PROJECT IMPLEMENTATION PROGRESS REPORT PRESENTED TO THE PERMANENT SECRETARY,

ON 9TH JULY, 2012

MINISTRY OF REGIONAL DEVELOPMENT AUTHORITIES

KIMIRA OLUCH SMALLHOLDER FARM IMPROVEMENT PROJECT

OLUCH INTAKE WEIR AND BRIDGEKIMIRA MAIN CANAL M3

1.2 Key Dates

Date of Loan/Grant Approval: 31st May 2006

Date of Loan/Grant Signature: 14th July 2006

Date of Loan Effectiveness: 21st September 2006

Date of Grant Effectiveness: 14th July 2006

Date of Loan Disbursement

Effectiveness: 20th October 2006

Date of Grant Disbursement

Effectiveness: 6th November 2006

Starting Date and Duration: February 2007, for 6yrs

Loan Last Disbursement Date: 30th September, 2013

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1.3 Project Goal

To improve income levels in a sustainable manner for the rural households and thus reduce poverty

To improve agricultural productivity and production and Value of produce for poverty reduction and improved livelihoods

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1.4 Project Objectives

To develop sustainable and environmentally friendly smallholder irrigation schemes in Kimira and Oluch.

To empower farmers through acquisition of entrepreneurial skills to manage the schemes.

To increase household income and food security through irrigated agriculture

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2.0 PROGRESS IN PROJECT IMPLEMENTATION

The Executing Agency (EA) – MoRDA constituted KOSFIP Project Management and Coordination Team (PMCT) in March, 2007, and currently has a workforce of 54.

Since then it has been implementing project activities under the following three (3) distinct components:-

2.1 Irrigation Scheme Development and Management

Under this component activities are being undertaken under the following sub-components:-

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2.1.1 Formation of Water Users Associations

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The target farmers have been organized to form Kimira Water Users Association and the Oluch Water Users Association.

The two IWUA’s were registered under the Ministry of Social Services and assisted to obtain permits from Water Resources Management Authority (WRMA).

The community members have been mobilized and sensitized to develop IWUA constitutions.

Registration of IWUA members is ongoing.

2.1.1 Formation of Water Users Associations

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Election of the leaders will take place in July, 2012

The two IWUA’s will then be registered at the Attorney General’s Chamber.

Both IWUA’s have opened bank accounts. The PMCT, in conjunction with the relevant line Ministries, has continued to capacity-build the two IWUAs to be in a position to operate and maintain the two irrigation schemes upon handing over.

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Under this sub-component the irrigation and drainage infrastructure for the two schemes were to be delivered using two phases; namely:-

i) Major Civil Works Contracts Two contracts were awarded to M/S Sinohydro Corporation Ltd/Machiri Ltd Joint Venture at costs of Ksh.1,396,134,224.54 and Ksh.1,543,670,027.48 for Kimira and Oluch Schemes, respectively. The two contracts run concurrently and are expected to end in October, 2012.The summary of progress of construction works for each contract are as indicated in the next slide;

2.1.2 Irrigation Scheme Development

Table 1: Summary of Progress of Major Civil Works

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Description % Completed in

Kimira

% Completed in Oluch

Intake Works 90% 98%Water Conveyance System

90% 90%

Sand Trap 98% 96%Major & Minor Siphons 97% 82%Night Storages 90% 85%Drainage Systems 60% 60%Access and Service roads

90% 85%

Communal Water Points

75% 56%

WUA Buildings 97% 98%Maugo Bridge 76%Lower Awach Tende Bridge

98%

Overall works progress

88% 84%

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The contract for design and supervision of Minor Works was awarded to M/S Otieno Odongo & Partners Engineering Consultants on 6th Dec 2011 at a cost of Kshs.88, 302,100.

The Consultancy is to run for 24 months with effect from 31st January, 2012, and is now on its 6th month.

The consultant has submitted preliminary designs for in-block irrigation & drainage systems for 12 blocks in Oluch Scheme.

The consultancy is however behind schedule as the tendering process should have commenced for the first 10 blocks in each scheme, by 30th June, 2012.

ii) Minor Civil Works

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The works are to be executed through several national contracts which will run concurrently, under supervision of the consultant.

The Loan funds allocated for the Minor works is Kshs. 124,984,643.50. However the preliminary cost estimates for the works is Kshs. 1,207,897,635.00, hence there is an approximate deficit of Kshs. 1,082,912,991.50. The exact cost, however, will be known once the Engineer’s Estimate is ready.

ii) Minor Civil Works Cont...

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Construction of Major Civil Works is being supervised by M/S Sabbour Associates/CAS Consultant Ltd who were awarded a 60 months’ contract for this consultancy and are currently on their 51st month of service.

2.1.3 Supervision of Scheme Construction

2.1.4 ENVIRONMENTAL MITIGATION13

a) Compensation for affected parcels of land and houses using Grant Funds

The Bank availed a grant of approximately Kshs.130.7Million, to fund activities under this sub-component.

These include:

Trainings and Monitoring Increasing farmers’ awareness on best environmental

management practices through training workshops. Monitoring the implementation of environmental

management plan, during project implementation. Oversight environmental monitoring by the District

Technical Advisory Committee to ensure contractor adherence to the code of good practice.

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Under Grant funds, 24 houses (18 in Kimira and 6 in Oluch) were tendered. Construction of 14 (11 in Kimira and 3 in Oluch) have been completed and handed over. Construction of 5No is nearing completion, while completions of the last 5No have been retendered.

51 land owner’s who were identified during project design, have been compensated for loss of land to the night storage reservoirs.

2.1.4 ENVIRONMENTAL MITIGATION Cont...

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b) Compensation for affected parcels of land and houses using GoK Funds

During project implementation, more families have been identified to be on the irrigation canal alignment, while new farmers have lost land to Night Storages Reservoirs. GoK has availed an additional Kshs. 123Million to compensate another 59 farmers, and construct 71 new houses and 1 church.

GoK has also funded construction of 71 houses (32No. houses in Kimira; 39No. houses and 1No. Church building in Oluch Scheme), through 37 contracts.

2.1.4 ENVIRONMENTAL MITIGATION Cont...

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The allocation for compensation activities including resettlement houses for, FY 2011/2012 was Kshs.123 Million. Out of these funds, Kshs.11,039,585 were utilized in compensation for land taken up by night storage reservoirs.

The total contract sums for the 37 No. GoK contracts for construction of resettlement houses is Kshs.157 Million. Therefore, the total expenditure on compensation including the funds committed under the resettlement houses contracts is Kshs.168,039,585. This implies that there is a shortfall of Kshs.45,039,585 which we have requested for in FY 2012/2013.

2.1.4 ENVIRONMENTAL MITIGATION Cont...

2.2 Marketing and Extension Component

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This component has three sub-components:- i) Support to farmers; ii) Support to extension workers; and iii) Market linkages.

The activities in the above three Sub-Components were to be implemented by a Consultant - M/S Sabbour Associates/CAS Consultants/Heritage Consultants Ltd, who failed and its services were terminated.

The component is now being implemented by PMCT, spearheaded by Agronomists.

The activities that have been achieved include provision of capacity building to farmers on agricultural production and sustainability which is done in coordination with relevant line ministry technical staff.

2.3 Procurement18

Major procurement of goods, services and works have been concluded.

Evaluation of Proposals for the consultancy on Environmental Audit is on-going.

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The cumulative disbursements on the Loan funds stand at Kshs.2,011.09 Million (77.23%) of the total ADF Loan amount of UA 22,978,992 approximately Kshs.2.604 Billion.

The Government has disbursed a total of Kshs.1, 273.46 million since Project inception.

2.4 Disbursement

Table 2: Funds received as at 30th June 2012

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Kshs ‘000000’

Source of Funds Total

ADF – Loan Revenue 149.19

ADF – Loan A-I-A Direct Payments 1,861.90

ADF – Grant Revenue 57.74

GoK Contribution 1,273.46

Total 3,342.29

Table 3: Cumulative Expenditure as at 31st May, 2012.

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Financier “000,000” Kshs Percentage

ADF – Loan 1,976.33 66.31%

ADF – Grant 30.68

GoK 1,019.90 33.67%

Total 3,026.91

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The Project has been prompt in submitting to the Kenya National Audit Office(KENAO) its Financial Statements for auditing, and the Bank has accepted the certified Project Financial Statements and Audit Reports for Financial Years (FY) 2006/2007 (3months); 2007/2008; 2008/2009; 2009/2010; and 2010/2011.

 The Project has no outstanding audit issues.

2.3 Audit

3.0 KEY CHALLENGES23

3.1 Need for additional funds for development of Minor Works

The amount allocated for the Minor works is Kshs. 124,984,643.50. However the preliminary estimated cost of the works is Kshs. 1,207,897,635.00. This implies that there is an approximate deficit of Kshs. 1,082,912,991.50.

3.2 Provision of way-leaves for construction of

Irrigation and Drainage Infrastructure:- The farming communities had not anticipated the

sizes of the way- leaves necessary for construction of Access and Service Roads; Irrigation and Drainage Infrastructure. There is now considerable resistance for way-leaves to construct the drains and secondary canals.

3.0 KEY CHALLENGES Cont…24

3.3 Vandalism and theft of irrigation structures’ Metal Works.

There has been reported cases of theft and vandalism of installed gates and valves on the major irrigation infrastructure in both Kimira and Oluch schemes. This pauses two challenges;-

A threat to the efficient operations of the system once handed over to the farmers.

Lack or weak sense of ownership by the targeted beneficiaries of the schemes being constructed.

3.0 KEY CHALLENGES Cont…25

3.4 Effects of floodingThe floods experienced in April/May 2012 across

the country affected the access roads, canals and drains at the project area. In some areas the structures were vandalized by the community to allow passage of flood water. The floods also eroded most of the drains, forming big gullies. This pauses two challenges;-

Additional costs for repair of the damages on the roads and the canals.

Need for stone pitching of most drains

3.0 KEY CHALLENGES Cont…26

3.5 Increased demand for compensationFollowing the new compensation considerations, there is marked increase in demands by the community members for compensation.

The April/May 2012 floods have made the situation worse.This has affected way-leaves for construction of drains, for which farmers are now demanding for compensation, although those were

contributions by the community, in accordance to the Loan Agreement.

3.6 Low sense of ownership of the project by the Beneficiary community

Community ownership of the project is still low in spite of the intensive sensitizations done. This was depicted in the low number of farmers who have registered as IWUA members - which is way below 10%, for each scheme.

The Project Steering Committee noticed this and formed a committee to develop an exit strategy on transitional management of the schemes so as to facilitate smooth handing over to farmers. The exit strategy paper has been prepared although it is yet to be presented to the stakeholders for ratification before submission to MoRDA.

4.0 RECOMMENDATIONS27

Need for extension of implementation period by at least one (1) year after the set 30th September, 2013, Loan last disbursement date.This is necessary to oversee the completion of the construction of Minor works, the defects liability period for the last Minor works’ element, preparation of operation and maintenance manuals, handing over and preparation of Project Completion Report (PCR).

GOK to provide additional funding for construction of minor works.

More sensitisation of farmers on provision of way- leaves and ownership of the infrastructure.

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