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AFRICAN DEVELOPMENT FUND
REPUBLIC OF CHAD
BUSINESS CLIMATE IMPROVEMENT AND ECONOMIC DIVERSIFICATION
SUPPORT PROJECT (PACADET)
OSGE/GECL
November 2013
Translated Document
TABLE OF CONTENTS
I. STRATEGIC THRUST AND RATIONALE ........................................................................ 1
1.1. Project Linkages with Country Strategy and Objectives .................................................... 1
1.2. Rationale for Bank’s Involvement ...................................................................................... 2
1.3. Aid Coordination ................................................................................................................. 4
II. PROJECT DESCRIPTION ................................................................................................. 5
2.1. Project Components ............................................................................................................ 5
2.2. Technical Solutions Adopted and Alternatives Explored ................................................... 7
2.3 Project Type ........................................................................................................................ 7
2.4. Project Cost and Financing Arrangements .......................................................................... 7
2.5. Project Area and Beneficiaries ............................................................................................ 9
2.6. Participatory Approach for Project Identification, Design and Implementation. ............... 9
2.7. Consideration of Bank Group’s Experience and Lessons Reflected in Project Design .... 10
2.8. Key Performance Indicators .............................................................................................. 11
III. PROJECT FEASIBILITY ................................................................................................. 12
3.1 Economic and Financial Performance............................................................................... 12
3.2 Environmental and Social Impacts and Climate Change .................................................. 12
3.3 Gender ............................................................................................................................... 12
3.4 Social ................................................................................................................................. 13
3.5 Forced Resettlement .......................................................................................................... 13
IV. PROJECT IMPLEMENTATION ..................................................................................... 13
4.1. Implementation Arrangements .......................................................................................... 13
4.2. Monitoring and Evaluation................................................................................................ 15
4.3. Governance........................................................................................................................ 15
4.4. Sustainability ..................................................................................................................... 16
4.5. Risk Management .............................................................................................................. 16
4.6. Knowledge Building ......................................................................................................... 17
V. LEGAL FRAMEWORK .................................................................................................... 17
5.1. Legal Instrument ............................................................................................................... 17
5.2. Conditions Related to Bank’s Intervention ....................................................................... 17
5.3. Compliance with Bank Policies ........................................................................................ 18
VI. RECOMMENDATION ...................................................................................................... 18
LIST OF TABLES
Table 1.3: Major Projects of TFPs in PACADET-Related Sectors
Table 2.1: Project Components and Activities
Table 2.2: Alternative Solutions Explored and Reasons for Rejection
Table 2.3: Estimated Project Cost by Component
Table 2.4: Sources of Financing (UA million)
Table 2.5: Project Cost by Expenditure Category (UA million)
Table 2.6: Expenditure Schedule by Components (UA million)
Table 2.7: Lessons from Previous Institutional Support Projects
Table 4.1: Monitoring Stages and Feedback Loop
Table 4.2: Potential Risks and Mitigation Measures
Annex I. Comparative Socio-economic Indicators
Annex II. Table of AfDB Portfolio in the Country (June 2013)
Annex III. Key Related Projects Financed by the Bank and Other Development Partners
Annex IV. Map of the Project Area
i
Currency Equivalents
(September 2013)
Monetary Unit: CFA FRANC (XAF)
UA 1 = CFA 747.75
UA 1 = EUR 1.18
UA 1 = USD 1.50
Fiscal Year 1 January - 31 December
Acronyms and Abbreviations
ADF
AFD
African Development Fund
French Development Agency
AfDB African Development Bank
ANIE National Investment and Exports Agency.
ARMP Public Procurement Regulatory Authority
BDEAC Development Bank of Central African States
CCIAMA Chamber of Commerce, Industry, Handicrafts, Mines and Agriculture
CDE Centre for the Development of Enterprise
CEDAW Convention on the Elimination of All Forms of Discrimination against Women
CEMAC Central African Economic and Monetary Community
CMA Mediation and Arbitration Centre
CS Sector Committee
CSPR Reform Programme Coordination and Monitoring Unit
DSEPP Projects and Programmes Monitoring and Evaluation Directorate
ECCAS Economic Community of Central African States
ENFJ National Judicial Training School
EPA Economic Partnership Agreement
EPCV
Permanent Survey on Household Living Conditions
EUD European Union Delegation
FDI Foreign Direct Investment
FE
FODEP
Foreign Exchange
Forum for State-Private Sector Dialogue
GAP Governance Action Plan
GDP Gross Domestic Product
GUF Landed Property One-Stop Shop
GVT Government
HIPC Heavily Indebted Poor Countries
IFC International Finance Corporation
IMF International Monetary Fund
LC Local Currency
ii
MTC Commercial Court Judges
MTEF Medium-Term Expenditure Framework
NA Not Applicable
NCB National Competitive Bidding
OCMP
OHADA
Public Procurement Oversight Agency
Organization for the Harmonization of Business Law in Africa
OPEV Operations Evaluation Department of the Bank
PACADET Business Climate Improvement and Economic Diversification Support Project
PCR Project Completion Report
PIU Project Implementation Unit
RAFC Administrative, Finance and Accounting Officer
RCCM Trade and Personal Property Credit Register
RT Republic of Chad
SG Sector Groups
SMP Staff Monitored Programme (IMF Economic Assistance Programme)
TDFO Bank Field Office in Chad (TDFO)
TFP Technical and Financial Partner
UA Unit of Account
UNDP United Nations Development Programme
US
USD
PND
United States
United States Dollars
National Development Programme
WB World Bank
WTO World Trade Organization
iii
Project Information Sheet
Client Information
BORROWER: Republic of Chad
EXECUTING AGENCY: Reform Programme Coordination and Monitoring Unit
(CSPR) attached to the Office of the Prime Minister
(PM) 1
Financing Plan
Source Amount (in UA) Instrument
ADF2
5.89 million
Comprising 1.92 million Grant 3.97 million Loan
TOTAL COST 5.89 million
Key ADF Financial Information
Loan/Grant Currency
UA
Interest Type* NA
Interest Rate Margin* NA
Commitment Fee* 0.50%
Other Costs* 0.75%
Maturity 50 years
Grace Period 10 years
FRR, NPV (baseline scenario) NA
ERR (baseline scenario) NA
*where applicable
Duration – Milestones (expected)
Preparation Mission
April, 2013
Appraisal Mission August, 2013
Country Team October, 2013
Grant and Loan Agreement Negotiation November, 2013
Presentation to the Board December, 2013
Effectiveness January, 2014
Completion December, 2017
Last Disbursement December, 2018
1 Established by Decree No. 2/PR/PM/2013 and attached to the Prime Minister’s Cabinet
2 Country allocation (Loan 2.81, Grant 0.86); Cancellation (Loan 1.16, Grant 0.59).
iv
Project Summary Project
Overview
Project Name: Business Climate Improvement and Economic Diversification Support Project
(PACADET).
Project Area: Nationwide
Project Duration: 48 months
Project Cost: UA 5.89 Million
Project
Objectives
PACADET’s objective is to promote private sector development and economic diversification in order to
lay the groundwork for inclusive economic development in Chad. Its operational objectives are to improve
the investment climate by implementing two major components, namely: (i) Supporting public and private
sector dialogue and investment climate reform; and (ii) Supporting entrepreneurship and investment
promotion.
Needs
Assessment
The role of the private sector and its importance in the Chadian economy are reflected in Chad's 2013-2015
National Development Programme (PND), which embodies the country's development vision. The private
sector remains poorly developed, characterized by a dual structure in which a few large firms coexist with a
myriad of small businesses of the informal sector. Very small enterprises (VSEs)3 account for 91% of all
enterprises, small- and medium-sized enterprises (SMEs) for about 3% and major enterprises, backed
mainly by foreign capital, make up about 6%. The main challenges and constraints faced in promoting
medium- and long-term development of the private sector are threefold: (i) weakness of the legislative,
institutional and regulatory framework; (ii) difficulties in accessing financing, especially for SMEs; and
lastly (iii) weak supervisory and support structures. The Government adopted in 2012, in consultation with
the private sector and Technical and Financial Partners, a timetable for implementing business climate and
economic diversification reforms aimed at reducing the country's dependence on oil resources.
Target
Beneficiaries
The project area is N'Djamena and the rest of the country. The direct beneficiaries are public
administration, the private sector, entrepreneurs in the country and the entire Chadian population.
Economic operators will take advantage of the improved business climate to accelerate the development of
their businesses, while the people, on their part, will benefit from better prices and the improved
employment situation brought about by the positive developments in the competitive environment and
national production landscape.
Outcomes
and
Impact
The expected outcomes of the project implementation in the short-term are: (i) reduction in the cost and
time it takes to start a business; (ii) reduction in the time it takes to issue land titles; (iii) facilitation of
access to financing thanks to the availability of land titles serving as collateral and the assistance provided
by the approved business incubation centre; (iv) increased number of businesses started by women in
growth-oriented sub-sectors; (v) decreased recourse to legal redress over business disputes following the
establishment of the Arbitration Centre and strengthened capacity of commercial courts. In the longer term,
the country will become increasingly more attractive, particularly in terms of Foreign Direct Investment
(IDE), thus paving the way for more inclusive economic growth. Bank’s Value
Added
The Bank’s comparative advantages and value added in this operation stem from the experience it has
acquired over the years in the design and implementation of capacity building projects in Member States.
Concerning the improvement of the business climate, in particular, it has financed similar operations in
Rwanda with the Rwanda Development Board, Burkina Faso with the Business Incubation Centre
(“Maison de l’Entreprise”) and in Senegal with the Investments and Exports Promotion Agency (APIX).
Knowledge
Building
When implemented, this project will support technical capacity building in the monitoring and
implementation of inter-ministerial reforms. In particular, capacity in the area of business climate will be
strengthened through technical assistance and various methodological guidelines that will be developed.
The practices will be disseminated within the administration through the documents produced and the
training sessions and within the Bank by TDFO through seminars and OPEV reports.
3 There are four categories of enterprises in Chad: very small enterprises (VSEs) characterized by a staff of less than 5 people, small
enterprises with a staff of 5 to 20 people, medium-sized enterprises with a workforce of 20 to 100 people and lastly big enterprises with
a workforce of over 100 people (CNPT-2011 Survey)
v
Results-Based Logical Framework Country and Project Name: Business Climate Improvement and the Economic Diversification Support Project (PACADET)
Project Objective: Promote private sector growth and economic diversification by improving the business climate.
RESULTS CHAIN
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISKS/MITIGATION
MEASURES
Indicator
(including ISC) Baseline Target
IMP
AC
T Sharp fall in the
dependence of the Chadian
economy on the oil sector
[Share of the non-oil private
sector in the GDP]
8.7% in 2012
10% in 2017
Consultation of
IMF’s 2015
Article IV
Report
OU
TC
OM
ES
Outcome I: Private sector
development is facilitated
by the reforms
I.I. Number of days it takes
to start a business
I.2 Number of commercial
disputes resolved through
mediation
I.3 Number of days required
to issue a land title
A minimum of 10
days is required to
start a business
Less than 1% of all
cases are currently
resolved by
mediation
At least six months
are required to issue
a land title
I.I. Starting businesses
reduced from 10 to 3
days in 2014
I.2. At least 5% of
commercial disputes are
resolved by mediation in
2015, pursuant to
OHADA regulations
I.3. The time taken to
issue land titles is
reduced from six months
to one month in 2015
ANIE Report
Statistics from
the Chamber of
Commerce
Risk 1:
Sluggishness in
making decisions
related to reform
implementation
Mitigation:
Enhancement of
inter-ministerial
coordination
Outcome II:
Entrepreneurship and sector
support are strengthened
Number of SMEs in growth-
oriented sub-sectors4
established as a result of the
project (including the
percentage owned by
women)
2 Two SMEs
established in
growth-oriented
sub-sectors and
listed in ANIE
databases
20 viable SMEs
established in growth-
oriented sub-sectors in
2016, including at least
25% by women
ANIE Report
Statistics from
the Chamber of
Commerce
OU
TP
UT
S
COMPONENT I: SUPPORT FOR PUBLIC AND PRIVATE DIALOGUE AND INVESTMENT CLIMATE REFORM Risk 2:
(ii) Underestimation
of the scope and
difficulty of reforms
to be implemented
Mitigation measures:
(i) Strengthening the
operationalization of
public and private
dialogue;
(ii) Communication
1.1. The legal and
regulatory framework for
the establishment and
promotion of SMEs is
reviewed and upgraded 5
1.1.1 Number of regulatory
instruments reviewed,
upgraded, promulgated and
broadcast nationally
The regulatory
instruments are
obsolete and
studies not
available
Texts revised and
promulgated, if need be,
no later than 2015 and
broadcast nationally
Official
Gazette of
Chad (OG)
1.1.2. Number of instruments
accompanied by decrees of
implementation on the
promotion of investment
adopted6.
No comprehensive
inventory of
statutory
instruments relating
to investments
A collection of
instruments is made
available to potential
investors by ANIA and
broadcast nationally
ANIE Reports
and
Newsletters of
the Ministry of
Commerce
4 High growth potential sub-sectors listed in the National Development Plan 5 This entailed (i) reviewing and improving the institutional, regulatory and legal framework relating to the establishment of companies to
reduce the time, procedures and costs required to start a business (see Chad's ranking on starting a business); (ii) streamline the tax
system (special levies) and licensing and related regulations; and (iii) support the preparation of strategic and institutional and legal frameworks required to optimize production sectors and prepare special economic zones.
6 In particular, instruments relating to the facilitation of the process for starting a business and obtaining a land title.
vi
1.2. Public and private
dialogue is operational and
a standing forum sponsored
by the Prime Minister's
Office is legalized
1.2. Number of public and
private meetings held in 2014
and minutes of meetings
Public-private
dialogue is sporadic
and unstructured
The public-private
dialogue framework is
formal, operational and
permanent; at least three
minutes of meetings are
available in 2014 and
subsequent years
Official
Newsletters of
the Chamber of
Commerce and
the Ministry of
Commerce
on reforms;
(iii) Technical
assistance for the
structure tasked with
monitoring reforms
and the Ministry of
Trade and Industry;
(iv) Establishment by
the Government of a
reform programme
monitoring
coordination unit
attached to the Prime
Minister's Office;
Risk 3:
Political instability
Mitigation measures:
Re-election in 2011
of the President with
a comfortable
majority and the new-
found peace with
Sudan allow for
strong presumptions
of relative political
stability.
Risk 4: Non-
involvement of
stakeholders
Mitigation measures:
Establishment of a
Steering and
Operationalization
Committee in charge
of the platform for
dialogue between the
private sector and the
public.
1.3. Commercial Courts are
strengthened and the
records processing time
reduced
1.3. Minutes of training
sessions and acceptance of IT
equipment
Court staff have not
received any
training for five
years
Staff members are trained
and IT equipment
available in 2015 for the
five Commercial Courts
ENFJ official
training
curriculum
1.4 The framework for
monitoring reforms using
“Doing Business”
indicators is formalized
1.4. Minutes on the delivery
of the reform-monitoring
methodology and framework
is available
Lack of a reform-
monitoring
methodology and
framework
A methodology and
framework for monitoring
reforms are available in
2014
Project report
and AT report
available at the
PIU
1.5 Reform of the cadastral
register and land tenure
legislative framework for is
effective7
1.5 Legislation and
regulations as well as
implementing decrees are
adopted on urban planning,
housing, land tenure and State
lands
The legislation and
regulations are
obsolete
The legislation governing
land tenure in Chad is
updated and available in
2016
Chad's Bulletin
of Legal
Notices and the
Newsletter of
the Ministry of
Commerce and
Handicrafts
COMPONENT II: SUPPORT FOR PARTNERSHIP AND INVESTMENT PROMOTION
2.1. ANIE is fully
operational and
interconnected
2.1. Delivery record of the
project for the
interconnection of ANIE
with partner government
services
ANIE is not
interconnected
with partner
government
services
The time it takes to start a
business drops from 10 to
3 days in 2015
ANIE and
“Doing
Business”
Report
2.2. Short- and medium-
term guidelines of the
Ministry of Commerce are
defined and accessible
2.2 An allocation is provided
in the 2014 budget for the
recruitment of a Consultant
The Ministry has no
Strategic and
Operational Plan
A Strategic and
Operational Plan is
available at end-2014
Record of
delivery of the
Strategic and
Operational
Plan to the
Ministry
2.3.Specific support for
project structuring and
contract analysis is
proposed
2.3. List of seminars and
training and targeted studies
on growth-oriented sub-
sectors implemented (with
women making up 25% of
the beneficiaries)
No specific
seminars on
growth-oriented
sub-sectors
Seminars on growth-
oriented sub-sectors are
provided in 2014 (with
women making up 25% of
the beneficiaries)
ANIE and
Chamber of
Commerce
reports
2.4. SME access to public
procurement is supported
and regulated by law
2.5. Share of public
procurement contracts
awarded to national SMEs
Less than 3% of
public procurement
contracts are
awarded to national
SMEs
10% of public
procurement contracts are
reserved for SMEs,
including subcontracting
and consortia in 2015
OCMP Reports
from 2015
KE
Y A
CT
IVIT
IES
COMPONENTS RESOURCES
Component I: Support for public-private dialogue and investment climate reform
- Technical assistance, equipment and training Component II: Support for partnership and investment promotion
- Technical assistance, equipment and training, Component III: Project Management
- Technical assistance, procedure manuals, equipment and training
Resources:
Component I: UA 3.97 million
Component II: UA 1.11 million
Project Management: UA 0.50 million8
Total: UA 5.89 million9
7 This refers to the reform of legislation and regulations on urban planning, housing, land tenure and State lands, and review the draft Code on Private and
State Lands and the implementing legislation to be enacted. 8 These expenses will also cover the administration of the project from support to preparation for the HIPC Initiative
9 This total includes costs related to contingencies and hazards
vii
Project Implementation Schedule
A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
0. Preparatory activities
0.1 Project appraisal
0.2 Board presentation
0.3 Grant effectiveness
0.4 Selection of project management team
0.5 Project launch mission
0.6 Preparation of procedures manual
1. Procurement of equipment and supplies
1.1 IT hardware and software and office automation
2. Technical assistance services
2.1 Preparation of CBDs and drawing up of shortlists
2.2 Launch of CBDs, bid evaluation and contract award
2.3 Consulting services
3. Training
3.1 Preparation of CBDs and drawing up of shortlists
3.2 Launch of CBDs, bid evaluation and contract award
3.3 Consultancy services
4. Operating expenses
5. Monitoring and evaluation
6. Steering committee meetings
7. Project supervision and mid-term review
8. Closure of activities
9. Annual financial audits
2013 2014 2015 2016 2017
1
REPORT AND RECOMMENDATION OF MANAGEMENT TO THE
BOARD OF DIRECTORS CONCERNING THE BUSINESS CLIMATE
IMPROVEMENT AND ECONOMIC DIVERSIFICATION SUPPORT PROJECT
(PACADET)
This proposal submitted for Board approval concerns the provision of a loan of UA 3.97
million and a grant of UA 1.92 million10, from the resources of the African Development Fund
to the Republic of Chad, for financing the Business Climate Improvement and Economic
Diversification Support Project (PACADET). This is an institutional support project whose
purpose is to back the implementation of reforms necessary to develop the private sector and
build the capacity of the Ministry of Trade and Industry, an agency which plays a key role in
implementing Government’s private sector policies. PACADET will be implemented over the
2014-2017 period.
I. STRATEGIC THRUST AND RATIONALE
1.1. Project Linkages with Country Strategy and Objectives
1.1.1 Chad’s 2013 to 2015 National Development Plan (PND), which focuses on the
country’s vision and defines its development agenda, is the reference document for its
technical and financial partners. It centres on eight priority strategic outcomes, including
the development of the private sector11. These priority strategic outcomes reflect the activities
on which the Government plans to focus its efforts in the coming years so as to accelerate
growth and boost sustainable development. To achieve these outcomes, the Government has
defined four strategic pillars: (i) developing production supply and decent employment
opportunities12
; (ii) mobilizing capital and combating inequality, poverty and social exclusion;
(iii) protecting the environment and adapting to climate change; and (iv) improving
governance. Activities supported under Pillar (i) aim to encourage private investment and
improve the competitiveness of the economy by providing basic infrastructure. Pillar (iv)
activities aim to pursue reforms with a view to enhancing the efficiency of the administration
and developing instruments that ensure transparency, further streamline justice and strengthen
social dialogue.
1.1.2 The Bank’s 2010-2014 Country Strategy Paper (CSP) for Chad is consistent
with the National Development Plan (PND). Its assistance strategy in Chad revolves around
two pillars: (i) promoting good governance in the public sector; and (ii) developing basic
infrastructure. Pillar 1 is in line with the first thrust of the PND. Through this pillar, the Bank
is supporting the implementation of reforms to improve the business environment with a view
to facilitating private sector development. More specifically, the Bank’s objective under this
pillar is to reduce the main barriers to the emergence of the private sector in Chad as may be
summed up in two major constraints: (i) an unattractive investment environment; and (ii)
weak institutions responsible for promoting the private sector.
1.1.3 The project is consistent with both Thrust I of the PND and the guidelines of Pillar I
of CSP 2010-2014. It is a continuation of the reforms initiated by the country since 2003,
which, among other aspects, led to the adoption in 2003 of a Poverty Reduction Strategy
Paper (PRSP). This document also enabled the implementation of the first National Poverty
Reduction Strategy (NPRS I) over the 2003-2006 period, the second National Poverty
Reduction Strategy (SNRP II) for the 2008-2011 period and, more recently, to the definition
10 UA 5.89 million (Loan: 2.81 million, Grant 0.86 million) and cancellation (Loan: 1.16 million, Grant: 1.06 million) 11 See the development agenda diagram on page 1 of the technical annexes 12 Pillar covering private investment initiatives
2
of a new National Development Plan (PND) for 2013-2015. Under its eight priority strategic
outcomes, the PND guarantees the continuation of private sector development, beginning with
the removal of the aforementioned constraints affecting the business climate. Furthermore, the
project is also consistent with the guidelines of the Bank’s Strategy (2013-2022), the Bank’s
Private Sector Development Strategy (2013-2017) and the Strategic Framework and
Governance Action Plan II for the period 2014-201813, especially its pillar on the private
sector. Indeed, by reducing the constraints affecting the business environment, the project
aims to create favourable conditions for the resumption of economic growth through a
significant increase in private investment and production – the source of lasting jobs and
prosperity.
1.2. Rationale for Bank’s Involvement
1.2.1 Political, Economic and Social Context: After a decade marked by recurrent
conflicts, Chad is gradually emerging from its fragile state and has, since 2010, enjoyed
relative political and security stability thanks to Government efforts and the constant dialogue
it maintains with neighbouring countries and the international community. On the economic
front, after a strong rebound in 2010 (average GDP growth of 9.4%14
)), growth slowed in
2011 (1.6%) due to the decline in oil production and the effects of drought on the agricultural
sector. Economic prospects for 2013 and 2014 are encouraging, with real GDP growth of
around 2.7% and 11.1%, respectively. GDP growth in 2014 would be driven by new
investments in the oil sector. However, the resulting oil revenue should experience a relative
decline due to falling world prices. Nevertheless, the Chadian economy remains highly
dependent on the oil and gas sector, which accounts for 20% of GDP, compared with 12% for
agriculture, 22% for trade and transport, and 1% for the manufacturing sector. This
dependence leads to high vulnerability to external shocks and the vagaries of oil production.
However, the impact of the oil sector on employment and the rest of the economy is limited,
as shown by monetary poverty prevalence rate which stands at 46.7%.
1.2.2 To date, the private sector15 has sustained growth only marginally as shown by the
level of (non-oil) private investment, which accounted for only 8.7% of GDP in 2012
(compared to 14% on average in sub-Saharan Africa and 25% in Asia). According to the
“Doing Business 2014” Report, Chad ranks 189th
out of 189. Moreover, the Chadian private
sector is characterized by a dual structure whereby a few large companies with mostly foreign
shareholding coexist with a myriad of small businesses in the informal sector. Very Small
Enterprises (VSEs)16 account for 91% of all enterprises, while Small- and Medium-sized
Enterprises (SMEs) account for 3%, and large Foreign Investment Enterprises (FIEs) for 6%.
13 Governance Action Plan (GAP) 2014-2018 in the process of being approved 14 Over the 2004-2012 period, according to PND 2013-2015 15 A full description of Chad's private sector is available in Technical Annexes (A2) 16 There are four categories of enterprises in Chad: very small enterprises (VSEs) characterized by a staff of less than 5 people, small
enterprises with a staff of 5 to 20 people, medium-sized enterprises with a workforce of 20 to 100 people and lastly big enterprises with a workforce of over 100 people (CNPT-2011 Survey)
3
1.2.3 On the strength this observation, Chadian authorities are seeking to diversify
the economy and make the private sector the main driver of growth and productive
employment creation. To achieve this goal, Chad needs to improve its investment climate
and better capitalize on the comparative advantages it enjoys by virtue of its geographic
location and the wealth of its natural resources. Several challenges greatly limit the
development of the country’s private sector, especially SMEs. These key challenges that were
identified in the Employers’ White Paper (Livre Blanc du Patronat)17
, the study on growth-
oriented value chains18
and the strategy paper for the promotion of SMEs/SMIs19
include:
(i) The ineffectiveness of support and supervisory structures: these structures exist but
are ineffective, dispersed and lack the material and human resources required to coordinate
their activities. They include the National Investment and Exports Agency (ANIE) - the
business start-up one-stop-shop in Chad – which is supposed to facilitate the process of
starting businesses, especially in growth-oriented sub-sectors20, the Business Formalities
Centre (CFE), the Business Development Centre (CDE), the Chamber of Commerce,
Industry, Agriculture, Mines and Handicrafts (CCIAMA), the Chadian National Employers'
Council (Conseil National du Patronat Tchadien - CNPT), and the Ministry of Trade and
Industry, which enforces Government policies in terms of private sector support and
organization. Moreover, the private sector lacks the appropriate framework for high-level
dialogue on reform priorities with the public sector, particularly as regards measures that
should be taken to remove constraints hindering the development of a robust private sector.
Indeed, although there is an inordinate number of professional associations, private sector
unions or sector-based think tanks (Chamber of Commerce, Professional Association of
Banks, Association of Chadian Trade Unions, etc.), they lack a united front when discussing
with the Government on key priorities to improve the business climate;
(ii) Difficulty in accessing financing: access to credit is extremely difficult for SMEs. Due
to the high risk level and the reluctance of banks, financing may be obtained only if backed
with collateral, and the main instrument often required by banks in this regard is a land title.
However, ownership of a reliable land title by SMEs presupposes the existence upstream in
the country of a property registration procedure that is working well enough to make such
titles acceptable to banks. The modernization of the cadastral register and the land tenure
system, particularly the land-titling process, is currently underway. Meanwhile, SMEs are
financed primarily with own resources and rarely resort to bank credit. This situation is most
paradoxical, especially since according to the latest report of the Bank of France on the status
of the Franc Zone, banks in the Central African region in general, and Chad in particular, are
all in a situation of over-liquidity. According to the “Doing Business 2013” Report, access to
financing remains a major obstacle for Chadian SMEs. The country’s ranking on access to
credit actually slipped from the 97th
position in 2012 to the 104th
. This poor performance is
mainly due to the lack of an operational guarantee system and the unreliability of land titles;
(iii) Weakness of the legislative, regulatory and institutional framework: this aspect is
clearly demonstrated by the difficulties that businesses face in carrying out their activities. On
the judiciary front, the difficulties are manifold and pertain to relations that companies and
credit institutions have with public authorities, clients and employees. The most disturbing
difficulties cause disputes that eventually lead to wrongful convictions, thus not only
endangering the survival of businesses, but also swell unemployment when they cause
employees to lose their jobs. These difficulties also lead to loss of revenue for the
17 Chadian Employers’ White Paper (Livre Blanc du Patronat Tchadien), 2012 edition, page 25 18
Diagnostic study on growth- and employment-generating value chains in Chad, conducted in partnership with the World Bank 19
Study conducted by ORCE in 2012 on SMEs
20 According to the PND, growth-oriented sub-sectors refer to activities related to gum arabic, spirulina and shea butter
4
Government, particularly in terms of unpaid taxes. Moreover, the handling of disputes with
tax authorities is another source of risk for businesses since there is excessive recourse to
legal redress to settle commercial disputes in Chad due to the human, material and
organizational weaknesses of commercial courts and the absence of an arbitration centre that
would have the advantage of offering an alternative method for resolving such matters.
Furthermore, it is necessary to reform the country’s fiscal and trade policy, especially to align
it with “OHADA21” regulations. In its current state, Chad’s fiscal policy does not allow for the
harmonious development of business. Very often, economic operators complain about the
latent climate of tax insecurity and the high tax burden, resulting in a reduction in their
investment capacity.
1.2.4 The Bank’s intervention is motivated by three main reasons: firstly, the project is
part of a reform process guided by a roadmap22 for improving the business climate. To
overcome the aforementioned problems, the Government adopted, in consultation with the
private sector and the Technical and Financial Partners (2012), a timetable for implementing
reforms to improve the business climate and diversify the economy. The specific objectives of
the initiative include: (a) facilitating the practical implementation of public-private sector
dialogue so as to improve the business climate; (b) streamlining and reducing taxes and
special levies, and introducing a system that is more oriented towards private sector growth;
(c) structuring the institutional support mechanism for private sector development; (d) developing
financial and non-financial support mechanisms for SMEs to have greater access to credit; and
(e) promoting entrepreneurship. Secondly, to improve knowledge of the context, particularly
in connection with production sectors, with a view to ensuring diversification, the
Government, in partnership with the Bank and the World Bank23, conducted a study on
growth- and employment-generating value chains of the agro-industry sector that
recommends interventions in key sectors such as gum arabic, spirulina and cattle production,
in partnership with other TFPs. Thirdly, the key technical and financial partners in Chad have
established a framework for joint reflection on the reform implementation timetable.
1.3. Aid Coordination
In Chad, a Technical and Financial Partners’ Committee chaired by AfDB was
set up in April 2011. The Committee hosted several multi-donor thematic groups24
, including
the one charged with private sector issues (chaired by BDEAC, with AFD serving as the
secretariat). It holds meetings to coordinate and harmonize partner interventions. Apart from
the Bank, the key TFPs involved in the sector in Chad are the European Union25
, through its
Regional Trade and Integration Support Programme (Programme Régional d’Appui au
Commerce et à l’Intégration - PACIE) which aims, among other things, to introduce the
notion of quality assurance in infrastructure projects and modernize the country’s industrial
base. For its part, the World Bank is studying the constraints affecting growth-oriented sub-
sector market systems, particularly the upstream aspects, as part of preparation of a support
project that will complement the Bank’s on the downstream aspects of growth-oriented sub-
sector value chains, especially in terms of entrepreneurship in these sectors and export support
process. This project was designed in close coordination with the authorities, the private
sector and key TFPs on the ground in Chad. Consultations have helped to ensure the
complementarity of project activities with those partners.
21 Organization for the Harmonization of Business Law in Africa 22
Business Environment Improvement Charter, adopted in 2010, leading to development of the reform implementation timetable 23
Diagnostic study on growth- and employment-generating value chains in Chad 24 The “private sector” thematic group is also undertaking a mapping of available financial and non-financial support that TFPs may offer
to private sector operators in Chad 25 The EU and French Cooperation supported the programme for the establishment of commercial courts, while the World Bank supported
the Forum for State-Private Sector Dialogue (FODEP)
5
Table 1.3
Major Projects of TFPs in PACADET-Related Sectors TFPs Projects/Studies Areas Covered
European
Union
Delegation
Technical Assistance
Regional Trade and Integration Support Programme (PACIE) 26
Advisory support services for businesses
Standardization and quality infrastructure, improvement of trade and
agricultural statistics, strengthening and upgrading of the industrial
fabric
World Bank Study on value chains
Support to growth-oriented sub-sectors
Analysis of market system constraints affecting a number of growth-
oriented sub-sectors Assistance for the structuring of export sectors
AfDB Study on the private investment
environment in ECCAS member
countries
Study on the major constraints affecting
private sector development and
SME/SMI promotion in the
diversification of the Chadian economy
Private sector investment environment
Challenges and constraints affecting SMEs/ SMIs in Chad
BDEAC Support for the rehabilitation of Sahr
market
Support for the beef sector
Modernization of market infrastructure to boost marketing
Assistance for the construction of production facilities
UNDP Technical Assistance as part of the "CIR"
project implementation
Sales support for economic operators on national and international
markets
AFD Support for gum arabic production
Support for the Small Business
Incubation Centre (Maison de la petite
entreprise)
Structuring of the upstream and downstream aspects of the sector
Operational support activities for small businesses
II. PROJECT DESCRIPTION
2.1. Project Components
2.1.1 PACADET’s objective is to foster private sector development to drive strong
and inclusive economic growth. Its operational objectives include: (i) improving the
business climate through the identification and implementation of the necessary key reforms;
and (ii) building entrepreneurial and investment capacity.
2.1.2 The project consists of three components: (I) Support for public and private
dialogue and reform of the investment climate; and (II) Support for entrepreneurship
and investment promotion; a third component (III) is devoted to project management and
coordination. Complementarity between the first two components stems from the fact that the
investment climate needs to be improved to facilitate economic diversification through
entrepreneurship and investment.
26 Overall cost EUR 68 million
6
Table 2.1:
Project Components and Activities Component Name Cost (in UA
million) Components Description
Component ❶: SUPPORT FOR
PUBLIC-PRIVATE
SECTOR DIALOGUE
AND INVESTMENT
CLIMATE REFORM
3.97
Sub component I.1: Operationalization of public and private sector dialogue and
technical assistance for monitoring “Doing Business” indicators
Definition and facilitation of sector-based and thematic working groups;
Development of a business climate improvement strategy and coordination with the
“Doing Business” Secretariat;
Defining the reform steering and monitoring framework and organization and
operationalization of the action plan associated with “Doing Business” indicators in
conjunction with the Reform Programmes Coordination and Monitoring Unit of the
Prime Minister’s Office;
Sub-component I.2: Development and adoption of an SME promotion legislative
and regulatory framework
Review and reform of the legal, regulatory and institutional framework for setting up
business;
Preparation and signing of instruments implementing the law and dissemination of
new regulations;
Sub component I.3: Support for the cadastral and land tenure system reform
Updating the N'Djamena cadastral map, establishing a single geodetic reference
network and supplying technical equipment (SIF);
Feasibility study and implementation of a landed property one-stop shop (GUF);
Reviewing and strengthening the institutional, regulatory and legislative framework,
and providing training in real estate appraisal27
;
Providing assistance to the Directorate General for Legal Affairs in land dispute
management;
Sub-component I.4: Support for commercial courts
Compliance of Chadian commercial law with “OHADA” provisions and “CEMAC”
regulations, especially those relating to arbitration;
Capacity building for ENFJ trainees and judges of commercial courts28
;
Conducting a feasibility study and establishing a Mediation and Arbitration Centre
(CMA);
Providing assistance to the ENFJ Legal Documentation Centre;
Computerization of RCCM, IT equipment for commercial courts and networking.
Component ❷ SUPPORT FOR
ENTREPRENEURSHIP AND INVESTMENT
PROMOTION
1.11 Sub-component 2.1: Assistance to strengthen the SME institutional support
framework 29
Reviewing the business development process and operationalizing the one-stop shop
for business development, export and investment;
Feasibility study for the establishment of a “Business Incubation Centre”; Support for the development of SMEs in growth-oriented sub-sectors
30 ;
Feasibility study and establishment of an approved pilot management centre under
CCIAMA;
Sub-component 2.2: Fostering market access for SMEs
Facilitating SME access to public procurement by training them to respond to bid
invitation31
, as well as facilitating their integration into value chains of multinational
groups based in Chad through subcontracting;
Organizing dialogue between major groups and SMEs;
Sub-component 2.3: IT equipment and networks
27 This concerns the reform of legislation and regulations governing on urban planning, housing, land tenure and State lands, the review of
the draft real estate and land code as well as the implementation instruments to be enacted.
28 (i) Training in the keeping of the RCCM; (ii) computer and Internet tools applied to the court; and (iii) introduction of specialized training modules in the ENFJ curriculum for Judges and Clerks.
29 The issue here concerns the inadequacy of Chad’s current SME support system, which should be aligned with the new realities of a
globalized world and the country’s membership in the WTO, CEMAC, ECCAS and the Central African EPA. 30 Growth-oriented sub-sectors in gum arabic, spirulina and agro-industry. 31 Chad Small Business Act: this activity will necessitate the review of the Investment Code and upgrade of Chadian SMEs to enable them
to respond to bid invitations and fit into the value chains of large national or multinational groups operating in Chad, and thus strengthen their commercial and productive capacity.
7
Interconnection of ANIE32
with partner government services, IT equipment for one-
stop shops and establishment of a data centre;
Component ❸: PROJECT
MANAGEMENT AND
COORDINATION
0.50 Procurement and installation of accounting software, provision of training and
guidance for users and development of a procedures manual; and
Production of interim and annual financial statements and annual account audits;
Coordination; Organization of Steering Committee meetings (two meetings per year).
Basic Costs UA 5.58
Million
Contingencies UA 0.31
Million
Total Cost UA 5.89
Million
2.2. Technical Solutions Adopted and Alternatives Explored
At the project preparatory phase, several implementation options were
considered, particularly concerning project anchoring, the number of entities to be
supported, the scope and scale of investments to be made and inherent constraints facing the
potential beneficiary entities. In this particular case, trade-offs had to be made to: (i) ensure
compatibility between the project development objectives and the financial allocation; and (ii)
take the operations of other TFPs into account for reasons of complementarity. The technical
solution adopted for the project is presented in paragraphs 2.1 and 2.1.2 of this report. Chad’s
National Development Plan (PND) clearly identifies the main constraints affecting private
sector development in the country and provides guidance in terms of reforms needed to
address them. Moreover, the Employers’ White Paper33 also suggests avenues for reform. It
must, however, be noted that the lack of national commitment to their implementation
contributes to significantly impede further reforms. Therefore, to support the Government, the
capacity building provided by the project is essential.
2.3 Project Type
PACADET is an ADF-financed institutional support project designed to
promote private sector development in Chad in a bid to foster strong and inclusive
economic growth. This will be achieved by reducing constraints that affect the business
climate and economic diversification. The project also includes a strong capacity building
component, especially in terms of support services for SMEs and the Ministry of Trade and
Industry.
2.4. Project Cost and Financing Arrangements
The total project cost is estimated at UA 5.89 million, of which UA 4.30 million
will be in foreign exchange (73%) and UA 1.60 million in local currency (27%). The ADF
will cover 100% of the project cost, excluding project-related duties and taxes, in line with the
Policy on Expenditure Eligible for Bank Group Financing (ADF/BD/2007/72/Rev.2,
paragraph 4.2.2), which allows ADF to fund the entire cost of a given project provided the
following three criteria are met: (i) the country's commitment to implement its development
programme; (ii) the level of funding allocated by the country to sectors targeted by Bank
assistance; and (iii) the budgetary situation and the debt level. Chad meets all three eligibility
criteria. These costs include a 2% provision for physical contingencies and a 3.5% provision
for price escalation. The detailed cost table is provided in Technical Annex B2 of this report.
The following summary tables give the breakdown of project costs:
32 National Investment and Export Agency, one-stop shop for business development in Chad 33 2012 Edition, published by the Chad National Employers’ Council (CNPT)
8
Table 2.3
Estimated Project Cost by Component Components CFAF Million UA Million %
F.E.
L.C. Total F.E. L.C. Total
I. Public-Private Sector Dialogue and
Business Climate Improvement
Support
2375.85 593.96 2969.81 3.18 0.79 3.97 67%
II. Entrepreneurship and Investment
Support 666.58 166.65 833.23 0.89 0.22 1.11 19%
III. Project Management 0.00 370.80 370.80 0.00 0.50 0.50 8% Total Base Cost 3042.43 1131.41 4173.83 4.07 1.51 5.58 95%
Provision for Physical Contingencies
(2%) 60.85 22.63 83.48 0.08 0.03 0.11
Provision for Price Escalation (3.5%) 108.65 40.41 149.06 0.15 0.06 0.20
Total Project Cost 3211.93 1194.44 4406.37 4.30 1.60 5.89 Note: The exchange rates used are indicated in the introduction of this report (Page (i))
Table 2.4
Sources of Financing (UA million)
Source of Financing UA Million % of total
F.E. L.C. Total
GOVERNMENT 0.00 0.00 0.00 0% ADF - LOAN 1.40 0.52 1.92 33% ADF - GRANT 2.90 1.08 3.97 67% Total Project Cost 4.30 1.60 5.89 100%
Table 2.5
Project Cost by Expenditure Category (UA million)
Code EXPENDITURE CATEGORIES CFAF Million UA Million % in F.E. Grant Loan
F.E. L.C. Total F.E. L.C. Total
1. Goods 417.33 231.47 648.80 0.56 0.31 0.87 64% 0.00 0.87
2. Consultancy Services 2,625.10 656.27 3 281.37 3.51 0.88 4.39 80% 1.50 2.89
3. Operation 0.00 243.66 243.66 0.00 0.33 0.33 0.33 0.00
Total Base Cost 3,042.43 1 131.41 4 173.83 4.07 1.51 5.58 73% 1.83 3.76
Provision for Physical
Contingencies (2%)
60.85 22.63 83.48 0.08 0.03 0.11 0.04 0.08
Provision for Price Escalation (3.5%)
108.66 40.41 149.06 0.15 0.05 0.20 0.07 0.13
Total Project Cost 3,211.93 1,194.44 4,406.37 4.30 1.60 5.89 73% 1.92 3.97
9
Table 2.6
Expenditure Schedule by Component (UA million)
Component 2014 2015 2016 2017 Total
I. Public-Private Sector Dialogue and
Business Climate Improvement
Support
0.80 1.19 1.19 0.80 3.97
II. Entrepreneurship and Investment
Support 0.22 0.33 0.33 0.22 1.11
III. Project Management 0.10 0.15 0.15 0.10 0.50
Total Base Cost 1.12 1.67 1.67 1.12 5.58
Provision for Physical Contingencies
(2%) 0.02 0.03 0.03 0.02 0.11
Provision for Price Escalation (3.6%) 0.04 0.07 0.07 0.04 0.20
Total Project Cost 1.18 1.77 1.77 1.18 5.89
2.5. Project Area and Beneficiaries
The project covers Chad’s national territory with a total population estimated
at 11.5 million. The direct project beneficiaries are: (i) the private sector, especially SMEs;
(ii) administrative structures34 selected for project purposes; and (iii) the Chadian population
as a whole, since the development of investment and private production will necessarily result
in increased competition between the players and will be good for consumers because it will
also stimulate production, thanks to the rising consumption level. It will also help to reduce
unemployment. Moreover, the State will benefit from PACADET since the increased
production and consumption will generate additional revenue. Such revenue could effectively
be used to finance projects that are likely to improve Chad’s social indicators, especially
those promoting gender mainstreaming in public policy and PND priority programmes, thus
reducing gender inequality.
2.6. Participatory Approach for Project Identification, Design and Implementation.
During project preparation, consultations were held with various structures
from the public (Ministries of Trade and Industry, Justice, Urban Planning, Housing, Land
Affairs and State Lands) and private sectors (Chamber of Commerce, Industry, Agriculture,
Mines and Handicrafts, and Employers). The consultations continued in August 2013 during
the appraisal mission. The process has helped to demonstrate and confirm that the project
objectives are consistent with the expectations of the beneficiaries. Needless to say, this
collaboration in structuring the project will continue during the implementation phase through
the participation of various beneficiary institutions in the Steering Committee. The private
sector will be particularly involved in activities such as: (i) implementation of the public-
private sector dialogue platform; (ii) training in the methodological approach to the piloting
and monitoring of reforms identified; and (iii) training programmes for project promoters in
growth-oriented sub-sectors.
34
Ministries of Justice, Urban Planning, Housing, Land Affairs and State Lands, Trade and Industry.
10
2.7. Consideration of Bank Group’s Experience and Lessons Reflected in Project
Design
2.7.1 As of 31 July 2013, the portfolio of AfDB-financed projects in Chad comprised
16 operations for a total commitment of UA 138.34 million (see Annex II). It is divided
between institutional support projects with a national and regional scope, on the one hand, and
infrastructure projects, on the other. Specifically, the twelve domestic operations35
represent a
financing volume of UA 93.09 million, with a total disbursed amount of UA 51.43 million or
55.25% of commitments.
2.7.2 In 2005, the Bank approved a Governance Reform Support Project (PARG),
which actually ended on 30 November 2010; its main achievements and outcomes are
included in this project. PARG led to significant improvements in public finance
management in Chad, and the design of the current project took into account the lessons
drawn from its implementation. Key lessons reflect the need to: (i) better target beneficiary
structures; (ii) ensure better distribution of training during the project lifespan; and (iii)
improve the structure of training sessions, with emphasis on shorter sessions, for instance.
Between 2004 and 2009, the Bank also financed the Economic Management Support Project
(PAGE) whose implementation has helped to strengthen management capacity and
development projects. Two main beneficial lessons may be drawn from PAGE’s
implementation: (i) problems arising during implementation should be corrected; and (ii) new
impetus should be given by identifying additional support and incorporating it into the
implementation schedule. These lessons have helped to highlight the importance of
supervision missions and the concrete benefits that may be derived from them. During
PACADET’s preparation, account was taken of lessons drawn from PARG and PAGE. In
combination with capacity building operations planned under PACADET, these lessons will
help to improve the project design and implementation.
2.7.3 Lessons from implementing previous projects were taken into account in
PACADET’s design. Table 2.7 below presents the main lessons learned and shows how they
have been incorporated into the preparation of the current project.
Table 2.7:
Lessons Learned from Previous Institutional Support Projects Lessons Learned Steps taken to Incorporate them in the Project
Project Area Right from the project identification phase – and for efficiency and budgetary reasons
discussions focused on limiting the number of beneficiary structures. In light of these
concerns, it was decided during the appraisal phase to limit the number of such
structures to three.
Number of Activities Right from the identification mission, considering the large number of challenges to
overcome, the need to prioritize activities became crucial. Our discussions with the
authorities allowed us to limit the number of components to three36
, with seven sub-
components.
Anchoring the Project
Implementation Unit at
the Prime Minister’s
Office
The need to anchor the Project Implementation Unit at the Prime Minister’s Office
was determined from the preparatory phase in agreement with the authorities, to
facilitate the coordination of reforms entailed by the project. Moreover, the
preparation coincided with the establishment of the Reform Programmes
Coordination and Monitoring Unit recently set up by Government.
35 Including institutional support operations amounting to UA 5.02 million, financed by the Fragile States Facility (FSF). The disbursement
rate for these projects is 27.76%, and their average age 1.84 years. 36 Including the project management component.
11
Weak coordination of
donor interventions
and sector-based
reform programmes
The operation was designed in close collaboration with other development partners.
The common anchor point for all similar projects at the Reform Programs
Coordination and Monitoring Unit established by the Government and attached to the
Prime Minister, under which the project will be placed, will facilitate the
harmonization of various operations.
2.8. Key Performance Indicators
2.8.1 Key performance indicators identified and expected outcomes at project
completion are listed in the Results-Based Logical Framework and in Box I below. It is
hoped that the process of identifying, prioritizing and implementing reforms will be fully
operational in the short and medium term. The operationalization of ANIE and the
computerization of the Trade Register (RCCM) should reflect concrete results. In the longer
term, private investment growth is expected to lead to job creation, reduction in
unemployment and an increase in tax revenue, thus making it possible to finance social
programmes targeting vulnerable groups.
Box :
Key Performance Indicators Output Indicators
SME legal framework instruments revised and, if necessary, promulgated latest by 2015
A collection of instruments is henceforth available for potential investors in 2015
The public-private dialogue framework is formal, operational and permanent in 2014
Staff are trained and equipment available in 2015
A reform monitoring framework and methodology are available in 2014
Legislation governing the cadastral register and land tenure is updated and available in 2016
The time required to start a business is reduced from 10 to 3 days in 2015
An operational strategic plan is available at the Ministry of Trade and Industry by end-2014
Support seminars on growth-oriented sub-sectors are organized and at least 25% of women are
beneficiaries
Outcome Indicators
The time required to start a business drops from 10 to 3 days at end-2014
The number of viable SMEs created in growth-oriented sub-sectors increases from 0 to 20 by end-
2016 with at least 25% owned by women
Impact Indicators
The share of the non-oil private sector in GDP increases from 8.7% in 2012 to 10% in 2017.
2.8.2 Staff recruited will gather data that will reflect indicators on outcomes achieved. The
Reform Programme Coordination and Monitoring Unit (CSPR), which will be the executing
agency, will be backed by a three-member team, including a monitoring/evaluation expert
exclusively dedicated to the project, and the Bank’s field office (TDFO). The
monitoring/evaluation expert will produce quarterly progress reports and contribute to the
preparation of reports on the status of project implementation and outcomes. PACADET’s
performance will be assessed based on indicators defined at project start up and supporting
data obtained during the implementation phase and on completion.
12
III. PROJECT FEASIBILITY
3.1 Economic and Financial Performance
This project will not generate any direct revenue on the basis of which the
financial return could be established. However, its performance could be assessed based on
the direct and indirect impacts of economic and social achievements generated in the medium
and long term. The expected economic and financial benefits will include the possibility of
creating the necessary conditions for increasing the contribution of the non-oil private sector
to GDP.
3.2 Environmental and Social Impacts and Climate Change
3.2.1 The project will not have any direct adverse environmental impact since its
activities are limited to training, technical assistance, studies and procurement of logistics
such as minor office automation and IT equipment. Moreover, PACADET is classified in
Category 3 in accordance with Bank guidelines.
3.2.2 Project activities are focused on building human and institutional capacities and will
not have a negative impact on the climate change process.
3.3 Gender
Chad has signed and ratified Conventions on the Rights of the Child (CRC) and
the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW). In addition, during the Millennium Summit, the country undertook to achieve a
number of Millennium Development Goals (MDGs), including Goal 3 to promote gender
equality and empower women. Government’s stated objective is to promote gender
mainstreaming and protect vulnerable, disadvantaged37
groups. To achieve this goal, the
following four strategic thrusts were identified: (i) promotion of women and gender
mainstreaming; (ii) protection and development of young children and adolescents; (iii)
promotion and protection of vulnerable persons; and (iv) establishment of a social protection
framework for the family. There are on-going projects on all of these strategies – a reflection
of Government’s commitment to achieve its set goals on gender, in particular, and the
protection of vulnerable groups, in general. However, the persistent absence of equality and
fairness still undermines the country's sustainable development. To reduce gender inequality,
public policies must underscore the cross-cutting gender mainstreaming approach with a view
to reversing the curve and achieving significant progress in that area. The strategic options
previously defined and implemented by the Government will certainly help to advance the
gender cause in Chad. The project will strengthen Chadian women's entrepreneurial spirit38
and positively impact the country’s gender indicators. It is expected that 20 companies will
be incorporated by women in competitive growth-oriented sub-sectors, and that one
quarter of the economic operators trained under Component II will necessarily be
women.
37 PND 2013-2015, page 93. Similarly, between 2011 and 2015, the percentage of women appointed to decision-making positions
increased from 12% to 15%. 38
Particularly through Component II (entrepreneurship and investment support).
13
3.4 Social
In recent years, Chad's economy has experienced uneven growth, as reflected
by the outcome of the Third Consumption and Informal Sector Survey39
, according to
which poverty declined only slightly, despite the strong growth recorded in 201240..
Considering that nearly half of Chad’s population (46.7%) live in abject monetary poverty, it
goes without saying that by targeting vulnerable groups under Component II entrepreneurship
activities, PACADET and its expected outcomes will be beneficial to the most
underprivileged segments of the population, particularly unemployed youths and women.
3.5 Forced Resettlement
The project will not entail any population displacement.
IV. PROJECT IMPLEMENTATION
4.1. Implementation Arrangements
4.1.1 Institutional Arrangements
4.1.1.1 Due to the strong need for inter-ministerial coordination necessary to facilitate the
implementation of reforms required by the project, PACADET will come under the
supervisory authority of the Reform Programmes Monitoring Unit (CPSS), which is the
project executing agency under the aegis of the Directorate of the Prime Minister's Office.
The Reform Programmes Monitoring Unit (CPSS) will be strengthened by a dedicated project
team, comprising a coordinator responsible for the administration of project implementation,
assisted by monitoring-evaluation41, procurement and financial management specialists, all of
whom will be recruited through national or international competitive bidding process and on
the basis of terms of reference approved by the Bank.
4.1.1.2 A Project Steering Committee (PSC) will be responsible for overseeing and
monitoring implementation. As such, it will validate budgets and progress reports prepared by
the PIU (INS). The PSC will comprise representatives of various beneficiary structures: (i)
Ministry of Justice; (ii) Ministry of Urban Planning, Land Tenure, Housing and State Lands;
(iii) Ministry of Trade; and (iv) Ministry of Economy, Planning and International
Cooperation; (v) Ministry of Finance and Budget; and (vi) the Private Sector. The PSC will
take any action deemed necessary to ensure the smooth implementation of various project
components and will address all issues of jurisdiction to ensure proper coordination of project
implementation. The Project Coordinator will provide secretarial services during PSC
meetings.
4.1.2 Procurement Arrangements
All procurement of goods and works by international competitive bidding (ICB) and
consultancy services will be in accordance with Bank Rules and Procedures for the
Procurement of Good and Works, May 2008 Edition (Revised July 2012) or Rules and
Procedures for the Use of Consultants, May 2008 Edition (Revised July 2012), as the case
may be, using the Bank's standard bidding documents. Furthermore, pursuant to provisions
under Article 3.3 of these Rules of Procedure, procurement of goods through local
competitive bidding (LCB) shall comply with national procurement laws (Decree No.
39 ECOSIT 3 Survey, 2011 40
Increased from 1.6% in 2011 to 7.2% in 2012 and, according to projections, will stand at 7.4% in 2013 and 11.5% in 2014 41
He will oversee the results framework and, in particular, the logical framework indicators
14
503/PR/PM/SGG/2003), using standard bidding documents of the Republic of Chad, subject
to conditions set forth in the financing agreements. A Public Procurement Plan (PPP) will be
prepared by the country and submitted to the Bank, which will ensure its compliance with the
Grant Protocol and its relevant rules. The PPP will be prepared for an initial period of 18
months and will be updated by the Donee annually or as needed. Prior to its use, any proposed
revision of the PPP will be approved by the Bank. The Project Implementation Unit (PIU)
will be strengthened by a procurement specialist who will assist the PIU in the procurement of
goods, works, consultancy services and training as described in detail in Technical Annex B7.
4.1.3 Financial Management Arrangements
The Reform Programmes Monitoring Unit (CPSS) will be strengthened by a
dedicated project team. The Directorate of Administrative, Financial Affairs and Equipment
(DAAFM) of the Prime Minister's Office, will supervise the financial management of
PACADET, in collaboration with the project team. The Bank carried out an appraisal of the
current financial management system at DAAFM in September 2013 in accordance with the
Bank's methodology laid down by ORPF.0 in June 2010 in its kit on “Financial Management
of Projects Funded by the African Development Bank”. The objective of this assessment is to
ensure that funds provided for the project are used effectively and efficiently, and solely for
the purposes for which they were granted. To this end, it is important for the executing agency
to have technical and human resources that will help account for, preserve, inform and audit
the use of financial resources placed at its disposal.
Proposed mitigation measures42 should ensure that the project’s financial
management arrangements are such that can provide timely, accurate and reliable information,
and allow for the safeguard of project assets and the conduct of accounts audit within the
agreed timeframes. These measures mainly include the recruitment of a qualified accountant
assigned for project financial management, preparation of an administrative, accounting and
financial procedures manual, procurement of appropriate accounting software and conduct of
internal and external audit of missions fielded by private consulting firms. Details of the
financial management assessment are provided in the Technical Annexes.
4.1.4 Disbursement Arrangements
Disbursements will be made in accordance with the Bank’s Disbursement Manual.
The ADF will commit UA 5.89 million to fund the entire project. The disbursement methods
retained are: (i) the direct payment method for the loan disbursement; and (ii) the special
account and direct payment methods for the grant disbursement. The special account or the
revolving fund will be used to cover operating, workshop and field mission expenses, etc. The
funds will be disbursed by the Bank as an advance paid into a special account opened in the
name of the project by the Prime Minister's Office in a commercial bank acceptable to the
Bank. A disbursement letter setting forth all disbursement guidelines will be reviewed and
accepted by both parties during loan and grant negotiations.
4.1.5 Auditing Arrangements
The annual financial statements and financial monitoring reports prepared by
PACADET and the internal control system will be audited annually by a competent and
reliable independent audit firm, to be recruited on the basis of terms of reference (TOR) and
criteria satisfactory to the Bank. External audit will be tailored to specific project risks. Each
financial audit will cover one fiscal year ending 31 December in accordance with the rules in
42
See Table 4.2 on page 18
15
force in Chad. However, should the first disbursement be made in the second half of the first
disbursement year, the first audit could cover the first 18 months of the project. This same
principle shall apply to the last audit of the project, if the closing date falls within the first six
months of that fiscal year. The audited financial statements for each fiscal year will be
submitted to the Bank latest six months after the end of the relevant fiscal year. The report
shall include: (i) an opinion report; and (ii) a letter of internal control.
In accordance with the Bank’s new Policy on Disclosure and Access to Information,
the project will disclose audit reports (including audit reports with reservations) in the month
following the validation of the report by management. These reports must be officially
published and posted on an official website.
4.2. Monitoring and Evaluation
4.2.1 Project implementation is scheduled to last four years, from January 2014 to
December 2017. Attached to the Prime Minister's Office, the PIU will define the mechanisms
for monitoring and evaluating project implementation and outcomes. The PIU’s capacity will
be strengthened by a monitoring/evaluation expert to be recruited by the project to set up the
mechanism and train PIU members. The PIU team within the CSPR will prepare, in
accordance with the format required by the Bank, quarterly and annual progress reports based
on the monitoring of the project's logical framework indicators.
4.2.2 Project monitoring will be conducted by the Bank through sustained dialogue
between it and the authorities, in particular through the Bank’s Field Office in Chad and
during the half-yearly or quarterly project supervision missions, if necessary. At the end of
project implementation phase, a completion report will be prepared by the Bank in
conjunction with the Government. The implementation schedule is summarized below:
Table 4.1:
Monitoring Stages and Feedback Loop Milestones Responsibility Date/Period
Financing Approval AfDB/ADF October 2013
Setting-up of Project Management Team GVT November 2013
Loan/Grant Effectiveness AfDB-ADF/GVT January 2014
Preparation and Launch of BDs PIU/AfDB April-May 2014
Award/Signing of Contracts PIU May-December 2014
Start-up of Consultancy Services PIU June 2014
Mid-Term Review AfDB/PIU June 2016
Physical Project Completion PIU December 2017
Completion Mission AfDB/PIU December 2018
4.3. Governance
4.3.1 The last PEFA43 report on Chad (2009) shows that the institutional framework for the
country's public finance management is comprehensive, and that the external authorization
and financial control bodies44 (National Assembly, Ministry of General State Control and
Moralization) exist. Similarly, the budget execution and internal oversight agencies are
available. However, the report highlights the weak national and governance capacity that
43 PEFA 2009 Report is the most recent on “Chad” (page 17) 44 The recently established Court of Auditors should be included on the list of control bodies
16
undermines the performance of the framework. This situation limits the degree of donor
alignment with the national system. However, the fiduciary system is undergoing major
positive changes as a result of the support45 that the Bank is currently providing for national
public procurement system for the establishment of the Public Procurement Regulatory
Authority (Autorité de Régulation des Marchés Publics - ARMP).
4.3.2 With specific reference to PACADET, the project-based governance risk pertains to
the goods and services procurement process and financial resources management. These risks
will be mitigated by the strict implementation of the Bank's procurement rules of procedure
and establishment of the financial management system recommended as well as
implementation of all recommendations requested by the Bank's fiduciary departments. In
addition, the support of the Bank’s Field Office in Chad and financial audits will ensure
alignment between the resources involved, the services actually provided and the expected
outcomes. The training sessions that the Bank will provide for PIU members on project
management, procurement and financial management will help to reduce the risk associated
with poor governance. Lastly, project executing bodies and particularly PIU staff and Steering
Committee members will help to strengthen project governability.
4.4. Sustainability
Sustainability depends on the Government's willingness to carry out reforms through
the establishment of the Reform Programmes Monitoring Unit. The second factor is the
quality of capacity building actions and training courses for staff of selected structures. The
ability to capitalize on and re-use the knowledge learned, for instance as regards IT tools,
reforms management and planning as well as change management in public and private
environments, will enable beneficiary staff to improve their daily productivity and facilitate
the dissemination of best practices within the beneficiary institutions. Project outcomes will
significantly improve the business climate and facilitate the development of the private sector
source of investment, growth and creation of skilled jobs.
4.5. Risk Management
The table below provides a summary of the residual risks (other than those related to
governance and sustainability) as well as mitigation measures.
Table 4.2:
Potential Risks and Mitigation Measures Risks Level Mitigation Measures
Political instability Moderate The presidential election held on Monday, 25 April 2011, led to the re-election of
President Idriss Deby with a comfortable majority of about 88.26% of the vote. In
addition, peace was restored with Sudan, thereby paving the way for a period of relative
stability.
Slow decision-making and
under-estimate of the level
of difficulty involved in
the reforms to be
implemented
Moderate Government’s establishment of a unit devoted to the coordination and monitoring of
reform programmes and provision of technical assistance to reforms under the project
and a capacity building programme in the Ministry of Trade and Industry will help to
improve the information and decision-making level of the Government as well as the
spread of reforms.
Insufficient involvement of
stakeholders
Moderate The establishment of a Steering Committee that includes all project beneficiaries and the
operationalization of the platform for dialogue between the private and public sectors
will foster ownership and involvement of all and sundry.
45 FSF (Fragile States Facility) Public Finance and Planning Support Programme, which runs until November 2014
17
Weak administrative
capacity for the
implementation of project
activities and fiduciary
management and
procurement risk
Moderate Training activities planned by the project and support for the project management team
will mitigate this risk. The project plans to recruit three financial management,
procurement and monitoring/evaluation experts on a competitive basis to support the
project management team. Project implementation monitoring will be enhanced through
regular supervision missions by Bank experts who will provide, as appropriate, technical
support necessary for the timely execution of the operation.
Fiduciary risk High The recruitment of a financial management expert, the preparation of a procedures
manual that describes an appropriate internal oversight system, the establishment of a
computerized system of accounting and financial reporting, and internal oversight
missions of the State should ensure that the project’s financial management arrangements
are such that can provide timely, accurate and reliable information, and allow the
safeguard of project assets and the timely conduct of external audit of accounts. The
project will be supervised at least twice a year to ensure that risk-mitigation measures are
implemented and are operating satisfactorily.
4.6. Knowledge Building
PACADET’s implementation will lead to the development of several types of
knowledge related to the spread of reforms, particularly with respect to their identification,
planning and implementation management. Best practices will be disseminated within the
administration through members of the Steering Committee and focal points as well as
training sessions that will be held under the project. Additional knowledge will be capitalized
on and disseminated through various technical assistance reports, progress reports and
reporting by the project management team, project supervision reports and the completion
report.
V. LEGAL FRAMEWORK
5.1. Legal Instrument
A Protocol Agreement and a Loan Agreement to finance the project with ADF
resources for an amount not exceeding UA 5.89 million (UA 3.97 million loan and UA 1.92
million grant) will be signed between ADF and the Government of Chad.
5.2. Conditions Related to Bank’s Intervention
Conditions Precedent to Effectiveness
5.2.1 Effectiveness of the Loan Agreement shall be subject to fulfilment by the Borrower
of the provisions under Section 12.01 of the General Conditions. The Grant Protocol
Agreement shall become effective on the date of its signature by the Donee and the Fund.
Conditions Precedent to First Disbursement
5.2.2 In addition to effectiveness, as indicated above, the first disbursement of loan and
grant resources shall be subject to fulfilment by the Borrower of the following conditions, to
the Fund’s satisfaction:
(i) (i) Provide to ADF evidence of opening a special account bearing the name of the project in a
bank acceptable to ADF, to receive grant resources; and
(ii) Provide evidence of the appointment of the Coordinator.
18
5.3. Compliance with Bank Policies
This project complies with all applicable Bank policies.
VI. RECOMMENDATION
Management hereby recommends that the Board of Directors approve the proposal to
award a loan of UA 3.97 million and a grant of UA 1.92 million, i.e. a total amount of UA
5.89 million, to the Republic of Chad for the purposes and under the conditions set forth in
this report.
I
ANNEX I: COMPARATIVE SOCIOECONOMIC INDICATORS
Social indicators Chad
Africa Developing countries 1990 2011 *
Area (000 Km²) 1,284 30,323 98,461
Total Population (million) 6.0 11.5 1,044.3 5,733.7
Annual Population Growth (%) 3.1 2.6 2.3 1.3
Life Expectancy at Birth - Total (years) 50.7 49.6 57.7 77.7
Infant mortality rate (per 1,000) 128.1 126.6 76.0 44.7
Physicians (per 100,000 people) …. 40.0 57.8 112.0
Births Attended by Trained Health Professionals (%) ... 22.7 53.7 65.3
Anti-Measles Immun. Rate (% of children from 12 to 23 months) 32.0 46.0 78.5 84.3
Primary Enrolment Rate (Gross %) 49.9 92.5 101.4 107.8
Girls/Boys Ratio in Primary Education (%) 43.8 75.0 88.6 ...
Literacy Rate (% of the Population >15 years) ... 34.5 67.0 80.3
Access to Safe Water (% of Population) 39.0 51.0 65.7 86.3
Access to Health Services (% of the Population) 8.0 13.0 39.8 56.1
HDI Value (0 to 1) 0.3 0.5 0.5 ...
Human Poverty Index (HPI-1) (% of population) ... 53.1 33.9 ...
Chad
Macroeconomic indicators 2000 2009 2010 2011
GNI per capital, Atlas method current USD) 180 610 620 ...
GDP (in millions of current USD) 1,386 9,031 10,626 11,959
Real GDP per capital (% annual) -0.5 4.1 14.3 2.8
Real GDP per capital (% annual) -3.8 1.5 11.4 0.2
Gross Domestic Investment (% of GDP) 17.5 24.5 29.5 23.6
Inflation (annual %) 3.8 10.1 -2.1 -0.6
Fiscal balance (GDP %) -6.8 -7.8 -3.8 0.4
Trade, foreign debt and financial flows 2000 2009 2010 2011
Changes in export volume (%) 5.5 -9.1 -1.5 -6.2
Changes in import volume (%) 2.9 5.6 11.3 24.8
Changes in terms trade 24.7 -23.5 36.5 35.0
Trade balance (USD million) 28 791 1,438 1,806
Trade balance (% of GDP) 2.0 8.8 13.5 15.1
Current account balance (USD million) -214 -285 -52 272
Current account balance (% of GDP) -15.4 -3.2 -0.5 2.3
Debt servicing (% of exports) 13.3 2.0 2.5 2.2
Total external debt (% of GDP) 75.0 18.9 20.0 19.5
Total net financial flows (USD million) -225 576 501 ...
Net official development assistance (USD million) 131 561 486 ...
Net direct investment (USD million) 115 462 781 ...
International reserves (months of imports)
2.1 …
..
Private sector and infrastructure development 2000 2009 2010 2011
Time required to start a business (days) ... 75 75 66
Investor protection index (0-10) ... 3.3 3.3 3.3
Fixed phone subscribers (per 1,000 people) 1.2 5.3 5.3 …
Cell phone subscribers (per 1,000 people) 0.7 208.6 238.3
Internet users (per 1,000 people.) 0.4 15.4 17.4 …
Asphalted roads (% of total roads) 0.8 …
Railway, Goods transported (million tonne-km) …. …. … ...
Source: ADB Department of Statistics, from national and international sources
*The most recent year Latest update: May 2012
.
II
Annex II: Table of AfDB Portfolio in the Country (August 2013)
# Project Key Dates Amount (UA) %
Disb.
Age
(yr.) Closure
Approval Signature Effective. Commitment Disbursed
ADF PROJECTS
1
Natural Resource Management and
Development Project LOAN 4/17/2005 5/19/2005 2/16/2006 4,270,000 3,086,023.30 72.27 8.27 3/31/2014
Natural Resource Management and
Development Project GRANT 4/17/2005 5/19/2005 5/19/2005 2,000,000 1,463,519.91 73.18 8.27 3/31/2014
2 Natural Resource Management and
Development Project Supplementary LOAN 1/31/2011 04/04/2011 1/31/2011 9,570,000 0.00 0.00 2.50 12/31/2014
3 Rural Infrastructure Support Project LOAN 6/7/2011 11/14/2011 08/17/2012 5,200,000 180,959.67 3.48 2.15 12/31/2016
Rural Infrastructure Support Project
GRANT 6/7/2011 11/14/2011 11/14/2011 5,200,000 639,662.16 12.30 2.15 12/31/2016
4 Fisheries Development Project GRANT 11/09/2005 11/23/2005 11/23/2005 10,000,000 9224833.65 92.25 7.73 12/30/2013
5
DWSS Programme 8 Secondary Centres
GRANT 7/11/2012 7/17/2012 7/17/2012 6,900,000 50,307.73 0.73 1.05 10/31/2017
DWSS Programme 8 Secondary Centres
GRANT RWSSI 7/11/2012 7/17/2012 7/17/2012 3,461,400 102,090.50 3.91 1.05 10/31/2017
DWSS Programme 8 Secretary Centres
LOAN 7/11/2012 7/17/2012 10/4/2012 10,710,000 114,752.84 1.07 1.05 10/31/2017
6 Koumra- Sahr Road Asphalting Project
GRANT 6/26/2009 7/12/2010 7/12/2010
31,610,000 27790377.65 87.92 4.08 10/31/2015
FSF INSTITUTIONAL SUPPORT
7 NFSP Round Table 11/29/2011 11/29/2011 11/29/2011 139,326 133,092.02 95.53 1.67 3/31/2014
8 Statistics Support 11/22/2011 11/22/2011 11/22/2011 1,000,000 506,776.48 50.68 1.69 12/31/2013
9 General Livestock Census 2/12/2010 587,245 236,827.00 40.33 3.47 12/31/2013
10 Public Finance Capacity Building 11/1/2012 1/14/2013 1/14/2013 1,450,000 517130.2 35.79 0.75 10/31/2014
11 Capacity Building in Extractive and Oil
Industries (EITI) 11/1/2012 1/14/2013 1/14/2013 1,350,000 0.00 0.00 0.75 10/31/2014
12 PND Implementation Support Project 06/25/2013 - - 500,000 0.00 0.00 0.10 12/31/2014
REGIONAL OPERATIONS
13 Lake Chad Basin Sustainable Development
Programme /GRANT 12/19/2008 12/19/2008 12/19/2008 30,000,000 5939075.74 19.80 4.64 12/31/2015
14 Cotton Sector Support Project / GRANT 2/8/2007 2/8/2007 2/8/2007 5,000,000 1949577.58 38.99 6.67 12/31/2013
15 Lake Chad Basin Initiative Support Project
(PAIBLT) / GRANT 10/26/2005 11/18/2005 11/18/2005 10,000,000 7387483.43 73.87 7.77 12/31/2013
16 Central Africa Biodiversity Conservation
Programme/GRANT 07/22/2013 - - 250,000 0.00 0.00 0.02 31/12/2017
OVERALL TOTAL 138,340,676 56,044,327 40.47 3.33
- LOAN 29,750,000 1,898,829 6.38
- GRANT 108,590,676 54,145,498 49.80
III
Annex III: Key Related Projects Financed by the Bank and Other Development
Partners in the Country
Technical and
Financial
Partner
Project Activities Implementation Status
European
Union
Technical Assistance
Regional Trade and Economic
Integration Support
Programme (PACIE)
Support and consultancy services
for businesses.
Standardizations and quality
infrastructure, quality improvement
of trade and agricultural statistics,
strengthening and upgrade of the
industrial fabric.
On-going
On-going
IMF Staff-Monitored Programme
(SMP)
Programme to stabilize the
macroeconomic framework with a
view to reaching the HIPCI
completion point.
On-going
World Bank Study on Value Chains
Support for Growth-oriented
Sub-sectors
Analysis of constraints affecting the
market systems of some growth-
oriented sub-sectors
Support for the structuring of
sectors considered for export.
In preparation
UNDP Technical Assistance to
Implement the “Enhanced
Integrated Framework” (EIF)
Project
Commercial support for economic
operators on domestic and
international markets.
On-going
AFD Support for the Gum Arabic
Sector
Support for the Small Business
Centre
Structuring the upstream and
downstream aspects of the industry.
Operational support activities for
small businesses.
On-going
AfDB Extractive Industries
Transparency Initiative (EITI)
Support
Public Finance and Planning
Support
HIPC Initiative Preparation
Support
Study on the Private
Investment Climate in ECCAS
Countries
Strategic Paper on the
Promotion of SMEs/SMIs
Transparency in extractive
industries.
Public procurement, planning
instruments.
Macroeconomic capacity building.
Private sector investment climate.
Challenges and constraints affecting
SMEs/SMIs in Chad.
On-going
On-going
Awaiting launch
Study delivered
On-going
BDEAC SAHR Market Rehabilitation
Support.
Cattle Sector Support
Market infrastructure upgrades with
a view to boosting marketing.
Support for the construction of
production facilities
(slaughterhouses).
Closed
On-going
IV
Annex IV Map of the Project Area
This map has been provided by the staff of the African Development Bank Group exclusively for the use of the readers of this appraisal report. The names
used and the borders shown do not imply on the part of the AfDB Group, its members and Board of Directors any judgment concerning the legal status of
a territory nor any approval or acceptance of these borders.