing Mogadishu sewerage and drainageproject will be delayed, the project would also include a complementary
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program of low-cost sanitation (para. 3.09). The preparation and detaileddesign of a future water supply project, which will be required by about 1987,would also be part of the project.
Least Cost Solution
6.02 Based upon available information, the proposed project representsthe least costly of the several technical alternatives considered. Thesealternatives include two projects dependent upon local groundwater and aproject dependent upon a surface water supply from the Shebelli River.Given the present status of investment planning, the need for immediateaction to remove current water supply deficiencies and financing constraints,tlhe proposed project represents the most acceptable alternative.
Rate of Return and Pricing Considerations
6.03 A tariff increase equivalent to a 110% real increase over thep-resent tariff level by 1985 (the initial year after commissioning of facili-t[es under the project) will be needed to meet MWA's financial requirements(para. 5.05). The tariff required in 1985 (expressed at constant 1982 prices)would be So Sh 9.40 per cu m which, based upon the cost and revenue streamsand the method and assumptions set out in Table 1 of Annex 12, would producean incremental financial rate of return (IFR) of about 5.6%. If the currenttariff level of So. Sh. 4.50 per cu m instead is used in calculating incre-mental revenues for the project, the IFR would be -2.5%. This indicates thatpresent tariff levels are too low.
6.04 The average incremental cost (Table 2 of Annex 12) of water supplyreflecting MWA's medium-range development program through the early 1990s(including the proposed project and a future Mogadishu water supply project)has been estimated at So Sh 10.50 per cu m at a discount rate of 8%. For adiscount rate of 10%, the average incremental cost is estimated at So Sh 12.40per cu m. MWA's investment planning has not been carried out in sufficientde!tail to permit the projection of average incremental costs beyond 1990.
Impact on Poverty Group
6.05 Little recent reliable information is available concerning populationor income distribution in Mogadishu. However, based upon estimates madesubsequent to appraisal, 640,000 persons resident in areas which do notpresently have reasonable access to public water supplies, out of an estimatedMogadishu total population of about 870,000 persons, would be provided withwater service by the project in 1987. The urban poverty group has been esti-mated as 320,000 (37% of Mogadishu's total population in 1987), on the assump-tion that all of the population resident in low cost houses are below theurban poverty threshold. Substantially all of the poverty group would obtainwater deliveries through public taps and thus poverty group consumption isprojected at about 21% of total residential consumption estimated for that
- 30 -
year. 1/ The proportion of total project costs associated with provisionof service to the poverty group probably would conform to that group's share(12%) of total consumption estimated for the design year (1987).
Affordability
6.06 Information concerning willingness to pay was recently developedas a result of a survey of a selected group of Mogadishu water consumerscovering a broad range of family income by the tariff consultants financedunder the first Mogadishu Water Supply Project. Based upon this survey,customers receiving delivery of water from vendors presently pay from So Sh 33to So Sh 46 per cu m. 2/ Consumers participating in the survey also indicatedthat they could afford to pay from So Sh 63 to So Sh 82 monthly by household.A comparison of these figures to projected tariff levels indicates thatimproved water service provided by the project would be affordable by allconsumers, including the members of the poverty group. A typical household(using public taps) of six persons with a per capita consumption of 14 lcdwould be charged about So Sh 24 monthly based upon the average tariff level ofSo. Sh. 9.40 per cu m required by 1985 (para. 6.03). The present tariff studywould consider the appropriateness of MWA's present flat rate tariff and thepossibility of cross subsidization of low-income consumers, most of whom aresupplied through public taps (para. 5.03).
Project Merit and Risk
6.07 The proposed project will provide Mogadishu with reliable suppliesof safe water, eliminate present water shortages, satisfy the city-s futuregrowth in water demand until about 1987, and provide about 640,000 personswith improved access to the water system through the extension of MWA'sdistribution grid from 20 sq km to 45 sq km. It also would assist through:a) a survey of Mogadishu's needs for low-cost sanitation; c) strengthening ofMWA through future funding for management, financial and technical advisorystaff; and d) the preparation and engineering design of a future Mogadishuwater supply project.
6.08 The incremental financial rate of return (IFR) is estimated at about5.6%, based upon the estimated 1985 average tariff level of So Sh 9.40 percu m (para. 6.03). A 20% increase in capital costs of the project wouldcause the IFR to decline about 1.9%. Due to the extent of unsatisfiedwater demands, a decrease in water sales from projected levels is unlikely.
1/ Poverty group consumption is estimated in 1987 at 1,510 thousand cu mout of a total residential consumption of 7,280 thousand cu m.
2/ This represents a substantial increase from the official price ofSo. Sh. 4.50 per cu m charged consumers who take delivery at the publictaps.
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6.09 There are several risks associated with the project. A risk ofproject cost overruns due to inaccurate estimates of costs of physical compo-nents has been reduced by basing the cost estimates on bids recently receivedon all major contracts to be included in the project (para 3.11). A risk ofthe inability of Somalia's National Electric Power Authority to continuouslymeet power needs at MWA-s Afgoi Road wellfield also exists. Although, foreconomic reasons, it is not possible to fully remove this risk, the projectreduces the magnitude of the risk through provision for an increase in MWA'sstandby power generation capacity at the Afgoi Road site to 65% of requiredflrm capacity.
6.10 The main project risks lie in MWA's institutional weaknesses whichcould have an adverse effect on project implementation and subsequentlyon the maintenance and operation of the project facilities. To minimizethese risks during implementation, advisers would be employed to providesupport for MWA's management, financial and technical operations. Theongoing efforts under the first project would help to strengthen MWA'seffectiveness through a comprehensive training program and the establishmentof commercial accounting. Despite these risks, the project merits Bank Groupsupport, as without such support, the people of Mogadishu would face an evenmore serious water shortage than they do at present.
VII. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATIONS
7.01 During negotiations, agreement was reached that agreements underCredit 822-SO will be extended to the project as follows:
(a) MWA will employ engineering consultants whose qualifications,experience, and terms and conditions of employment are accept-able to the Association (para. 3.16);
(b) The Government would promptly acquire all land and rights ofway required under the project (para. 3.20);
(c) MWA will employ a Financial Advisor and Technical Advisorwhose qualifications, experiences, and terms and conditionsof employment are acceptable to the Association (para. 4.06);
(d) MWA will maintain a Project Management and Planning Unit(PMPU) to monitor and report on the project, and will continueto employ a duly qualified, experienced and competent personas head of the PMPU (para. 4.07);
(e) MWA will consult with the Association before making new appoint-ments to the positions of Head of the Project Management andPlanning Unit, Director of Technical Operations or Director ofFinance and Administration (para. 4.07);
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(f) Prior to extending the activities of MWA to provide servicesother than water supply, the Borrower will: (i) inform theAssociation of the effects such extension might reasonablybe expected to have upon MWA, and (ii) afford the Associationa reasonable opportunity to comment (para. 4.09);
(g) MWA would continue to have its financial statements audited byindependent auditors acceptable to the Association and wouldsubmit its audited financial statements to the Associationwithin four months after the close of its fiscal year(para. 4.15);
(h) Before taking any action to modify the level or structure ofMWA's tariff, both the recommendation of the tariff study andthe Association's comments would be taken into account byGovernment and MWA (para. 5.04); and
(i) MWA will not incur debt, without the approval of the Associa-tion, unless future debt service, including that of proposedborrowings, is covered at least 1.4 times by internal cashgeneration and that MWA will not incur annual capital expendi-tures, other than for the proposed project in excess of US$250,000equivalent without a financing plan agreed with the Association(para. 5.10).
7.02 During negotiations, agreement was reached that:
(a) Government would open a special bank account for the projectwith an initial deposit of So Sh 6 million by September 30, 1982and deposit the remainder of the So Sh 12.5 million Governmentproject loan promptly when required (para. 3.13);
(b) MWA would submit a report to the Association on the projectwithin one year of project completion (para. 3.31);
(c) MWA will employ a Management Advisor and an additional (second)Technical Advisor by December 31, 1982, or such other date asthe Association may agree, whose selection, qualifications,experience, and terms and conditions of employment are acceptableto the Association (para. 4.06);
(d) MWA will consult with the Association before making newappointments to the position of Director of Sewerage andDrainage (para 4.07);
(e) The accounting system, designed under the first project,would be implemented not later than December 31, 1982(para. 4.10);
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(f) by December 31, 1982, or such other date as the Associationmay agree, MWA would employ accounting consultants whoseselection, qualification, experience and terms and conditionsof employment are acceptable to the Association (para. 4.10);
(g) Government would reduce its indebtedness to MWA to a levelnot exceeding 60 days annual sales by September 30, 1982 andwould not permit future indebtedness to exceed this level(para. 4.12);
(h) MWA will revalue its net fixed assets as of December 31,1981 at a replacement cost of So Sh 371.28 million lessaccumulated depreciation of So Sh 150.09 million and, afterthat date, MWA will annually revalue its net fixed assetsaccording to procedures acceptable to the Association (para.5.02);
(i) MWA will maintain its tariff at levels sufficient to providean annual rate of return on average revalued net fixed assetsof not less than 2% in 1983 and 1984, 3% in 1985 and 1986,and 4% thereafter (para. 5.05);
(j) Government would relend the proceeds of the proposed IDACredit to MWA together with a further loan of So Sh 12.5million at an interest rate of 10% for 20 years witha grace period of 3 years and interest during constructionadded to the onlending during the same period (para. 5.07).
7.03 As conditions of Credit effectiveness:
(a) all conditions precedent to the effectiveness of the ArabFund and EDF agreements should be fulfilled (para 3.13);
(b) the tariff study (required under the first project) shouldbe completed (para. 5.04); and
(c) the Subsidiary Loan Agreement between the Government and MWAshould be executed (para. 5.07).
7.04 With the above agreements, the proposed project would be suitablefor an IDA Credit of SDR 13.4 million (US$15 million).
- 34 -
ANNEX 1Page 1 of 5
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Mogadishu Water Demands
Historical Demands
1. Records of Mogadishu water demands date back only to 1973 whenthe present municipal water system was completed. Due to the brevity ofrecord and supply constraints experienced beginning in 1977, it is difficultto establish a long-term trend based upon historical experience. Table 1summarizes estimates of annual consumption for the period 1974 through 1981.Due to incomplete consumer metering, these data are somewhat conjectural,particularly for the years 1978 through 1981.
2. Approximately half of the water consumed in Mogadishu is forgovernmental and institutional use while residential, commercial andindustrial usage represents the balance. In 1979 private connectionsprovided service to about 50,000 persons (11%) of a household populationof about 490,000 but accounted for about 22% of the total consumption. Asnoted in Table 2, no apparent change in composition of demand was observedduring the historical period, 1977-79. Information on composition ofdemand was not available for 1980 and 1981 although characteristics wereprobably similar to those of prior years.
- 35 -
ANNEX 1Page 2 of 5
TABLE 2: COMPOSITION OF ANNUAL DEMAND(million cu m)
Government and Institutions 3.12 52 3.00 52 2.98 52Industry 0.15 3 0.15 3 0.15 3
TOTAL 5.94 100 5.70 100 5.68 100
Future Demands
3. Demand forecasts continue to recognize three basic categories ofconsumption: residential; governmental and institutional; and commercial andindustrial. Projected residential consumption is tied to population growthbut also is dependent upon household size and per capita consumption. Thelatter is further related to housing type of which four basic types wereidentified in the housing survey conducted by the consultants in 1977.Estimates of 1980 per capita consumption associated with these housing typeswhich were prepared by the consultants, are shown in Table 3. Per capitaconsumption values shown for populations served from public taps are extremelylow compared to the experience of other comparable water utilities. (Provisionfor per capita consumption of at least 20 lcd is considered desirable formeeting basic sanitation needs.) The values shown reflect supply constraintsand the relatively poor access of these populations to MWA-s water system.Significant increase in per capita consumption of populations served frompublic taps would be possible only after completion of the proposed project.
4. Forecasts of water demands prepared by the consultants for themedium-term future were based on the following assumptions: Governmental andinstitutional water demands are expected to increase generally in accordancewith population growth. Commercial and industrial demand is small and esti-mated to increase slowly in the near future. Demand of existing commercialindustrial development is assumed to increase at a constant rate of 11% peryear while demand by new developments would increase in proportion to popula-tion growth. Due to production and delivery constraints, it will not bepossible to fully meet MWA's water demands until additions to capacity providedby the first project and the proposed project are completed. (These additionsare expected to be complete by mid-1982 and mid-1984, respectively). Theconsultants forecasts of future consumption and production have been adjusted
- 36 -
ANNEX 1Page 3 of 5
downward by Bank staff to reflect this. The revised forecasts are shown onpage 4 and in the Figure attached to this Annex. Page 4 also includes anestimate of the composition of revised future consumption.
TABLE 3: ESTIMATED 1980 PER CAPITA WATER CONSUMPTION
Per CapitaConsumption
Housing Type Description (lcd)
Served through private connectons:
I Large residences with gardens 135II1 Large residences without gardens 70
Served from public taps:
II2 Large residences without gardens 10.5
III Low-Cost houses 10.5IV Temporary houses 5.5
Variation in Demand
5. Required future design flows (in terms of water production) developedfor the proposed project based upon different peaking factors for time periodsof various duration are shown on page 5. Due to lack of historical operatingrecords and the difficulty of developing meaningful operating records duringan extended period of water supply deficiencies, there is some uncertaintyabout the appropriateness of the factors proposed. Improved metering inconjunction with additions to production capacity expected to be availableafter 1983 will permit closer monitoring by MWA to confirm the reasonablenessof these design factors. Any modifications of peaking factors that appearadvisable as a result of this monitoring could be applied to the design offuture projects.
March 19, 1982
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Futute MWA Annual Water Requirements
(thousand cu m)
Water Consumption
Residential Total Unaccounted- TotalCalendar Private Public Governmental/ Commercial/ Water for-water WaterYear Connections Taps Subtotal Institutional Industrial Consumption % Production
b/ Based upon assumption that 10% of total installed capacity is held inreserve for planned maintenance and to cover unplanned outages.
March 19, 1982
ANNEX 1- 39 - Figure
SOMALIASECOND MOGADISHU WATER SUPPLY PROJECT
MWA WATER DEMANDS AND PRODUCTION CAPACITY
90 I 1 1
Demand = Estimated Consumption Plus Unaccounted for Water.
Later Additions
80 -4-----
> 70 Future Mogadishu ,'Water Supply Project
5~~~~~~~~~~~~~\
60 IInstalled capacity- 7E -
*0c Second Mogadishu
Water Supply Project
0.Uo
-o2 0 _4_ __0_
a./MogadiNshu WaterSupply Project s
30 -Legend: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
-ore thn5 Average day water demand.Maximum week water demand
20 .. ..... __1/Note: Installed capacity shown prior to 1984 is estimated "total"
while capacity shown after 1983 is "firm"; latter reflectslimiting production from existing MWA sources to nom'ore than 15MI per day (average tiduring maximum weekdemand I'
Description of Physical Elements of Proposed Project
General Criteria
1. Except for distribution system elements which would be designedto meet water demands projected for the early 1990's, all water system additionswould be sized for the year 1987. Source of supply facilities, chlorinationequipment and well collector mains would be sized based upon the average demandduring a maximum-demand week while the design of distribution mains would bebased upon peak-hour demands. Distribution system storage capacity would beprovided to meet operational and emergency needs with the former assumed equalto 0.75 and emergency storage equal to 0.21, respectively, of an average day'sdemand. Further, the determination of emergency storage needs would be basedupon meeting system water demands during a 24-hour outage of MWA's largestsingle transmission main.
Source of Supply Facilities
2. The proposed facilities would consist of an extension to the AfgoiRoad wellfield presently being constructed under the first project. Theextension would consist of about 24 production wells (including 3 standbywells) having a total firm production capacity of about 30 Mld, three observa-tion wells, electric-drive pumping equipment at each of the production wellsites, collector mains, totalling about 8,000 m in length with diameters from150 mm to 600 mm, a 312-kVA power generating station extension, electric powertransmission lines, transformers and switchgear, thus extending the wellfield's total power supply capacity to 24,000 kVA. Disinfection with chlorinewould be provided to the water at the wellfield prior to discharge into theAfgoi Road transmission main.
Mogadishu Distribution System Additions
3. MWA's existing distribution system would be extended through mainextensions, totalling about 60,000 m in length in sizes ranging from 75mm to 700 mm, the provision for additional public taps and the creation of twoadditional pressure zone (approximate control elevations 95 m and 115 m,respectively) permitting improved water service to populations in higherelevations of the town. Additional treated water storage (about 14,000 cu m)and booster pumping capacity would be provided at a new MWA reservoir sitelocated adjacent to 21st October Road while the service area would be doubled
- 41 -
ANNEX 2Page 2 of 2
(from 20 sq km to about 45 sq km). The new booster station would be equippedwith electric-drive pumps to boost from ground level storage to a new elevatedtank on the same site serving the porposed Tower Zone.
Other Additions
4., The project also would include water meters, vehicles and workshops,and tools and equipment for inspection and repair. Remaining additions wouldconsist of miscellaneous equipment, furniture and supplies.
March 25, 1982
- 42 - ANNEX 3- 42 - ~~~~~Page 1 ot z
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Project Cost Estimates
So.Sh (thousands) US$ (thousands)
Description Local Foreign Total Local Foreign Total
1. Southern Somalia is divided into two geological provinces,the Coastal Province and the Inland Province. The Coastal Province, whichunderlies all of the Mogadishu region, comprises quaternary and recent allu-vial and aeolian deposits overlying Tertiary sediments (Map IBRD 15171). Withinthe Mogadishu area, the Coastal Province is further subdivided into threegeomorphological regions, viz., a) the Coastal Belt, b) the Benedir CoastalPlain, and c) the Shebelli Valley. Although each region has groundwater, theShebelli valley probably is the most important of these relative to water supplysince recharge from the Shebelli River serves as principal source for ground-water in the Mogadishu area.
2. The climate is tropical and semi-arid with a bi-moda'L rainfallpattern influenced by monsoon winds. Rainfall, which is irregular in dis-tribution both areally and from year to year, occurs in two seasons, the Gu(from March to May) and the Der (from September to November). Mean annualrainfall for the period 1953 to 1977 totalled 557 mm (22 in) at Afgoi and487 mm (19 in) at Mogadishu. The mean daily temperature (27 C) at Afgoi) isrelatively constant throughout the year with the hottest months (March andApril) generally being only a few degrees warmer than the cooler months (Julyand August).
Surface Water
3. The Shebelli River, which is the only stream of consequence inthe region, rises in the Ethiopian highlands, drains the central Ogaden andhas a catchment area of about 300,000 sq km. However, only about a third ofthe catchment (which contributes no significant flow) is in Somalia. Themonthly distribution of stream flow corresponds closely with the distinct,two-peaked pattern of precipitation observed in the Shebelli's headwaters.
4. For the period 1961 through 1976, the mean annual discharge at Afgoiwas 1500 million cu m, with a minimum of 975 million cu m recorded in 1973and a maximum of 2084 million cu m in 1968. These figures are about 35%lower than flows recorded for the same periods near the Ethiopian border andreflect the effects of upstream diversions for irrigation, seepage and lossesfrom overbank flooding. Although recent developments on the Shebelli 1/ arelikely to modify the natural flow of the river, the extent of these futurechankges is not clear. However, more effec-tive utilization of Shebelli River
1/ Most important of these in Somalia are an offstream storage scheme atJowhar, which is about 50 km upstream of Balad, and a barrage at Balad.Reportedly, similar developments are planned upstream in Ethiopia.
- 47 -
ANNEX 6Page 2 of 6
water is anticipated with the completion of these developments. The Jowharoffstream storage scheme, in particular, would permit the diversion of aportion of future flood flows into the reservoir thereby permitting laterreleases from storage to augment natural river flows during low-flow periods.
5. Current diversions from the Shebelli are mainly for irrigation andapproximately 35,000 ha, 1/ of a total of about 120,000 ha of irrigableland, were estimated to be under irrigation in 1978. Assuming that irrigationefficiencies, which are quite low averaging about 20%, were increased to 45%,the annual irrigation water requirements of present agricultural developmentsare estimated at about 760 million cu m. Based upon these water requirements,and the assumption that no significant Shebelli flows are diverted for otheruses, it has been estimated that present irrigation developments locateddownstream of Jowhar could be irrigated with only a 75% probability of satis-fying annual consumptive use requirements. Based upon Government's plansto expand irrigation developments on the Shebelli, annual irrigation waterrequirements would increase to an estimated 1180 million cu m and these require-ments would be likely to exceed available flows during five months of an averageyear. This does not reflect future upstream developments in Ethiopia orabstractions to meet the needs of Somalia non-agricultural water users such asthe MWA. 2/
6. Although disagreement exists as to the extent and rate that existingirrigated agriculture developments on the Shebelli should be expanded, 3/there is evidence that present agricultural practices and low irrigationefficiencies in the Shebelli valley have resulted in declining crop produc-tion. Further, the Bank and the Government are in agreement that the rehabil-itation of existing irrigation developments and the improvement of presentagricultural practices and irrigation efficiencies are necessary to improvethe effectiveness of land and water use on the Shebelli. Differences mainlyexist as to the priorities that should be attached to the various elements
1/ Over 80% of presently irrigated lands are located downstream of Jowharreservoir.
2/ The 1978 legislation establishing the Mogadishu Water Agency (MWA)authorizes MWA to construct water treatment facilities at the ShebelliRiver but does not recognize any rights associated with the diversionor use of Shebelli waters.
3/ According to the Somalia Agricultural Sector Review (Report No. 2881a-SOdated December 22, 1980), water shortages already exist along the Shebelliand major expansion of irrigation schemes should be stopped until improve-ments in agricultural practices and irrigation efficiencies permittingwater savings can be effected. The Government's view is that Shebelliwaters are not fully utilized and that irrigated agriculture could beexpanded to 85,000 ha. Several new schemes are being implemented which,upon completion, would further increase irrigation water demands.
- 48 -
ANNEX 6Page 3 of 6
of programs to increase the effectiveness of land and water use. A compre-hensive irrigation rehabilitation program is proposed in the Bank's Agricul-tural Review report to effect improvement in land and water use in the Jubaand Shebelli valleys. A water resource allocation component, which forms avital part of this program and has particular application to the Shebelli,is described in para. 12 of this annex.
Groundwater
7. Groundwater is the traditional source of water in the Mogadishuarea. The Mogadishu aquifer system, which consists of portions of the CoastalBelt, the Benedir Coastal Plain and the Shebelli alluvials (para. 1, thisannex), is one of Somalia's most significant groundwater resources and, atthis stage, probably its most intensively developed. By the early 1960s, some200 dug wells already existed in the city. Few of these, which were mainlyprivately owned, are still in use, being replaced with higher-capacity bore-holes introduced in the early 1970s as part of Mogadishu's new municipal watersystem. Despite this intensive past development, until recently, littleinformation was available concerning Mogadishu's local groundwater resourcesthus making the planning for future water supply additions somewhat risky.Particularly lacking was information on groundwater quality and sustainableyields. The local situation mirrors the nationwide picture in that therehas been no concerted effort to collect and maintain records of well construc-tion and production, groundwater levels or water quality. Further, there isno recognition of water rights nor have there been attempts to control orregulate water production although, in order to optimize future developmentof this water resource, it is recognized that regulation, as well as improvedmonitoring, would be required.
Water Resource Investigations
8. Much of the current knowledge of the surface water resources ofthe Shebelli valley has resulted from basin-wide studies financed by the UNDPthat were carried out in the late 1960s and early 1970s to identify futureirrigation schemes suitable for development. Although several irrigationprojects subsequently were implemented on the Shebelli, preparation for theseprojects generally was limited in scope and did not add appreciably to the basichydrologic knowledge of the basin. FAO currently is assisting the Government inthe upgrading of stream flow records.
9. Initial groundwater investigations in the Mogadishu area were car-ried out in the 1960s which resulted in the design and construction of MWA'sexisting Balad Road wellfield. These investigations covered only a smallarea immediately adjacent to Mogadishu and were too limited to permit futureplanning of major water supply extensions included under the Mogadishu WaterSupply Project (first project) and the proposed project. In recognition ofthis, more extensive water resource investigations that encompassed substan-tially all of the Afgoi-Balad-Mogadishu triangle were included as part of thefirst project. These investigations, which were completed in late 1979, aredescribed below.
- 49 -
ANNEX 6Page 4 of 6
10. The 1979 investigations, which were directed by the Institute ofHydrology (UK), included a surface geophysical survey and an exploratorydrilling and aquifer testing program. A total of 22 boreholes were drilled(Map IBRD 15172) and six long-term pump tests (to determine aquifer charac-teristics) were carried out. The results of the field investigations provideddata which, together with water level and water production information for theyears 1968 and 1979, were used to calibrate a digital model of the aquifer inthe study area (within "local area boundary" shown on Map IBRD 15171). Aftercalibration, the model was then used to predict groundwater level responsebased upon MWA water production requirements previously projected for theperiod 1976 to 2000. Principal conclusions resulting from the 1979investigations are described below:
i) The sustainable (safe) yield of aquifers within the Afgoi-Balad-Mogadishu triangle (the Triangle) is proportional to long-termrecharge from the Shebelli River occurring within the Balad-Afgoireach of the River. Based upon average annual recharge of 40million cu m, annual sustainable yield would approximate 25 millioncu m;
ii) To avoid problems due to adverse water quality, future groundwaterproduction in the Triangle should be secured from wellfields located10-20 km inland from the coast. Recommended wellfields would consistof the existing Balad Road wellfield, the Afgoi Road wellfield (tobe constructed under the first project and extended under the pro-posed project), and a wellfield to be constructed further inlandadjacent to Balad Road under a future Mogadishu (Stage 2B) watersupply project (Map IBRD 15172);
iii) Current production from the existing Balad Road wellfield is inexcess of that wellfield-s share of basin safe yield and, as soon assignificant supplemental production capacity is secured, 1/ annualproduction from MWA's existing facility should be reduced to about4.4 million cu m (about 60% of current production);
iv) In order to meet annual water demands in excess of about 25 millioncu m, 2/ additional sources of supply located outside the Trianglewould have to be developed. The most likely sources for thesesupplemental supplies would be: a) the Shebelli River and b) othergroundwater sources located northeast and southwest of the Triangle;and
1/ In view of the extent of excess demand, this reduction probably wouldnot be possible until the completion of facilities included in theproposed project.
2/ MWA's average annual demand at source is expected to reach 25 millioncu m by about 1990.
- 50 -
ANNEX 6Page 5 of 6
v) Insufficient information is available on the ShebelliRiver and adjacent groundwater resources to evaluate thesesupplemental sources or to plan future water supply facil-ities that may be required to meet MWA-s future waterdemands. Thus, further investigations of groundwater and theShebelli are required for planning and preliminary design.
Preparation of Future Mogadishu Water Supply Projects
11. The 1979 water resource investigations indicate that, after about1990 when MWA water demands are projected to equal the safe yield of theTriangle's groundwater resources, supplemental supplies from the ShebelliRiver and/or from other more distant groundwater sources would be required.The following critical actions need to be taken shortly in order to plan forthese later additions to supply capacity.
12. To develop the Shebelli River as an effective MWA source, an assess-ment of the Shebelli valley's total water resources and an economic allocationof these resources to present and potential future high-priority water usersneeds to be made as part of a regional water plan. It would require: a) theenactment of national water laws; 1/ b) the establishment and development of aShebelli River development authority (preferably under existing institutionssuch as the Department of Land & Water Resources of the Ministry of Agricul-ture); c) the registration of water users; d) the carrying out of studies todetermine current and optimum future water needs for principal irrigatedagriculture areas in the Shebelli valley; e) the identification of specificprograms for irrigation rehabilitation; f) consideration of location of user,land and water use, and season in allocating water rights and establishingpriorities of use. Although supplies from the Shebelli probably will not berequired by Mogadishu before 1990, to avoid future delays in planning andinefficient use of investment funds, the majority of the steps noted aboveshould have been accomplished by no later than mid-1984. Preferably, eachof the above-listed actions should be included or required under the proposedproject. Primarily because of problems of finance and the need to limitproject costs, however, they are being deferred until the next Bank Groupproject in the agriculture sector.
13. As noted in para. 10, additional physical planning and preliminarydesign of facilities for the diversion, treatment and conveyance of Shebelliwaters to Mogadishu also would be required. Potential sites for diversionwithin the Balad-Afgoi reach would be investigated. Since this work wouldneed to be complete by the time that the detailed engineering of the futureMagadishu water supply project is begun, it is included in the proposed project.
1/ Although the enactment of laws covering Juba River waters already isrequired under the Trans-Juba Livestock Project (Cr 462-SO), it has notbeen achieved.
- 51 -
ANNEX 6Page 6 of 6
14. For similar reasons, additional groundwater investigations ofcoastal regions northeast of Balad Road and southwest of Afgoi Road alsowould be required and are included in the proposed project. These investi-gations would assist in identifying the sites and capacities of wellfieldsrequired for meeting MWA's post-1990 average and peak water demands inconjunction with future supplies from the Shebelli River.
March 24, 1982
- 52 -ANNEX 7Page 1 of 3
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Project Monitoring Guidelines
A. Progress in Project Implementation
Item Target Dates
1. Physical Components Civil Works Plant
Issue bid documents September 1981 May 1982Receive bids December 1981 August 1982Evaluate bids February 1982 September.1982Award contracts July 1982 November 1982Begin work on site October 1982Deliver equipment to site September 1983Commission facilities April 1984 April 1984
2. Designs, Studies and Investigations Target Completion Date
Water resource investigations:
Groundwater August 1984Shebelli River March 1984
Low-cost sanitation studies March 1985Design future (Stage 2B) project July 1985
B. Operational Characteristics (End of Year):
1. Sources of Supply, Number of
a) Activeb) Total
2. Number of Service Connections
a) Residentiali) House connectionsii) Public taps
b) Commercial/Industrialc) Governmental/Institutional
- 53 -
ANNEX 7Page 2 of 3
3. Water Production and Sales, cu m per year
a) Water producedb) Water sold
i) ResidentialHouse connectionsPublic taps
ii) Commercial/Industrialiii) Governmental/Institutionaliv) Total
c) Unaccounted for water
i) Amount, cu m per yearii) % of production
4. Customers water meters
a) Total number in place, end of yearb) Number replaced during yearc) Number repaired during year
5. Annual Energy Requirements
a) Diesel fuel purchased
i) Quantity, bbls/yr.ii) Cost, So. Sh./year
b) Energy purchased (from ENEE)
i) Quantity, KwH/yrii) Cost, So. Sh./yriii) Power interruptions, number and duration
C. MWA Staffing and Training
1. Number of permanent staff (by classification)2. Staff Training, per year
a) Number of staff trained (by classification)b) Training effort, man-weeks
i) In Somaliaii) Outside Somalia
- 54 -
ANNEX 7Page 3 of 3
D. Financial Data, for financial years
1. Average tariff level, So Sh per cu m2. Rate of return on average revalued net fixed assets3. Debt service coverage, %4. Operating ratio5. Uncollected water sales, number of days6. Debt/equity ratio
March 24, 1982
SOMALIASECOND MOGADISHU WATER SUPPLY PROJECT
ORGANIZATION CHART OF MOGADISHU WATER AGENCY
Ministry of Ml-ereI and| Water Rtesources
Mogadishu WaVter Agency
| Comotiee | ......... 4General Manager ........
.Ct , !c S| , IDirectr t Direto n & Financial Director utgTechnica DirOc
.......r... f..... .SPntins Draitngande
Departm................ .................................................................................... t....... . .... ............|Project Plantng Stetittict Chn Bilin Seto Purchasing Waehus Personnel G (eneral M|ncoc Wrksh| Construction |Hydrologist1and Managemsns and Accountant Superinsetndont Superyisor Manager O fficer Sem ices L Supetintonden Sriyerinsendent e nd lnata le-l r s
1. The financial statements are based on information supplied by MWAand their consultants.
Income Statements
Revenues
2. Water consumption forecasts are derived from Annex 1. It is assumedthat 95% of this consumption would be billed and collected.
Salaries
3. In addition to provision for increased staffing requirements, infla-tion has been assumed as follows: 1982, 30%; 1983, 25%; 1984, 20%; 1985, 15%;1986 onward, 10%.
Fuel Oil and Electricity, Chemicals, Repairs and Maintenance, and GeneralExpenses
4. Inflation for these expenses has been assumed as follows: 1982, 8%;1983 and thereafter, 7%. Fuel oil and chemicals are assumed to increase alsoin proportion to production while repairs and maintenance and general expenseshave been assumed to increase annually by 6% and 4% respectively.
Annual Payment to Mogadishu Municipality
5. An annual payment of So Sh 0.55 million is made to MWA in perpetuityto compensate the Municipality for the small water supply system which MWA tookover on its inception.
Depreciation
6. An average annual rate of 4% has been assumed.
Payables
7. These are assumed at about 45 days cash operating expenses.
- 60 -
ANNEX 12Page 2 of 3
Balance Sheet
Fixed Assets
8. Fixed assets have been revalued annually to reflect estimatedreplacement costs. Assuming 70% of fixed asset values represent foreign costsand 30% local costs, fixed assets have been revalued at the following annualpercentages:
1982 1983 1984 1985 1986 1987 1988
15 12 11 9 8 8 8
In arriving at the above, foreign and local price escalations are forecastas follows:
Local 30 25 20 15 10 10 10Foreign 8 7 7 7 7 7 7
Receivables
9. Estimated at 2 months sales (16.5%).
Inventories
10. Inventories are high because of lengthy procurement procedures.They are assumed to increase in line with production.
Financing Terms
11. First Mogadishu Water Supply Project. Government will provide anestimated SoSh 89.2 million finance for the estimated cost overrun in the formof equity.
12. The Project. Equity finance would be provided by Government toMWA as follows:
millions of
Source So Sh US$
EDF 62.8 5.0Arab Fund 220.5 17.5
283.3 22.5
- 61 -
ANNEX 12Page 3 of 3
Loan finance would be provided by Government to MWA at a 10% interestrate over 20 years, including a 3 year grace period as follows with interestduring construction being added to the principal amounts indicated belowduring the construction period:
millions of
Source So Sh US$
IDA 189.0 15.0Government 12.5 1.0
201.5 16.0
13. Possible Future Projects. It has been assumed that 80% of the costof a future project would be met through loans on terms similar to those forthe proposed project.
USAID Loan
14. Under the terms of a loan agreement dated January 7, 1968 betweenSomalia, MWA and the U.S., MWA is to repay Government over 30 years from dateof first loan disbursements, including a 5-year grace period, by level semi-annual installments including interest at 3.5% per annum. The final install-ment is due January 20, 1999.
March 24, 1982
- 62 -ANNEX 13
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Incremental Financial Rate of Return and Average Incremental Costs
1. The following assumptions were used in calculating incrementalfinancial rate of return (IFR) and average incremental costs (AIC):
(a) Constant prices (at 1982 levels) were used throughout;
(b) Annual costs include capital costs (reflecting physicalcontingencies but not price contingencies) and recurringcosts exclusive of duties and taxes;
(c) Capital costs assumed in the calculation of IFR and AIC excludeconsideration of the low-cost sanitation component. However, AICreflects costs of the water resource investigations and designengineering for a future project whereas IRA does not;
(d) Shadow pricing was not used;
(e) Annual operational expense was calculated on the basisof the following average unit costs applied per cubicmeter of incremental production:
Pumping costs So Sh 0.48Cost of chemicals 0.10Other operating costs 0.12
(f) Other details relative to the analysis of IFR and AICare shown below and on attached tables 1 and 2.
Incremental Financial Rate of Return
2. Annual incremental revenue was based on an average revenue ofSo Sh 9.40 per cu m of annual incremental sales estimated as required forthe year 1985.
3. The effective service life of the proposed project's physical plantwas estimated at 25 years beginning with the year 1984.
Average Incremental Cost
4. The effective service life of the physical plant of the proposedproject and a future water supply project was estimated at 26 years with thebeginning of the proposed project, 1984, and the beginning year of the futureproject, 1987.
March 18, 1982
- 63 -
ANNEX 13Table 1
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Calculation of Incremental Financial Rate of Return for Project a/
a/ Calculations do not reflect shadow pricing;b/ Except as indicated;c/ Annual cost assumed to be equal to 1% of cumulative capital costs;d/ Portion of total annual production (up to maximum of 15.6 million cu m) attributed to proposed (Stage 2A) project
less effective long-term annual production capacity of MWA water supply plant (10.0 million cu m) after fullutilization of first project;
e/ Annual operational expense based upon average cost of So. Sh. 0.70 per cu m of production;f/ Sum of annual capital and recurring costs;g/ Portion of total annual consumption met by proposed project (total annual sales of up to maximum of 12.48 million
cu m less 8.0 million cu m of total sales met after full utilization of first project); andh/ Based on average revenue (in real terms) of So. Sh 9.40 per cu m.
March 18, 1982
- 64 -ANNEX 13Table 2
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Calculation-of MWA's Average Incremental Costs!/for Medium-Range Investment Period
(So.Sh OO'a)b./
Capital CostsTotal Annual Annual Annual Annual Annual Annual
Calendar Proposed Future Capital Maintenan7e IncrementaJ, Operational M & 0 Incremental IncrementalYear Project Project Costs Expense - Productiona' Expense e Expense Cost f/ Consumption;I
a/ Costs do not reflect shadow pricing;b/ Except as indicated;c/ Annual cost assumed to be equal to 1% of cumulative total capital costs;[/ Portion of total annual production (up to maximum of 25.2 million cu m) attributed to proposed project and
future project less effective long-term annual production capacity of MWA water supply plant (10.0 million'cu m)after full utilization of first project;
e/ Annual operational expense based upon average cost of So.Sh. 0.70 per cu m of production;f/ Sum of annual capital and recurring costs; andj/ Portion of total annual consumption met by proposed project and future project (total annual sales of up to
20.6 million cu m less 8.0 million cu m of total sales met after full utilization of first project).
March 18, 1982
-65 - ANNEX 14Page I of 2
SOMALIA
SECOND MOGADISHU WATER SUPPLY PROJECT
Selected Documents and Data Available in Project File
A. WATER SUPPLY SECTOR
Al. Extract concerning Somalia from: "Water Law in Moslem Countries,"FAO (Rome), D.A. Caponera, 1973, 149-161 pp.;
A2. Legislation establishing Mogadishu Water Agency, 1978, 10 pp.;
A3. "A Conceptual Review of Somalia's Groundwater Resources," FAO(Rome), James H. Johnson Consultant Hydrologist, 1978, 33 pp.;
A8. "Travel Report" concerning reconnaissance mission to Somaliato prepare for workshop under GTZ/WHO Cooperative ActionPreparatory Assistance, G. Schultzberg of WHO/EHE/GWS,August 1980, 1 vol.
B . PROJECT
Bl. "Mogadishu Water Supply Investigation, Report on ElectricalResistivity Survey," Electronic & Geophysical Services Ltd.,April 1978, 2 vol.;
B2. "Mogadishu Water Supply Investigation, Supplementary Reporton Electrical Resistivity Survey," Electronic & GeophysicalServices, Ltd., November 1978, 1 vol.;
-66 - ANNEX 14Page 2 of 2
B3. "Mogadishu Water Supply Expansion: Groundwater Explorationand Modelling Studies," Institute of Hydrology (U.K.), March1980, 3 vol.;
B4. "Feasibility Study for Mogadishu Water Supply Expansion:Stage 2," Final Report, Sir Alexander Gibb & Partners(Africa), July 1980, 3 vol.
March 19, 1982
IBRD 15171DECEMBER 1980
SOMALIA /
MOGADISHU SECOND WATER SUPPLY PROJECTHYDROGEOLOGY OF SOUTHERN SOMALIA E T H 1 0 P A
K E Ni4 :- A 0 00 X 00 30:<X fff 2 1A ESBnrp oo Aien
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9 acce~~~~~optotoe oP such OoooutJrto yflS , AOS i0iANZANib -...... t.LOhfT.RS .
BRD 1517,I NOVEMBER 1I1
<2T F ~ SOMALIA
-_s-, MOGADISHU SECOND WATER SUPPLY PROJECTFIRST PROPOSED THIRD \'
~~ SOMALIA ~ ~ ~ POWER PLANTS G2~A ATREATED WATER RESERVOIRS 1 B
7 tS> . '. / PUMPING STATIONS
GGAISW AN . t * j5 / // ~~~~~BUILT-UP AREAS .(
NATIONAL CAPITALS 2°2>
KENY'A | WZ OCeAN MAJOR ROADS
// 5l' RIVERS :
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-- Iow iormi bwsdrt(R
Th,s t5p h., bet pseed by the tWol erh tff eslo,sel.y For
the Otnstv,tieoof the red ofthe repor to which tis letehed /The d-tnostet,ons used nd the.houndeories shown so this maEp / )do sat itply us the pas of theWorld eok od its -tistos, soyjodg t -s the lgal Statvs ofso trritbory or soyedrsemontotsrorcuapta/ooa sofo Jehsodeis. /f
