Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 50684-LS

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CATALYTIC FUND GRANT

IN THE AMOUNT OF US$20.0 MILLION

TO THE

FOR A

BASIC EDUCATION PROJECT FOR LESOTHO

June 29, 2010

Education Sector UnitSouthern Africa 2 DepartmentAfrica Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective June 1, 2010)

Currency Unit = Maloti (LSL)7.75 LSL = US$1

US$ 1 = SDR 0.65866

FISCAL YEARApril 1 – March 31

ABBREVIATIONS AND ACRONYMS

AfDBAGAPLCFCIPSCSDPL

African Development BankAuditor GeneralAdaptable Program LendingCatalytic FundChartered Institute of Purchasing and SuppliesContracts SectionDevelopment Policy Lending

DTEPECCD

Distance Teacher Education ProgramEarly Childhood Care and Development

EFAEFUEPDF

Education for AllEducation Facilities UnitEducation Program Development Fund

ESDP II Education Sector Development Project IIESAMI Eastern and Southern Africa Management InstituteESMF Environmental and Social Management FrameworkESSPFM

Education Sector Strategic PlanFinancial Management

FPE Free Primary EducationFTIGDP

Fast Track InitiativeGross Domestic Product

GER Gross Enrolment RateGoLHoPIC

Government of LesothoHead of ProcurementIndividual Consultants

IDA International Development AssociationIDM Institute of Development ManagementIECCD Integrated Early Childhood Care and DevelopmentIFMIS Integrated Financial Management and Information SystemIIEPIMF

International Institute for Education PlanningInternational Monetary Fund

JICA Japan International Cooperation AgencyLCE Lesotho College of EducationLDTC Lesotho Distance Teaching Center

MDG Millennium Development GoalsMoET Ministry of Education and TrainingMoFDP Ministry of Finance and Development PlanningMTEF Medium Term Expenditure FrameworkMTESP Medium Term Education Sector PlanNER Net Enrollment RateNGO Non-Government OrganizationNMDS National Manpower Development SecretariatOVCPAD

Orphans and Vulnerable ChildrenProject Appraisal Document

PERPFMPIU

Public Expenditure ReviewPublic Financial ManagementProject Implementation Unit

PRSPPS

Poverty Reduction Strategy PaperProcurement Section

PSCU Project Support and Coordination UnitPSIRP Public Sector Improvement Reform ProgramPSLE Primary School Leaving ExaminationSACU Southern African Customs UnionSADCSACMEQ

SIL

Southern African Development CommunitySouthern and Eastern African Consortium for Monitoring Educational QualitySpecific Investment Loan

TVET Technical and Vocational Education and TrainingUNESCO United Nations Education Social and Cultural

OrganizationUNICEF United Nations Children’s FundWFP World Food Program

Vice President: Obiageli Katryn EzekwesiliCountry Director: Ruth KagiaSector Manager: Christopher J. Thomas

Task Team Leader: Cristina Isabel Panasco Santos

LESOTHO

Basic Education Project

EFA Fast Track Initiative Catalytic Fund Grant

CONTENTS

Page

I. STRATEGIC CONTEXT AND RATIONALE.......................................................................1

A. Country and sector issues....................................................................................................1

B. Rationale for Bank and International Partners’ Involvement..............................................2

C. Higher level objectives to which the project contributes.....................................................3

II. PROJECT DESCRIPTION.....................................................................................................3

A. Lending instrument..............................................................................................................3

B. Project development objective and key indicators..............................................................4

C. Project components..............................................................................................................5

D. Lessons learned and reflected in the project design............................................................6

E. Alternatives considered and reasons for rejection...............................................................6

III. IMPLEMENTATION.............................................................................................................7

A. Partnership arrangements.....................................................................................................7

B. Institutional and implementation arrangements...................................................................7

C. Monitoring and evaluation of outcomes/results..................................................................9

D. Sustainability.......................................................................................................................9

E. Critical risks and possible controversial aspects...............................................................10

F. Loan/credit conditions and covenants...............................................................................11

IV.APPRAISAL SUMMARY.....................................................................................................12

A. Economic and financial analyses.......................................................................................12

B. Technical............................................................................................................................13

C. Fiduciary............................................................................................................................13

D. Social.................................................................................................................................15

E. Environment......................................................................................................................15

F. Safeguard policies..............................................................................................................16

G. Policy Exceptions and Readiness......................................................................................17

Annex 1: Country and Sector or Program Background..........................................................18

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies..................21

Annex 3: Results Framework and Monitoring.........................................................................22

Annex 4: Detailed Project Description………………………………………………………..26

Annex 5: Project Costs................................................................................................................33

Annex 6: Implementation Arrangements..................................................................................34

Annex 7: Financial Management and Disbursement Arrangements......................................37

Annex 8: Procurement Arrangements.......................................................................................49

Annex 9: Economic and Financial Analysis..............................................................................63

Annex 10: Safeguard Policy Issues.............................................................................................71

Annex 11: Project Preparation and Supervision......................................................................78

Annex 12: Documents in the Project File..................................................................................80

Annex 13: Statement of Loans and Credits...............................................................................81

Annex 14: Country at a Glance..................................................................................................82

Annex 15: Map.............................................................................................................................85

List of Figures

Figure 1: Total project disbursement per implementation year (in millions) 8

List of Tables

Table 1: Project Key Performance Indicators 4

Table 2: Component 1 Performance Targets 5

Table 3: Disbursement of FTI funds 8

Table 4: Critical Risks and Mitigations Measures 10

Map IBRD 33434

LESOTHO

BASIC EDUCATION PROJECT

EFA FAST TRACK INITIATIVE CATALYTIC FUND GRANT FOR LESOTHO

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTED

Date: June 29, 2010 Team Leader: Cristina Isabel Panasco SantosCountry Director: Ruth KagiaSector Manager/Acting Director: Christopher J. Thomas/Tawhid Nawaz

Sectors: Primary education (80%); Pre-primary education (20%)Themes: Education for all (100%)

Project ID: P116426 Environmental category: Partial AssessmentLending Instrument: Specific Investment Loan Joint IFC:

Joint Level:

Project Financing Data[ ] Loan [ ] Credit [ ] Grant [ ] Guarantee [X] Other: EFA-FTI Catalytic Fund Grant

For Grants: Total Operation Cost (US$m.): 26.80

Financing Plan (US$m)Source Local Foreign Total

Borrower 0.00 0.00 0.00EFA-FTI Catalytic Fund 19.43 0.57 20.00IRELAND, Govt. of* 6.70 0.10 6.80Financing Gap 0.00 0.00 0.00Total: 26.13 0.67 26.80* The Govt. of Ireland is committed to support the Lesotho education sector through this project. Thus, Irish Aid is envisaged to be a co-financier for this project. However, Irish Aid will not provide legal evidence of such commitment. As such, all references regarding Irish Aid funds refer to funds that may be available for the project.

Amount of financing to be provided by Source Amount (US$m)Trust Fund Program 20.00SPF 0.00Borrower/Recipient 0.00External Funds, not Bank Managed 6.80Financing Gap 0.00Total Project Cost 26.80

Borrower:Kingdom of Lesotho

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Responsible Agency:Ministry of Education and TrainingConstitution RoadPO Box 1279LesothoTel: (266-22) 324-465 Fax: (266-22) 327-305Ministry of Education and TrainingLesotho

Estimated disbursements (Bank FY/US$m)FY 2011 2012 2013Annual 2.80 7.40 9.80Cumulative 2.80 10.20 20.00Project implementation period: Start: July 1, 2010 End: June 30, 2013Expected effectiveness date: August 2, 2010Expected closing date: June 30, 2013

Does the project depart from the CAS in content or other significant respects? Ref. PAD I.C. [ ]Yes [X] No

Does the project require any exceptions from Bank policies?Ref. PAD IV.G.Have these been approved by Bank management?

[ ]Yes [X] No[ ]Yes [ ] No

Is approval for any policy exception sought from the Board? [ ]Yes [ ] NoDoes the project include any critical risks rated “substantial” or “high”?Ref. PAD III.E. [X]Yes [ ] No

Does the project meet the Regional criteria for readiness for implementation? Ref. PAD IV.G. [X]Yes [ ] No

Project development objective Ref. PAD II.B., Technical Annex 3

The Project Development Objective is to provide improved facilities at existing primary schools, support and contribute to expand access to pre-primary education, and support improvements in quality of teaching.

Project description Ref. PAD II.C., Technical Annex 4

The project has three components, which were designed in line with priorities defined in the Education Sector Strategic Plan 2005-2015, and the Medium Term Education Sector Plan 2009-2012.

Component 1: Improve the quality of primary school infrastructure This component will provide additional fully furnished primary gender and disability friendly classrooms at existing schools, along with toilet blocks. Construction will develop within a new approach which makes greater use of smaller contractors, de-concentrated procurement and subcontracting of technical supervision of civil works. This approach is expected to speed up the pace of construction and reduce costs.

Component 2: Support and contribution to the expansion of pre-primary education This component will support the Government’s aim to maintain and expand access to reception classes

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especially for the poorest children, through procurement of care givers, procurement of learning materials, and procurement of catering services to existing and additional reception classes. This expansion will support the continued inclusion of an estimated 5.2 percent of the age five population in reception classes over the duration of the project.

Component 3: Contribution to improvements in quality of teaching This component will support the Government plans to improve learning outcomes in primary schools through (i) conducting analytical work to understand the conditions of education service delivery, teaching, and learning, through school resources survey, classroom-based observation, skills profiles and training needs, and assessment of student outcomes measurement; (ii) assisting in increasing the qualification level of the teacher force in ‘difficult’ schools (these are schools located in the most remote and/or difficult to access areas of the country) by attracting and/or retaining more qualified teachers in targeted schools and/or upgrading the qualifications of teachers working there; (iii) providing additional in-service teacher training aimed at improving literacy and numeracy teaching; and (iv) providing textbooks in core subjects and grades where there are deficits and learning materials for the implementation of the new curricula.

Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10

Environmental Assessment (OP/BP4.01).

The project has been categorized as Category B – Partial Assessment in line with World Bank Operational Policy 4.01 (OP/BP 4.01) for Environmental Assessment.Significant, non-standard conditions, if any, for:Ref. PAD III.F.Board presentation:n/a

Loan/credit effectiveness:(i) The Recipient shall adopt a procedures manual (“Procedures Manual”) which is in form and substance satisfactory to the World Bank, outlining implementation, organizational, administrative, monitoring and evaluation, environmental and social monitoring and mitigation, financial management, disbursement, and procurement arrangements for purposes of implementation of the Project.

(ii) Adoption of annual work program in form and substance satisfactory to the Association.

Covenants applicable to project implementation:Procurement Audits. The Association may (at its sole discretion) perform annual audits of the procurement for all goods, works, consultants’ services, Operating Costs, Incentives and Training required for the Project and the Recipient shall provide all such information as is requested by the Association (or any external auditor performing such audit for or on behalf of the Association) in connection with the performance of such audit. Each such audit of the Project’s procurement shall cover the period of one (1) calendar years commencing with the calendar year in which the first withdrawal under the Project is made and shall include action plans to improve performance and/or correct any shortcomings and/or deficiencies.

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I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. Lesotho is a small landlocked country in Southern Africa, with an estimated population of 1.9 million (2006 census). The country has had uneven economic growth in recent years, with GDP per capita rising from US$384 in 1990 to around a US$1,000 in 2007, prior to the current recession. Lesotho has a very poor human development index (HDI), ranking 156 out of 182 countries, in 2007, and the HDI has been falling since 1995, driven largely by the negative impacts of HIV/AIDS. Lesotho has the third highest HIV prevalence rate in the world (23.2 percent in 2005), and the highest of any International Development Association (IDA) country. In 2007, life expectancy at birth was 44.9 years. Food security is poor, particularly for those depending on subsistence agriculture in the mountain areas, and although the percentage of the population living below US$ PPP US$1.25/day fell four percentage points between 1995 and 2003, in this year, it was still of 44 percent.

2. Real per capita Gross Domestic Product (GDP) growth has been greater than the average for sub-Saharan Africa in recent years, with an average of 3.4 percent over the period 2004-2008, although this is unlikely to be sustained. The impact of the current financial crisis is expected to last through the medium term, as Southern African Customs Union (SACU) revenues decline. SACU revenues have accounted for over half of government revenue in recent years. The economy, traditionally reliant on subsistence agriculture and remittances, has been undergoing structural change, with increasing manufacturing industry providing mainly low-wage employment. The economy is dominated by government expenditure and budget estimates for 2009-10 show government expenditure at 73 percent of GDP.

3. Wealth distribution is inequitable. The Gini coefficient for Lesotho is 63.2, which is higher than that of South Africa, Botswana, Mozambique or Swaziland. There is also a strong geographic pattern to poverty incidence, as more than half of the population lives in mountainous areas, characterized by poor soil and difficult climatic conditions. The mountain areas have a low population density, making service delivery more difficult, and have a higher incidence of poverty, greater reliance on subsistence agriculture and have been particularly adversely impacted by the reduction in income from remittances.

4. In the past eight years, substantial gains have been achieved in education service delivery, and the Millennium Development Goals (MDG) for universal primary education and gender parity are within reach. The government introduced free primary education (FPE) on a phased basis from 2000, bringing the net enrollment rate from 60 to 82 percent. Lesotho is unusual in having almost gender parity. In 2007, 49.4 percent of primary school pupils were girls, and there was a female majority in secondary education.

5. The Ministry of Education and Training (MoET) developed an Education Sector Strategic Plan (ESSP) in 2005, which was endorsed by the development partners active in the sector and the Education for All (EFA) Fast Track Initiative (FTI) Partnership, and subsequent developments have substantially followed the direction anticipated in the sector plan. The education sector has received support from the International Development Association (IDA), Irish Aid and the EFA Fast Track Initiative Catalytic Fund (CF).

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6. In 2009, the MoET prepared a medium term sector plan, consistent with the Education Sector Strategic Plan (ESSP), providing more detailed projections for the years 2009-2012, following an exhaustive process of consultation with stakeholders, review of progress, and development of individual sub-sector work-plans and priorities. The main priorities for the next period are:

a) Expand access to Early Childhood Care and Development (ECCD) in a pro-poor manner;b) Ensure that all children have the opportunity to complete a good quality primary

education;c) Expand access to secondary education, with particular support to Orphans and Vulnerable

Children (OVCs); andd) Improve the quality and relevance of tertiary education.

7. Despite the progress made in recent years, much remains to be done. The cohort survival to grade 7 (the last grade of primary school) fell with the introduction of FPE, and although improving, had reached only 55 percent by 2007. Repetition remains unusually high, with a 29 percent repetition rate in grade 1 and an overall repetition rate of 21 percent. On average each child repeats 1.4 years over the 7 year primary cycle. While Lesotho has an average pupil teacher ratio of 36:1, over 40 percent of primary teachers are unqualified, and the unqualified teachers are over-represented in the mountain or difficult to access schools, many of which have no qualified teachers at all. Currently less than half of the primary school classrooms meet the required standards, and the remainder operates in a mix of huts of local construction, church halls, tents and other structures.

B. Rationale for Bank and International Partners’ Involvement

8. Lesotho has the potential to improve basic education outcomes and to achieve the MDG goals for primary education by 2015, with assistance from international financial and technical support. The World Bank Country Assistance Strategy (CAS) (2006-09) highlights the need to improve human development outcomes. In the context of Lesotho’s location and paucity of natural resources, opportunities for growth center on its labor force. Improving the level of education and employability of the workforce is an essential prerequisite for sustained economic development. Education is one of the main mechanisms for social mobility, and presents opportunities for allowing the poor to partake on the economic growth of the country.

9. There are clear resource gaps in the government plan for the development of the education sector. In line with government policy, domestic resources have been focused on recurrent costs, and particularly payroll costs, leaving resource shortfalls in capital budgets. The shortage of adequate classrooms is acute, but provision of new classrooms has been constrained by both resources and implementation capacity. There remain some subjects and grades for which textbooks have not been provided. These resource gaps are likely to continue, as Lesotho is currently operating with a budget deficit, and may be forced to continue reducing government expenditure in the coming years.

10. This project builds on previous support from the Association, Irish Aid and the Fast Track Initiative partnership. The IDA-supported Second Education Sector Development Project

11

(ESDP) Phase 2, which closed in December 2008, financed investments including school construction, procurement of textbooks and training of teachers, school leaders and inspectors. Lesotho has also received two grants from the FTI Catalytic Fund of US$7.2 million (2006-07) and US$4.7 million (2008-09). These grants provided support for primary school infrastructure, the provision of textbooks, the expansion of the Lesotho College of Education (LCE) to a second campus, and key studies.

11. This operation aims to strengthen the planning and donor harmonization process in the education sector. The MoET has developed a detailed medium term plan for the education sector, with which all of the project activities are aligned. The operation anticipates providing finance through a sector pooled fund, for the first time in the education sector. Initially this is envisaged to involve only the World Bank (the agreed supervising entity for the FTI Catalytic Fund Grant) and the Government of Ireland, through Irish Aid1, which has provided an informal commitment to participate in the pooled fund. It is expected that other resources will be channeled through the pooled fund as it matures. The pooling mechanism will require the sustained use of annual joint reviews of the sector and will strengthen sector dialogue.

C. Higher level objectives to which the project contributes

12. This support is consistent with the Government of Lesotho (GoL) Poverty Reduction Strategy (2004) which notes that ‘government is convinced that investment in appropriate education is the single most important contribution that it can make to the long-term socio-economic development of the country’. It also contributes to the CAS objective to improve human development outcomes and to build skills for shared and sustained growth.

II. PROJECT DESCRIPTION

A. Lending instrument

13. The instrument selected for this grant is a sector investment loan (SIL), as used in the preceding two FTI Catalytic Fund grants. This grant will be implemented through a pooled funding arrangement, with an annual implementation plan approved by the Bank (in consultation with the pooled fund partners). This instrument provides the possibility of providing resources to the sector in a targeted manner with clear traceability of funds. It also allows greater harmonization with the other development partner, e.g., Irish Aid, thus strengthening the engagement in sector dialogue.

14. The possibility of a development policy instrument was considered, but rejected because (i) there are some concerns about the prioritization of resources between sectors and within the education sector, (ii) the integrated financial management system (IFMIS) is newly implemented and it is not yet robust, and (iii) an upstream fiduciary assessment conducted jointly with the development partners recommended the use of a SIL.

1 Irish Aid is committed to support the Lesotho education sector through this project. Thus, Irish Aid is envisaged to be a co-financier for this project. However, Irish Aid will not provide legal evidence of such commitment. As such, all references regarding Irish Aid funds refer to funds that may be available for the project.

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B. Project development objective and key indicators

15. The project development objective is to provide improved facilities at existing primary schools, support and contribute to expand access to pre-primary education, and support improvements in quality of teaching.

16. The key performance indicators for this operation will be:

Table 1: Project Key Performance Indicators

Type of Indicator

Indicator Baseline2009

FY 2011 (04/10-03/11)

FY 2012 (04/11-03/12)

FY 2013 (04/12-03/13)

Project Specific Indicators

Improved facilitiesClassrooms constructed by the project meeting the agreed standards (%)*

0 10% 33% 100%

AccessEnrolment in Reception Classes supported by the project (number)

0 2,400 3,000 3,600

Quality of teachingRepetition rate (grade 1) (%)

26 25 24 23

Qualified teachers (from total number covered by the project) retained or attracted to ‘difficult’ schools (number)

0 0 800 1,600

Core Indicators

AccessDecline in shortfall of classrooms at primary level (%)

0 0.7% 2.5% 7.5%

Quality of teachingDecline in shortfall of qualified teachers at primary level (%)

0 0 5.0% 10.1%

BeneficiariesDirect project beneficiaries (number) Teachers (T) Pupils (P)

T: 0P: 0

T:1,300P:3,320

T:3,800P:7,440

T:7,800P:16,800

Of which female (%)Teachers (T)Pupils (P)

T: 0%P: 0%

T: 60%P: 50%

T: 60%P: 50%

T: 60%P: 50%

*This indicator measures the percentage of classrooms built by the project every in relation to the overall number of classrooms expected to be built by the project.

17. Given the short lifetime of the project, and in order to provide some information on the potential impact of the interventions on quality during project implementation, a set of studies is being proposed. These will not only provide information, but they will also allow for the refinement of the interventions and for the design of other future support. More detail on these studies is discussed in the project description and monitoring and evaluation framework annexes to this Project Appraisal Document (PAD).

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18. As per request of the FTI Catalytic Fund Committee, two performance targets, to be measured at mid-term review, are included. The targets, which specifically refer to component 1, were discussed and agreed with the EFA FTI Secretariat, and they are the following ones:

Table 2: Component 1 Performance Targets

Percentage of civil works contracts signed by January 2012 50%

Percentage of classrooms built by January 2012 33%

C. Project components

Component 1: Improve the quality of primary school infrastructure (Pooled Fund: US$ 12.6 million; FTI CF: US$ 9.1 million)

19. This component will provide approximately 330 additional, fully furnished, primary gender and disability friendly classrooms at existing schools, along with approximately 100 toilet blocks. Construction will be developed using a new approach which makes greater use of smaller contractors, de-concentrated procurement and subcontracting of technical supervision of civil works. This approach is expected to speed up the pace of construction and reduce costs.

Component 2: Support and contribution to the expansion of pre-primary education (Pooled Fund: US$ 2.0 million; FTI CF: US$ 1.5 million)

20. This component will support the government’s aim to maintain and expand access to reception classes especially for the poorest children, through procurement of care givers, learning materials, and catering services to approximately 100 existing and approximately 20 additional reception classes, with a capacity of approximately 3,600 children. This expansion will support the continued inclusion of an estimated 5.2 percent of the age five population in reception classes over the duration of the project.

Component 3: Contribution to improvements in quality of teaching (Pooled Fund: US$ 10.6 million; FTI CF: US$ 7.8 million)

21. This component will support the government plans to improve learning outcomes in primary schools through (i) conducting analytical work to understand the conditions of education service delivery, teaching, and learning through school resources surveys, classroom-based observation, skills profiles and training needs, and assessment of student outcomes measurement; (ii) assisting in increasing the qualification level of the teacher force in ‘difficult’ schools (these are schools located in the most remote and/or difficult to access areas of the country) by attracting and/or retaining more qualified teachers in targeted schools and/or upgrading the qualifications of teachers working in these areas; (iii) providing additional in-service teacher training aimed at improving literacy and numeracy teaching; and (iv) providing textbooks in core subjects and grades where there are deficits and learning materials for the implementation of the new curricula.

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D. Lessons learned and reflected in the project design

22. One of the main lessons derived from experiences of previous FTI and IDA-supported operations in the sector has been the need for simple project design, closely tied to the government ESSP, and with strong government ownership. Learning from these lessons, this project is derived from the MTESP 2009-2012, is focused on a limited number of interventions aligned with the MTESP 2009-2012, and will be implemented through government systems as far as possible.

23. School infrastructure is the most pressing priority for external support. The terrain and climate in Lesotho make provision of adequate shelter an unusually important factor in the attendance and retention of pupils. Less than half of the classrooms in use meet the required standards, and there remain classes conducted in the open air and in tents. Government financing patterns prioritize recurrent expenditure and particularly salary costs, leaving a financing gap in the provision of infrastructure. Previous support has indicated the use of small contractors to be an alternative to consider in future operations in order to speed construction and reduce costs. This project introduces a different approach to school construction, targeting the use of small contractors along with de-concentrated procurement and supervision of works.

24. Provision of reception classes is an important pro-poor intervention. International research points to the benefits of early interventions to student retention and achievement. Initial experience in Lesotho, though limited, suggests that reception classes encourage children to attend school earlier, start grade 1 at the correct age, and have positive impacts on behavior and performance in grade 1. Provision of reception classes is likely to have the greatest impact on children suffering from malnutrition, and on children from families where the adults are illiterate and where private pre-schooling options are unaffordable.

25. The planned measures to improve quality are built on existing government plans and have strong local ownership. The introduction of a scheme to encourage qualified teachers to locate in ‘difficult’ schools has already been approved by the government, but implementation was postponed for budgetary reasons. The focus on literacy and numeracy teaching in the early grades is also part of the government’s strategy, builds on pilot work already done with literacy and numeracy materials in the early grades, and is consistent with the on-going refocusing of the primary curriculum.

E. Alternatives considered and reasons for rejection

26. Policy based instrument. As previously noted, the use of Development Policy Lending (DPL) as a financing instrument was considered, but rejected for a number of reasons. First, there are concerns about the public financial management and allocation of resources in Lesotho. Second, this operation is not primarily intended to influence change in government policy, but to support specific expenditure items which are essential to achieving the existing government objectives.

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27. Financing recurrent costs. The use of the funds to finance investment line items from the recurrent budget was considered, but rejected. MoET has been providing very modest capitation grants to schools for non-salary recurrent costs, but is unwilling to scale these up for the moment due to concerns about the capacity of schools to manage and account for the funds.

III. IMPLEMENTATION

A. Partnership arrangements

28. Lesotho has a very small pool of donors active in the education sector, and in 2005 was considered a donor orphan by the EFA FTI partnership, with only the World Bank and Irish Aid contributing more that $1 million per annum. Since then it has been successful in attracting some additional assistance, with the African Development Bank (AfDB) providing support for technical and secondary education, and the Japanese International Cooperation Agency (JICA) providing increased support for secondary school construction. International donors have been striving to increase the harmonization of their support. In 2004, international donors, active in the education sector, signed a statement of intent outlining the arrangements for working together, and since 2006 there have been regular annual joint reviews of the sector.

29. While most of the assistance to the sector is provided through individual projects, the medium term aim is to develop a sector pooled fund, through which donor funds can be channeled. This operation will lay the foundations for this pooling arrangement, by initially combining the resources of Irish Aid and the FTI Catalytic Fund. This pooled fund will finance expenditures aligned with the strategic plan for the sector and the agreed parameters of the operation, based on an annual procurement plan agreed by the Bank (in consultation with the government and the contributing donors). The operation of the pooled fund will be supervised by the contributing partners, initially the World Bank (the agreed supervising entity for the FTI Catalytic Fund Grant) and Irish Aid.

30. This support is aligned with the MTESP 2009-2012. The partners aim to further enhance the planning, sector dialogue and harmonization of support through strengthening the annual joint reviews to include both rigorous monitoring of the performance of the sector and review of the performance of the pooled fund.

B. Institutional and implementation arrangements

31. Project implementation capacity at MoET has been undergoing a process of change. Until December 2008, projects were implemented with the support of a Project Support and Coordination Unit (PSCU). The unit was created to implement ESDP II but was dismantled when the project closed. In order to build and retain in-house capacity, MoET has decided to carry out project implementation without making use of an external unit. Although this is an important step towards building capacity in the MoET, in the short term it has important implications for the implementation of this operation. It will take time to build robust and sustainable capacity in the ministry.

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32. In order to help MoET rebuild capacity in the shortest possible period of time, a set of measures are being proposed, some of them already under implementation. These include:

a) Low disbursement in the first year of project implementation with associated increase in years two and three, as per the chart below:

Figure 1: Total project disbursement per implementation year (in millions)

Table 3: Disbursement of FTI funds

FY 2011 2012 2013Annual 2.8 7.4 9.8

Cumulative 2.8 10.2 20.0

b) Prior to project implementation, and making use of funds from FTI II and other available sources for technical assistance:

(i) A team of international consultants with sound experience in procurement, financial management, school construction and monitoring and evaluation was assembled to provide short term capacity building and hands-on training to MoET staff. This team has been working closely with MoET staff in detailing project management and implementation, in the preparation of a short and medium term capacity building plan, and in developing capacity in project management and reporting. This team is also expected to support MoET during the first months of project implementation.

(ii) Training in financial management and procurement will be provided to all project stakeholders, as well as in the use of information systems for data collection, analysis and production of most appropriate and needed indicators. General training in procurement will be provided by the Lesotho Institute of Management. Training in World Bank procurement guidelines will be provided by the Eastern and Southern Africa Management Institute (ESAMI).

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0 5 10 15

Year 1

Year 2

Year 3

Comp 1Comp 2Comp 3

(iii) A workshop for all involved actors (MoET staff, district tender panel members etc.) will be organized, so as to discuss in detail all aspects related to the implementation of the project, strengthen capacity, and to promote a sense of team work around it. This workshop will be organized with funds from the Education Development Program Fund (EPDF).

c) During the first year of implementation, supervision will be strengthened with an increased number of joint technical missions to the country.

d) Support to the implementation of the medium term capacity building program prepared by MoET will be provided during the lifetime of the project.

33. Overall project implementation will be guided by annual programs which will be prepared by MoET and submitted to the World Bank. Each annual program will lay out the activities to be implemented in the following year, together with a proposed budget and financing plan. Each program will be subject to World Bank approval, and changes to the program during its implementation period will be subject to prior written agreement of the World Bank. Approval by the World Bank of the first annual program is a condition of effectiveness.

C. Monitoring and evaluation of outcomes/results

34. The key indicators for the sector are monitored through an annual school census and other sources, with results published in an annual statistical bulletin. Progress in the sector is reviewed annually during joint reviews of the sector. The project development objective and the associated indicators are in line with the government plan for the sector, and will be monitored through these existing processes. Project-specific outputs will be reported at least twice a year during supervision, and monitored against the agreed annual implementation and procurement plan.

35. Some of the studies considered in the project components will also be used as part of the monitoring and evaluation process, including an impact evaluation of the introduction of ‘difficult’ schools qualified teachers’ scheme, the establishment of baseline data on student outcomes in literacy at early grades, an evaluation of reception classes, and an analysis of the changes in infrastructure development brought about by the project’s approach to school construction. These studies will not only contribute to monitor and evaluate interventions, but they will also be very important in the definition of future support to the education sector.

D. Sustainability

36. The sustainability of this operation is enhanced by its strong foundations in the MTESP 2009-2012. The project activities form part of the government program, and reflect the government aspirations for the sector. This ensures strong government ownership of the project. Most of the project inputs are investment items, such as civil works and furniture. This is in line with a deliberate strategy by the government to avoid sustainability difficulties by channeling external assistance to capital costs and non-salary recurrent costs.

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37. The fiscal implications for sustainability are modest. In line with government policy and Bank regulations, none of the project finance supports public-service salaries. Most of the expenditure is on investment items. Civil works at schools are designed for longevity and low maintenance cost, and schools are provided with a small capitation grant which is expected to allow for minor maintenance items. As this project is primarily providing infrastructure at existing sub-standard schools, there is no new fiscal cost. Some of the project components may involve recurring costs, particularly the ‘difficult’ schools qualified teachers’ scheme. However, this is designed to test two possible options, with different recurrent cost implications, so as to provide MoET with the necessary information on the most cost effective policy regarding attracting and/or retaining qualified teachers in ‘difficult’ schools.

E. Critical risks and possible controversial aspects

Table 4: Critical Risks and Mitigations Measures

Risk Mitigation Measures Rating*To project development objectiveThe main risk for the sector, and thus for the project objective, is a potential decrease in the budget due to the impact of the financial crisis.

An added risk to the project development objective is the impact of the financial crisis in the economy of Ireland and thus, in the contribution of funds from Irish Aid (the co-financier) of the operation.

Leveraging resources and attracting more donors to contribute to the pooled fund to complement funding.

M

To component resultsGovernment may be unable to implement civil works fully on time.

The project design seeks to increase implementation capacity for civil works by making use of external consultants to supervise construction, making use of district tender panels to spread the burden of procurement, simplifying the systems for management of works, and by greater use of standard designs. Training will be provided for all the key intervenient in school construction. A short and medium term capacity building program, which is being designed during project preparation, will be implemented.

S

To project managementThe MoET may be unable to manage the project efficiently in the absence of a Project Implementation Unit (PIU).

Since the closure of the ESDP II phase 2 in December 2008, the government has acted quickly to create permanent positions in financial management, procurement and supervision of civil works. Technical assistance is being provided to MoET prior to project implementation to provide short term capacity development and to help MoET prepare and start implementation of a medium term capacity building program. A team of international consultants with sound knowledge in procurement, financial management and school construction will provide support to the team during first six

M

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months of the project. Support to the implementation of the capacity building program will be provided accordingly. Supervision will be strengthened with an increased number of joint technical missions.

To fiduciary aspectsOverall financial management and procurement risk due to general low capacity and uncertainty related to change resulting from the end of the Project Support and Coordination Unit (PSCU).

Apart from the technical assistance support considered in the above risk category, and which includes issues on financial management and procurement, other specific measures were proposed (as per Annexes 5 and 6) including the use of the existing financial management information system Finpro/Tempro, training in financial management and procurement, more supervision support, and higher number of procurement post-reviews.

Sfor Financial Management

Hfor

Procurement

Overall SRating scale: H=high; S=substantial; M=modest; L=Low or negligible

38. There is strong commitment at MoET to carry out reform in education and to achieve the MDGs for education. Education expenditure is high and there is commitment to keep such high engagement with the sector. Although Lesotho is expected to suffer the impacts of the financial crisis, the potential risk for the education sector is low. The project design is sound and fully embodied in MoET’s Medium Term Education Sector Plan 2009-2012. It is informed by lessons from previous operations, and its monitoring and evaluation framework includes a set of studies which not only allow for measuring progress, but they will also operate as mitigation measures by providing information to refine project interventions.

39. With the closing of the previous project coordination and implementation unit, MoET lost part of its implementation capacity. MoET has sought to rebuild capacity in-house and has already begun to take measures in this regard. In addition, the project includes various capacity building measures. This temporary weakness in capacity increases the risk of the project at entry. It is expected that this risk will decrease from substantial to moderate during the first year of project implementation.

F. Loan/credit conditions and covenants

40. Effectiveness conditions:

a) The Recipient shall adopt a procedures manual (‘Procedures Manual’) which is in form and substance satisfactory to the World Bank, outlining implementation, organizational, administrative, monitoring and evaluation, environmental and social monitoring and mitigation, financial management, disbursement, and procurement arrangements for purposes of implementation of the Project.

b) Adoption of annual work program in form and substance satisfactory to the Association.

Key Implementation Covenants:

41. Procurement Audits . The Association may (at its sole discretion) perform annual audits of the procurement for all goods, works, consultants’ services, Operating Costs, Incentives and Training required for the Project and the Recipient shall provide all such information as is

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requested by the Association (or any external auditor performing such audit for or on behalf of the Association) in connection with the performance of such audit. Each such audit of the Project’s procurement shall cover the period of one (1) calendar years commencing with the calendar year in which the first withdrawal under the Project is made and shall include action plans to improve performance and/or correct any shortcomings and/or deficiencies.

IV. APPRAISAL SUMMARY

A. Economic and financial analyses

42. Education expenditure has been increasing consistently since 2002, and remains above 20 percent of government expenditure (21.5 percent recurrent expenditure budgeted for 2010/2011, according to the 2010 Budget Speech). This is the equivalent of 14 percent of GDP in 2001/02 and 15 percent of GDP on 2009/10. The distribution of expenditure by sub-sector has remained relatively stable over time. Together basic and secondary education account for between 55 percent and 63 percent of total expenditure. Recurrent expenditure accounts for 90 percent of total education expenditure. Payroll costs, of necessity, take priority within the budget, and as a result any overspending in payroll tends to be at the expense of capital expenditure. In consequence, capital programs are heavily reliant on donor funds and partly determined by the availability of resources. In line with this policy, this project supports infrastructure development and a few interventions on education quality and pre-primary education.

43. The provision of new classrooms has limited recurrent fiscal implications, as the classrooms are replacing existing structures, and there is no overall increase in the number of students or teachers. The government-financed classrooms are designed to a high physical standard, and designed specifically for longevity and low maintenance cost. This design has been in use for many years, and has proved durable. Schools are provided with a modest capitation grant of 8 Maloti per child per year, intended to finance recurrent expenses (mainly water charges) and small maintenance items. In addition some schools raise funds informally from parents to finance repairs to the physical infrastructure, although this is in breach of the FPE policy.

44. The provision of books has a medium term fiscal implication, as books are expected to last for five years. In practice existing titles are normally replenished annually as required by the school supply unit, with funds from government sources. By providing textbook to subjects where there are still deficits this project will contribute to an increase in the cost of book replacement in the medium term. Estimated cost is 20 percent of the initial purchase price per annum, after the first two years. However, the procurement methods used in the first two phases of FTI have already lowered the cost per book by approximately 30 percent, by increasing the competition in the selection process.

45. The provision of reception classes has recurrent cost implications. Given the budgetary constraints imposed by the effects of the financial crisis, the project is only supporting the expansion of 20 new reception classes. However, it is supporting 100 already existing classes. Although the costs are modest, this sub-component represents a recurrent cost of US$1.9 million. The cost of reception classes may in part be offset by a reduction in wasteful repetition.

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Currently 29 percent of children repeat grade 1, and it is expected that provision of good quality reception classes will assist in reducing this repetition.

46. The qualified teachers in ‘difficult’ schools scheme was designed to test two alternatives aimed at increasing the level of teacher qualification in remote and/or difficult to access areas. The alternatives have different recurrent costs, and it is expected that after the three years of project implementation, and after the results of the associated impact evaluation, information may be provided to the authorities on how best to proceed so as to ensure sustainability of qualified teachers in ‘difficult’ schools. One of the alternatives , which considers the provision of a cash incentive to teachers who accept to move or stay in ‘difficult’ schools costs US$1.28 million per year for a total of 800 teachers. The other alternative, which considers the provision of training scholarships for existing unqualified teachers, has no recurrent costs, although it may need to be implemented for some time even after the three years of the project duration.

47. Overall therefore, the project involves an investment of US$26.8 million over three years, with an annual recurrent cost of US$3.27 million, i.e. 8.5 percent of the total investment.

B. Technical

48. The design of the project derives from the lessons learned from previous interventions, in particular the Association ESDP Phases I and II, and the Education for All Fast Track Initiative Phases I and II.

49. The project is designed to support the GoL in implementing its education program as expressed in the Education Sector Strategic Plan 2005-2015, and in the updated document MTESP 2009-2012, of which components associated to Basic Education were endorsed by the Local Education Donor Group in July 2009. This is in line with a key lesson from previous interventions on the need to ensure support embodied within the government plan.

50. So far, only half of the infrastructure for primary education in the country meets the required standards. The project will support infrastructure development. The project will only support new construction of classrooms in existing sites, and it will use an approach designed to speed up construction and reduce costs. This involves attracting small contractors and de-concentrating tendering and supervision functions. The use of big contractors and the concentration of all functions at the central level were identified as key factors for slow implementation and high costs.

51. The various studies included in the project are in line with the project’s monitoring and evaluation framework, and they will allow for the impact evaluation of one of the interventions, i.e. the implementation of the scheme to attract and/or retain qualified teachers to teach in remote and/or difficult to access schools; they will also allow for the refinement of some interventions and inform the design of future operations.

C. Fiduciary

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52. Financial Management : The MoET will have overall responsibility for the management of the FTI (Phase III) financing. The MoET has already managed FTI Phases I and II, although for this phase the previous stand-alone implementing unit has been disbanded and absorbed into the ministry, creating some challenges.53. The proposed financial management arrangements for the project were reviewed and assessed in accordance with the Financial Management Practices Manual issued by the Financial Management Board on November 3, 2005. Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 shall apply to the project.

54. The following conclusions were reached:

a) That the overall financial management (FM) risk rating for the operation is substantial, due primarily to substantial inherent risks associated with a general low capacity environment and uncertainty associated with change. The government is currently changing its management information system from the old Golfis to a more modern IFMIS. Several mitigating measures were proposed, including the continued use of the stand alone accounting software in use for FTI Phase II until the government’s new IFMIS is fully installed, assessed and determined to be reliable and usable for purposes of managing Association assisted projects.

b) The residual risk is moderate, due primarily to manageable control risks, and the benefits of prior implementation experience by the ministry. Additional staff training on the old software for new FM staff and updating of the FM procedures manual, which was designed for a stand-alone implementing unit, will be conducted. As indicated, the new phase will be mainstreamed into the MoET.

55. Overall the program’s financial management arrangements satisfy the Association’s minimum requirements under OP/BP 10.02.

56. Procurement : Procurement for the proposed project will be carried out in accordance with the World Bank’s ‘Guidelines: Procurement under IBRD Loans and IDA Credits’ dated May 2004, revised October 2006 and May 2010; and ‘Guidelines: Selection and Employment of Consultants by World Bank Borrowers’ dated May 2004, revised October 2006 and May 2010, and the provisions stipulated in the Legal Agreement. A procurement plan for goods and non-consultant services, works and consultancy service contracts for the first 18 months of implementation of the project has been prepared.

57. A procurement capacity assessment for MoET Education Facilities Unit (EFU), (which includes the Contracts Section (CS) and the Procurement Section (PS)), was conducted. The capacity assessment found a strong need for enhancing procurement capacity for both staff in the contracts section and the procurement section. The assessment also noted the need to strengthen capacity of the MoET at all levels to process, evaluate, make recommendations and approve contracts, particularly that of tender panels to review and approve procurement, award recommendations consistent with the provisions of the bid documents, or request for proposals including any amendments without due regard to extrinsic provisions and political considerations.

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58. Given the current capacity constraints, the overall risk assessment rating for this project is substantial. A condition of effectiveness is the adoption of the procurement manuals for the project in form and substance satisfactory to the Association. Several mitigation measures were proposed to enhance capacity and ensure project implementation.

D. Social

59. The purpose of the project is to provide improved facilities at existing primary schools; support and contribute to expand pro-poor access to pre-primary education and support improvements in quality of teaching. Infrastructure development will target existing schools with very bad infrastructure. Most of these are located in mountain areas, where there is a higher concentration of poor children. New primary classrooms will support school retention, as many children drop out or are absent from school, especially during the harsh winter months, due to the physical conditions of the schools. New infrastructure is to be gender and disability friendly. A scheme to attract and/or retain qualified teachers to teach in the most remote and/or difficult to access schools, along with pro-poor pre-primary education support are interventions which are expected to have a positive social impact for the most disadvantaged sectors of society.

E. Environment

60. This operation is a follow-up program to ESDP II APL Phase II and the FTI I and FTI II which all had a component for extensive construction activities. Such activities included construction of a MoET head office building, rehabilitation of existing schools and construction of new schools on various sites throughout the country, and construction of administrative office buildings for schools. Because the exact sites for most of the identified activities were not known at appraisal stage, an environmental and social management framework was prepared for these projects. The current operation, on the other hand, will only focus on building of about 330 primary school gender and disability friendly classrooms along with about 100 toilet blocks at existing schools, in order to provide improved facilities at existing primary schools.

61. In preparation for the proposed operation, the MoET has updated the Environmental and Social Monitoring Framework (ESMF) that was prepared for the previous projects in order to align it with project activities. Since the project will be building classrooms at existing schools, it is envisaged that no additional irreversible adverse environmental impacts will be incurred as a result of construction works. Identified negative impacts in the form of noise, air pollution as a result of dust from construction works, and slight disruption of school activities as a result of construction works within school premises will be temporal, and mitigation measures will be implemented to minimize such impacts.

62. The project is classified as Category B – Partial Assessment in line with World Bank Operational Policy 4.01 (OP/BP 4.01) for Environmental Assessment. An addendum to the existing ESMF was done and disclosed attached to the original document in the country and in the World Bank Infoshop. As confirmed with the Government of Lesotho, no land acquisition is anticipated, because all construction and rehabilitation activities will take place within the perimeters of existing educational institutions. The land parcels allocated by the government to

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the specific schools for education infrastructure purposes have no claims on them. Therefore, a separate Resettlement Policy Framework was not prepared and OP 4.12 will not be triggered.

F. Safeguard policies

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment (OP/BP 4.01) X [ ]Natural Habitats (OP/BP 4.04) [ ] XPest Management (OP 4.09) [ ] XPhysical Cultural Resources (OP/BP 4.11) [ ] XInvoluntary Resettlement (OP/BP 4.12) [ ] XIndigenous Peoples (OP/BP 4.10) [ ] XForests (OP/BP 4.36) [ ] XSafety of Dams (OP/BP 4.37) [ ] XProjects in Disputed Areas (OP/BP 7.60)* [ ] XProjects on International Waterways (OP/BP 7.50) [ ] X

G. Policy Exceptions and Readiness

** By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas.

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63. The project does not seek any policy exceptions to the Bank’s policies. The project is designed in line with the government Medium Term Education Sector Plan 2009-2012. Furthermore, the GoL has submitted to the education local donor group, in August 2009, a Letter of Sector Policy strengthening its commitment to the interventions proposed in the project.

64. The following activities have been carried out as part of readiness for implementation: Drafted 18 months procurement plan Updated Operations Manuals including financial management, procurement, and

safeguards arrangements Drafted list of selected schools for qualified teachers in ‘difficult’ schools scheme Drafted list of schools with reception classes to benefit from the project MoU between partners prepared (draft) Terms of reference agreed and bidding documents drafted

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Annex 1: Country and Sector or Program Background

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

1. Lesotho is a mountainous country of 30,000 square kilometers and a population of 1.9 million (2006 census), completely surrounded by South Africa. It has a highly dispersed population, with 76 percent living in rural areas (2006 census), although the urban population is growing. Its high altitude and mountainous terrain result in difficult conditions, including harsh winters, severe storms with high winds, some areas of thin soil cover and soil erosion, frequent drought, and some areas inaccessible by road.

2. With a predominantly rural population heavily dependent on agriculture in relatively poor conditions, poverty incidence is high, and food security is poor. Approximately 40 percent of families reported farming as their main source of income (Poverty and Gender and Social Impact Analysis, 2008). Around half of the population lives below the poverty line and the incidence of malnutrition in children is increasing, rising from 15 percent in 2000, to 17 percent in 2007 (World Bank statistics). According to the latest Labor Force Survey of June 2008, around 22.7 percent of the population is unemployed.

3. Life expectancy at birth was 44.9 in 2007. Lesotho has the third highest adult HIV prevalence rate in the world, at 23 percent. As of 2007, an estimated 270,273 Basotho were living with HIV, including 11,801 children. AIDS related deaths have resulted in loss of critical skills, over 100,000 orphans, and increasing mortality rates. The population census of 2006 revealed that population was almost 15 percent lower than the official projections from the 1996 census.

4. The relatively strong economic performance in recent years has been challenged by the impact of the financial crisis and the potential decrease in SACU revenues. Real GDP has substantially decreased reaching 0.9 in 2008, and although this tendency has been reverted it will take several years to reach increases similar to those of the first years of the twentieth century. As an enclave economy, Lesotho’s economic growth is heavily influenced by the conditions in South Africa. Traditionally remittances from workers employed in South African mines have been a major source of income. More recently, with retrenchment in the mining industry, foreign-owned factories, particularly garments factories have become major sources of waged employment. By 2008, the GoL estimated that garments factories directly employed 40,000 workers, and that the jobs of another 200,000 were linked with the garments industry.

5. The government is committed to a strategy of shared growth, as outlined in the Poverty Reduction Strategy Paper (PRSP), completed in 2005. The poverty reduction strategy was a result of an extensive participatory process, using a wide range of participatory techniques and two hundred community reports. The poverty reduction strategy is built on three interconnected approaches; (i) rapid employment creation through the establishment of a conducive operating environment that facilitates private sector led economic growth, (ii) delivery of poverty targeted programs that empower the poor and vulnerable and enable them to secure access to income opportunities, and (iii) ensuring that policies and legal framework are conducive to the full

27

implementation of priorities and bureaucratic constraints are removed and that the productivity of the public sector improves.

6. In the past eight years, substantial gains have been achieved in education service delivery, and the MDGs for universal primary education and gender parity are within reach. The government introduced free primary education (FPE) on a phased basis from 2000, bringing the net enrollment rate from 60 percent to 82 percent. The early years of FPE saw large numbers of older children enroll in primary school, and the gross intake was double the age cohort, but by 2007 intake had fallen back to 108 percent of the age six population. While most children now enroll in school, less than half start at the expected age of 6, and 30 percent of the primary school pupils are over 12, the expected age for grade 7 pupils. In 2008, the gross enrollment rate was 119 percent and the net enrollment rate was 81.8 percent. Lesotho is unusual in having almost gender parity. In 2007, 49.4 percent of primary school pupils were girls, and there was a female majority in secondary education.

7. The MoET has maintained a stable policy environment in recent years, despite capacity problems. The MoET developed an Education Sector Strategic Plan in 2005, which was endorsed by the development partners active in the sector, and subsequent developments have substantially followed the direction anticipated in the sector plan. The education sector has received support from the Association and from the EFA Fast Track Initiative Catalytic Fund. The key donors in the sector include Irish Aid (the donor coordinator), the United Nations Children’s Fund (UNICEF), the AfDB, JICA, and the World Food Program (WFP). The MoET is one of the largest spending ministries in Lesotho, and has been to the fore in piloting the use of a medium term expenditure framework (MTEF) and in the roll-out of the integrated financial management and information system (IFMIS). While there have been constraints on implementation capacity, associated with the loss of staff from the project support and coordination unit, the MoET as been actively building capacity within the public service structures to replace these functions.

8. In 2009, the MoET prepared a medium term sector plan, consistent with the ESSP, providing more detailed projections for the years 2009-2012, following an exhaustive process of consultation with stakeholders, review of progress, and development of individual sub-sector work-plans and priorities. The main priorities for the next period are:

a) Expand access to early childhood care and development in a pro-poor manner;b) Ensure that all children have the opportunity to complete a good quality primary

education;c) Expand access to secondary education, with particular support to OVCs; andd) Improve the quality and relevance of tertiary education.

9. Despite the progress made in recent years, much remains to be done. The cohort survival to grade 7 (the last grade of primary school) fell with the introduction of FPE, and although improving, had reached only 55 percent by 2007. Repetition remains unusually high, with a 29 percent repetition rate in grade 1 and an overall repetition rate of 21 percent. On average each child repeats 1.4 years over the 7 year primary cycle. While Lesotho has an average pupil teacher ratio of 36:1, over 40 percent of primary teachers are unqualified, and the unqualified

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teachers are over-represented in the difficult mountain schools, many of which have no qualified teacher at all. Currently less than half of the primary school classrooms meet the required standards. The remaining primary schools operate in a mix of huts of local construction, church halls, tents and other structures. The lack of appropriate classroom spaces contributes to dropout and absenteeism, particularly in the winter months. Evidence of learning outcomes is mixed, as the pass rate in the Primary School Leaving Examination (PSLE) at the end of grade 7 has been consistently over 80 percent, but results from national assessments based on a statistical sample of students indicate falling performance in some areas.

10. The MoET is planning a series of measures to address these challenges. A new education bill, currently before the parliament, will inter alia make primary education compulsory, and prohibit schools from excluding children for non-payment of any charges. A new teacher career structure has been introduced, which will make a series of salary bands within the teaching profession, and introduce merit based promotion. The training of new teachers has been expanded with the addition of a second campus for the LCE, financed by the FTI CF, and the in-service distance teacher education program introduced under the Association ESDP II project, has been sustained with government finance to continue to train unqualified teachers. The implementation of a new policy on repetition is being prepared, which will limit repetition to under 10 percent in each year, and gradually eliminate it after the first two years. The primary curriculum is being simplified to focus on literacy and numeracy in the early grades, and teachers are being encouraged to use regular formative assessments to identify and address problems early. To support these measures the inspectorate is being reorganized to increase the number and impact of school visits.

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

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LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Development Partner Project/ Area of Support Amount Duration

EFA-FTI Catalytic Fund II

Basic Education US$4.7 million 2 years*

African Development Bank

Education Quality Enhancement Project (Education III), launched 2007

$15.69 million 5 years

Irish Aid Support for basic education. Funds held for contribution to pooled fund.

$6.8 million 3 years**

World Food Program Support for school feeding in mountain primary schools. Extended existing scheme for three years, 2008-2010

$4.7 million 3 years

UNICEF Support for ECCD, sanitation, basic education and NFE. $0.5 million Annual

* The EFA-FTI Catalytic Fund II was originally for one year. It was extended for one year due to the closure of the PSCU and the resulting inadequate implementation capacity. The project will close by June 30, 2010.

** Corresponds to the anticipated Irish Aid contribution to the pooled fund created by this operation.

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Annex 3: Results Framework and Monitoring

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

PDO Project Outcome Indicators Use of Project Outcome Information

To provide improved facilities at existing primary schools, support and contribute to expand access to pre-primary education, and support improvements in quality of teaching.

Improved facilitiesClassrooms constructed by the project meeting the agreed standards (%)*

Indicators will be used mainly to assess improved availability of quality primary and pre-primary education inputs. Information from targeted impact evaluation studies will also be used to assess the proposed scheme to attract and/or retain qualified teachers in ‘difficult’ schools.

AccessEnrolment in Reception Classes supported by the project (number)Decline in shortfall of classrooms at primary level (%)Quality of teachingRepetition rate (grade 1) (%)Qualified teachers (from total number covered by the project) retained or attracted to ‘difficult’ schools (number)Decline in shortfall of qualified teachers at primary level (%)BeneficiariesDirect project beneficiaries (number) (teachers and pupils) of which female %

Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring

Improved facilities in primary schools

Decline in shortfall of classrooms in primary level (number of additional classrooms built by the project) To measure improvement in the quality

of primary school infrastructure.Toilet blocks constructed (number)

Classrooms furnished (number)

Supported pre-primary education Reception classes supported (number) To measure support of pre-primary education.

Quality support measures implemented

Teachers in ‘difficult’ schools targeted by the project receiving a grant (number)

To inform future strategies on distribution and retention of qualified teachers to remote and/or difficult to access areas.

Teachers in ‘difficult’ schools targeted by the project enrolled in training programs (number)Teachers and principals in grade 1 to 3 targeted by the project that were trained in teaching methods adapted to the new curriculum (number)

To inform future training needs in new pedagogy methods as per new curriculum.

Textbooks purchased and distributed by the project (number)

To inform on textbooks purchased and remaining needs.

System for learning assessmentSupplemental Number

To inform about the development of MoET system to access learning outcomes and provide information on how to continue to strengthen it in the future.

*This indicator measures the percentage of classrooms built by the project every year in relation to the overall number of classrooms expected to be built by the project.

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1. Several studies are proposed as part of the monitoring and evaluation framework of the project. These studies also aim at informing potential necessary revisions of the proposed interventions as well as future interventions. The following studies are proposed:

a) Study 1: Elaboration of an analytical report on the results and lessons learnt from the new approach to school construction

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b) Study 2: Elaboration of a report on the value of the reception classes as a form to expand quality pre-primary education

c) Study 3: An analysis of the quality of service delivery, teaching and learningd) Study 4: An impact evaluation of the scheme to attract and/or retain qualified

teachers in remote and/or difficult to access arease) Study 5: Elaboration of an analytical report on the causes for high early year

repetition and recommendations for future interventionsf) Study 6: Measurement of early grade reading

2. The proposed studies will be carried out by MoET with supervision from the project team and making use of consultants and firms whenever needed.

3. As per request of the FTI Catalytic Fund Committee, two performance targets, to be measured at mid- term review, are included. The targets, which specifically refer to Component 1, were discussed and agree with the EFA FTI Secretariat and they are the following ones:

Percentage of civil works contracts signed by January 2012 50%

Percentage of classrooms built by January 2012 33%

4. The Planning Unit at MoET is the unit which has the overall role of supervising data collection and producing reports. Given the capacity constraints currently being faced by the Planning Unit, particular attention will be given to it in the capacity building activities included in the project. This will particularly include an assessment of the Unit’s database system, with subsequent training of staff and implementation of improvements as per assessed needs.

5. In what concerns the indicator System for Learning Assessment, the system already exists and assessment exercises have been carried out both through Southern and Eastern African Consortium for Monitoring (SACMEQ) and through national testing at grades three and six. These have been disseminated among the policy makers, and thus the baseline supplemental value for this indicator is 3. The project will provide support to strengthen the system and to develop and perfect existing baseline data on assessment of learning outcomes, in particular regarding early reading grade assessments. Data collection of student achievement will take place in year 2 of the project.

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Arrangements for results monitoring

Target Values Data Collection and ReportingProject Outcome Indicators Baseline

2009 FY

2011 (04/10-03/11)

FY 2012

(04/11-03/12)

FY 2013

(04/12-03/13)

Frequency and Reports Data Collection Instruments

Responsibility for Data Collection

Classrooms constructed by the project meeting the agreed standards (%)

0 10% 33% 100% Quarterly progress reports

Annual implementation reports

EMIS

Procurement and financial management records

Teacher Services records

MoET

Enrolment in Reception Classes supported by the project (number)

0 2,400 3,000 3,600

Decline in shortfall of classrooms at primary level (%)

0 0.7% 2.5% 7.5%

Repetition rate (grade 1) (%) 26 25 24 23Qualified teachers (from total number covered by the project) retained or attracted to ‘difficult’ schools (number)

0 0 800 1,600

Decline in shortfall of qualified teachers at primary level (%)

0 0 5.0% 10.1%

Direct project beneficiaries (number) (teachers and pupils)Teachers (T)Pupils (P)

00

1,3003,320

3,8007,440

7,80016,800

Of which female (%)Teachers (T)Pupils (P)

00

60%50%

60%50%

60%50%

Intermediate Outcome Indicators

Component 1

Decline in shortfall of classrooms in primary level (number of additional classrooms built)

0 33 110 330 Quarterly progress reports.

Annual implementation reports.

Procurement and financial management records

MoET

Toilet blocks constructed (number)

0 10 33 100

Classrooms furnished (number)

0 33 110 330

Component 2

Reception classes supported (number)

0 120 120 120 Quarterly progress reports.

Annual implementation reports.

Procurement and financial management records

MoET

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Component 3

Teachers in ‘difficult’ schools targeted by the project receiving a grant (%)

0 0 400 800 Annual implementation reports.

Quarterly progress reports.

Procurement and financial management records

Teacher Services records

MoET

Teachers in ‘difficult’ schools targeted by the project enrolled in training programs

0 0 400 800

Teachers and principals in grade 1 to 3 targeted by the project that were trained in teaching methods adapted to the new curriculum (number)

0 450 2,250 4,500

Textbooks purchased and distributed by the project (number)

0 3,300 8,300 13,300

System for Learning Assessment

Yes Yes Yes Yes Results and reports from assessment exercises

Assessment tests MoET

Supplemental Number 3 3 3 3

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Annex 4: Detailed Project Description

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

1. This project is designed to support the Kingdom of Lesotho in implementing its education program as expressed in the Education Sector Strategic Plan 2005-2015, and in the update document Medium Term Education Sector Plan (MTESP) 2009-2012, which components associated to Basic Education were endorsed by the Local Education Donor Group in July 2009. The operation anticipates providing finance through a sector pooled fund. While this will initially involve only the World Bank (the agreed supervising entity for the FTI Catalytic Fund Grant), and Irish Aid2, it is expected that other resources will be channeled through the pooled fund as it matures.

2. The components in this project are designed to support the government MTESP as presented below.

3. Expansion of access to Early Childhood Care and Development through:a) Attachment of reception classes to primary schools prioritizing deprived areas;b) Support existing and encourage establishment of new community centers to cater for the

urban poor and other disadvantaged areas, including the provision of bursaries for OVC in these centers;

c) Provision of support to home-based centers to make them more sustainable; andd) Support to pre-service training of pre-school teachers in local institutions.

4. Primary Educationa) Provision of infrastructure in schools including water and sanitation facilities;b) Reduction of repetition in schools to at most 5 percent by 2012;c) Establishment of schools as centers for care and support for all children; andd) Intensification of school inspection with emphasis on instructional supervision and

teaching and learning practices.

5. Teacher Development, Supply, and Managementa) Implement and manage an improved career structure for the Teaching Service;b) Set up and sustain an efficient teacher management information system for Lesotho;c) Provide an incentive package to attract and retain qualified teachers in schools located in

difficult areas and those teachers with rare skills; andd) Attain quantitative and qualitative improvements in teacher supply by 2013.

2 Irish Aid is committed to support the Lesotho education sector through this project. Thus, Irish Aid is envisaged to be a co-financier for this project. However, Irish Aid will not provide legal evidence of such commitment. As such, all references regarding Irish Aid funds refer to funds that may be available for the project.

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Component 1: Improve the quality of primary school infrastructure (Pooled Fund: US$ 12.6 million; FTI CF: US$ 9.1 million)

6. Component 1 is designed to support the government in addressing priority (a) for Primary Education, through the improvement of the quality of physical infrastructure in primary education schools by provision of new classrooms and school furniture taking into account gender and disability issues. This component will build and furnished about 330 new classrooms and 100 toilet blocks. Currently less than half (48 percent) of the classrooms in use meet the expected standards, and there are 341 classes in the open air and tents.

7. The cost of construction in Lesotho is high, with the cost of a four-classroom school including latrines, office and other works ranging from $208,000 to $311,000 in recent years. This high cost results from the use of high specifications necessitated by the climate and other conditions, high cost of materials, and limited number of contractors bidding for school construction. The government has been constructing classrooms to high technical standards for some years, but the volume of construction is limited, normally less than 100 classrooms per year, and these gains are offset by annual losses of around 40 of the non-standard classrooms due to collapse, loss of roof and the effects of bad weather. As will be discussed below, changes in government school construction approaches have been introduced so as to speed up implementation and reduce costs.

Table 1: Classroom stock in primary schools in Lesotho (EMIS 2008)

Classification as used in

EMIS

Description Total Percentage of total

Standard classroom

Permanent classrooms meeting design standards 4,126 48.3

Op-Tak Non standard classrooms with sloping roof 2,272 26.6Plat Non standard classrooms with almost flat roof 557 6.5Heisi Non standard classrooms with grass-thatch roof 32 0.4Rondavel Traditional circular hut 35 0.4Church Hall Often multiple classes in one hall 798 9.3Tent Frame tents 254 3.0Open Air No building 87 1.0Other (Specify) Varied 389 4.5Total 8,550 100.0

Subcomponent 1.1 Construction of new classrooms8. The objective of this sub-component is to support more accelerated provision of high quality durable gender and disability friendly classrooms for primary classes at lower costs. This sub-component will construct approximately 330 new classrooms and 100 toilet blocks, where most necessary. Accelerated construction will be facilitated through delegation of responsibilities for bidding, certification, and supervision of works. The package of works in each school will normally be limited to three to four new classrooms and up to two latrine blocks (in exceptional circumstances of over-crowed schools, the number of classrooms and latrines may be higher), thus ensuring that the benefits are spread over more than 80 schools. This is in

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line with government policy of firstly ensuring a maximum of standardized good-condition school infrastructure to all children, and secondly, developing where needed extra infrastructure in due time.

9. The MoET will continue to select the schools where works will be supported using its prioritization formula based on enrollment and current infrastructure conditions. Engineering services for site survey will be carried out by MoET’s EFU with the support of external consultants. Supervision will be contracted to qualified individuals (individual consultants or consultants working for firms), normally with one contract per district. Construction will be based on standard designs and specifications prepared by MoET. The civil works contractors will be procured following government procurement systems, with tenders managed by the district tender panels. Payments to the contractors will be managed centrally by MoET, upon certification from supervising engineer, the district education officer, and the school principal.

10. This approach ensures that (i) all of the new construction will meet the government standards for design and specification, and (ii) all procurement will be done through the government procurement systems by properly constituted tender panels. Construction is expected to be accelerated through addressing the current bottlenecks in the process. First, there is limited capacity to procure, contract, and supervise at the MoET and at the district level. By de-concentrating the responsibility for procurement to the district tender panels, this workload will be spread over ten districts. Procurement will be further facilitated by the use of standard bid documentation and designs. Second, there is limited capacity to supervise construction. This will be addressed by contracting the work of supervision of construction to professional engineers through competitive tender.

11. Capacity is also constrained by the limited number of eligible contractors. The Ministry of Public Works classifies civil works contractors according to their capacity, and tenders for publicly financed civil works are normally restricted according to this classification system. Recent procurement of school construction has normally been for construction of complete schools, and advertised in tenders of multiple schools. This has tended to restrict the selection to the larger, ‘category A’ contractors. There are currently only 22 registered ‘category A’ contractors, almost all of whom are based in Maseru. The focus on provision of a limited package up to three to four classrooms at existing schools, with each contract advertised individually in lots, will open the market to ‘category C’ contractors, of whom there are a greater number. This will increase the overall capacity, and may also increase local employment opportunities and resource flows to rural areas.

Table 2: Categories of civil works contractors, Ministry of Public Works classification

Category Size of contract Number of registered contractors, 2009

A Cost greater than 1,750,000 Maloti 22B Cost between 750,000 and 1,750,000 Maloti 103C Cost between 150,000 and 750,000 Maloti 367D Cost up to 150,000 Maloti 540Total 1,006

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12. This approach to classroom construction is expected to reduce the cost of classroom provision. First, the concentration on construction of classrooms and essential latrines, as opposed to full schools with administration offices, fencing and landscaping, will reduce the expenditure on non-classroom construction. Second, the use of smaller contracts, with three to four new classrooms per school, will reduce the contract size and open the market to more building contractors, increasing competition, and increasing the use of local contractors with lower overhead and transport costs.

13. This component will also encompass capacity building activities and a study designed to improve the operation of the system. These activities will include training for district officials, school principals and management committees to familiarize them with the planned system, the procurement regulations, and their responsibilities in the process. This will also include a component of awareness of technical construction issues including environmental aspects, to strengthen their capacity to oversee the process. Some capacity building will also be provided for small building contractors, to enable them to understand the tendering process and strengthen their ability to cost their bids and participate in competitive tendering. The study will focus on an evaluation of the new approach to construction introduced by the project.

Subcomponent 1.2: Furniture for schools

14. The objective of this component is to improve the supply of classroom furniture. Furniture will be procured, based on MoET specifications, for the approximately 330 new classrooms built. Issues of disability will be taken into account.

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Component 2: Support and contribution to the expansion of pre-primary education (Pooled Fund: US$ 2.0 million; FTI CF: US$ 1.5 million

15. This component will provide support to the government in implementing priority (a) for ECCD. Provision of pre-primary education has been very limited in Lesotho. Most providers are private ones, and thus ECCD has been denied to the poorest families. Priority (a) expresses the intention of the government to provide pre-primary education targeting the most poor and vulnerable children, while trying to keep fiscal implications low. Reception classes are defined as extra room available in primary schools, which can be used for five year-old children to attend pre-school. Without building new facilities, the government aims at (i) supporting children’s development from an early age, paying particular attention to the most disadvantaged; (ii) retaining children in school during primary education; and (iii) decreasing repetition in early years of primary education by enhancing school readiness from an early age.

16. This component will provide support for the government aim to maintain access to reception classes especially for the poorest children, through the provision of support to procurement of care givers, procurement of learning materials, and procurement of catering services to 100 existing and 20 additional reception classes, with a capacity of 3,600 children. This expansion will include an estimated 5.2 percent of the age 5 population in reception classes.

Component 3: Contribution to improvements in quality of teaching (Pooled Fund: US$ 10.6 million; FTI CF: US$ 7.8 million)

17. This component will support the government plans to improve quality in primary schools, which is one of the four pillars of Lesotho’s Education Sector Strategic Plan 2005-2015. It encompasses support to the implementation of priority (c) of sub-sector teacher development, supply and management, by (i) conducting analytical work to understand the conditions of education service delivery, teaching and learning through school resources surveys, classroom-based observations, teacher skills profiles and training needs assessments, and student achievement monitoring; (ii) assisting in increasing the qualification level of the teaching force in ‘difficult’ schools (these are schools located in the most remote and/or difficult to access areas of the country) by attracting and/or retaining more qualified teachers in targeted schools and/or upgrading the qualifications of teachers working there; (iii) providing additional in-service teacher training aimed at improving literacy and numeracy teaching; and (iv) providing textbooks in core subjects and grades, where there are deficits.

18. Under the government’s strategy to improve quality primary education, the primary curriculum will be reformed with a greater emphasis on acquisition of basic literacy and numeracy skills in the early grades and a reduction in the number of discrete subjects. A revised teacher career structure is being implemented on a phased basis from 2009, and will increase teacher pay, introduce a more graduated teacher career structure, introduce performance management measures and link promotion to professional conduct, and provide incentive payments for teachers who accept posts in ‘difficult’ locations. The school inspectorate is also being reformed, with an increase in the number of inspectors, and a greater emphasis on classroom supervision, and a consequent reduction in the administrative duties of inspectors.

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19. Within the analytical work to be conducted by the project to support these objectives, the following may be considered: (i) establishment of baseline data on teaching and learning, including teacher absenteeism, time-on-task, teaching skills needs assessments, student learning outcomes, etc.; (ii) measurement of early grade literacy; (iii) rigorous evaluation of the impact of the scheme to attract and/or retain qualified teachers in remote and/or difficult to access schools; and (iv) evaluation of the Distance Teacher Education Program (DTEP); as well as other analyses which may inform the development of materials for formative assessment and support the development of the teacher performance system. A study on factors influencing early grade repetition is also considered.

Subcomponent 3.1: Qualified teachers in ‘difficult’ schools scheme

20. This sub-component aims at supporting implementation of priorities (c) and (d) of the sub-sector teacher development, supply and management. Such priorities are part of a broader on-going reform on teachers’ career, salary, incentives, and deployment. These priorities aim at increasing the qualification level of the teaching force, in particular in the remote and/or difficult to access schools (‘difficult’ schools). This sub-component will support the government to incentivize qualified teachers to accept and/or remain in posts in designated ‘difficult’ schools. It will also support the upgrading of unqualified individuals currently teaching in a ‘difficult’ school who wish to improve their qualifications. Incentives to qualified teachers who accept jobs in the most difficult locations will be equivalent to approximately 17 percent of pay for up to 800 teachers. Payment of qualifications for unqualified teachers who decide to upgrade their qualifications will cover all costs associated to the training. This will serve as a pilot, allowing identification of the most cost effective approach to attract and retain qualified teachers in difficult areas. An impact evaluation will be implemented in conjunction with the pilot for analysis.

21. This scheme is targeted at the 400 most difficult to access schools, mostly small mountain schools, which often have no qualified teachers at all. The MoET will designate up to 400 primary schools as ‘difficult’ schools. Qualified teachers in these schools will benefit from a transport allowance of M500 per month, a housing allowance of M250 per month, and a communications allowance of M250 per month. Together, these allowances amount to M1,000 per month and will be paid quarterly to each teacher through the normal payroll system. Unqualified teachers in these schools who accept to upgrade their qualification will benefit from exemption of college fees, transport to the college and accommodation outside their community for the duration of the on-site training sessions. Teachers benefitting from the scheme will sign an additional contract with the MoET. Qualified teachers will be guaranteed the incentives for a period of three years, subject to remaining in the designated ‘difficult’ school, and having adequate attendance and professional behavior. Upgraded teachers will be required to teach in the school for a period of three years.

22. The design of this scheme is intended to improve the qualifications and skills level of the teaching force in remote rural schools. Schools eligible for the scheme will be selected on the basis of a verifiable and transparent ‘remote school index’, mainly based on poor access, isolation and poor facilities. This scheme is targeted at a maximum of 400 schools, thus restricting it to approximately 25 percent of schools. The program will be rolled out on half of

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those ‘difficult’ schools in the first year, and then extended to the remaining 200 schools in the second year. This will allow for a better understanding of the teachers’ response and for any necessary refinements to be introduced in the second year of the scheme.

Subcomponent 3.2: Improving literacy and numeracy teaching in the early grades

23. This sub-component aims at supporting the government in implementing on-going and future curricular reform. As the curricula for primary education moves its focus more sharply toward literacy and numeracy, it is important to ensure that teachers are prepared to deliver such curricula with quality, and that the appropriate materials are produced and used. This sub-component will support the training of teachers and preparation and provision of teaching materials to support improved teaching of literacy and numeracy in primary schools. Support will be provided for review of the literacy and numeracy materials in use, development and reproduction of updated and localized teaching materials for grades 1-3, and the training of 4,500 teachers in improved methods for literacy and numeracy teaching.

24. Training will be delivered at dissemination centers in each district, by District Resource Teachers and designated trainers. Courses will be provided in short blocks during school vacations, for a duration of approximately 10 contact days per teacher. The training will be linked with the teacher accreditation system and the teacher performance management system.

25. In order to support the development of improved teaching strategies and learning materials an early grade reading assessment is envisaged. This is expected to be developed in association with an impact evaluation. The new curricula and materials will be piloted in a selected number of schools. The early grade reading assessment will be applied to the students piloting the new curricula using a control group of students following the existing curricula. The association of the early grade reading assessment to the impact evaluation will allow as well for strengthening the existing system of assessment of learning outcomes.

Subcomponent 3.3: Textbooks for core subjects in primary schools26. This subcomponent will provide textbooks for the core subjects in primary schools where there are deficits. Books will be procured through competitive bidding, on the basis of one book per child, and distributed through the School Supply Unit using established procedures.

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Annex 5: Project Costs

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Project Cost By Component LocalUS $million

ForeignUS $million

TotalUS $million

Improved facilities in primary schools 8.80 0.30 9.10Supported and expanded pre-primary education 1.50 1.50Quality support measures in primary schools 7.70 0.10 7.80

Total Baseline Cost 18.00 0.40 18.40Physical Contingencies1 0.19 0.06 0.25Price Contingencies 0.19 0.06 0.25

18.38 0.52 18.90Taxes and Duties2 1.05 0.05 1.10

Total Financing Required 19.43 0.57 20.00

1 Physical and price contingencies are minimal on consultant services and determined here based on a 5 percent contingency on civil works components.

2 Identifiable taxes and duties are 1.10 (US$m), and the total project cost, net of taxes, is 18.9 (US$m). Therefore, the share of project cost net of taxes is about 94.5 percent.

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Annex 6: Implementation Arrangements

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Implementation Capacity at MoET

1. In 1999 a Project Support and Coordination Unit (PSCU) was established to support MoET planning unit in implementing donor funded projects. The personnel in the PSCU were mainly local, paid salaries higher than the civil service rates, and mainly financed from the counterpart funds for the IDA ESDP II project. This PSCU grew over time to a staff of around 108, became the implementing agency for most education capital and externally-funded projects, and required substantial additional government resources from the Association counterpart funds. In time, the MoET became dependant on the PSCU for many of its routine functions, and PSCU funded personnel were instrumental in operating the Ministry email system, the EMIS database, the capital budget management, as well as procurement, financial management, and the supervision of civil works. By March 2009 the PSCU closed, with some of the older staff retiring, some absorbed into the public service, and others leaving on expiration of their contracts. While this closure has resulted in some disruption of operations, the MoET is determined to build capacity within the civil service structures, in order to develop sustainable implementation capacity.

General Financial Management and Procurement Issues

2. Financial Management within the public service is currently undergoing a major transformation, with the introduction of a national Integrated Financial Management and Information System (IFMIS) covering all government ministries. Once fully implemented, this system will allow accurate and timely tracking and reporting of expenditure throughout the public service. In the initial phases, some difficulties have been reported with the system, resulting from both technology problems and inadequate staff training. Currently financial management for externally funded projects and capital projects in education is handled by a small team in the MoET under the leadership of the Financial Comptroller. Accounts are maintained using the proprietary Finpro/TEMPRO package, and are audited by the office of the Auditor General.

3. Public procurement in Lesotho has also undergone a major reform. The responsibility for procurement has been transferred from the central tender panel, which was overburdened, to separate tender panels in each ministry. A central Public Procurement Advice Division in the Ministry of Finance and Development Planning provides technical support to ministries. In line with this policy, MoET has constituted a tender panel, and arranged ongoing procurement training for those without the appropriate expertise. This panel is used for all MoET procurement from both government and external sources, and meets on a weekly basis, chaired usually by the Deputy Principal Secretary, MoET. District tender panels were also created, within the legal framework for local government.

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Project Implementation

4. This project will be implemented by the MoET. Overall responsibility of project implementation will be delegated to the Deputy Principal Secretary (DPS) of the MoET, who will act as project director. The Chief Education Officer (CEO) for Primary Education will act as project manager under the supervision of the DPS, and will work closely with three major sections of the MoET: Planning, Curriculum, and Teaching Services. Financial management will be done through the Project Accounts Section of the MoET by the Financial Comptroller, under the leadership of the in-coming Director of Finance. Procurement will be done through the MoET tender panel and the district tender panels. Oversight of the civil works will be provided through the EFU of the MoET. Monitoring, evaluation and production of reports will be the responsibility of the Planning Unit.

5. Overall project implementation will be guided by annual programs which will be prepared by MoET and submitted to the World Bank on an annual basis by December of each fiscal year. Each annual program will describe the activities which will be implemented in the following year, together with a proposed budget and financing plan for such activities. Each program will be subject to the Association approval, and changes to the program during its implementation period will be subject to prior written agreement of the Association. Approval by the Association of the first annual program is a project condition of effectiveness.

6. In order to support MoET in building sustainable capacity and at the same time ensure sound project implementation, the following will be considered:

Financial Management

7. Implementation by the government of the new IFMIS is still at a very early stage, such that system integrity and reliability is low, due both to normal teething problems, as well as roll out and training deficiencies at different levels. While the bugs in the IFMIS are being addressed by the Ministry of Finance and Development Planning, the project will continue to use the stand alone Finpro/TOMPRO software. To optimize this solution, all staff underwent additional training on the software.

8. All financial management transactions will be carried out by staff from MoET, and the project procedures manual is being updated.

Procurement

9. As a new procurement team is being created at MoET, staff will need to undergo training on procurement procedures. The procurement manuals are being updated. Some functions will be outsourced. In particular, while oversight of school construction will be the responsibility of the EFU, supervision of works will be contracted to qualified individual consultants, and bidding will take place using the district tender panels. Payment of all procured items will be made by MoET centrally; certification and award for payment of civil works will be done jointly by the school, the district authorities, and the individual consultant which supervised the works.

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Disbursement10. Disbursement will be low in the first year of project implementation with associated increase in years two and three, in order to allow enough time for robust capacity to be replaced within MoET.

Overall capacity building11. In order to help MoET rebuild capacity in the shortest possible period of time, a set of measures are being proposed. These include:

a) Prior to project implementation, and making use of funds from FTI II and other available sources for technical assistance:

(i) A team of international consultants with sound experience in procurement, financial management, school construction and monitoring and evaluation was assembled to provide short term capacity building and hands-on training to MoET staff. This team has been working closely with MoET staff in detailing project management and implementation, in the preparation of a short and medium term capacity building plan, and in developing capacity in project management and reporting. This team is also expected to support MoET during the first months of project implementation.

(ii) Training in financial management and procurement will be provided to all project stakeholders. General training in procurement will be provided by the Lesotho Institute of Management. Training in Bank procurement guidelines will be provided by ESAMI.

(iii) A workshop for all involved actors (MoET staff, district tender panel members etc.) will be organized so as to discuss in detail all aspects related to the implementation of the project, to strengthen capacity, and to promote a sense of team work around it. This workshop will be financed with EPDF funds.

b) During the first year of implementation, supervision will be strengthened with an increased number of joint technical missions to the country.

c) Support to the implementation of the medium term capacity building program prepared by MoET will be provided during the lifetime of the project.

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Annex 7: Financial Management and Disbursement Arrangements

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Summary of the Financial Management Assessment

1. The proposed financial management arrangements for the third phase of the Lesotho FTI were reviewed and assessed in accordance with the Financial Management Practices manual issued by the Financial Management Board on November 3, 2005. The objective of the assessment was to determine whether the MoET, which has responsibility for implementing the project, has acceptable financial management arrangements, which will ensure: (i) that the funds are used only for the intended purposes in an efficient and economical way; (ii) the preparation of accurate, reliable and timely periodic financial reports; and (iii) safeguard assets acquired by the program.

2. The financial management assessment was carried out jointly with Iris Aid, which is envisaged to be one of contributing partners to the Pooled Fund to be established for the education sector. The following conclusions were reached:

a) That the overall FM risk rating for the project is substantial, due primarily to substantial inherent risks associated with a general low capacity environment and uncertainty associated with change. The government is currently changing its management information system from the old GOLFIS to a more modern IFMIS. Several mitigating measures were proposed, including the continued use of the stand alone accounting software in use for Lesotho FTI phase II till the government’s new IFMIS is fully installed, assessed and determined to be reliable and usable for purposes of managing Bank assisted projects.

b) The residual risk is moderate, due primarily to manageable control risks, and the benefits of prior implementation experience by the Ministry. Key to properly benefitting from the prior experience will be additional staff training on the old software, as most senior members of FM staff are new, and an update of the FM procedures manual, which was designed for a stand-alone implementing unit. The new phase will be mainstreamed into the MoET.

3. Overall however, the team feels that the program’s financial management arrangements satisfy the Bank’s minimum requirements under OP/BP 10.02 except for the issues referred to in the Financial Management Action Plan (below).

Country Issues

4. Lesotho has been working actively to improve its Public Financial Management (PFM) systems over the past few years, culminating in the launch of its IFMIS, which went live on April 1, 2009. However, as would be expected of any high risk project in a low capacity environment, several implementation challenges for the IFMIS have arisen, including:

a) Inadequately prepared staff, b) Improperly defined user profiles, c) Delays in setting up vendor profiles resulting in late payments or manual payments,

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d) Absent or incorrectly loaded budget data preventing processing of payments for the affected cost centers,

e) Bank reconciliation interfaces not yet set up.

5. Corrective measures are being implemented, but while the system is being stabilized, the government has requested that all development partners project financing be kept outside of the IFMIS. When the system is declared ready, the Bank will need to carry out an assessment of its operation in order to determine whether it can be used for purposes of managing Bank financed projects.

6. As regards FM staffing, the ability of the government to attract and retain qualified FM staff has always been questionable due to poor salaries and uncompetitive conditions of service, hence projects financed by the Association have tended to rely on outside advisors (on finance, procurement, and technical matters) to assist projects in their implementation efforts.

7. To help address the staffing and other critical PFM issues, the government is implementing a wide ranging Public Sector Improvement Reform Program (PSIRP) which is expected to be implemented over the next 3-5 years with support from Lesotho’s key development partners. The PSIRP includes a significant component on PFM, which places emphasis on modernization, resource efficiency, transparency and accountability. It seeks to improve PFM through: (a) a shift to MTEF performance budgeting approach, supported by the development of a macroeconomic model to facilitate the achievement of the government’s poverty reduction and other development goals; (b) the already embarked on phased replacement of the previous computerized FM system (GOLFIS) through the introduction of a new Integrated Financial Management System (IFMIS); and (c) public procurement reform.

8. In addition, the reform program will strengthen the operation of the Auditor General’s Office and assist the Public Accounts Committee to execute its oversight role more effectively. It will also support a review of the PFM legislation, leading to the revision of the finance act (along with the budget, planning, procurement legislations, etc.) and the Audit Act. This would clarify roles and responsibilities in the budget process and also explicitly recognize the medium-term nature of budgeting introduced through the MTEF.

9. While the government’s position is that all new projects must be mainstreamed, with ministry FM staff taking responsibility for project FM, not all aspects of the PFM system can be used to manage project resources at this time (refer to comments on the IFMIS above). Aspects that can, and those that cannot be used, are detailed in the following sections.

Risk Assessment and Mitigation

10. The table below shows the results of the risk assessment carried out using the risk rating summary. This identifies the key risks that program management may face in achieving project objectives and provides a basis for determining how management should address these risks.

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Risk Risk Rating

Risk Mitigating Measures incorporated into the

Project Design

Conditions of Negotiations,

Board or Effectiveness (Yes or No)

Residual Risk

Rating

Inherent RiskCountry Level - risk to successful project execution due to low overall FM capacity arising from weak systems, less than optimal human capacity in both FM and Audit due to government’s poor competitive position on remuneration.

S Acknowledge the major PFM reform process underway incorporating the new IFMIS and the proposed overhaul of PFM laws. Mitigation measures to be addressed at project level.

No S

Entity Level (MoET) – same issues as per country level, with staffing a major concern because all senior staff in the Ministry’s implementing unit previously responsible for project FM have left the Ministry.

S Although project FM will be mainstreamed within the MoET FM department, a specific project FM section is being established therein to maintain direct responsibility for the project. In addition to a new Director of Finance to be hired for the Ministry, a Financial Comptroller level officer will be directly in charge of the project FM.

No S

Project Level – risks of error arising from the fact that this is a complex operation involving another contributing partner, with widely dispersed implementing units covering multiple locations with a large number of relatively small transactions.

S A great deal of useful experience has been picked up implementing phases I and II of the same program. The new senior FM staff to be hired will therefore be building on these experiences, while continuing to use a parallel accounting software until such time that the IFMIS has stabilized and been assessed as adequate by the Bank.

No M

Control RiskBudgeting - the main challenge to establishing credible budgets and working within budget to date has related to the issue of managing Maloti based contracts against a USD denominated Source of Funds.

M Annual budget preparation will be based on the GoL’s policy guidelines and regulations. Per current practice, the Ministry’s annual plans will be discussed with contributing partners to ensure congruence of purpose and that enough resources are allocated for approved activities.

No M

Accounting - the risk is that the accounting system may not be capable of producing the necessary reports in a timely manner to effectively monitor and manage the project.

M As government has itself declared the IFMIS unfit at this stage for managing donor financed projects, reliance will once again be placed on the current ‘FINPRO’ software already in use by the project. The system is proven, and works satisfactorily for purposes of project financial management. New

No M

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Risk Risk Rating

Risk Mitigating Measures incorporated into the

Project Design

Conditions of Negotiations,

Board or Effectiveness (Yes or No)

Residual Risk

Rating

Ministry staff working on the project however require more training (underway at the time of the review) to be able to use the system to its fullest potential.

Internal Control - the project is to be implemented at both national and sub-national level. There is a risk that adherence to approved government policies and procedures may be negatively affected by poor staffing levels at both the national and sub-national levels.

S While government policies and regulations will be applied throughout implementation of the program, it will be necessary to update the old project implementation unit’s FM procedures manual, to take into account the absorption of the unit into the Ministry, while still retaining independent operation on the FINPRO system.

Yes. Production of an updated

FM procedures manual will be a condition of effectiveness.

M

Funds Flow – risk that funds may not be used for purposes intended, particularly at the remote district levels.

S Arrangements will be made to transfer funds from the DA direct to beneficiaries, on the strength of properly approved certifications by the districts.

No M

Financial Reporting - there is a risk that reports may not be available in a timely manner, and that they may not incorporate all relevant data.

M The project will produce quarterly interim un-audited financial reports in a format to be agreed by negotiations. The reports will cover all project activities, irrespective of financier. Annually, audited financial statements must be submitted to the program partners within six months of the end of the year audited.

IFR formats and formats of

annual financial statements were

agreed negotiations – Condition met.

M

Auditing - risk that audits may not be conducted in accordance with international auditing standards due to the low staff capacity of the Auditor General (AG)’s office.

M While the program will be audited by the AG annually, terms of reference for the audit will be prepared in consultation with the contributing partners. On the issue of staffing, the AG is allowed to outsource the services to private professional audit firms should work load issues require it.

Audit TORs were agreed at negotiations -

Condition met.

M

Overall Control Risk M Per above. MOverall Risk Assessment S M

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Strengths

11. As already indicated, this is the third phase of the FTI, implemented by the MoET. Although phases I and II benefited from a standalone Project Support and Coordination Unit (PSCU) which has since been disbanded, a lot of necessary experience was gained during the preceding phases, and most aspects of the PSCU have been incorporated into the Ministry, including the FM Procedures Manual (to be updated), and at least one Accountant and two Assistant Accountants. For the earlier phases, no major negative financial management issues were raised in supervision missions and in annual audit reports prepared by the Auditor General for the Bank-financed operations. The overall financial management ratings in the ISRs have been consistently satisfactory.

Identified Weaknesses and Action Plan

Significant Weaknesses

Action Responsible Person

Completion Date

IFMIS implementation is still at a very early stage, such that system integrity and reliability is low, due both to normal teething problems, as well as roll out and training deficiencies at some levels.

While the bugs in the IFMIS are being addressed by the MoFDP, the project will continue to use the standalone FINPRO/TOMPRO software. To optimize this solution, all staff will undergo additional training on the software (already underway by a local consultant)).

MoET Project Financial Controller.

Completion of the training will be open-ended, as it is generally a continuous process. The IFMIS implementation program is outside the influence of the project.

Implementation Entity

12. The program will be implemented directly by the Ministry of Education and Training (MoET). This means that fiduciary matters (financial management, disbursement, and procurement) will be handled within existing structures of the Ministry. The old PSCU (standalone implementing unit) has been disbanded.

Budgeting

13. The annual budget will be prepared based on the GoL’s policy guidelines and regulations and will follow the new medium term planning framework. The annual plans and performance will be discussed with contributing partners during semi-annual review meetings.

14. The Project Financial Comptroller, under the direction of the Ministry’s Director of Finance (to be appointed), will have coordinating responsibility for the budget, with necessary input from the key operational departments. The approved budget will be loaded into FINPRO and actual performance measured against the budget on a regular basis. The current Financial

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Controller is an experienced government financial officer with knowledge and experience of the government’s annual budget process, and is expected to discharge of this responsibility satisfactorily.

Accounting

15. As already described above, project accounting will continue to be based on the standalone conventional accounting software package FINPRO, already in use for the ongoing FTI phase II.

16. While the accounting policies and procedures will adhere fully with established GoL financial policies and procedures, an FM Procedures Manual, specific for the project, and developed from the disbanded PSCU FM manual, will be used for day to day accounting. This manual was previously approved by the Bank but has to be updated to take into account the ‘absorption’ of PSCU staff into the Ministry’s mainline staffing arrangements. Key FM staff for the project within the Ministry include the financial controller, a senior accountant, and the accountant and assistant accountants.

17. All the key members of the FM staff, including who were previously not familiar with the FINPRO software, underwent necessary training and are expected to discharge of their roles satisfactorily. In line with GoL policy, accounting will be cash based and comply with international accounting standards. The chart of accounts has been retained from phase II, with any necessary updates in the activities and categories.

18. A separate record of all project assets will be maintained in FINPRO. These assets are expected to comprise primarily immovable assets, being the classrooms under construction.

Internal Control and Internal Audit

19. While the program’s overall internal controls and procedures will be based primarily on the government’s established accounting procedures and regulations, project specific functions will be captured in the bespoke Project FM Procedures Manual described above. The updated manual will be approved by the Bank, and its finalization will be a condition of effectiveness.

20. All key FM members of staff are career civil servants with a thorough understanding of government procedures and requirements, and they will be expected to ensure the project complies fully with these.

21. The internal audit department in the Ministry of Finance and Development Planning (MoFDP) has responsibility for internal audit across the entire government of the Kingdom of Lesotho. A unit of this internal audit department is based in MoET. The unit’s capacity, like that of other government departments, is affected by a shortage of sufficiently qualified higher level staff. The capacity issues are intended to be addressed by the above mentioned Public

52

Sector Improvement Reform Program. Meantime, project activities are expected to be included in the unit’s program of work, and any feedback by the auditors used to improve implementation.

Funds Flow and Disbursement Arrangements

22. Funds Flow: During negotiations, the government requested a US$ denominated designated account, maintained at the Central Bank, and both contributing pool partners are expected to transfer funds into this account in that currency. On a monthly basis, funds required to finance operations will be translated from US$ in the Designated Account into a Maloti denominated current account to effect the necessary payments. Funds will be transferred directly from the project’s Maloti denominated account in the Central Bank to the accounts of the service providers, based on approved invoices/work certifications. There will be no cash advances to intermediaries like districts or schools.

23. Disbursement arrangements: Disbursements of the pooled fund will be done based on quarterly unaudited interim financial reports. An initial advance will be made into the Designated Account upon the effectiveness of the Financing Agreement and at the request of GoL. The initial advance will be the estimated cash requirements to meet project expenditure for the first six months of project life, based on an initial cash requirement forecast by the project. After every subsequent quarter, the GoL will submit periodic financial reports detailing expenditure for the quarter and to date, which will also include a cash flow forecast for the following six month period. Cash requests at the reporting date will be the amount required for the forecast period as shown in the approved periodic financial reports less the unused balance in the Designated Account at the end of the quarter reported on.

24. The option of disbursing funds through direct payments from the grant account on contracts above a pre-determined threshold will also be available, as will Special Commitments if required. Withdrawal applications for such payments will be accompanied by relevant supporting documents such as copies of the contract, contractors’ invoices and appropriate certifications. Further details of the disbursement arrangements will be set down in a Disbursement Letter to be issued by the Bank.

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Pooled Fund Partner

IDA

Pooled Fund Partner

Irish Aid

MoETDesignated Account (in USD) - Central Bank

Ministry of Education and Training

MoETCURRENT ACCOUNT (in Maloti) – Central Bank

Ministry of Education and Training

Providers of goods and services

Certification by districts and schools

Flowchart - Flow of Funds – see chart below.

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25. Using the current FINPRO accounting package, MoET will produce regular reports to facilitate project performance monitoring as follows:

a) Quarterly unaudited interim financial reports. The project will produce interim un-audited financial reports on a quarterly basis, using formats agreed with the Bank during negotiations.

i. The quarterly reports will be prepared and submitted to the Bank within 45 days of the end of each calendar quarter reported on. The financial reports will be designed to provide quality and timely information to project management, implementing agencies, and various stakeholders on project performance. These quarterly reports will include Sources and Uses of Funds; Detailed Uses of Funds by Project Component; Designated Account Activity Statements; Summary Statement of Expenditures subject to prior review; and Summary Statement of Expenditures not subject to prior review. In addition, a narrative explanation of the performance for the quarter is always useful, and comparison of actual expenditure with budgets; as well as summary schedules of assets acquired under the project.

b) Annual financial statements in accordance with formats agreed per above. The accounts will be prepared on a cash basis, and in accordance with international accounting standards. The annual financial statements, once audited, will be required to be submitted to the Bank and other pooling partners no later than six months after the end of the year reported on. The annual financial statements, will consist of at least:

i. A Statement of Sources and Uses of Funds / Cash Receipts and Payments which recognizes all cash receipts, cash payments and cash balances controlled by the entity for this project, and separately identifies payments by third parties on behalf of the agency.

ii. The Accounting Policies Adopted and Explanatory Notes which should be presented in a systematic manner with items on the above Statement of Cash Receipts and Payments being cross referenced to any related information in the notes. Examples of this information include a summary of fixed assets acquired by the project, summarized by category of assets.

iii. A Management Assertion that contributing partners’ funds have been used for the purposes intended as specified in the relevant legal agreements.

External Audit

26. In accordance with GoL requirements, the program’s financial statements will be audited by the Office of the Auditor General (AG) of Lesotho. The Bank has previously reviewed the AG’s terms of reference and is satisfied that these meet the Association’s requirements for the audit of projects. The AG is also empowered to outsource the audit services from private audit firms when circumstances dictate it. In such circumstances, the AG retains responsibility for the audit opinion, and signs the cover letter in support of the private auditor’s report. The audit will be conducted in accordance with international standards on auditing, and in line with the GoL

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financial year-end, the audit report will be submitted to contributing partners within six months after the financial year-end, that is, by September 30 each year.

27. The auditors will be required to express a single opinion on the program financial statements. In addition, a detailed audit management letter containing the auditor’s assessment of the internal controls, accounting system and compliance with financial covenants in the contributing partners Financing Agreements, as well as suggestions for improvement, and management’s response to the auditors' observations will be prepared and a copy submitted to the cooperating partners.

28. The audit committee for the MoET is not yet in place, this is in the process of being established in terms of changes to Lesotho PFM arrangements, and will form part of the improved oversight arrangements for the project.

Project Governance and Accountability

29. Issues of governance have surfaced in previous Bank financed activities in Lesotho. The most prominent was the Lesotho Highlands Water Project, where the offending counterpart staff were convicted of corruption and jailed. In a rare success by an African country, participating multi-national contractors were also convicted of being the supply half of the crime, and among other penalties barred by the Bank. While this may point at the existence of governance related challenges in the country, it should also be read to mean that the counter measures do work sometimes.

30. For the FTI, the project specific governance and accountability related measures incorporated in project design include:

a) Smaller Lot Sizes: To reduce the possibility of collusion by a small group of bidders (previously only 22 category A contractors qualified to bid for the FTI school construction contracts), the lot sizes have been made smaller (individual school contracts), enabling a large number of previously non-qualifying category B and C contractors to bid. This also allows the use of individual district tender committees to manage the bidding and selection of contractors in their districts, as opposed to having a centralized adjudication committee that could be susceptible to undue influence by the big bidders.

b) Financial System: Due to perceived weaknesses in the government’s new IFMIS, the FTI will continue to use the tried and tested FINPRO accounting system to handle the administration and financial management of the project. Use of this system at this time both improves control and audit trail, as well as reduces the possibility of errors, intentional or otherwise, that would result from premature use of the untested IFMIS.

c) Audit: In terms of International Standards on Auditing 240 and 260, the external auditors also have specific responsibilities towards the detection and reporting of fraud and corruption, which duty the AG is expected to discharge patriotically

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with respect to project activities. Once installed, the MoET audit committee will also improve oversight and follow up on audit reports and recommendations.

Conditionality

31. The following actions were complete by project negotiations:

a) Formats and contents of the quarterly financial reports, and customized chart of accounts to enable the financial management system to be able to generate the quarterly financial reports directly and be able to identify program activities therein;

b) Format and content of Annual Financial Statements;c) Audit terms of references.

32. Effectiveness conditions:

Update the FM Procedures Manual

FM Action Plan

33. The action plan below indicates the financial management actions to be taken by project going forward:

Action Responsibility Completion Date

1 To agree formats and contents of the quarterly IFRs and customize the chart of accounts to enable the FM system to be able to generate quarterly financial reports directly and be able to identify program activities therein.

MoET and Contributing partners

Completed

2 To agree on formats and contents of the Annual Financial Statements.

MoET and Contributing partners

Completed

3 To agree on audit terms of references. MoET and Contributing partners

Completed

4 To prepare MoU (draft) MoET and Contributing partners

Completed

5 Complete the update of the FM Procedures Manual.

MoET Effectiveness

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Supervision Plan

34. Financial management supervision will be carried out by the contributing partners Financial Management staff at least once a year in line with the moderate risk rating. Financial Management staff will also:

a) Review the quarterly financial reports; and

b) Review the audit reports and management letters from the external auditors and follow-up on material accountability issues by engaging with the TTL, client, and/or auditors.

Allocation of Grant Proceeds

35. The table below shows the allocation of the proceeds of the Grant.

Conclusion of the FM Assessment

36. The proposed FM arrangements for the FTI, as reinforced by the FM Action Plan above, meet the minimum requirements for financial management under OP/BP 10.02.

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Category Amount of the Grant Allocated

(expressed in USD)

Percentage of Expenditures to be Financed

(inclusive of taxes)

(1) Goods, works, consultants’ services, Training, Incentives and Operating Costs for the Project

20,000,000 Such percentage as the World Bank shall determine and

communicate to the Recipient in its Annual Confirmation for the relevant Agreed Annual Work

Plan

TOTAL AMOUNT 20,000,000

Annex 8: Procurement Arrangements

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

General

1. Procurement for the proposed project will be carried out in accordance with the World Bank’s ‘Guidelines: Procurement under IBRD Loans and IDA Credits’ dated May 2004, revised October 2006 and May 2010; and ‘Guidelines: Selection and Employment of Consultants by World Bank Borrowers’ dated May 2004, revised October 2006 and May 2010, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Recipient and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement of Works: Works procured under this operation: construction of new classroom blocks for primary classes at existing primary schools. Procurement of works will be done using the Bank’s Standard Bidding Documents (SBD) small works for all ICB activities.3 Works contracts estimated to cost US$3,000,000 equivalent or more per contract will be procured through ICB however, few if any works are expected to be undertaken under ICB. As National SBD are in the process of being developed, the GoL will use the Bank’s SBD for both ICB and NCB, as appropriate. Works contracts estimated to cost more than equivalent US$100,000 but less than US$3,000,000 will be procured through NCB. Small works estimated to cost less than US$100,000 or equivalent per contract may be procured using the shopping method by requesting at least three written quotations from qualified contractors, with contracts awarded on lump sum basis. Contracts will be awarded following a response to a written request which will include modality for evaluation and award of contract, a simple bill of quantity, draft contract, and conditions of contract. Direct Contracting may be used when competition is not advantageous, with the Bank’s prior review and approval. The prior review threshold for works contracts would be US$3,000,000 equivalent per contract. However, the Bank will select some procurement activities which are below the Prior Review Threshold and subject them to prior review, as a means to continue to support the government capacity building efforts. Pre-qualification of bidders for works contracts is not envisaged, as no works are envisaged to be complex or to have cost estimates above US$10,000,000.

3. Procurement of Goods and Non-Consultant Services: Not all the goods and non-consultant services to be procured under this project have been defined. However, the goods and non-consulting services to be procured may include educational materials such as textbooks, school reading materials, school furniture and equipment, office equipment and furniture,

3 Although ICB is considered for the various procurement categories, this is not envisaged to take place during the life time of the project.

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computers, computer accessories and software, and school desks. The procurement of goods will be done using the Bank’s SBD for all procurement under ICB. As National SBD are in the process of being developed, the GoL will use the Bank’s SBD for both ICB and NCB as appropriate. Goods and non-consultant services estimated to cost US$500,000 equivalent or more per contract would be procured through ICB procedures. Goods and non-consultant services estimated to cost less than US$500,000 equivalent per contract would be procured through NCB procedures. Goods and non-consultant services contracts estimated to cost less than US$50,000 equivalent per contract may be procured using the shopping procurement method. UN Agencies and direct contracting may also be considered with the Bank’s prior review and approval. The prior review threshold for goods and non-consultant services would be for contracts estimated at US$500,000 or equivalent per contract. However, the Bank will select some contracts in the procurement plan which are below the Prior Review Threshold and subject them to prior review, as a means to continue to support the government capacity building efforts. Pre-qualification of bidders for supply of goods is not envisaged under the project.

4. Selection of Consultants (Firms): Consulting services to be financed will include, among others: sector studies and policy formulation and reviews; consulting services for capacity building, basic engineering and architectural building works and services design; civil and building works supervision; contract management; technical assistance in project management; engineering; technical and value engineering reviews. All consulting service contracts estimated to cost US$100,000 equivalent or more for firms will be awarded through Quality and Cost Based Selection (QCBS) method and or Quality Based Selection (QBS). Contracts estimated to cost less than US$100,000 equivalent may be contracted through Consultants’ Qualification (CQS) or selection based on Fixed Budget (FBS). Consulting firms for carrying out standard or routine nature assignments such as financial and technical audits of a routine nature and for which standard practices exist and which are estimated to cost less than US$100,000 or equivalent per contract may be selected on the basis of Least Cost (LCS). Single Source Selection (SSS) may be used where competition is not advantageous and it can be justified after consultation with and prior approval by the Bank. All contracts estimated to cost the equivalent of US$100,000 or more or assignments which may be of lower value but which the Bank may determine to be of a critical nature and in interest of building the procurement capacity of the government, will be identified in the procurement plan and will be subject of the Bank’s prior review.

5. Selection of Individual Consultants (IC) would be on the basis of their qualifications in accordance with the provisions of Section V of the Consultant Guidelines.

6. Support to implementation of certain interventions such as identified construction of primary classrooms at identified school sites etc. may be contracted to specialized service providers, such as NGOs or communities. Community Participation in procurement will be undertaken as described under 3.17 of the guidelines. Contracting of NGOs will be done through a competitive process using the appropriate selection method described above. Services for capacity building and specialized research and training of staff in the Ministry of Education and Training (MoET) shall be carried out through research institutions and Universities, subject to

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the Bank’s prior approval and inclusion in the procurement plan. The activities to be carried out with the participation of NGOs and Communities will be included in a manual which will describe how these activities will be undertaken. The manual will describe such issues as eligibility for participation of NGOs, guidelines for community participation in procurement, etc. The manual will be reviewed and approved by the Bank. If needed, the manual will be revised at least yearly for relevance and to capture best practices.

7. Short lists for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

8. Prior Review: Consultancy services estimated to cost US$100,000 equivalent or above per contract for firms will be subject to prior review by the Bank. Consultant services estimated to cost US$100,000 equivalent or above for individual consultants will be subject to prior review by the Bank. All single source selection of consultants will be subject to prior review by the Bank.

9. Training: All training will be based on an agreed training plan that will be prepared by the MoET and it’s implementing Agencies. The training plan will be approved by the Bank and will include at a minimum the justification of the training identified and the capacity gap, the intended trainees, the name of the training provider, the duration and cost of training along with any other relevant details. After the training, the beneficiaries will be requested to submit a brief report indicating what skills have been acquired and how these skills will contribute to enhancing performance. All training to be undertaken under financing from the project must be in line with and contribute to the project objectives. The training plan will be prepared and submitted once a year and updated as required.

10. The procurement procedures and SBDs to be used for Bank funded procurement will be presented in the Procurement Manual and should be in line with the procurement and consultants guidelines of the World Bank. The manual should include the component description, institutional arrangements, regulatory framework for procurement, approval systems, activities to be financed, procurement and selection methods, thresholds, prior review and post reviews arrangements and provisions, filing and data management and the procurement plan for the first 18 months for all project components.

Assessment of the agency’s capacity to implement procurement

11. A Procurement Capacity Assessment for MoET Education Facilities Unit (EFU) which includes the Contracts Section (CS) and the Procurement Section (CS) was carried out by Wedex Ilunga, Senior Procurement Specialist on December 10, 2008 and updated on July 23, 2009 together with John Chitambala Sikazwe, Procurement Specialist. The assessment reviewed the capacity and experience of the implementing agency and their organizational structures to carry out procurement under phase III of the EFA FTI. The assessment also considered the

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qualifications and experience of the staff that are charged with carrying out procurement in the CS and the PS and the governance systems in which the procurement will be carried out. Based on findings and particularly noting the changes in staff from April 2009, which were undertaken in the interest of institutional sustainability and long term capacity development of the procurement function within the MoET, but that at the same time, resulted in temporal reduction in capacity given that the new staff are not fully qualified procurement professionals and some lack experience, the capacity assessment took note of the need for the procurement staff capacity to be enhanced for both staff in the CS and the PS. The capacity assessment also noted the need to enhance the capacity of the MoET at all levels to process, evaluate, make recommendations and approve contracts. There is also an identified need to sensitize senior staff of the Ministry and particularly to enhance the skills and capacity of the Tender Panel to review and approve procurement, award recommendations consistent with the provisions of the bid documents, and or request for proposals including any amendments without due regard to extrinsic provisions and political considerations.

12. Staff in the CS is technically qualified and experienced, and it is reasonably adequate to carry out the technical aspects of procurement of civil works proposed to be undertaken under the project. However the numbers are insufficient to adequately shoulder the responsibility to supervise the construction of civil works at all school sites in the 10 districts of the country. Consequently, there is an identified need to increase the capacity of the MoET by engaging individual consultants (IC) to supervise civil works in each district. These IC would in turn be supervised by the technical staff of the MoET EFU. The IC would include IC who are working with a Consulting Firm or as individual consultants. The school site surveys in preparation for the school classroom construction at each site will be carried out by the EFU CS Land Surveyors under the EFA FTI II, as part of the preparatory work for this operation. Consultants may be recruited to support the activity. Existing standard building designs for classrooms and latrines will be used and as needed adapted to the requirements at each site. Staff in the CS includes the Manager EFU (who is also the head of the CS), 2 quantity surveyors, 1 architect and 4 site supervisors.

13. All staff in the PS of the EFU is relatively new except for the Head of Procurement (HoP) who has experience both in contracts management and in procurement of civil works. The rest of the staff in the PS include by hierarchy – 4 Assistant Procurement Officers, all of whom are university graduates (in economics) but who lack experience in procurement. They are currently studying the Chartered Institute of Purchasing and Supplies (CIPS) which is a professional procurement qualification recognized by the GoL. There are also 3 Procurement Officers (who are in effect Senior Store Keepers). These do not have university degrees and are also currently pursuing CIPS training. These staff also lack experience in procurement. All staff will be required to undergo training in public procurement particularly as applies under Bank financed projects to complement the training in CIPS.

14. Main procurement risks: The procurement capacity within the MoET is adequate in terms of number of staff. However staff lack experience in public procurement except for the Head of Procurement. Further, the structure of procurement in MoET lies with the EFU. The

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structure of the EFU has fragmented the procurement function with the CS carrying out procurement of works and the PS carrying out procurement of goods and services. This has the disadvantage of undermining continuity when there are staff changes as was the case in 2008, and more recently post April 2009, when staff contracted as consultants to carry out civil works and procurement left the Ministry. Moreover, the procurement function is fragmented as the EFU manager is responsible for one part, and the Head of PS is in charge of the other. This makes it difficult to build skills and share best practices, and to build internal quality control checks, since staff has limitations brought about by the institutional set up. These limit staff understanding of the principles involved in aspects of procurement in which they are not directly involved. Further, the institutional set up has a tendency to perpetuate bad practices, as its controls and internal quality assurances are weak. A consolidation of all procurement functions under the Head of PS is desirable. This should include the procurement of works which is currently under the Manager of EFU. The Manager of EFU should have the overall management function of the EFU under which procurement falls, but concentrate on directly supervising the CS. The CS and the PS should work out modalities on how the PS can support the procurement activities and requirements for the CS, which are critical for carrying out the procurement of civil works. The details of the modalities and linkages including quality assurance aspects, and clear roles and responsibilities of the CS and PS should be spelt out in the procurement manual of the MoET. The manual should also spell out the support role and linkage with other technical specialists of the MoET in supporting the procurement function. The procurement manual would also include the roles and responsibilities and good practice requirements for the Tender Panel in reviewing and approving procurement evaluations and contract award recommendations. The manual would also spell out how and on what basis the evaluation committees will be constituted, always remembering to include qualified technical staff from specialized agencies of the MoET, such as staff from the CS in case of civil works evaluations, etc. Subject to the above changes being addressed and an on-going capacity development plan being put in place for staff in the EFU, the capacity of the MoET should over time become adequate and sustainable.

15. Some risks have been identified as follows:

a) Procurement systems need to be enhanced to address some of the noted deficiencies and documented in the MoET Procurement Manual. The manual would need focus on providing sufficient guidance to procurement implementation without having to repeat provisions of the government procurement guidelines and the provisions of the Bank guidelines, which will be available separately and could be consulted as required. The manual should refer, as appropriate, to pertinent sections of supporting source documents such as standard SBDs, RFPs, guidelines, etc.

b) The roles and responsibilities of the senior staff of the ministry in particular, that of the gender panel, and their capacity to review and approve procurement evaluation and recommendation for award of contracts, requires to be enhanced.

c) The role of the technical specialists (such as staff from CS of the EFU) / sector specialists in procurement should be acknowledged and taken into account in planning and implementation of procurement activities.

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d) Fragmentation of the procurement in MoET between the CS and the PS, all of which are under the EFU, needs to be addressed in the interest of improved coordination, accountability, reporting and long term sustainability and capacity building.

16. Overall risk assessment rating for this project is high.

17. Conditionality and Risk Mitigation Action Plan: A condition of effectiveness is the adoption of the Procurement Manuals for the Project in form and substance satisfactory to the Bank. The following actions are suggested to mitigate the procurement risk and facilitate the implementation of the project.

Risk Mitigation/Action Due Date/By Whom Conditionality

Contracts Section and Procurement Section

Inadequate capacity to carry out procurement of works in all districts, and to carry out timely contract management and supervision at all sites.

Engage individual consultants to supplement contract management and works supervision in each of the 10 districts.

By contract start dates for civil works in each district based on implementation work plan – CS / PS

None

Use of district capacity under guidance of the EFU (SC and PS) to carry out procurement at the district level.

Throughout life of the project – CS / PS

None

Carry out bidding for each district in one bid process, but packaged in such a manner that bidders can bid for individual school sites, as lots with evaluation and contract award being on basis of individual school sites. This would enhance participation of small scale contractors including those in lower categories like ‘C’, increase competition and will likely lead to economic bid sums than has been the case.

Throughout life of the project – CS / PS

None

Staff in the CS will need to be trained in procurement in order to complement the capacity of the PS in carrying out procurement of civil works and to, in turn, carryout related training for district staff.

Before start of EFA FTI Phase 3. Training should be under Phase 2. – MoET

None

Bidding in districts should be in phases. Limited number of districts in each period or quarter in order for the EFU to provide adequate needed support by the CS and PS to the districts in bidding and evaluation process.

As needed – CS / PS

None

Develop and enforce information sharing and reporting as needed fortnightly, monthly, quarterly and annually.

Head EFU, Head Procurement and CEO Primary

Include reporting formats and frequency in procurement manual

Procurement Section

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Risk Mitigation/Action Due Date/By Whom Conditionality

Lack of documented roles and responsibilities and accountabilities for procurement cycle activities, and need to address procurement fragmentation.

Update and or develop Procurement Manual and submit to the Bank for its review and No Objection. The manual will outline internal controls, procurement and quality assurance systems, and ensure it is done in a timely manner, and that clearly defines when and how staff and consultants will be used in the procurement cycle, and outlines the role and responsibility of senior MoET management staff and the MoET Tender Panel

Head of Procurement

Manual to be updated by effectiveness

Filing and data management system not robust.

Enhance systems for storing, maintaining and safeguarding data and avoiding loss of data for procurement.

Head of procurement before negotiations

None

Risk of inadequate experience and capacity of the MoET EFU PS and CS.

New staff to undergo basic training in public procurement applicable under Bank financed projects.

Bank to increase frequency and number of procurement post review.

Review TOR and Job description for staff in the CS and PS to avoid duplication and to move procurement responsibilities to the staff in the PS with the staff in CS playing a complimentary role.

During the first year of project implementation

To be covered within the procurement manual.

18. Procurement Plan: A procurement plan for goods and non-consultant services works and consultancy service contracts for the first 18 months of implementation of Phase 3 of the EFA FTI has been prepared. The plan includes relevant information on all goods and non-consultant services, works and consulting services under the project. It includes prior review thresholds and the timing of each milestone in the procurement process. The procurement schedule will be updated once every six months and reviewed by the Bank during supervision missions. The procurement plan requirements for the Bank funded activities are packaged in such a manner that they are relevant to the whole project including timing, taking into account the need expressed by the government to enhance the participation and possible award of contracts to local bidders who are predominantly small scale contractors and suppliers, whenever this is practical. The procurement plan for the MoET in respect of the EFA FTI III will be updated as the need arises, but at least once a year.

19. Procurement Monitoring and Supervision: The Bank will carry out procurement prior reviews and issue ‘no objections’ for all ICB related procurement. Monitoring and evaluation of procurement performance will be carried out for procurement during Bank implementation review missions (frequency of procurement supervision missions proposed is at least once every six months), and through annual ex-post procurement audits. Post reviews of contracts awarded below the prior-review threshold levels will be carried out selectively by Bank during supervision missions and/or by an independent procurement auditor. Given the low capacity of the MoET, at a minimum, two out of five contracts will be subject to post review. In addition, post-reviews of in-country training will be conducted from time to time to review the selection of institutions / facilitators / course contents / trainees, justifications thereof and costs incurred.

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20. Annual independent physical verification of contract implementation will be carried out by the Association in order to:

a) verify that the procurement and contracting procedures and processes followed for the project were in accordance with the Financing Agreement;

b) verify technical compliance, physical completion and price competitiveness of each contract in the selected representative sample;

c) review and comment on contract administration and management issues as dealt with by participating agencies;

d) review capacity of participating agencies in handling procurement efficiently; and,

e) identify improvements in the procurement process in light of any identified deficiencies.

21. Contract award and disclosure requirements for ICB procurement method shall be consistent with Paragraph 2.60 of the Guidelines: Procurement under IBRD Loans and IDA Credits, May 2004, and revised October, 2006 and May, 2010. Within two weeks of receiving the Bank’s ‘no objection’ to the recommendation of contract award, the Borrower shall publish in UNDB online and in dgMarket the results identifying the bid and lot numbers and the following information:

a) name of each bidder who submitted a bid;b) bid prices as read out at bid opening;c) name and evaluated prices of each bid that was evaluated;d) name of bidders whose bids were rejected and the reasons for their rejection; and,e) name of the winning bidder and the price it offered, as well as the duration and

summary scope of the contract awarded.

22. Contract award and disclosure requirements for Direct Contracting procurement method shall be consistent will Paragraph 3.7 of the Guidelines: Procurement under IBRD Loans and IDA Credits, May 2004, and revised October, 2006 and May, 2010. After the contract signature, the Borrower shall publish in UNDB online and in dgMarket the:

a) name of the contractor;b) price;c) duration; and,d) summary scope of the contract.

This publication may be done quarterly and in the format of a summarized table covering the previous period.

23. Contract award and disclosure requirements for Consultancies shall be consistent with Paragraph 2.28 of the Guidelines: Selection and Employment of Consultants by World Bank

66

Borrowers, May 2004, revised October, 2006. After the award of contract, the Borrower shall publish in UNDB online and in dgMarket the:

a) names of all consultants who submitted proposals;b) technical points assigned to each consultant;c) evaluated prices of each consultant;d) final point ranking of the consultants; ande) name of the winning consultant and the price, duration, and summary scope of the

contract.

The same information shall be sent to all consultants who have submitted proposals.

24. Contract award and disclosure requirements for Selection Based on the Consultants’ Qualifications (CQS) shall be consistent with Paragraph 3.8 of the Guidelines: Selection and Employment of Consultants by World Bank Borrowers, May 2004, revised October, 2006 and May 2010. The Borrower shall publish in UNDB online and in dgMarket the:

a) name of the consultant to which the contract was awarded;b) the price;c) duration; and,d) scope of the contract.

25. This publication may be done quarterly and in the format of a summarized table covering the previous period.

26. Operating costs include the reasonable incremental operating costs under the Project, based on the Agreed Annual Work Plans, and incurred by the MoET on account of utilities and supplies, bank charges, communications, vehicle operation, maintenance, insurance, office space rental, building and equipment maintenance, public awareness-related media expenses, travel and subsistence, and salaries of contractual and temporary staff (other than consultant services), but excluding salaries members of the Recipient’s civil service.

27. Incentives means a cash transfer or a scholarship provided by the Recipient to a teacher as an incentive in connection with the implementation of sub-component 3.1, which will support the government to incentivize qualified teachers to accept and/or remain in posts in designated ‘difficult’ schools.

67

LESOTHO: BASIC EDUCATION PROJECT - SIMPLIFIED PROCUREMENT PLAN

This simplified procurement plan with the minimum content is required for disclosure on the Bank’s website in accordance with the Bank’s Procurement Guidelines, version May 2004, revised October 2006. The initial procurement plan covers the first 18 months of the project and will be updated annually or earlier as necessary.

I. General

1. Project information: Country: LESOTHO; Project Name: Basic Education Project Grant No.: TF097043, Project ID: P116426; Project Implementing Agency: Ministry of Education and Training (MOET).

2. Bank’s Approval Date of the Procurement Plan Original : 26th May 2010

3. Date of General Procurement Notice: TBA

4. Period covered by this procurement plan: 18 Months from June 2010 to November 2011

II. Goods and Works and Non-Consulting Services

1. Prior Review Threshold: Procurement Decisions subject to Prior Review by the Bank as stated in Appendix 1 to the Guidelines for Procurement: Thresholds for applicable procurement methods (not limited to the list below) are indicated in the PAD, the Grant Agreement and/or in the detailed procurement plan.

Expenditure Category Procurement Method Contract Value Threshold

(US$)

Contracts Subject to Prior Review

(US$ millions)1. Works (Including any Supply & Installation)

ICB NCB

Shopping

>=300,000,000>=100,000 - <3,000,000

<100,000

All ContractsAs in procurement plan

None

2. Goods ICBNCB

ShoppingDirect Contracting

>=500,000>=50,00 < 500,000

<50,000All values

All ContractsAs in procurement plan

NoneAll Contracts

Note: for all NCB, MoET will use Standard Bidding Documents agreed by the Bank. For Shopping, the MoET will use Standard Request for Quotations samples of which will have been approved by the Bank.

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Reference to Procurement Manual: The MoET will prepare and use a Procurement Procedures Manual which will be reviewed and approved by the Bank. The consultants responsible to update the Procurement Procedures Manual will be financed by the Government of Lesotho under the Free Primary Education Project Budget.

69

2. Procurement Packages with Methods and Time Schedule

1 2 3 4 6 7 8

Ref. No.

Contract (Description)

EstimatedCost$US

ProcurementMethod

Domestic Preference(yes/no)

Reviewby Bank

(Prior / Post)

ExpectedBid-Opening

Date A) Works: Construction of new classrooms (By District) B) Note: Contract packages for each district may allow for bidding evaluation and contract award on site by site

basis (school by school basis). In preparing bid documents, MOET has the option to combine the requirements for 2 or more smaller districts with IDA Prior approval of changes to procurement plan)

1. District: Thaba-Tseka(6 sites) 899,520.00

NCB No Prior 14-09-2010

2 District: Mokhotlong(6 sites) 726,720.00

NCB No Prior 14-09-2010

3. District: Qacha’s Nek(6 Sites) 720,720.00

NCB No Post 10-05-2011

4. District: Quthing(6 sites) 755,520.00

NCB No Post 10-05-2011

5. District: Mohale’s Hoek(6 sites) 725,599.98

NCB No Post 10-05-2011

6. District: Mafeteng(3 sites) 377,573.33

NCB No Post 10-05-2011

7. District: Maseru(5 sites) 566,826.66

NCB No Post 10-05-2011

8. District: Berea(3 sites) 329,573.33

NCB No Post 10-05-2011

9. District: Leribe(4 sites) 483,919.99

NCB No Post 10-05-2011

10. District: Butha-Buthe(4 sites) 426,506.66

NCB No Post 10-05-2011

11. WORKS: Construction of new classroomsTOTAL ALL DITRICTS

6,012,479.95

C) Goods: Furniture for new classrooms (By district)D) Note: Contract packages for each district may allow for bidding evaluation and contract award on site by site

basis (school by school basis), will all deliveries be made to each school site. In preparing bid documents, MOET has the option to combine the requirements for 2 or more smaller districts with IDA Prior approval of changes to procurement plan)

Ref. No.

Contract (Description)

EstimatedCost$US

ProcurementMethod

Domestic Preference(yes/no)

Reviewby Bank(Prior / Post)

ExpectedBid-OpeningDate

1. District: Thaba-Tseka(6 sites) 120,000.00

NCB NoPrior

08-08-2011

2. District: Mokhotlong(6 sites)

91,200.00 NCB No Prior 08-08-2011

3. District: Qacha’s Nek(6 sites) 91,200.00

NCB No Post 01-11-2011

4. District: Quthing NCB No Post 01-11-2011

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(6 sites) 96,000.005. District: Mohale’s Hoek

(6 sites) 96,000NCB No Post 01-11-2011

6. District: Mafeteng (3 sites) 48,800.00

NCB No Post 01-11-2011

7. District: Maseru(5 sites) 71,200.00

NCB No Post 01-11-2011

8. District: Berea(3 sites) 40,800.00

NCB No Post 01-11-2011

9. District: Leribe(4 sites) 63,200.00

NCB No Post 01-11-2011

10. District: Butha-Buthe52,800.00

NCB No Post 01-11-2011

11. GOODS: Furniture for new classroomsTOTAL ESTIMTATED AMOUNT ALL DITRICTS

771,200.00

E) Goods: Teaching and Learning materials including books 1. Textbooks for grade 1-7

including top-up and Learning Materials

100,000.00 NCB No Prior 05-10-2010

2. Goods: Teaching and Learning materials including books TOTAL ALL DISTRICTS

100,000

III. Selection of Consultants

1. Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to the Guidelines Selection and Employment of Consultants:

Expenditure Category Procurement Method

Contract Value Threshold

(US$)

Contracts Subject to Prior Review

(US$ millions)

.Consulting ServicesA) Firms

QCBS CQS, LCS, QBS, FBS

SSS

>=100,000<100,00

<All values

All ContractsNone

All Contracts

Consulting ServicesB) Individual

Consultants (IC)

Competitive selectionSingle Source Selection

>=50,000All Values

All ContractsAll contracts

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Note: In all cases of consultant’s selection for firms and or individual consultants, irrespective of selection method and estimated cost of the contract, the TOR or position description will be subject of prior review by the Bank.

Short list comprising entirely of national consultants: Short list of consultants for services, estimated to cost less than US$ 100,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

2. Consultancy Assignments with Selection Methods and Time Schedule

1 2 3 4 5 6 7Ref. No.

Description of Assignment

Estimated

Cost

(US$)

Selection Method

Reviewby Bank(Prior / Post)

Expected Proposals Submission Date

Comments

1. Site Survey support for decentralised construction of facilities

100,000.00 IC Prior August 2010 Consultants sanctioned by Ministry of Works will be preferred.

Various Individual Consultants to be hired to supervise the individual sites.

2. Quantity Survey and architectural support for decentralised construction of facilities

40,000.00 IC Prior August 2010

3. Works inspections and supervision support for decentralised construction of facilities

160,000.00 IC Prior August 2010

4. Quality of service delivery, teaching and learning in primary schools

220,000 QCBS Prior November 2010 To begin April 2011

5. Impact evaluation of the teachers’ incentives

40,000.00 CQS Post November 2011 Preliminary study

6. High early year repetition in primary schools

80, 000.00 CQS Post October 2010 To begin March 2011

7. Assessment of early grade reading

60,000.00 CQS Post October 2010 To begin March 2011

8. Assessment of early grade numeracy

60,000.00 CQS Post October 2010 To begin March 2011

9 Consulting Services: TOTAL ESTIMTATED AMOUNT ALL DITRICTS

680,000

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IV. Implementing Agency Capacity Building Activities with Time Schedule

1. In this section the agreed Capacity Building Activities are listed with time schedule

No Expected outcome /Activity Description

Estimated Cost (US$)

Estimated Duration

Start DateComments

1. Tendering and Contracting in Project Management provided by IDM in Lesotho

60,000.00 2 weeks July 2010

2. Training in World Bank Financed Procurement provided by ESAMI or GIMPA to be conducted in country (within Lesotho)

80,000.00 2 weeks July 2010

3. Procurement Training of the District Tender Panel by EFU and Ministry of Finance

------------- On going May 2010 MOET GoL and Ministry of Finance funding also to be used

4. Tendering and Contracting Training for the small and medium contractors

------------- On going On going Provided by the Ministry of Works

5. TOTAL Capacity Building and Training 140,000

Note: All training will be based on agreed training plan that will be prepared by the GOM and approved by the Bank and will include at the least the justification of the training identified and the capacity gap, the intended trainees, the name of the training provider, the duration and cost of training. After the training, the beneficiaries will be requested to submit a brief report indicating what skill have been acquired and how the skills will contribute to enhance his performance and contribute to the attainment of the project objective. The training plan will be prepared and submitted once a year and updated as required.

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Annex 9: Economic and Financial Analysis

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Lesotho Economic Trends1. The population of Lesotho is relatively stable (approximately 1.9 million inhabitants according to the 2006 census), as the rate of growth of population has slowed (while population growth from 1975 to 2005 was 1.8 percent, population growth from 2005 to 2015 is expected to be of 0.6 percent), and total population may even begin to decline in the coming years. This change in population dynamics is driven by both a demographic transition and by the impact of HIV (HIV prevalence of 23.2 percent) on both mortality and fertility. Lesotho’s population live mostly in rural areas, and it is mainly young (life expectancy at birth in 2007 was 44.9 years).

2. Lesotho’s economic performance has been uneven, but relatively healthy over the last decade, with growth rates ranging from 3-7 percent. Since 2004, economic growth has been driven by the garments and mining industries with agriculture paying a limited role. The stable population and economic growth have been reflected in steadily increasing GDP per capita. This increase was mainly the result of factor accumulation, which took place in an annual rate of 3.5 percent, accounting for approximately 105 of growth. Physical capital and labor accounted for approximately 74 percent and 31 percent, respectively. However, the economic future is uncertain. As an enclave economy, Lesotho’s economic performance is highly dependent on events in South Africa.

3. Lesotho’s economy is currently in transition, as retrenchment of workers from the mines in South Africa has reduced what were traditionally among the best paying employment opportunities. The average number of workers employed in the mines of South Africa declined by 5.5 percent in 2004, by a further 9.6 percent in 2005 and by 2.1 percent in 2006. More recently foreign-owned factories, particularly garments factories, have become major sources of waged employment. By 2008, the GoL estimated that garments factories directly employed 40,000 workers, and that the jobs of another 200,000 were linked with the garments industry. The presence of these factories is linked with the availability of concessional trade agreements which may not be maintained in the long term. In fact, in early June 2009, Lesotho, along with Botswana, Namibia, Swaziland, and Mozambique signed the Economic Partnership Agreement (EPA) with the European Union, which will impose changes in local industries to meet the quality demands of European markets. So far, Lesotho was exporting textiles mainly to the USA under the Africa Growth and Opportunity Act (AGOA).

4. Lesotho’s economy is also very much dependent on Southern Africa Customs Union (SACU) revenues. SACU involves an agreement under which all goods entering the union are taxed at the point of entry, and the revenue shared by an agreed formula. This formula is widely believed to favor Lesotho, and in effect provides the country with a significant subsidy from South Africa. With SACU revenues accounting from more than half of government revenue, Lesotho is vulnerable to a decline in its customs income, which is expected to arise from a decline in economic activity in South Africa (resulting in lower imports), and a change in the distribution formula (which has been discussed repeatedly).

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Table 1: Summary of economic indicators

  1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 

                   GDPMaloti millions

5,565 5,920 6,476 7,244 7,862 8,522 9,065 10,12011,27

3 12,723Constant 2000 prices (Maloti millions) 5,802 5,920 6,025 6,197 6,364 6,629 6,819 7,308 7,665 8,065US Dollars, millions 903 809 679 687 1,039 1,319 1,425 1,494 1,588 1,762                     GDP per capitaMaloti 3,223 3,395 3,679 4,080 4,389 4,715 4,968 5,493 6,061 6,781US dollars 523 464 386 387 580 730 781 811 854 939Real growth of GDP per capita 2.00% 1.80% 2.90% 2.70% 4.20% 2.90% 7.20% 4.90% 5.20% 2.00% 

                   ReferencePopulation thousands 1,727 1,744 1,760 1,775 1,791 1,808 1,825 1,842 1,860 1,876Exchange rate Maloti/US dollar. 6.163 7.318 9.538 10.544 7.567 6.461 6.361 6.774 7.099 7.221GDP deflator

95.91 100107.4

8 116.91 123.55128.5

5 132.93 138.48147.0

7 157.75Source: MoET, Education Sector Public Expenditure Review, 2008.

Government Expenditure

5. Government expenditure dominates the economy as a whole. Over the last decade, government expenditure has accounted for between 55 percent and 65 percent of GDP, and in the 2009, it rose to 73 percent. Much of this government expenditure is devoted to social spending, including education, health, old age pension, and provision of roads and water.

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Table 2: Government expenditure 2001/02 to 2009/10

Figures in Maloti millions

2001/02Actual

2002/03 Actual

2003/04 Actual

2004/05 Actual

2005/06 Actual

2006/07 Actual

2007/08 Actual

2008/09 Actual

2009/10 Budget

GDP 6,476.0 7,244.0 7,862.0 8,522.0 9,062.0 10,120.0 11,273.0 13,862.2 15,781.2GoL expenditure 3,595.0 3,740.6 4,276.3 4,714.5 5,108.4 5,766.8 7,408.0 7,721.3 11,446.3of which Recurrent 2,792.4 2,935.8 3,429.1 3,871.8 4,065.0 4,514.7 5,483.8 6,219.6 8,237.3of which Capital 802.60 804.80 847.20 842.70 1,043.40 1,252.10 1,924.20 1,501.70 3,208.99GoL expenditure as a percentage of GDP 55.5 51.6 54.4 55.3 56.4 57.0 65.7 55.7 72.5

6. Aid dependency is low, with external grants accounting for only 7.9 percent of government revenue. Customs revenue, which accounted for 58 percent of revenue in 2008/09, is derived mainly from the Southern Africa Customs Union (SACU). From 2004/05 onwards, mindful of the windfall from SACU revenues based on a booming economy in South Africa, the government followed a conservative fiscal policy, maintaining a surplus of income over expenditure, which was used to retire some of the highest interest debt. This policy changed in the 2009/10 fiscal year, and in response to the worldwide economy crisis the government announced an expansionary budget with a projected deficit equivalent to 10 percent of GDP.

Table 3: Government revenue, 2008/09 (budget)

Budget 08/09 (Maloti millions) percentageCustoms 5,082 58.4Income tax 1,051 12.1VAT and other taxes 1,140 13.1Non tax revenue 733 8.4Grants 690 7.9Total 8,696 100

Source: Ministry of Finance and Development Planning, budget speech 2009.

Education Expenditure7. Education expenditure has been increasing consistently year on year since 2002. Education spending is channeled through two ministries. The Ministry of Education and Training (MoET) finances all of the public education system, including the public university and other post secondary colleges. In parallel, the National Manpower Development Secretariat (NMDS), managed by the Ministry of Finance and Development Planning (MoFDP) provides bursaries for students, mainly at post-secondary level, in both public and private institutions. The total for Ministry of Education and Training expenditure more than doubled from 736 million Maloti in 2002/03 to a budget of 1,857 million Maloti in 2009/10. There was a particularly large increase of 48 percent in the 2009/10 fiscal year, driven by reform of teacher career structure, and a general increase in teacher salaries. NMDS expenditure also increased in the period, rising from 176 million Maloti in 2002/03 to 535 million Maloti in 2009/10.

8. Education expenditure (MoET and NMDS) has been consistently in excess of 20 percent of government expenditure, although declining from a peak of 26 percent in 2001/02 to 21

76

percent in 2009/10. This is the equivalent of 14 percent of GDP in 2001/02 and 15 percent of GDP on 2009/10. Recurrent expenditure accounts for 90 percent of total education expenditure. The government, as a matter of policy, avoids the use of donor funds to finance payroll costs. Payroll costs, of necessity, take priority within the budget, and as a result any overspend in payroll tends to be at the expense of capital expenditure. In consequence, capital programs are heavily reliant on donor funds and partly determined by the availability of resources.

9. Figure 1 and table 4 below highlight the growth in education expenditure from 2001/02 to 2009/10.

Figure 1: Growth of MoET and NMDS expenditure 2001/02 to 2009/10

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2,000.0

Mal

oti M

illio

ns

MoET expenditureNMDS bursary expenditure

MoET expenditure 818.5 736.2 828.7 865.2 955.4 985.0 1,154.1 1,246.8 1,856.7 NMDS bursary expenditure 120.0 176.3 216.6 246.4 265.9 298.6 423.8 450.5 535.7

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

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Table 4: MoET and NMDS expenditure 2001/02 to 2009/10

Figures in Maloti millions

2001/02Actual

2002/03 Actual

2003/04 Actual

2004/05 Actual

2005/06 Actual

2006/07 Actual

2007/08 Actual

2008/09 Actual

2009/10 Budget

MoET expenditure 819 736 829 865 955 985 1,154 1,247 1,857of which Recurrent 679 646 728 700 797 899 1,056 1,054 1,620of which Capital 139 90 101 166 159 86 99 193 237NMDS bursary expenditure 120 176 217 246 266 299 424 451 536Total education expenditure 939 913 1,045 1,112 1,221 1,284 1,578 1,697 2,392

Education expenditureAs a % of GoL 26.1 24.4 24.4 23.6 23.9 22.3 21.3 22.0 20.9As a % of GDP 14.5 12.6 13.3 13.0 13.5 12.7 14.0 12.2 15.2

10. The distribution of expenditure by sub-sector has remained relatively stable over time. Together Basic and Secondary Education account for between 55 percent and 63 percent of total expenditure. It is not possible to separate Primary and Secondary expenditures, as teachers for both levels are paid through the teaching services department budget line. While the number of teachers at each level is available, Secondary teachers normally have higher qualifications, and are paid at a higher rate. Post-Basic Education, including Tertiary, Technical Education and Teacher Training, receive between 34 percent and 41 percent of the expenditure, and 70 percent of the funding to these subsectors comes through student bursaries. A further 2-3 percent is absorbed in management costs.

Table 5: Education recurrent expenditure by subsectorIn Maloti millions 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10ECCD, Primary, Secondary and Curriculum 488 561 542 625 716 783 999 413TVET and Tertiary 135 140 137 146 148 157 168 126Management; Admin, Special projects, Planning and district mgt 23 27 21 26 35 53 53 140NMDS 176 217 246 266 299 424 451 120Total Education recurrent expenditure 822 945 946 1,063 1,198 1,416 1,671 799

As a percentage of education recurrent (incl NMDS) 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Basic and secondary 59.3 59.4 57.3 58.9 59.8 55.3 59.8 62.7TVET and Tertiary/ NMDS 37.8 37.8 40.5 38.7 37.3 41.0 37.0 34.2Management 2.8 2.9 2.2 2.4 2.9 3.7 3.2 3.1Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

11. The proportion of education expenditure devoted to Post-Secondary sub-sectors is relatively high, at about one third of total expenditure in the 2009/10 budget. A number of

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factors contribute to this high expenditure. Most of the funding to these sub-sectors is provided through the NMDS. At present, while entry to higher education is competitive, almost all of the successful applicants qualify for a full scholarship through the NMDS. Students are expected to repay all or part of the funds received following the completion of their studies, but the proportion to be repaid varies with the type of employment. The NMDS scheme supports very large numbers of students. In 2009 the NMDS was supporting 28,377 students, of whom 9,464 were in the first year of support. Of these new entrants, 7,200 were in post secondary courses. This is the equivalent of over 70 percent of the Form E enrollment (9,991 in 2009). Hence, for those who complete Form E, there is a high probability of a subsidized place in further education. The NMDS scholarship scheme is expensive, providing the full cost of fees and in many cases accommodation, at an average cost of 18,879 Maloti per student per year. The highest costs are for students supported to attend universities in South Africa or elsewhere abroad, where the average cost per student is over 49,000 Maloti per year.

Table 6: Students supported by NMDS (NMDS data, 2009)

InstitutionNo of

students New entrants Cost (Maloti)Cost per student

(Maloti)National University of Lesotho 7,399 1,945 184,957,500 24,998Lerotholi Polytechnic 2,012 800 46,301,200 23,013Other local institutions 5,597 2,250 74,136,354 13,246Post primary 8,778 2,819 31,886,317 3,633RSA universities 2,153 450 107,250,200 49,814International 228 100 10,568,500 46,353Limkokwing University 2,210 1,100 80,620,000 36,480Total 28,377 9,464 535,720,071 18,879

12. The government has argued that this high level of expenditure on Higher Education is necessary for a number of reasons. First, the national shortage of high level skills is a constraint to growth, and therefore investment in Higher Education is an important part of the national manpower strategy. Second, as a small country, Lesotho cannot sustain high level courses in key specialist areas, such as medicine and engineering and is therefore reliant on training citizens in external (and expensive) colleges. Third, as so few Basotho families could afford the full cost of Tertiary Education, the bursary scheme provides a mechanism for allowing more equitable access to employment in the modern sector. However, it is widely acknowledged that with the expansion of participation in Secondary Education, the almost automatic access to Higher Education bursaries cannot be sustained, and the scheme is currently under review.

Value of Investment in Education13. There is little detailed data on the returns to education available for Lesotho. Analysis for the Growth and Employment Options Study (World Bank, Country Economic Memorandum, 2005) indicates that education is an important correlate of wage employment. However, the relationship between wages and education was non linear. Education up to 11 years of schooling was associated with only a slight increase in earnings. However, for those who completed 12 years of schooling (i.e. completed secondary school), earnings were almost three times those of people with 11 years of education. Completion of secondary schooling is the entry point to both further education and to the higher paid waged employment in both public and private sectors.

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Table 7: Gross Attendance rates for secondary school, by wealth quintileMale Female Total

Lowest 4.9 7.1 5.9Second 12.5 17.6 15.0Middle 24.3 39.0 31.0Fourth 42.4 51.3 46.5Highest 69.2 84.8 76.8

Source: Government of Lesotho, DHS, 2005.

14. Economic modeling indicates that that the majority of the value added by labor comes from the high-skilled workers. For example, in the garments and textiles sector, it is calculated that 70 percent of the added value derives from the small number of high skilled workers, while only 30 percent is added by the much larger numbers of low-skilled laborers (World Bank, Country Economic Memorandum, 2005).

15. In spite of lack of specific data for the country, in Lesotho as elsewhere, if quality primary education is completed, important social and human outcomes are expected. Solid Basic Education of at least 6 years (in Lesotho, it is of 7 years) is a necessary condition for sustained literacy and numeracy. These are fundamental skills for work and further skills and knowledge development. The development of education, in particular post-basic education in Lesotho is perceived as a key component for sustained growth.

Fiscal Sustainability and Fiscal Risk16. The project inputs are mainly capital expenditure items, with low risks to sustainability. The provision of new classrooms has limited recurrent fiscal implications, as the classrooms are replacing existing structures, and there is no overall increase in the number of students or teachers. The government-financed classrooms are designed to a high physical standard, and designed specifically for longevity and low maintenance cost. This design has been in use for many years, and has proved durable. Schools are provided with a modest capitation grant of 8 Maloti per child per year, intended to finance recurrent expenses (mainly water charges) and small maintenance items. In addition some schools raise funds informally from parents to finance repairs to the physical infrastructure, although this is in breach of the free primary education policy.

17. The provision of books has a medium term fiscal implication, as books are expected to last for five years. In practice existing titles are normally replenished annually as required by the school supply unit, with funds from government sources. By providing textbook to subjects where there are still deficits this project will contribute to an increase in the cost of book replacement in the medium term. Estimated cost is 20 percent of the initial purchase price per annum, after the first two years. However, the procurement methods used in the first two phases of FTI have already lowered the cost per book by approximately 30 percent, by increasing the competition in the selection process. 18. The provision of reception classes has recurrent cost implications. Given the budgetary constraints imposed by the effects of the financial crisis, the project is only supporting the expansion of 20 new reception classes. However, it is supporting 100 already existing classes.

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Although the costs are modest, this sub-component represents recurrent costs of US$1.9 million. The cost of reception classes may in part be offset by a reduction in wasteful repetition. Currently, almost 30 percent of children repeat grade 1, and it is expected that provision of good quality reception classes will assist in reducing this repetition.

19. The qualified teachers in ‘difficult’ schools scheme was designed to test two options targeting at increasing the level of teacher qualification in remote and/or difficult to access areas. The two options have different recurrent costs, and it is expected that after the three years of project implementation, and as well, after the results of the associated impact evaluation, information may be provided to the authorities on how best proceed so as to ensure sustainability of qualified teachers in ‘difficult’ schools. One option considers the provision of a grant to teachers who accept to move or stay in ‘difficult’ schools, and it costs US$1.28 million per year for a total of 800 teachers. The other option, which considers the provision of training scholarships, has no recurrent costs, although it may need to be implemented for some time even after the three years of the project duration.

20. Overall therefore, the project involves an investment of $26.8 million over three years, with an annual recurrent cost of $3.27 million, i.e. 8.5 percent of the total investment.

Fiscal Risk21. The proposed project is consistent with the medium term expenditure framework. However there is some concern that the government expenditure projections may prove unrealistic, in the light of the overall macroeconomic situation. In response to the global economic downturn, the government has planned an expansionary budget, with a deficit of equivalent to 10 percent of GDP. At the same time the economy may be impacted by a decline in garment exports to the US, and a decline in SACU revenues resulting from a weakening of the South African economy. These circumstances may force a revision of planned expenditure including reductions in education spending. Any reduction in education expenditure is likely to result in significant cuts in government capital expenditure initially. In view of these uncertainties, it is important that the project retain the flexibility to reallocate resources on an annual basis in the event of significant changes in government expenditure.

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Annex 10: Safeguard Policy Issues

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Environmental Issues

1. The project’s main environmental safeguard issues are related to the construction of about 330 primary school gender sensitive and disability friendly classrooms, along with 100 toilet blocks for identified primary schools. Because all civil works will be carried out in existing sites, i.e. existing schools, no additional adverse impacts are envisaged as a result of project activities. Thus, the environmental and social management framework (ESMF) prepared for IDA credit ESDP II has been updated with an addendum, and was disclosed in the country on 09/14/2009 and at the World Bank Infoshop on 04/28/2010.

2. The implementation team within the Education Facilities Unit (EFU) at the MoET does not have a dedicated and qualified environmental specialist for ensuring compliance with environmental safeguards during school construction. The consultant to be engaged by the EFU as an inspector of works will have environmental management skills that will enable him/her to monitor and report on environmental safeguards compliance for all sub-projects. The consultant will report directly to the Team Leader who will ensure that environmental safeguards compliance report are submitted to the Bank on a quarterly basis together with other fiduciary reports. A simplified reporting format has been prepared for purposes of streamlining the reporting process for the EFU as follows:

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Reporting Format for Environmental Safeguards Compliance during Schools Construction

in Lesotho

ITEM DESCRIPTION COMMENT/S1. Description of Project/

ActivityContract No.; Location; size; schedule for implementation; any alternatives considered

Any relevant comment

2. Description of Environment

A brief description of the physical, ecological, and human aspects of the site and its surroundings

Any relevant comment

3. Impact Description and Evaluation

1 Brief account of significant impacts likely to occur if no mitigation occurs. 2.Mitigation Plan Summary Table; OR3. If a detail EMP is needed because of the nature and extent of expected impact, then a recommendation to this effect should be made.

Any relevant comment

4. Impact Management 1. Description of mitigation measures, monitoring program and schedule of implementation.2. Technical and institutional requirements for successful implementation.

Any relevant comment

5. Summarized description of the mitigation plan identifying: Impacts to be prevented or reduced in severity Benefits to be enhanced Mitigation measures to achieve the above Cost, institutional or training requirements Monitoring programs to track project related impacts and implementation of

mitigation measures Community liaison procedures needed Schedule for implementation/targets Reporting procedures Work programs Budget Staffing and training requirements.

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Safeguard Policy Issues

3. The project has been categorized as Category B – Partial Assessment in line with World Bank Operational Policy 4.01 (OP/BP 4.01) for Environmental Assessment. An addendum to the existing ESMF was done and disclosed attached to the original document in the country and in the World Bank Infoshop. As confirmed with the Government of Lesotho, no land acquisition is anticipated, because all construction and rehabilitation activities will take place within the perimeters of existing educational institutions. The land parcels allocated by the government to the specific schools for education infrastructure purposes have no claims on them. Therefore, a separate Resettlement Policy Framework was not prepared and OP 4.12 will not be triggered.

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment (OP/BP 4.01) X [ ]Natural Habitats (OP/BP 4.04) [ ] XPest Management (OP 4.09) [ ] XPhysical Cultural Resources (OP/BP 4.11) [ ] XInvoluntary Resettlement (OP/BP 4.12) [ ] XIndigenous Peoples (OP/BP 4.10) [ ] XForests (OP/BP 4.36) [ ] XSafety of Dams (OP/BP 4.37) [ ] XProjects in Disputed Areas (OP/BP 7.60)* [ ] XProjects on International Waterways (OP/BP 7.50) [ ] X

Social Assessment

Context4. The purpose of the project is to provide improved facilities at existing primary schools, support and contribute to expand access to pre-primary education, and support improvements in quality of teaching. In order to increase access to education, it is important to understand social issues which impact and constrain students from accessing and attending school. Prior to 2000, school fees were required for all grades. Starting in 2000, the Ministry of Education implemented Free Primary Education (FPE) on a phased basis, starting from grade 1. The introduction of FPE resulted in a very significant increase in enrollment in the free grades, with a grade 1 intake in 2000 of almost double the age cohort. Included in this enlarged intake were many teenage and even adult learners taking the opportunity to attend primary school. Nevertheless there remain some children out of school, and some schools have reintroduced informal fees. The government is preparing legislation to make primary education both free and compulsory, to ensure that all children have the opportunity to attend school.

5. In Lesotho differences exist between populations residing in the more rural, remote, and rugged highlands region compared to those living in the more populated, less rugged lowlands region. Lesotho has a history of a fairly equal proportion of girls and boys who attend school. In the recent past it was more likely that girls, especially in the highlands region, would be

** By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas.

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encouraged to further their education into secondary and higher grades. The cultural view was that girls would need to find jobs whereas boys do not need formal education, as they would be able to find employment through tending livestock or mining.

6. As populations move towards the larger towns and cities, located in the lowlands, gender proportions and school attendance trends shift such that a greater number of boys are in secondary schools and pursuing higher education opportunities. This is due to the fact that girls, in larger towns and cities, are needed to stay at home to assist with domestic work. At the same time, there is no livestock for boys to tend and therefore would be sent to school. A decrease in mining employment also contributed to boys being sent to school so that they would also find employment opportunities once they graduated.

Livelihood7. A greater proportion of the population living in the highlands is stricken with poverty than those living in the lowlands. Populations living in the highlands rely heavily on livestock and subsistence farming. In the recent past, men would find employment as mine workers. Increasing unemployment in the mining sector has led to able-bodied men returning to tend and own livestock. As a result, stock theft has begun to rise. For rural poor relying on livestock if they experience any loss of livestock their livelihood is destroyed. This is especially the case for women-headed households, as women tend to be the first victims since they are more vulnerable to theft. Without their livelihood (livestock) a person or family may be forced to rely on aid and therefore would have no money for providing basic needs, and therefore would not be able to afford school fees.

8. It is not uncommon for a boy to be hired out to tend livestock. The payment of one cow per year benefits the family caring for the boy, not the individual boy. Because of this the family may decide to continually hire out the boy such that no opportunities exist for attending school. The situation is made even worse as herd boys are given the worst blankets, worst shoes, and must live in stick shacks through harsh winter weather in the mountains. In the lowlands, where there is less reliance on livestock, boys are no longer hired out. Instead, the girls are sent out in search of employment, usually in domestic services.

School Locations9. In the mountainous highlands, schools tend to be far apart and quite remote. Some students must walk two or more hours, up and down mountains, to attend school. This is more dangerous for girl students who risk being attacked along the way. The added burden of such a distance means students do not have enough time in the evening to both study and complete household subsistence chores. Even fewer students will attend during the winter months due to the harsh winter weather.

10. In the lowlands, terrain is less rugged with more populous communities, towns, and urban areas. There are more schools located within closer vicinity thus allowing for greater accessibility. Shorter distances allow for safer and shorter transit time. This combined with the fact that fewer families rely on livestock and subsistence agriculture in the lowlands provides students more time after school to study.HIV/AIDS and Orphans

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11. The effects of HIV/AIDS have taken a larger toll in the poorer areas of Lesotho, especially the highlands. Not only may it be difficult to receive medicine, but also poverty stricken households have poorer nutrition and greater food insecurity. When family members fall ill or die, girls are expected to care for the sick and orphaned siblings. In families stricken with illness and/or poverty, children become an additional, or sole, source of livelihood. Head Teachers have noticed that those who need to repeat upper classes tend to be orphans as they do not attend school regularly.

12. Children are categorized as a single orphan if one parent has died or double orphan if both parents have died. During the initial impacts of HIV/AIDS, extended family members would take in orphans. As the disease became more prevalent, and the number of orphans increased, families could no longer absorb more orphans thus children are left to care for themselves. Orphans are also beginning to stay in their family’s home to avoid property grabbing. In some cases a family or community member will move in with the orphan to provide care.

13. In order to assist students impacted by HIV/AIDS, two teachers per school are trained to serve as councilors. Teachers, as councilors, provide psycho-social support to those who have HIV-positive family member(s) or if the student is HIV-positive. For HIV-positive students councilors will assist with ensuring the student has access to proper medicine. The new teaching structure being established by the Ministry of Education is expected to provide more economic support to those teachers who also serve as councilors.

Early Marriage and Pregnancy 14. Girls are often pushed into early marriages, especially if they are a double orphan. A family will force a girl to marry so the burden of caring for her shifts to the husband’s family. A married girl is unlikely to go to school, as they will now be expected to take care of domestic chores and provide services for the new family.

15. Early Pregnancy tends to be more common in urban areas than in rural areas. Remote areas uphold traditions where boys and girls are culturally more separate than in urban areas. Also, parents who have the means are willing to rent apartments and send their child to urban areas to attend school. This leaves students in urban settings without adult supervision. Girls who become pregnant will need to leave school in order to take care of her child, while boys are not burdened with the responsibility of caring for any child they fathered.

Assistance for Orphans and Vulnerable Children16. The Ministry of Education and Training provides bursaries to the most needy students. In 2008, 19,200 bursaries were distributed. MoET seeks assistance from donor partners and NGOs once their own budget can no longer fulfill requests. With the introduction of free primary school, more bursaries can now be directed towards secondary school opportunities. All double orphans are granted a bursary if a request is given to the Ministry. Remaining bursaries are provided to abandoned children, a single orphan with a sick remaining parent, a child with disabled parent(s) which prevents the parent from earning a living, and children with parents who are over age 55. Support is also provided to children with disabilities. In order to receive a

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bursary the child must be of school going age and attending a registered government, community, or church school.

17. Awarding bursaries was launched in the 2001-02 school year. A student, government or school official, community chief, relative, or other interested person would provide an application letter to the Ministry. Application letters need to be accompanied with a letter from the Chief, who confirms the neediness of the applicant, and certified copies of death certificate(s). If a parent is still alive yet unable to earn an income, the application must also be accompanied with a medical letter confirming a parent’s unfit condition to earn a living.

18. The Ministry relies on community chiefs to identify orphans as the chief will know lineage, family status, and whether or not a child’s parents have died. There has been a push in Lesotho to ensure deaths are immediately reported and officially documented to ensure proper records are available on orphan status. Teachers are also instrumental in identifying vulnerable students and ensuring bursaries truly go to the most needy.

19. Individual schools have also taken initiatives to assist the most vulnerable. These initiatives include:

a) Teachers provide food, clothing, and money;b) Students collect clothes to be distributed to the most needy students;c) Fund raising events;d) Establishing a partnership with community and businesses to provide supplies on behalf

of needy students;e) A partnership arranged with taxi owners to offer lower transportation costs for orphans

and vulnerable children; andf) Waive tuition costs, including board and lodging.

Early Childhood Care and Development20. Pre-primary education is provided mainly through private Early Childhood Care and Development centers. As ECCD is financed through fees charged to parents, access to ECCD is lower among the poorest families. In poorer areas there is some use of home-based care centers, using volunteers from the community. The number of centers, however, remains very small. The MoET has piloted the use of reception classes providing one year of pre-primary education at primary schools as a mechanism to improve the equity of access to pre-primary education. Children in reception classes are provided with school meals, and engage in a series of educational and developmental activities.

21. Teachers notice better performance from students who attended some form of pre-school prior to entering primary school as these students are less afraid, have a better understanding of the language, speak more freely, understand how to interact in a classroom setting, and know some letters and numbers. The Ministry intends to expand the provision of reception classes, especially in the remote and underprivileged highlands region. The Ministry will also continue to support home-based care by providing parenting manuals, training of care providers, producing home-based care curriculum, and actively mobilizing communities to create home-

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based care opportunities. The MoET is also negotiating the provision of school meals at the home-based care centers, which may help to retain both volunteers and children.

Boarding School Initiatives22. There are some schools in Lesotho which provide boarding opportunities for students who stay at the facility throughout the school session. Due to the significant reliance in the highlands on children to assist with household subsistence, such as tending livestock or assisting with farming activities, parents are unwilling to allow a child to be absent for extended periods. To address this, the Ministry is considering establishing boarding facilities, where the student will reside at the school during the week and return home for weekends to assist the family. The weekly boarding facilities would include a matron who would be able to assist students with homework as well as ensure a student has proper nutrition. This would be advantageous to students, especially in the highlands, who live in households with parents who have little or no education and therefore are unable to assist children with school work.

23. Other advantages to this arrangement include less time spent traveling long distances each day to school in harsh conditions, more time available to concentrate on school work in an environment conducive to studying, and increased safety for girl students who are currently vulnerable to abuse and assault as they walk to school. If a child is able to return home each weekend to assist with household subsistence, parents would be more willing to allow their child to be absent during the week.

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Annex 11: Project Preparation and Supervision

LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Planned ActualPCN review 01/13/2009 01/13/2009Initial PID to PIC 08/24/2009 05/25/2010Initial ISDS to PIC 08/24/2009 04/22/2010Appraisal 09/01/2009 09/24/2009Negotiations 05/13/2010 05/14/2010Board/RVP approval 06/29/2010Planned date of effectiveness 08/02/2010Planned date of mid-term review 01/01/2012Planned closing date 06/30/2013

Key institutions responsible for preparation of the project:

Ministry of Education and Training

Bank staff and consultants who worked on the project included:

Name Title UnitCristina Panasco Santos

Luis Benveniste

Senior Education SpecialistTask Team Leader

Lead Education Specialist

AFTED

AFTEDAidan MulkeenHusam Abudagga

Senior Education SpecialistSenior Country Officer

AFTEDAFMLS

Wedex Ilunga Procurement Specialist AFTPCChintambala John Sikazwe Procurement Specialist AFTPCGert Van Der Linde Lead Financial Management Specialist AFTFMJonathan NyamukapaJoseph ByamuguishaSuzanne MorrisThomas Jeffrey RaminVictoria Gyllerup

Senior Financial Management SpecialistConsultant

Senior Finance OfficerSenior Operations OfficerSenior Operations Officer

AFTFMAFTFMCTRFCAFTRLAFTRL

Warren Waters Regional Environmental and Safeguards Advisor AFTQKThandiwe Gxaba Senior Environmental Specialist AFTENKristine SchwebachAnthony MolleMarie-Hèlene CloutierHana YoshimotoMary GreenRosario Aristorenas

Operations AnalystCounsel

Extended Term ConsultantKnowledge Management Analyst

Program AssistantProgram Assistant

AFTCSLEGAFAFTEDHDNEDAFTEDAFTED

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Luc LapointeDavid WeekMike KiernanPeter MoockYesim YelmazJacob Bregman

ConsultantConsultantConsultantConsultantConsultantConsultant

Bank funds expended to date on project preparation:1. Bank resources: US$42,0002. Trust funds: US$143,0003. Total: US$185,000

Estimated Approval and Supervision costs:Remaining costs to approval: US$30,000Estimated annual supervision cost: US$100,000

Annex 12: Documents in the Project File

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Lesotho: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Aide Memoires for supervision missions, 2004-2009.

Carr-Hill, R, Sebatane, M and Caraher, M, 2002, Evaluation of the School Feeding program in Lesotho.

Examinations Council of Lesotho, 2006, National Assessment of Educational Progress.

Government of Lesotho, 2004, Demographic and Health Survey.

Government of Lesotho, 2006, Lesotho Housing and Population Census 2006 preliminary results.

Hua, H, 2007, Report on Primary School Enrollment in Lesotho.

IMF (2008) IMF Country Report No 08/135, April 2008, Kingdom of Lesotho: Selected Issues and Statistical Appendix.

Livingstone, G, 2006, The Finalization of the Teachers Career Structure, Lesotho.

Ministry of Education and Training, 2006, Report of the National Education Dialogue.

Ministry of Education and Training, 2007, Medium Term Expenditure Framework for the Education Sector in Lesotho, April 2007 to March 2010.

Ministry of Education and Training, 2008, Public Expenditure Review of the Education Sector.

Moshapane, C, 2004, Multigrade Teaching in Lesotho.

Population Reference Bureau, 2003, Lesotho Demographic Analysis and Projections Note.

Statement of Intent between the MoET and the development partners in education, 2004.

World Bank, 2005, Lesotho Country Economic Memorandum, Growth and Employment Options Study.

World Bank, 2005, Primary and Secondary Education in Lesotho, a Country Status Report.

World Bank, 2006 Lesotho Teachers Issues, An examination of teacher supply, management and finance.

World Bank, 2006, Lesotho Country Assistance Strategy.

World Bank, 2008, Lesotho. Sharing Growth by Reducing Inequality and Vulnerability: A Poverty, Gender, and Social Assessment.

Annex 13: Statement of Loans and Credits

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Lesotho: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

P108143 2009 LS-Water Sector Imp. Proj (Second Phase) 0.00 25.00 0.00 0.00 0.00 26.17 0.00 0.00

P075566 2007 LS-Integr Transp SIL (FY07) 0.00 23.50 0.00 0.00 0.00 9.50 6.70 0.00

P088544 2007 LS-Priv Sec Competitiveness 0.00 8.10 0.00 0.00 0.00 6.70 1.84 0.00

P076658 2006 LS-Health Sec Reform Phase 2 APL (FY06)

0.00 6.50 0.00 0.00 0.00 2.11 1.71 0.00

P056418 2005 LS-Water Sec Improvements APL (FY05) 0.00 14.10 0.00 0.00 0.00 7.07 6.38 4.91

Total: 0 77.2 0 0 0 51.55 16.63

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LesothoSTATEMENT OF IFC’s

Held and Disbursed PortfolioIn Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

Total portfolio: 0 0 0 0 0 0 0 0

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

Total pending commitment: 0 0 0 0

Annex 14: Country at a Glance

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LESOTHO: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

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Annex 15: Map IBRD 33494

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Lesotho: Basic Education Project EFA Fast Track Initiative Catalytic Fund Grant

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