AFRICAN DEVELOPMENT BANK

ZIMBABWE

EMERGENCY POWER INFRASTRUCTURE REHABILITATION

PROJECT - PHASE II STAGE II

RDGS/PGCL DEPARTMENTS

June 2017

Publi

c D

iscl

osu

re A

uth

ori

zed

P

ubli

c D

iscl

osu

re A

uth

ori

zed

TABLE OF CONTENTS

EXECUTIVE SUMMARY v

1. STRATEGIC THRUST & RATIONALE 1

1.1 Project Linkages with Country Strategy and Objectives 1

1.2 Rationale for Bank’s Involvement 2 1.3 Donor Coordination 3

2 THE PROJECT DESCRIPTION AND FINANCING PLAN 3

2.1 Project Background and Origin 3

2.2 Project Objective 4

2.3 Project Components 4

2.4 Project Cost and Financing Arrangements 5

2.5 Bank Group experience, lessons reflected in project design 6

2.6 Key Performance indicators 6

2.7 Project Implementation Status 8

3 PROJECT FEASIBILITY 8

3.1 Economic and financial performance 8

3.2 Environmental and Social Impact 9

4 IMPLEMENTATION 12

4.1 Implementation Arrangements 12

4.2 Financial Management 12

4.3 Disbursements 13

4.4 Procurement Arrangements Phase II Stage II 13

4.5 Monitoring & Evaluation 14

4.6 Risk Management 14

5 JUSTIFICATION FOR FUNDING 15

6 LEGAL INSTRUMENTS AND AUTHORITY 16

6.1 Legal Instrument 16

6.2 Conditions Associated with Bank’s Interventions 16

7 RECOMMENDATION 16

Appendix 1 - Map of the Country and Location of the Project Areas

Appendix 2: Status of Emergency Power Infrastructure Rehabilitation Project – Phase I

Appendix 3 – Status of Zim-Fund Resource Mobilization

Appendix 4 – Status of Active Country Portfolio as at 31 May 2017

Appendix 5 – Project Risk Matrix

i

Grant Information

Client’s Information

Recipient: Republic of Zimbabwe

Executing Agency: Zim-Fund MDTF Management Unit

Financing plan

Source Amount

(Million USD )

Instrument

ZIM-FUND (Phase II-Stage I)

ZIM-FUND (Phase II Stage II)

TOTAL COST

15.42

7.32

22.74

Grant (Approved in 2013)

Grant

Grant

ADB’s key financing information

Loan / grant currency

USD

FIRR, NPV (base case) (13.9%, USD17.30million)

EIRR (base case) (38.0%, USD271.60million)

Timeframe - Main Milestones (expected)

Project approval 19 April 2017

Effectiveness 30 April 2017

Completion (Phase II Stage II) 31 January 2019

Project Closing (Phase II Stage II) 31 March 2019

Project SAP Code:

EPIRP PH II Stage I P-ZW-FA0-002

EPIRP PH II Stage II P-ZW-FA0-014

Currency Equivalents

February 2017

1 UA = 1.358 USD

Fiscal Year

1 Jan – 31 Dec

ii

Weights and Measures

1 metric tonne = 2204 pounds (lbs)

1 kilogramme (kg) = 2.200 lbs

1 metre (m) = 3.28 feet (ft)

1 millimetre (mm) = 0.03937 inch (”)

1 kilometre (km) = 0.62 mile

1 hectare (ha) = 2.471 acres

Acronyms and Abbreviations

AfDB African Development Bank M&E Monitoring and evaluation

ADF African Development Fund MMU MDTF Management Unit

EIRR Economic Internal Rate of Return MOE Ministry of Environment

EOCK MOEPD Ministry of Energy and Power Development

ESMP Environmental and Social Management Plan

MOFED Ministry of Finance and Economic

Development

EPIRP Emergency Power Infrastructure

Rehabilitation Project

POC Programme Oversight Committee

ESIA Environmental and Social Impact Assessment STERP Short Term Emergency Rehabilitation

Program

FIRR Financial Internal Rate of Return T&D Transmission and Distribution

IG Inclusive Government Tx Transformer

I-PRSP Interim-Poverty Reduction Strategy Paper USD United States Dollar

kV Kilovolt (1,000 volts) VAR Volt-Ampere Reactive

MDTF Multi Donor Trust Fund WACC Weighted Average Cost of Capital

MTP Medium Term Plan ZESA Zimbabwe Electricity Supply

Authority

MVA Megavolt ampere (1,000 kVA) ZETDC Zimbabwe Electricity Transmission

and Distribution Company

PA Procurement Agency Zim-Fund Zimbabwe Multi-Donor Trust Fund

PFM Public Finance Management ZPC Zimbabwe Power Company

PMT Project Management Team

iii

Result-based Logical Framework (As agreed with Project Oversight Committee, represented by Government and all contributing Donors)

Country and project name: Zimbabwe, Emergency Power Infrastructure Rehabilitation Project: Phase II Stage II Purpose of the project : Improve availability and reliability of electricity supply to critical social infrastructure facilities and the people of Zimbabwe

RESULTS CHAIN

PERFORMANCE INDICATORS MEANS OF

VERIFICATION RISKS/MITIGATION MEASURES Indicator

(including CSI) Baseline

(year) Target

IMP

AC

T

Improved health of the

people in targeted areas.

Diarrheal morbidity in

children under 5

7.2/1000-2010 <7 (2018) National

statistics, DHS

(Demographic

and Health

Surveys

OU

TC

OM

ES

Re-establishing capacity at Sherwood and Orange Grove to increase available power supply and improve reliability of supply to Gimboki Sewerage works

1.1 Percentage of customers with access to firm transformer capacity at Transmission level

1.2 Number of outages experienced at Gimboki Sewage Treatment Works

43% in 2016 600 hours/ year (2016)

63.5% in 2018 12 hours per year (2018)

ZESA Holdings Quarterly and Annual Progress Reports

Risk 1: Vandalism of rehabilitated facilities Mitigation Measures: Enactment and enforcement of legislation that criminalizes

acts of vandalism and reduction in power outages ensuring that the system is live most of the time. Improve customer communication and feedback options.

OU

TP

UT

S

1. Power infrastructure rehabilitation 1.1 Transmission Transformer capacity increased, Sherwood

1.1 Total Transformer capacity at targeted transmission substations

445MVA in 2016

620 MVA in 2018

EPIRP II Stage II monthly progress reports/ ZETDC reports

Risk 2: Political instability in the run up to the 2018 harmonized elections could lead to

disruption of project implementation. Mitigating Measures: Continued dialogue with Government of Zimbabwe so they ensure a conducive environment and maintain stability during implementation and completion of national project

1.2 Sub-Transmission and

Distribution Capacity Strengthened, Orange Grove

1.2 No. of procured and

installed transformers (with accessories) commissioned.

0 in 2016 2 in 2018

1.3 New 33kV supply line to Gimboki Sewerage works.

1.3 Length of Electricity line constructed

0 km in 2016 2.2km constructed in 2018

INPUTS

KE

Y

AC

TIV

ITIE

S

Component I Installation of 1 x 175MVA, 330/(132)88/11kV Transformer and associated Switchgear at Sherwood substation Installation of 1 x 50/75MVA, 132/33kV Transformer and associated Switchgear at Orange Groove substation Construction of a 2.2 kilometres, 33kV dedicated line to Gimboki Sewerage works

Component II Provide Project Management, engineering design and supervision services Provide Procurement Services Project audit

Components of Phase II Stage II (USD Million)

I. Power infrastructure rehabilitation

$6.30

II. Project Management $0.42

Contingency $0.60

TOTAL $7.32

iv

Project Implementation Schedule

Activity

Project completionProject Disbursement Deadline

1 2 3

2019

8 9 10 11127 8 9 10 11 9 # 11

Preparation of Terms of References for servicesProcurement of Contractors and consultantsStage I Transmission Works (Marvel and Chertsey substations)Stage I Distribution Works Stage I Services (Hwange Power Station)Stage I Goods (Hwange Power Station)

2 38 9 #1 2 3 4 5 6121 2 3 4 5

Project Audit

Board Approval of Additional FinancingSigning of Grant Additional Financing Recruitment of Project Implementing Entity & Procurement AgentProject Management and procurement services Project launchingPreparation of design, specifications and tender document

POC Project Appraisal ApprovalNegotiationTranslation and processing for BoardBoard Approval of ProjectSigning of Grant for Stage IEffectiveness

# 11 #

2016201520142013

111 #121 2 3 4 5 67 8 4 56 77

Schedule for Emergency Power Infrastructure Rehabilitation Project - Phase II

Board Approval

Additional Financing

2017 2018

Stage II Transmission Works (Sherwood & Orange Grove)

7 8 9 10 11 121 2 3 4 5 66 7 8 9

v

EXECUTIVE SUMMARY

In its administrative capacity of the Zimfund, the Bank presented for approval Phase II of the

Emergency Power Infrastructure Rehabilitation Project (EPIRP) on 18 December 2013 with a total

estimated cost of US$32.94 million. The project aims to support of electrical infrastructure

development in Zimbabwe and will contribute to the economic recovery process, improving the

livelihood of general Zimbabweans. However at the time of Board approval, the Donor funds were

inadequate to cover the total project scope. It was therefore agreed to split the overall project scope

into two stages to match the availability of grant funding. Stage I of the program was covered by

US$15.42 million that was available at the time and was approved in 2013. The Board was

informed at the time that management would resubmit the project seeking approval for the

remaining amount (US$ 17.52 million) once more resources became available from the ZimFund

donors.

During the Programme Oversight Committee (POC) meeting held on 29 January 2016, POC

members approved the funding of the US$7.32 million towards EPIRP Phase II Stage II. The

Donors have also confirmed that there will be no further commitments for the Zim-Fund. It is

against this background that management is now seeking approval for the funds to be committed

to EPIRP II Stage II based on the original approved scope.

The objective of the project is to improve the availability and reliability of electricity supply

through the rehabilitation of transmission and distribution facilities in Midlands and Manicaland

provinces. The project was also formulated to further the benefits and impacts of Phase I whose

components included the rehabilitation of the power generation, transmission and distribution

infrastructure throughout the country. The Project target areas are Kwekwe, Gweru and Mutare

with a combined target population of 2 million people.

The Phase II Stage I programme (US$ 15.42 million) focused on the Plant Drain System

Containment and Effluent Treatment Study at Hwange Power Station, rehabilitation of two power

transmission substations in Bulawayo and Gweru and rehabilitation of power distribution facilities

for water supply and waste water treatment plants in Harare. The project was launched in March

2014 and is now under implementation with a planned completion date of November 2018. It

should be noted that the current services of the Procurement Agent and Implementing Entity for

Phase II Stage I already cover Stage II activities.

The processing and implementation of the project will be guided by the Operations Manual

developed for Zim-Fund. The implementation arrangements will remain the same as for EPIRP

Phase II Stage I and the project will receive regular follow up and supervision from the Bank,

Multi-Donor Trust Fund Management Unit (MMU) and other Government of Zimbabwe

structures. The POC will continue to provide policy and strategic guidance.

1

REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE AFDB GROUP

TO THE BOARD OF DIRECTORS ON A PROPOSED GRANT FUNDING TO ZIMBABWE

FOR THE EMERGENCY POWER INFRASTRUCTURE REHABILITATION PROJECT

(EPIRP) PHASE II STAGE II.

Management hereby submits this report and recommendations for grant funding amounting to US$

7.321 million to the Republic of Zimbabwe from the resources of the Multi-Donor Trust Fund (Zim-

Fund) to finance part of the shortfall on the EPIRP Phase II. When EPIRP II was presented and

subsequently approved by the Board on 18 December 2013, the total budget for the entire project was

US$ 32.94 million. The Board was informed that only USD 15.42 million was available and this would

constitute EPIRP II Stage I and when donors make more commitments, then management would come

back to the Board for approval of the financing towards the scope for EPIRP II Stage II remaining.

1 STRATEGIC THRUST & RATIONALE

1.1 Project Linkages with Country Strategy and Objectives

1.1.1 The project is consistent with the Zimbabwe Agenda for Sustainable Socio-Economic

Transformation (Zim-ASSET), Government’s blue print for development (2013-2018) in which

Infrastructure and Utilities is one of the four pillars of the plan. The project addresses the priority

areas, rehabilitation of electricity infrastructure, emphasized in the National Energy Policy of

Zimbabwe (2012). The Government of Zimbabwe (GoZ) has developed a new Interim Poverty

Reduction Strategy Paper (I-PRSP 2016-2018) which builds on the ZimAsset; the President‘s 10-

Point Plan of August 2015; and sector plans and strategies, and the Sustainable Development Goals

(SDGs), 2016-2030). The I-PRSP focuses on promoting inclusive growth and poverty reduction

through improved policies and interventions, and this is consistent with the ZimAsset Vision of

“Towards an Empowered Society and a Growing Economy”. The proposed project is aligned with the

I-PRSP infrastructure pillar as investment in energy sector is a critical enabler in poverty reduction

and economic development.

1.1.2 The intervention in the sector was entailed in the Updated Country Brief (2014-2016) for

Zimbabwe through the emphasis on rehabilitation of basic infrastructure. The Country Brief (CB)

articulated three focal areas: (i) rehabilitation of basic infrastructure, (ii) governance and institutional

capacity strengthening, and (iii) supporting private sector development. The project is also aligned

with the Bank’s Ten-Year Strategy (TYS) 2013-2022, “High-5s” and the Bank’s Energy Sector Policy.

It is aligned to two of the five TYS operational areas, infrastructure development and private sector

development. The project will also contribute to the achievement of three of the five “High-5s”

objectives; light up and power Africa; industrialize Africa (making electrical power available for the

creation of small and medium-sized industries); and improve the quality of life of Africans. The project

is also in line with the Bank Group’s Strategy on Addressing Fragility and Building Resilience in

Africa. A key focus of the strategy is strengthening state capacity, establishing effective institutions

and promotion of inclusiveness to build resilient societies.

1.1.3 The main vehicles for financing the Bank’s support to Zimbabwe over the last five years have

been the ZimFund, ADF Performance Based Allocation and Transition Support Facility, Private

Sector Window, Fund for Africa Private Sector Assistance (FAPA), and African Water Facility. As of

31st May 2017, the Bank Group’s active portfolio in Zimbabwe consisted of 16 operations (including

one regional operation and 2 private sector operations) with a total commitment of UA 158.7 million.

The portfolio is composed of African Development Fund Grants (59.8 percent), Africa Development

1 Out of USD$ 7.3 million, USD 4.9 million is new resources while the remaining balance is a reallocation from EPIRP Phase I project.

2

Bank loan for Private Sector (14.9 percent) and trust funds administered by the Bank - the Multi-Donor

Trust Fund for Zimbabwe (23.9 percent) and other Trust Funds (1.5 percent). In terms of sectoral

distribution, water supply and sanitation sector accounts for 32.8 percent of the portfolio followed by

the power sector 30.2 percent, the multi-sector (governance and institutional support) 16.6 percent,

financial 11.3 percent, agriculture 4.6 percent, social sector 3.9 percent, and transport sector

accounting at 0.6 percent. The portfolio is relatively young with an average age of 2.3 years.

1.1.4 Currently the overall performance of the portfolio is rated satisfactory at 2.8 on a scale of 1 -

4 based on recent updated supervision rating assessments. This has slightly declined from a level of

3.0 in 2014 and 2015 mainly due to implementation start-up delays due to capacity constraints in

Government amongst others. Out of the rated projects, the portfolio has two problem projects, namely,

(i) Lake Harvest Project which has experienced challenges due to insufficient capital injection from

the sponsor and reduced sales volumes; and (ii) the Capacity Building for Public Finance and

Economic Management (CBPFEM) Project, which was affected by procurement delays particularly

due to extensive contract negotiations for big contracts. The implementation was also affected by weak

capacity in most beneficiary institutions. However, more recently there has been substantive progress

in the procurement process and high valued contracts have been brought to signature Stage in the

CBPFEM, thereby paving the way for payments. On December 16, 2016, the Alaska Karoi Power

Transmission Reinforcement Project was approved and currently is effective for first disbursement.

1.1.5 The overall key portfolio issues include complex stakeholder arrangement, inadequate detailed

design studies at time of project approval; market failure to attract best qualified bidders which

necessitated re-launching of some of the tenders hence delaying procurement process; particularly for

ZimFund projects. Capacity constraints in procurement is also an issue, which the Bank is addressing

by providing capacity building support to the relevant procurement teams at the project level as well

as extending support at the country level through the implementation of the Procurement Roadmap of

the country. The country’s limited experience in project/program implementation in the past several

years, has led to weaknesses in government’s capacity coupled with limited oversight and

accountability, which in return had slowed project implementation, financial management,

procurement, project management, and M&E. To mitigate these issues, the Bank Group together with

Government have in 2016 prepared a Country Portfolio Improvement Plan (CPIP) identifying three

portfolio-wide risks factors which are likely to have adverse impacts on project implementation and

results, namely: (i) inadequate project design and start-up delays, (ii) limited oversight and

implementation capacity and (iii) fiduciary management. The implementation of the agreed CPIP will

be closely monitored by the Bank, Government and Project Implementing Entities.

1.1.6 Since the start-up of Phase II Stage II, the Bank has been closely working with the Zim-Fund

partners to mobilize the additional resources required for the project estimated at US$17.52 million.

Convinced with the progress being made and results demonstrated through the first phase of the Zim-

Fund projects, Denmark, Sweden and Norway committed additional resources amounting to

US$22.74million (including USD4.31 million savings from Phase I) which would be allocated to

EPRIP Phase II. The Program Oversight Committee (POC) of the Zim-Fund endorsed the allocation

of this additional funding to the project on 29 January 2016 to partially complete the initial scope.

1.2 Rationale for Bank’s Involvement

1.2.1 The rationale for the Bank’s involvement in the Project is premised on the commitment the

Bank made to administer the ZIMFUND; and to assist in the economic recovery of Zimbabwe. The

Zim-Fund provides Zimbabwe with much needed resources for revitalizing the economy through

rehabilitation of power and water and sanitation infrastructure. The Project is the last segment of the

on-going power sector infrastructure rehabilitation programme that is financed by the Zim-Fund and

managed through the Zim-Fund Management Unit (MMU) established by the Bank to strengthen staff

presence on the ground to manage the daily operations of the Zim-Fund. The Bank’s continued

3

involvement in the sector through the administration of Zim-Fund therefore remains relevant for

consolidation of the gains made by the country to date and to avoid regression and stagnation in the

power sector infrastructure programme.

1.3 Donor Coordination

1.3.1 Donor support in Zimbabwe has continued despite the restrictive measures and financial

sanctions. To date donor coordination in Zimbabwe has been geared towards the Zim-Asset priority

areas. In June 2014, the Government set up a Cabinet Committee on Aid Coordination to oversee all

aid inflows and to ensure the effective use of such resources in the implementation of Zim-Asset.

Currently the Government is in the process of reviewing the aid architecture for effective development

coordination towards achievement of Zim-Asset objectives. Dialogue and coordination among the

various funding partners is carried out within the context of the ZimFund.

1.3.2 The Bank has deepened its collaboration with all relevant bilateral and multilateral actors on

the ground, including its leadership role in the arrears clearance process. It will continue to participate

in routine joint donor meetings to discuss macroeconomic management and economic governance

issues in Zimbabwe. The Bank constantly engages bilateral and multilateral partners (IMF and World

Bank), United Nations agencies and regional institutions. Thematic group meetings (e.g. on public

financial management) also provide opportunity for coordination and collaboration with other

development partners including the African Capacity Building Foundation, the United States Agency

for International Development, the UK’s Department for International Development (DfID) and the

UN.

1.3.3 In December 2016 the Bank approved a grant facility for Zimbabwe (TSF & PBA) to the value

of US$ 18,762,700 for the construction of a 132kV power line from Alaska Substation to the new

Karoi Substation with associated works including the development of a Network Masterplan. This

project will be the first energy sector project directly funded by the bank and executed by Government.

1.3.4 Direct Government funding by other development partners are however limited due to the

restricted direct investment mandate until the country arrears are cleared. Some support is provided

by the India Export Import Bank for the upgrade of the Bulawayo power station and by the Chinese

Export Import Bank towards the expansion of Hwange Power station, and Kariba South Power Station.

The other development partners such as the World Bank, Power Africa and DFID currently only

provide Technical Assistance within the energy sector or support small pilot projects directly with

civil society. It is anticipated that once the arrears clearance issues have been resolved, this situation

would drastically change, providing opportunity for much more development funds to become

available for the sector.

2 THE PROJECT DESCRIPTION AND FINANCING PLAN

2.1 Project Background and Origin

2.1.1 The Zimbabwe Multi-Donor Trust Fund (ZimFund) was established in 2010 as an emergency

response to a severe humanitarian crisis that manifested itself in the deadly cholera epidemic that

engulfed the country in 2008/9. The outbreak claimed more than 4,000 lives and affected more than

100,000 people. The ZimFund Donor countries responded to the outbreak of cholera by mobilizing

funds for the rehabilitation of water supply and water sanitation infrastructure complimented with the

rehabilitation of power infrastructure through its first phase of projects. The Bank was requested and

accepted to administer the funds in accordance with Bank rules and operational manual that was agreed

between the Donors, the Bank and the Government of Zimbabwe. The first Emergency Power

Infrastructure Rehabilitation Project (EPIRP) under ZimFund was approved in June 2011 and its

execution was completed in April 2016. The project was implemented throughout the country and

4

comprised of the rehabilitation of the power generation, transmission and distribution infrastructure.

The emphasis of the project was on improving the reliability and availability of power supply.

2.1.2 The intervention in the power sector was to be implemented in phases with Phase I utilizing

funds that were immediately available and subsequent phases as donors committed more resources.

As more resources became available and with some savings from Phase I, it was decided to embark

on Phase II which was appraised in March 2013. The total estimated cost of Phase II at appraisal was

USD 32.94 million. However, the committed amount from the donors amounted to only USD 15.42

million. The Phase II intervention was therefore split into Stage I using available resources (USD

15.42 million) and Stage II using resources that would be committed later by Donors. Stage I is

currently under implementation with a planned completion date of November 2018.

2.1.3 The Donors have approved an additional USD7.32 million composed of US$ 4.31 million from

the savings on phase I and US$ 3.01 from additional donors’ contributions for Funding Phase II Stage

II project. They have indicated that no further funding will be made as the ZimFund program is to end

in October 2019. It is against this background that the current project proposal is being submitted for

Board approval.

2.2 Project Objective

2.2.1 The objective of the EPIRP II Stage II is to further improve the availability and reliability of

electricity supply through the rehabilitation of transmission and distribution facilities. The Project

target areas are Kwekwe, Gweru and Mutare with a combined target population of 2 million people.

2.3 Project Components

2.3.1 As appraised in 2013, the EPIRP Phase II scope was prepared through wide consultations with

contributing donors in Zimbabwe and various arms of the government and the power utility. The

project components were split into Stage I which is under implementation and Stage II whose approval

is now being sought from the Board. The original project components for each Stage are described in

table 1 below. Due to limited funding and with the agreement of the contributing donors, most of the

Hwange scope of works was removed as indicated by an “x” symbol. The table below summarises the

retained scope items for Phase II Stage II.

Table 1: Original EPIRP Phase II Stage I and Stage II components

No Item description Stage I scope Stage II scope

1 Rehabilitation works at the Hwange thermal power Station

1.1 Dam dust suppression system for the coal handling plant x x

1.2 Dirty Drainage system (Partial scope)

1.3 Vacuum cleaning plant. x x

2 Power Infrastructure rehabilitation

2.1 Supply and installation of 1 x 175MVA, 330/(132)88/11kV transformer at Marvel Substation

2.2 Supply and installation of 1 x 90MVA, 330/132/11kV

transformer at Chertsey Substation

2.3 Supply and installation of 1 x 50/75MVA, 132/33kV

transformer at Orange Grove substation

5

No Item description Stage I scope Stage II scope

2.4 Supply and installation of 1 x 175MVA,

330/(132)88/11kV transformer at Sherwood substation

2.5 Erect Gimboki Sewage Works 33kV Line

2.6 Supply and installation of 1 x 50MVA, 132/33kV

transformer at Mashava Substation x x

2.7 Rehabilitation of supplies to water and sewerage works in Harare:

2.7.1 Prince Edward Water Treatment Plant

2.7.2 Crowborough Sewage Treatment Plant

2.7.3 Firle Sewage Treatment Works

2.8 Investment plan for power infrastructure x x

2.9 Project Management services 2.9.1 Procurement Agent

2.9.2 Implementation Entity

2.9.3 Audit

2.3.2 It should be noted that the Project Management services for both Stage I and Stage II were

approved under Phase II Stage I financing. Initially it was expected that the project management

services of Stage I and Stage II would overlap but the overlap is now limited. For this reason, provision

has been made for additional resources for project management services under Stage II.

2.4 Project Cost and Financing Arrangements

2.4.1 The revised total project cost of Phase II is estimated at US$ 22.74million. This project cost is

summarized below by component and category of expenditure.

Table.2: Estimated Project Costs

Components Phase II Stage I

Financing approved

(USD million)

Phase II Stage II

Financing

(USD million)

Total Cost (USD million)

1. Power infrastructure

rehabilitation 10,74 6.30 17.04

2. Project Management 2.59 0.42 3.01

Subtotal 13.33 6.72 20.05

Contingency 2.09 0.60 2.69

Total project cost 15.42 7.32 22.74

Table 3: Categories of expenditure

Categories of expenditure Phase II Stage I

Financing approved

(USD million)

Phase II Stage II

Financing

(USD million)

Total Costs

(USD million)

Works 9.29 6.30 15.59

Services 2.87 0.42 3.29

Goods 1.17 0.00 1.17

Sub-total 13.33 6.72 20.05

Contingency 2.09 0.60 2.69

Total 15.42 7.32 22.74

6

2.5 Bank Group experience, lessons reflected in project design

2.5.1 The following key lessons learnt from EPIRP Phase I and Phase II were incorporated in the

design and planning for EPIRP Ph II Stage II:

i) The involvement of the relevant sector ministries is crucial for smooth coordination of project

implementation. In Phase I, the Ministry of Energy and Power Development (MOEPD) did not have

a clear-cut relationship with the existing Project Management Teams (PMTs) within ZPC and ZETDC.

In Phase II, the two Ministries will each identify a coordinator, who will work closely with these

project teams.

ii) The use of country governance structures relevant to the sector to ensure smooth coordination of

project implementation – It is important not only for the implementation of the programme but also

for the sustainability of the solutions that the relevant government and governance structures are

consulted and involved during the design and execution of the programme. ZETDC has been involved

with the project design and approvals and will continue to play a key role during project

implementation.

iii) Technical studies to scope and cost Phase II were carried out to avoid the problems of delay in

implementation experienced and eventual down-sizing of the scope of the Phase I project.

iv) Continuous evaluation of priorities to ensure project intervention is relevant and timely – due to

the emergency nature of interventions, some activities identified at appraisal under phase 1 were

executed by the utilities prior to the implementation of the Project.

v) Procurement processes to take into account the emergency nature of the Project – in phase 1 a lot

of time was spent in the procurement of the Procurement Agent (PA) and Implementing Entity (IE)

before the Project could commence. It is therefore recommended that the PA and IE recruited for

Phase I be retained.

2.5.2 Refer to technical annex B1 for a summary of lessons learned during EPIRP PH I and Phase

II.

2.6 Key Performance Indicators

2.6.1 The project will result in (i) increased electrical network capacity; (ii) contribute to improved

access to electricity; (iii) improve reliability of electricity and (iv) the reduction of outages. The Result

Based Log-frame of the project reflects the performance indicators for the project at input, output and

outcome levels.

2.6.2 The progress during implementation will be monitored by the timely commencement of the

works, regular disbursements, and consultations with the project team, timely submission of quarterly

progress (no later than 45 days after the end of each calendar quarter) and environmental and social

management plan reports as well as annual audit reports. Similarly, the project implementation

schedule and procurement plan provide key indicators for monitoring implementation progress. These

will be updated with actual status for evaluation with planned targets. The detailed project monitoring

plan is attached in the technical annex C1 which provides the timelines, reporting, and responsibility

among the different project stakeholders.

7

2.7 Project Implementation Status

Phase II Stage I

Entry into Force and Conditions for First Disbursement

2.7.1 The project became effective when the Project Protocol of Agreement was signed on 22

January 2014 and became eligible for disbursement on 21 July 2014 after the fulfilment of conditions

precedent for first disbursement. The Agreement provided that the Bank’s obligation to make first

disbursement of the grant was conditioned upon the engagement of the PA and IE.

2.7.2 The Government of the Republic of Zimbabwe (GoZ), acting through the Ministry of Finance

and Economic Development, entered into an agreement with Crown Agents Limited on 19 March

2014, to extend the provision of procurement services to Zim-Fund operations to 30 September 2017.

In addition, a supplementary agreement was concluded on 2 May 2014 for specific procurement

services for the EPIRP Phase II project. Similarly, the GoZ concluded a contract with Parsons

Brinckerhoff Africa Pty (Ltd) which became effective on 21 July 2014 as an Implementing Entity

providing all project management and engineering services.

Technical Progress

2.7.3 The IE mobilized on the 21st of July 2014 to carry out the initial technical assessment and

preparation of detailed scope of works, design, specifications and bill of quantities for the project. All

specifications have been completed for both Stage I and Stage II activities.

2.7.4 There has been a delay in the implementation of the works project components for Phase II

Stage I due to prolonged design, planning and procurement processes. It is now envisaged that

completion of implementation of Stage I will be in the last quarter of 2018. Currently disbursements

are low at sixteen (16) percent because the project has just entered the execution stage. However,

disbursements are expected to rise sharply in the third quarter of 2017 when the equipment for the

works starts arriving on sites.

2.7.5 To ensure timely completion of the phase II project, all stakeholders have been advised that

the end date for the Zim-fund project is October 2019 including defects liability period with no

possibility of extension of funding beyond this date.

2.7.6 To ensure that the project is implemented on time, the MMU will closely monitor the detailed

design approvals and during execution through increase in the number of project monitoring missions

to ensure that all hurdles and bottlenecks between the IE, End-user and the contactor are timeously

cleared.

Procurement

2.7.8 Phase II Stage I project consists of two works packages, one goods package and four services

packages all of which are awarded, as detailed below:

8

Table 4: EPIRP PH II Stage I summary of contracts

Name of Contract Commencement Completion due: Remarks

EPIRP II /001 Implementing Entity

Parsons Brinckerhoff Africa

(Pty) Ltd (PB)

21 July 2014 21 Jan 2019 Contract in progress.

EPIRP II /002

Procurement Agent

(Crown Agents)

12 May 2014 30 Sep 2017

Contract in progress. The contract may

be extended to March 2019 if EPIRP II

Stage II is approved.

EPIRP II /003

External Auditor

(Baker Tilly Gwatidzo, Zimbabwe)

24 July 2015 30 June 2017

Contract in progress. The contract may

be extended to March 2019 if EPIRP II

Stage II is approved.

EPIRP II /004

Transmission Rehabilitation for Marvel and Chertsey Sub-stations.

(Angelique International Ltd.)

14 June 2016 6 Dec 2017 Contract in progress. Design work in advanced stage .

EPIRP II /005

33/11 kV Substations for Prince

Edward Dam, Airport, Mufakose,

and Glenview Substations and 33

kV line from PE Dam to Airport

Substation

(Technofab Engineering Ltd.)

16 Aug 2016. 7 Feb 2018 Contract in progress.

Design work in advanced stage .

EPIRP II /006

Consultancy services for Plant

Drain System containment and

Effluent Treatment Study

(Aqualogus SIRDC Consortium)

24 May 2016 24 Feb 2017

Contract in progress.

Final report findings presented to ZPC in

February 2017

EPIRP II /007

Supply of Mobile Plant Equipment

for Hwange Power Station

Supplier: Barzem Enterprises Ltd.)

19 July 2016 30 April 2017 Contract is in progress.

Phase II Stage II

2.7.9 Under Stage I, considerable time was taken in scoping, design and costing at the commencement

of project which resulted in delays. For the current project, IE for Stage I was asked to scope and cost

the project before finalization of PAR for Stage II and this has been done in advance. In support of the

overall project completion timeline for the Zim-Fund programme, advance contracting procedures

have been approved. This has enabled the MMU to prepare procurement activities for Phase II Stage

II in advance of PAR approval.

3 PROJECT FEASIBILITY

3.1 Economic and financial performance

3.1.1 The financial and economic benefits were determined during the initial project scoping. As

this approval submission is only for the approval of new donor funds towards the completion of the

original scope the pervious determined indicators are still deemed valid.

3.1.2 The Project intervention will result in improved electricity supply as a result of (i) transformer

rehabilitation at the substations, and (ii) provision of dedicated power supplies to water sewerage

9

works. Indirect economic impact will arise from the improved distribution of power which will re-

invigorate the country’s economic activities and boost industrial production and contribute towards

better operations in social institutions through a positive impact on water supply and sewerage services

delivery. Power shortages and network faults have mostly affected manufacturing industries,

agriculture, mining, and social services.

3.1.3 Both the financial and economic benefits from the work at the substations are measured by the

additional revenues from electricity sales and the savings realised by consumers by not using

alternative sources of energy following the rehabilitation, respectively. The alternative cost of supply,

as measured by own generation using diesel engines by household, commercial and industrial

consumers, has been estimated at USD 45 ¢/kWh compared to the current average tariff of USD 9.86

¢/kWh which clearly indicates the magnitude of benefit to be realised from consuming grid energy.

3.1.4 Based on the analysis carried out in 2013 during the original project preparation, the project is

both financially and economically viable as summarised in the table below.

Table 5: EPIRP PH II financial and economic indicators

FIRR; FNPV (WACC of 10%) 13.9%, FNPV USD 17.30 million

EIRR; ENPV (EOCK of 12%) 38.0%, ENPV USD 271.60 million

3.2 Environmental and Social impact

Environment

3.2.1 The Project was validated by ORQR as Category 2 on 23 May 2013. In line with the Bank’s

Environmental and Social Assessment Procedures (ESAP), subsequently two ESMPs have been

prepared by the two sponsoring organizations and the summary of both was disclosed on the Bank’s

website on August 27, 2013. The classification of Category 2 is mainly because the Project’s activities

pertain to medium scale rehabilitation of existing infrastructure and addressing environmental

pollution. The Project is expected to yield more environmental and social benefits than negative

impacts. However, negative impacts are expected to be site specific and temporary such as dust and

noise and will mainly occur during construction. Two other potential impacts are the management of

transformer oil decanted from old transformers which may contain polychlorinated biphenyls (PCB’s);

and contamination of other oils with PCB’s and spillage already observed hence likelihood of soil and

ground water contamination. However, this no longer applies as the transformers have been removed

from the site. The oil from the old transformers has been recycled and reused.

3.2.2 In the ESMP, resettlements were not expected as a result of this project. The works will mainly

comprise urgent repairs of existing infrastructure and O&M capacity building which will not result in

the relocation of beneficiary communities.

3.2.3 EPIRP Phase II Stage I components are under implementation. Prior to the implementation of

these components, detailed ESMPs were prepared for each of the works contracts by the appointed

contractors and reviewed by the Implementing Entity (IE) and ZETDC in accordance with local

legislation and best practices.

3.2.4 The ESMP prepared and disclosed in 2013 included components in EPIRP II Stage I and Stage

II. The Bank and ZETDC staff who visited the sites in October 2016 ascertained that there have been

no environmental changes that warrant intervention. The transformers for the substations in Stage I

and the proposed Stage II have since been removed from site in an environmentally friendly manner.

The sites are clear of any obstructions and are ready to receive the new equipment. The monitoring of

10

Stage II implementation will be done in a similar manner to Stage I. The implementation of Stage I

and II will overlap and therefore the monitoring of both Stage s will be done simultaneously.

3.2.5 ZETDC have an Environmental Management Unit and together with the IE they monitor the

works under the contracts in accordance local legislation and the approved ESMPs. The monitored

environmental aspects among others include compliance with Personal protective clothing, monitoring

and suppressing dust and noise pollution. The Unit also ensures proper handling of transformer oil and

other materials that may be hazardous to health as well as monitoring compliance with the daily safety

toolbox talks that are a prerequisite before work commences. The Unit ensures that the contractors

comply with the requirements of undertaking regular Health and HIV awareness campaigns for the

workers.

3.2.6 The substations sites are all remotely located away from the community residential areas and

their access is restricted to the public and therefore there will be no social impacts as result of the

project.

Climate Change

3.2.7 While the country’s main carbon emissions are from power generation, by and large,

Zimbabwe contributes minimally to global carbon emissions. Expected climate change impacts in

Zimbabwe include excessive or lack of rainfall. However, the current project will not contribute

significant carbon emissions due to its nature of being a rehabilitation project rather than a green field

project.

Gender

3.2.8 The energy sector in Zimbabwe, as in many developing countries, is characterized by both

gender and class dimensions. While high income households rely on more energy efficient and

convenient sources of energy such as electricity and gas, poor people rely largely on wood fuel.

Furthermore, rural communities are estimated to meet 94% of their cooking energy requirements from

traditional fuels, mainly firewood while 20% of urban households use wood as the main cooking fuel.

This situation has led to environmental degradation as families encroach on forests in search of

firewood.

3.2.9 Among rural households, the collection of firewood is largely done by women and girls and in

addition to the time it takes away from productive activities and studying, women and girls are exposed

to the danger of sexual assault when collecting firewood in isolated areas. This risk is exacerbated by

the increasing deforestation that requires people to go farther distances in search of firewood. Among

urban poor households the lack of options has health implications as a consequence of reliance on

petroleum based fuels. Hence, women, girls and young children often suffer the brunt of exposure to

wood smoke and fuel fumes as a result of prolonged exposure when cooking.

3.2.10 Availability of reliable power supply can empower women and contribute significantly to

gender equality at household and institutional level. Institutions of higher learning in Zimbabwe are

experiencing adverse impacts of power outages and this is particularly detrimental to sustaining

competitiveness and gender parity in enrolment. The Zimbabwe Open University (ZOU), due to the

nature of its coverage and target population, is well positioned to improve women’s education and

skills. Open and distance learning (ODL) is a powerful enabler of gender parity in access to higher

education as it allows women particularly adult learners and those who terminated their education

early due to marriage, pregnancy or poverty to catch up. It should thus be noted that the persistent

power outages in Zimbabwe while impacting negatively on the higher education sector overall, has

particularly detrimental effects on gender parity and on the ability of women to fully benefit from

educational opportunities and escape the perpetual poverty trap. In addition, it emerged from anecdotal

reports that there are real concerns about safety for women who may forego study opportunities that

11

require them to commute at night when street lighting may be unavailable. Both the ZOU regional

centres as well as polytechnics have reported a decline in attendance by women when tutorials and

lectures are scheduled at night due to power failures. However, the information emerged from similarly

anecdotal reports, with no supporting baseline data.

Social 3.2.11 For the past decade, Zimbabwe’s energy sector has been in decline resulting in chronic power

outages that have impacted negatively on households, industry, human capital institutions, and

essential basic service delivery. The current power supply continues to be inadequate to meet the needs

of households, industry and key human capital development institutions. In 2012, only 37% of

households in Zimbabwe had access to electricity that is connected to the national grid.

3.2.12 The persistent unscheduled power outages and load shedding have an adverse and sometimes

severe impact on hospitals and higher education and tertiary institutions. Public hospitals by and large

do not have adequate back-up generator capacity to power all operations for extended periods of time.

The largest facilities which predominantly serve poor clients are particularly hard hit as they cannot

generate sufficient income to finance alternative power sources. Such facilities include General

hospitals, in the small urban centres and rural areas are not fed by dedicated power lines and so they

are subjected to the same frequency of power outages as the surrounding communities.

3.2.13 Intermittent power supply is often a direct cause of disruption of clean water supplies in

households as well as essential institutions such as hospitals as power outages affect the water

treatment plants that supply the hospitals. The lack of water for even an hour in such essential

institutions has serious implications for infection control and the health of patients and staff.

3.2.14 Similar to the situation prevailing at most public hospitals, educational institutions including

universities are not spared. ZOU established in1999, is a unique institution of higher learning offering

ODL. ZOU has 10 regional centres in the country where students go for tutorials and examinations.

Some of the negative impacts of frequent power outages on the university include failure to stick to

tutorial and examination schedules, delays in planned work until power supply resumes, the university

printing press failing to meet its production targets resulting in outsourcing of printing jobs work which

entails additional costs. Furthermore, at the ZOU regional centres, study schedules are frequently

disrupted by the unpredictable power supply and this ultimately impacts on study completion rates

with students taking more time than is necessary to complete their studies. This creates additional

barriers to economic participation by the majority rural and adult learners who are expected to benefit

from the ODL institution.

3.2.15 The ZOU also has a Virtual Centre which runs on an e-learning platform. As the centre is run

from Harare, it is affected by power outages which impact on students’ ability to receive tutorials

timeously and to submit assignments online. This is particularly problematic for students in the smaller

urban centres and rural areas.

3.2.16 The key impact of power outages on ZOU is on its operational efficiency, including, (i)

constraints to revenue generation as a result of declining enrolment, (ii) inability to operate its virtual

learning centre efficiently which affects its competitiveness and attractiveness to foreign students, (iii)

increased costs to students as a result of re-scheduling tutorials and (iv) longer duration of studies. The

ZOU which accounts for nearly half of the country’s university enrolments, needs to remain

competitive to take advantage of the increasing free movement of people in the SADC region and

beyond as well as the relaxation of trade barriers. However, there is a striking observation that may be

attributed to a decline in the competitiveness of the institution. The ZOU has experienced a decrease

in overall enrolment between 2005 and 2012. In 2005, ZOU enrolled a total of 20,482 students of

12

whom 71% were female. Enrolment peaked again in 2008 reaching 19,694 students but has since been

on a downward trend year on year with the largest decline between 2010 and 2011.

3.2.17 In addition to the universities, Zimbabwe has 8 Polytechnics, 3 Vocational and Technical

Colleges and 13 Teacher Colleges. All institutions are affected to varying extent by inadequate power

supply which is exacerbated by power outages and load shedding. The hardest hit institutions are those

with power grids linked to suburbs. Rural Institutions have additional challenges. Those connected to

Central Business Districts (CBDs) such as Harare Polytechnic are slightly better off. Load shedding

is currently unscheduled and there is no longer notification to customers about impending power cuts.

3.2.18 The most serious impact of power outages is on the quality of learning, especially at

polytechnics and VTCs. Students at these institutions are expected to spend 90% of their time in

workshops and machines have to be kept running to meet the specified number of contact machine

hours. In the event of power outages, the machine contact hours are reduced which impacts on the

competency of students and readiness for work.

3.2.19 The rating of Zimbabwe’s tertiary institutions have seen a continuing decline against other

African universities especially following the opening up of South African Universities post 1994. The

continuing power shortages are an important contributor to this decline, especially the research output

of the institutions. The restoration of reliable power supply is likely to see a resurgence of the

attractiveness and competitiveness of these institutions in the region.

3.2.20 Addressing fragility and building resilience: The sector and the project area face varying

degrees of fragility. Lack of adequate power supply, dilapidated rural infrastructure, environmental

factors, weak institutions, low accountability and transparency, high public debt and liquidity crisis,

lack of economic opportunities for women etc. are key elements of fragility. The project is designed

to address these challenges and build resilient institutions and societies.

4 IMPLEMENTATION

4.1 Implementation Arrangements

4.1.1 The original institutional and implementation arrangements of the project will continue. The

POC provides an overall strategic and policy oversight for the Zim-Fund. The MMU under the Bank’s

oversight provides portfolio management support. The IE and PA procured through the program

provide project management and procurement services respectively on behalf of the Government of

Zimbabwe. The Project receives guidance from a Project Steering Committee comprising beneficiary

power utilities and key Ministries. The IE concluded an MOU with the two power utilities namely

Zimbabwe Electricity Transmission and Distribution Company (ZETDC) for the transmission and

distribution activities and Zimbabwe Power Company (ZPC) for the generation activities defining the

roles and responsibilities of each party. The coordination is further strengthened through regular

working meetings with the focal points.

4.2 Financial Management

4.2.1 In accordance with the Zim-Fund financial management arrangements, the Project financial

management activities are carried out by the IE. The IE is responsible for ensuring appropriate

financial management arrangements are in place and will prepare quarterly and annual project

financial statements. The financial statements shall be prepared in accordance with the International

Public Sector accounting standards and they shall be audited by an independent external audit firm in

accordance with internationally recognized auditing standards and Bank approved Terms of

Reference. The audit report along with the management letter shall be submitted to the Bank no later

than 180 days after year end. Further details on financial management are disclosed in the technical

annexes.

13

4.2.2 The project financial management activities will be performed by the Project Accounting

division of the Implementing Entity (IE), a division headed by a well-qualified professional with over

three decades of experience. A competent accountant from the Division will be assigned to the Project,

and his/her duties shall be to ensure an appropriate system of bookkeeping, accounting and

documentation to enable timely production of quarterly and annual financial reports in accordance

with the Bank Group’s financial reporting requirements. The IE was responsible for the financial

management of EPIRP Phase I and is currently managing Phase II Stage I. The financial management

responsibilities of the IE were previously not sufficiently and explicitly spelt out in the contracts.

Under Phase II, the financial management responsibilities are contractual obligations of the

implementing entity.

4.2.3 The Project will be audited annually by an external auditing firm in accordance with the

requirements of the Bank Group. An amount has been allocated in the cost of the Project to cover the

cost of the external auditing services. The IE shall provide all financial statements as well as technical

reports to the auditors. The audited accounts and the management will be submitted to the GoZ and

the Zim-Fund MMU once completed, not later than six months after the end of the financial year.

4.3 Disbursements

4.3.1 In accordance with the Zim-Fund Operations Manual, disbursements for all goods, works and

consultancy services for the Project will be undertaken using the Direct Payment method based on

disbursement applications prepared by the PA and approved by the MMU, and shall be in accordance

with the Bank disbursement rules as contained in the Disbursement Handbook. The IE will be

responsible for certification of invoices submitted by other service providers or contractors and

preparation of the disbursement application which will be reviewed and signed off by the PA and

submitted to the Bank, as administrator of the Zim-Fund, for payment. Financial management and

disbursement arrangements are detailed in the technical annex B4.

4.4 Procurement Arrangements Phase II Stage II

4.4.1 Similar to Phase II Stage I, all procurement of Goods and Works and acquisition of consulting

services will be in accordance with the Bank Rules and Procedures for Procurement of Goods and

Works (May 2008, revised July 2012) and Rules and Procedures for the Use of Consultants (May

2008, revised July 2012), as well as in accordance with the Zim-Fund Operations Manual, using the

relevant Bank Standard Bidding Documents. The same procurement arrangement will be utilized for

the final phase of the Emergency Rehabilitation project as used for the first two phases.

4.4.2 The PA, Crown Agents, appointed during Phase I & Phase II Stage I of the programme will

continue to support the procurement activities for Phase II Stage II. The services provided by the PA

include i) preparation of the procurement plan, ii) design of the procurement packages from the

technical specifications prepared by the IE, iii) preparation of prequalification and bidding documents,

iv) advertisement of tender in the relevant publications, v) follow up of the bidding process up to

contract award and including all requisite notifications to the Bidders, vi) monitoring of project

procurement activities, vii) contract amendments and viii) processing of disbursement requests and

submission to the Bank. The current contract Crown Agents is valid until 30th September 2017. It is

anticipated that if EPIRP II Stage II is approved, the contract may be extended to March 2019.

4.4.3 The various items to be procured under respective categories of expenditure and their

procurement methods are summarized below in Table 6. An updated procurement plan of the project

has been included in the technical annex B5. The plan summarizes current status and expected

activities. The Stage II project is expected to be completed by January 2019. The plan provides detail

for each contract to be financed by the grant facility the different procurement methods, the need for

prequalification, estimated costs, prior-review requirements, and time frame are agreed between the

Government and the Bank team.

14

Table 6: Summary of Procurement Arrangement (Amounts in million USD) for Stage II

Procurement Activities/Category Procurement Method Total

ICB SSS LCS

A: Works

Refurbishment of network

infrastructure 6.30 0.00 0.00 6.30

B: Services

Consultancy for Project

Implementation 0.00 0.25 0.00 0.25

Consultancy for Project Audit 0.00 0.04 0.04

Consultancy for Project Procurement 0.00 0.13 0.00 0.13

Total 6.30 0.42 0.00 6.72

4.4.4 The Bank has approved advance contracting to facilitate procurement for the refurbishment of

the network infrastructure package. This procurement package for Works includes three components:

(i) replacement of transformers and related accessories at Sherwood substation; ii) replacement of a

sub transmission transformer and related accessories at the Orange Grove sub-station and iii)

Construction of a 33 kV Overhead Line dedicated to Gimboki Sewage Works.

4.4.5 The IE, appointed for EPIRP Phase II Stage 1, i.e. Parsons Brinckerhoff Africa (Pty) Ltd (PB)

will continue to support Phase II Stage II program. PB is currently responsible for the implementation

of Phase II Stage 1 of the project. The services provided by IE include: (i) the preparation of technical

specifications, (ii) technical evaluation of tenders (bids), (iii) monitoring and tracking project

activities, (iv) coordination of project activities with stakeholders, (v) project supervision and overall

project management services including financial management and the preparation of financial

statements and (vii) reviews of full contract documentation at various Stages of the pre-tender, tender

adjudication and contract negotiation. The current contract with Parsons Brinckerhoff Africa (Pty) Ltd

(PB) is valid until 21st January 2017. It is anticipated that if EPIRP II Stage II is approved, the contract

may be extended to March 2019.

4.4.6 External Project Auditor appointed for EPIRP Phase II Stage I, i.e. Baker Tilly Gwatidzo

Chartered Accountants in association with Baker Tilly France will continue to provide Auditing

services for EPIRP Phase II Stage II. The current contract with Baker Tilly Gwatidzo is valid until

30th July 2017. It is anticipated that if EPIRP II Stage II is approved, the contract may be extended to

March 2019.

4.5 Monitoring & Evaluation

4.5.1 Zim-Fund has developed a monitoring and evaluation (M&E) framework for the Phase II

project. The framework was adopted by the POC on 3rd December 2014 and has been rolled out from

April 2015 starting with the Project Baseline. The Project result matrix has been updated on the basis

of the adopted M&E Framework. It was also prepared in line with the new template approved by the

Bank. The Bank also conducts supervision missions every six (6) months. ZWCO will closely monitor

implementation and dialogue with ZimFund donors, Government and other stakeholders on project

progress performance and improvement.

4.6 Risk Management

4.6.1 Programme risks are regularly reviewed and discussed by the POC. Mitigation factors are

identified and implemented as part of the programme execution. The detail risk matrix for the

programme is notes in Appendix 5. The following key risks are summarised in the table below.

15

Table 7: Summary of Projects Risks EPIRP Phase II Stage II

Actual Risk

Extent of MMU’s

control over the

identified risk

Risk Description and Mitigation Measures

Cost overrun High

Description: Risk of not completing the intended scope

due to cost overrun and limited budget.

Mitigation: Carry out fairly detailed scoping exercise to

meet the project objectives with due allowance for

unforeseen contingencies.

Corruption and

procurement

malpractices.

High

Description: Mis-procurement or the un-authorised

expenditure of project funding.

Mitigation: Adhere to the Bank's procurement of Works,

Goods and Services procedures.

Keep vigil on possible corruption, unethical and

procurement malpractices and investigate, if required.

Political instability could lead to disruption of

project implementation.

High

Description: Project delays experienced due to political

instability. Mitigating: Continued dialogue with Government of

Zimbabwe so they ensure a conducive environment and

maintain stability during implementation and completion

of national project

Vandalism of

rehabilitated facilities High

Description: Risk of not sustaining the programme

outcomes due to vandalism of refurbished infrastructure.

Mitigation: Enactment and enforcement of legislation

that criminalizes acts of vandalism and reduction in power

outages ensuring that the system is live most of the time.

Improve customer communication and feedback options.

5 JUSTIFICATION FOR FUNDING

5.1 The project was originally designed with a full amount of US$32.94 million with funding

arrangement for Stage I (for available resources) and Stage II (for funds to be mobilized) and the Board

was advised that management would come back for the approval of financing for the remaining scope

once grant funding is available. This was therefore expected from the initial approval of the project on

18 December 2013.

5.2 Following commitment of additional resources to ZimFund by Denmark, Sweden and Norway

as well as surplus funds from Phase I identified, the continuation of EPIRP PH II Stage II scope and

the financing for these project activities were approved by the Program Oversight Committee of the

Zim-Fund, which is composed of the Zim-Fund donors and GoZ representatives, on 29 January 2016,

after consideration of the need to move towards achieving the full objectives of the Project as

envisaged at Project Appraisal.

5.3 The project is in alignment with the Bank Group updated Country Brief (2014-2016), the

Bank’s Ten Year Strategy (2013-2022), “High-5s” and Bank’s Energy Sector Policy. The poor state

of power transmission and distribution infrastructure in the country affects the operation of water

16

supply and sanitation plants thus becoming a major constraint and burden to vulnerable and poorer

segment of the residents.

5.4 Stage I is under implementation and front end activities (design, technical specifications) for

Stage II have been completed.

5.5 The Project Appraisal cost estimates, financial and economic outcomes were based on the first

phase of EPIRP and also other works funded by other programs in the country. The estimates included

adequate contingency to cushion for unforeseen circumstances.

5.6 The continuation of EPIRP Phase II Stage II is justified as the expected outcomes will improve

economic recovery and in general contribute to the wellbeing and health of Zimbabweans. This

outcome is aligned to the objectives of the Zim-Fund donor community.

6 LEGAL INSTRUMENTS AND AUTHORITY

6.1 Legal Instrument

6.1.1 The legal instrument to finance the grant will be a Protocol of Agreement between the Republic

of Zimbabwe and the Bank, in its capacity as the administrator of the Zimbabwe Multi-Donor Trust

Fund (ZimFund), for a grant from the resources of the ZimFund.

6.2 Conditions Associated with Bank’s Interventions

6.2.1 Conditions Precedent to Entry into Force of the Grant

The Protocol of Agreement will enter into force on its date of signature by the Recipient and the Bank.

6.2.2 Conditions Precedent to First Disbursement of the Grant

The conditions precedent to first disbursement of the initial grant, which will be extended to the new

grant, have been fulfilled. As such, disbursements may be made from the new phase II stage II grant

upon entry into force of the Protocol of Agreement.

6.2.3 Undertakings

The Government of the Republic of Zimbabwe agree to:

(i) maintain the existence and functioning of the Project Steering Committee from EPIRP, Phase

I & II, in a form and with a composition acceptable to the Bank, with its terms of reference extended

to cover this Project;

(ii) provide a written commitment to the Bank to apply tax and duty exemption for the Project, and

to facilitate work permits and visas for persons working on the Project; and

(iii) implement and report on a bi-annual basis, in a form acceptable to the Bank, on the status of

the implementation of the Environmental and Social Monitoring Plan.

6.2.3 Compliance with Bank Policies

The proposed grant complies with all applicable Bank policies.

7 RECOMMENDATION

7.1 Considering the many socio-economic and environmental benefits of this Project and

objectives of the ZimFund in the recovery and development efforts of Zimbabwe, it is recommended

that the Board of Directors approves this financing from the resources of the ZimFund towards the

completion of the activities for EPIRP Phase II Stage II scope for the amount of US$ 7.32 million.

I

Appendix

Appendix 1 - Map of the Country and Location of the Project Areas

Kariba hydro power station

Mutorashanga

Bindura

Norton

Hwange Thermal

power station Sherwood

Haven

Chertsey

InsukaminiMarvel Tokwe

Plumtree

Triangle

Beitbridge

Dema

Orange Grove

Warren

Harare

Alaska

MOZAMBIQUE

ZAMBIA

BOTSWANA

SOUTH AFRICA

Gweru

Zvishavane

Mashava

Mvuma

Kadoma

Install 50MVA 132/33 kV

Transformer

Horseshoe

Atlanta

Mazowe

Vic Falls

RedcliffInstall 90MVA

330/132 kV

Transformer

Rehabilitation

of Hwange

Power station

Install 175MVA

330/(132)88 kV

Transformer

Install 175MVA

330/(132)88 kV

Transformer

Rehabilitation of Prince Edward

Dam Water works substation and

Crowborough & Firle

Sewerage substations

ZIMBABWE EMERGENCY POWER INFRASTRUCTURE PHASE II

REMOVED FROM

SCOPE

II

Appendix 2: Status of Emergency Power Infrastructure Rehabilitation Project –

Phase I

The Emergency Power Infrastructure Rehabilitation Project Phase I (EPIRP I) was

approved on the 30th June 2011. The approved grant of USD 39,610,000.00 has been

financed by the Zim-Fund. The project had the following components: (i) Rehabilitation of

the Ash Handling Plant at Hwange Thermal Power Station; (ii) Rehabilitation of sub-

transmission and distribution facilities; (iii) Environmental and Social Audit and

implementation of re-designed Environmental and Social Management Plan (ESMP), (iv)

Project Supervision and (v) Project Accounts Audit.

Progress towards Development Objective: The development objective of the project was

to assist in improving the provision of adequate and reliable power supply in an

environmentally sound manner through the rehabilitation of the Ash Plant at Hwange

Power Station and the sub-transmission and distribution facilities in the country. Physical

implementation of the project on the ground started in March 2013 with mobilization of the

first contractor. Most of the packages were completed in 2014 except the rehabilitation of

the Ash Plant at Hwange which was completed during the first quarter of 2016.

Outcome Reporting: Table 7.4.3 below reflects the project outcomes based on the PAR

Results Based Logical Framework (RLF).

Outcome indicators (as per RLF; add more

rows as needed)

Baseline

value

(Year)

Most

recent

value

(A)

End

target (B)

(expected

value at

project

completion

)

Progres

s

towards

target (%

realized)

(A/B)

Comment

Outcome 1:

Electrical energy

production at

Hwange Power

Station

3 133

GWh

3 500

GWh

3 850

GWh

91% The Ash Plant was one of the factors

limiting generation at HPS, the

efficiency and output has increase

beyond the targeted value.

Outcome 2: Number

of customers restored to the network

0 11 382 11 632 98% Implementation of the Sub-transmission

and the Distribution Packages are completed.

Outcome 3:No. of

new customers fed

from supply points

upgraded under

distribution

transformer project.

0 11 888 20 010 59% Implementation of the contracts for the

Distribution is complete. However the

new connection uptake is slow due to

prevailing economic conditions.

Outcome 4:

Population supplied

with water from a

water treatment

source that has a

reliable power supply

0 2 600

000

2 920 73

8 (22%

of

Zimbab

we)

89% Some water points are no longer

functional and in most cases the

transformers were relocated to other

needy areas.

Outcome

5:Population whose

sewerage

reticulation is

0 529 768 529 768

(4% of

Zimbab

we)

100% Sub-transmission and PMTs supplying

sewage works have been installed.

III

powered by a

reliable source of

power

Outcome

6:Customers with

continuous supply of

power due to firm

capacity (Customers)

0 49 605 49 605 100% Seven Sub-transmission transformers

were installed, at the following

Substations: Norton, Atlanta, Mpopoma,

Pomona, Stamford, Criterion and

Mazowe. These will provide firm

capacity to the customers.

Output Reporting:

Table 7.4.4 below reflects progress in achievement of project outputs. The indicators are

based on some of the output indicators reflected in the PAR RLF, but are more refined for

focus and closer to what would be expected in the 2011 RLF. They are as proposed in the

retrofitted RLF.

Output indicators (as specified in the RLF;

add more rows as needed) Most recent

value

(A)

End target (B)

(expected value at project

completion)

Progress towards

target (% realized) (A/B)

Output1: Sub-transmission level

transformers installed (No.)

7 7

100%

Output 2: Sub-transmission level

circuit breakers installed (No.)

16 16

100%

Output 3: 11/0.4kV & 33/0.4kV

distribution transformers installed

(No.)

426 by the

Contractor

81 by ZETDC

507

100%

Output 4: Distribution lines rehabilitated (km)

342 342 100%

Output 5: Distribution cables

rehabilitated (km)

17 17

100%

Output 6: Replace wet ash handling

system

0 1

98%

Output 7: Construct new ash plant

control room

1 1

100%

Output 8: 3.3kV 3-core cables

(metres)

500 500

100%

Output 9: Environmental & Social

Management Plan (1 Report)

1 1 100%

IV

Appendix 3 – Status of Zim-Fund Resource Mobilization The ZimFund contributions as at the end of March 2016 are as indicated in the table below.

Donor Date Pledged Amount Pledged Amount paid in

Currency of the

Donor

Balance in Currency

of the Donor

Amount

Paid in USD

Date of Payment

Australia 12 Oct 2010

AU$ 10,000,000.00 AU$ 5,600,000.00 AU$ 4,400,000.00

AU$ 0.00 USD 5,518,240.00 USD 4,551,800.00

21 Oct 2010 07 Apr 2011

Australia 01 June 2012 AU$ 10,000,000.00 AU$ 10,000,000.00 AU$ 0.00 USD 9,794,000.00 12 June2012

Denmark 04 Oct 2010 DKK 30,000,000.00 DKK 30,000,000.00 DKK 0.00 USD 5,318,081.72 30 Nov 2010

Denmark 21 Nov 2011

09 June 2014

DKK 45,000,000.00

DKK110,400,000.00

DKK 45,000,000.00

DKK 77,000,000.00

DKK 0.00

DKK33,400,000.00

USD 5,158,343.81 USD 2,643,818.03

USD 12,680,502.91

15 Dec 2011 01 Jun 2012

29 Dec 2014

Germany 21 Jan 2011 EUR 5,000,000.00 Euro 5,000,000.00 EUR 0.00 USD 6,857,362.00 01 Apr 2011

Germany 07 Feb 2011 EUR 5,000,000.00 Euro 5,000,000.00 EUR 0.00 USD 6,912,575.00 01 May 2011

Germany 21 Dec 2011 EUR 10,0000,000.00 EUR 10,000,000.00 EUR 0.00 USD 12,957,700.00 13 Dec 2012

Norway 12 Oct 2010

11 Apr 2012

05 Aug 2015

NOK 41,000,000.00

NOK 41,000,000.00

NOK 9,000,000.00

NOK 41,000,000.00

NOK 25,000,000.00

NOK 16,000,000.00

NOK 0.00

NOK 0.00

NOK 0.00 NOK 0.00

USD 7,073,818.03

USD 4,399,084.99

USD 2,697,436.70 USD 1 058 412.62

01 Nov 2010

11 Dec 2012

08 Aug 2013 31 Aug 2015

Sweden 26 Nov 2010

SEK 40,000,000 SEK 10,000,000.00

SEK 30,000,000.00

SEK 0.00

SEK 0.00

USD 1,563,769.91

USD 4,324,470.11

01 May 2011

03 Dec 2010

Sweden 08 June 2012 SEK 50,000,000.00 SEK 30,000,000.00 SEK 20,000,000.00

SEK 0.00 SEK 0.00

USD 4,228,169.89 USD 2,986,970.13

26 June 2012 21 Nov 2012

Sweden 26 Nov 2014 SEK 20,000,00.00 SEK 20,000,00.00 SEK 0.00 USD 2,612,370.15 16 Dec 2014

Switzerland 11 Aug 2011 CHF 4,900,000.00 CHF 4,500,000.00

CHF 400,000.00

CHF 0.00

CHF 0.00

USD 5,699,810.01

USD 412,939.60

06 Sept 2011

27 June 2012

United Kingdom 19 Oct 2010 GBP 10,000,000.00 GBP 10,000,000.00 GBP 0.00 USD 15,865,000.00 28 Mar 2012

United Kingdom 13 Mar 2012 GBP 10,000,000.00 GBP 10,000,000.00 GBP 0.00 USD 15,546,000.00 06 Dec 2010

Total 145,959,285.88 USD 140,860,671.79

Received pledges amount to USD 140,860,671.79. The Contribution Exchange Letter for the remaining Danish pledge was signed between the Bank and

Australia (assigned Danish representative to ZimFund) during the month of August 2016 and disbursement of AU$ 6,589,741.00 to the ZimFund account is

expected in November 2016.

V

Appendix 4 – Status of Active Country Portfolio as at 31 March 2017

# Sector/Operations Funding

Window

Approval

Date

Effective for

1st Disb Date

Completion

Date

Amount App.

(UA)

Amount Dis.

(UA)

Disbursement

RateAge

IP

(Impl.Progress)

DO (Dev.

Objectives)

Overall

Performance

Status

AGRICULTURE SECTOR 7,293,691 5,871,577 80.5% 3.1

1 LAKE HARVEST PROJECT ADB Loan 10/26/2011 1/3/2013 11/26/2020 5,844,023 5,844,023 100.0% 5.6 2 2 PP

ADF Grant 10/19/2015 12/2/2016 19/05/2018 719,165 3,740 0.52% 1.6

FAPA Grant 6/11/2015 11/24/2016 19/05/2018 730,503 23,814 3.3% 2.0

MULTI_SECTOR 26,320,000 17,079,837 64.9% 2.6

3 CAPACITY BUILD. PROJECT FOR PFDEM ADF Grant 12/5/2012 7/4/2013 12/31/2017 16,120,000 12,516,209 77.6% 4.5 3 2 PP

4 GOVERNANCE AND INSTITUTIONAL PROJECT ADF Grant 12/12/2013 4/1/2014 12/31/2017 5,200,000 3,519,769 67.7% 3.5 3 3 PPP

5 STRENGTHENING INSTITUTIONS OF TRANSPARENCY AND ACCOUNTABILIT ADF Grant 7/10/2015 11/23/2015 3/31/2019 2,000,000 1,043,859 52.2% 1.9

6 INST. SUPPORT FOR STATE ENTERPRISE REFORM & DELIVERY PROJECT ADF Grant 1/24/2017 6/30/2020 3,000,000 0.0% 0.3

POWER SECTOR 47,945,403 2,292,909 4.8% 2.1

7 EMERGENCY POWER INFRASTRUCTURE REHAB Phase II ZIMFUND 12/18/2013 7/9/2014 11/30/2018 11,145,403 1,852,709 16.6% 3.5 3 3 NPP

8 ALASKA-KAROI POWER TRANSMISSION REINFORCEMENT PROJECT ADF Grant 12/16/2016 5/18/2017 6/30/2018 13,540,000 0.0% 0.5

9 MULTINATIONAL KARIBA DAM REHABILITATION PROJECT ADF Grant 12/15/2014 11/23/2015 12/31/2025 23,260,000 440,200.00 1.9% 2.5

FINANCIAL SECTOR 17,857,143 - 0.0% 1.1

10 CABS TRADE FINANCE LINE OF CREDIT ADB Loan 4/20/2016 12/28/2018 17,857,143 0.0% 1.1

SOCIAL SECTOR 6,110,000 2,764,526 45.2% 2.0

11 YOUTH AND TOURISM ENHANCEMENT PROJECT ADF Grant 12/18/2013 4/8/2014 6/30/2017 2,700,000 2,483,611 92.0% 3.5 3 3 NPP

12 YOUTH AND WOMEN EMPOWERMENT PROJECT ADF Grant 10/31/2016 5/18/2017 6/30/2022 3,410,000 280,915 8.2% 0.6

TRNASPORT SECTOR 880,000 721,884 82.0% 3.5

13 TRANSPORT SECTOR MASTER PLAN STUDY ADF Grant 12/18/2013 5/20/2014 12/31/2017 880,000 721,884 82.0% 3.5 3 3 NPP

WATER SUPPL/SANIT 51,629,297 6,268,690 12.1% 2.1

14 URGENT WATER SUPPLY AND SANITATION REHAB PHASE II ZIMFUND 10/7/2013 7/10/2014 12/31/2017 14,340,129 3,621,166 25.3% 3.7

ADDITIONAL FINANCINF TO UWSSRP PHASE II ZIMFUND 9/30/2015 11/17/2015 12/20/2018 11,673,039 2,037,566 17.5% 1.7

15 BULAWAYO WATER & SEWARAGE SERVICES IMPROVMENT PROJECT ADF Grant 12/9/2015 5/17/2016 30/12/2021 24,000,000 434,758 1.8% 1.5 3 3 NPP

16 ZIMBABWE INTEGRATED URBAN WATER MANAGEMENT AWF 12/21/2015 8/26/2016 1/2/2019 1,616,129 175,200 10.8% 1.4

158,035,534 34,999,423 22.1% 2.3 2.9 2.8

Note: Ratings (1-4): Highly Unsatisfactory = 1; Unsatisfactory = 2; Satisfactory = 3; Highly Satisfactory = 4 NPP= Non Potentially Problematic Project; PP = Problem Project; and PPP = Potentially Problematic Project

NPP

GRAND TOTAL

SUPPORT TO THE BEEF AND LEATHER VALUE CHAIN2

3 3

VI

Appendix 5 – Project Risk Matrix

Presented below are the perceived risks for the project. From the table below, it can be noticed that all the perceived risks are scored as “Medium” meaning

that the MMU needs to monitor and maintain strict measures as implementation continues.

Risk Category Actual Risk Extent of MMU’s

control over the

identified risk

Risk Assessment

Actual Risk Probability

Rating

Impact

Rating

Score &

Colour

Cost Risks

Cost overrun High 2 3 6

Carry out fairly detailed scoping exercise to meet the

project objectives with due allowance for unforeseen

contingencies.

Liquidity challenges

affecting smooth

payments for services by local service providers

Medium 2 3 6

Ensure financial soundness of winning bidder to ensure

smooth execution.

Hold Regular meetings with Contractor and

Subcontractors to give them a platform to air their liquidity concerns, if any and engage Government for

solution

Contextual risks

Corruption and

procurement

malpractices.

High 2 5 10

Adhere to the Bank's procurement of Works, Goods and

Services procedures

Keep vigil on possible corruption, unethical and

procurement malpractices and investigate, if required.

Disruption of project

implementation High 2 3 6

Political instability in the run up to the 2018 harmonized

elections could lead to disrupted project implementation

and delay in execution.

Continued dialogue with Government of Zimbabwe so

they ensure a conducive environment and maintain stability during implementation and completion of

national project

Local Sub-contractors

being incapacitated by a

troubled financial sector

due to uncertain

economic policies

Low 3 3 9

Engage with the IEs to ensure that the contractor and

subcontractors anticipate changes within the local

financial sector as well as stay ready to institute remedial

measures

Post

implementation

risks

Vandalism of

refurbished installations High 2 3 6

Enactment and enforcement of legislation that

criminalizes acts of vandalism and reduction in power

outages ensuring that the system is live most of the time.

Improve customer communication and feedback options.

VII

Benefits not reaching the

intended beneficiaries Medium 2 4 8

Engage with targeted beneficiaries at project inception

Stage to ensure the design and implementation in line

with the project objectives and outcomes. Carry out post

implementation project verification.

Monitor and ensure continued stakeholder engagement

for any corrective action;

Failure to properly

operate, and maintain the

rehabilitated facilities

Medium 2 4 8

Build Capacity of operating staff within beneficiary

institutions and ensure availability of manuals so that

end users are sufficiently equipped to carry on trouble

shooting.

Engage beneficiary institutions on a //system to ensure

long term sustainability of the project.

Weak institutional

capacity Medium 2 4

Probability Ratings (What is the likelihood of this risk taking place)

1 2 3 4 5

Very unlikely to

happen/ Might not

happen at all.

Unlikely to happen 50-50 chances of happening of

not happening

High likelihood of happening Will definitely happen

Impact Ratings (What is the effect of this risk on project outcomes if it happens and not mitigated)

1 2 3 4 5

Minimum – not much

alteration in any of the key project outcomes

Mild – All or Key outcomes will

be achieved but some outputs will not be achieved

Strong – some key

outcomes might be compromised

Very damaging – significant

reduction in intensity of key outcomes

Catastrophic – complete negation of project

outcomes

Scores and Colour Codes (The score is the product of the Probability Rating and the Impact Rating).

1-5 6-10 11-15 16-25

Low risk, monitor and

manage while

continuing with

implementation

High risk, review and introduce additional

controls to lower risk level. Proceed with

implementation with caution.

Extreme risk, Stop! Immediately introduce further control

measures to lower the risk. Reassess before proceeding.