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AFRICAN DEVELOPMENT BANK GROUP
PROJECT : POWER SECTOR IMPROVEMENT AND
GOVERNANCE SUPPORT PROJECT (PAGASE)
COUNTRY : DEMOCRATIC REPUBLIC OF CONGO (DRC)
------------------------------------------------------------------------------------------------
PROJECT APPRAISAL REPORT
ONEC DEPARTMENT
November 2016
Translated Document
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TABLE OF CONTENTS
Currency Equivalents, Acronyms and Abbreviations, Grant Information, Executive Summary,
Results-based Logical Framework and Implementation Schedule…………………….....… i to vii
1 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 .................................................................................................................................. 3
2 PROJECT DESCRIPTION ....................................................................................................................... 3
2.1 PROJECT DESCRIPTION AND COMPONENTS ............................................................................................... 3
2.2 TECHNICAL SOLUTIONS RETAINED AND ALTERNATIVES EXPLORED ........................................................ 4
2.3 PROJECT TYPE ........................................................................................................................................... 5
2.4 PROJECT COSTS AND FINANCING ARRANGEMENTS ................................................................................... 5
2.5 PROJECT’S TARGET AREAS AND BENEFICIARIES ....................................................................................... 7
2.6 PARTICIPATORY PROCESS FOR PROJECT IDENTIFICATION, DESIGN AND IMPLEMENTATION ...................... 8
2.7 BANK EXPERIENCE AND LESSONS LEARNED REFLECTED IN PROJECT DESIGN.......................................... 8
2.8 KEY PERFORMANCE INDICATORS .............................................................................................................. 9
3 PROJECT FEASIBILITY ......................................................................................................................... 9
3.1 ECONOMIC AND FINANCIAL PERFORMANCE.............................................................................................. 9
3.2 ENVIRONMENTAL AND SOCIAL IMPACTS ................................................................................................ 10
4 PROJECT IMPLEMENTATION ........................................................................................................... 12
4.1 IMPLEMENTATION ARRANGEMENTS........................................................................................................ 12
4.2 PROJECT MONITORING ............................................................................................................................ 15
4.3 GOVERNANCE ......................................................................................................................................... 16
4.4 SUSTAINABILITY ..................................................................................................................................... 16
4.5 RISK MANAGEMENT ............................................................................................................................... 16
4.6 KNOWLEDGE MANAGEMENT .................................................................................................................. 17
5 LEGAL FRAMEWORK .......................................................................................................................... 17
5.1 LEGAL INSTRUMENT ............................................................................................................................... 17
5.2 CONDITIONS ASSOCIATED WITH BANK’S INTERVENTION ........................................................................ 17
5.3 COMPLIANCE WITH BANK POLICIES ........................................................................................................ 19
6 RECOMMENDATION ............................................................................................................................ 19
ANNEX 1: DRC’s Comparative Socio-Economic Indicators
ANNEX 2: Status of Bank Group’s Active Portfolio in DRC as at 31 July 2016
ANNEX 3: Development Partners’ Interventions in the Power Sub-Sector in DRC
ANNEX 4: Map of Project Area
ANNEX 5: Analysis of Key Drivers of Fragility to be taken into Consideration by the Project
ANNEX 6: Counterpart Financing Waiver
TABLES
No. Title Page No. Title Page
2.1 Project Components and Costs 3 2.5 Project Costs by Expenditure Category 6
2.2 Project Alternatives Explored and
Reasons for Rejection 4 2.6 Expenditure Schedule by Component
6
2.3 Estimated Costs by Component 5 3.1 Key Financial and Economic Indicators 9
2.4 Project Sources of Financing 5 4.1 Project’s Main Implementation Stages 15
2.4bis Project Sources of Financing by
Component 6
ii
Currency Equivalents
September 2016
UA 1 = USD 1.39434 UA 1 = EUR 1.25255
UA 1 = CDF1387.77847
Fiscal Year
1 January - 31 December
Weights, Units and Measures T Tonne = 1000 kg kW kiloWatt = 1000 Watt
GW GigaWatt = 1 000 000 kW or 1 000 MW kWh kiloWatt hour = 1,000 Wh
GWh Gigawatt hour = 1 000 MWh MVA Mega Volt Ampere = 1 000 kVA or 1 000 000 VA
Toe Tonne oil equivalent MW MegaWatt = 1 000 000 W or 1 000 kW
kV kiloVolt = 1 000 Volt MWh Mega Watt-hour = 1 000 kWh
kVA Kilo Volt Ampere = 1 000 VA tCO2 Tonne CO2 = 1000 kg of carbon gas
Acronyms and Abbreviations
ADF
AfDB
AFD
ANSER
ARE
CBFF
CDF
CMU
CSP
ESIA
ESMP
EU
GPRSP
MERH
MONUSCO
PNSD
OPSCOM
PAP
PAR
PASEL
PCN
PEASU
PEPUR
PIU
PMEDE
PRISE
RAP
SAPMP
TFP
TSF
UA
WB
African Development Fund
African Development Bank
French Development Agency
National Agency for Electrification and for Energy Services in Rural
and Suburban Areas
Electricity Sector Regulatory Authority
Congo Basin Forest Fund
Congolese Franc
Project Coordination and Management Unit
Country Strategy Paper
Environmental and Social Impact Assessments
Environmental and Social Management Plan
European Union
Growth and Poverty Reduction Strategy Paper
Ministry of Energy and Water Resources
United Nations Mission for Stabilization in DRC
National Strategic Development Plan (being finalized)
Operations Committee
Government’s Priority Action Plan
Project Appraisal Report
The Inga Site Development and Electricity Access Support Project
Project Concept Note
Semi-Urban Drinking Water Supply and Sanitation Project
Peri-Urban and Rural Electrification Project
Project Implementation Unit
Project for the Rehabilitation and Strengthening of the Inga Hydropower Stations and
Kinshasa Distribution Grid
Project for the Reinforcement of Socio-Economic Infrastructure in the Central Region
Resettlement Action Plan
Southern African Power Market Project
Technical and Financial Partners
Transition Support Facility
Unit of Account
World Bank
iii
PROJECT INFORMATION SHEET
CLIENT INFORMATION
Donee/Borrower Democratic Republic of Congo
Executing Agency Ministry of Energy and Water Resources
FINANCING PLAN
SOURCES Amount (UA million) INSTRUMENT
ADF (PBA) 4.88 Grant
ADF (PBA) 66.22 Loan
TSF 25.00 Grant
DRC Government 1.498 Counterpart funds
TOTAL PROJECT COST 97.598
FINANCIAL INFORMATION ON GRANTS AND LOAN
Type of Financing ADF Grant TSF Grant ADF Loan
Currency UC UC UA
Interest Rate Type NA(*) NA NA
Interest Rate Spread NA NA NA
Service Charge NA NA 0.75% / year
Commitment Fee NA NA 0.50% / year
Other Charges NA NA NA
Tenor NA NA 10 years grace period and 30 years
reimbursement
(*)NA: Not applicable
FIRR 13.1%
FNPV CDF 30.00 billion
EIRR 19.6%
ENPV CDF 82.19 billion
TIMEFRAME AND MAIN MILESTONES
Concept Note Approval August 2016
Project Approval December 2016
Effectiveness January 2017-April 2017
Last Disbursement December 2019
Completion 30 June 2019
Last Reimbursement 31 December 2057
iv
PROJECT SUMMARY
1. Project Overview: The Power Sector Improvement and Governance Support Project in
DRC (PAGASE) will help to improve power sector management by contributing to the effective
establishment of an institutional framework for regulation and rural electrification. It will also
contribute to the development of electricity facilities in Kinshasa and in Kasaï and Central Congo
provinces. It is consistent with the implementation of the new Power Sector Law adopted in June
2014. The project will help to foster an enabling environment for investments, promote public-
private partnerships, improve the electricity access rate and enhance quality of service to users.
The project, whose total cost is UA 97.598 million, will be implemented over a three-year period.
2. Needs Assessment: Through its different development strategies, DRC wishes to transform
the power sector into a real driver of its socio-economic development. Therefore, it has embarked
upon reforms aimed, in particular, at increasing investments in order to meet demand for electricity
which, linked to demography and urbanization, has risen sharply in relation to supply, creating chronic
supply deficits. This situation is particularly prevalent in Kinshasa, the country’s capital and main
centre for power consumption, with a population of almost 12 million people, and in Katanga province
where the shortage of electricity is impeding the development of the mining industry.
3. Bank’s Added Value: For over a decade, AfDB has been helping the DRC to develop its
energy sector. In particular, its operations have concerned electricity infrastructure which it continues
to finance. Through this operation, the Bank is supporting the DRC with regard to the sector’s
governance by establishing key institutions that will guarantee the success of the reforms. The
Regulatory Authority and Agency responsible for Rural Energy Services should play a key catalytic
role in mobilizing the financing required to significantly improve access to electricity. The Bank’s
operation will also help to build resilience and reduce the number of situations of fragility that
have characterized the country. Special attention is paid to the gender issue through the
establishment of a mechanism that will mainstream this concern in the energy sector.
4. Knowledge Management: The project is among those aimed at supporting clean energy
initiatives with a transformative effect on the economies of beneficiary regional countries, in
particular by facilitating access to electricity. The experience that will be acquired in managing
complex anchor projects in the form of public-private partnerships will speed up implementation
of the Bank’s New Energy Deal for Africa. Indeed, such experience will create opportunities for
replication especially concerning strategic themes entailing: (i) setting up the right enabling policy
environment; (ii) enhancing the capacity of power utility companies for success; (iii) significantly
increasing the number of bankable energy projects; and (iv) rolling out waves of country-wide
energy ‘turnarounds’. The Project is in keeping with the Bank’s vision for the development of
the African Energy Sector through the promotion of universal access to modern energy based on
a low carbon growth trajectory.
v
RESULTS-BASED LOGICAL FRAMEWORK POWER SECTOR IMPROVEMENT AND GOVERNANCE SUPPORT PRORECT (PAGASE)
Project Goal: Contribute to the implementation of sector reforms and the development of power infrastructure
RESULTS CHAIN
PERFORMANCE INDICATORS
MEANS OF
VERIFICATION
RISKS AND MITIGATION
MEASURES INDICATORS
Baseline
Situation (2016)
TARGET
(2020)
IMP
AC
T
Contribute to improving the quality of life of the population in
the project area
1.1. National electricity coverage rate (coverage rate: the
population with effective access to the service (served) compared to the population of localities
electrified)
15%
Reports:
- Ministry of Energy
- Ministry of Finance
- SNEL, ARE, ANSER
- National Institute of Statistics
RISKS
1. Socio-political situation in the DRC.
2. CMU capacity to coordinate several
projects at the same time.
MITIGATION MEASURES
1. The ongoing peace
process in the country for several years
and several other factors such as: (i) the existence of a United Nations peace-
keeping mission (MONUSCO) which is
the world’s biggest; (ii) the ongoing national dialogue to reach a consensus on
electoral issues; (iii) the commitment of
the international community, are reasons for believing that the project’s
implementation will not be affected by the socio-political situation.
2. Recruitment of the
consultant engineer to support the CMU in its mission to control and supervise the
different services as well as the
appointment of a dedicated PAGASE project leader will help to mitigate this
risk.
OU
TC
OM
ES
1.1 Improved power service quality
1.2 Increased power supply
1.1 Charging rate of MV/LV public cabins
1.2 Additional available capacity
> 90%
-
OU
TP
UT
S
Component 1. Infrastructure Development
1.1 The North Kinshasa MV/LV grid restructured 1.2 New connections made
1.3 Rehabilitation studies conducted on power plants
1.4 A metering system installed in Kinshasa transformer stations and sub-stations
Component 2 Support to Governance
2.1 The main thrusts defined for restructuring of SNEL 2.2 ARE and ANSER established
2.3 The institutional and structural aspects of the sector’s
governance studied 2.4 An integrated information system established
2.5 Capacity of sector actors built
Component 3. Institutional Support
3.1 Rehabilitation of Zongo 1 CHE as a PPP studied and defined
3.2 Renewable energy development projects studied
3.3 Gender-related development activities conducted
1.1 MV/LV lines/transformer stations constructed (km/number)
1.2 Connections made (number)
1.3 Study reports available (number) 1.4 Metering systems installed
2.1 Study report available (number)
2.2 ARE and ANSER operational
2.3 Study report available (number)
2.4 Integrated information system operational
2.5 Number of employees trained (men/women)
3.1 Study report available
3.2 Study report available
3.3.1 Gender unit operational at MERH
3.3.2 Cold rooms installed (number)
3.3.3 Number of people whose income has risen
3.3.4 Number of temporary jobs created (direct and
indirect) (including for women)
- -
-
-
- -
-
-
-
-
-
- -
-
-
23% (2021)
<75%
30 MW
575/60136 000
05
32
0102
01
01
70/30
01
10
0105
1000/550
women200 (50)
Reports:
- Ministry of Energy
- SNEL, ARE, ANSER
- National Institute of
Statistics -Activity status reports
-Bank supervision reports
Status report on CGED activities
- CMU monitoring report
- Completion report
vi
KE
Y A
CT
IVIT
IES
BY
CO
MP
ON
EN
T
1. Infrastructure Development: (i) extension of Lungudi power plant; (ii) rehabilitation of Inga 1 power plant (1 generator); (iii) installation of a metering system in 9 transformer stations and 23 sub-stations of SNEL; (iv) restructuring of Kinshasa MV/LV grids by strengthening and expanding the MV/LV
grid and installation of 60 new cabins, (v) LV recharging from 35 discharge cabins; and (vi) building the capacity of feeder posts and sub-stations.
2. Governance Support: (i) definition of SNEL restructuring thrust; (ii) operationalization of ARE and ANSER; (iii) definition of an optimal structure for the Ministry of Energy; (iv) establishment of an information system; and (v) capacity building for the Ministry;
3. Institutional Support: (i) Study on rehabilitation of Zongo I CHE as PPP; (ii) Studies on renewable energy development; and (iii) gender mainstreaming
activities 4. Project Management: works control and supervision, operation of project management unit
Inputs: UA 97.28 Million (UAM)
TSF Grant : UAM 25.00
ADF (Loan and Grant) : UAM 71.10
DRC Government : UAM 1.498
Uses: UAM 7.28 (UA Million)
Component 1 : UAM 78.747 ; Component 3 : UAM 3.761 MUC
Component 2 :UAM 7.740 ; Component 4 : UAM 7.350
vii
PROJECT IMPLEMENTATION SCHEDULE
ACTIVITIES 2 016 2 017 2 018 2 019 2 020
10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 ## 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Approval / Effectiveness
Project Approval
Signature of Financing Agreements (grants and loan)
Financing Agreement
Effectiveness
Fulfilment of Disbursement
Conditions
Procurement (TOR, bidding and contract signature)
Consultant Engineer
Renewable Energy
Development Studies
Zongo1 Studies
SNEL Restructuring Studies
Tariff Studies
Provincial Electrification Plan Studies
Study on Structural Aspects of
MERH
Rehabilitation of G16
Lungudi CHE Extension
Metering System
Restructuring of Kinshasa Grid
Integrated Information System
Project Implementation
Procurement of Goods
Conduct of Studies
Rehabilitation of G16
Lungudi CHE Extension
Gender Promotion Activities
Restructuring of Kinshasa Grid
Project Supervision Mission
Supervision Missions
Project Audit
Recruitment of Auditors
Auditor Services
Completion Report
Borrower’s Report
ADF/TAF Report
1
MANAGEMENT’S REPORT AND RECOMMENDATIONS TO THE BOARD OF
DIRECTORS ON A PROPOSED TSF GRANT, ADF GRANT AND LOAN TO THE
DEMOCRATIC REPUBLIC OF CONGO
Management herewith submits the following report and recommendations on a proposed: (i)
UA 25 million TSF Grant; (ii) UA 4.88 million ADF grant; and (iii) UA 66.22 million ADF
loan to the Democratic Republic of Congo to finance the Power Sector Improvement and
Governance Support Project.
1 STRATEGIC THRUST AND RATIONALE
1.1 Project Linkages with Country Strategy and Objectives
1.1.1 The project is aligned on the Government’s Priority Action Programme (2012-2016
PAP) and the National Strategic Development Plan (PNSD) about to be adopted. The first five
years of the PNSD will cover the 2017-2021 period. The PAP is focused on five sectors
including infrastructure, economic and administrative governance. It aims to increase power
generation and improve access to electricity. Furthermore, within the PNSD framework,
narrowing the energy gap is one of the key factors on which the country is counting in order to
accelerate its development. The project’s ultimate goal is to provide the Congolese population
and economy with clean, high quality energy. The diagram below summarizes the
Government’s power strategy - an area for which it has set a target of increasing available
capacity by 600 MW over the 2017 – 2030 period through the rehabilitation, modernization
and construction of new infrastructure, and the doubling of the electricity coverage rate from
15.2% to 30% by 2030.
Conduct of exploratory
work and technical studies
Improvement of the
sector’s institutional
framework and
governance
Development of existing
energy potential
Increased energy
supply
Mobilization of public and
private capital
Development of
distribution channels
The main objective of the Government’s strategy will be to: (i) improve the sector’s
institutional framework and governance (establishment of master plans and mechanisms to
regulate electricity and water supply); (ii) conduct exploratory work and technical studies (for
all forms of energy); and (iii) modernize energy infrastructure and expand its geographic
coverage, especially by constructing PLDs (development ‘bright spots’). Improved access to
energy will come from increased generation and enhancement of the power transmission and
distribution grids. It will also provide impetus to the construction of large cities, modern
administrative and commercial centres as well as business districts in both rural and urban
areas. (Source: PNSD)
2
1.1.2 The project, which aims to implement sector reforms and develop power
infrastructure, is in line with Pillar 1 of the Bank’s CSP (2013-2017) for DRC (‘Development
of private investment and regional integration support infrastructure’). It is also in keeping
with Pillar 2 of the CSP (‘building central government capacity in order to increase public
revenue and create an incentive framework for private investment’). Furthermore, it will help
to achieve the CSP’s main objective, which is to help DRC emerge from its situation of fragility
and create conditions for strong and inclusive growth driven by the emergent buoyancy of the
productive sectors.
1.1.3 In June 2014, DRC adopted a law governing the power sector which, in particular,
enshrined its liberalization by opening up the electricity market to private operators. The
targeted objectives are: (i) the creation of an environment that will encourage competitiveness;
(ii) the promotion of public–private partnerships and access to diversified sources of financing;
(iii) a higher coverage rate; and (iv) improved service quality to users. In addition, the law
provides for a new institutional architecture of the sector, which has not yet been concretized
(as is also the case with the expected impacts of SNEL’s reform embarked upon since 2010).
1.2 Rationale for Bank’s Involvement
1.2.1 The project is consistent with the Bank’s Energy Policy (approved in 2012), one of
the objectives of which is to support the efforts of regional member countries to provide all
their population and production sectors with access to modern, reliable and affordable energy
services. It is also aligned on the Bank’s Ten-Year Strategy (2013-2022), Pillar 2 of which aims
specifically to facilitate affordable access to reliable power infrastructure. The project
addresses the need to improve people’s access to power by enhancing the quality and expanding
electricity coverage in Kinshasa and conducting various electrification studies. Furthermore, it
is in line with the operational priorities of the Bank’s Ten-Year Plan in terms of infrastructure
and private sector development. It targets one particular area of interest of the aforementioned
strategy by building the capacity of a fragile State.
1.2.2 The project is aligned on the first of the High 5s, “Light up and Power Africa”. It also
plays a role in achieving the priorities related to the following: “Industrialize Africa” and
“Improve the quality of life for the people of Africa". In addition, it is consistent with the
Bank’s New Deal on Energy for Africa (2016-2025) since it covers almost all the 7 strategic
themes on which the Deal is based: (i) Setting up the right enabling policy environment;( ii)
Enabling utility companies for success; (iii) Dramatically increasing the number of bankable
energy projects; (iv) Increasing the funding pool to deliver new projects; (v) Funding ‘bottom
of the pyramid’ energy access programmes; (vi) Accelerating major regional projects and
driving integration; and (vii) Rolling out waves of country-wide energy ‘turnarounds’.
1.2.3 The project is also in keeping with the Bank’s 2014-2019 ‘Strategy for Addressing
Fragility and Building Resilience in Africa’ - Focus Area 2 (“promote resilient societies
through inclusive and equitable access to employment, basic services and shared benefits from
natural resource endowment”) of which considers equitable access to electricity as a factor
likely to strengthen the legitimacy of governments, build trust between the State and its citizens
and consolidate the peace dividends in post-crisis contexts. The analysis carried out identified
the following drivers of fragility: (i) administration’s lack of authority in the power sector; (ii)
socio-economic exclusion linked to low access to electricity; (iii) SNEL’s weak institutional
capacity; (iv) extreme poverty and high unemployment among young people, and few
opportunities for their social and vocational integration; and (v) a tense and uncertain political
situation. Details on the analysis of the factors of fragility and their consideration in the project
are presented in Annex 5.
3
1.2.4 Through this project, the Bank provides real value added to the sector’s development
by continuing its previous actions while consolidating or complementing their impact in both
the electricity (PMEDE, PEPUR, PASEL, Inga, NELSAP) and water (PEASU, PRISE) sectors.
This value added is also reflected in the framework provided by the Bank for the project’s
implementation.
1.3 Aid Coordination
1.3.1 In addition to AfDB, the main donors operating in the sector are the World Bank
(WB), the European Investment Bank (EIB), KfW, the French Development Agency (AFD),
Japanese (JICA), American (USAID), Belgian, Korean and Chinese Cooperation Agencies.
The EIB and WB are jointly financing with AfDB the Project for the Rehabilitation and
Strengthening of the Inga Hydropower Stations and Kinshasa Distribution Grid (PMEDE), for
which the DRC has made significant efforts to coordinate various donors’ actions through
SNEL and MERH. The periodic organization of meetings and information sharing have
resulted from these efforts. The WB and EIB are co-financing the SAPMP.
1.3.2 During the appraisal of this project, the Bank’s team met with most of these partners.
The discussions with them, which were held in the presence of the Congolese side, revealed
the complementarity between this project and those being prepared by the WB and KfW, as
well as the one awaiting implementation by USAID. Therefore, since the Bank will intervene
in the northern part of Kinshasa, the WB intends to intervene in the Kinshasa Grid
Restructuring Programme by covering the central and western areas of the city. USAID is
providing DRC with support to develop its energy sector. The related financing agreements
have been signed but details of the activities are still being finalized. Complementarity with the
Bank lies in the fact that USAID intends to provide assistance to the operation of the agencies
responsible for regulations and electrification after they have been established with Bank
support.
2 PROJECT DESCRIPTION
2.1 Project Description and Components
The project goal is to contribute to the implementation of reforms and the development of
power infrastructure. Specifically, it aims to: (i) implement the provisions of the Law on the
institutional framework relating to the regulation of the power sector and rural electrification;
(ii) improve the sector’s governance; and (iii) establish infrastructure to improve service
delivery and quality. It was designed as a continuation of - or complement to - the Bank’s
previous energy-related operations actions in the country, while providing DRC with the tools
that will facilitate future engagements in the sector. The following table presents the project
components and costs.
4
Table 2.1
Project Components and Costs in UA Million
No
.
Component
Name
Estimated
Cost
(UAM)
Component Descriptions
1 Infrastructure
Development 78.747
Rehabilitation of Generator 6 of the Inga I hydropower plant (G16)
and procurement of a new wheel for that power plant
Extension of the Lungudi hydropower plant
Procurement and installation of a metering system for HV
transformer stations and MV/LV substations in Kinshasa
Restructuring of North Kinshasa grid
2 Governance
7.740
Study on main focus areas of SNEL restructuring
Support to transition towards operationalization of ARE and ANSER
Study on structural aspects of the Ministry (CMU, CATE and CNE)
Establishment of an integrated information system
Training sessions
3 Institutional
Support 3.761
Review of study on rehabilitation of Zongo 1 CHE as PPP
Renewable energy development studies (rehabilitation of 5
hydropower plants, solar power supply for 4 international airports)
Support to gender mainstreaming activities in energy projects and
support of the sector to the people’s socio-economic empowerment.
4 Project
Management 7.350
Operation of the executing agency
Monitoring of project activities
Consultant engineer
Preparation of procedures manuals
Procurement and installation of management software
Auditing of project accounts; environmental and social audit
Monitoring of ESMP implementation
Total Project Cost 97.598
A detailed description of project activities is presented in Annex B2.7
2.2 Technical Solutions Retained and Alternatives Explored
The technical solution retained in Component 1 concerns generation, transmission and
distribution infrastructure. These investments are necessary to facilitate the population’s access
to electricity under sustainable conditions and with a higher quality of service. Component 2
aims to provide DRC with decision-making tools (for the restructuring of SNEL, the
organization of the Ministry of Energy or the definition of an energy strategy or policy), build
the capacity of existing staff and contribute to the effective establishment of ARE and ANSER.
This support will be in the form of studies or use of international or national technical assistance
skills. For Component 3, it will be necessary to create a critical mass of bankable projects for
the future and build capacity to mainstream gender aspects in energy sector projects. Table 2.2
below shows the alternatives explored and gives reasons for their rejection.
5
Table 2.2
Project Alternatives Explored and Reasons for Their Rejection
Alternatives Descriptions and
Characteristics Reasons for Rejection
Implement a well-
targeted operation in a
clearly determined
segment
Select a single segment
(generation or transmission or
distribution or governance) and
allocate all available resources to
it
- Failure to take into account the sector’s many needs
- Failure to take into account the synergy that must exist
between the different partners
- The sector constitutes a system that is difficult to
manage piecemeal.
Only install the power
metering systems for
end consumers
Use financial resources for
metering in transformer stations
and in sub-stations for the
purchase of meters to be used to
bill energy supplied to consumers
- With the support of several other partners, SNEL has
initiated a major prepayment meter purchasing
programme.
Invest in thermal power
to improve electricity
supply
Use resources (earmarked for the
extension and rehabilitation of
hydropower plants) to build a
thermal power plant
- Uneconomic solution in terms of generating cost per
kWh;
- Fight against climate change because thermal plants
emit greenhouse gases into the atmosphere
2.3 Project Type
This is an investment project which includes a major technical assistance component aimed at
implementing sector reforms pursuant to the provisions of Law 14/011 of 17 June 2014
governing the electricity sector. The investments also concern power generation, transmission
and distribution. In the case of the Lungudi power plant extensions, the investment is in the
form of a public-private partnership (PPP). Following the signing of a concession contract with
the DRC, the power utility “Electricité du Congo” (EDC) is responsible for its operation. In a
concern for operational continuity, the Bank’s financing, which will be used to extend the plant,
will be contingent on: (i) broadening the scope of the concession to cover the extension of the
Lungudi plant; and (ii) the signing of a power purchase agreement between EDC and the Water
Distribution Authority of the Democratic Republic of Congo (REGIDESO) to supply the
Tshikapi drinking water supply facilities financed by the Bank under the PEASU project.
2.4 Project Costs and Financing Arrangements
2.4.1 The total project cost, net of taxes and customs duties, is estimated at UA 97.598
million, comprising approximately UA 84.068 million in foreign exchange and UA 13.530
million in local currency. The calculation was made based on the unit costs of the different
preliminary studies and contracts for similar works from recent bidding processes in the sub-
region and in the country. The project costs include a 5% provision for physical and technical
contingencies as well as a 10% provision for price escalation. The project costs by component,
sources of financing and expenditure category are presented in the following tables. The
conversion rates used are those indicated on page (ii).
Table 2.3
Estimated Cost by Component (UA Million)
Components F.E. L.C. Total % F.E.
1. Infrastructure Development 61.362 6.818 68.180 90%
2. Governance 4.691 2.010 6.701 70%
3. Institutional Support 2.279 0.977 3.256 70%
4. Project Management 4.454 1.909 6.363 70%
Base Cost 72.786 11.714 84.500 86%
Provision for physical contingencies 3.639 0.586 4.225 86%
Provision for price escalation 7.643 1.230 8.873 86%
Total Project Cost 84.068 13.530 97.598 86%
6
2.4.2 Project Financing Arrangements: 98% of the project will be financed by the Bank
Group. The counterpart contribution covering the remaining 2% will be paid by the
Government of DRC. These counterpart funds mainly comprise evaluated in-kind support to
the operation of the implementation unit (provision of premises, staff salaries, part of the
operating and equipment costs). In view of DRC’s economic situation, a counterpart funding
waiver in relation to the percentage of counterpart funding required in AfDB financing has
been granted (see Annex C1). The Bank’s total contribution will be provided from the public
window (ADF and TAF) and will be broken down as follows: an ADF grant of UA 4.88
million, a TSF grant of UA 25 million and an ADF loan of UA 66.22 million extended as per
the conditions set out in the project information sheet and accepted by DRC.
Table 2.4
Project Sources of Financing (UA Million)
Sources of Financing F.E. L.C. Total % Total
ADF Loan 59.598 6.622 66.220 68%
ADF Grant 3.416 1.464 4.880 5%
TSF 20.005 4.995 25.000 26%
DRC GOVERNMENT 1.049 0.449 1.498 2%
Total Project Cost 84.068 13.530 97.598 100%
2.4.3 The project cost by category is presented as follows:
Table 2.5.1
Project Cost by Expenditure Category (UA Million)
Expenditure Categories F.E. L.C. Total % F.E.
Works 61.362 6.818 68.180 90%
Goods 0.164 0.070 0.235 70%
Services 8.997 3.856 12.853 70%
Operation 2.263 0.970 3.233 70%
Total Base Cost 72.786 11.714 84.500 86%
Provision for physical
contingencies 3.639 0.586 4.225 86%
Provision for price escalation 7.643 1.230 8.873 86%
Total Project Cost 84.068 13.530 97.598 86%
2.4.4 The Project Cost by Expenditure Category and Source of Financing is as follows:
Table 2.5.2
Project Cost by Expenditure Category and Source of Financing (UA Million)
Expenditure
Categories
UA Million
ADF Loan ADF Grant TAF DRC GVT TOTAL
F.E. L.C. Total F.E. L.C. Total F.E. L.C. Total F.E. L.C. Total
Works 51.600 5.733 57.333 0.000 0.000 0.000 9.762 1.084 10.846 0.000 0.000 0.000 68.179
Goods 0.000 0.000 0.000 0.164 0.070 0.234 0.000 0.000 0.000 0.000 0.000 0.000 0.234
Services 0.000 0.000 0.000 1.084 0.464 1.548 7.559 3.240 10.799 0.354 0.152 0.506 12.853
Operation 0.000 0.000 0.000 1.710 0.733 2.443 0.000 0.000 0.000 0.553 0.237 0.791 3.234
Total Base
Cost
51.600 5.733 57.333 2.958 1.267 4.225 17.321 4.324 21.645 0.908 0.389 1.297 84.500
Provision for
physical
contingencies
2.580 0.287 2.867 0.148 0.063 0.211 0.866 0.216 1.082 0.045 0.019 0.065 4.225
Provision for
price escalation
prix
5.418 0.602 6.020 0.310 0.134 0.444 1.819 0.454 2.273 0.095 0.041 0.136 8.873
Total Project
Cost
59.598 6.622 66.220 3.416 1.464 4.880 20.006 4.994 25.000 1.048 0.449 1.498 97.598
7
2.4.5 The estimated project expenditure schedule is as follows:
Table 2.6
Expenditure Schedule by Component (UA Million)
Components 2 017 2 018 2 019 2 020 Total
1. Infrastructure Development 15.749 31.499 23.624 7.875 78.747
2. Governance 1.548 3.483 2.322 0.387 7.740
3. Institutional Support 0.940 1.504 1.316 0.000 3.761
4. Project Management 2.205 1.837 1.837 1.470 7.350
Total 20.443 38.324 29.100 9.732 97.598
% Total 20.9% 39.3% 29.8% 10.0% 100%
2.5 Project’s Target Areas and Beneficiaries
2.5.1 Project Area
The infrastructure concerned by the project is located in 4 distinct localities of the DRC. The
Inga 1 hydropower plant, one generator (G16) of which will be rehabiliated, is located on the
Congo River in Kongo Central (formerly Bas-Congo) Province, close to the town of Matadi
which has a population of about 350,000 inhabitants. Matadi is located on the left bank of the
Congo River, about mid-way between the Atlantic Ocean and the capital, Kinshasa. The Zongo
plant, on which a rehabilitation study will be carried out, is also located on the Inkisi River in
Kongo Central between Matadi and Kinshasa (about 120 km from Kinshasa). The Lungudi
power plant which will be extended, is located on the Kasai River in Kasai Province, more
specifically near the town of Tshikapa. The plant is also listed as one of the Bank’s areas of
intervention under the ongoing CSP. The restructuring of the Kinshasa MV and LV grids will
concern the northern part of the city where Gombé, Lingwala, Kasa Vubu, Barumbu and
Kinshasa municipalities are located. Operational readiness of these grids is deemed
satisfactory.
2.5.2 Project Beneficiaries
In the near-term, over 136 000 households in Kinshasa will have access to electricity through
the project as a result of the new connections. Thanks to the project, households already
connected to the grid will enjoy better quality of service in terms of power supply. The
population of Tshikapa and its surroundings will enjoy improved access to electricity and
drinking water. Similarly, SNEL will benefit from the purchase and installation of the metering
system in all Kinshasa transformer stations and sub-stations (which will ensure a more effective
control of energy flows) as well as of new infrastructure acquired by the Ministry of Water
Resources (MERH) with Bank Group financing granted to the DRC Government. The transfer
to SNEL is made by a compensation mechanism developed by the Ministry of Portfolio mainly
for the purpose of reducing central government debt owed to water and electricity utilities. In
the medium-term, the project will enable MERH to create a more efficient organization while
building up staff capacity. In Tshikapa, REGIDESO will have affordable and more reliable
power supply to feed the drinking water supply system used by the communities in the locality.
A similar arrangement exists with Electricité du Congo (EDC) which could improve the
population’s access to electricity through new connections. Generally, the project will benefit
small- and medium-sized enterprises, retail shops, administrative and municipal services, and
all basic social services (education, training, health, hygiene, sanitation and drinking water).
People will also have access to more reliable power for various uses (domestic. industrial,
8
commercial, pumping, cultural, security, etc.). Furthermore, access to electricity in these
neighbourhoods will facilitate the emergence of new job-creating activities in different fields,
especially in agri-food processing, information and communication technologies, carpentry,
maintenance, sewing, embroidery, crafts, petty trading and services. The quality of social
services will be improved in the project area because of electricity. The project will contribute
to the promotion of leisure and family amusement, thus helping families to find fulfilment.
2.6 Participatory Process for Project Identification, Design and Implementation
In accordance with the Bank’s and national policy, the Government of Congo adopted a
participatory and inclusive process. As a result, this project’s design stemmed from the
feasibility study conducted by the Congolese side and took into account discussions between
stakeholders including communities living in the project area. The ESIA and ESMP were
prepared using the same process. In this regard, the following practical arrangements were
made to inform and involve the stakeholders: meetings with the municipal authorities and
techncial services; public meetings and a survey of local communities. These public
consultations made it possible to: (1) inform stakeholders about the project, its impact in the
project area and proposed negative impact mitigation and optimization measures; and (2)
gather their opinions, concerns and expectations concerning the project. The following
expectations were noted: (i) step up electricity generations to reduce the outages already
observed; (ii) guarantee supply to every street in the municipalites concerend; (iii) adopt a
special social connection price to allow access for all households and, in particular the most
vulnerable ones; (iv) engage in, and maintain dialogue, consultations and negotiation among
the stakeholders; (v) involve the municipalities and associations in the project’s
implementation, in particular through information, sensitization and mobilization for the
communities concerned as well as by facilitating works implementation; and (vi) make
provision for public lighting in all the streets in the project area. The project executing agency
will ensure that the participatory process is maintained throughout the project implementation
period. Plans have been made to: (a) regularly inform the communities concerned of the exact
works implementation status; (b) organize an IEC campaign on environmental protection,
promotion of sustainable energy and STI/HIV/AIDS prevention. Similarly, an information,
sensitization and marketing campaign will be carried out to attract subscribers to the pre-
payment meter. The Bank will publish the ESMP summary on its website 30 days before the
project is presented to the Board of Directors.
2.7 Bank Experience and Lessons Learned Reflected in Project Design
2.7.1 For over three decades, the Bank has been committed to providing support to the
Government to develop the power sector in the DRC. It is still present in that sector through
several operations including PMEDE, EDIRA, PEPUR, NELSAP and PASEL. All these
projects are ongoing and have not yet been the subject of completion reports. However, the
lessons learned from the supervision of these energy operations and those of other partners are
reflected in this project’s design. From these experiences, the following lessons were taken into
account during project preparation: (i) PMEDE revealed the need for close coordination among
donors to avoid duplication; (ii) PEPUR underscores the importance o12f the structure of the
implementation unit; and (iii) NELSAP, EDIRA and PASEL demonstrate the urgent need to
build DRC’s capacity and improve the quality-at-entry of projects through the availability of
the appropriate studies. The recent combined CSP and Portfolio Review, approved by the
Boards in June 2016, revealed the following difficulties: (a) the poor performance of the
monitoring mechanism at government level; (b) weak involvement of ministries in project
supervision; (c) delay in ratifying loan agreements, fulfilling conditions precedent to first
9
disbursement, installing key personnel and recruiting external auditors; and (d) delay in
mobilizing counterpart funds.
2.7.2 The project reflects these different lessons by: (i) attaching priority to the quality-at-
entry of all activities; (ii) ensuring the positioning of the implementation unit established by
MERH and its operating process based on collaborating with specialized national bodies to
implement some activities and using international expertise for transfer of expertise; (iii)
involving a monitoring/evaluation expert; and (iv) cashing in on possibilities for mobilizing
counterpart funding by reducing it as much as possible.
2.8 Key Performance Indicators
2.8.1 The project’s key performance indicators are set out in the results-based logical
framework. They concern all project activities. The periodic activity reports prepared by the
different service providers, supervision reports as well as the integrated information system
should provide a way of measuring these indicators. The results will then be analysed by the
monitoring/evaluation expert to assess the progress made during project implementation.
2.8.2 The Project Implementation Unit will be responsible for establishing a baseline
situation for the performance indicators, then monitoring and analysing their trend by
comparing them with the projections in the logical framework or any other reference deemed
relevant. At the levels of MERH and SNEL, the project performance indicators will be
incorporated into the periodic activity reports.
3 PROJECT FEASIBILITY
3.1 Economic and Financial Performance
3.1.1. Project Economic and Financial Performance: This was analysed based on the
financial internal rate of return (FRR) and the economic rate of return (ERR), respectively. The
FRR is calculated on the basis of the project’s financial costs, and the share of said costs in
relation to income from the sale of electricity to new customers. The ERR is calculated on the
basis of the economic costs (investment costs adjusted by conversion factors) and the project’s
expected economic benefits, especially the sale of electricity to new customers, and valuation
of the reduction in the level of non-distributed energy as a result of the decongestion of the
transformer stations. Both the FRR and ERR are above the average weighted cost of the capital
to be invested in this project (Bank’s concessional financing at an interest rate not exceeding
2% per year) and at an economic cost of capital estimated at 12% (August 2016).
3.1.2. Sensitivity of Project’s Financial and Economic Performance: This was analysed in
relation to: (i) a 10% increase in investment costs; and (ii) a 10% increase in operating costs.
The analysis shows that the project is highly sensitive to an increase in operating costs, in
particular the cost price of electricity. SNEL will have to take adequate measures to control
operating costs in order to benefit from the project’s positive impacts (for details see Annex B
7). This analysis shows the importance of intervening in DRC’s energy sector governance.
Commercial practices, including pricing, deserve close attention in a concern to achieve
sustainable conditions for all stakeholders (power utilities, consumers and investors). As
Table 3.1: Project’s Key Economic and Financial Data
Baseline Scenario FRR 13.1% NPV CDF 30.0 billion
ERR 19.6% NPV CDF 82.9 billion
10
stipulated in the Electricity Law, some current practices must be abandoned as soon as possible.
These include the current lump sum billing system, the accumulation of debts owed by central
government or the “entitlement system” made up of a clientele supported by central
government.
3.2 Environmental and Social Impacts
3.2.1 Environment
3.2.1.1 The project was classified in Environmental Category 2 by AfDB based on the scale
of works and the number of people affected (nobody identified as affected during the
preparation of the ESIA and ESMP). It is also classified in Category B in compliance with
national regulations.
3.2.1.2 The main negative environmental and social impacts concern: (i) disruption to, and
difficulty of movement and various other nuisances during the works; (ii) risks related to
occupational health and safety engendered by such works; (iii) the felling of trees, deterioration
of plant cover and potential impacts on water resources linked to the extension of the Lungudi
power plant.
3.2.1.3 Mitigation measures are proposed in the ESMP to prevent or, if necessary, minimize
the aforementioned impacts. These are: (i) implementation of a plan for work site signage,
communication of information to communities in the areas concerned and restoration of access
for the local population, etc.; (ii) implementation of a site waste management plan, adherence
to working hours, etc.; (iii) implementation of a safety and health protection plan for workers
and local communities during the works and operating phases; and (iv) compensatory tree
planting. The project will build the capacity of actors involved in implementing the ESMP. The
estimated cost of the ESMP measures at this stage is USD 902,800.
3.2.1.4 The CMU will be responsible for monitoring the ESMP’s implementation in
collaboration with SNEL’s Environmental and Social Management Unit (ESMU), EDC and
the works control and supervision mission. Environmental control and monitoring will be
carried out by the Congolese Environmental Agency (ACE).
3.2.2 Climate Change
3.2.2.1 Based on the vulnerability assessment carried out by the Bank’s Climate Safeguards
System, this project was classified in Category 2. The project’s main positive climate impact
stems from the benefits to households provided by access to electricity in urban and rural areas
in the project areas, mainly from hydropower sources. The main benefits are: (i) more
environmentally friendly alternatives than the use of wood fuels (fuel wood and charcoal) and
kerosene lamps, which are currently the main sources of energy for lighting and cooking; and
(ii) opportunities for the processing and conservation of perishables and, consequently,
optimization of natural resources used in their production.
3.2.2.2 The project will also contribute to a reduction in emissions of gaseous pollutants
produced by small standalone generators currently used in the project areas. The main climate
challenge for the project concerns the frequency of extreme phenomena, in particular torrential
rain/flooding, and an increase in temperature variations.
11
3.2.2.3 In terms of adaptation, good design practices will be adopted to ensure, among others
the appropriate specifications for the foundations for poles, taking into account geotechnical
parameters and prevailing winds.
3.2.3 Gender and Vulnerability
3.2.3.1 The inventory of electricity supply capacity in Kinshasa reveals chronic shortages in
some neighbourhoods. The quality of service is marked by the irregularity or even absence of
power supply which has become a scarce commodity in many households. Similarly, in 2015,
only 50.4% of the Congolese population had access to drinking water according to the Ministry
of Planning and Monitoring Implementation of the Revolution of Modernity. In spite of efforts
made under several projects and programmes embarked upon by the Government with
assistance from its technical and financial partners, the results achieved fall far below
expectations. The following observations have been made: (i) weak involvement of the
population in general, and of women and children in particular, in the design and
implementation of these projects/programmes; (ii) acts of vandalism to infrastructure; (iii)
illegal connections often exposing communities to risks of electrocution; (iv) irrational use of
the little energy available; (v) carelessness of consumers when faced with situations affecting
electrical safety; and (vi) failure to pay water and electricity bills. Analysis of this situation
reveals the following: (a) failure to take into account the specific requirements of all segments
of society; (b) lack of communication among stakeholders; (c) the poverty affecting certain
segments of the population prevents them from accessing those basic social services to which
they are entitled; and (d) the common use of certain forms of energy, particularly traditional
fuels by women.
3.2.3.2 As in other parts of the country, the activities of women and youth in the project areas
are mainly concentrated in the agriculture and informal sectors, especially in trading (SNVBG,
2009). While these activities are central to the Congolese economy, women and youths who
represent over 60% of the populations are the hardest hit by poverty. It is estimated that 61.15%
of women-headed households are living below the poverty line compared to 54.32% of
households headed by men (SNVBG, 2009). Traders in foodstuffs (sale of fishery products,
livestock products, market garden products and other fresh produce in municipality markets),
organized in cooperatives, are experiencing serious conservation problems since they do not
have cold rooms or access to electricity for such equipment.
3.2.3.3 In light of these observations, analyses and expectations expressed during the
preparation and appraisal missions, it was decided to implement the following specific actions:
The project aims to foster the mainstreaming of the gender approach in all
energy sector development projects through the establishment of a Gender,
Energy and Development Unit at the Ministry of Energy by decree, with the
involvement of the Ministry of Women, Family and Children. This Unit will
develop an action plan with three main thrusts: gender and energy knowledge
building; promotion of energy efficiency; capacity buidling for actors and
monitoring/evaluation.
By restructuring the electricity sector, the project aims to contribute to the
emergence of of Women’s Entrepreneurhsip in Kinshasa to improve the
conservation of foodstuffs in municipality markets. In close collaboration with
the Ministry of Women, Family and Children in DRC, plans have been made to
purchase and install one cold room per targeted market in each of the 5
12
municipalities concerned in Kinshasa Province (Gombé, Lingwala, Kasa Vubu,
Barumbu and Kinshasa). These cold rooms will be used by the joint
cooperatives present in the these markets, which will be fully responsible for
their management by bearing the maintenance and operating costs. The same
Ministry will be charged with building the capacity of members of these
cooperatives in technical, associative, administrative and financial management.
Thanks to this action, the project will reduce by at least 60% the risks of losses
on perishable products and build the entrepreneurial capacity of these joint
cooperatives.
The project aims to reduce customer subscription charges by financing
connections and by providing all segments of society with access to electricity.
Thus, 136,000 new subscribers will benefit from this action. PAGASE will
protect the population from the existing risks of electrocution.
3.2.4 Job Creation
The project will contribute to the creation of about 200 temporary jobs, of which a minimum
of 50 will be occupied by women during the construction of power facilities as well as a further
50 during their operation. The project will also boost the development of related income-
generating activities by supplying power for the small businesses run by women, girls and
youths (mills, shops, hairdressing salons, welding workshops, etc.).
3.2.5 Involuntary Resettlement
The project’s implementation, especially the rehabilitation of the Inga power plants and
extension of the Lungudi plant as well as the restructuring of the North Kinshasa power grid
will affect no one insofar as existing public easements in the project areas will mostly be used
as rights-of-way for the grid works (lines and stations-cabins). However, in order to prepare
for all contingencies, a financial provision of USD 500,000 has been made to compensate for
possible damage or losses that might be identified during the implementation phase.
4 PROJECT IMPLEMENTATION
4.1 Implementation Arrangements
4.1.1 The project will be implemented by the MERH Project Coordination and Management
Unit (CMU), which will be fully responsible for it, in particular at the fiduciary level. The CMU
is the result of the transformation of the former Inga 3 Project Management Unit (I3MU),
previously in charge of the technical assistance project for the construction of Inga 3 and the
development of medium-sized hydropower plants financed by the Bank. Established by Decree
No. 058/2015 of 30 October 2015 as amended and supplemented by Decree No. 039/2016 of
17 June 2016, the CMU is responsible for coordinating all projects placed under MERH’s
oversight. It has the minimum capacity required to allow it assume responsibility for projects
financed by the Bank. To improve project performance while building capacity, the CMU will
coordinate the participation of the different actors involved in the project’s implementation.
Specifically, these include SNEL, the Congolese Environmental Agency (ACE), REGIDESO,
Electricité du Congo (EDC), the Ministry of Portfolio through the Public Enterprise Reform
Steering Committee (COPIREP), the Ministry in charge of Gender Issues and MERH’s
different services (General Secretariat for Energy, National Energy Commission, and Energy
Technical Support Unit (CATE)). A consultant engineer will also be recruited to build the
13
CMU’s capacity, specifically with regard to implementation of the PAGASE project.
Discussions have also allowed for an accurate definition of the role of each operator as well as
a framework for cooperation through the institutional arrangements described in the technical
annexes. ACE participates in the project by seeing to the environmental certification of
activities and implementation of the recommendations contained in the ESMP. REGIDESO
and EDC contribute to the preparation and construction of the extension of the Lungudi power
plant. COPIREP assists the CMU regarding the conduct of the SNEL restructuring studies as
well as for activities related to the recruitment of experts or the establishment of ARE and
ANSER. MERH’s different services are associated with the implementation of certain activities
(information system, gender development and training).
4.1.2 The different documents required for the project’s appraisal are available. These are the
study terms of reference as well as the works feasibility studies. As regards procurement, a
procurement plan was prepared by DRC and discussed with the Bank. Adjustments will be made
to the plan with a view to its validation at the latest during the negotiations. As mentioned in
paragraph 4.1.1, institutional arrangements have been made between the CMU responsible for
project implementation and the different agencies targeted, in line with their specificities and
responsibilities. In the case of the energy sector, all recent national projects have been awarded
grants, the conditions precedent to which have been fulfilled. There has been slippage on one
multinational project due to a revision of the amount.
4.1.3 Procurement
4.1.3.1 The procurement of goods (other than consulting services), works and consultancy
services financed by the Bank under the project will be made in accordance with the
Procurement Policy for Bank Group Funded Operations dated October 2015 and in compliance
with the provisions set out in the Loan Agreement. More specifically, procurements will be
made in accordance with :
Borrower Procurement System (BPS): Procurement Methods and Procedures
(PMP) under the Borrower’s procurement system comprising Law 10/010 of 10
April 2010 on public procurement, as well as the following decrees: (1)
No.10/22 of 2 June 2010 on the procedures manual; (2) N0.10/32 of 28
December 2010 on the establishment, organization and operation of the Project
Management and Public Procurement Unit ‘CGPMP’; (3) No.10/33 of 28
December 2010 determining the modalities for public procurement and public
service delegations; (4) No. 10/34 of 28 December 2010 determining thresholds
for the award, control and approval of public procurement contracts; (5)
No.10/21 of 2 June 2010 on the establishment, organization and operation of the
Public Procurement Regulatory Agency, ‘ARMP’ and; (6) No.10/21 of 2 June
2010 on the establishment, organization and operation of the Directorate-
General for Public Procurement Control, ‘DGCMP’, using national standard
bidding documents (NSBD) or other bidding documents as approved during the
project negotiations for the different types of activity planned under the project.
Bank’s Procurement Methods and Procedures (BPM): The Bank’s standard
PMP on the basis of relevant standard bidding documents (SBD) for contracts
which are: (i) above the thresholds mentioned in Annex B 5, Para. B.5.3.2, or
(ii) in the case where the Borrower PS is not used for a given activity or series
of activities; and (iii) in the case where the BPM are deem the most appropriate
for a given activity or series of activities.
14
Procurement Methods and Procedures (PMP) from a third party: PMPs
from third parties using the relevant standard or model bidding documents of
the third party.”
4.1.3.2 Country Procurement Assessment Review (CPAR): The assessment of risks at the
level of the country, sector and project as well as the procurement capacity of the Executing
Agency (EA) was carried out for the project and the results use to guide the decision on the
selection of a procurement system (Borrower, Bank or Third Party) to be used for given
activities or all similar activities under the project. The appropriate risk mitigation measures
have been included in the CPAR action plan set out in Paragraph B.5.9 of Annex B.5.
4.1.4 Financial Management Arrangements and Auditing
4.1.4.1 The fiduciary risk assessed with respect to the project’s financial management is
deemed substantial. The existing financial management arrangements at the CMU will be
bolstered in order to meet the Bank’s minimum requirements as defined by the policy on the
Financial Management of Projects Financed by the African Development Bank issued in
February 2014. Measures have been agreed upon that will mitigate the financial risk and are
set out in detail in the financial management action plan in Annex B 4. By strengthening the
existing financial management arrangements, the speedy implementation of these measures
will, with reasonable assurance, provide reliable financial information and safeguard project
assets in compliance with Bank policy.
4.1.4.2 The CMU has the minimum capacity required to assume responsibility for projects
financed by the Bank. The existing financial personnel comprises an administrative and
financial officer, an internal auditor and a treasurer, all covered by the central government
budget. The CMU will be responsible for the financial management of all the project
components and will be provided with the necessary resources and management tools to ensure
smooth project implementation. In view of its very limited experience as well as the lessons
learned from implementing energy projects in DRC, the CMU will be supported by technical
assistance in financial management in the form of two individual consultants assigned to
project activities, to be recruited on the basis of open competition for the project’s duration.
The CMU will implement all the necessary controls to ensure that: (i) project funds are properly
used in an efficient and economic manner; (ii) accurate, reliable and timely periodic financial
reports have been prepared; (iii) project assets are properly protected; and (iv) commitments
are respected with regard to the auditing and management of special accounts.
4.1.4.3 The CMU has inherited the TOM2PRO account management software used to
implement PASEL. It will be necessary to update the configuration of the existing CMU
software and Manual in order to computerize the project’s management. The internal audit
function currently performed by a Government internal auditor will be expanded to include
PAGASE activities by covering the missions already scheduled for the internal auditor, whose
work programmes shall be submitted to the Bank for prior approval. The internal auditors’
reports will be submitted to the Bank for information. The presentation of financial monitoring
reports (FMR) prepared on the use of central government resources managed by the CMU will
be improved to include PAGASE activities. The project FMR will be submitted to the Bank on
a quarterly basis.
15
Disbursements
4.1.4.4 Disbursement of Bank resources (ADF and TSF resources) will be made in accordance
with the Bank’s Disbursement Handbook. It is expected that the first disbursement will be
released within six months of the signing of the Grant and Loan Agreements. The following
two disbursement methods will be applied for disbursement of Bank resources: (i) the direct
payment method; and (ii) the revolving fund or special account method. The direct payment
method will be used for the payment of contracts for the works, goods and services expenditure
categories. The special account method will be used to finance operating expenditure. Two
special accounts will be opened in Kinshasa in an acceptable bank for the payment of Bank
disbursements in respect of the TSF grant and ADF grant. A disbursement letter setting forth
the specific modalities for each loan and grant agreement will be the subject of negotiations
with the Donee/Borrower.
4.1.4.5 The national counterpart funds provided by the Government of DRC are estimated at
2%. These funds mainly comprise valued contributions in kind to the operation of the CMU
(provision of premises, staff salaries, part of the operating and equipment costs). In view of the
prevailing economic situation in DRC, a waiver was granted on the percentage of counterpart
funds required in Bank financing (see Annex C1). No other disbursements are planned in terms
of financial flows in respect of the counterpart funds.
Audit
4.1.4.6 The PAGASE project annual audits financed from Bank resources will be conducted
by an independent external auditing firm to be recruited on the basis of open competition in
accordance with the Bank’s standard terms of reference (TOR). Recruitment of the external
auditor will be the responsibility of the SMU and will require prior approval by the Bank. An
annual audit is planned for the project’s duration, including the closing audit. The first project
audit could cover an 18-month period, counting from the loan effectiveness date or the date of
first disbursement. MERH shall ensure that outstanding audit reports awaited by the Bank are
submitted as soon as possible and at the latest before the negotiation phase. A single external
auditing firm could be recruited for all the projects entrusted to CMU for three (3) consecutive
periods, with a report for each donor. The audit terms of reference will be jointly validated by
the Bank and other partners working with the CMU.
4.2 Project Monitoring
The main stages of the project are presented in Table 4.1 below. The activities will be carried
out based on the project implementation schedule. A monitoring/evaluation specialist will be
made available to the CMU. His/her main duty will be to define measurable results (including
those contained in the results-based logical framework) as well as the methods and resources
to be used to obtain these results. He/she will help to improve performance and accountability
on a clear logical basis.
16
Table 4.1
Main Project Implementation Stages
Duration Stages Follow-Up Activities/Feedback Loop
120 days Approval and Effectiveness
Loan and grant approvals
General Procurement Notice
Signing and effectiveness of financing agreements
AfDB launching mission
120 days Procurement
Preparation of bidding documents
Bidding and award of contracts
Signing of consultancy firm contracts
Signing of works contracts
900 days Project’s physical
implementation
Contract execution
Preparation of periodic project status reports
Bank supervision mission
Project environmental and social monitoring
Bank’s mid-term review
150 days Auditing of project accounts Recruitment of auditor to perform annual audits
Performance of annual audits
90 days Project completion Borrower’s project completion report
Preparation of Bank’s project completion report
4.3 Governance
This project’s governance risk is low and could occur during the establishment of the CMU, in
particular the selection of personnel and the Unit’s position within the MERH institutional
mechanism. However, the risk is mitigated by the fact that the Bank will be involved in the
competitive recruitment of CMU staff working on the project. Moreover, concerning
procurements, the Bank, pursuant to its new procurement policy, still retains means of control
prior to the signing of contracts.
4.4 Sustainability
4.4.1 The project’s sustainability is mainly contingent on the Government’s commitment to
implementing the Power Sector Law. The adoption of regulations could help to resolve the
issue of tariffs, thereby providing a sustainable solution for all parties. Furthermore, with regard
to infrastructure, it is planned to maintain the public-private partnership for the management of
the Lungudi power plant. With respect to SNEL, ongoing efforts in the areas of service level
and performance contracts are helping to improve its assets management. The Government is
also making efforts to reduce its debts to SNEL, which is a key driver for improving the
company’s management. The renewable energy development studies represent a vital stage,
irrespective of the development method that the DRC may choose. Their availability could
facilitate future investments.
4.5 Risk Management
4.5.1 Implementation Risk: The CMU is a newly established body and has no historical
precedent in the simultaneous monitoring and implementation of several projects. This risk
will be mitigated by the quality of the personnel to be assigned to it, support from an
engineering consultant, analyses and opinions of the Bank and other partners. The appointment
of a PAGASE project leader at the CMU is another mitigation measure.
17
4.5.2 Fiduciary Risk: The fiduciary risk deemed substantial for DRC is an inherent risk
factor for this project since the CMU which will implement the project is not yet sufficiently
operational to be able to simultaneously manage several projects. This risk can be mitigated by
the implementation of the financial management plan, in particular, and by building CMU’s
capacity.
4.5.3 Political Risk: This risk stems from the country’s socio-political situation and the
fragility of the ongoing peace process which could impede project implementation. This risk
will be mitigated by the ongoing political developments, in particular national dialogue and
national and international mediation. Other factors are the presence of MONUSCO and
commitment of the international community. It will also be necessary to strengthen dialogue
with the Government and other technical and financial partners for information on the political
and security situation, and to factor in the political risk in the project’s monitoring and
evaluation system.
4.6 Knowledge Management
4.6.1 The project provides an opportunity to disseminate new knowledge for the Bank and
the DRC Government. For the Bank, PAGASE is an example of support to a Fragile State to
help it establish governance structures in a complex sector. It also helps to assess the scale of
infrastructure needs and is an example of collaboration among technical and financial partners.
4.6.2 New knowledge will mainly be acquired through interaction between partners but also
with beneficiaries. The documentation generated by these meetings and supervision missions,
periodic status reports as well as reports arising from the different controls will provide a basis
for knowledge acquisition.
5 LEGAL FRAMEWORK
5.1 Legal Instrument
To finance this project, the Bank will use the following financing instruments: a UA 4.88
million grant from ADF-13 resources, a UA 66.22 loan from ADF-13 resources and a UA 25
million grant from TSF resources to the Democratic Republic of Congo.
5.2 Conditions Associated with Bank’s Intervention
A. Conditions precedent to effectiveness of the grants/loan:
Effectiveness of the ADF and TSF Grant Agreements is subject to their signing by the Donee
and ADF. Effectiveness of the ADF Loan agreement is subject to fulfilment by the Borrower
of conditions stipulated in Section 12.01 of the General Conditions Applicable to Loan,
Guarantee and Grant Agreements of the African Development Fund.
B. Conditions precedent to first disbursement of the grants/loan:
In addition to effectiveness of the Grant Agreements and Loan Agreement, the first
disbursement on each loan or grant for project financing shall be subject to the fulfilment of
the following conditions by the Donee/Borrower, to the complete satisfaction of ADF/TSF:
18
For the ADF/TSF Grants:
(i) Provide ADF with evidence of opening a special account in the name of the
Project at a bank acceptable to the Fund, in which the proceeds of the ADF grant
will be lodged (paragraph 4.1.3.4);
(ii) Provide TSF with evidence of opening a special account in the name of the
Project at a bank acceptable to the Fund, in which the proceeds of the TSF grant
will be lodged (paragraph 4.1.3.4);
For the ADF Loan:
(i) Provide ADF with evidence of the amendment to the concession contract for the
Lungudi power plant to include in it the part related to the extension of the plant
as provided for in the project (paragraph 2.3);
(ii) Provide ADF with evidence of the signing of a power purchase agreement in
Tshikapa between REGIDESO and the Lungudi concessionaire (paragraph
2.3).
C. Other Conditions:
In addition, the Donee shall:
(i) Update, latest six (6) months after the first disbursement, the Administrative,
Financial and Accounting Procedures Manual;
(ii) Recruit the external auditor six (6) months after the first disbursement;
(iii) Update the software configuration to factor in the accounts of the PAGASE
project latest six (6) months from the date of signature of the financing
agreements.
D. Undertakings:
To the satisfaction of the Fund, the DRC shall undertake to:
(i) Provide the Fund/TSF with any document reasonably necessary for monitoring
the project’s implementation;
(ii) Execute the project and ESMP, and have them implemented by its contractors
in compliance with national law, the recommendations, requirements and
procedures contained in the ESMP as well as with the related rules and
procedures of the Fund (paragraph 3.2.1.4) ;
(iii) Improve SNEL’s commercial management by: (i) gradually abolishing lump
sum billing pursuant to the Power Sector Law; (ii) clearing SNEL debts owed
to the central government; (iii) adjusting SNEL tariffs while retaining a social
tariff for the first kilowatt hours consumed; and (iv) abolishing or rationalizing
the “entitlement” system (paragraph 3.1.2).
19
5.3 Compliance with Bank Policies
The Power Sector Improvement and Governance Support Project complies with all applicable
Bank rules.
6 RECOMMENDATION
Management recommends: (i) that the Boards of Directors of the Bank and Fund approve the
proposal for a UA 25 million TSF Grant to the Democratic Republic of Congo; and (ii) that the
Board of Directors of the Fund approve the proposal of a UA 66.22 million ADF loan to the
Democratic Republic of Congo to finance the Power Sector Improvement and Governance
Support Project, for the purposes and subject to the conditions set forth in this report.
I
Annex 1
Country’s Comparative Socio-Economic Indicators
Year
Congo,
Dem.
Republic
Africa
Develo-
ping
Countries
Develo-
ped
Countries
Basic Indicators
Area ( '000 Km²) 2016 2,345 30,067 94,638 36,907Total Population (millions) 2016 79.7 1,214.4 3,010.9 1,407.8Urban Population (% of Total) 2016 39.5 40.1 41.6 80.6Population Density (per Km²) 2016 35.2 41.3 67.7 25.6GNI per Capita (US $) 2014 380 2 045 4 226 38 317Labor Force Participation *- Total (%) 2016 71.1 65.6 63.9 60.3Labor Force Participation **- Female (%) 2016 70.5 55.6 49.9 52.1Gender -Related Dev elopment Index Value 2007-2013 0.822 0.801 0.506 0.792Human Dev elop. Index (Rank among 187 countries) 2014 176 ... ... ...Popul. Liv ing Below $ 1.90 a Day (% of Population) 2008-2013 77.2 42.7 14.9 ...
Demographic Indicators
Population Grow th Rate - Total (%) 2016 3.2 2.5 1.9 0.4Population Grow th Rate - Urban (%) 2016 4.0 3.6 2.9 0.8Population < 15 y ears (%) 2016 45.9 40.9 28.0 17.2Population >= 65 y ears (%) 2016 3.0 3.5 6.6 16.6Dependency Ratio (%) 2016 95.5 79.9 52.9 51.2Sex Ratio (per 100 female) 2016 99.5 100.2 103.0 97.6Female Population 15-49 y ears (% of total population) 2016 22.5 24.0 25.7 22.8Life Ex pectancy at Birth - Total (y ears) 2016 59.4 61.5 66.2 79.4Life Ex pectancy at Birth - Female (y ears) 2016 60.9 63.0 68.0 82.4Crude Birth Rate (per 1,000) 2016 41.1 34.4 27.0 11.6Crude Death Rate (per 1,000) 2016 9.9 9.1 7.9 9.1Infant Mortality Rate (per 1,000) 2015 74.5 52.2 35.2 5.8Child Mortality Rate (per 1,000) 2015 98.3 75.5 47.3 6.8Total Fertility Rate (per w oman) 2016 5.8 4.5 3.5 1.8Maternal Mortality Rate (per 100,000) 2015 693.0 495.0 238.0 10.0Women Using Contraception (%) 2016 23.3 31.0 ... ...
Health & Nutrition Indicators
Phy sicians (per 100,000 people) 2004-2013 10.7 47.9 123.8 292.3Nurses and midw iv es (per 100,000 people) 2004-2013 52.9 135.4 220.0 859.8Births attended by Trained Health Personnel (%) 2010-2015 80.1 53.2 68.5 ...Access to Safe Water (% of Population) 2015 52.4 71.6 89.3 99.5Healthy life ex pectancy at birth (y ears) 2013 51.8 54.0 57 68.0Access to Sanitation (% of Population) 2015 28.7 39.4 61.2 99.4Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2014 1.0 3.8 ... ...Incidence of Tuberculosis (per 100,000) 2014 325.0 245.9 160.0 21.0Child Immunization Against Tuberculosis (%) 2014 90.0 84.1 90.0 ...Child Immunization Against Measles (%) 2014 77.0 76.0 83.5 93.7Underw eight Children (% of children under 5 y ears) 2010-2014 23.4 18.1 16.2 1.1Daily Calorie Supply per Capita 2011 ... 2 621 2 335 3 503Public Ex penditure on Health (as % of GDP) 2013 1.6 2.6 3.0 7.7
Education Indicators
Gross Enrolment Ratio (%)
Primary School - Total 2010-2015 107.0 100.5 104.7 102.4 Primary School - Female 2010-2015 101.8 97.1 102.9 102.2 Secondary School - Total 2010-2015 43.5 50.9 57.8 105.3 Secondary School - Female 2010-2015 33.3 48.5 55.7 105.3Primary School Female Teaching Staff (% of Total) 2010-2015 28.3 47.6 50.6 82.2Adult literacy Rate - Total (%) 2010-2015 77.2 66.8 70.5 98.6Adult literacy Rate - Male (%) 2010-2015 88.8 74.3 77.3 98.9Adult literacy Rate - Female (%) 2010-2015 65.9 59.4 64.0 98.4Percentage of GDP Spent on Education 2010-2014 2.2 5.0 4.2 4.8
Environmental Indicators
Land Use (Arable Land as % of Total Land Area) 2013 3.1 8.6 11.9 9.4Agricultural Land (as % of land area) 2013 11.6 43.2 43.4 30.0Forest (As % of Land Area) 2013 67.6 23.3 28.0 34.5Per Capita CO2 Emissions (metric tons) 2012 0.0 1.1 3.0 11.6
Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update :
UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports.
Note : n.a. : Not Applicable ; … : Data Not Available. * Labor force participation rate, total (% of total population ages 15+)
** Labor force participation rate, female (% of female population ages 15+)
COMPARATIVE SOCIO-ECONOMIC INDICATORS
Congo, Dem. Republic
August 2016
0
20
40
60
80
100
120
2000
2005
2009
2010
2011
2012
2013
2014
2015
Infant Mortality Rate( Per 1000 )
C ong o, D em . R epu bli c A fr i ca
0
500
1000
1500
2000
2500
2000
2005
2008
2009
2010
2011
2012
2013
2014
GNI Per Capita US $
C ong o, D em . R epu bli c A fr i ca
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2000
2005
2009
2010
2011
2012
2013
2014
2015
Population Growth Rate (%)
C ongo , D em . R epub li c A fr ic a
01020304050607080
2000
2005
2009
2010
2011
2012
2013
2014
2015
Life Expectancy at Birth (years)
C ong o, D em . R epu bli c A fr i ca
II
Annex 2
Status of Bank Group’s Active Portfolio in DRC as at 31 July 2016 1. National Projects
# Division Long Name Loan Number Approval
Date
Planned
Final Disb.
Date
Net Loan Amount
Disbursed
Disburs.
Ratio
(%)
Status
1 OITC1 PRIORITY AIR SAFETY PROJECT 2100155018970 27/09/2010 30/12/2016 88 600 000 68 718 144 78
2 OITC1 BATSHAMBA-TSHIKAPA ROAD REHABILITATION PROJECT 2100155023025 13/06/2012 31/12/2017 53 550 000 23 572 963 44
3 OITC1 BATSHAMBA-TSHIKAPA ROAD IMPROVEMENT PROJECT 2100150030396 10/12/2013 31/12/2019 660 000 0 0
OITC1 BATSHAMBA-TSHIKAPA ROAD IMPROVEMENT PROJECT 2100155026371 10/12/2013 31/12/2019 13 260 000 208 165 2
4 OITC1 RN1 ROAD IMPROVEMENT PROJECT (TSHIKAPA-MBUJI MAYI) 2100155028819 17/12/2014 31/12/2019 74 000 000 529 477 1
5 OITC1 LOT 3 - BATSHAMBA-TSHIKAPA ROAD IMPROVEMENT PROJECT 2100155029069 22/10/2014 31/12/2019 55 560 000 42 697 0
Total Transport and ICT Sector 285 630 000 93 071 446 33
6 ONEC1 PROJECT FOR THE REHABILITATION AND STRENGTHENING OF THE INGA
HYDROPOWER STATIONS AND KINSHASA DISTRIBUTION GRID (PMEDE)
2100155010866 18/12/2007 31/12/2017 35 700 000 22 996 569 64
7 ONEC1 PERI-URBAN AND RURAL ELECTRIFICATION PROJECT 2100155019766 15/12/2010 31/12/2017 9 690 000 4 989 965 52 PPP
ONEC1 PERI-URBAN AND RURAL ELECTRIFICATION PROJECT 5900155001603 15/12/2010 31/12/2017 60 000 000 20 350 886 34
8 ONEC1 SUPPORT FOR THE ESTABLISHMENT OF THE INGA SITE DEVELOPMENT
AND PROMOTION AUTHORITY
5900155004751 17/04/2013 30/11/2016 1 995 000 328 725 16
9 ONEC1 NELSAP INTERCONNECTION PROJECT – DRC 2100155020266 27/11/2008 30/12/2016 27 620 000 8 355 846 30
10 ONEC1 PROJECT FOR TARGETED TECHNICAL ASSISTANCE FOR THE
DEVELOPMENT OF INGA 3
5900155004801 13/05/2013 30/11/2016 1 500 000 1 386 925 92
Total Energy Sector 136 505 000 58 408 915 43
11 OPSD4 NYUMBA YA AKIBA CEMENT PLANT 2000130011980 12/02/2014 27/11/2017 21 577 766 20 778 590 96
OPSD4 NYUMBA YA AKIBA CEMENT PLANT - EKF COVERED 2000130011981 12/02/2014 27/11/2017 21 577 766 20 778 590 96
Total Private Sector 43 155 533 41 557 179 96
12 OSAN WORKING WITH COMMUNITIES TO REDUCE DEFORESTATION AND
ALLEVIATE POVERTY
5650155002051 28/11/2014 31/03/2018 1 978 570 0 0
13 OSAN2 PPF-PROJECT FOR YOUTH ENTREPRENEURSHIP IN AGRICULTURE AND
AGRI-BUSINESS
2100155031517 18/01/2016 30/04/2017 800 000 0 0
14 OSAN2 RURAL INFRASTRUCTURE DEVELOPMENT SUPPORT PORJECT 2100155021418 10/11/2011 31/12/2017 49 460 000 14 641 510 30
15 OSAN3 INTEGRATED REDD+ PROJECT IN THE MBUJI-MAYI, KANANGA AND
KISANGANI BASINS
5565155000351 11/09/2013 30/06/2019 15 464 066 902 324 6
Total Agriculture Sector 67 702 636 15 543 834 23
16 OSGE1 REFORMS STEERING AND INSTITUTIONAL CAPACITY BUILDING PROJECT 5900155005251 18/07/2013 30/09/2016 1 540 000 1 144 580 74
III
17 OSGE1 STATISTICAL AND PUBLIC FINANCE INSTITUTIONAL SUPPORT PROJECT 2100155025918 23/10/2013 31/12/2017 10 960 000 4 611 180 42
18 OSGE1 PRIVATE SECTOR DEVELOPMENT AND JOB CREATION SUPPORT PROJECT 2100155029868 03/06/2015 30/06/2019 38 000 000 2 448 615 6
19 OSGE1 PUBLIC FINANCE MODERNIZATION SUPPORT PROJECT (PAMFP) 2100155022668 25/04/2012 30/12/2016 10 000 000 8 787 768 88
20 OSGE1 PROJECT TO MOBILIZE AND REVITALIZE PUBLIC ADMINISTRATION
HUMAN RESOURCES
2100155019866 21/01/2011 30/12/2016 20 000 000 18 048 450 90
Total Governance Sector 60 500 000 35 040 593 58
21 OSHD1 EMERGENCY HUMANITARIAN ASSISTANCE TO FLOOD VICTIMS 5000199004368 20/05/2016 31/03/2017 719 259 0 0
22 OSHD1 GENERAL POPULATION CENSUS AND SOCIAL DATABASES
CONSOLIDATION SUPPORT PROJECT
5900155007701 26/11/2014 30/06/2018 15 000 000 132 153 1
Total Social Sector 15 719 259 132 153 1
23 OWAS1 DWSS AND STRENGTHENING OF SOCIO-ECONOMIC INFRASTRUCTURE 2100150030344 27/11/2013 30/06/2019 1 475 000 0 0
OWAS1 DWSS AND STRENGTHENING OF SOCIO-ECONOMIC INFRASTRUCTURE 2100155026317 27/11/2013 30/06/2019 43 525 000 4 927 923 11
OWAS1 DWSS AND STRENGTHENING OF SOCIO-ECONOMIC INFRASTRUCTURE 5800155001251 27/11/2013 30/06/2019 4 746 066 62 621 1
OWAS1 DWSS AND STRENGTHENING OF SOCIO-ECONOMIC INFRASTRUCTURE 5900155005901 27/11/2013 30/06/2019 55 000 000 622 144 1
24 AWTF PREPARATION OF IUWM-MP FOR KINSHASA AND KINSHASA WEST DWS
FEASIBILITY STUDY
5600155004151 26/06/2015 31/12/2019 1 495 609 123 637 8
Total Water and Sanitation Sector 106 241 674 5 736 325 5
TOTAL NATIONAL PORTFOLIO 715 454 102 249 490 445 35
2. Regional Projects
# Division Long Name Loan Number Approval
date
Planned
final Disb.
date
Net loan Amount
Disburs.
Disburs.
Ratio
(%)
Status
25 IPPF EXTENSION OF THE KINSHASA-ILEBO RAILWAY 5150155000501 15/07/2012 31/12/2016 769 607 348 310 45
26 OITC1 KISHASA –BRAZZAVILLE RAILWAY BRIDGE KINSHASA RAILWAY STUDY 2100155015516 03/12/2008 31/12/2016 5 000 000 2 588 426 52 PP
27 OITC1 STUDY ON THE OUESSO-BANGUI-NDJAMENA ROAD AND INLAND
NAVIGATION ON THE CONGO, OUBANGUI AND SANGHA RIVERS
2100155019416 01/12/2010 30/11/2016 8 000 000 1 023 432 13 PPP
Total Transport Sector 13 769 607 3 960 167 29
28 IPPF SUPPORT FOR INGA - 3 DEVELOPMENT 5150155000852 23/08/2013 31/12/2016 1 438 518 1 133 828 79
29 ONEC1 THE INGA SITE DEVELOPMENT AND ELECTRICITY ACCESS SUPPORT
PROJECT
2100155029267 20/11/2013 31/12/2019 39 409 000 2 612 486 7
ONEC1 THE INGA SITE DEVELOPMENT AND ELECTRICITY ACCESS SUPPORT
PROJECT
5900155006203 20/11/2013 31/12/2019 5 000 000 2 108 647 42
30 ONEC1 INTERCONNECTION OF CAR AND DRC POWER GRIDS FROM THE BOALI
HYDROPOWER SYSTEM
2100155024116 19/09/2012 31/12/2017 5 550 000 76 950 1 PP
Total Energy Sector 51 397 518 5 931 911 12
IV
31 OSAN3 DRC- LAKES EDWARD AND ALBERT INTERGRATED FISHERIES & WATER R 2100155030167 20/05/2015 30/06/2021 6 000 000 0 0
Total Agriculture Sector 6 000 000 0 0
TOTAL REGIONAL PORTFOLIO 71 167 125 9 892 078 14
3. Congo Basin Forest Fund Projects
# Division Long Name Loan Number Approval
date
Planned
final Disb.
date
Net loan Amount
Disburs.
Disburs.
Ratio
(%)
Status
32 CBFF CIVIL SOCIETY AND GOVERNMENT CAPACITY BUILDING WITHIN THE RE 5650155000853 13/07/2011 30/09/2016 2 549 136 1 624 711 64
33 CBFF INTEGRATED REDD PILOT PROJECT AROUND THE LUKI BIOSPHERE
RESERVE IN MAYOMBE FOREST
5650155000854 22/07/2011 30/12/2016 1 865 806 1 529 035 82
34 CBFF SUPPORT TO SUSTAINABLE FOREST RESOURCE MANAGEMENT IN
GABON
5650155000803 18/05/2011 31/03/2016 4 777 174 3 276 017 69
35 CBFF VAMPEEM – VALORIZATION OF AFRICAN MEDICINAL PLANT FOR MAINST 5650155001052 16/11/2011 30/11/2016 1 256 229 986 168 79
36 CBFF GEOGRAPHICALLY INTEGRATED REDD PILOT PROJECT (ECOMAKALA +) 5650155000851 12/07/2011 31/10/2016 1 987 145 1 917 049 96
37 CBFF SOUTH KWAMOUTH REDD AGROFORESTRY PILOT PROJECT 5650155000852 12/07/2011 30/09/2016 1 983 163 1 914 647 97
38 CBFF ISANGI GEOGRAPHICALLY-INTEGRATED REDD PILOT PROJECT 5650155000802 19/05/2011 30/09/2016 1 830 244 1 771 843 97
39 CBFF MAMBASA GEOGRAPHICALLY-INTEGRATED REDD PILOT PROJECT 5650155000751 27/04/2011 30/09/2016 2 357 495 1 934 783 82
Total CBFF Projects 18 606 392 14 954 253 80
TOTAL PORTFOLIO 805 227 619 274 336 776 34
V
Annex 3
Development Partners’ Interventions in the Power Sub-Sector in DRC as at June 2016
SOURCES OF
FINANCING
PROJECT AMOUNT
(million
USD)
African
Development
Bank
- Project for the Rehabilitation and Strengthening of the
Inga Hydropower Stations and Kinshasa Distribution
Grid (PMEDE)
- The Nile Equatorial Lakes Subsidiary Action Program
(NELSAP)
- Peri-Urban and Rural Electrifications Project (PEPUR)
- Electrification of Zongo Town from Boali Hydropower
Plants (CAR)
- Study on Inga Site Development and Associated
Electrical Interconnections (EDIRA)
- Inga Site Development and Electricity Access Support
Project (PASEL)
- Power Sector Improvement and Governance Support
Project (PAGASE) (*)
430
TFP
(WB and EIB)
- Project for the Rehabilitation and Strengthening of the
Inga Hydropower Stations and Kinshasa Distribution
Grid (PMEDE)
- Southern African Power Market Programme (SAPMP)
- Project for Improved Electricity Access and Expansion
of Electricity Access in Targeted Areas (EASE) (*)
1275
Bilateral
(China, India
Belgium, Japan
and The
Netherlands)
- Rehabilitation of Tshopo Plant and Kisangani
Distribution Grid
- Rehabilitation of Tshopo Plant and Kisangani
Distributing Grid
- Construction of Zongo Hydropower Plant (147 MW)
- Project to Strengthen Interconnection of Power Grids of
Nile Equatorial Lake Countries - Gisenyi (Rwanda)-
Goma (RDC) Interconnection
- Construction of Kakobola (9 MW) and Katende (64
MW) Hydropower Plants
- Inga II Hydropower Plant Rehabilitation Project
(Generator 24 or 23) (*)
847
(*) being finalized
VI
Annex 4
Map of Project Area
Project Area of Intervention
This map has been provided by the staff of the African Development Bank exclusively for the use of the readers of the report to which it is attached. The
names used and the borders shown do not imply on the part of the Bank Group and its members any judgment concerning the legal status of a territory nor any approval or acceptance of these borders.
LUNGUDI
KINSHASA
ZONGO
INGA
VII
Annex 5
Analysis of Key Drivers of Fragility Taken into Consideration by the Project
Drivers of Fragility
The DRC faces several economic and structural drivers of fragility that affect its institutional,
geographic, security, political and socio-economic environment. These scourges, which are
mutually reinforcing, derive mainly from deep-rooted structural problems linked to the
country’s colonial history. The main drivers of fragility in DRC identified and analysed during
appraisal of the PAGASE project may be summarized as follows: (i) administration’s lack of
authority in the power sector; (ii) socio-economic exclusion linked to low access to electricity;
(iii) SNEL’s weak institutional capacity; (iv) extreme poverty and high unemployment among
young people, and few opportunities for their social and vocational integration; and (v) a tense
and uncertain political situation.
Other social and demographic factors also play a role as drivers of fragility and should be taken
into consideration in this project, namely: (i) the different forms of gender-based violence; and
(ii) the exponential population and urban growth, which represent a real threat to the country’s
stability.
Measures
With a surface area of 2.3 million km², the DRC faces an enormous infrastructure challenge.
Several infrastructure networks have been seriously damaged or neglected as a result of the
destruction caused by the many armed conflicts that the country has experienced. This lack of
basic infrastructure has impeded the process of decentralization and unification of the country’s
different urban and economic centres. The urban growth experienced by the country since its
independence has not been accompanied by corresponding investments and was achieved under
disorganized conditions, as a result of poor urban development management, with no
connections to basic facilities or services. This aspect of urban poverty represents an additional
risk of social tension. Despite the many ongoing reforms, the DRC is the world’s lowest ranked
country as measured by the Human Development Index according to the United Nations Human
Development Report, with over 70% of the population living below the poverty threshold.
Poverty particularly affects young people and women. Against this backdrop, the energy sector,
an anchor sector that falls within the remit of the key functions of government, can serve as a
tool not only to restore the trust of Congolese citizens in central government but also contribute
to poverty reduction by helping to create an enabling business environment for the country.
The PAGASE project will help to reduce fragility by taking the following measures into account
in its formulation and implementation:
Strengthen dialogue with the Congolese Government as well as with its other
TFPs in order to remain informed of the political and security situations, and
reflect the political risk in the project’s monitoring and evaluation system;
Ensure that the project takes into account social sensitivities by taking care not
to increase the exclusion of certain segments of society, particularly taking
gender-equity into account in decision-making concerning electricity access at
community level;
VIII
Provide SNEL with continuing technical support in order to build its capacity
during project implementation;
Ensure that the project, through the establishment of a “Gender, Energy and
Development Unit” at MERH, provides for related activities to empower the
most vulnerable segments of society in close collaboration with the Ministry
of Women, Family and Children, to prevent the duplication of gender
promotion activities;
In the project, make provision for activities relating to the sensitization and
empowerment of the population in the project impact area, concerning the
importance of respecting and maintaining basic infrastructure in the
communities and risks associated with the handling of electricity
infrastructure; and
Ensure that the project will contribute to the creation of sustainable jobs,
especially for young people in both the formal and informal sectors.
IX
Annex 6
Counterpart Funding Waiver
AFRICAN DEVELOPMENT BANK GROUP
INTER-OFFICE MEMORANDUM
Date:
A : M. KANGA
Director, ORCE and Head of Country Team
c/o : S. MALIKO
Resident Representative, CDFO
FROM : J.M.V. DABIRE
Country Economist, ORCE/CDFO
SUBJECT : Democratic Republic of Congo: Power Sector Improvement and
Governance Support Project (PAGASE)
Request for a Waiver of the 10% Minimum Counterpart Funding
The purpose of this memorandum is to present the analysis which justifies this request for a
waiver on the amount of counterpart funding submitted to the Country Team as part of the
financing of the Power Sector Improvement and Governance Support Project (PAGASE). The
aim of the requested waiver is to reduce the Government’s contribution to 1.21% compared to
a 10% minimum stipulated in the ‘Policy on Expenditure Eligible for Bank Group Financing’.
It is based on the three criteria stipulated under the above mentioned Bank policy, particularly
with regard to cost sharing. The analysis of these criteria is summarized below:
1. Country Commitment to Implement its own Development Programme
Since mid-2015, the DRC has experienced negative shocks mainly as a result of a drop in its
main export products, but has been able to maintain macro-economic stability through major
internal adjustment efforts. In 2015, the economy posted growth of 6.9%, with an inflation
rate of 1.0% and a fairly stable exchange rate. In 2016, the difficult external economic situation
coupled with uncertainties concerning the domestic situation impacted negatively on growth,
public finances and the balance of payments. Consequently, the gross domestic product (GDP)
growth rate was revised downwards to 4.3% compared to the initially projected 9%, inflation
is expected to rise to 4.2% and the overall fiscal deficit is expected to represent 1.1% of GDP.
The deficit on the external current account, excluding transfers, is also expected to widen in
2016 by almost 2 GDP points to 8.4% of GDP compared to 2015. It should be noted that the
conclusions of the IMF Article IV Consultation Report (September 2015) pointed out that the
macroeconomic situation was stable despite the country’s fragility and limited external
financing.
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In view of the difficult context, the Congolese Authorities in January 2016 adopted a series of
emergency measures to contribute to the country’s stabilization and economic recovery. They
are intended to increase government revenue and build up the economy’s resilience. The pace
of implementing these reforms must be accelerated in order to achieve the targeted objectives.
In terms of strategy, following the expiry of the second Growth and Poverty Reduction
Strategy Paper (GPRSP 2011-2015), DRC’s development strategy is currently based on the
Priority Action Programme (PAP) 2012-2016. The PAP focuses on five sectors: (i)
sovereignty, defense and security; (ii) economic and administrative governance; (iii)
infrastructure; (iv) production and trade; and (v) the social sectors. High priority has been given
to increasing power generation and improving the population’s electricity access rate. The
Government is also finalizing the National Strategic Development Plan (PNSD) which defines
the country’s development vision up to 2050, the first five-year tranche of which will cover the
2017-2021 period. Closing the energy gap is one of the key factors on which the country intends
to take action under the PNSD, with a view to accelerating its level of development. It is
expected that the different documents relating to the PNSD (Vision 2050, Global and Sector
Strategies, and the Five-Year Plan 2017-2021) will be adopted by the end of 2016.
2. Financing Allocated by the Country to Sectors Targeted by Bank Assistance
Infrastructure modernization is one of the top priorities of the 2012-2016 PAP and the PNSD
that is being finalized. The 2012-2016 PAP whose total cost is USD 46.33 billion has
earmarked 51.5% of its resources to infrastructure development. Financing requirements in
terms of water and electricity infrastructure represent about 34% of total infrastructure
requirements, which is an indication of the priority given to the sector. About 10% of the 2016
Finance Law’s budget was allocated to infrastructure development and improvement of the
living environment, despite budget constraints following the drop in the prices of the country’s
main export commodities. It should also be noted that for several years, the DRC electricity
sector has faced many challenges relating to power generation, transmission and distribution.
Although the country has remarkable energy potential, DRC has fairly low electricity access
rates with 15% in 2015 compared to an average for Africa of 24.6%. In rural areas where over
70% of the population live, only 1% of households have access to electricity compared to 39%
in urban areas. In addition, supply and quality of service have also fallen mainly to the methods
used to operate facilities, characterized by a lack of maintenance and steadily rising demand.
To address all these challenges, closing the energy gap is one of the key factors on which the
country intends to take action under the PNSD, in a bid to accelerate its level of development.
Thus, four energy infrastructure development sub-programmes are defined in the Five-year Plan
2017-2021:
Sub-Programme 1. Improvement of electricity sector governance
Sub-Programme 2. Promotion of energy resource development
Sub-Programme 3. Renewable energy development
Sub-Programme 4. Strengthening of national and sub-regional integration
process
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3. Country Budget Situation and Debt Level
The steady fall in commodity prices could present a risk for the sustainability of DRC’s
public finances. To address the narrowing of fiscal space as a result of the adverse international
situation for mining products, the Government decided in 2015 to curtail certain expenditure,
to safeguard the sustainability of State finances. Therefore, the fiscal deficit was contained at
0.5% of GDP compared to a fiscal surplus representing an average of 1.1% of GDP over the
2012-2014 period. In anticipation of resource mobilization difficulties, the initial 2016 Finance
Law recorded a 0.2% drop compared to 2015. Compared to 2015, it was expected that there
would be a drop of 3.3% in tax revenue, 58.9% in oil revenue and 10.6% in external revenue.
In addition, in order to close the financing gap in 2016, the Government intends to issue bonds
for CDF 746.7 billion (i.e. about 10% of the general budget), on the domestic and foreign
markets. The anticipatory measures have turned out to be insufficient in view of the scale of the
fall in commodity prices (…). This compelled the Government to adopt a Supplementary
Finance Law in June 2016 with a reduction in expenditure of almost 22% in relation to the
initial budget especially because of difficulties in mobilizing the expected bonds.
At the end of June 2016, the public sector cash flow plan resulted in a cumulative budget deficit
of CDF 267.1 billion compared to a cumulative surplus of CDF 30.6 billion over the
corresponding period in 2015. Government revenue had contracted by 13.3% as at 30 June 2016
compared to the same period in 2015, while government expenditure rose by 1.5%. There is
still a risk that this deficit could widen given the continuing drop in export prices. To strengthen
the sustainability of fiscal policy, further efforts are required to ensure stronger mobilization of
fiscal revenue, by broadening the tax base, deepening VAT reform and combating fraud and
tax evasion.
The Congolese Government is continuing to pursue a prudent debt policy to ensure the
sustainability of its public finances as well as its international financial credibility. Therefore,
in the absence of a debt management strategy, the Government has established a rigorous
mechanism for monitoring new commitments to be contracted. The mechanism gives
preference to concessional borrowing, in order to prevent further debt distress. The most recent
debt sustainability analysis conducted jointly by the IMF and World Bank in July 2015 confirms
that the country’s risk of debt distress remains moderate despite its increased volume of
commitments. According to IMF estimates, DRC’s external debt stock was US$ 5.39 billion at
end- 2015, representing 15.2% of GDP. In 2016 this ratio could rise to 16.2% of GDP.
4. Conclusion
Successive reviews of DRC’s portfolio as well as project completion reports show that the
payment of counterpart funds remains a generic and recurrent constraint for all projects. Not
only does such a situation block project implementation but it also impacts negatively on
portfolio performance. In light of the DRC’s situations, the Bank has contributed 100% of the
financing of all expenditure on new projects approved since 2010.
In light of the foregoing, a waiver is requested of DRC’s contribution of 10% to the financing
of the Power Sector Improvement and Governance Support Project (PAGASE).