PROJECT: MASSINGIR DAM EMERGENCY

REHABILITATION PROJECT COUNTRY: MOZAMBIQUE PROJECT APPRAISAL REPORT Date: June 2009 16

APPRAISAL TEAM

Team Leader : Olagoke OLADAPO, Agro Economist, OSAN.4 Team Members : Kisa MFALILA, Environmentalist, OSAN.4 Gabriel MARO, Procurement Specialist, ORPF

Cesar TIQUE, Agronomist, MZFO Joao MABOMBO, Civil Engineer, MZFO Femi SONUGA, Consultant Dams Engineer

Sector Manager : Josephine N. Mwangi Sector Director : Aly Abou Sabaa Regional Director: Frank Black

Peer Reviewers

Hesham KANDIL, Chief Water.Res. Officer, OSAN.0 Eshetu LEGESSE, Principal Disbursement Officer, FFCO.3 Sebastian VEIT, Environmental Economist, OSUS Tony NYONG, Principal Climate Change Expert, OSAN.4 Wael SOLIMAN, Principal Hydrologist, OSAN.3 Joseph RIBEIRO, Principal Procurement Expert,OSAN.1 Tefera WOUDENEH, Chief Water & San. Engr, AWF

TABLE OF CONTENTS

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CURRENCY EQUIVALENTS i FISCAL YEAR i WEIGHTS & MEASUREMENTS i ACRONYMS & ABBREVIATIONS i LOAN INFORMATION ii PROJECT SUMMARY iii RESULT-BASED LOGICAL FRAMEWORK v PROJECT TIMEFRAME vii PART A – 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 Donors coordination 4 PART B – PROJECT DESCRIPTION 5 2.1 Project Objectives 5 2.2 Project Components 5 2.3 Technical Solution Retained and Other Alternatives Explored 6 2.4 Project Type 7 2.5 Project Cost and Financing Arrangements 7 2.6 Project’s Target Area and Population 8 2.7 Participatory Process for Project Design and Implementation 8 2.8 Bank Group Experience, Lessons Reflected in Project Design 9 2.9 Key Performance Indicators 9 PART C – PROJECT FEASIBILITY 10 3.1 Economic & Financial Performance 10 3.2 Environmental Impact 10 3.3 Climate Change 11 3.4 Impact on Gender 11 3.5 Social Impact 12 3.6 Involuntary Resettlement 12 PART D - IMPLEMENTATION 13 4.1 Implementation Arrangements 13 4.2 Procurement Arrangements 13 4.3 Disbursement Arrangements 13 4.4 Monitoring 14 4.5 Governance 14 4.6 Sustainability 14 4.7 Risk Management 15 4.8 Knowledge building 15 PART E – LEGAL INSTRUMENTS AND AUTHORITY 16 5.1 Legal instrument 16 5.2 Conditions Associated with Bank’s Intervention 16 5.3 Compliance with Bank Policies 16 PART F –CONCLUSION AND RECOMMENDATION 16

Appendixes I. Country’s Comparative Socio-Economic Indicators II. Table of ADB’s Portfolio in the Country III. list of Projects financed by the Bank and other Development Partners in the Country IV. Map of the Project Area 1 Technical Annexes are contained in the Project Implementation Document (PID). These include the detailed cost tables, implementation modalities, disbursement and procurement processes, project feasibility, including economic and financial analysis. This report will be used jointly with the PID and the Project Preparation Report.

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CURRENCY AND MEASURES (May 2009)

1 UA = USD 1.54

1 UA = 37.62 MZN 1USD= 24.43 MZN

FISCAL YEAR

01 January – 31 December

WEIGHTS AND MEASURES Metric System

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

ACRONYMS & ABBREVIATIONS

ARA-Sul Administracao Regional de Aguas do Sul ( The Southern Regional

Water Authority) CC Climate Change CRMU Climate Risk Management Unit CSP Country Strategy Paper DNA Direcção Nacional da Águas (National Directorate of Water) EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return ESMP Environmental and Social Management Plan FIRR Financial Internal Rate of Return FO Field Office GEF Global Environmental Facility GTP Government Preparation Team GoM Government of Mozambique JICA Japanese International Cooperation Agency KPI Key Performance Indicators M&E Monitoring and Evaluation MDSARP Massingir Dam Small Holder Agriculture Rehabilitation Project MDERP Massingir Dam Emergency Rehabilitation Project MPD Ministry of Planning and Development MTR Mid-Term Review MW Mega Watts OAG Office of the Auditor General PARPA Proactive Action for the Reduction of Absolute Poverty PSC Project Steering Committee RMCs Regional Member Countries SADC South African Development Countries SWAp Sector Wide Approach WFP World Food Program

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Loan Information Client’s information BORROWER: Government of Mozambique EXECUTING AGENCY: Administracao Regional de Aguas do Sul

(ARA-Sul) Financing plan

Source Amount (UA million)

Instrument

ADF

13.30

Loan

GoM 08.14 Counterpart funds TOTAL COST 21.44 ADB’s key financing information

ADF Loan

UA 13.3 million

Interest type* N/A Interest rate spread* N/A Other fees* 0.75% Service Charge Commitment fee* 0.5% Other fees* (type, b. points) Tenor 40 Years Grace period 10 Years FIRR, NPV (base case) 28%; USD 85 million EIRR (base case) 25% Timeframe - Main Milestones (expected)

Concept Note approval

May 2009

Project approval July 2009 Effectiveness September 2009 Completion April 2011 Last Disbursement December 2011 Last repayment (month, year)

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PROJECT SUMMARY 1. Project Overview 1.1 The project is a response to an emergency. On 22 May 2008, the bottom outlets of the Massingir dam collapsed resulting in the release of an uncontrollable outflow (see Appendix III b and c), and GoM requested support from the Bank to address the situation. As a result, the Dam is currently unstable due to the low outflow through the spillway (the only open outlet). About one million people (representing 5% of the total population of Mozambique) live within the vicinity of the dam and their lives, livelihoods and properties are threatened by a possible collapse of the Massingir dam in the event of a flood. Development of the well over 90,000 ha of irrigable land and the farming communities downstream would also be deprived of water for irrigation and hence a chance to ensure their food security. 1.2 The construction of Massingir dam was initiated by the Government of Portugal in 1972 and was partially completed in 1977 after Mozambique became independent. From the word go, the dam exhibited serious seepage problems at the toe of the right embankment. Consequently, the Government of Mozambique (GoM) requested for the Bank Group’s financing assiatance in 1986. This was followed by a feasibility study in 1992. An ADF loan amounting to UA55 million was approved by the Board on 24 November 1993 for the rehabilitation of the Dam and to also support smallholder irrigation schemes downstream at Xai-Xai. Theproject has just been completed and a PCR finalized. 1.3 Further to this, a supplementary loan of UA17 million was approved on 02 March 2007, specifically to finance the construction of an additional Auxiliary Spillway at Massingir Dam to ensure dam safety, rehabilitation of gates and installation of pumps to prevent salt intrusion from high tides, as well as add protection during floods. While the implementation of this is on-going, the bottom outlets of the Massingir dam collapsed resulting in the release of an uncontrollable outflow (see Appendix III b and c), and GoM requested support from the Bank to address the situation. An investigative panel to determine what actually caused the structural damaged to the bottom outlet was constituted by the Government. The report of the committee was released and posted on the GoM’s website in June 2008. The report concluded that there was an element of negligence by the two consulting firms that supervised the construction works, Messrs Coyne et Belier and BKS, but did not make any recommendations on measures to take. The Bank and the GoM are in the process of constituting a panel of dams experts to provide an independent and objective assessment of the dam situation to mitigate against a similar damage on the dam soon after major rehabilitation works.

1.4 This emergency project is of high economic and social importance to the country of Mozambique. Recently, Mozambique has become prone to floods and there is a very serious risk that a flood occurrence while the bottom outlets are closed could lead to a total collapse of the dam with serious consequences to human lives and property. Moreover, the predecessor of this project, the just completed Massingir Dam and Smallholder Agricultural Rehabilitation project (MDSARP), already achieved important tangible benefits in terms of increased crop production and portable water supply which could be wiped out if the project is not implemented. The Bank’s involvement in this project is therefore considered highly expedient.

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1.5 The project will be implemented under 2 components namely: (i); Rehabilitation of the Massingir Dam Bottom Outlets; and (ii) Project Management (including Consultancy Services for the Supervision of Engineering Works). The project will be implemented over a two year period (2009 - 2011). It is estimated to cost UA 21.44 million out of which the Bank will contribute UA 13.3 million (62%) and the Government 8.14 million (38%). 1.6 The beneficiaries of the project will be an estimated 16,000 farmers located downstream at Xai-Xai and Chokwe Districts, and people living in Massingir village for water supply; 550 fishers operating in the dam; and Procana Sugar Irrigation scheme, a private sector initiative dependent on the efficient operation of the Dam.

2. Needs Assessment

The dam is under distress as a result of the collapse of the bottom outlets, and therefore the intervention is critical. As the result of the damage, the two outlets were closed leaving the spillway as the only outlet for excess water in the dam. About one million people live within the vicinity of the dam and their lives, livelihoods and properties are threatened by a possible collapse of the Massingir dam in the event of a flood. Moreover, achievements recorded under the old project such a increased yield of maize, paddy rice and vegetables stand the risk of being eroded in case of heavy down pour. 3. Bank’s Added Value

The project is of high economic importance to the Government of Mozambique (GoM). Firstly, the implementation of the project offers the opportunity to review, reinstate and improve the operational capabilities of the Massingir Dam by holistically fixing some aspects of its structural weakness including those that predate the colonial era, thereby allowing the dam to operate in its full potential. Secondly, the project will address the potential environmental and ecological problems that could arise as a result of the dam failure. The outcome of the recent investigations and extensive structural analysis of the causes of failure revealed that the accident that occurred is due to a combination of many factors which include: high hydrostatic pressure generated in the bottom outlet that could not be restrained by the section where the accident occurred; inappropriate and leaking construction joints; deficiency in design as well as inadequate reinforcement details. Finally, the need to ensure all year round safety of the dam is of critical concern to the GoM. The project will allow the GoM to be able to monitor and manage the likely effects of floods, thereby, preventing possible loss of life and economic properties. 4. Knowledge Management The project is expected to introduce a modern method of data collection and analysis (hydrological and dam instrumentation) to help predict flood events at the dam, thereby allowing advance measures to be put in place to minimize the effects of any unexpected floods. This would be achieved through the installation of a state-of-the-art early warning system using automated telemetric hydrological and meteorological monitoring network within the operational flood management systems of the ARA-Sul. The earliest possible warning on the expected floods and the advance determination of expected water levels at the dam, would secure the operation of the dam by allowing ARA-Sul to launch its Emergency Preparedness Plan in a timely manner, consequently saving lives and property.

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RESULTS-BASED LOGICAL FRAMEWORK HIERARCHY OF OBJECTIVES

EXPECTED RESULTS AND TIMEFRAME

REACH (TARGET POPULATION)

PERFORMANCE INDICATORS

INDICATIVE TARGETS TIME FRAME

ASSUMPTIONS /RISKS

Sector Goal/Theme The sector goal is to contribute to GoM’s central objective of increasing agricultural productivity to ensure food security.

Sector/Theme Long Term Outcome i) Increased agricultural productivity; ii) Reduction in rural population experiencing food insecurity from 70% in 2009 to less than 50% by the 2015.

Beneficiaries i) The rural population in Gaza Province of Mozambique.

Verifiable Indicators Long Term Outcome i) Growth rate in food production; ii) Proportion of the rural poor suffering from food insecurity. Means of Verification a) Min. of Agriculture. Surveys. b) MPD Statistics

Target Indicators and Time Frame i) Agricultural Sector growth rate increases from about 5% to 8% in 5 years; ii) Reduced proportion of rural poor in Gaza Province experiencing food insecurity from about 70% to 50% by 2014

Assumption: i) Reform program on track and political and economic stability in the region.

Project purpose: i). Objectives of the project are to: (i) prevent total collapse of the Massingir Dam in the event of heavy downpour; ii)improve food production and the living standards of the target group through sustainable improvement of the operational efficiency of the Dam

Medium Term Outcomes i) Increased agricultural productivity through efficient downstream irrigation. ii) Better safety for the downstream communities.

Beneficiaries i) Xai-Xai Small Holder Irrigation scheme with farming family estimated at 8,000; and ii) Chokwe irrigation scheme downstream with beneficiaries estimated at 8,000 farming families;

Indicators i) Dam operating efficiently; ii) Number of additional hectares put under irrigated cultivation; iii) Increased yield of the major crops grown on the irrigated fields. Means of Verification a) Min. of Agriculture. Surveys. b) MPD Statistics c) Project Data collection and surveys.

Target Indicators i) Dam operating at full capacity of 2,844 mill m³ by 2011; ii) Increase in irrigated area from 19000 ha to 29000 ha by 2014 & eventually 90,000 ha by 2020. iii) Increase in irrigated farm holdings from 0.3 ha to 1-2 ha by year 2011 iv) Increase in crop yields by 60% by 2014. v) Increase in smallholder farmers’ net income from USD 800 per annum to USD1600 by 2010 and USD3200 by 2014

Assumptions i) Emergency preparedness plan already in place; ii) Satisfactory operation and maintenance of Massingir dam by the Government; iii) The Xai-Xai irrigation enterprise remains in place to organize the distribution of water, maintenance of the irrigation infrastructure and provide extension services. (iv) involvement of private sector operators in the irrigation activities downstream puts pressure on the Government to maintain the dam .

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HIERARCHY OF OBJECTIVES

EXPECTED RESULTS AND TIMEFRAME

REACH (TARGET POPULATION)

PERFORMANCE INDICATORS

INDICATIVE TARGETS TIME FRAME

ASSUMPTIONS /RISKS

Input and Activities Component 1: Rehabilitation of Massingir Dam Bottom Outlet. Repair of the Bottom Outlet conduits; Rehabilitation of bottom Outlet Steel liner; and Refurbishment of the Bottom Outlet Hydro-mechanical Equipment Component 2: Project Management & Supervision Consultancy Services for Engineering Works

3.1 Timely and quality implementation of the project 3.2 Increase in the dam’s operational capacity; 3.3 Protection of the dam against adverse floods; 3.4 Reduction in cost of dam operation and maintenance. 3.5 Effects of flood alleviated by early warning system

Beneficiaries i) Xai-Xai Small Holder farmers estimated at 8,000; ii) Chokwe downstream beneficiaries estimated at 8,000; iii) The entire population of the Gaza province.

Indicators i) adherence to planned works schedule ii)Dam operation efficiency; iii) Number of additional hectares put under irrigated cultivation; iv) Increased yield of the major crops grown on the irrigated fields Means of Verification i) PIU and Consultants’ monthy/quaterly progress reports a. ii) Dam operation records iii) Min. of Ag. Surveys. iii) MPD Statistics iv) Xai-Xai district office statistics on irrigated area and land under cultivation

Target Indicators i) Better and reliable water delivery and services to downstream users; (ii) Massingir dam safety brought to international standards; (iii) allow full development of irrigation scheme and associated infrastructure; iv) Establishment of new agro-allied industries.

Timely implementation of the rehabilitation works

Inputs Budget (UA Million) Component 1 20.38 Component 2 1.06 Total 21.44 ADF 13.30

GoM 8.14 Total: 21.44

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PROJECT TIME FRAMEWORK

ID Task Name

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2 PREPARATION3 Internal Processing of Preparation Report4 Appraisal Mission5 Internal Processing of Appraisal Report6 Loan Negotiation7 Board Distribution8 Board Approval9 Loan Signature10 CONSULTANCY SERVICES11 Design of Rehabilitation W orks12 Preparation of Bidding Documents13 IMPLEMENTATION14 Advance Contracting15 Procrement of Steel Liner (Internal Shop)16 a) Tendering17 b) Approval18 c) Supply19 Early W arning System (Direct Procurement)20 Civil W orks (ICB)21 Tendering22 Approval and Engagement of Contractor23 Implementation24 Hydromechanical W orks (ICB)25 Tendering26 Approval and Engagement of Contractor27 Implementation28 DEVELOPMENT of ESMO29 MONITORING and EVALUATION (ARA-Sul)30 PROJECT COMPLETION REPORT

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

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REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE ADB GROUP TO THE BOARD OF DIRECTORS ON A PROPOSED LOAN TO MOZAMBIQUE MASSINGIR DAM EMERGENCY REHABILITATION

PROJECT

Management submits the following Report and Recommendation

PART A – STRATEGIC THRUST AND RATIONALE

1.1 Project Linkages with Country Strategy and Objectives 1.1.1 The current CSP for Mozambique was approved by the Board in April 2006 and its implementation period spans through to 2009. The major pillars identified for the Bank support are: i) Governance (including institutional capacity building), and ii) infrastructure development to increase access to basic economic and social services. This project is anchored on the second pillar of the Bank’s CSP and fits into the GoM’s Poverty Reduction Strategy Paper termed Proactive Action for the Reduction of Absolute Poverty II (PARPA II) which has economic development, governance and human capital development as its pillars. The project will rehabilitate the necessary civil and mechanical infrastructure that will maximize the full benefits of the Massingir Dam. The project is also in line with the Bank’s Medium Term Strategy which supports the development of economic infrastructure in its Regional Member Countries (RMCs). 1.1.2 The construction of Massingir dam was initiated by the Government of Portugal in 1972 and was only partially completed in 1977 after Mozambique became independent. The dam exhibited serious weaknesses from early on as seen from the uncontrolled seepage. The Government of Mozambique (GoM) requested for the Bank Group’s financing assistance in 1986, to rehabilitate the dam and complete uncompleted works, but it was not until November 1993 that an ADF loan of UA55 million was granted for the rehabilitation of the Dam and support to smallholder irrigation scheme downstream at Xai-Xai. The project’s implementation start-up experienced some delays because the country was coming out of war and the Government staff responsible was not familiar with the Bank procedures. Serious implementation therefore did not commence until 2004. The project has just been completed and a PCR prepared. 1.1.3 During the course of the dam rehabilitation, a need for an additional auxiliary spillway was identified. The GoM therefore requested and the Bank granted, a supplementary loan of UA17 million, which was approved on 02 March 2007. The loan would also finance rehabilitation of gates and installation of pumps at Chilaulen, downstream from Xai Xai, to prevent salt intrusion from high tides and add protection during floods. The supplementary loan is under implementation. However, during implementation, damage to the bottom outlets was detected and the inlet had to be closed. 1.1.4 Recently, Mozambique has become prone to floods and there is a very serious risk that a flood occurrence while the bottom outlets are closed (the inlets had to be closed after the damage to the bottom outlet) could lead to a total collapse of the dam with serious consequences to human lives and property. Thus, the need to ensure all year round safety of the dam is of critical concern to the Government in order to withstand and control the likely effects of floods, thereby, preventing great economic loss. Thirdly, the project will help to address the potential environmental and ecological problems that could arise as a result of the

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damages to the Dam’s bottom outlets which resulted in the release of an uncontrollable outflow of more than 1000 m³/s when they collapsed. The project will also address the GoM’s food security challenge by guaranteeing water supply for the downstream irrigated agriculture in Gaza province which has a high irrigation potential that has not been fully tapped. Moreover, the Bank’s intervention will contribute to the GoM’s development of its critical infrastructure, especially those that can stimulate pro-poor growth and economic development as enunciated in GoM development agenda i.e. PARPA. 1.1.5 This emergency project is of high economic and social importance to the GoM. Firstly, the predecessor of this project, the just completed Massingir Dam and Smallholder Agricultural Rehabilitation project (MDSARP), already achieved important benefits in terms of increased crop production (through provision of water for irrigation purpose for the Districts of Chokwe and Xai-Xai -see paragraph 1.2.6 and portable water to the Massingir village) which could be wiped out if the project is not implemented. Secondly, the function of the bottom outlet is to release excess water from the dam above the level determined as secure for the dam’s stability. 1.2 Rationale for Bank’s Involvement 1.2.1 The project is a response to an emergency. On 22 May 2008, the bottom outlets of the Massingir dam collapsed resulting in the release of an uncontrollable outflow (see Appendix III b and c), and GoM requested support from the Bank to address the situation. The Bank acted promptly by sending an assessment Mission which reported that, although there was no loss of life and damage to properties was minimal, there were serious damages to the bottom outlet structures, threatening the dam’s safety in the event of heavy downpour. The Mission team recommended a technical investigation of the damages and the need to carry out the necessary repairs in order not to jeopardize the investments and stability of the dam. A Board document was prepared to request: (i) direct recruitment of consultants to carry out the investigations, and (ii) to use resources of the on-going Supplementary Loan to the original MDSARP. The Board Document was approved in January 2009 and the consultants started work immediately. They have produced an inception report which has provided an input into the intial design details and definition of the scope of works (with preliminary estmated costs) for the proposed project.

1.2.2 Meanwhile, GoM set up a Commission of Inquiry to investigate and determine what caused the collapse of the bottom outlets and the consequences of the incident. The report of the committee was released and posted on the GoM’s website in June 2008. The conclusions of the enquiry are that the accident may have been caused by a combination of the following factors: (I) lower security coefficient in the initial project and poor placement of armour during implementation; (ii) localized degradation of the concrete and that of the steel armour caused by infiltration of water from the overlying “pool”; (iii) water pressure increase in the bottom outlet structures resulting from the increase in the level of water in the dam and the closure of the sector floodgates; (iv) and fracture of the structure of the concrete in isolated blocks resulting in their ejection by the water pressure. However, consulting firms recruited to supervise the rehabilitation works, COYNE ET BELLIER and BKS failed to undertake proper analysis on the dam structures, even though this was part of their respective Terms of Reference. The report, however did not make any recommendations on measures to take. The Bank and the GoM are in the process of recruiting a panel of dams’ experts to review and provide an independent assessment of the dam situation, and evaluate the results and

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recommendations of the consulting firm undertaking detailed technical investigations and proposal for the damage repairs. 1.2.3 The GoM also took measures to temporarily secure the dam through stop gap measures including deliberate reduction of the inflow of water into the dam and preliminary early warnings and evacuation of the population located downstream of the dam.

1.2.4 The Dam is currently unstable due to the low outflow through the spillway (the only open outlet). About one million people (representing 5% of the total population of Mozambique) live within the vicinity of the dam and their lives, livelihoods and properties are threatened by a possible collapse of the Massingir Dam in the event of a flood. Development of the well over 90,000 ha of irrigable land and the farming communities downstream would also be deprived of water for irrigation and hence an opportunity to ensure their food security. The Bank’s involvement in this project is therefore considered highly expedient. 1.2.5 Secondly, the Bank has been the major player in the realization of the GoM’s efforts to have the Dam fully functional by solving some of the operational problems left behind by the colonial government including unfinished works, through the financing of the initial rehabilitation works. The Dam was constructed to primarily develop the irrigation potential of the 90,000ha blocks downstream, including Chokwe and Xai-Xai. At present, the Dam is providing water for irrigation to an estimated 19,000 ha downstream. 1.2.6 The implementation of the MDSARP made a significant impact on crop production in the project area. This included increase in yield of maize from 1.5 Mt to about 4 Mt per ha; paddy rice from 1.2 Mt to 4 Mt per ha and vegetables from 2 Mt to 6 Mt per ha. This translates to an annual incremental production of 14,800 Mt of maize, 16,000 Mt of rice and 11,600 Mt of vegetables. 1.2.7 Another potential contribution of the Dam in the economic development of Mozambique is its capacity to generate 60 MW of electricity. GoM is in contact with some private companies for possible partnership in electricity generation. This is becoming increasingly important as a result of the general decline in the electricity generation/distribution in the SADC region. This potential for increased hydro power can only be realized if the repairs to the damaged portions are carried out. 1.2.8 Mozambique is presently categorized by the World Food Program (WFP) as a food deficit country. Statistics as at January 2009 by WFP showed that its food aid to Mozambique will end in a couple of weeks as its food supplies continue to dwindle. Should this happen; over 1 million people stand the risk of being food deficient. The Bank’s involvement in this project therefore, will support the GoM efforts in boosting food production through support to irrigation agriculture so as to turn the country into a food sufficient rather than a food deficient country.

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1.3 Donors Coordination

Size

Sector or sub sector* GDP Exports Labor Force

Agriculture Sector 28.8 16.5 81.7

Players - Public Annual Expenditure (average 2008 to 2009)**

Government Donors 2008-2009 % of Total USD millions USD 82.531 105.081 AfDB 10.7 10.18

Austria 0.65 0..62 Canada 8.123 7.70 Denmark 6.271 6.01 EU 40.252 38.30

FAO 0.216 0.21 Finland 10.4 9.90 Ireland 4.67 4.44 Japan 2.21 2.10 Sweden 10.90 10.37 UK 0.989 0.94 WB 1.5 1.43 Italy 8.2 7.80 Level of Donor Coordination TOTAL USD Existence of Thematic Working Groups Y

Existence of SWAps or Integrated Sector Approaches Y

ADB's Involvement in donors coordination*** member * as most appropriate ** Years [yy1 to yy2] *** for this sector or sub-sector

1.3.1 There is an active agriculture sector thematic donor group in Mozambique where the donors support the implementation of the Ministry of Agriculture’s development programs. The program termed ProAgric is a common fund that is delivered by the donors as a sector-wide budget support for the development of the agriculture sector. ProAgric is a framework for agricultural development in Mozambique, focused on the agricultural sector as well as rural development needs beyond the confines of agriculture, that have significant impact on the sector, such as marketing, rural finance, access roads, agro processing and others. ProAgric is part of a broader perspective to pursue the goal of reducing poverty and food insecurity by using improved agriculture to provide for the majority of rural households. The proposed project will, however be implemented as a stand alone project because: (i) the main activities are on dam rehabilitation which, although it is to provide water for agriculture, it is under the responsibility of the Ministry of Works and Housing; (ii) it is not a new project but a follow-up to a project that predates SWAps, and was already designed outside ProAgri 1.3.2 The donor coordination group meets on a monthly basis to review their activities and update each other of new developments from their respective head office that has implications on the sector. The donors also meet as a group with the relevant key officials of the Ministry of Agriculture and National Department of Water Resources intermittently to review the progress of the activities being funded.

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PART B – PROJECT DESCRIPTION 2.1 Project Objectives 2.1.1 The sector goal is to contribute to GoM’s central objective of increasing agricultural productivity to ensure food security. The project objectives are to: (i) to ensure sustainability of the Massingir Dam by preventing its total collapse in the event of heavy downpour; ii) improve food production and the living standards of the target group through sustainable improvement of the operational efficiency of the Dam. This would facilitate the productive capacity of farmers both small and medium scale to produce major crops downstream in Chokwe and Xai-Xai. 2.1.2 The project consists of two components: I) Rehabilitation of the Massingir Dam Bottom Outlet and II) Project Management) Consultancy Services for the Supervision of Engineering works. Details of the activities specified under each component are as follows:

2.2 Project Components

Table B1: Project Components No. Component Name Est. Cost

(UA million) Component Description

1 Rehabilitation of the

Massingir Dam Bottom Outlet.

20.38 Repair of the Bottom Outlet conduits: o the demolition of the concrete around (three sections of

each conduit approximately 52 mt length) and reconstruction, including steel lining;

o repairs to the entire length of the outlet conduits including joints and cracked concretes;

Rehabilitation of bottom Outlet Steel liner: o Installation into the conduits of new steel liners incased

in concrete extending through the impervious zone about 183m;

o Rehabilitation of the two conduits steel liners in the rectangular section close to the radial gates (including the repairs of the cracked concrete);

Rehabilitation and Refurbishment of the Bottom Outlet Hydro-mechanical Equipment: o Repairs to radial gates including the alignment and

reinforcements of the gates, replacement of hydraulic jacks and provision of hydraulic operating equipment;

o Refurbishment of the intake gate of the upper conduit; o Rehabilitation/replacement of downstream gate stoplogs.

2 Project Management 1.06 Consultancy Services for the Supervision of Engineering

Works Planning, management, coordination and implementation of project activities. Monitoring and evaluation and technical assistance;

Management of all Procurement activities; Dam Management (operation and periodic maintenance).

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2.3 Technical Solution Retained and Other Alternatives Explored 2.3.1 The bottom outlet structure of the Massingir Dam failed when a blow-out occurred in three sections of the downstream part of each conduit due to the increased hydrostatic pressure generated as a result of the increase in the upstream reservoir level. These high hydrostatic pressures in the bottom outlet led to the generation of internal pressures within the conduit that was too high for that part of the conduit. The sections that failed happen to be the outlet’s weakest sections where the outlet transits from a horseshoe to a rectangular shape and also where the sections has only the concrete surround with no overburden to help it resist the internal pressures generated. 2.3.2 The steel lining of the bottom outlet (which has been proposed under this project) is the only practical method of reinstating the integrity of the conduit such that it can withstand the full hydrostatic pressures. This is particularly appropriate as the steel lined bottom outlet would also be able to withstand any external pressures acting on it as well as seal the many leaking joints. The original design of the middle sections of the bottom outlet conduits had assumed full support from the rock and backfill to resist part of the internal hydrostatic loading. This is apparent from the structural detailing. However, this intimate contact within the middle sections of the bottom outlet is likely to have been eroded by the significant seepage through the joints; therefore the conduit is now probably not capable of withstanding the internal pressures. This can result in failure of the bottom outlet and possibly the dam. With the steel lining of the conduits going from the damaged sections through the impervious zone of the dam, structural stability can be ensured and piping of fine material into the conduits prevented. The proposal to use steel lining conforms to international standards for similar situations. In other words similar situation elsewhere in the world had been resolved using the steel liner.

Table B.2: Project Alternatives Considered and Reasons for Rejection Alternative Name Brief Description

Reasons for Rejection

Independent Steel Pipes through the bottom outlet

Installation of two 3 meter diameter pipes in each conduit.

Reduction in capacity; Cumbersome to install; Complex intake arrangements; Would affect negatively downstream

riparian use during construction. Unlined bottom outlet

Reinstatement of the bottom outlet and repairs to all joints.

Not capable of withstanding the internal hydrostatic pressures when the dam is operating at full capacity;

Cannot guarantee sealing of the joints. 2.3.3 The alternative technical solution considered is to pass two independent ductile iron pipes of about 2.5m to 3m diameter each through the bottom outlet. However, this would reduce the capacity of the outlet significantly and would create complex problems tying it into the existing hydraulically shaped and fitted intake arrangement. It would generate unstable conditions at the intake as well as an unbalanced hydrostatic condition with the operation of the gates. This alternative would also require a crane along the length of the conduit for maintenance purposes and saddles adequately tied into the existing structure for carriage of the pipes. A review of the reinforcement detailing of the conduit show deficiencies and may not be adequate for the tying in of the saddles and crane. Implementation of this alternative would necessitate the lowering of the reservoir below the level of the bottom outlets (emptying the reservoir) for a significant amount of time whilst the

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remodelling of the intake and construction works are on-going thereby not being able to service the downstream riparian users for a long period. This alternative has not been considered further as it is cumbersome, has varied technical complexities and the attendant cost implications as well as its disruption to downstream activities. 2.4 Project Type This project is conceived as a response to an emergency and a solution to an existing problem hence it is a standalone operation necessitated by the need to prevent catastrophe in the event of excess flooding which is a common phenomenon in Mozambique. 2.5 Project Cost and Financing Arrangements

The total project cost including contingencies is estimated at UA 21.44 million and would be financed partly through an ADF loan of UA13.3 million (representing 62% of the total project costs) and Government contribution of UA 8.14 million (38% of the total cost). Assurances were made by the GoM that it will allocate resources amounting UA 8.14 million from the State Budget to finance the project, given its high priority to the Government.

Table B.3: Project Cost Estimates by Component [amounts in millions UA equivalents] COMPONENT UA MILLION F.E L.C Total % of Total 1) Rehabilitation of Massingir Dam Bottom Outlet 17.32 3.06 20.38 95% 2) Project Management & Consultancy Services for Supervision of Engineering Works

0.90 0.16 1.06 5%

TOTAL COST 18.22 3.22 21.44 100% Note: Exchange rates used: [1 UA = USD 1.54(January 2009]

Table B.4: Sources of Financing [amounts in millions UA equivalents] SOURCE F.E. % L.C. % TOTAL % of Total ADF 11.31 62% 2.00 62% 13.30 62% GoM 6.92 38% 1.22 38% 8.14 38% 18.22 100 3.22 100 21.44 100

Table B.5: Project Cost by Category of Expenditure [amounts in millions UA equivalents]

CATEGORY F.E.($) L.C. ($) Total ($) % of Tot

A. Civil Works 3,358,158.44 687,815.58 4,045,974.03 18.88%

B. Goods 9,377,922.08 1,920,779.22 11,298,701.30 52.71%

C. Non-Consultancy Services 495,649.35 491,363.64 987,012.99 4.60%

D. Consultancy Services 415,000.00 85,000.00 500,000.00 2.33%

E. Miscellaneous 1,314,838.57 269,304.29 1,584,142.86 7.39%

Total Base Costs 14,961,568.44 3,454,262.73 18,415,831.17

F. Physical Contingencies 1,314,838.57 269,304.29 1,584,142.86 7.39%

G. Price Contingency 1,171,901.30 268,096.82 1,439,998.13 6.70%

Total Project Cost 17,448,308.32 3,991,663.84 21,439,972.16 100.00%

TOTAL COSTS 17,448,308.32 3,991,663.84 21,439,972.16

8

Table B.6: Expenditure Schedule by Component [amounts in millions UA equivalents]

2.6 Project’s Target Area and Population

2.6.1 The Dam provides irrigation water for an estimated 8,000 farmers located downstream at Xai-Xai and another 8,000 at Chokwe. The Dam is capable of providing irrigation water for a total land area of 90 000ha. At present the Dam is assisting in the irrigation of an active 19,000 ha (consisting of 12,000 ha at Xai-Xai and 7,000 ha at Chokwe). An additional 10,000 ha (consisting 3,000 ha at Xai-Xai and 7,000 ha at Chokwe) which are currently being developed will be brought under cultivation through the safe operation of the dam for irrigation which is the major objective of this project. In addition the Dam provides employment opportunity to about 550 fishers with an average annual catch of 3,350 tons. 2.6.2 The repairs to the Dam will also facilitate the development of the Procana Sugar Irrigation scheme (a private sector initiative dependent on the efficient operation of the Dam) which will lead to the development of over 20,000 ha for sugar plantation and employment of about 1,000 people who will be directly engaged by the sugar plantation; encourage out-growers and the development of associated agro-allied industries. 2.7 Participatory Process for Project Design and Implementation In preparing this project, the Task Team carried out wide consultations with stakeholders that are involved in the water resources and agriculture sectors. The mission held several interactive sessions with officials of ARA-Sul and the Ministries of Public Works, Agriculture and Environment. The Task Team also worked with a team of experts assembled by the GoM who constituted the Government Preparation Team (GPT). In addition the team met and discussed with the direct beneficiaries of the dam i.e. the farmers of the downstream blocks of Chokwe and Xai-Xai, where the water is used for irrigation purposes. The team also had a working session with the major donors in the sector including the EU, CIDA, SIDA, Finland Embassy, Denmark, Japan, Ireland, Austria and the World Bank. The preparation mission also had technical sessions with all the Consultants working

COMPONENTS YEAR 1 YEAR 2 TOTAL % COMPONENT 1 Rehabilitation Works

a) Goods b) Works c) Services d) Contingency e) Misc. f) Price Contg.

10,519,480.52 2,808,961.04 492,857.14 1,382,129.87 1,382,129.87 1,194,160.21

779,220.78 1,237,012.99 3,896.10 202,012.99 202,012.99 174,539.22

11,298,701.30 4,045,974.03 496,735.25 1,584,142.86 1,584,142.86 1,368,699.43

52.70 18.87 2.32 7.39 7.39 6.38

Total 17,779,718.65 2,424,155.84 20,378,413.71 COMPONENT 2 Project Management

a) Services b) Operating Cost c) Price Contg.

543,993.51 77,922.08 44,777.00

329,383.12 38,961.04 26,520.78

873,376.63 116,883.12 71,298.70

4.07 0.55 0.33

Total 666,693.51 394,864.94 1,061,558.44 Grand Total 18,446,412.16 2,819,020.78 21,439,972.15 100%

9

on different aspects of the dam including Messrs Niham Shands (Consultants responsible for investigation and design of solutions to the bottom outlet that ruptured) and Coyne et Belier (Consultants responsible for the design and supervision of the auxiliary spillway under the supplementary loan.). 2.8 Bank Group Experience and Lessons Reflected in Project Design The project design has benefited from lessons learned in implementing the original Massingir Dam and Small Holders Agricultural Rehabilitation Project (MDSARP). These lessons will also provide better guidance in planning and implementing the proposed project. They include: (i) Delays in the implementation of the MDSARP that caused cost over run and contract

amendments cum variations have been mitigated in the design of this project by an elaborate Procurement Plan, costing and scheduling of all procurement activities, which have been agreed with the GoM through its implementing agency;

(ii) The Bank’s Field presence in Maputo (particularly with the plan to have a Regional Procurement Coordinator based in this field office or nearby, as well as an Infrastructure Expert already in the field office) will ensure quick actions, decisions and feedback on all matters pertaining to Project implementation;

(iii) The need for adequate supervision of works to ensure that the designed standards are complied with has been addressed through the introduction of a major separate component for the supervision of works in the project;

(iv) Incorporation into the project of ‘advance procurement action’ which allows carrying out essential procurement activities before financing is approved by the Board in order to ensure timely implementation of the critical works of this emergency operation;

(v) Implementation of MDSARP was hampered by unfamiliarity of the PIU staff with the Bank’s rules and procedures. The staff of the Implementation Agency has now been well trained and experienced with the Bank’s operations and will be able to handle the project with ease. However, some of the staff have left the Government, and there is need to provide Technical Assistance Experts to strengthen the PIU;

(vi) The PIU of MDSARP was extremely large and unmanageable due to the merger of the dam engineering works with irrigation activities as one project. The proposed project will be implemented by a compact PIU team consisting only of the basic key professionals (four in number) responsible for Dam rehabilitation, with appropriate qualifications, competency and familiarity with the implementation of projects financed by multilateral development institutions;

2.9 Key Performance Indicators Key performance indicators (KPIs) for the project will include:

a) Gradual increase in the operational efficiency of the dam from 1,600Mm³ to full operating capacity of 2, 884Mm³ by 2011;

b) Increase in irrigated farm holdings from 0.3 ha to 1-2 ha; c) Increase in active irrigated area downstream from 19,000 ha to 29,000 ha; d) Increase in agricultural crop production and improved farming practices and farm

yields and; e) Increase of smallholders farmers’ net income from the baseline figures of USD 800

by about 200% by 2014 since farmers can now crop al the year round

10

PART C – PROJECT FEASIBILITY

3.1 Economic and Financial Performance The economic rate of returns was calculated based on the following assumptions:

That the rehabilitation of the Dam bottom outlet will inter alia facilitate the efficient distribution of water from the dam to every current and potential user downstream, especially irrigation farmers;

Main crops to be grown with water from the dam would be maize and rice, and, being tradable commodities, the import parity prices of maize and rice were used in the calculation of the ERR;

Shadow prices of traded goods are not significantly different from market prices as the difference between the official and parallel markets for foreign exchange in Mozambique is insignificant;

Without prejudice to the official policy on farm inputs (such as seeds, power tillers, agrochemicals and fertilizers) imported into Mozambique, market prices paid by producers for these inputs are in most cases not significantly different from the international prices probably due to the cancelling effects of low tariffs and subsidies;

For the purpose of this analysis, the economic analysis treats tax and subsidies as transfer payments;

This analysis assumes there was no phasing in the entry point among beneficiaries as all accruable benefits were presumed to start in PY4;

The streams of benefits were netted out for over 30 years.

FIRR, 28%; NPV@12% USD 85 million EIRR 25%

3.2 Environmental and social impacts

3.2.1 The project is classified as Environmental Category II according to the Bank’s Environmental and Social Assessment Procedures (ESAP). Potential environmental impacts will be localized and the proposed interventions will not generate a new set of activities that are outside the scope of the earlier rehabilitation works that were carried out under the MDSARP. A full Environmental Impact Assessment (EIA) was carried out during appraisal of the MDSARP and an Environmental Management Plan (EMP) developed comprising a comprehensive set of environmental mitigation measures to monitor and mitigate the negative impacts. 3.2.2 Majority of the mitigation measures proposed during appraisal of the MDSARP remain unchanged and most of them have been implemented under the guidance of an environmental specialist engaged by the project as follows: (i) minimum flow requirements spelled out in the Environmental Flow Requirements Study (EFRs) are used to regulate releases from the reservoir that ensure protection of the downstream ecosystem; (ii) The salt-balance study is used in conjunction with the EFRs to release water downstream to mitigate high salt concentrations and tidal influences at the Limpopo River mouth at Xai-Xai; (iii) water quality continues to be monitored for any adverse effects; and (iv) Flow measurement and sediment sampling stations were installed on the two tributaries supplying water to the dam within the Kruger National Park in South Africa.

11

3.2.3 The proposed Massingir Dam Emergency Rehabilitation Project (MDERP) interventions seek to support repairs of the bottom outlet structure of the Massingir Dam to ensure the safety and operational efficiency of the dam. Potential environmental impacts of the project and its sub-projects are site specific and minor, and thus will be mitigated during the project design and implementation through the environmental and social management plan (ESMP) (see Technical Annex B.8) which provides concise framework spelling out procedures and measures to avoid, minimize or mitigate any likely negative impacts during the construction and operational phases of the project. 3.2.4 The emergency repair works to the bottom outlet will allow for a controlled release of water to ensure the protection of the downstream ecosystem. Minimal environmental impacts are likely to occur during the construction work associated with the emergency repairs, which will be mitigated as follows: construction camps which are likely to be a source of potential public health problems would be kept clean and hygienic; proper sanitation would be provided to prevent introduction and spread of water-borne diseases; proper disposal for all types of wastes generated on-site (run off from vehicle yards containing fuel and lubricants, and from material stock piles containing particulate matter that can lead to contamination of soil and water) according to the specifications outlined in the ESMP.

3.3 Climate change

Mozambique is highly vulnerable to changing climatic patterns, including extreme climatic events such as droughts and floods. The emergency repair works on the Massingir dam will enhance the dam’s operational efficiency and largely contribute to reduced vulnerability to climate change through flood controls and storage of sufficient water to be used during prolonged period of droughts. In addition, the project will introduce a modern method of data collection and analysis (hydrological and dam instrumentation) as a mitigation measure to help predict flood events at the dam, thereby allowing advance measures to be put in place to minimize the effects of any unexpected floods. This will be achieved through the installation of a state of the art early warning system using automated telemetric hydrological and meteorological monitoring network within the operational flood management systems of the PIU.

3.4 Impact on Gender 3.4.1 The Government has made specific efforts to enhance the status of women. This includes development and implementation of the: (i) Agriculture Sector Gender Mainstreaming Strategy and Action Plan in 2005. Its purpose is to

integrate women in the improvement of the food security and poverty reduction initiatives of agriculture development, by ensuring equal access and control of the resources, benefits, rights and chances, between women and men

(ii) the National Policy and Strategy on Gender (NPSG) which aims at integrating gender components in sector plans and programs of activities and contribute to the government’s effort on promoting equality of rights and opportunities between women and men,

(iii) The National Action Plan for Women’s Advancement, a strategy planning instrument, targeting gender issues both at the government and non-governmental institutions. It identifies the government priorities in women and gender areas especially the needs, actions and decision on the allocation of resources.

3.4.2 As a result, the status and role of women has advanced in Mozambique and is now higher. Women feel that they are now recognized as leaders, where in the past they were not

12

valued. They find that they have an acceptable status, and the country has grown because of their contribution. When women give their opinions, it is valued and such increased visibility and responsibility has changed attitudes of both men and women. This situation has been helped by increased girls’ literacy level as the government has given them equal access to education.

3.4.3 Demographically, there are more women. The ratio of women to men is 52% to 48%. There are generally more women than men in the rural area as exemplified by the population of Massingir district of 28,470 people of which 15,170 are women. Thus, should there be any overflow of the dam as a result of non-implementation of the project; women and children would constitute a larger proportion of the population that is likely to be displaced in the case of flooding. Moreover, the following activities that benefit women both socially and economically would be affected as follows: (i) a total of 7,190 people live in villages close to the dam directly benefiting from water supplied from the dam, of which 55% are women; (ii) there are 550 fisher-folks, 167 of them women, who use the dam for fishing purposes; (iii) forty percent of the farmers involved in irrigation in the project’s catchment area are women. About 3,000 women are located in the Xai-Xai area alone. The project focus on rehabilitating the dam to increase its efficiency and will therefore ensure adequate flow of water to support income generation activities which will likely increase the socio-economic well-being of women who are actively involved in agricultural activities.

3.5 Social Impact

There will be positive social impacts associated with the project as follows: (i) creating a safe structure of Massingir Dam will increase efficiency of the dam and hence increased water availability for additional agricultural lands downstream; (ii) employment as constrution work force since the contractor will largely recruit labour locally, enhancing economic opportunities for the local population of working age group; (iii) alleviate the risk of internal displacement of well over 1 million people who would be affected should the dam fail if the planned intervention is not undertaken; (iv) serve as a catalyst for rapid agro industrialization of the province. Job creation would also stem from the fact that more people will be encouraged to take up irrigated agriculture as a result of the opportunities provided by the dam’s water. It is esitmated that about 10,000 ha of additional land will be cultivated within two years of the project completion, making a total of about 29,000 ha of land available for smallholder cultivation. There is potential to increase irrigated land to 49,000 ha with the likely participation of the private sector, particularly at the Procana Sugar Cane farm. With the repairs therefore, the quality of life of the people of Gaza province would be enhanced through improved socio-economic well being and job creation.

3.6 Involuntary resettlement

The project will not involve any involuntary resettlement.

13

PART D - IMPLEMENTATION 4.1 Implementation Arrangements 4.1.1 The project will be implemented using existing structures and incorporating lessons and the experience garnered from the MDSARP. The initial and supplementary loans are being managed by ARA-Sul, which is the GoM agency charged with the mandate and responsibilities of managing all water resource activities in the Southern Region of Mozambique, including Gaza province where the Dam is located. It has the responsibility for managing the river basins of Limpopo, Umbeluzi, Inkomati and Save. ARA-Sul has over the years developed in-house capacity to generate essential data on the Dam and this will continue to be used for future analysis that will guarantee sustainable management of the Massingir dam. In the light of the foregoing, ARA-Sul will also manage this project albeit with compact and streamlined personnel consisting of a Project Manager, a Resident Engineer, a Procurement Specialist/Contract Engineer and a Financial Accountant (who will also serve as the administrative officer of the project). The candidates for these positions will be recruited regionally/locally to strengthen ARA-SUL which does not have adequate internal capacity to manage the project as most of the previously identified experienced staff on the project are leaving for other organizations. 4.1.2 The project’s oversight arrangement would be through the formalization of the Inter-Ministerial task force set up by the GoM into a Project Steering Committee (PSC). The PSC would be chaired by the Minister for Public Works and or the designated officer of a Director level. Membership of this committee will include the Inspector General of Public Works, Representative of Direcção Nacional da Águas (DNA), one representative each from the Ministry of Finance and Ministry of Planning & Development, Director of Water Resources and Director General of ARA-Sul. The Project Manager will be the Secretary of this committee. The PSC will provide guidance for the smooth implementation of the project. It will among others approve the relevant annual work-plans, budgets and convene meetings at least four times every year (every quarter).

4.2 Procurement Arrangements Procurement arrangements are summarized in Annex B5 based on a Procurement Plan, which has been discussed and agreed with ARA-Sul. All procurement of Goods, Works and acquisition of Consulting Services financed by the Bank will be in accordance with the Bank's Rules and Procedures for Procurement of Goods and Works or, as appropriate, Rules and Procedures for the Use of Consultants, using the relevant Bank Standard Bidding Documents. The main procurement modalities will be International Competitive Bidding, Shopping, Direct Purchase and Force Account as may be deemed relevant. Due to the emergency nature of the project, the use of advance procurement action, which was discussed and agreed with the Borrower, has been strongly recommended.

4.3 Disbursement Arrangements Disbursement of the ADF resources will be made directly to the suppliers and Contractors for the ICB, NCB packages and for Consultancy Services. Other payments, including operating expenses and dam maintenance will be paid through a Special Account. The Special Account under the present supplementary loan to the Project will continue to be

14

utilized for the proposed loan but with separate and distinct books of accounts kept by Project Accountant. 4.4 Monitoring

Timeframe Milestone Monitoring process/feed back Y 1 Qtr 2 Finalization of Design Works Details Cost Estimate Report, Structural

Assessment Report, Dam Inspection Report, Final Design and Tender Documents.

Y 1 Qtr 3 Award of Contracts for the Manufacture of Steel liners and for the Upgrade of the Early Warning System;

Advanced Procurement Documents for Steel Liners and Early Warning System. Compliance with Specifications and International Standards.

Y1 Otr 3 Award of Civil works Tender Evaluation Report, Compliance with Technical Specifications, Progress Reports, Interim Monthly Certificates.

Y1 Otr 4 Award of Hydro-mechanical works; Installation of the Steel Liners

Tender Evaluation Reports, Progress Reports, Interim Monthly Certificates

Y2 Otr 2 ,Completion of 1st Outlet Test Running and Finishing works Y2 Qtr 3 Completion of 2nd Outlet;

Completion of Civil & Hydro-mechanical works

Test Running and Completion Report

Y2 Qtr 4 Completion of Project Trial Run of all systems and Project Completion Report

4.5 Governance 4.5.1 Mozambique shows commitment to transparency and good use of resources. It made a public statement of its intension to adhere to the Extractive Industries Transparency Initiative in October 2008. 4.5.2 In order to safeguard the funds committed to the project from possible misuse and abuse, which may lead to fraud and corruption, all contracts during project implementation will be subjected to prior review and ‘no objection’ by the Bank. Regular monitoring of the project implementation will be provided by the Bank field office in Mozambique to ensure the project complies with Bank rules of procedures. The proposed Regional Procurement Coordinator to be posted in the region will help to address any issues dealing with project implementation. The Bank will also be very vigilant on preparation and submission of audit reports on the project.

4.6 Sustainability The maintenance and operation of the Dam is assured as it is within the purview of ARA-Sul which is largely funded by the Government as ARA-Sul cannot generate enough funds through the users’ fees charged for irrigation purposes. ARA-Sul is already operating and maintaining other similar dams in the country. Since the Dam is of high economic importance to the GoM, its operation and maintenance will be accorded high priority in the annual national budget. The project sustainability will be further enhanced through the new public private sector partnership through which the water for private large scale irrigation farms will be charged at economic rate rather than the social cost associated with current water users in the catchments area. The farmers’ groups are already well organized for irrigated farming and will ensure ownership of the facilities to be installed on their farms thereby ensuring sustainability. Lastly, the technology option for rehabilitation of the bottom

15

outlet, and the installation of an early warning system would enhance positive development of the project over a long time.

4.7 Risk Management 4.7.1 The project aims at addressing risks posed by the failure of the bottom outlets of the dam which has threatened the dam’s safety in the event of heavy downpour. For such an occurrence, the risks posed are multi-dimensional including attendant economic, environmental and ecological implications. The project itself is thus a risk mitigating action that would ensure the avoidance of a likely catastrophic effect of major dam failure. Furthermore, the project includes the establishment of an early warning system that would trigger an advance warning and allow ARA-Sul to engage its Emergency Preparedness Plan, thus mitigating against the risk to human and property that would be caused to an ill prepared population in an event of flooding. 4.7.2 Another likely risk is posed by lack of regular maintenance of the dam infrastructure especially if the GoM renege on its commitment to provide the necessary and regular funds for the operation and maintenance of the Dam. This will however be mitigated by the involvement of the private sector operators in the irrigation activities downstream who will: (i) contribute more funds to the dams maintenance; and (ii) put pressure on the Government to maintain the dam to safeguard their commercial interests. 4.7.3 The risk encountered in the previous projects in Mozambique which include delayed implementation and the attendant cost overruns, would be mitigated in this project through the elaboration of a detailed procurement plan a priori and greater involvement of the Field Office in Mozambique. 4.8 Knowledge Building

The project will introduce a modern method of data collection and analysis (hydrological and dam instrumentation) to help predict flood events at the dam, thereby allowing advance measures to be put in place to minimize the effects of any unexpected floods/events. This would be achieved through the installation of an early warning system using state of the art automated telemetric hydrological and meteorological monitoring network within the operational flood management systems of the ARA-Sul. The system will also allow for the establishment of new and upgraded hydrometric stations; establishment of a data bank; improved analytical capability of ARA-Sul; establish procedures and provide tools and training for real-time analysis of flood situations. The early warning of the expected floods and the advanced determination of expected water levels at the dam would trigger an advance alert warning during a flood event thereby allowing the ARA-Sul engage its Emergency Preparedness Plan and consequently saving lives and property. The data generated from the installed system will be used as research information for the future management of the river basin system.

16

PART E – LEGAL INSTRUMENTS AND AUTHORITY

5.1 Legal instrument

The project will be financed with an ADF loan of UA 13.3 million (granted to the Government of Mozambique) and the standard ADF terms and conditions will apply.

5.2 Conditions associated with Bank’s intervention A. Conditions Precedent to Entry into Force of the Loan Agreement

It shall be a condition precedent to entry into force of the Agreement that the Borrower shall have fulfilled the conditions of section 12.01 of the General Conditions of the Fund Applicable to Loan Agreements and Guarantee Agreements.

B. Conditions Precedent to First Disbursement

The obligations of the Bank to make the first disbursement of this Loan shall be conditional upon the entry into force of this Loan.

5.3 Compliance with Bank Policies

The project is in consonance with all the relevant Bank’s policies on Environmental Management, Climate Change and gender mainstreaming.

PART F – CONCLUSION AND RECOMMENDATION Management recommends that the Board of Directors approve the proposed ADF loan of UA 13.3 million (Thirteen million, three hundred thousand Units of Account) to the Government of Mozambique for the purposes and subject to the conditions stipulated in the report.

PAGE 1/2 APPENDIX I

Mozambique Comparative Socio Economic Indicators

Year Mozam- bique AfricaDevelo-

ping Countries

Develo- ped

Countries

Basic Indicators Area ( '000 Km²) 802 30 307 80 976 54 658Total Population (millions) 2008 21.8 985.7 5 523.4 1 226.3Urban Population (% of Total) 2008 36.9 39.2 44.0 74.4Population Density (per Km²) 2008 27.2 32.5 23.0 49.6GNI per Capita (US $) 2007 320 1 238 1 742 34 962Labor Force Participation - Total (%) 2005 51.6 42.3 45.6 54.6Labor Force Participation - Female (% ) 2005 50.6 41.1 39.7 44.9Gender -Related Development Index Value 2005 0.373 0.486 0.694 0.911Human Develop. Index (Rank among 174 co 2005 172 n.a. n.a. n.a.Popul. Living Below $ 1 a Day (% of Popula 2003 54.1 34.3 … …

Demographic IndicatorsPopulation Growth Rate - Total (%) 2008 1.9 2.3 0.3 1.2Population Growth Rate - Urban (%) 2008 4.1 3.3 2.5 0.5Population < 15 years (%) 2008 44.4 40.9 16.6 27.4Population >= 65 years (%) 2008 3.2 3.4 16.7 8.0Dependency Ratio (%) 2008 90.5 79.5 47.7 53.9Sex Ratio (per 100 female) 2008 94.6 99.3 94.3 101.5Female Population 15-49 years (% of total po 2008 23.7 24.2 24.3 25.8Life Expectancy at Birth - Total (years) 2008 42.4 54.5 76.7 67.5Life Expectancy at Birth - Female (years) 2008 42.7 55.6 67.5 80.3Crude Birth Rate (per 1,000) 2008 38.7 35.7 11.0 20.1Crude Death Rate (per 1,000) 2008 19.5 13.0 10.4 8.6Infant Mortality Rate (per 1,000) 2008 93.5 83.9 7.1 48.5Child Mortality Rate (per 1,000) 2008 159.2 137.4 8.8 72.3Total Fertility Rate (per woman) 2008 5.0 4.6 1.6 2.5Maternal Mortality Rate (per 100,000) 2005 520.0 683.0 450 9Women Using Contraception (%) 2003 16.5 29.7 61.0 75.0

Health & Nutrition IndicatorsPhysicians (per 100,000 people) 2004 2.6 39.6 78.0 287.0Nurses (per 100,000 people) 2004 19.7 120.4 98.0 782.0Births attended by Trained Health Personnel 2003 47.7 51.2 59.0 99.0Access to Safe Water (% of Population) 2006 42.0 62.3 80.0 100.0Access to Health Services (% of Population)* 2004 39.0 61.7 80.0 100.0Access to Sanitation (% of Population) 2006 31.0 37.6 50.0 100.0Percent. of Adults (aged 15-49) Living with H 2007 12.5 4.5 1.3 0.3Incidence of Tuberculosis (per 100,000) 2006 0.0 0.0 275.0 19.0Child Immunization Against Tuberculosis (%) 2007 90.0 83.0 85.0 93.0Child Immunization Against Measles (%) 2007 75.0 83.1 78.0 93.2Underweight Children (% of children under 5 2003 23.7 25.2 27.0 0.1Daily Calorie Supply per Capita 2004 2 057 2 436 2 675 3 285Public Expenditure on Health (as % of GDP) 2004 2.7 2.4 1.8 6.3

Sources : ADB Statistics Department Databases; World Bank: World Development Indicators; last update :UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports

Note : n.a. : Not Applicable ; … : Data Not Available;

February 2009

0200400600800

100012001400

2002

2003

2004

2005

2006

2007

GNI per capita US $

Mozambique Africa

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2003

2004

2005

2006

2007

2008

Population Growth Rate (%)

Mozambique Africa

111213141516171

2003

2004

2005

2006

2007

2008

Life Expectancy at Birth (years)

Mozambique Africa

PAGE 2/2

APPENDIX I (Continued)

Mozambique Comparative Socio Economic Indicators (Continued)

Year Mozam- bique AfricaDevelo-

ping Countries

Develo- ped

Countries

Education Indicators Gross Enrolment Ratio (% ) Primary School - Total 2006 104.8 99.6 91.0 102.3 Primary School - Female 2006 96.9 92.1 105.0 102.0 Secondary School - Total 2006 15.5 43.5 88.0 99.5 Secondary School - Female 2006 12.9 40.8 45.8 100.8Primary School Female Teaching Staff (% of 2006 26.4 47.5 51.0 82.0Adult Illiteracy Rate - Total (%) 2007 55.6 ... 26.6 1.2Adult Illiteracy Rate - Male (%) 2007 42.8 ... 19.0 0.8Adult Illiteracy Rate - Female (% ) 2007 67.0 ... 34.2 1.6Percentage of GDP Spent on Education 2006 5.0 4.5 3.9 5.9

Environmental IndicatorsLand Use (Arable Land as % of Total Land A 2005-08 4.0 6.0 9.9 11.6Annual Rate of Deforestation (% ) 2000-08 0.2 0.7 0.4 -0.2Annual Rate of Reforestation (% ) 2000-08 4.0 10.9 … …Per Capita CO2 Emissions (metric tons) 2005-08 0.1 1.0 1.9 12.3

Sources : ADB Statistics Department Databases; World Bank: World Development Indicators; last update :UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports

Note : n.a. : Not Applicable ; … : Data Not Available;

February 2009

0

20

40

60

80

100

120

2003

2004

2005

2006

2007

2008

Infant Mortality Rate( Per 1000 )

Mozambique Africa

PAGE 1/2 APPENDIX II: Table of Bank Portfolio in Mozambique

Secto r N ame F in.pro ject Lo an N umber Lo ng N ameA ppro val

D ate Effect .

D ate C lo sind

D ate A ppro ved

A mo unt D isbursed

A mo unt D isb.R a

t ioAgriculture P-M Z-AAF-001 2100150006688 ARTISANAL FISHERIES DEVELOPM ENT PROJECT 14-Nov-01 10-Jul-03 30-Dec-10 14,170,000 4,341,849 30.64%Agriculture P-M Z-AAF-001 2100155001708 ARTISANAL FISHERIES DEVELOPM ENT PROJECT 14-Nov-01 10-Jul-03 30-Dec-09 1,730,000 552,151 31.92%Agriculture P-M Z-AAZ-001 2100150000723 FAM ILY SECTOR INCOM E ENHANCEM ENT PROJECT 31-Oct-00 21-Sep-01 30-Dec-09 12,460,000 7,201,220 57.79%Agriculture P-M Z-AAZ-001 2100155000231 FAM ILY SECTOR INCOM E ENHANCEM ENT PROJECT 31-Oct-00 21-Sep-01 30-Dec-09 1,000,000 577,119 57.71%Agriculture P-M Z-AA0-026 2100150014043 M ASSINGIR DAM AND SM ALLHOLDER AGRICULTUR 2-M ar-07 30-Nov-07 31-Dec-09 17,000,000 525,520 3.09%Agriculture P-M Z-AA0-011 2100150000711 M ASSINGIR DAM & SM ALLHOLD AGRICULTURAL REH. 24-Nov-93 13-Jan-97 30-Dec-08 55,000,000 54,288,645 98.71%Agriculture P-M Z-AA0-015 2100150007156 RURAL FINANCE INTERM .SUPPORT PROJECT 12-Nov-03 11-Jul-05 30-Jun-11 11,520,000 2,939,234 25.51%Agriculture P-M Z-AA0-015 2100155002003 RURAL FINANCE INTERM .SUPPORT PROJECT 12-Nov-03 11-Jul-05 30-Jun-11 3,840,000 494,728 12.88%Agriculture P-M Z-A00-001 2100150000731 SM ALL SCALE IRRIGATION PROJECT 2-Dec-98 26-Sep-00 30-M ar-10 12,430,000 9,351,892 75.24%Agriculture P-M Z-A00-001 2100155000252 SM ALL SCALE IRRIGATION PROJECT 2-Dec-98 26-Sep-00 30-M ar-09 1,210,000 921,958 76.19%Agriculture P-M Z-AZ0-001 2100155006516 Women's Entrepreneurship And Skills Deve 25-Jan-06 29-M ay-08 31-Dec-12 2,510,000 58,127 2.32%

A griculture T o tal 132,870,000 81,252,442 61.15%Finance P-M Z-HZ0-001 2100155005616 Financial Sector TA Project (FSTAP) 4-Oct-05 8-Feb-06 31-Jan-12 6,800,000 1,405,864 20.67%F inance T o tal 6,800,000 1,405,864 20.67%Ind/M ini/Quar P-M Z-BA0-001 2100150006671 M INERALS RESOURCES M ANAGT CAP. BUILDING 3-Sep-01 13-M ay-02 29-Dec-08 3,290,000 2,565,423 77.98%Ind/M ini/Quar P-M Z-BAA-001 2000120000169 M OM A M INERAL SANDS PROJECT 21-M ay-03 9-Jun-05 18-Oct-07 26,811,089 26,811,089 100.00%Ind/ M ini/ Quar T o tal 30,101,089 29,376,512 97.59%M ulti-Sector P-M Z-K00-005 2100155005317 Inst. Support for Public Sector Reform 22-Jun-05 6-Apr-07 31-Aug-09 2,126,000 261,041 12.28%M ulti-Sector P-M Z-K00-007 2100150017695 POVERTY REDUCTION SUPPORT LOAN II 22-Oct-08 17-Dec-08 31-Dec-10 60,000,000 20,000,000 33.33%M ult i-Secto r T o tal 62,126,000 20,261,041 32.61%Power P-M Z-FA0-006 2100150012843 ELECTRICITY IV PROJECT 13-Sep-06 24-Jan-08 31-Dec-12 26,300,000 317,785 1.21%Power P-M Z-FA0-005 2100150007228 Energy Reform and Access Program 5-Nov-03 24-Jan-05 30-Dec-10 9,017,000 1,655,899 18.36%Power P-M Z-FA0-005 2100155002048 Energy Reform and Access Program 5-Nov-03 24-Jan-05 30-Dec-10 1,965,000 141,008 7.18%Power P-M Z-FA0-004 2100150006670 RURAL ELECTRIF.PROJECT (ELECT III) 3-Sep-01 1-Oct-02 31-Dec-09 11,120,000 2,436,192 21.91%P o wer T o tal 48,402,000 4 ,550,885 9.40%Social P-M Z-IA0-006 2100150006657 EDUCATION IV PROJECT 13-Sep-01 3-M ar-06 31-Dec-08 10,000,000 3,423,074 34.23%Social P-M Z-IB0-001 2100150000726 HEALTH II PROJECT 21-Dec-00 15-Feb-02 29-Jun-09 9,000,000 3,599,264 39.99%Social P-M Z-IB0-001 2100155000233 HEALTH II PROJECT 21-Dec-00 15-Feb-02 31-Dec-08 600,000 139,960 23.33%So cial T o tal 19,600,000 7 ,162,298 36.54%Transport P-M Z-DB0-007 2100150013143 M ONTEPUEZ-LICHINGA ROAD PROJECT 27-Oct-06 29-Jul-08 31-Aug-11 30,100,000 - 0.00%Transport P-M Z-DB0-003 2100150000727 VANDUZI-CHANGARA ROAD REHABILATATION PROJECT 15-Dec-99 11-Aug-00 31-Dec-09 16,790,000 10,576,111 62.99%Transport P-M Z-DB0-003 2100155000251 VANDUZI-CHANGARA ROAD REHABILATATION PROJECT 15-Dec-99 7-Jul-00 31-Jan-05 800,000 325,321 40.67%T ranspo rt T o tal 47,690,000 10,901,431 23.85%Water Sup/Sanit P-M Z-E00-002 2100150000735 INTEGRATED WATER SUPPLY AND SANITATION PROJECT 8-Dec-00 29-Aug-01 29-Jun-09 15,770,000 10,262,634 65.08%Water Sup/Sanit P-M Z-E00-002 2100155000250 INTEGRATED WATER SUPPLY AND SANITATION PROJECT 8-Dec-00 28-Aug-03 29-Jun-09 1,000,000 548,602 54.86%Water Sup/Sanit P-M Z-E00-001 2100150000734 M APUTO WATER SUPPLY AUGM ENTATION PROJECT 17-Jun-99 3-M ay-02 30-Jun-08 17,500,000 17,435,787 99.63%Water Sup/Sanit P-M Z-E00-001 2100155000246 M APUTO WATER SUPPLY AUGM ENTATION PROJECT 17-Jun-99 3-M ay-02 30-Jun-08 2,160,000 1,410,784 65.31%Water Sup/Sanit P-M Z-E00-003 2100150007036 URBAN WATER SUPPLY, SAN.& INST. SUPPORT 20-Dec-02 17-M ay-05 30-Dec-09 19,064,810 10,455,636 54.84%Water Sup/Sanit P-M Z-E00-003 2100155001917 URBAN WATER SUPPLY, SAN.& INST. SUPPORT 20-Dec-02 17-M ay-05 30-Dec-09 2,310,000 874,635 37.86%Water Sup/ Sanit T o tal 57,804,810 40,988,078 70.91%Grand T o tal 405,393,899 195,898,551 48.44%

A F R IC A N D EVELOP M EN T B A N K M o zambique Ongo ing P ro jects as at 31.01.2009

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Appendix III Similar projects financed by the Bank and other development partners in country٭

List of Projects Funded by the Bank that have strong impact on the new Project: S/N Name Financier Main features Main Linkages 1 Massingir Dam &

Smallholders Agriculture Rehabilitation Project

AfDB • The objectives is improved efficiency and safety of the Massingir Dam and to enhance smallholder productivity

• Activities involved construction of an additional Auxiliary Spillway at Massingir Dam to ensure dam safety and; rehabilitation of gates and installation of pump

• Project Cost: UA17 million • Status: On-going

The new project complement this as the additional auxiliary spillway did not envisage that there would be damage to the bottom outlet

2 Small Scale Irrigation Development Project

AfDB • The objective is to increase food production through efficient small scale irrigation technology;

• It consists of four components namely: Irrigation Development; Agricultural Technology Transfer; Direct Support to Farmers and Management Operations

• Project Cost: UA12.43 million and UA1.2 in grant. • Status: On going

The technology being propagated by this project could be replicated downstream by the new projects’ beneficiaries;

3 Rural Finance Intermediation Support Project (RFISP

AfDB • The project aims at establishing a rural credit system or institution for supporting agricultural production at the national level.

• The project consists of four main components; namely: (i) Policy, Legislative and Institutional Support, (ii) Innovation and Outreach Facility, (iii) Support for Community-based Financial Institutions, and (iv) Programme Management;

• Project Cost: UA 15.36 million UA12.43 million and UA 3.84 million.

• Status: On going

Will provide credit opportunity for the project beneficiaries.

There are no new related projects being funded by other donors as they are mostly supporting the SWAP called Proagric ٭

PAGE 1/3 APPENDIX IV (a): Map of Mozambique showing the Project Area

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APPENDIX IV (b): Uncontrolled Release of Water After the failure of the Bottom

Outlet on 22 May 2008

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APPENDIX IV (c): Collapsed Bottom Outlet