Languaage: Englishh

Origina
al: English
Original:
O Ennglish

AFRICAN
A N DEVEL
LOPMEN
NT FUND
D

PROJEC
P CT: Darr es Salaaam Wateer Supplly and Sanitation
n Projecct

COUNT
C TRY: Tan
nzania

PROJE
P ECT CO
OMPLE
ETION REPOR
RT
October
O 20110

Team Leader::
T Saabas Maranduu Water & San. Eng., TZFO
W
T
Team Membeers: Geeoffrey Shooo Finnancial Expeert, Consultaant
PROGRAM
COMPLETIO
ON Sector Managger: Seering B. Jalloow WAS.2
OW
TEAM R Rep:
Res. Prrajesh Bhaktaa (OIC) TZ
ZFO
Sector Directoor: Alli Kies OW
WAS & AW
WF
R
Regional Direector: Diiarietou Gayee OR
REA

Boniface Aleeobua
B Prinncipal Sanitaation Engineer (OWAS.22)
PEER REVIE
EWERS
J
John Sifuma Waater and Saniitation Specialist (KEFO))
 Table of Content
A: PROJE
ECT DATA
A AND KEY DATES ........................................................................ 1
A1. BASIC INFORM
MATION ...................................................................................................................1
A2. KEY DATES ...............................................................................................................................1
A3. RATINGS SUMMMARY....................................................................................................................1
A4. RESPONSIBLEE BANK STAFF F .........................................................................................................1

B: PROJ
JECT CON
NTEXT (RA
ATIONALE
E FOR BA
ANK ASSIS
STANCE) .................
. ..... 2

C: PROJ
JECT OBJ
JECTIVES
S AND LOG
GICAL FR
RAMEWOR
RK ................................... 3
C1. PROJECT DEV VELOPMENT OBJECTIVE ...........................................................................................3
C2. MAJOR PROJE ECT COMPONENTS ..................................................................................................3
C3. LAY OUT OF TH
HE LOGICAL FRAMEWORK
F . ......................................................................................4
C4. B
BRIEF ASSESS
SMENT OF THEE PROJECT OB BJECTIVES. .......................................................................5
C5. ASSESSMENT OF LOGICAL FRAMEWORK K ......................................................................................5

D: PROJ
JECT OUT
TPUTS AN
ND OUTCO
OMES............................................................... 6
D1. ACHIEVEMENTT OF OUTPUTS
S ........................................................................................................6
D2. ACHIEVEMENTT OF OUTCOM
MES / IMPACT INDICATORS .....................................................................7

E: PROJ
JECT DES
SIGN AND
D READINE
ESS FOR IMPLEME
I NTATION ..................... 8
E1. DESIGN AND PREPARATION
P .........................................................................................................8
E2. ASSESSMENT OF PROJECT DESIGN AND PREPARATIO ON FOR IMPLEM MENTATION ..............................9

F: IMPL
LEMENTAT
TION ............................................................................................... 10
F1. KEY CHARACTTERISTICS OF PROJECT IMP PLEMENTATIO ON .............................................................. 10
F2. THE ROLE OF OTHER PARTN NERS (E.G. DO ONORS, NGOS, CONTRACT TORS, ETC.) ............................ 11
F3. INTEGRITY ...............................................................................................................................12
F4. ASSESSMENT OF PROJECT IMPLEMENTA ATION ............................................................................. 13

G: CO
OMPLETIO
ON .................................................................................................... 14
G1. IS THE PCR DELIVERED
D ON
N A TIMELY MA H BANK POLIC
ANNER IN COMPLIANCE WITH CY ..................... 14

H: SELE
ECTED KE
EY LESSO
ONS .................................................................................. 15

I: PROJ
JECT RAT
TINGS SUMMARY .......................................................................... 18

J: PROC
CESSING ........................................................................................................ 19

TECHNIC
CAL ANNE
EXES ................................................................................................... I
 Currency Equivalents
October 2010

UA 1.00 = TZS 2218.98

UA 1.00 = USD 1.55619
UA 1.00 = EURO 1.14023

Fiscal Year
1 July – 30 June

Weights and Measures

1metric tone = 2204 pounds (lbs)
1 kilogram (kg) = 2.200 lbs
1 metre (m) = 3.28 feet (ft)
1 millimetre (mm) = 0.03937 inch (“)
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres

Annexes
Annex 1 Project Costs and Financing
Annex 2 Bank inputs
Annex 3 Economic and Financial Analysis
Annex 4 Summary of Procurement
Annex 5 List of Supporting Documents
Annex 6 Project Narrative
Annex 7 Project Map and Photos

Acronyms and Abbreviations

ADB African Development Bank
ADF African Development Fund
DAWASA Dar es Salaam Water and Sewerage Authority
DP Development Partner
IDA International Development Agency
EIB European Investment Bank
EIRR Economic Internal Rate of Return
ESMP Environmental and Social Management Plan
EWURA Electricity and Water Utilities Regulator
Authority
FIRR Financial Internal Rate of Return
GOT Government of Tanzania
ICB International Competitive Bidding
JAST Joint Assistance Strategy Tanzania
JICA Japanese International Co-operation Agency
MCC Millennium Challenge Corporation
MKUKUTA National Strategy for Growth and Reduction of
(NSGRP) Poverty for Tanzania
NCB National Competitive Bidding
PGA/AHA Public Granting Authority / Asset Holding
Authority
PIT Project Implementation Team
PPP Public Private Partnership
PO Private Operator
TAF Technical Assistant Fund
TZS Tanzania Shilling
UA Unit of Account
NRW Non Revenue Water
WSDP Water Sector Development Program
WACC Weighted Average Cost of Capital
A: PROJEC
CT DATA
A AND KE
EY DATE
ES
The tables
t below sshow key projeect data, i.e. (i)) project basic information (iii) key dates (iiii) ratings for project
p outcom
mes, Bank
perfo
ormance and Client’s
C performmance (iv) Bannk Staff responsible for the project.

A1. BASIC INFORMATIO

ON

PROJJECT / LOAN NUMBER PROJECT NAME

A COUNNTRY PC
CR Date
210001550006772 (L
Loan) Dar es Salaaam Water Supply
Tanzaania Occtober 2010
21000155001742 (Grrant) and Sanitatiion Project

LENDDING INSTRUMEENTS SECTTOR ENVIRONMENTAL

N L CLASSIFICATIION
Loan
n and Grant OWA
AS Cattegory 1

ORIG
GINAL COMMITM
MENT AMOUNT CANCELLED
A AMOUUNT DISBURSEED PERCENT DISBURRSED
UA 36.
3 94 million. – Loan UA 4,121,3662.54 UA 322,818,637.46 88..84
UA 1.31 million. – TTAF Grant UA 142,054..24 UA 1,,167,945.76 89..16

CLIENT EXECUTING AGENCY CO-FINANCERS ANND OTHER EXTERNAL PARRTNERS

Dar es Salaaam Water
Uniteed Republic off Tanzania
and Seweragge Authority
Government of Tanzzania (USD12 mill.);
m World Bannk (USD 61.5 mill.);
m
Europpean Investmennt Bank (USD 34
3 mill.); Privatee Operator Equiity
(USD
D 8.5 mill.)

A2.. KEY DA
ATES

CONCEPT REVIEW APPRAISAL APPROVAL SIGNATURE RESTRUCTURING(S)

Pre-aappraisal - 06..09.1997 16.04.2001 17.12.2001 2
29.05.2002 March 2006

DIFFEERENCE IN MONTTHS
ORIGINAL DATTE RESTRUCTURED DATE
A ACTUAL
C DATE [Actual – original /restrucctured]
EFFE
ECTIVENESS 14.04.2004 N/A 114.04.2004 0
MID-TERM REVIEW
W 11.11.2006 N/A 1
11.11.2006 N/A
CLOSSING 31.12.2007 31.12.2009 3
30.06.2010 - 30

A3.. RATING
GS SUMMAR
RY

CRIT
TERIA S
SUB-CRITERIA RATING
G

Achievement off Outputs

A 3
A
Achievement off Outcomes 2
PROJECT OUTCOM
ME
Timeliness 2
OVERA
ALL PROJECT
T OUTCOME 2
Design and Reaadiness
D 3
BANK PERFORMA
ANCE S
Supervision 3
OVERAL
LL BANK PERF
FORMANCE 3
Design and Reaadiness
D 3
CLIE
ENT PERFORM
MANCE Im
mplementationn 3
OVERALL
L CLIENT PERF
FORMANCE 3

A4.. RESPONSIBLE BAN

NK STAFF

POS
SITIONS A
AT APPROVA
AL AT COMP PLETION
COUNTRY DIRECTO OR D. GAYE
SECTTOR DIRECTORR K
K. MTEGHA A. KIES
SECTTOR MANAGERR G
G. MBESHERRUBUSA LLOW
S. B. JAL
PROJJECT TEAM LEEADER K
K. KHOTLE P. DZIMIRRI
PCR
R TEAM LEADER N
N/A S. MARA ANDU
1
B: PROJ
JECT CO
ONTEXT (R
( ATIONA
ALE FOR BANK ASSIS
STANCE)
Below is a summarry of the ratio onale for Bank assistance, in ncluding: (i) wh
hat developmeent challenge the
t project con ncerns, (ii) thee
Clien
nt’s overall stra
rategy for addrressing it, (iii) why
w and how the t Client requ uested Bank asssistance, (iv) previous Ban
nk activities in the
counntry and sectorr and how theyy performed, citing
c all relevaant PCRs, (v) ongoing
o Bank and other exteernally financeed activities th
hat
compplement, overllap with or relaate to this projject and (vi) co
omment on thee strength andd coherence off the rationale.

Developm
ment challengge of the projecct.
B1.. The devvelopment ch hallenge of the
t project was
w to provide reliable, affordable and a sustaina
able water su upply
servicess and improvved sewerage and sanita ation facilitiess in Dar es Salaam
S city and parts off coast regio
on, in
order to improve public health and
a socio-ec conomic activvities. The current
c estimated populattion of the city
c is
about 4 million people. The city contributes
c about
a 18 % of o the Nationa al Gross Dom mestic Produ
uct.

B2.. At the sttart of the prroject, the Daar es Salaamm water and sewerage in nfrastructure was at an advanced
a sta
ate of
disrepair, posing significant pote ential health hazards.
h Tecchnical opera
ations and coommercial performance were
poor, wiith more than 50% of the water prod duced being g lost throughh leakage and unpaid consumption. The
billing and collectionn system wa as highly ineefficient. Suppply to the city was perioodically cut off due to bursts
along ke ey transmiss sion mains. Electrical
E and mechanica al equipment were beyo ond their useeful economic life
and the filters at thee main facilitty were out ofo operation leading to partial
p treatm
ment. None o of the 15 sewwage
pumping g stations we ere operationnal and the sea
s outfall which
w conveyys waste watter from the city centre to
o the
sea had collapsed, le eading to siggnificant pollu
ution of the coastline.
c

The Cliennt’s overall strrategy for addrressing the deevelopment chhallenge.

B3.. The Clie ent’s strategies to overcoome the abovve challengees were: (i) major
m rehabilitation of exiisting facilitie
es (ii)
institutio
onal reforms including private
p partne
ership to im
mprove opera ational and commercial
c performance e (iii)
preparattion for addittional water sources and d expansion of the facilitties (iv) impllementation of a program m for
low-inco ome commun nities outside
e the current network.

Why andd how the Cliennt requested Bank

B assistance.
B1.. In 1992, the Govern nment reque ested assista ance to rehaabilitate the Dar
D es Sala aam system in order to meet
customeer demands for f improved d service leveels. AfDB proovided an AD DF grant of UA 520,000 and a studyy was
carried out from 19 994 to 1997,, in which a four phase e investmentt program of about UA 160 million was
formulatted. A projecct of UA 38 million,
m for es
ssential reha
abilitation and
d leakage co ontrol was also identified
d and
approveed by the AffDB in 2001. The AfDB project wass kept on ho old pending the outcom me of instituttional
reforms including puublic private partnership,
p as discussed
d further in Annex
A 6. In February
F 200
03, after a bid
dding
process (described in Annex 6), a ten yearss Lease Con ntract was signed
s with a private opeerating comp pany,
which became effecctive in Augu ust 2003. A joint appraissal of the prroject by co-financiers was
w carried out o in
March 22003 and USD 143.45 million joint fina ancing was aapproved by the AfDB, ID DA and EIB.

Previous Bank activitiees in this counntry and sectorr and how theyy performed, citing
c all relevaant PCRs.
B2.. The ADF F water and sanitation support in Tanzania starteed in 1976 and
a comprise es twelve opeerations and
d four
studies; amounting to
t UA 168 million.
m All the
e studies and e operationss have been completed. One
d eight of the
Project Completion Report (PC CR) is avaiilable, for th
he Monduli District Wa ater and Sa anitation Prooject,
successsfully comple
eted in 2009 9. The Monduli proje ect performe ed satisfacto
orily in achie
eving the prroject
objective
es although it was complleted 6 montths beyond the original project
p closing date and itt was affecte
ed by
cost oveerruns and delays
d in the
e disbursemment of counterpart contrributions. PCCRs for the other completed
operatio
ons were not available.

Ongoing Bank and othher externally financed

f activvities that compplement or rellate to this prooject.
B3.. A major ongoing ADDF funded water program m in Tanzaniia is the Rurral Water Su
upply and Sa
anitation Prog
gram
(RWSSP P) which is part of the Tanzania Water
W Sectorr Developme ent Program (WSDP), a national se ector-
earmarkked programm supported by several Developme ent Partnerss. including the World Bank, Germ many,
France, Japan, the Netherlands,
N e USA. The WSDP supp
DfID and the ports and com
mplements th
he project.

Commennts on the strenngth and coheerence of the rationale

r for Bank
B assistancce.
B4.. The projeect rationale was coherentt and respons sive to Goverrnment policie es, strategies and prioritiess together witth the
sectoral orientation off the AfDB. It is compatible e with: (i) the
e developmen nt focus and sectoral
s orientation of the AfDB
Strategy 2003-2007, (iii) the thrust of
o the AfDB Country
C Strateggy Paper 2002-2004 (iii) the Tanzania Development
D V
Vision
2025 (iv)) the Tanzaniia National Water
W Policy 2002,
2 which focuses
f on thhe provisionn of potable water with sp pecial
emphasiss on cost reccovery and su ustainability, and
a (v) the Tanzania
T Poveerty Reduction Strategy Paper (2000) which w
focuses oon poverty reduction and im mprovement in i the quality of life. A ma ajor constraintt during impleementation wa as the
collapse of the public private particcipation, whichh was a centrral pillar of the
e project design. This is discussed furth her in
ssons learned)) and Annex 6.
section H (selected les

2
C: PROJ
JECT OB
BJECTIVE
ES AND LOGICA
AL FRAMEWORK

C1.. PROJEC
CT DEVELO
OPMENT OBJ
JECTIVE

The devvelopment ob bjective of the

e Project, as
s set out in th
he appraisal report,
r is to provide
p reliab
ble, affordab
ble
and susttainable wateer supply serrvices and im
mproved sew werage and sanitation
s in Dar
D es Salaa am city and parts
p
of coast region in Ta
anzania.

C2.. MAJOR
R PROJECT COMPONEN
NTS

Below are
a the majorr project com mponents, ass originally b
budgeted, annd how each
h will contribu
ute to the prroject
objective
e. The financcing plan and
d actual costs are given in Annex 1.

C2.11 Rehabiliitation and Extension

E of Water
W Supply
ly Facilities to
o improve th
he water servvice levels - b
budgeted at USD
106.5 equivalent to 64% of tottal project co ost comprisiing: rehabilittation of the
e three main n production and
treatmennt facilities, transmission, storage and
d distributionn network.

C2.2
2 Rehabiliitation and Extension
E off Waste Wa ater Facilitiess, so that waste
w water can be disp posed propeerly -
budgete ed at USD 22.4
2 equivale ent to 13% of
o total projecct cost, comp prising: reha
abilitation of nine
n waste water
w
stabiliza
ation ponds, rehabilitationn and extenssion of sewe ers and sew wage pumpin ng mains, rep placement of
o the
marine ssewer outfall, rehabilitatio
on of 15 sew
wage pumping g stations.

C2.3
3 Commun nity Water Supply
S and Sanitation
S P
Program, to serve
s low inccome comm munities not connected
c too the
piped neetwork - budg geted at US
SD 3.85 equivvalent to 2.33 % of the to otal project co
ost, coveringg:
Construcction of 50 community
c w
water and saanitation sub b-projects in ncluding: (i) small water supply sche emes
based ono point sou urces such as borehole es or bulk supply poin nt on the main
m distribution networkk (iii)
sanitatio
on facilities, mostly
m comm
munity, schoool and instituttional latriness.

C2.4
4 Institutio
onal Strengtthening, to improve th he capacity of DAWAS SA (the Exe ecuting Ageency) and othero
Governm ment Institutiions involved d in the impllementation o of the projec
ct - budgetedd at USD 266.15 equivale ent to
15% of ttotal project cost, coverin ng: Technical Assistance (financial an nd engineerinng advisors; legal assista
ance;
environm mental and social mon nitoring assistance; com mmunication n consultantts; engineerring consulttants;
financiall and technical auditors;; revaluation n of DAWAS SA assets; trraining of sta
aff from DAWWASA, EWU URA,
Ministry of Water and a Irrigation
n and Wate er Basin Offfices; financial support for DAWAS SA transition and
maintenance activitiies, technica al assistancee to the Wa ami/Ruvu Ba asin Agency, financial assistance
a to
o the
Operato or, including sub-loans
s to help finance
e initial opera
ations.

C2.5
5 Future SStudies, to prepare
p the
e medium terrm water sup pply and san
nitation extension progra am - budgete ed at
USD 6.1 15 equivalennt to 3.8% off total projectt cost, coveriing: Future water resou urces plan an
nd environmental
assessm ment; feasibilities studies and designss for additional water sup
pply facilities;; developmen
nt of a strate
egic
on plan plus feasibility studies and designs;
sanitatio d andd preparation
n of a strate egy for deve
eloping the urban
u
WSS se ector in Tanza
ania.

3
C3.. LAY O
OUT OF THE LOGICAL
L FRAMEW
WORK.
SECCTOR GOAL SECTOR INDICATORS VERIFICATION KEY ASSUMPTIONS
S A RISKS
AND
Impproved urban infrastructure 1. Urbann WSS servicess • GoT Deveelopment planss GoT capaacity to sustain
servvices and particcipation of the rehabilitated and exppanded • Annual naational economic investments in the WSS S sector,
privvate sector in Water
W Utility 2. Privatee operation of WSS
W survey report attract private sector parrticipation
mannagement to suupport in Dar es Salaam • EWURA annual
a report too and mainntain a functioning
exppansion of produuctive sectors 3. Functiioning regulatorry Parliamennt regulatoryy framework
andd public health framew work

OBJECTIVE
B OUTCOME / IMPACT
M INDICAATORS VERIFICATION KEY ASSUMPTIONS
S A RISKS
AND
To provide 1 70% of cuustomers obtainn 24 hour waterr supply • Reports byb EWURA, thee
reliaable, service unnder adequate pressure
p Operator, and DAWASA A - All paarties function within
w the
affoordable and 2 100% of water
w samples meet
m quality staandards (includingg FMRs) dictaates of the reguulatory
susstainable specified in the Lease coontract. • Independent audits and frameworrk and perform as per their
WS SS services 3 80% of seewage collectedd and treated too acceptable reviews reespective contraacts
in thhe Dar es effluent sttandards • Project mid-term review - Capacity of GoT to maintain
m a
Salaam and 4 A life-linee tariff for low income househoolds is report tariff poliicy that ensuress adequate
parts of Coast implemented • Completioon Report cost reecovery, and guuarantees
Reggion 5 Revenue from WSS coveer O&M costs and a 10% of • Reviews of o the Operatorr seervices to the poor
p
construction cost of the project
p tariff

OUTPUTS
U OUTPUT INDICATORS VERIFICATION KEYY ASSUMPTIONS/ RISKS
1 Original design productioon capacity guaaranteed at threee - DAWASA and - Inaadequate capaccity of
treatment plants O
Operator quarteerly and DAW WASA to supervvise
Water supply
2 110 km off transmission mainm rehabilitated a
annual reports Opeerator, consultannts and
faciilities
3 1,040 km of distribution pipes
p installed - Commissioned NGO Os
rehabilitated
4 173,000 new
n / rehabilitatted, metered cuustomer connecctions s
surveys and auddits - Pooor performancce of the
andd extended
5 80% of neew connectionss funded from thhe Connection Fund. F - Supervision mission Opeerator in executiing the
6 250 new kiosks
k built r
reports DWC C
Sew werage 7 124 km off sewers(exten nded / cleane ed / rehabilitaated) - NEMC, DAWA ASA - Inaadequate capaccity of
faciilities 8 15 pumpinng stations and 9 stabilizationn ponds facilitiess a Operator reeports
and DAW WASA
rehabilitated rehabilitatted - Surveys and audits
a - Pooor performancee of
andd extended 9 500 new sewer
s connectioons made - Mission reports conttractors etc
Com mmunity 10 36 Community WSS schemes built and operating - DAWASA repoorts Inaddequate capacitty of
watter and 11 Community sanitation acctivities implemeented in low inccome - Surveys and audits
a DAW WASA
sannitation done neighbourrhoods where pipedp water is innstalled - Supervision missions
Tecchnical, 12 173,000 meters
m installed - DAWASA repoorts - Pooor performancee of the
commmercial 13 All water bills
b based on actuala meter reaading - Operator Tarifff Opeerator
andd financial 14 Collectionn ratio increasedd to 90% r
review - Inaadequate capaccity of
cappacity of 15 UFW reduuced to 35% - Communicatioons with DAW WASA
insttitutions 16 Technical Advisors to DA AWASA mobilizzed and perform ming. E
EWURA - Noon payment of WSS
W bills
streengthened 17 DAWASA A assets re-valued. - Commissionedd by GOT
G agencies
18 DAWASA A staff trained in regulation, priccing, procuremeent, s
surveys and auddits - EWWURA's capacitty
project maanagement, & financial
f managgement. -Supervision
- mission - Cooordination betw
ween
19 Operatingg equipment suppplied to Ruvu / Wami Basin A Authority r
reports DAW WASA and the Operator
O
20 Ruvu / Waami gauging staations built -MOWI
- annual reports
Future WSS 21 Water ressources plan and environmenttal assessment done - MOWI
M annual reports
r Inaddequate capacitty of
projjects 22 Water suppply feasibility study
s and prelimminary design carried
c out - DAWASA
D and DAW WASA to implem ment works
prepared 23 Strategic sanitation plan carried out EWWURA reports in a timely fashion and
a
24 Sanitationn feasibility studdy and preliminnary design carrried out - Surveys
S and auudits supeervise implementation
25 Urban WS SS sector devellopment strateggy prepared by 2005. - Supervision
S repports agennts

ACTIVITIES
C PLANNED INPUTS VERIFICAATION
USD milllion % of totaal
Rehhabilitation of wwater facilities 106.005 64.4 - DAWASA,
D Operaator & EWURA A quarterly
Rehhabilitation of wwaste water facilities 22.400 13.6 andd annual progreess reports
Commmunity Water Supply Program 3.855 2.3 - Bank disbursemeent data and suupervision
Insttitutional Strenggthening 25.000 15.2 misssion reports.
Future WSS projecct preparation 6.155 3.8 - Inndependent auddit reports.
PPAA financing 1.155 0.7

4
 ACTIVITIES
C PLANNED INPUTS VERIFICAATION
USD milllion % of totaal
Total 164.66 100

C4.. BRIEF A
ASSESSMEN BJECTIVES.
NT OF THE PROJECT OB

The table below gives a brief

b assessmeent of the projecct objectives. Working
W scores are
a inserted, ussing a scoring scale provided
below1.

PROJECT
P OBJECTIVES
S / DIMENSIO
ONS ASSES
SSMENT SC
CORE
The prroject was in liine with the Baank Group’s CSP
C and in
Relevant to
t the country’s
conforrmity with the Tanzania
T MKUUKUTA – poverty reductionn 4
RELEVANT
R development priorities
strateggy.
Objectivess could in The 5 years original project time frame
f for achieving 24 hourr water
principle be
b achieved with
w supplyy service undeer adequate prressure to 70%% of the Dar es
e
ACHIEVABLE
A E 2
the projecct inputs and inn Salaamm population was
w optimisticc. Currently, onnly about 25 % of
the expeccted time framee. the population is gettting 24 hour supply.
s
Consistennt with the Bannk’s
country prrogram
CONSISTENT
C T The prroject was in liine with CSP for
f Tanzania. 4
Consistennt with the Bannk’s
corporate priorities

C5.. ASSESS
SMENT OF LOGICAL
L FRAMEWORK

The tablee below providees a brief asseessment (up too two sentencees) of the extent to which thee log frame co
overed key
dimensioons. Working scores
s are inseerted, using a scoring
s scale provided in Apppendix 1.

LOGIC
CAL FRAME
EWORK DIM
MENSIONS A
ASSESSMEN
NT SCO
ORE
Presentts a logical causal chain forr
A cauusal and logicaal chain for prroject development
LOGICAL
L achievinng the project development 4
objecctives is presented.
objectivves

Expressses objectivess and outcomees in

Log-fframe states objectives
o and outcomes in a
MEASURABLE
M E a way thhat is measuraable and 4
clear, and measuraable way.
quantifiaable
Riskss and key assuumptions are stated.
s Mitigattion
meassures are also provided; howwever, the
primaary target of the project design,
d i.e.
THOROUGH
T States the
t risks and key
k assumptioons improovement of operational
o m
management t of 2
the Utility
U to proje
ect targets, was
w not achie eved,
after failure and termination
t o the private
of e
operator in June 2005

1
Scale for working scoores and ratings: 4 – Very Good - Fuully achieved with no
n shortcomings; 3 – Good – Mostly achieved
a despite a few shortcomings; 2 – Fair – Partiallyy
achievved – shortcomingss and achievementss are roughly balannced; 1 – Poor – Veery limited achievem
ment with extensivee shortcomings; 0 – No achievement.

5
D: PROJ
JECT OU
UTPUTS AND
A OUT
TCOMES
S

D1.. ACHIEV
VEMENT OF OUTPUTS

The tablee below, gives an assessment of the achieevement of exxpected vs. acttual outputs foor each major activity.
a The
expected outputs have been imported d from the log frame in Secttion C. The extent to which the
t expected outputs
o were
achieved has been giveen a score. Thhe scores are weighted
w as peer the activitiees’ approximatte share of pro
oject costs. Th
he
overall ou
utput score haas been auto-calculated as an average of the weighted scores.

MAJOR ACTIVITIES
A S
Working Appraaisal Weigh
hted
sco
ore % coosts Scoore
Exp
pected Outp
puts Ac
ctual Outputts %

COMMPONENT 1 – WATER FACILITIES

Orig
ginal design production capacity
c of 27
70 Sub bstantially ach
hieved
(exxcept Mtoni)
99
cum
m/day restoreed at the threee treatment plants
110
0 km of transmission main ns rehabilitatted Achieved 100
1,04
40 km of disttribution pipe
es installed 128
82 km 100
173
3,000 new / rrehabilitated, metered 3 65
5 1.9
95
114
4,329 70
connectionss
80%
% of connecttions funded from Connecction
Fund reassigne
ed 0
Funnd.
250
0 new kiosks built Achieved 100

COMMPONENT 2 – SEWERAGE FACILITIES

124
4 km sewers (extended / cleaned / 86
107
7 km
reha
abilitated)
3 14
4 0.4
42
15 pumping
p stattions and 9 ponds rehab
bilitated Achieved 100
500
0 new sewer connections s made Achieved 100

COMMPONENT 3 – COMMUNITY WATER SUPP PLY AND S AN

NITATION
36 community
c W
WSS scheme es built Achieved 100
3 2 0.0
06
Commmunity sanitation activitties impleme
ented 75%% achieved 75

COM MPONENT 4 – INSTITUTIONA AL/FINANCIALL

1733,000 meterss installed 114 4,329 70
All water
w bills ba
ased on actu
ual meter rea
ading 74 % 74
Collection ratio increased to
o 90% 77 % overall (20099/2010) 85
exccluding arrears
UFW
W reduced to o 35% 57% % (estimate ed) 30
3 15
5 0.4
45
Tec
chnical Advissors to DAWA ASA mobilize
ed Achieved 100
DAW
WASA assetts re-valued Achieved 100
DAW
WASA staff ttrained as plaanned Achieved 90
Ope
erating equippment supplied to Ruvu Basin
B Achieved 100
Gau
uging station
ns built in Ruv
vu Basin Achieved 100

COM MPONENT 5 – FUTURE WAT TER SUPPLY AND

A SANITATTION STUDIES
Watter resourcess plan & env vironmental 100
Coompleted
asssessment
Watter supply feeasibility stud
dy & preliminary 100
Coompleted
dessign
3 4 0.12
Stra
ategic sanitation plan Coompleted 100
Sannitation feasibility study / preliminary d
design Co ompleted 100
Urbban WSS secctor developm ment strategyy 80
Partially compleeted
prepared

OVERALL
O O
OUTPUT SCO
ORE 3
[Score iss calculated as an average of the
t weighted scores]

6
D2.. ACHIEV
VEMENT OF OUTCOMES
S / IMPACT INDICATORS
S
The tablee below gives an
a assessment of the achievvement of the five
f major expected outcomee/impact indiccators, using
available monitoring daata. The expeccted outcomess / impact indiccators have beeen imported from
f the log frame in Section
n C.
The extennt to which thee expected outtcomes/impactt indicators weere achieved has
h been given n a score. Thee scores are
weighted as per the acttivities’ approxximate share of
o project costss. The overall output score has
h been auto-calculated ass an
average oof the weightedd scores.

OUTCOMES / IMPA
ACT INDICATORS Workin
ng
Expected Actual Score
e
1. 70% of customers
c obbtain 24 hour water suppply service
25 % of customers
c 2
under ad dequate presssure
2. 100% off water samp ples meet quaality standards specified
94% of sa
amples qualiffy. 4
in the Leease contrac ct.
3. 80% of sewage
s colle
ected and tre
eated to acceeptable Majority of
o effluent samples fail
2
effluent quality in BOD5 and
a COD
4. A life-lin
ne tariff for lo
ow income ho ouseholds iss
Implemen
nted 4
impleme ented
5. Revenue es from WSS S services co
over O&M co osts and
Not achie
eved 0
10% con ntribution to the
t constructtion costs of the project.

OVERA
ALL OUTCOM
ME SCORE 2
[Score is calculated as an average
a of the working
w scores]

D2.1
1 Additio
onal outcom
mes and im
mpacts.
Water U
User Associa ations (WUAAs) set up under
u the Co
ommunity Water
W Supplyy and Sanita ation Program to
managee the community subpro ojects includ
de a fair reepresentation
n of women n and have provided some s
employm
ment opporttunities as technicians,
t clerks etc. Following successful rehabilitation n of the crritical
elementts of the maiin treatment works at Loower Ruvu, another
a Devvelopment Paartner is currrently suppo
orting
expansioon of the pla
ant. Tender evaluation foor the new plant
p expanssion packagee was in proogress duringg the
PCR misssion.

D2.2
2 Risks tto Sustaine
ed Achieve
ement of Ou
utcomes.

Belo
ow is the stattus of key pe
ending issue
es as explained by the Exxecuting Age
ency to the PCR mission:

1. Weak reven nue collection n and high non revenue e water: DAWASA and DAWASCO managements are currrently
implementing
i g a joint recoovery prograam which inc cludes short and long terrm targets to o improve revenue collecction.
Finalization o of customer surveys to establish
e a re
eliable custom
mer informattion database e linked to a GIS system m is in
progress
p toggether with arrangement
a ts for usage of the rece ently establisshed District Metering Zo ones (DMAs s) for
NRW manag gement. NRW W management is also scheduled un nder additional support, currently
c in progress, by other
o
Developmen nt Partners, inncluding leakkage control through perfformance ba ased contractts.
2. Potential
P larg ger DAWASA A financial deficit,
d with debt obligations scheduled from July 2010.2 Throug gh an application
to
t the Ministtry of Finan nce and Eco onomic Affairrs, DAWASA A has requessted restructturing of the e debt repayment
including:
i (i) conversion of the City Water
W Ltd suub loan to eq quity (ii) reducing the DW WSSP on-lending rate to o 5%
from
f 11.5% (iii) changing DAWASA’s repayment start date e from 15/07 7/2010 to 15//07/2013. Diiscussions are a in
progress.
p
3. Future institutional frame ework, includding the leasse review. Le ease review has been co ompleted and awaiting Board
B
approval. Th he Governm ment is workking on the legal and regulatory
r asspects, toge
ether with fu uture instituttional
arrangements.
4. Protection
P off water sourcces: Design anda Tender documents for f permanen nt breach rep
pair at Kidog gozero have been
completed
c a
and budgetarry requireme ents for impllementation have been included in the 2010/20 011 Government
budget.
b Prottection of Kim mbiji and Mp pera water so ources is in progress inc cluding necesssary steps forf gazetting g and
protection
p elds. Wami Ruvu Basin Water Office is working
off the well fie g with Temekke municipallity to protecct the
Kizinga sourrce.
5. Disposal
D off industrial waste into the rehabiilitated pond ds DAWASC CO, in con nsultation wiith the Nattional
Environmenttal Managem ment Councill issued discconnection notices to defaulters and four industrries have alrready
been
b disconnected. Legislation governing waste disposal is also a being revviewed to inttroduce stiff penalties.
p
6. Low river flo ows during periods
p of drrought: Durin ng a site visiit on 28th Occtober 2010, the PCR m mission noted d that
water production at the main treatme ent plant (Lo w affected by low riverr flows, due to drought. From
ower Ruvu) was F
1997 to date e, there havve been thre ee short term m incidents in separate years
y g which low flows have been
during
7
 unable to meet
m the full demand
d at the intake. These
T occurred for 2 months from November to December 2003; 2
one month in Decemberr 2000, and 4 months fro om Decembe er 1996 to March 1997. The
T present unregulated river
ovide a reliab
does not pro ble source off water for a major city likke Dar es Sa
alaam and plans are alrea ady underwaay by
DAWASA fo or regulating the river andd for installing
g additional water
w source
es, following studies carrried out unde
er the
project.

E: PROJ
JECT DESIGN AN
ND READ
DINESS FOR
F IMP
PLEMENT
TATION
The section below staates the extent to which thee Bank and the Client ensured the projeect was comm mensurate witth the
client’s capacity to imp
plement by designing the prroject approprriately and by putting in placce the necessary implementtation
arrangem ments. Both deesign aspects (inputs) and actual
a outcomees are consideered. Design aspects
a includde: extent to which
w
project design took acccount of prevvious operations in the secttor; how well Bank and Clieent assessed the capacity of o the
implemennting agenciess and Project Im
mplementation n Unit; provisiion made for teechnical assisstance. Projecct outcomes include
the extent to which the project was completed on time and activiities were impllemented as designed.

E1. DESIGN A
AND PREPARA
ATION

E.1.1 A projecct study andd design cossting UA 5200,000 was financed

f by the Bank fro om 1994 to 1997 leadin ng to
formulattion of a UA 160 million program tog
gether with a
an urgent reh
habilitation project of UA 38 million which
w
was appproved by thee Board in 20
001.

E.1.2 The projject was kep pt on hold pe

ending the ou utcome of seector institutional reformss initiated byy the Government
in 1997 7 to strengthhen the tecchnical, finanncial and op perational capacity of water
w supplyy and sanittation
manage ement in Dar es Salaam. In February y 2003, after a long bidding process detailed in Annex A 6(a), a ten
years Le ease Contracct was signeed with a privvate operatin
ng company, City Water Services Lim mited, comprrising
a British
h / German Joint
J venture (Biwater/Gaauff Tanzaniaa Ltd) holdinng 51% share es and a Tanzania Company
(Super DDoll Trailer Manufacturing
M g Company) holding 49% % shares.

E.1.3 The 199 97 studies and

a designs under ADF F financing wwere subseqquently upda ated through h an IDA Prroject
Preparation Facility (PPF). A joint appraissal by three co-financiers, the AfDB B, the World Bank and d the
Europeaan Investmen nt Bank took place in March 2003 and d USD 143.4
45 million pro
oject financin
ng was appro
oved.
The tota
al investmentt budget wass USD 164.66, including the
t Governm ment contribuution (USD 12.6 mill.) and
d the
Operatoor equity (US
SD 8.5 mill). The projec ve in Augustt 2003 but ccollapsed in June
ct lease became effectiv
2005.

E.1.4 Out of th
he USD 164 million proje ect investme
ent, the Operrator was ressponsible to: (i) carry outt a USD 5 million
m
essentiaal refurbishment of the water production facilities;; (ii) procuree 173,000 cuustomer metters worth US SD 4
and (iii) projject-manage a USD 40 million reha
million a abilitation off the seconddary and tertiary distribution
network at a design and supervission fee of 10
0 % of the co ontract valuees (or approxximately USD
D 4 million).

E.1.5 The Exe ecuting Agenncy (EA) was the Dar ess Salaam Water W and Se
ewerage Authority (DAW WASA) which was
transform
med, via thee DAWASA Act of 2001 1, into an Asset
A Holding
g Authority (AHA) with responsibilitty for
financing
g and develo oping the faccilities in the
e service area under term
ms specified in a “Develo opment Conttract”
with the Governmen nt. DAWASA A’s specific responsibilitiees included managing
m the rehabilitatiion program (non
delegateed works) tog
gether with other
o programm elements.

E.1.6 DAWAS SA capacity: DAWASA had h satisfacttorily implem

mented the Dar
D es Salaa am part of the Urban Se ector
Rehabilitation Progrramme (USRP), and had h a Chief Executive Officer and managers with substa antial
nce and com
experien mpetency in the t water an nd sewerage e sector. Its procurement
p t capacity wa as assessed d and
found to
o be satisfacttory. Its finan
ncial manage ement capaccities were also
a assessed and it wass found to ha ave a
sound accounting syystem, clear rules for fina ancial manag gement and proper
p guidelines for financial control.

E.1.7 Technica al Assistancce: Due to tthe size andd complexityy of the prop posed projecct, technical assistance was
provided d to DAWAS SA including: (a) financial and engineeering advisoors (b) legal assistance (c)( public relation
assistannce (d) comb bined financiaal and techn
nical audits (e
e) a revaluattion of assetts (f) construction supervvision
consultaant (g) specialized NGOss for managing the com mmunity WSS S component (h) environ nmental audiits (i)
staff traiining and caapacity building (j) HIV/A
AIDS adviso ory services on a part tim me basis. Outline
O TORss and
budgets for the vario ous TAs were e agreed upoon and includded in the project operation manual.

E.1.8 Project Operation Manual:

M A Prroject Operation Manual was preparred comprisin ng (i) projecct implementtation
plan (ii) procuremen
nt plan (iii) financial man
nagement ma anual (iv) prooject administration (v) community
c water
w
supply and
a sanitation program (vvi) safeguard ds, and (vii) quality
q assurrance. The financial man nagement maanual
includedd accounting and financia al managemment procedu ures, audit arrangementss together with the forma at for
Financia al Managemeent Reports (FMR)
( needeed for quarte
erly monitorin
ng.
8
E.1.9 Environmmental and social safeg
guards: The project wass classified as categoryy 1 and a fu
ull environmental
impact aassessment (EA) was caarried out together with an environm
mental management plan n (EMP). Thee EA
and EMP were disclosed publicly in Tanzan nia on 28 Feeb 2003. A re
esettlement framework paper
p (RFP) was
also prepared by DA
AWASA and publicly disclosed on 28 February 20 003.

E2. ASSESS
SMENT OF PROJECT DESIGN AND PREPARAT
TION FOR IM
MPLEMENTAT
TION

The tablee below presen

nts a brief asseessment for eaach dimension
n of project dessign and readiiness for impleementation.

WORKING
D
DIMENSIONS
S ASSESSSMENT
SCO
ORE
The Government
G t displayed political commitment tto
implemment the pro
oject by (a) passing an Acct to
reflectt DAWASA’ss new mand date as AHA A; (b) preparre
Project complexity iss
drafts of the various
v conttracts that formed the
matched d with countrry
REA
ALISM frameework for the
e WSS servicce in Dar es Salaam; and 4
capacityy and politica
al
(c) suupported pu ublic-private partnership. Due to itts
commitm ment.
ed provision to strengthen
complexity, the prroject include
the im
mplementatio on capacity of the Executing Agenccy
througgh technical assistance and
a capacity building.
RISK
K
Risk level of the central
c pillar of the projecct design, the
ASSSESSMENT Project design includ
des
publicc-private parrtnership thrrough a priv vate operato or 1
ANDD adequatte risk analyssis.
was underestimat
u ed.
MITIGATION
Procuurement of Goods, Wo orks and Services
S wa
as
Procureement, FM, M&E
M
carried out by the DAWAS SA Procurem ment Unit, in
USE
E OF and otheer systems are
a
accorddance with the rules and proced dures of the
COU
UNTRY based on
o those already 3
respective funding
g agencies. NCB was allso deployed d.
SYS
STEMS in use by
b governmen nt
FM was
w impleme ented by DAW WASA in acc cordance witth
and/or other
o partnerrs.
Projecct Implementtation Manua
al guidelines
WORKING
G SCORE
Bank Client
Respo onsibilities for
f project implementat
i ion including
Responsibilities for
institu
utional arrangements we ere detailed in a Projecct
CLA
ARITY project implementati
i ion 4 4
Opera ation Manual including financial management and
are clea
arly defined.
monito oring and evvaluation arra
angements.
Necessa ary
The required implementattion docum ments werre
PRO
OCUREMENT impleme entation
availaable. DAWAS SA procurem ment plan was s agreed witth 4 4
REA
ADINESS docume ents are readdy at
all fina
ancing agenccies and included in the POM.
P
appraisaal.
Monitoriing indicatorss
and mon nitoring plan are
MON
NITORING agreed upon and Monitooring indica
ators and a monitoringg plan werre
2 2
REA
ADINESS baselinee data are agree
ed, however baseline data for key in
ndicators wa
as
available or are bein
ng poor.
collected.
The lease includ ded provisioon for the Operator to t
Baselinee data were
establish base va alues for keyy parameters
s at the latesst
BAS
SELINE available or were
within one montth of the end of the e “enhanced 1 1
DAT
TA collected during projject
monitooring periodd” however this was not n achievedd,
design
within the specified period.

9
F: IMPLE
EMENTA
ATION
The section below desccribes the majjor characterisstics of projectt implementatiion with refereence to: adherrence to sched dules,
quality off construction or other workk, performancee of consultantts, effectiveneess of Bank su
upervision, effeectiveness of Client
C
oversightt, and compliance with safeg guards.

F1. KEY CH
HARACTERISTICS OF PROJECT IMP
PLEMENTAT
TION
F.1.1 Schedulles: The projject was app proved on 17 7 Decemberr 2001 and th he agreements were sig gned on 19th May
2002. Immplementatio on (effectiveeness) was however co onditional to o institutiona
al reforms and
a provisio
on of
additiona
al resourcess from other financiers.
f A joint appraiisal of the prroject was caarried out in March 2003 3 with
other co
o-financiers, after
a the institutional refo
orms.
th st
2
F.1.2 The projject became effective onn 14 July 20 004. The origginal project closing date
e of 31 Deccember 2007 7 was
restructu
ured and the e project waas re-schedu uled to be completed
c after
a 5 yearss i.e. by Deccember 2009. In
practice, it was clos
sed in June 2010.
2 There was a slipp
page of 18 months
m betweeen the re-sstructured clo
osing
date andd the actual closing
c date.. This was mainly
m due to the loss of momentum
m arising
a from the
t terminatio on of
ate operatorr on 1 June 2005, due to breach o
the priva of contract (discussed
( fu
urther in An
nnex 6). A public
p
operatorr (DAWASCO O) was appoointed on 1 Juune 2005.

F.1.3
3 Restructturing: The project
p was re
estructured in
i March 200
06 during wh
hich a new in
nstitutional arrrangement, after
terminattion of the private operator, was acccommodatedd. However, the main coomponents of the projectt and
the deve
elopment objjective were not changed d.

F.1.4
4 Rehabiliitation workss: The rehab
bilitation prog
gram, involving about 20 0 civil works
s contracts, was
w successsfully
complete ed. Although the origina
al contract tim
meframes we ere frequently exceeded, cost overruns were care efully
manage ed by DAWAS SA and thosse that occurred were ma ainly due to increased scope, which bbecame appa arent
during th
he refurbishmment processs. Liquidatedd damages were
w applied where delayys were not ju
ustifiable. Ovverall
contractt cost overrun
ns were abouut 10% of the e original summs.

F.1.5
5 The PCR mission re eviewed the completion reports for all a the majorr works contracts (CP1 – CP5). All the t 3
treatmen nt plants we ere refurbished (under a design and d build contrract) togethe er with seleccted parts of
o the
transmisssion and the e primary disstribution neetworks unde er admeasure contracts. During the PCR mission n the
refurbishhed plant wa as found to be producin ng water to thet required quality and reliable floww measurem ments
were be eing recorded. Parts of the seconda ary and tertiary distributtion network were also rehabilitated and
extended (one proje ect completion report was w availablee; the rest were
w under preparation during the PCR
mission)). Site inspecctions showe ed that residents in some e of the rehaabilitated seccondary and tertiary netw
works
were be enefitting fromm improved service
s levels, with adeq quate supplie es at accepta able pressurre such as Mbezi
M
beach, b but in some areas such as parts of Kimara, water is still rationed due to o inadequatee supplies. At
A the
start of tthe project, priority
p rehab
bilitation conttracts includiing limited ne
etwork exten nsions were scheduled inn line
with the approved financing. Cu urrently, the MCC is fund ding expansion of the main water tre eatment facillities,
while addditional reha abilitation of the
t network is being carrried out unde er the WSDP P.

F.1.6
6 All the ssewerage pumping statio ons and wastte water stab bilization pon
nds were resstored. New sewer lines were
installed
d and sewe erage equipm ment procurred. The se ea outfall was
w also reeplaced and extended. The
Community Water SupplyS and Sanitation Program wa as implemen nted with thhe assistancce of specia alized
international NGOs.. The origin nal target was
w to impleement 50 su ubprojects but
b this wass revised byy the
Stakeho olders Steerinng Committe ee, to 36 sub
bprojects. At the time of the
t PCR, 45 5 water subpprojects had been
construccted, of whicch 35 subpro ojects were operational a and 10 subp projects weree awaiting power
p conneection
etc. A ssuccessful bidder for som me of the lattter subprojeects presenteed a forged performance guarantee e and
was dulyy disqualifiedd, which led to delay as other imple ementation arrangements s were sought. Out of th he 45
water su ubprojects, 4 were imple emented sep parately fromm DAWASA own sourcess. A list of constructed
c w
water
subproje ects is given in Annex 6 (a). Sanitation facilities were construucted, includ
ding two pubblic toilets at local
markets and 8 promo otional EcoS
San latrines.

F.1.7 Quality of works: Overall, the q quality of works was satisfactory and
d acceptable e to the Clieent. There was
w a
technica al audit arrangement during
d imple
ementation, with the auditors
a poiinting out identified
i qu
uality
weaknessses for remmedial action. DAWASA made m close follow up onn identified quality
q issuess – at the tim
me of
the PCR R mission, the
t final acccount for so
ome contraccts had not been concluded and DAWASA D waas in
discussions with thee Supervising o some outtstanding quality issues such as the Mtoni raw water
g Engineer on w
pumps, functionality of the grit pumping systtem at Lowerr Ruvu and broken
b baffle
e plates in th
he new pulsa atube
clarifier at
a Lower Ruvvu.
F.1.8
8 Institutio
onal strength
hening: Capa
acity building
g componentts for the Exxecuting Ageency (DAWA ASA), the Minnistry
of Wate er, the Reg gulator (EW
WURA), the Ruvu/Wami Basin Wa ater Office (RWBO),
( annd the ope erator
(DAWAS SCO) were implemente ed, although h there wass some dela ay in the trraining of DAWASCO
D staff.
Revalua ation of DAW
WASA assets was also ca arried out. Su
upport to RW
WBO includedd rehabilitatio
on of hydrom
metric
stations and purchasse of motor vehicle
v and computers.
c

F.1.9
9 Studies for future exxpansion: Stu
udies for futu
ure water sou
urces were successfully
s conducted. Out
O of 26 surface
and ground water options
o whichh were evalu uated two opptions were recommende ed, namely: (i) regulatioon of
Ruvu rivver by buildin
ng a dam at Kidunda and (ii) develop pment of deeep groundwa ater aquiferss on the soutthern
part of th
he city.

F.1.10 Safeguaards: An outs standing safe e is the discharge of indusstrial effluentts, without pre-treatment, into
eguard issue
the reha
abilitated sewwage ponds.. The operattor, in consultation with thet National Environmen ntal Management
Council, issued discconnection notices to deffaulters and four industrries have alre eady been disconnected
d d. At
present, industrial efffluent is disccharged untrreated throug
gh the sea outfall,
o althou
ugh proposalls for provisio on of
seweragge treatmentt facilities in Dar es Sala aam (and exxpansion of thet system) are included d in the Stra
ategic
Seweragge Master Pllan prepared d under the project.
p

F.1.11 The AfD DB financed the rehabilitation and exxtension of the

t primary water
w distrib
bution networrk, the seweerage
system (pumping stations,
s sewwer lines an nd the sea outfall), parrts of the se econdary an nd tertiary water
w
distribution network and parts off the commu unity water supply
s and sanitation proogram plus revaluation
r o the
of
DAWAS SA assets an
nd support to
o Wami Ruvu u Basin Wate er Office. A detailed list of ADF financed contrac cts is
given in Annex 4. By 31 Decem mber 2010, th he capital invvestment wo orks were substantially co ompleted, exxcept
parts of the ADF fun e secondary and tertiary distribution network. Thiis subcompo
nded rehabilitation of the onent
was co-ffunded with the World Bank.
B The ADDF part had been schedu uled for the last half of the project pe
eriod
and prog gress was de
elayed by the
e terminationn of the priva
ate operator.

F.1.12 Joint supervision misssions were useful and enabled

e jointt review and resolution of
o various isssues. Overall, the
performaance of the Consultants and Contractors was sa atisfactory. There
T was a technical au udit arrangement
during implementation, which was w effective
e in identifyying areas re equiring corrective actio on and prov viding
suggestions and rec commendatio ons. The auditors produced twelve audit a reportss, five techniical opinionss and
providedd significant additional te
echnical adv vice. Techniccal audit ove ersight is pa
articularly helpful for commplex
and/or llarge scale projects. The original scope of th he technicall audits wass limited to specific prroject
components but afte er submissioon of the first audit reporrt the scope was widene ed to cover the
t whole prroject
except the studies and capacity building.
b

F.1.13 The prooject benefiteed from DAW WASA’s com mmitment which
w ensure
ed the succe essful implemmentation of the
scheduleed rehabilitation works, the
t communiity water sup pply and sanitation progrram and the studies for fu uture
expansioon. Following successful rehabilitatio
on of the crittical elements of the ma ain treatmentt works at Lower
Ruvu, th
he Millenniumm Challenge Corporation (USA) is currrently financ cing further expansion
e of the plant.

F2. THE RO ER PARTNERS (E.G. DO

OLE OF OTHE ONORS, NG
GOS, CONTR
RACTORS, ETC
E .)

F2.1
1 The Exe
ecuting Agen ncy (DAWAS SA): satisfactorily manageed the implementation off the capital works,
w in spite of
impleme
entation consstraints, arissing from the
e termination
n of the lease contract. DAWASA also a successsfully
manageed the service
e contracts.

F2.2
2 The Con
ntractors ove
erall, satisfacctorily implem
mented the va
arious investtment contracts.

F2.3
3 The Con
nsultants and
d NGOs overrall, performe
ed satisfacto
orily.

F2.4
4 The Fina
ancial and Te
echnical Aud
ditors perform
med satisfacttorily.

F2.5
5 The privvate operatorr (City Waterr): significanttly delayed the
t implemen ntation of tw
wo special coontracts, awa
arded
as part o
of the lease agreement, for the impro ovement of critical
c plant and equipme ent of the syystem (SIPE)) and
for suppply of custom
mer meters (POG).
( The operator also breached various prov visions of the lease conttract,
which w
was subseque ently termina
ated in June 2005.
2

F2.6
6 The pub blic operator (DAWASCO O): has not yet
y attained revenue
r colle
ection to meeet operation
nal costs and
d has
not complied with many of the le ease targets. Although th he DAWASCO lease agre eement incluudes provisio
on for
tariff adjjustment acccording to ann inflation/co
ost index forrmula, the Regulator
R (EW
WURA) did notn authorizee the
Operato or’s annual taariff review applications
a for the perio
od 2007/2008 8 and 2008//2009. Subssequently, in July
11
 2009 EW WURA autho orized a 30%
% tariff increa
ase which became
b effec
ctive in Augu
ust 2009. Th he customer tariff
was alsso restructurred to allow
w DAWASCO O retain a higher
h perceentage of th enues. The tariff
he tariff reve
restructu
uring was ba
ased on the provisions
p of the lease co
ontract.

F2.7
7 The Regulator (EW WURA): Altho ough the de esign for thee Dar es Salaam
S PPPP included provision
p for an
autonommous regulato ory mechanism, the Tanzzania Regula atory Authoriity (EWURA)) was not in operation, fo or the
whole d duration of th
he private operator
o leasse and the Minister responsible forr water acted as the Intterim
Regulato or, by an am
mendment to the DAWAS SA Act in Mayy 2003. The legal framew work establisshing EWUR RA as
an auton nomous multti-sectoral re
egulatory autthority was enacted
e in 20
001 but EWU URA started operating on nly in
2006. A Although the Interim Reg gulator autho
orized annual tariff review ws based on the inflation index formuula in
the leasse contract, EWURA
E did not authorizze annual tarriff review appplications fo
or 2006/2007 7 and 2007/22008
based on the inflation index form
mula and their decision wa as upheld by y the Fair Competition Triibunal.

F3. INTEGR
RITY

F.3.1 During pproject implementation, th

he Bank or Client
C did nott raise any in
nstance of su
uspected corrruption or la
ack of
integrity in procuremment, accounting, auditing, and qua ality of workk, personnel matters, orr another prroject
aspect. On one insttance a successful bidder for the Community
C W
Water Supplyy and Sanitaation subpro ojects
presente ed a forged performance
p guarantee and
a was dulyy disqualified by DAWASA A.

12
F4. ASSESS
SMENT OF PROJECT IMPLEMENTA
M ATION
An assesssment of the project
p implem
mentation dimeensions is sho
own below, tog
gether with a working
w score, using the sco
oring
scale proovided in Appeendix 1.

DIMENSIO
ONS WORKING
AS
SSESSMENT
SCO
ORE
Project wass completed on o time. Draw
directly fromm Section A ono Project Dataa and
Key Data. Calculate
C the ratio of actuall to The date
d of appro
oval was December 2001 1
and the
t original closing
c date was
w Decemb ber
planned tim me from approoval to closing..
TIME
ELINESS 20077. The projecct was closedd in June 201
10. 2
Score “4” iff the ratio is 1..0, score “1” iff the The slippage
s betw
ween the acttual and the
ratio is 2.0, score “0” if raatio is greater than origin
nal closing date is 30 moonths.
2.0 (i.e. prooject completioon took more than
twice as lonng as plannedd)].

The project was classified

c as category 1 on
o
03.044.1997 after an EIA and EMP carried d out
in 19
995. The EA and EMP we ere updated in
Marcch 2000 and publicly discclosed on 28
Feb 2003.
2 The Bank enforced d environmental
Bank enforrced Environm
mental safeguaards safegguards. Durinng supervisio
on missions
3
comp pliance with environment
e tal and social
safegguards was reviewed
r andd site
BAN
NK inspe
ections carrie
ed out to verify
imple
ementation ofo the ESMP and RAP
PER
RFORMANCE
Bankk fiduciary co
ommitments and safegua ards
Bank enforrced fiduciary safeguards
s weree honoured.
3
Bank enforrced project coovenants Proje
ect covenants were enforrced. 3
Bank providded quality suupervision in thhe Bankk carried out 15 supervisiion missions
form of skillls mix provideed and practicaality from 2003 and prrovided adeq quate 3
of solutionss. supeervision.
Bank providded quality maanagement Bankk provided quuality managgement
3
oversight. overssight.

Dischharge of induustrial waste water, into the

t
Client compplied with envvironmental rehabilitated pond ds, without pre-treatment
p t is
2
safeguardss a maajor outstanding environm mental
safegguard issue.
DAW WASA complied with Fina anciers’
procuurement guid delines. Overall, project
Client compplied with fiduuciary safeguards finan
ncial manage ement was ge enerally 3
satisfactory. The final audit re
eport is undeer
prepaaration.
Proje
ect covenants were gene erally honoureed,
BOR
RROWER Client compplied with projject covenantss
altho
ough Government contrib bution of USDD
3
PER
RFORMANCE 8.96 million, was slightly less than originaal
comm mitment of USD
U 12 millio
on.
Client was responsive too Bank superviision Clien
nt was generrally responsive to Bank
3
findings and recommenddations supeervision findin
ngs and reco ommendation ns.
Vario
ous monitorin ng data was collected during
the project
p includ
ding water an nd waste watter
quality data, custtomer meter records etc.
Client colleected and usedd monitoring
Howe ever reliable data on system flows wa as 2
informationn for decision-m
making. not available
a ove
er a long period due to
delayys/problems is installing required
r flow
w
meteers.

13
G: COMP
PLETION
N

G1.. IS THE PCR

P DELIV
VERED ON A TIMELY MA OMPLIANCE WITH BANK
ANNER IN CO K POLICY

Date project
p reachhed 98% Date PCR was sent Differen
nce in montths Working score
disburrsement to pcr@a
afdb.org
98% disbursement had not
eached at the
been re e time of the
e 28th Janu
uary 2011 4
PCR mmission.

G.1 R was carried out from 18th – 29th Oc

The PCR ctober 2010. The PCR mission team comprised:
c
• Sabas Mara andu - Water and Sanitatiion Engineerr [OWAS.2, Tanzania
T Fie
eld Office]
• Geoffrey Shoo - Financcial Analyst Consultant
C

G.2 The projject was finaanced by the e AfDB together with the World Bankk, the Europe ean Investme ent Bank andd the
Governm ment of Tanzzania. The Executing Age ency prepare ed its own PCCR and issued a draft to
o the Bank. At
A the
time of the
t PCR misssion, the Wo orld Bank Im
mplementatio on Completio on Report (IC
CR) was at aan advance stage
s
and a draft was provided to the AfDB for co omments. Th he World Ba ank started to
o prepare itss ICR at an early
stage beecause by De ecember 200 09 IDA financed compon nents had been substantially complete ed while the ADF
funded rehabilitation
r n of the seco ondary and tertiary distrribution netw
work was still in progresss as it had been
schedule ed for the last half of the
e project period and its progress
p was
s substantially delayed by
b the termination
of the prrivate operattor. The Euroopean Investtment Bank informed the e AfDB that they
t would not be able too join
the AfDBB for a joint PCR
P missionn in October 2010 as the eir PCR misssion had already been sccheduled for early
2011.

G.3 The PCR R was carrie

ed out in closse consultatiion with the Executing Agency
A (DAWWASA), who was represe ented
(during the mission)) by the DAW WASA Corp porate and Planning
P Manager (Mr. Antony
A Masssawe). The PCR
mission had meetinggs with the DAWASA
D Chiief Executive e Officer (Mr. Archard Mu n its first day (18th
utalemwa) on
th
Octoberr 2010) and on
o the last daay (29 Octo ober 2010).

G.4 Subsequ uently the mission

m d the project sites and h
visited held discussions with the
e Executing Agency’s prroject
team inccluding the Director
D of Technical
T Se
ervices (Mr. Boniface Kaasiga), the Director
D of Quality
Q Assurrance
(Mr. She elukindo Sabbuni), the Diirector of Fin
nance (Mr. Milawi),
M the Project Delivvery Manageer (Mr. Romanus
Mwangin ng’o), the Procurement
P Manager (Mr.
( Machummu) the Finnance Mana ager (Mr. Saais), the Bu
udget
Manage er (Ms. Gracee), the Comm munity Liaiso
on Manager ((Ms. Nelly) and
a the Community Liaiso on Engineer (Ms.
Lydia).

G.5 The mission also: (i)) visited the public

p operattor (DAWASCO) and held discussion ns with the CEO
C (Mr. Jacckson
Midala), the Operations Manage per Kirango), the Comm
er (Mr. Jasp mercial Mana ager (Mr. Ricchard Peter)), the
Water a and Waste Water W Quality Manager (Mr. Emanuel Makusa), the Distribution Mana ager (Mr. Abbas
A
Muslim) and the Lo ower Ruvu Plant Manager – (Mr. J. Bamwenz zaki) (ii) visited the National Burea au of
Statisticss, and (iii) intterviewed so
ome water veendors.

G.6 The PCR ared by the Field Office Engineer and a Country based Consultant Financial Expert.
R was prepa

14
H: SELE
ECTED KEY LESS
SONS

0
H.0 Genera
al

The scheduled rehabilitation n works were e effectively implemente ed and succe essfully mannaged by DA AWASA; toge ether
with the community water supply and d sanitation program, in nstitutional capacity
c buillding and sttudies for fu uture
expaansion. Undeer the studie es, new dee ep ground wa ater aquiferss were identified in the southern
s parrt of the cityy and
threee 400 – 50
00 m test bo oreholes we ere drilled too verify the water qualiity, which was
w found to
o be accepttable.
Furthermore, whhilst at the sttart of the pro
oject, there were
w no funcctioning bulk meters in th
he system an nd only abou ut 3%
ustomers we
of cu ere metered, at the end of o the projectt bulk meterss had been installed togeether with mo ore than 100 0,000
custtomer meterss.

Howwever, the prrimary targett of the projeect design, i..e. upgrading

g commercia al operationss and enhanccing the fina
ancial
situa
ation of the Utility to cover operatioon and maintenance (O& &M) costs, service
s long term debt and
a contribute to
capital investment was not achieved
a afteer failure and termination of the privatte operator (C
City Water Ltd)
L in June 2005.
2
Fivee years after appointmen nt of a publicc operator (DDAWASCO), revenue collection has not improved to the required
leve
el. It was envvisaged in the
e Project Imp plementation
n Manual tha at commercia al operationss would be uppgraded andd non
reveenue water w would be reduced to speccified levels, however at the end of the t project non revenue water is still very
highh and revenue collection does
d not stilll meet opera
ational costs.

While numerouss lessons are

e apparent, th
hree selected ones are discussed
d be
elow in relatio ed lease, reliable
on to the faile
data
abase and no
on – revenuee water.

H.1 Due to the poor ba aseline data and the dirre condition of the asse ets, a lower risk delegatted management
contractt was, potenttially, a more
e prudent PPPP preparatorry step prior to a lease, as
a suggested
d by an AfDB
B pre-
appraisaal mission in n Septemberr 1997. Rep plication of successful
s PPP
P models from other regional setttings
should ffully take into
o account loccal characteri
ristics and co
onditions.

An AfDB
A pre-apppraisal misssion comprissing Mr. Jallow, Mr. Kho otle and Ms.. Wang, which visited T Tanzania fromm 27
August to 6 September1997 7 was inform med of the Governmentt’s intention to introduce e PPP in the e form of a joint
ventture (JV), as advertised in
i July 1997. The missio on was of thee opinion tha
at a low risk PPP
P in the fo
orm of deleg
gated
mannagement wo ould be a bettter starting option
o due to
o the vast information gaap and the pooor condition
n of the asse
ets. It
was however no ot possible for
f the misssion to discu uss this optioon with Govvernment in detail, becau use of preva
ailing
conssultations onn the proposeed joint ventuure. The Bannk therefore gave its opin
nion to the Government
G and requeste
ed to
be updated
u on thhe progress and outcom me of the JV pre-qualification processs. A comparisson of variouus forms of PPPs
P
inclu
uding joint ve
enture, lease
e and management contra act, is shownn in Annex 6.

Eventually, the Government

G abandoned the propose ed JV option n. While it ha
ad been expeected that JV
V partners would
w
bring
g in the requuired capital financing,
f no
one of the fou
ur internation
nal companie es which sub
bmitted substantive propo
osals
(Biw
water UK, S Saur France,, Vivendi Frrance and Northumbria
N n UK) were e ready to secure the required ca apital
inve
estment. In June 1998, the Govern nment sough ht the assistaance of a Transaction
T A
Advisor, (Seven Trent Water
W
Interrnational) to assist in the
e PPP proce ess. A worksshop on the various
v optioons for PPP was also coonducted. Itt was
evenntually decided to requesst bids for a lease contracct.

The lease contra act with a private operattor was signned in February 2003 bu ut was terminnated after only
o two yeaars of
operration, due tot breach off contract. TheT Dar es Salaam lea ase was based on a succcessful mod del introduceed in
Senegal in 1996 6, and adopteed in Niger in
n 2001. How wever, the Senegalese population
p haas a strong trradition of pa
aying
theirr water bills and the collection ratio was good when
w the Se e Dar es Salaam
enegal lease started. In contrast, the
se was ineffective, and itss enforcemen
leas nt by the Ass
set Holding Authority
A (AH
HA), was difficult.

After terminationn of the priv vate operato or, a public operator wa as appointed d and there was a smo ooth transitio
on of
operrations. Give en the failed
d lease, the Government
G indicated that it would like to pause and review the unsucce essful
transsaction before going forwward with the e next attemppt at public-pprivate partnership; which
h was accep pted by a ma ajority
of th
he financiers. Based on thet views of a representa ative from thhe Internationnal Federatio
on of Water Operators during
the operators’
o ro
oundtable org ganized by the Governm ment in Decem mber 2009, iti was unlikely that the G
Government could
c
havee embarked on a quick attempt
a at annother public--private partnership, immmediately afte
er the failed lease, taking
g into
accoount the acrim
monious way y in which it ended.
e

ough the PP
Altho w open to all internatio
PP process was onal water operators, only four intern
national profe
essional parttners
submmitted substa
antive propo
osals. Furthe
ermore, at the
e final round
d of bidding for
f the lease e, only one bid
b was rece eived.

15
As discussed in the second lesson below, the lack of reliable baseline data led to a lease which was not sufficiently
conclusive financially and commercially. A management contract could have been a better starting option which could
have been “rolled into” a lease at the appropriate time.

It is also to be noted that at project appraisal, the prevailing experience on successful WSS PPPs in Africa was
limited. It is only in the 1990s and 2000s that major efforts were made to introduce substantive private sector
participation in the water sector in Africa, including in Ivory Coast (where previous contracts were consolidated into a
lease in 1987), Senegal and South Africa in 1996, Gabon in 1997 and Niger in 2001.

Due to weaknesses in various PPPs in Tanzania during the 1990s and early 2000s, a PPP policy was formulated in
November 2009, followed by a corresponding legal and institutional framework through enactment of the Tanzania
PPP Act of 18 June 2010, which includes rules, guidelines and procedures governing PPP procurement,
development and implementation.

H.2 Reliable baseline data is crucial in the formulation of complex contracts such as major WSS leases, including,
accurate customer data, reliable network data including flows and system losses, correct billing and collection
records etc; its implications should not be underestimated

Historically, there was little accurate data collected on flows in the Dar es Salaam system. Thus, at the start of the
project, there was no reliable operational data on which to establish effective performance criteria for many of the
major parameters of the lease contract, which significantly compromised its effectiveness. Performance targets are of
limited use, without reliable baseline data, together with effective reporting and monitoring mechanisms.

During the last stage of the lease bidding process, two of the three pre-qualified bidders did not submit a bid because
of the risk levels they perceived, including lack of reliable baseline data. Bidders had been asked to bid only on the
operator tariff. Other conditions remained identical for all bidders including: (i) initial equity contribution to the capital of
the Operator, (ii) financial support to the Operator’s start-up activities, and (iii) fees for managing program works
assigned to the Operator. A guiding minimum operator tariff was specified in the bid, and accepted by the only bidder
who submitted a bid.

The tariff was a key driver of the lease financial model, to ensure recovery of operating costs together with
requirements for servicing of debts and returns to shareholders. However, it was contingent on the volume of water
available for billing, which in turn depended on the quantities of the existing system losses that could be recovered by
the rehabilitation.

The lack of a comprehensive and accurate customer data base together with poor data on the flows in the system
meant that the Operator tariff was established on the basis of information that was not sufficiently solid. Furthermore,
although rehabilitation measures were part of the project, there was uncertainty in predicting their immediate
operational impact.

It was also difficult to establish realistic time frames for achieving some of the key project indicators because of the
uncertainty in the baseline data. For example, it was envisaged that at the end of the five 5 years original project time
frame, 70% of customers would obtain 24 hour water supply service under adequate pressure. Currently, only about
25% of customers are getting reliable water supply. The target was optimistic considering that its attainment depended
largely on the quantities of the existing system losses that could be recovered by the rehabilitation as there were no
additional sources scheduled in the first 5 years.

H.3 Reduction of non revenue water requires special dedicated effort.

Reduction of non revenue water (NRW) is still a major challenge for the financial sustainability of the project. NRW is
the difference between the amount of water put into the distribution system and that billed to consumers. It comprises
leakage, theft and improper billing. At the start of the project, in 2003, NRW was estimated above 50%. At present
(2010) NRW is still estimated above 50%. In its edition of 4th December 2010, the Tanzania “Daily News” reported
that the Minister for Water urged the Operator (DAWASCO) to reduce NRW after he carried out a field survey of
Bahari beach area on 2nd December 2010 and locating 15 areas with water leakages which have lasted for a long
period.

The Regulator reported in its 2008/2009 report that among the urban water authorities in Tanzania, the Dar es Salaam
operator (DAWASCO) is the overall least performer in NRW management. The Regulator recommends that NRW
should be less than 20%. Furthermore, the operator’s collection efficiency is at 77 % on current bills, without
considering arrears in respect of previous months. The collection efficiency should be more than 95%. In their
2008/2009 audit report, the auditors noted that the operator is unable to quantify how much of NRW has been lost
through leakages or to identify individuals who have not been billed for their consumption.
16
One of the major lessons that the public operator (DAWASCO) learned from the failed private operator lease is that a
reliable customer database is paramount for effective NRW and customer management together with billing efficiency.
Accordingly, immediately after takeover in 2006, DAWASCO with support from the Uganda National Water and
Sewerage Corporation, embarked on a major effort to improve the customer information data base including linkage to
a GIS system. However, after an initial promising start, progress slowed down. In discussions with the new
DAWASCO CEO (appointed in June 2010) the PCR mission was informed that the exercise has now been revamped
and is scheduled for completion early next year.

It essential that the effort to establish a reliable customer information database be completed as a matter of priority
and effective strategies of reducing non revenue water are worked out and implemented.

17
I: PROJ
JECT RA
ATINGS SUMMA
ARY
All working
w scoress are auto-geneerated by the computer
c from
m the relevant section
s in the PCR. The oveerall scores annd sub-scores for
projeect design and
d supervision/implementation are to be enttered by the auuthor.
WORK
KING
CRIT
TERIA SUB-CRITE
ERIA
SCOR
RE
OUTPUTS, OUTCOM
MES AND TIMELINESS
PRO
OJECT Achievement of Outputs 3
OUT
TCOMES Achievement of Outcomees 2
Timeliness 2
OVERALL PROJECT OUTCOME
O SCO
ORE 2

DESIGN AND
A READIINESS
Project Objectives are rellevant to country developmeent priorities. 4
Project Objectives could in principle bee achieved with the inputs in n the expected time frame. 2
Project Objectives are coonsistent with thet Bank’s cou untry or region
nal strategy 4
Project Objectives are coonsistent with thet Bank’s corrporate prioritiies 4
The log fram
me presents a logical causal chain for achhieving the pro oject developm
ment objectivess. 4
The log fram
me expresses objectives and d outcomes inn a way that is measurable annd quantifiablee. 4
The log fram
me states the risks
r and key assumptions.
a 2
Project com
mplexity is mattched with cou untry capacity and political commitment.
c 4
Project design includes adequate
a risk analysis.
a 1
Project proccurement, finaancial management, monitorring and/or oth her systems arre based on
those alreaddy in use by government and/or other parrtners. 3
Responsibilities for projeect implementaation are clearly defined. 4
BAN
NK Implementaation documen nts (e.g. speciffications, desig
gn, and procurrement) are ready at appraissal. 4
PER
RFORMANCE Monitoring indicators and d monitoring plan
p were agreeed upon durin ng design 2
Baseline daata were availaable or were co ollected duringg design 1
DESIGN AND REA ADINESS SCO ORE 3
SUPERVIISION
Bank enforcced environmeental safeguarrds 3
Bank enforcced fiduciary safeguards
s 3
Bank enforcced project co
ovenants 3
Bank provid
ded quality supervision in th
he form of skills mix provideed and practicaality of solutions. 3
Bank provid
ded quality maanagement oveersight. 3
PCR was deelivered on a timely basis 4
SUPE ERVISION SCO ORE 3

OVERALL BANK PERFORMANCE SCO

ORE 3

DESIGN AND
A READIINESS

Responsibilities for projeect implementaation are clearly defined. 4

Implementaation documen nts (e.g. speciffications, desig
gn, procuremeent) are ready at
a appraisal. 4
Monitoring plan / indicatoors are agreed upon and basseline data aree available or being
b collectedd. 2

DESIGN AND REA

ADINESS SCO
ORE 3
IMPLEME
ENTATION
BOR
RROWER Client compplied with enviironmental saffeguards 2
PER
RFORMANCE Client compplied with fiducciary safeguarrds 3
Client comp plied with project covenantss 3
Client was responsive
r to Bank supervission findings and
a recommen ndations. 3
Client collected and used d monitoring in
nformation for decision-makking. 2

IMPLEMEN
NTATION SCO
ORE 3

OVERALL CLIENT PERFORMANCE SCO

ORE 3

18
J: PROC
CESSING
G

Signature a
and Comments Datte

S.B Jallow
Secttor Manager Clearance

D. Gaye
G
Regional Directo
or Clearance

A. Kies
K
Secttor Director A
Approval

19
TECHNICA
AL ANNEX
XES

Date: October 22010

I
 Conte
ents

ANNEX 1: PROJE
ECT COST
TS AND FIN
NANCING
G

ANNEX 2: BANK INPUTS

1.1 BANK STAFF INPUTS
S
1.2 PROJEECT PERFORMMANCE RATIN
NG
1.3 LIST OF
O MISSIONS

ANNEX 3: ECONO
OMIC AND
D FINANCIIAL ANALYSES

ANNEX 4 - SUMM
MARY OF P
PROCURE
EMENT

ANNEX 5: LIST OF SUPPOR

RTING DO
OCUMENT
TS

ANNEX 6 - PROJE
ECT NARR
RATIVE

ANNEX 7 - PROJE
ECT MAP

II
ANNEX 1: PROJECT COSTS AND FINANCING

Table 1(a): Project cost estimates by component

COMPONENT AT JOINT APPRAISAL AT COMPLETION

USD million % of total USD million % of total
Rehabilitation of water facilities 106.05 64.4 118.17 69.5

Rehabilitation of waste water facilities 22.40 13.6 19.13 11.3

Community Water Supply Program 3.85 2.3 1.86 1.1

Institutional Strengthening 25.00 15.2 25.71 15.1

Future WSS project preparation 6.15 3.8 5.17 3.0

PPA financing 1.15 0.7

Total 164.6 100 170.04 100

Table 1(b): Sources of financing

Financier ‘million
AT JOINT APPRAISAL AT COMPLETION

Borrower USD 12,600,000 USD 8,960,000

AfDB UA 38,350,000 UA 33,986,583
World Bank USD 61,500,000 USD 65,980,000
European Investment Bank USD 34,000,000 USD 41,190,000
Operator Equity USD 8,500,0002

2
The private operator (City Water) was terminated on 1 June 2005 and a public operator (DAWASCO), was appointed on 1 June
2010.
III
ANNEX 2: BA
ANK INPUTTS

2.1 BANK STAFF INPUTS

Name Positiion Division

D
K. Mteggha Directtor OCDE
O
A. Kiess Directtor OWAS
O
G. Mbe esherubusa Divisio
on Manager OCDE.4
O
Sering Jallow Actingg Manager / Manager ONIN.2
O / OW
WAS
Peter NNjuguna Chief Sanitary En ngineer / Ag
g. Division Manager
M ONIN.2
O
S. Sesa ay ResRe ep TZFO
T
S. S. Moyo
M Res Rep
R TZFO
T
K. Khottle Principal Sanitaryy Engineerr OCDE.4
O
B. Kayo ongo Principal Financia al Analyst OCDE.4
O
I. Sambba Enviroonmentalist OCDE.1
O
Egbert H.J. Schrotten Sanitaary Enginee er ONIN.2/OW
O WAS.2
Daniel Lekoetje Publicc Utilities Ecconomist ONIN.2
O
Josephhine Ngure Financcial Analystt ONIN.2
O
Tom Ro oberts Waterr and Sanita ation Engine
eer OWAS.2
O
J.W. Ng gure Financcial Analystt ONIN
O
Amel HHamza Gende er Specialis st OWAS.2
O
Paul Dzzimiri Financcial Analystt OWAS.2
O
Sabas Marandu Waterr & Sanitatio on Engineer TZFO
T
Evans Ntagwabiraa Infrasttructure Spe ecialist TZFO
T
Brighto
on Kishebukka Procurement Asssistant TZFO
T

IV
2.2 PROJECT PERFORMANCE RATING

R
RATINGS
IN
NDICATORS
08.12.2008 08.06.20009 19.110.2009 01.12.2009 03.04.2010

A. PROJECT IMP
PLEMENTATIO
ON

Compliance with loan conditions 2 2 2 2 2

precedent too entry into forrce
Compliance with General Conditions
C 2 2 2 2 2
Compliance with Other Co onditions 2 2 2 2 2

B. PROCUREME
ENT PERFORM
MANCE

Procurement of Consultan
ncy Services 2 2 2 2 2
Procurement of Goods andd Works 2 2 2 2 2

C. FINANCIAL PERFORMANC
P E

Availability oof Foreign Excchange 3 3 3 3 3

Availability oof Local Currency 2 2 3 3 3
Disbursement Flows 2 2 2 2 2
Cost Manageement 2 2 2 2 2
Performancee of Co-Financciers 2 2 2 2 2

D. ACTIVITIES AND
A WORKS

Adherence to impplementation 2 0 0 0 0
schedule
Performancee of Conssultants or 2 2 2 2 2
Technical Asssistance
Performancee of Contractors 2 2 2 2 2
Performancee of Project Maanagement 2 2 2 2 2

E. IMPACT ON D
DEVELOPMENT

Likelihood oof achieving development

d 2 2 2 2 2
Objectives
Likelihood that benefitts will be 3 1 1 1 1
realized and sustained beyyond
Likely conttribution of the project 3 2 2 2 2
towards an increase in
Current Ratee of Return 2 2 2 2 1

F. OVERALL PR
ROJECT ASSES
SMENT

Current Sup
pervision Averrage
2.17 1.89 1.94 1.94 1.89
Current Trend over time
1.97

RATINGS: 3 = Hiighly Satisfacttory, 2 = Satisfa

factory, 1 = Unssatisfactory, 0 = Highly Unsaatisfactory

V
2.3 LIST OF MISSSIONS

TYPE OF MISSION START DATEE END DATE

1 Field Mission
M 17.03.20033 277.03.2003

2 Field Mission
M 02.03.20044 122.03.2004

3 Field Mission
M 06.11.20044 200.11.2004

4 Field Mission
M 08.06.20055 200.06.2005

5 Field Mission
M 03.11.20055 199.11.2005

6 Field Mission
M 28.09.20066 06.110.2006

7 Field Mission
M 20.06.20077 300.06.2007

8 Field Mission
M 02.12.20077 155.12.2007

9 Field Mission
M 07.04.20088 188.04.2008

10 Field Mission
M 25.06.20088 288.06.2008

11 Field Mission
M 08.12.20088 199.12.2008

12 Field Mission
M 08.06.20099 199.06.2009

13 Field Mission
M 19.10.20099 200.10.2009

14 Field Mission
M 01.12.20099 188.12.2009

15 Field Mission
M 03.04.20100 099.04.2010

16 Mid Term
m Review 11.11.20066 222.11.2006

17 PCR M
Mission 18.10.20100 299.10.2020

VI
ANNEX 3: ECONOMIC AND FINANCIAL ANALYSES
Actual Financial Results as per Audited Financial Statements
Annex 1

COMBINED FINANCIALS - PGA AND PO (TZS'000,000)

2002 2003 2004 2005 2006 2007 2008 2009 2010
PROFIT & LOSS ACCOUNT

Operating Income

Gross Water Supply Sales ( tariff) 15,443.00 16,218.00 8,184.00 5,343.00 23,340.29 21,791.67 22,763.45 22,153.53 30,480.00

Gross Sewerage Sales 1,888.00 2,377.00 400.00 595.00 1,410.35 1,533.67 1,603.41 1,233.19 1,651.46

Other Income 303.00 1,287.00 2,614.00 3,812.00 5,768.36 8,542.55 7,083.36 9,852.49 6,868.47

Total Gross Operating Income 17,634.00 19,882.00 11,198.00 9,750.00 30,519.00 31,867.90 31,450.22 33,239.21 38,999.93

Other Payments (e.g. Regulator Tariffs) - - - - 612.05 973.70 1,384.02 1,200.00 1,200.00

Bad Debts Allowance - - - - - 8,065.37 9,470.34 10,905.14 12,517.00

Net Operating Income 17,634.00 19,882.00 11,198.00 9,750.00 29,906.95 22,828.83 20,595.86 21,134.08 25,282.93

Operating Expenditure 26,798.00 22,014.00 15,231.00 19,427.00 33,965.19 48,907.11 38,971.32 59,187.64 40,562.61

Financial Costs - - - 425.00 3,105.21 8,243.40 6,355.39 9,760.85 10,683.95

Total Operating Expenditure 26,798.00 22,014.00 15,231.00 19,852.00 37,070.40 57,150.51 45,326.71 68,948.49 51,246.55

Operating Profit/Loss before Tax (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)

PWP Profit/Loss before Tax - - - - - - - - -

Total Profit/Loss Pre-tax (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)

Corporation Tax @40% - - - - - - - - -

Profit/Loss after Tax (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)
Dividend @90%

Retained Earnings (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)

VII
BALANCE SHEET

Fixed Assets 58,366.00 62,813.00 59,938.00 85,594.00 106,285.22 145,118.34 157,143.51 211,351.69 213,337.96

Long term Receivable - - 2,542.00 - 7,494.00 8,402.00 9,424.00 10,567.00 11,848.00

Current Assets 11,066.00 11,973.00 9,889.00 8,766.00 24,441.47 22,810.48 23,750.69 29,303.78 27,674.84

Current Liabilities 10,285.00 9,036.00 5,673.00 12,126.00 17,440.43 29,656.38 35,894.72 57,313.31 48,429.26

Net Current Assets 781.00 2,937.00 4,216.00 (3,360.00) 7,001.04 (6,845.91) (12,144.03) (28,009.53) (20,754.42)

TOTAL ASSETS 59,147.00 65,750.00 66,696.00 82,234.00 120,780.26 146,674.44 154,423.49 193,909.17 204,431.55
Equity & Long Term Liabilities

Equity ,Reserves and Retained Earnings 59,147.00 65,750.00 63,453.00 67,852.00 77,938.55 78,763.00 71,776.03 85,310.62 73,965.00

Medium Term Debt - - 3,243.00 14,382.00 42,841.71 67,911.44 82,647.46 108,598.55 130,466.56

TOTAL EQUITY & LIABILITIES 59,147.00 65,750.00 66,696.00 82,234.00 120,780.26 146,674.44 154,423.49 193,909.17 204,431.56

CASHFLOW
SOURCES

Surplus before Tax (4,971.00) (5,419.00) (4,748.00) (184.00) (10,693.11) (10,511.39) (16,366.77) 2,741.84 (32,225.30)

Add: Depreciation 6,330.00 4,031.00 4,258.00 4,084.00 4,513.66 5,235.22 6,915.05 9,405.62 9,564.05

Total Internal Generated Funds 1,359.00 (1,388.00) (490.00) 3,900.00 (6,179.44) (5,276.18) (9,451.72) 12,147.47 (22,661.24)

Equity/Grant 117.00 2,292.00 7,870.00 11,643.00 15,840.78 27,998.00 15,801.00 13,883.00 9,929.00

Loan fund received - - 3,040.00 11,139.00 26,841.38 21,703.13 17,742.34 16,707.41 16,415.53

TOTAL FUNDS GENERATED 1,476.00 904.00 10,420.00 26,682.00 36,502.72 44,424.95 24,091.62 42,737.88 3,683.29
APPLICATION

Capital Expenditure 1,297.00 1,507.00 4,523.00 27,387.00 34,131.14 44,572.60 20,678.99 38,070.26 12,805.79
Investment in Water Supply
Other Investments

Loans Repaid - - - - - 327.87 221.42 345.59 240.01

Increase/Decrease in Working Capital

VIII
 179.00 (603.00) 5,897.00 (705.00) 2,371.58 (475.52) 3,191.21 4,322.02 (9,362.51)
TOTAL FUNDS APPLIED

Cash b/f 532.00 711.00 108.00 6,005.00 5,300.00 7,671.58 7,196.06 10,387.27 14,709.29

Cash c/f 711.00 108.00 6,005.00 5,300.00 7,671.58 7,196.06 10,387.27 14,709.29 5,346.79

Combined (PGA & PO) FRR/ERR

Net Operating Revenue 17,634.00 19,882.00 11,198.00 9,750.00 29,906.95 22,828.83 20,595.86 21,134.08 25,282.93

Total Operating Expenditure 26,798.00 22,014.00 15,231.00 19,852.00 37,070.40 57,150.51 45,326.71 68,948.49 51,246.55

Operating Income before Int and Tax (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)

Net Income (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)

Retained Earnings (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)

Project Costs - - 1,994.53 20,053.23 28,594.65 37,846.38 21,015.78 22,222.27 45,565.96

PRE‐FIRR CASHFLOW
Net Income (9,164.00) (2,132.00) (4,033.00) (10,102.00) (7,163.45) (34,321.68) (24,730.85) (47,814.41) (25,963.63)

Add depreciation and amortization 6,330.00 4,031.00 4,258.00 4,084.00 4,513.66 5,235.22 6,915.05 9,405.62 9,564.05

Less Project Costs - - (1,994.53) (20,053.23) (28,594.65) (37,846.38) (21,015.78) (22,222.27) (45,565.96)

Cash Flow (2,834.00) 1,899.00 (1,769.53) (26,071.23) (31,244.44) (66,932.84) (38,831.58) (60,631.06) (61,965.54)

SUMMARY OF ECONOMIC ADJUSTMENTS

START: FIRR Incremental Cashflow 2,736.53 (22,993.52) (28,303.98) (63,101.19) (34,168.08) (46,827.08) (48,871.53)

IX
Adjust for:
Add: ANNUAL EXPENDITURE SAVINGS
BY EXISTING CUSTOMERS 4,957.23 4,957.23 4,957.23 4,957.23 4,957.23 4,957.23 4,957.23
Add: ANNUAL EXPENDITURE SAVINGS
BY NEW STANDPOST CUSTOMERS 4.29 71.17 117.95 157.86 202.29 270.94 423.49
Add: ANNUAL EXPENDITURE SAVINGS
BY DUE TO TIME SAVINGS 92.38 103.08 111.12 117.12 123.88 133.81 154.48

Less: ANNUAL LOSSES BY VENDORS - (1,009.69) (2,049.91) (2,762.91) (3,411.53) (3,647.55) (3,647.55)

EIRR Incremental Cashflow 7,790.43 (18,871.73) (25,167.59) (60,631.89) (32,296.21) (45,112.65) (46,983.88)

Terminal Value (469,838.79)

7,790.43 (18,871.73) (25,167.59) (60,631.89) (32,296.21) (45,112.65) (516,822.66)

Discount Rate

Economic NPV 10% (379,565.5)

Economic IRR 2.92

Financial NPV Tshs -404,394.70

Financial IRR 8.73%

Economic NPV Tshs billion -379,565.50

Economic IRR 2.92%

If all losses to vendors are ignored.

Financial NPV Tshs billion -404,394.70
Financial IRR. 8.73%

Economic NPV Tshs billion -350,537.10

economic IRR 2.78%

X
ANNEX 4 ‐ SUMMARY OF PROCUREMENT

This annex summarizes the number and value of contracts financed by the loan and grant, broken
down by procurement method (ICB, LCB, Turnkey, etc.)

Contract Cost Procurement Mode

Start Date Company
TZS million Appraisal Actual Status
Works
Primary Distribution Mains 15/2/2005 TZS 12,413,211,697 China Aneng ICB ICB Completed
Sewers, Pumping Mains, Sea
7/2/2004 TZS 6,631,246,645 CETIC ICB ICB Completed
Outfall
Secondary/tertiary distribution 2A 19/32008 TZS 7,506,680,399 China Hunan ICB ICB Completed
Secondary/tertiary distribution 2C 26/2/2008 TZS 8,252,824,196 China Hunan ICB ICB Completed
Secondary/tertiary distribution 3A 7/8/2008 TZS 6,402,231,117 Zhonghao ICB ICB Completed
Secondary/tertiary distribution 3B 11/8/2008 TZS 6,085,392,549 Sinohydro ICB ICB Completed
Secondary/tertiary distribution 3C 11/8/2008 TZS 6,360,321,579 Sinohydro ICB ICB Completed
Sewer manholes, connections &
2/4/2008 TZS 3,382,444,256 Zonghao ICB ICB Completed
equipment
CWSS - Kinondoni 5/1/2007 TZS 276,436,334.30 Spectra NCB NCB Completed
CWSSP - Temeke 21/2/2007 TZS 410,417,102.50 Shaan NCB NCB Completed
CWSSP – Ilala – Markaz etc 21/2/2007 TZS 274,717,079.00 Elite NCB NCB Completed
Construction of Hydromet stations- Ujenzi Stores
7/6/2007 TZS 276,436,334.30 NCB NCB Completed
installation of eq. LTD
Goods
OTT
Supply of Water Resources
2/11/2005 Euro 150,507.86 Messtechnik Shopping Shopping Completed
Monitoring Equipments
GmbH &
Supply of Cableway Systems, Mangula Mecha
21/10/2005 TZS 64,699,695.00 Shopping Shopping Completed
Recorder & Machine Tools
Rickly
Ruvu / Wami –equipment Lot 2,3, 7 29/11/2005 USD 251,446.76 Shopping Shopping Completed
Hydrological Co.
Shaj Computers
Ruvu / Wami –equipment – Lot 4 25/11/2005 USD 37,550.00 Shopping Shopping Completed
Ltd
Ruvu Wami Equipment - Lot 1 21/4/2004 USD 13,811.00 Joh Achelis Shopping Shopping Completed
Ruvu Wami Equipment - Lot 3 INFOSYS IPS
29/11/2004 USD 45,261.00 Shopping Shopping Completed
(T)
Ruvu Wami Equipment - Lot 5 Business
25/11/2004 USD 26,435.00 Shopping Shopping Completed
Machines (T) Ltd
Ruvu Wami Equipment - Lot 2 ABEM
22/04/2004 SEK 1,045,000.00 Shopping Shopping Completed
Instruments
Ruvu / Wami supply vehicles,
23/12/2005 USD 21,891.00 TOYOTA NCB NCB Completed
computers
Services
Revaluation of Assets 10/7/2007 USD 265,985.00 Seureca QCBS QCBS Completed

XI
ANNEX 5: LIST OF SUPPORTING DOCUMENTS

1. Appraisal Report, AfDB

2. Appraisal Report, IDA
3. Project Operation Manual
4. DAWASA Quarterly Progress Reports
5. Draft DAWASA Project Completion Report
6. Draft IDA Project Completion Report
7. Arbitration proceedings - ICSID
8. Mission Aide Memoires
9. Audited Project Accounts and Audit reports
10. Final Completion Reports – CP2 to CP5

XII
ANNEX 6 ‐ PR
ROJECT NARRATIVEE

General

Pro
oject Develo
opment Ob
bjective

a) The deevelopment objective of o the projeect is to pro

ovide reliab ble, affordab
ble and sustainable water
w
supply services annd improved d sewerage e and sanitaation facilitie
es in Dar es
s Salaam city
c and parrts of
egion, in ord
coast re der to impro
ove public health
h and socio-economic activitties. The cuurrent estimated
populattion of the city is 4 million people. The cityy contributes about 18 8 % of the National Gross
G
Domesttic Product.

Pro
oject Backg
ground

b) Over m many years, the Dar es e Salaam water and sewerage infrastructure was ch haracterizedd by
under-innvestment in maintenance, whic ch led to raapid deterio
oration of plants
p and installationss. In
additionn there wass no major system
s exppansion to meet
m growinng demand. An unofficcial and cha aotic
tertiary distribution
n network developed,
d creating major
m proble
ems and lea ading to siggnificant lossses
through h leakages. The billling and collection
c s
system wass inefficien
nt, resulting
g in signifiicant
nonpayyment of bills.

c) By the early 1990 0s, operatio ons were inn a very po oor state, with
w serious decline in service levvels,
leading to widesprread custom mer dissatissfaction. Critical eleme ents of the main
m treatmment plant were
w
substanntially dama aged, inope erable or in need of major
m overha aul – the en
ntire filtration plant wass out
of operration. Con nsequently, the Goverrnment requ uested assistance to rehabilitate the system m, in
order to
o improve service
s leve
els. AfDB fin
nanced a sstudy of the system, th hrough a UA A 520,000 ADF
A
Grant, from
f 1994 tot 1997, in which
w a fou
ur phase reh habilitation and investmment progra am of about UA
160 million was formulated. A An urgent reehabilitation
n project of UA 38 milliion was ide entified for Bank
B
funding, and appro oved by the e AfDB Boa ard in 2001. However, the project was kept on o hold pen nding
the outccome of insstitutional reform processes that were found d to be neccessary in order
o to ensure
comme ercial viabilitty and financial sustain
nability.

Bac
ckground to
o institutio
onal reform
m

d) By the 1990s, mosst urban wa ater schemes in Tanza

ania had significantly deteriorated
d d mainly du
ue to
lack of appropriatee institutiona
al managemment and au
utonomy tog gether with underfundiing of operaation
and ma aintenance. For example, urban water supply schemes in n Mwanza, Mbeya and d Mtwara, which
w
were reehabilitated and exten nded throug
gh support from the European Union, und der EDF 5 to 7
financin
ng, in late 19
980s and early 1990s, deteriorate
ed rapidly affter complettion and commissioninng.

e) There was
w ore urgent need for a review of the sectorr institutiona
therefo al arrangemments inclu
uding
decentrralization off operationss and decission makingg. Relevantt legislation was enactted in Febrruary
1997, in
ncluding thee Water Utilization Actt (Control an
nd Regulatiion) and update
u of th
he Water Works
W
Ordinannce for merg ging water supply
s and sewerage under
u a singgle authoritty.

f) The new mework led to the breakup of the National

w legal fram N Urban Water Authority
A NUWA) in 1997,
(N
and thee establishmment of 20 Urban
U Water Supply annd Sewerag ge Authoritie
es (UWSAs). In addition 49
District Urban Water and Sew werage Auth
horities (DUWSAs) werre established for the smaller
s townns.

g) The Da ar es Salaam Water and Sewe erage Autho ority (DAWWASA) was establishe ed by sepa
arate
legislatiion in 2001, to serve
e the Dar es Salaam m area and d parts of Coast region. The urban
populattion of Dar es
e Salaam is
i equivalen
nt to the tota
al populatio
on served by
y all the UW
WSAs.

h) In July 1997, the Government

G t requested
d proposals for a Joint Venture pu
ublic-private
e participatio
on in
ng the Dar es
operatin e Salaam WSS syste em. While it had been expected
e th
hat JV partners would bring
b
in the required capital
c financing, nonne of the four
f international com
mpanies w which subm mitted
XIII
 substan ntive propossals (Biwateer UK, Saurr France, Viivendi France and Norrthumbrian UK)U were re eady
to secu ure the invvestment needed
n to develop the system. Comme ercial finan
ncing for water
w
infrastru
ucture proje ects, whichh have long g periods of
o return, is often limitted. Under a “concesssion”
arrange ement all investment (including g equity and debt financing) together
t w
with operatiional
responssibility is tra
ansferred to
o the private
e sector. The public sec
ctor, throug
gh the Goveernment, rettains
control through contractual an nd regulatorry enforcemment through performance, covera age and serrvice
quality targets
t set in the conceession agreeement.

i) e 1998, the Governmen

In June nt sought th
he assistancce of a Trannsaction Ad dvisor, (Sevven Trent Water
W
Internattional) to asssist in the PPP proce ess. A workkshop on th he various options forr PPP was also
conducted. It wass eventuallyy decided to t request b bids for a lease contra act. A “leasse” is a form
m of
mediumm term “con ncession” whereby
w thee Governme ent retains the ownersship of the assets and d the
responssibility for financing anda develo
oping the system, while
w a “private opera ator” takes the
responssibility for operating
o a
and maintaining the ssystem inclu uding billing
g and reve enue collecction.
Typical characterisstics of PPP Ps are showwn in the tab
ble below.

Typical Operator Operattor

Form
m of Public Private Risk Public owns
P
duration finances finances capital
c
Paartnership (PP
PP) level assets
(years) O&M costss

ASSET SALE Forever High YES YES

S NO
CONCESSSION CONTRAACT 25 – 30 High YES YES
S NO
JOINT VENTURE 25 – 30 High YES YES
S Joint
BOOT/BBOT (BUILD
10 – 25 Medium YES YES
S NO
OPERATTE/TRANSFER)
LEASE CONTRACT/AFFFERMAGE 10 -15 Medium YES NO YES
DELEGAATED MANAGEEMENT 2–5 Low NO NO YES
SERVICEE CONTRACT 1-5 Low NO NO YES

j) After abbandoning the “Joint Venture”

V PP
PP option, tthe bid process for the “lease” PPP
P option took
three years,
y from 2000 to 2003,
2 and was conten ntious. Thee first biddiing processs for the le
ease
involvedd three preq
qualified firm
ms (Biwaterr, Saur and Vivendi). Biwater
B did not submit a bid. Saurr and
Vivendi submitted qualified bid ds, which were
w conside
ered non coompliant.

k) Biwaterr, Saur and d Vivendi werew pre-quualified in the re-biddding proces ss in which h invitation was
extende ed to all innternational private wa ater operattors in order to incre ease compe etition. The e bid
docume ents were also
a modifie ed to facilitaate evaluation. Bidders were ask ked to bid ono the Operator
Tariff only. Other conditions
c r
remained id
dentical for all bidders including: (i)
( initial equ uity contribu ution
to the ccapital of th
he Operatorr, (ii) financial support to the Ope erator’s starrt-up activities, (iii) fees
s for
managing the USD D 40 million n rehabilitatiion of the secondary
s & tertiary dis
stribution neetwork, and d (iv)
fees forr a USD 10 0 million pro ogram for es ssential reffurbishmentt of the wate er productioon facilities and
procureement of customer
c m
meters. Thee bid docum ments alsoo included a formula to protect the
Government again nst artificiallyy low biddin
ng.

l) Despite e two pre-bid meetingss, two pre-qualified biddders (Saur and Vivend di) did not submit bids after
disagreeeing with several
s proovisions of the draft Lease
L Conttract which they felt did
d not pro ovide
sufficiennt guarante
ee against riisks such as the lack o
of reliable baseline data. Therefore, only onee bid
was recceived from m Biwater/Ga auff Tanzannia Limited,, which alsoo complied with the miinimum alloowed
Operato or Tariff.

m) In February 2003, a ten yearss Lease Coontract was signed with h a private operating
o co
ompany, Citty
Water SServices Lim
mited comprising a Brittish / Germa
an Joint vennture (Biwatter/Gauff Ta
anzania Ltd
d)
holding 51% sharees and a Tanzania Com mpany (Sup per Doll Traiiler Manufacturing Commpany) hold
ding
49% shhares.
XIV
n) A joint appraisal
a of the projecct by co-fina
anciers wass carried ou
ut in March 2003. Subssequently, USD
U
143.45 million jointt financing was
w approvved by the co-financiers
c s.

o) It is to b
be noted th
hat Biwater//Gauff Tanzzania Limite ed was a sp pecial purpo ose limited liability veh
hicle.
During bid evaluation, the DAWASA Financial Advisor re ecommende ed that the performa ance
guaranttee be provvided by thee parent company / ma ajority share
eholder of the
t entity (i.e. Biwater UK)
but thiss requirement was not incorporate ed into the final docum ments. Due to this, the Governme ent is
unable to collect monies
m owed d to it by Citty Water, which
w is now
w insolvent.

Pro
oject Implem
mentation - Lease Co
ontract with
h Private Operator
O (City Water Ltd)
L

p) The privvate sector participatioon arrangem ment througgh the leasee contract with
w the operating comp pany
(City W
Water Ltd) was a centra al pillar of th
he project deesign. How
wever, City Water
W Ltd fa
ailed to mee et its
obligatio
ons under the lease. There wa as significan
nt delay in the Iimple ementation of two spe ecial
contraccts, awarded d to the operator as part
p of the lease agreeement, for the
t improve ement of critical
plant annd equipme ent of the syystem (SIPE) and in supplying cu ustomer me eters (POG)). There wa as no
timely improvemen nt of custom
mer meterin ng. Unsuitaable softwarre was prov vided for billing. Expeected
improveements in billing
b and collections
c a asset managemen
and m t did not ha
appen and revenue
r to fund
operatioonal activitie
es did not improve. Affter one and d half years
s of operatioon, the reve
enue was lo ower
than thaat before the lease con ntract.

q) A cash deficit resu

ulted becausse operational costs were
w not covvered by inccome. City Water Ltd, was
nt to invest its own cap
reluctan pital to cover the financcial shortfall at the levels required by the conttract.
Instead they used funds that should
s have
e been paidd to DAWAS SA to fund operational
o costs.

r) Specificcally, City Water

W Ltd breached various
v ovisions of the lease contract in
pro ncluding (i) non
provisio
on of equityy to the requ
uired levels (ii) non payyment of am
mounts duee to DAWAS SA (iii) failure to
deposit specified tariff levie es directly into a spe ecial Fund (iv) non-a attainment of certain key
mance targe
perform ets (v) nonn submissio on of quarrterly financcial statem
ments, colle
ection and cost
summa ary, annual report,
r audit report, etc
c. as require
ed under the
e Lease Coontract.

s) In April 2004, purs

suant to Artiicle 48.1 of the Lease Contract, DAWASA
D mposed a financial pen
im nalty
of TZS 70,188,193 3.00 to the private
p operrator, due to
o non-paym
ment of the lessor
l tariff and rental fees
and non-submissio on of financcial and acccounting sttatements, but the Opperator did not honourr the
penalty invoice.

t) In Deceember, 2004 4, City Watter requeste ed amendm ment of somme provision ns of the lea ase includin ng (i)
adjustmment of the equity
e subsscription (ii) 12.2% incrrease on noon-domesticc tariffs (iii) 100% reten ntion
of excess tariff, wh
hich was pa ayable to DA AWASA (iv)) 10% increase on dom mestic tariff and all pay yable
to City Water
W Servvices (v) lea
ase fee relieef of 100% (vi)
( electricity relief of 100%
1 (viii) write
w off of debt
payablee to DAWAS SA. These proposals
p a
amounted to
o a major modification
m of the original terms of the
lease ccontract, annd on 6th Ja anuary 200 05, City Wa ater Ltd req
quested a re-negotiatio
r on of the leease
contracct. A Regulaatory Speciaalist, Dr Tonny Balance, from Stone e and Webs ster Consulttants of UK was
appointted to draw w up terms for renego otiation and
d assist in the renego otiation of the lease. The
consultaant’s work started
s an 8th March 20 005.

u) e lease contract failed and it was terminated

empt to renegotiate the
The atte t on 1 June 2005.
2

v) Pursuant to the arbitration

a p
provision in
n the leasee contract, City Waterr Ltd pursu ued contrac ctual
arbitratiion claims through
t the United Nattions Comm mission for Internationa
I al Trade Laww (UNCITR RAL).
The trib
bunal’s verddict, rendereed on 31st December
D 2
2007, unanimmously dism missed Cityy Water’s cla aims
and up pheld DAWA ASA’s coun nterclaims. DAWASA A was awarrded 13.8 billion Tanzzanian shilllings
(approxx. $12 millio
on USD) min nus City Wa ater’s performance bon nd, equivale ent to a net award of some
s
TZS 6,9 989.59 milllion (approxx. $6 090 00 00 USD). Damages
D off 2 billion Ta
anzanian sh hillings (app
prox.
USD 1 740 000 US SD) was alsso awarded to DAWAS SA, in costs..

XV
w) On Aug gust 5, 2005 5, the foreig
gn shareholders of City Water Ltd d (Biwater/GGauff) submmitted a req
quest
for arbiitration, inc
cluding claim ms for dammages amo ounting to USD 20 million,
m to th
he Internatiional
Centre for the Se ettlement off Investmen nt Disputess (ICSID), invoking
i brreaches of the agreem ment
between the UK and the United U Reppublic of Tanzania
T fo
or the prom motion and d protection of
ments of 7 January 1994
investm 1 (BIT) and the Tanzanian
T Investmentt Act of 19 997. The local
l
sharehoolder, Supe erdoll Trailerr Manufactu
urers Ltd. (S
STM) was not a party to o the ICSID
D proceeding gs.

x) The ICSID issued d its award on 24 Jully 2008 and ruled tha at the Repu ublic breacched custom mary
internattional law and
a the ob
bligations se et out in thhe BIT in the
t followin
ng respectss: (a) a pu ublic
announ ncement of the termina ation of thee lease conttract by thee Tanzania Minister fo or Water on n 13
May 20 005; (b) a subsequent
s t political ra
ally of 17 May on the e terminatioon; (c) with
hdrawal of VAT
certifica
ate by the Tanzania
T Re
evenue Auth hority on 24
4 May; and finally (d) seeizure of the assets off City
Water, the immediate installa ation of DAW WASCO, and the deportation of City Water’’s managem ment
on 1 Ju une. The ICCSID ruled that
t these actions
a amoounted to ana expropria ation of the
e investmennt on
the bassis of Article
e 5 of the BIT. Howeve er the ICSD D dismissed Biwater/Ga auff claims for damage es of
USD 20 0 million an
nd ruled that none of the Repub blic’s violations of the BIT cause ed the loss and
damage e for which Biwater/Ga auff was claiming comp pensation.

Pro
oject Implem
mentation - Lease Co
ontract with
h DAWASC
CO - a Public Corpora
ation

y) Upon te ermination of
o the CWS S Lease Con ntract, the Governmen
G t appointedd the Dar ess Salaam Water
W
and Sew werage Corrporation (D
DAWASCO)) as the new w Operator.. The Government quicckly mobilizzed a
new Ch hief Executiive Officer for
f DAWAS SCO and ab bsorbed operational sttaff of City Water Servvices
Ltd into
o the new opperating enttity. A seam
mless and smooth
s tran
nsition of op
perations ennsued and there
was no serious crisis in the wwater supplyy and sewerage situatiion arising from
f the terrmination of the
lease. E
Emergency stocks of chemicals
c w
were purchased, throug gh an emerg gency advance of TZS 500
million ffrom DAWAASA to DAW WASCO, to ensure safe e delivery of
o water servvices. A suubsidiary loaan of
USD 6.0 million was also ma ade availablle to DAWA ASCO in ord der to meet cash flows for sustaiining
operatioons in the short term. In additionn, the Gove ernment contributed TZS 2.0 billion towards s the
retrenchhment cost of DAWASCO staff.

z) DAWAS SCO was in ncorporated under the Public Corp porations Ac ct, 1992 andd gazetted by public nootice
on Mayy 20, 2005. Following negotiations
n s, DAWASA A and DAW WASCO sign ned a new Lease
L Conttract,
which was
w substan ntially simila
ar to the prrevious one
e with City Water
W Ltd except
e in a few areas such
s
as resp
ponsibility fo
or the supe ervision of the
t rehabiliitation of th
he seconda ary and tertiary distribu
ution
networkks and insta
allation of buulk meters, which were e transferred d from the Operator
O to DAWASA.

aa) At the time DAW WASCO too ok over, there was sstill no commprehensive e and accu urate custoomer
databasse, in spite of 2 years operation by
b the private operatorr, and reven
nue collectio
on did not meet
m
operatio
onal costs.

bb) Given the failed lease, the Goovernment indicated thhat it would like to pause and review the lesssons
of the failed
f transsaction and carry out adequate preparation n before go oing forward
d with the next
attemptt at public-private parrtnership. The
T Govern nment also promised to organize e an opera ators’
roundtaable workshop as part ofo the goveernment road map on the way forw ward. The operators’
o ro
ound
table w
was organizzed on 10-1 11 Decemb ber 2009. Participants
P noted that the current public-puublic
lease a arrangemen nt was dyysfunctional but unde erstood thaat the Govvernment wished
w to limit
amendm ments to th
he current legal framework to the e strict minimum in the short and d medium term
while aaiming to im
mprove ove erall perform
mance. It was
w suggested that thhe principa
al/agent rela
ation
between DAWASA A and DAW WASCO be e establishe
ed and DA AWASCO explore
e wayys of improoving
mance such as special contracts with specia
perform alized contractors for reduction oof non reveenue
water.

cc) Althoug gh DAWASC CO has ma ade some progress

p sin
nce its appoointment, operational
o manageme ent is
still nott to the req
quired indusstry standard, and revvenue colle
ection does not still meet
m operatiional
costs.

XVI
Pro
oject Implem
mentation - Restructu
uring

dd) The prooject was reestructured in March 2006

2 during which the new institutional arran
ngement arising
from thhe termination of the lease conttract with the
t private operator were
w accom
mmodated. The
closing date was also exten nded to December 31, 2009 to make up fo or the losss of momen ntum
caused by the term mination of the lease contract.
c Th
he closing date
d was latter subsequ
uently exten
nded
for an a
additional six months to
o June 30, 2010.
2

ee) Funds were reallo ocated to support

s sho
ort-term tecchnical assistance for DAWASCO O’s operatiional
“Rescue e Plan” and
d emergenccy inputs ne
ecessary to ensure uninterrupted service. Th here was also a
re-alloccation of so
ome of thee categoriees and retrroactive financing for emergenccy expendittures
incurred d by DAWAASCO after the
t termina ation of the lease contra
act with the private ope
erator.

ff) The prooject compo onents rema ained substtantially the same as before,
b and the develop pment objecctive
and keyy indicators were not changed.
c H
However, the
e number ofo meters too be procure ed was redu uced
from 17
73,000 to 10 00,000 and some new w work elem ments were added,
a commprising: (i) drilling of three
400 – 5500 m deep p test borehholes to verrify the wate
er quality and
a capacityy of identifieed groundw water
aquiferss (ii) repairr of a brea
ach on the e Ruvu Rivver at Kido ogozero (iii)) constructiion of a waste
w
manage ement faciliity which to
o handle so
olid waste fo or the city and
a allow fo or disposal of sludge from
f
the wasstewater ponds..

Pro
oject Implem
mentation – Capital In
nvestment Works

gg) The prooject capita

al investment works, comprisinng major reehabilitation
n of the exxisting facilities
were eeffectively implemen nted togethher with th
he commu unity water supply anda sanita
ation
program, institu utional strrengthening, and studies
s fo
or future expansio on. DAWA ASA
successsfully man naged abo out 20 connstruction contacts. There we ere time exxtensions and
overall cost overrruns of ab
bout 10% ofo the origiinal contra
act provisio
ons. These were ma ainly
due to increased scope of works,
w which became e apparentt during the e rehabilita
ation proceess.

hh) A list o ervices and works prrocured un

of goods, se nder the pro
oject, as off June 2010, is show
wn
below:

FINA
ANCIER STA
ART DATE STATUS
S

WORK KS CONTRAC CTS

Supplyy and Installation of Pla
ant and Terminatedd (City
ID
DA 2003
Equipmment Waterr)
Lowerr Ruvu MCC C ID
DA 2005 Completted
SIPE BBalance ID
DA 2005 Completted
Standbby Transforrmer Lower Ruvu DAW
WASA 2007 Completted
Treatm
ment Plants & Pumping g Stations-CCP1 EIB 2005 01/02/0
09
Transmmission Mains and Resservoirs – CP2 C EIB 2004 Completted
Primarry Distribution Mains – CP3 AD
DF 2005 Completted
Wastee Water Pon nds – CP4 EIB 2006 Completted
Sewerrs, Pumping g Mains, seaa outfall - CP5
C AD
DF 2004 Completted
Sewag ge Pumping g Stations(th
hrough CP5 5) AD
DF 2006 Completted
Ration
nalization off High Volta
age ID
DA 2007 Completted
Kidogoozero Ruvu River Brea ach ID
DA 2008 completted
Sewerr Manholes,, connection ns and
AD
DF 2008 Completted
equipm
ment
Seconndary and Tertiary Distrribution - 1AAi ID
DA 2004 Completted
Seconndary and Tertiary Distrribution - 1AAii ID
DA 2004 Completted
Seconndary and Tertiary Distrribution - 1BB ID
DA 2004 Completted

XVII
X
 FINA
ANCIER STA
ART DATE STATUSS
Secon ndary and Tertiary Distrribution - 1C
C ID
DA 2005 Completted
Secon ndary and Tertiary Distrribution - 2A
A AD
DF 2008 Completted
Secon ndary and Tertiary Distrribution - 2C
C AD
DF 2008 Completted
Secon ndary and Tertiary Distrribution - 3A
A AD
DF 2008 Completted
Secon ndary and Tertiary Distrribution - 3B
B AD
DF 2008 Completted
Secon ndary and Tertiary Distrribution - 3C
C AD
DF 2008 Completed
Zonal Bulk Flow Meters
M ID
DA 2004 Completted
Comm munity Water and Sanitation - Part 1 ID
DA 2004 Completted
Comm munity Water and Sanitation - Part 2 AD
DF 2007
Installa
ation of gau
uging station
ns – Wami AD
DF 2005 Completted
Emerg gency & Major Mainten nance Works ID
DA 2003
Terminated
d (City
Procurrement of Goods
G (POG
G) - meters ID
DA 2003
Waterr)
Zonal Bulk Flow Meters
M ID
DA 2004 Completted
DAWAASA Furnituure, Equip, Vehicles
V ID
DA 2004 Completted
Ruvu / Wami supply of goods & equipmment AD
DF 2005 Completted

SERVIICE CONTRA ACTS

Delegaated Workss – design & supervisioon ID
DA 2003 Completted
Non DDelegated Works
W – design and
ID
DA 2003 Completted
supervvision
Financcial/Techniccal Auditor ID
DA 2003 Completted
Engineeering Advissor ID
DA 2003 Completted
Financcial Advisor ID
DA 2003 Completted
Legal A
Assistance ID
DA 2006
Enviro
onmental Mo onitoring ID
DA 2004
Revaluuation of Asssets AD
DF 2007 Completted
Seconndary & Terttiary Part 2 Designs ID
DA 2006 Completted
Seconndary & Terttiary Part 3&&4 Designss ID
DA 2007 Completted
Comm munications Assist. incl. HIV/AIDSS ID
DA 2005 Completted
Trainin
ng of DAWA ASA & MoW WLD Staff ID
DA 2004 Completted
NGO C CWSSP - PLAN
P ID
DA 2004 Completted
NGO C CWSSP- WATER
W AID ID
DA 2004 Completted
NGO C CWSSP - CARE
C ID
DA 2004 Completted

STUDIEES
Develoopment of Future
F Wateer Source ID
DA 2005 Completted
Strateg
gic Water Supply
S Plan ID
DA 2006 Completted
Strateg
gic Sanitatio
on Plan ID
DA 2006 Completted
Nat. U
Urban WS & Sanitation Strategy ID
DA 2004 Completted

ii) A list o
of community water supply subp
projects co
onstructed in low inco
ome areas outside the
s shown be
formal network is elow:

HOUSE
COMM
MUNITY WATER SOURCE KIO
OSKS
CO
ONNECTIONS
Kimbangulile Boreho
ole 20 8
TEMEKE Mchikkichini Boreho
ole 12
1
Konggowe Boreho
ole 42 1
10
DISTRICT
Majim
matitu Boreho
ole 8
Shu
uleni Boreho
ole 20 9

XVIII
X
 HOUSE
COMM
MUNITY WATER SOURCE KIO
OSKS
CO
ONNECTIONS
Unginndoni Borehoole 9
Yombo o Relini Borehoole 50 8
Mawweni Borehoole 9
Kichaapwi Borehoole 150 8
Mpeta Borehoole 27 1
11
Kilun
ngule Borehoole 7
Nzaasa Borehoole 8
Makang garawe Borehoole 66 9
Kibe
edea Borehoole 270 1
11
Mwemb beradu Borehoole 195 4
Kisarrawe Borehoole 2
21
Biblia Rellini A Borehoole 224 1
15
Biblia Rellini B Borehoole 200 1
12
Majumba sita B Borehoole 67 9
Majumbasita Borehoole 50 1
10
Mzinga A Borehoole 152 1
13
Mzinga B Borehoole 29 1
13
ILALA
A DISTRICT Markaz Borehoole 1 1
10
Kitunda C Borehoole 7
Nyang'an ndu Borehoole 27 1
11
Kipungun ni B Borehoole 9
Guluka Kwalala
K Borehoole 6
Korongo Borehoole 67 1
13
Karezeng ge Borehoole 9
Mwongozzo Borehoole 7
Ngilangwwa Borehoole 30 1
11
Kibangu Bulk Suupply 9
Kwa Mrosso Borehoole 19 1
14
Kwa Mbo onde Borehoole 8
Kwa Sind dano Borehoole 40 5
KINONDONI Azimio Bulk /borehole 8
DISTRICT Gide Bulk Sup
pply 9
Kibo Rom mbo Bulk Sup
pply 6
Goba Bulk Sup
pply 6
Madale Kisaule
K A Bulk Sup
pply
Madale Kisaule
K B Bulk Sup
pply
Kunduchii Borehoole 4
Soga Borehoole 4

XIX
Financial Pe
erformanc
ce

Stattus at Proje
ect Apprais
sal

jj) During the projectt appraisal the combin ned (DAWA ASA and Private
P Operator) finan
ncial projecttions
indicateed that there
e would be positive rettained earn
nings every year from 2002
2 to 20111, and possitive
cash flo ow balancees from 20006 onwards s. It was also expeccted that th he project costs
c wouldd be
incurred d from 20002 to 2006. The fina ancial Internnal Rate off Return (FFIRR) for the project was
computted as 9.1% % while thee associateed Financia al Net Pressent Value (FNPV) wa as TZS 13.505
billion. T
These indic
cators sugge
ested that the project was
w financia ally viable and
a sustaina able.

Stattus at Proje
ect Comple
etion

kk) During the review of financia

al performan
nce by the PCR missiion in Octo
ober 2010 itt was observed
that:

a) The actual combined performan nce during the period from 2002 2 to 2010 shows thatt the
project reallized negatiive retained
d earnings in all the yeears. The annual
a interrnally generrated
funds weree positive baalances onlly in 2002, 2005 and 2009.2 It was negative balance forr the
other yearss.
b) Project cap
pital expendditure was inncurred eve ery year fromm 2002 to 2010.
2
c) The projectt has not re
ealized a po ositive financial rate of return durin
ng the periood from 200 02 to
2010. The analysis off the actual financial re esults durin
ng the periood 2004-2010 showed that
the project had a nega ative Financcial NPV of TZS 404,3 394.70 millioon and an FIRR
F of 8.733 %.
The cash flows
f were discounted d at 10% ass the proxyy for the opportunity co ost of capittal in
Tanzania. The
T FNPV and FIRR are well be elow the pro ojected figu
ure during the
t appraisal of
the project..

Table 1 below sho ows a summ mary of keyy results fro

om the proje ect comparing the projject figures and
actuallyy realized figures. The
e notable fe
eatures fromm the resultts are actua al water supply sales tariff
was only 63 percent of the pro ojected water supply saales tariff while
w actual operating expenditure
e was
63 perccent higher than
t projected operatin
ng expendittures.

Tab ble 1: Summ

mary of key results (TZ
ZS 000,000))
TZS 000,000
At Ap
ppraisal At PCR (20010)
Gross water supp ply sales (tariff) 260,8
864 165,717
Total operating
o exxpenditure 210,1
133 343,637
Retained earningss 17,10
03 (165,425)
Total in
nternally ge
enerated fun nds 83,15
51 (28,040)
Equity /grant 175,1
151 105,374
Loan fund receive ed 108,9
958 113,589
Source: DAWASA

At the time of th he PCR mission, the Regulatorr’s report fo or the 201 10 period was
w still under
preparaation. Basedd on the prroject record
ds at projecct completio
on, the leve
els of servicce provisionn for
some kkey indicatoors were: (i) non reven nue water w was estimaated at 57 % against the Regula ator’s
recomm mendation of
o less than 20 % (ii) thhe percenta age of custo
omers gettin
ng reliable water supp ply at
adequa ate pressuree was abou ut 25% (iii) water billin
ng on actuaal meter rea
ading was at 74% (iii)) the
collectio
on ratio wa
as 77% ove erall exclud
ding arrearss and (vi) 94%
9 of sammples met specified water
w
quality standards.
s

ll) Figuress 1 and 2 below show w that whe ereas the projected
p re
evenue hass not been n achieved, the
operatin
ng expenditure has in ncreased byy 63%. The e projected growth of revenue and
a expenditure
comparred to the acctual growth
h of revenue and expe
enditure are depicted in
n the graphss below.

XX
 Figure
re 1 Revenu
ue performa
ance

Gross Water
W Supply Sales
S
(tariff) Projected
P
Gross Water
W Supply Sales
S
( tariff)A
Actual

F
Figure 2: Op
perating exp
penditure pe
erformance

Operaating Expenditture
projeccted
Operaating Expenditture
actual

mm) DAWAS SA has the erefore bee en subjecte

ed to liquiddity risks as
a its working capital resources are
primarily the Lesso or tariff colle
ections and
d monthly reental fee. Th
hese are de
ependent on n the opera
ator’s
ability tto bill and collect fromm customerrs which arre not within DASAWA A’s control. The collec
ction
efficienccy is at 77 7% on currrent bills without
w con
nsidering arrears.
a Errreur ! Source du renvoi
introuv vable. show ws billing and collection
n trends.

Table 1: Billing and collections trends

May-Dec Jan to Sept
2006 2007 20
008 200
09
Deta ail 2005 20
010
Billin
ng TZS millio
on 20,771 50,452 34,677
3 24
4,554 30,3
368 25,845
Colle
ections TZS
S million 8,717 17,428 18,642
1 22
2,452 23,5
518 19,839
Total arrears TZZS million 46,811 51,812 23,547
2 26
6,609 31,5
502 33,733
Colle
ection Efficie
ency % 42 35 54 91
9 77
7 7
77
Colle
ection as % arrears 19 34 79 84
8 75
5 5
59

Fina
ancial Auditors’ opinion

nn) The auuditors, in th

he their au
udit qualifica
ation expreessed that “in the 200 08/09 financial statem
ments
DAWAS SA recorde ed tariff revenue amo ounting to TZS 5,345 5 million which
w repre
esents reve enue
generatted from 433% of the water
w producced during the year, and
a thereforre reveals a an unaccou unted
for prop
portion of 57%
5 of the total produuction. A la
arge proporrtion of the unaccountted for wateer is
XXI
 attributed to illegitimate or unregistered connections; registered connections that are incorrectly
treated as inactive or disconnected hence not billed; and leakages. The authority is unable to
quantify how much of this unaccounted for water has been supplied to customers or lost through
leakages or to identify individuals who have not been billed for their consumption”.

oo) The auditors further stated that:

“DAWASCO which is the private operator has failed to comply with the terms and conditions set in
the Lease Contract with DAWASA. According to the lease contract, the Corporation was required to:
a) Achieve the Key Performance Indicators (KPIs) and Key Performance Targets (KPT) agreed
by both parties.
b) Remit the monthly installments of the rental fees as stipulated in Article 38.4 of the Lease
Contract. Failure to pay the rental fees or any additional rental fee to the lessor attracts a
penalty equal to 0.5% of the weekly revenue for each week of delay or part thereof after the
due date
c) Comply with conditions set in respect of the use of funds set aside for First Time New
Domestic Water Supply Connection. A portion (TZS 850 million) of the fund set aside for the
First Time New Domestic Water Supply Connection Fund was used to meet the
Corporation’s working capital requirements contrary to the terms of the Lease Contract.
DAWASCO claims that there would be no material liability because both DAWASA and
Ministry of Water are aware of the reasons which led to the misallocation.
d) The corporation was required to procure the maintenance of the Performance Guarantee to
the satisfaction of the Lessor in full force and effect during the duration of the Lease contract.
The Corporation has failed to provide the Performance Guarantee and appears to feel
comfortable because both DAWASA and DAWASCO are controlled by the Government
through the Ministry of Water”.

pp) The mission discussed the financial results with the Director of Finance to find out possible causes
of the failure to achieve the projected results. The main reasons put forward were:

a) The projections were ambitious in that no adequate provisions were made to ensure that the
revenue was achievable and costs were contained.
b) DAWASA experienced difficulties in getting tariff increase approvals from EWURA. EWURA
ignored the tariff indexation mechanism intended to cater for price increases for chemicals,
spares and inflation. Tariff increase was granted in 2009.
c) The exit of City Water and entry of DAWASCO in 2005. Planning and implementation of
some of the delegated works had to start afresh.
d) The Private Operator was supposed to make a survey of customers receiving water at the
beginning of the contract in order to identify the customers to improve billing. City Water
contracted Noremco to carry out the survey which they did not complete. DAWASCO has
taken over the task since 2006 but has not completed it.
e) DAWASCO laid off some employees in 2007 and this cost them terminal benefits which
were not anticipated at appraisal stage.
f) Delays in starting the project, which started in 2004

On the way forward, the Director of Finance informed the mission that DAWASA is working with
DAWASCO to improve the billing and collection systems. Several strategies are in place including:

a) Provision of mobile motor vehicles, cranes and excavators to DAWASCO;

b) Development of joint revenue enhancement plan to be implemented in November and
December 2010;
c) Acquisition of meter loggers to improve meter reading and give confidence to their
customers.
d) Introduction of inspectors to track meter by passers.
e) DAWASA has assisted DAWASCO to acquire hardware and software for customer survey
and block mapping.

XXII
Rec
commenda
ations

qq) In orderr to improve

e the financial position,, the PCR mission
m reco
ommends th
hat:

a) DAWASA in i collaboraation with DAWASCO

D should woork out strategies of ensuring tha at as
much as po ossible of the available
e water is billed
b to cusstomers. Thhe Regulato or recomme ends
that at leasst 80% of thee water pro
oduced shou uld be reven nue earningg.
b) DAWASCO O should im mprove its collection
c effficiency bo
oth on curreent and old bills. If the
e old
bills are not
n collectaable they should be e dealt witth accordin ngly using the preva ailing
regulationss.
c) DAWASA and a DAWAS SCO should d seek wayys to reduce e their overrheads as well
w as avoiiding
administrattive duplicattion by revie
ewing and streamlining
s g the organiizational set up.
d) Considering g that bothh DAWASA A and DAW WASCO are e governme ent institutio
ons the currrent
administrattive set up where DAW WASCO is regarded as a privatte operator under contract
with DAWA ASA is not functioning
f effectively.

ECO
ONOMIC AN
NALYSIS

Intrroduction

rr) The Ecconomic Ne et Present Value

V (ENP
PV) and Ecconomic Ra ate of Return (ERR) during
d appraaisal
were computed byy adjusting financial be
enefits by a factor whic
ch captures economic benefits
b acrruing
e project. The
from the T analysiss considereed only inve
estment in water
w supplyy and sanita
ation which was
equivale
ent to 80% of the tota
al investmen
nt costs. Thhe combine ed ERR for the project was computed
as 21%%.

Eco
onomic ass
sumptions

ss) Detailedd workings for the AfDDB econom mic model were
w vailable. In the absence of the AfDB
not av A
workingg model, thhe PCR mission exam mined the co-financier’s (IDA) model
m which provided the
followin
ng assessmment of the economic
e benefits
b and losses thatt would acccrue from the project.
a) Hou usehold exppenditure saavings by:
g and new private dom
a. Existing mestic custo
omers;
b. Existing
g and new standpost
s co
onsumers;
c. Time sa avings by exxisting and new stand post consumers as we ell as new private
p domeestic
cutome ers.
b) Estiimated reveenues lost by
b water ven ndors (hand
d cart vendoors and tank k operators) and by
connected houuseholds seling water too neighbours as a resuult of the pro
oject.

Stattus at proje
ect comple
etion

tt) Resultss of the Household Bu udget Surve eys (HBS) carried out by the Na eau of Statistics
ational Bure
(NBS) and shown in table 3 given
g beloww indicate that:
a) Perccentage of households
h s using piped water hass gone dow om 57.9 % in 2006 to
wn slightly fro
51.44 % in 2009.
b) Households witth piped wa ater (tap) in housing unit have increased fromm 13.7% in 2000/01
2 to
15.1% in 2009.
c) Availability of water
w has alsso improved d reducing congestion at water kioosks.

XXIII
X
 Table 2: Su
ummary re
esults from
m the HBS
Desc
cription 2000/0
01 2006
6 200
07 20
009
% % % %
Housseholds using g piped wateer 57.9
9 51
1.4
Priva
ate piped watter (tap) in ho
ousing units 13.7 5.1 8.0
0 15
5.1
Availability of watter
‐ Daily 5
39.5 66
6.9
‐ Two to th hree days 9
‐ Unpredicctable 20.9
9 11
1.9
Conggestion at kio osks
‐ seldom 17.9
9 322.6
‐ sometime es 33.5
5 488.9
‐ usually 38.7
7 111.4
‐ no conge estion 10.0
0 77.0
Distriibution distan
nces
Less than 1 km 84.0 82.0
9 km
1-1.9 6.5 7
9.7
2-2.9
9 km 1.7 2.9
9
3-3.9
9 km 3.3 3.2
2
4-5.9
9 km 2.3 0.8
8
Over 6 km 2.2 1.4
4

Housseholds using
g boreholes 26.2
2 37.3

The mission was also informed th hat:

a) More people have h accesssed water but the pressure has s gone dow wn in some areas cau using
these areas notn to have e similar wa ater accesss as before e. Some arrea like Mb bezi have been
b
connnected to the
t distributtion system m and they have
h adequ
uate pressure. There a are more pe eople
alonng the transsmission lin
nes than beffore.
b) Metter connecttions have reached 85% 8 level fo
or all custo
omers but the t problemm is inabilitty to
colllect debts due
d to a “not to pay” culture.
c) The e Commu unity Waterr Supply and a Sanitattion projectt has been n very succcessful. Fifty
subbprojects we ere originallly planned and
a forty se even have been
b comple eted (45 wa ater subprojjects
andd 2 sanitatio
on subprojects) with th he following benefits:
a. Abo out 170,0000 people have access to t water for 18 hours a day.
b. 1,746 houses have been connected with water.
c. Com mmunity members can n buy wate er at a low tariff
t of shss 1/- per litrre from the 376
watter kiosks which
w are functional.
d. Com mmunity sta andard of livving has improved due e to availabiility of waterr and electiccity
e. Smmall scale coommercial activities
a are
e being undetaken.

Eco
onomic Ratte of return
n (ERR)

uu) In the a
absence of actual data a on the eco
onomic benefits to com
mpare with original
o asssumptions, ERR
E
has bee en computeed using the e IDA modeel for DAWAASA which assumes th hat: all assuumptions off the
project except thoose relating g to losses suffered by water vendors – hand carrt, tankers and
neighbo ours were realized.
r It was observved that thoose vendorrs have incrreased in number
n and
d the
water prices
p have not been re educed as anticipated.
a

The caalculations of
o the ERR R assuming g that all assumptions
a s were reaalized resullted into ENPV
equivaleent to nega
ative Tshs 379,565.50
3 0 million an nd an EIRR of 2.92% ata 10% discount rate which
w
is assumed as opportunity co ost of capittal. The calculations of ERR, ignooring the lo
osses of priivate
water vvendors, rea
alized a negative ENP PV of Tshs 350,537.09 9 million and an ERR of 2.78%. Both
actual ENPV
E and ERR are farf below th he compute ed projectedd figures during the appraisal,
a w
which
suggest that the prroject was not
n economically viable e and sustainable.

X
XXIV
Con
nclusion

vv) The aboove figures indicate th

hat the DWS SSP has no ot been viabble both financially and d economiccally.
The maajor contribu
uting factorss are the high proportio
on of non-re
evenue watter, failure to
t collect de
ebts,
and hig
gh cost of operations.. The perio od of nine years whic ch is essen ntially the tiime the prooject
implementation wa as taking ha as contributed to the negative
n results since the benefitts are expe ected
over a longer perio
od of not leess than 20 0 years. The economicc benefits associated
a w the pro
with oject
were also underesstimated.

X
XXV
ANNEX 7 - PR
ROJECT MAP

Oceean

XXVI