Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698928479574.pdf (Uganda)
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Hon.

Speaker, Hon.
Hon.

Speaker, Hon.

Members, the Committee on National Economy considered the request by Government to borrow up to Euro 15O million from the French Development Agency (AFD) to support the Kampala Water - Lake Victoria Water and Sanitation II (KW-LWI/ATSAN II) Project in accordance with Rule 175 (2) (b) of the Parliamentary Rules of Procedure.

The request was presented to this House by the Hon.
Minister of Finance, Planning and Economic Development on 4th December, 2018 and was accordingly referred to the Committee on National Economy for consideration.

The Committee considered and scrutinized the request and now begs to report 2.O METHODOI,OGY 2.1 Meetings The Committee held meetings with the following: 1 ii.

iii.

The Minister of Finance, Planning and Economic Development; The Minister of Water and Environment; and National Water and Sewerage Corporation.
2,2 Documentary review The Committee studied and made reference to the following documents c{- I The Minister of Finance, Planning and Economic Development's brief on the loan request; 11 111 The KW-LVWATSAN Re-scoping Project Document; The French Development Agency Aide-memoire for the Appraisal of water related projects (February, 20l8l .

'> .'

iv.

The Draft Loan Agreement between the French Development (AFD) and the Government of U da; ?
"}w a--- (- v v1 Minutes of for the negotiation of the draft loan agreement between the French Development Agency (AFD) and the Government of Uganda; and The National Planning Authority clearance letter the Kampala water - Lake Victoria Water and Sanitation II (KW-LWVATSAN II) Project.
3.O BACKGROUND In the recent years, Uganda's Economy has undergone rapid growth and transformation and as such, the Economic boom has resulted into rapid urbanization across the major urban towns in the country and thereby increasing demand for infrastructure for water and sewerage services.

The increased demand for water and sewerage has also increased pressure on water resources and this has in turn aggravated water pollution.
The improvement of sanitation services, water availability and water quality in the major towns in Uganda, as well as the protection of water resources, forms part of t}re Government policies focused at eradicating poverty and continuing progress towards achieving the Sustainable Development Goals (SDGs) on water and sanitation as well as improving water governance and management of water resources in Uganda.
National Water and Sewerage Corporation (NWSC) which is mandated to provide water supply and sewerage services in major towns in Uganda, has in the recent years largely relied on donor support to undertake major water supply and sewerage infrastructure develop ment projects in its towns of operation I The Kampala Water - Lake Victoria Water and Sanitation oJect (KW-LV WATSAN) is one of such developments.
The Program is based on a long-term rehabilitation and extension strates/ for the water supply system of Kampala (2OO3, updated 2O1O) and is closely linked to the on-going and future implementation of the Kampala Sanitation Master Plan (2004).

The overall strateg/ aims at meeting Kampala's water demand for the year 2035.
It hrdes a systematic and phased approach to reduce water losses and 2 \\+ operational costs while protecting the watershed, improving sanitary conditions and providing better services to the urban poor.

It is expected that these interventions, will in turn contribute towards improvements in public health including infant and maternal mortalit5r rates and poverty reduction as well as achievement of national Povert1z Eradication Action Plan targets and Sustainable Development Goals.
It will also ensure improvements in protection of Kampala's natural environment, both land and water through pollution controls of the Lake Victoria water body.

The total cost of Phase 1 of the KW-LV WATSAN Project was Euros 222 rrrill:.on, and is being implemented through funding from GoU (Contribution - 34 million Euros) and a consortium of European Development Banks comprising of; i. KfW Entwicklungsbank - German Financial Corporation (KfW) - Grant of 2O million Euros; ii.
Agence francaise de Development (AFD) - Loan of 75 million Euros; iii.

European Union Africa Infrastructure Fund (EU-AIF) - Grant of 8 million Euros; and iv.

European Investment Bank (EIB) - Loan of 75 million Euros.

The loan financing agreements for phase 1 of this Project were signed by Government of Uganda (GoU) and the lenders on 28th April 2011.
4.O THE PROGRAM AND COUNTRY STRATEGY The Kampala Water - Lake Victoria Water and Sanitation ect (KW-LV WATSAN) is in line with the National Development Plan II, which is the national development policy of the Government of Uganda for the period 2016 - 2O2I.

ln the NDPII, "promotion of appropriate water sanitation technologies" is one of the key priority interventions for promoting efficient service delivery in order to achieve the development goals highlighted in the plan.
q 3 }.t The project is also in line with the Sanitation Stratery and Master Plan (November, 2OO4l for Kampala City, The project will hence translate into curtailing water and sanitation related diseases within the city and thereby reduce infant and maternal mortality rates, which will significantly contribute towards achievement of the National Poverty Eradication Action Plan targets and the Sustainable Development Goals (SDGs).
5.O PERT'ORMANCE OF THE PHASE I OF I(AMPALA WATER-LAKE VICTORIA UTATER AND SANITATION PROJECT On 27b April 2O I 1, Parliament of Uganda approved the request by government to borrow 75.0 Million Euros from The Agency Francaise De Development (AFD) of France and another Euros 75.0 Million from The European Investment Bank (EIB) to Support the Kampala Water- Lake Victoria (WATSAN )Project.

The Financing agreements for the Project were signed by Government of Uganda (GoU) and the lenders on 28th April 2O11.
This 4 year project commenced on 28l04l2ol1 with an initial closure date of 30l06l2Ol5, but an extension was secured to 30ft October 2O2O.

The project commencement was hindered by delays in conducting feasibility and diagnostic studies, which were pre- conditions for accessing financial resources for the major infrastructure developments.

Therefore, the physical progress of the project was delayed with only 1 of the 5 main project components having been completed i.e.
Rehabilitation of Ggaba I & II treatment Plants and New Transmission Mains ,7- ?- I c+- w\ 4 5.1 KSI-L\'"WATSAN PHASE I PROJECT COMPONENTS Phase 1 of the KW-LV WATSAN Project is implemented under in 5 Components namely; Component 1: Immediate measures for upgrading the Ggaba water treatment Plant complex and providing additional water transmission and storage capaclty This component was to finance the following; I Upgrading and rehabilitation of the Ggaba Water Treatment Complex: to Increase treatment capacity from 185.000 m3 per day to 230.000 m3 per day through appropriate rehabilitation and extension activities; and 11.
Construction of a new reservoir, clear water pumps, and a new sludge treatment plant for mechanical removal of the chemicals used in the treatment process.

Update/Achievements: a Rehabilitation of the Ggaba Water Treatment Plant and restoration of the Plants to their original design capacities.

o Constmction of Ggaba-Namasuba Transmission Mains (10km).

o Construction of Namasuba Reservoirs (8,000m3).
Component 2: Network restnrcturing and rehabilitation This component was to finance the following; I ll Restructuring and extension of the existing distribution network through construction and rehabilitation of transmission (25 km length of Nominal Diameter 1,2o0mm) and primary distribution system (49,4 krn of pipes of Nominal Diameter 20omm to Nominal D 70omm) and associated reservorrs, Densification and extension of secondary network (156 Nominal Diameter 50Omm to Nomi Diameter length of 200mm) and 5 $-(z --- - extension/rehabilitation of tertiary network (73O km length of Nominal Diameter 150mm to Nominal Diameter 50mm) 111 Implementation of district metering zones and pressure management, including a SCADA System for network monitoring, and of activities for technical and administrative water loss reduction.
Update/Achievenents: o Diagnostic Study and Modeling of the Kampala Water Supply Network.

r Preparation of Kampala Water and Sanitation Master Plan.

.

Procurement of Consultant for preparation of detailed designs for the Kampala Water Supply Network.

Component 3: Improvement and extension of water supply and sanitary senrices in informal settlements.
This component was to finance the following; I 11 Improve water supply in 20 selected informal settlements through network densilication and construction of nearly 3,000 public water points and yard taps with electronic pre-paid meters to ensure access for additional 40O.O0O people to clean and safe drinkin water at affordable costs Activities to promote user sensitisation and organization.
In close coordination with the Kampala Sanitation Programme implementation of pro-poor oriented sanitation measures comprising: construction of up to 200 private low cost demonstration latrines (dry compost latrines), procurement of small scale emptying equipment, and improvement of 1O km of drainage channel s, social sensitization keting campaigns and hygienq 6 Update/Achievements: a Preparation of Feasibility Study for the Improvement of Water and Sanitation Services for the Urban Poor in Kampala.
Component 4: Construction of New Slater Treatment Plant East of I(ampal,a, Transmission Main and associated Network This component was to finance the following; I Construction of intake for 240,00O m3 per day at a new location east of Kampala, of a water treatment plant with a capacity of 16O,000 m3 per day, sludge handling facilities, clear water pumping station, transmission mains (28 km length of Nominal Diameter 1, 400) and primary network (41.5 km length of Nominal Diameter 4o0mm to Nominal Diameter 1, 4o0mm and of the Asset Management and Control System for network management; appropriate activities to protect the watershed.
Update/Achievements: a a a a a a Preparation of Feasibility study and Water Quality Monitoring for the Development of New Water Treatment Plant.

Preparation of Terms of Reference and procurement of two (02) Consultancy Services i.e.

Package 48 Katosi Drinking Water Treatment Plant and Package 4B Katosi Transmission Mains, to oversee the implementation of the activities under this Package.

Preparation of Detailed Designs and Tender Documents for the Katosi Transmission Mains.
Preparation of Conceptual Desig ns and Tender Documents for the Katosi Drinking Water Treatment Plant.

Commencement of Works for the Katosi Transmission M alns.
Co encement of works for the Katosi Drinking Water Treatm a't \* Component 5: Accompanying Measures: This component was to finance the following; I Capacity development in the areas of overall investment planning, in particular better coordination of sanitation planning with expansion of water supply, operations management, network modeling, asset management, pressure management, network control, and financial management, including related training, attachments, and equipment.
Update/Achlevements: o Procurement and Supply of Non-Revenue Water Reduction Equipment.

r NWSC Capacity Needs Assessment Study.

.

Support to the Regionalization Process, Asset Management and Capacity Building, .

Technical Audits and Quarterly Reporting.

o Preparation of Terms of Reference for the Strengthening of the Project Implementation Unit.

o Procurement of PlU-Project Management Assistant.


/ _h e h \KK (-+ .,) Fp 8 5.3 Financial Performance of I(trI-LVTIATSAN I ProJect The disbursements of the program are indicated below.

Table l: Performance of Loan Disbursements for the KW-LVWATSAN I Project Phase l as at November 2018.
Source of Fluanclng Effectlve Date Agency Francaise De Development (AFD) European Investment Bank Total 28l04l2O1t 28l04l2ott Loan/Grant Amount (Euros Milltonsf 75 75 150 Disburseaents (Millions Euros) Disbursement Rate l%f 75 32 to7 IOOYa 42.7o/o 7l.3o/o Source: Nqtlonal Water and.

Sewerage Cooperotlo4 Noa 2O78.


The European Investment Bank (EIB) has disbursed Euros 32 million against a loan amount of Euros 75 million, representing a disbursement rate of 42.7yo while the Agency Francaise De Development (AFD) which provided a loan of a loan of Euros 75 million has disbursed 100% of its contribution, as at November, 2018.

The overall disbursement rate for the 2 loans stands at7l.3Vo as at 30ft November, 2018, 5.4 Cballenges faced by Phase I of the KW-LVWATSAN Project a?
a Discordance in multi-sectoral interagency collaboration (E.g.

multiple agencies UNRA, KCCA, NEMA, Utility Companies etc), in joint implementation of critical infrastructure E.g.

the contract (signed on Sth June 2017) for works on the 46km Tralsmission main (from Nsumba Hill to Ssonde Hill), Reservoir of 15,000 litres at Ssonde hill and Booster station at Namugongo; which has stalled due to delayed signing of the MoU with UNRA r use of Katosi road reserve.

-.-- 9 ?
-.-- 9 ?

e Whereas Pre-commencement activities like surveying, excavation of trial pits and procurement of pipes has been completed, major works are unable to commence a Absentee landlords making ownership of the land difficult to ascertain E.g.

for the sites in Namuwongo and Nalukolongo.

This presents a threat of wrongful compensation and/or future lawsuits against the implementing agency hence impeding project progress.
a High valuation and complex negotiations for compensation for sites located on private land which was delayed by over 1 % years.

This impedes project progress or presenting unplanned high costs of site relocation, re-surveying and re-design resulting in unnecessary supplementary.
G '"rdJ€,, 10 ,4 5.4 Performance of Loans in the Water and Euvironment Sector Table 2: Performance of externally funded projects in the fiIater and Environment Sector t rluly, .201 lake Victoria Enrrironmental Management Project II Kampala Sanitation Programme Phase 1 Kampala Water l,ake Victoria WATSAN Proiect Kampala Water l,ake Victoria WATSAN Proiect Rural Water and Sanitation Programme Water Management and Development Proiect Farm Income Enhancement and Forest Conservation Programme Froiect 2 l,akes Edward and Albert Integrated Fisheries and Water Resources Management Prpiect 29 /O9lOe 2slotIro 30l6lt3 27.5 27.O7 98.40h 2e loe loe 28/2lrO 3t I t2/ t4 53.19 52.t3 98.Oo/o Completed in June 20La Extended for one year FY 2018l 19 27 /O4 I tr 28l4ltr 30 l6/15 108.
18 7S 69.3o/o Extended to FY 2018/ 19 27 /04 I rt 28l4lrt 231 LL I t7 108.18 75 69.3Vo Extended to FY 2018/ 19 18l05 /12 slto/tr 13/t2l17 63.29 63.29 1OO.

Oolo os/02/13 8/L2lt3 3L / t2l 18 135 108 55.0% Completed in June 20L8 On-Going slot I 16 6lor I 16 30l6l2r 76.7 18.50 15.0% On-Going 08/o1/ 16 6lotlt6 30l6ll2r /.J 3.5 l5e/" On-Going ) ( % lrtll>:.
IL 07 lot lrs rrlsl16 30lt2l2O 92.t2 46.06 62Vo On-Going 2e lo3lt8 2812/10 3t I t2lL4 26.45 1 1.28 42o/o Extended for one year FY 2018/ 19 Water Supply and Sanitation Programme Phase II (wssP IIl.

Kampala Sanitation Programme Phase 1 (Supplementar v) Source: Uganda Slater and Environment Sector Performance Report July, 2018, MoWE.

698.31 479.43 68.71o/o Table 2 shows the performance of the externally funded projects in the Water and Environment Sector.
The sector received funding from development partners including the World Bank, Arab Bank for Economic Development in Africa (BADEA), African Development Bank (AfDB), European Investment Bank (EIB) and French Development Fund (AFD).

From these Partners, Government secured USD 698.31 million to linance 9 projects, By the end June 2018, 68.71% (US$479,83 million) had been disbursed to the 10 loans; which was an improvement from 4O.2o/o (US$17o.3million) in June 2017.
Despite the improvement, some projects did not perform well.

For example Kampala Water Lake Victoria WATSAN Project had challenges of court cases and cost variations which took long to conclude 5.O I(AMPALA WATER-LAKE VICTORIA WATER AND PROJECT PHASE II OBJECTIVES The overall objective of the KW-LWVATSAN II Project is to facilitate the realization of the initial KW-LWVATSAN Project Objectives i.e.
promotion of sustainable socio-economic growth and improved health through enhanced access to safe water, thereby contributing to the poverty eradication efforts of ATION LWVATSAN II Project addresses the shortfalls Go rnment Th e KW- \JU in -thee "&3 k 12 ffi/ 4#( original scope and overall Project structuring, in order to address the objectives of the KW-LWVATSAN Project as originally conceived.
6.1 SPECIFIC OBJECTIVES FOR THE KW.L\AIIATSAN PROJECT PHASE II The specific objectives of the proposed KW-LVWATSAN II Project are; a) To ensure adequate water provision in the Greater Kampala Metropolitan Area by addressing the growing water supply challenges through development of new infrastructure as well as rehabilitation and expansion of existing systems.
b) To improve the health and living standards of the target population, including vulnerable and disadvantaged groups, such as the urban poor, through improved access to clean water.

c) To contribute to environmental protection and sustainability of the Lake Victoria raw water source through sludge management & ecosystem services restoration, source protection and management through wetland restoration, land use practices, and reforestation among others.
d) To ensure sustainability of water supply and sanitation services in nt of the Greater Kampala Metropolitan Area through efficient and effective institutional support systems establis t'U 13 N 6.2 I(AMPALA U/ATER-LAKE VICTORIA WATER AND SANITATION PROJECT PHASE II COMPONENTS The KW-LVWATSAN II Project is being implemented under the framework of the following components as shown in table 3.

Table 3: ProJect Components aud Description No.


Compoaent Immediate measures for upgrading the Ggaba water treatment Plant complex and providing additional water transmission and storFge capacity.

Network restructuring and rehabilitation Improvement and extension of water supply and sanitary services in informal settlements.
Construction of New Water Treatment Plant East of Kampala, Transmission Main and associated Network Accompanying Measures Descriptiou Development of Ggaba sludge management system.

Water Supply Network Restructuring and Upgrading i.e.

over 20okm of Nominal Diameter 110-1400 to efficiently distribute the additional 160,000m3 /day to be produced from the Katosi Water Treatment Plant to all parts of the GKMA i.e.

Mukono, Wakiso, Kampala City.


Urban Poor/Informal Settlements WATSAN Infrastructure expansion entailing construction of 2,500 prepaid meters, and about T0krl:.

Water Network Intensification.

Construction of an additional 8O,OOOm3/day water treatment line at Katosi (giving a total production capacity of 16O,0OOm3/day) and additional 30,000m3 reservoir at Nsumba hill (giving a total storage capacity of 4O,000m3).
Programme Management Support, Technical Audits, and Institutional Support and Restructuring including Asset Management, Human Resource Enhancement, Information Technologr Systems Strengthening, Long Term Water Quality Monitoring, Non-Revenue Water Reduction, and Ecosystem Services Restoration and Source Protection.
7Ce VWATSAN ProJect Rescoplng Docum,ent MSq June 2078. d- t4 N\ 7.O KW-L\TSIATSAN PROJECT PHASE II ADDITIONAL FINANCING ARRANGEMENTS The outstanding and additional scope of works required to achieve the initial Project Objectives under the proposed KW-LWIATSAN II Project, requires additional financing to a tune of Euro 150 million.

The Agence Frangaise de D6veloppement (AFD) will finance the project through a loan to the Government of Uganda.
This estimate is broken down in the Table 4, Tabte 4: KW-L\,"WATSAN Addttional Cost Estimates ' fu,: i ;.:Cost:!
; r' :?, (mllllon €) : ;t E,' t 'l Output 7: Gcaba Sludce Management Geaba WTP Complex Sludge Management System Otttprtt 2: Network Rehabllttatlon and Restntchrlng Works Necessary for Distribution of 8O,O00m3/d Other Measures Necessary for Distribution of 16O,O006a/d from Katosi and Re-distribution of 232,OO0ms/d from Ggaba (Naguru, Namasuba, and Muyenga Sub-system Development and Expansionl Design and Supervision (Consultancy Servicesl A.fuut 9: Urban Poorllnfortnal Seltlements WA?ISAN Infrostltcture Construction of additional prepaid meters, and network intensification Accompanying Measures and Proiect Supervision Services Otttput 4: Addltlono,t SO,OOOma/dau Water Tveatment Plant at lda,tosl WTP Katosi II (Additional 80,000m3/d Production Capacity) and Nsumba Reserwoir Expansion by 30,OO0m3 [Works) Desisn and Supervision (Consultancvl Anput 5: Accomoanulng Me4.surers Programme Management Support, Technical Audits, and Institutional Support and Restructuring including Asset Management, Human Resource Enhancement, Information Technologz Systems Strengthening, l,ong Term Water Quality Monitoring, Non-Revenue Water Reduction, and Ecosystem Services Restoration and Source Protection Contlngencles (1O% t e. io/opltgslcal contlngencg utd 5% prlce contingencal Grand Total 3.O 3.O 94.O 11.O 76.O 7.O 9.O 8.0 1.0 24.O 23.O 1.O 8.O 8.O 72.O 7so.q Source: XW-LVWATSAN ProJect Rescoplng l)ocument IVWSC, June 2O78.
2Vo 7 .3o/" 50.7o/o 4.7Yo 5.3o/o o.7vo 15.3% O.7o/" 5.3"/o 8.O% 700 V N\- es necessary for the distribution of 16o,0O0ma/d r,- bution of 232,000m3/d from Ggaba tllaSuru,L{ Table 3 shows that meas from Katosi and Re-distri Namasuba, and Muyenga Sub-system Development and Expansion) will cost al project cost followed (Euro 76 million) of the KW-LWVATSAN 15 Qt by the Construction of an additionai 80,O00m3/day water treatment line at Katosi and additional 3O,OOOm3 reservoir at Nsumba hill that will cost 15.3o/o (Euro 23 million)of the KW-LVWATSAN Additional project cost.
The Programme Management Support will cost 5.3% (Euro 8 million) of the of the KW- LWVATSAN Additional project cost, 8.0%o of the KW-LVWATSAN Additional project cost (Euro 8 million) will be spent of price and physical contingencies.
8.O JUSTIFICATION T'OR ADDITIONAL FINAI{CING When NWSC initiated the KW-LVWATSAN Project in 2OIO, the Project Financing of Euro 222 million was secured based on Preliminary Studies, on the understanding that more detailed and definitive studies would be carried out as part of the Project interventions.

However, when detailed studies were eventually carried out under the Kampala Water and Sanitation Master Plan, it was realized that the funding was grossly inadequate to meet the Project objectives.
It therefore meant that the envisaged scope of the KW-LWVATSAN Project could not be fully implemented within the available financial envelope.

Out of the Euro 222 rnillion secured under the KW-LWVATSAN Project, Euro 198.5 million has already been utilised / committed.
Of this, Euro 94.6 million has already been paid while Euro 1O3.8 million is committed but not yet paid, as summarised in the table 5 \\k Q- N 'l\ 16 Table 5: Current Commltments under the KW-LWATSAN I ProJect ProJect Component Activlty Component 1: Upgrading and rehabilitation of the Ggaba Water Treatment Complex Component 2: Network Restructuring & Rehabilitation Component 3: Extension of Water Supply in Informal Settlements Component 4: Construction of New Water Treatment Plant East of Kampala and associated Network Componeut 5: Accompanying Measures Total Ggaba Refurbishment Works & Consultancy Services, and Non-Revenue Water Monitoring and Reduction Network Diagnostic Study and Master Plan Preparation Feasibility Study, Design, and Supervision Services for the Improvement of Water and Sanitation Services in Kampala 8o,O00me/d Katosi Drinking Water Treatment Plant and Transmission Mains Works and Consultancy Services Project Management Support and Capacity Needs Assessment Consultancy Services Contracted Amount (Euro) Amount Paid to date (Eurof Outstanding Amount (Eurol 45,843,545 42,366,735 3,476,8IO 2,233,325 2,2OO,774 32,552 7,757,872 3,694, 133 4,O73,739 t42,204,177 45,999,22L 96,204,956 469,174 403,163 66,011 198,508,O93 94,65,4,0126 103,8s4,O68 Source: XW-LII\IATSAN ProJect Rescoplng lrocument IVWSC, ,Iune 2O78 The remaining Euro 23.4 million is earmarked for the following activities; Table 6: Plc,nned.
Cornrnitm.en,ts under the KW-LII\IIATSAN ProJect ProJect Componeat Activity Estlmated Amount lEurof \- Component 2: Network Restructuring & Rehabilitation Conponent 3: Extension of Water Supply in Informal Settlements Component 5: Accompanying Measures Sonde and Kampala East Network construction works (P2b) Urban Poor Water Supply and Sanitation construction works (PSb) Project Management Support Consultancy Services (P6c) Capacity Needs Assessment Consultancy Services (P6d) Total : I{VI-LVWA Project Rescoplng Document rV.tr/SC, June 2078 3,689,643 12,2L2,264 3,O90,OO0 4,500,o00 I 23,491,9o,7\ ( N L7 9.O PROJECT IMPLEMENTATION The KW-LVWATSAN II Project will be implemented by National Water and Sewerage Corporation (NWSC) through its dedicated Project Implementation Unit (PIU) located in Kampala.
The PIU will not only be responsible for direct project implementation, but will also be required to closely work with other sector players and stakeholders in the development of appropriate solutions.

NWSC's Projects Monitoring and Evaluation department shall continue to oversee and coordinate the monitoring and evaluation of the Project.
The scope of works under the KW-LVWATSAN II Project shall be implemented concurrently with the ongoing KW-LWIATSAN I Project, and shall require five (05) years for full execution i..e. 2Ol9 to 2023.

1O.O ECONOMIC BENEFITS OF THE PROJECT o Direct Beneficiaries o The over 1.0mi11ion residents within the Greater Kampala Metropolitan Area who shall receive water for the first time, or whose water supply reliability and affordability is going to improve, thereby bettering their health and living conditions.
o Industrialists, for example the industries in the Namanve and Mbalala business parks, which shall be supplied with water supply services for\ their industrial needs, thereby contributing to the growth of the n V o Over 1,000 people who are going to be directly employed during the economy and downstream emplol.rnent.
a construction works and over 5O people during the operation period, thereby improving their livelihoods (s, o Service providers and material suppliers, who shall be engaged both during the construction and operational phases, thereby improving tJreir livelihoods and contributing to the growth of the economy,.
o Indirect Beneficiaries o The propert5r owners along or in the vicinity of the new infrastrLtcture whose property values will increase significantly as a result of improved servlces o Over 5,000 people indirectly employed in the indirect value chain, whose livelihoods shall be improved.
11.O LOAN TERMS, CONDITIONS AND BUDGETARY IMPLICATIONS 11.1 Loan Terms The Agence Francaise De Development (AFD) will make available million to finance the Kampala Water Lake Victoria-Water and S Phase II project under the terms shown in the table 7.
Euros 150 anitation - \^" Terms Euros 15O million 2l years 14 years 7 years Based on the Effective Global Rate of 1.25% which is the fixed reference Rate (floating) by the index rate 0.5% p.a amount n/ undisbursed on Table 7: Loan terms Item Loan Amount Maturity Repayment period Grace period Interest Rate Commitment fees Sourcer Drafi loa.n agreement 19 Table 7 shows that a credit is based on an interest rate determined by the Global effective rate of L25o/o indexed on any variations that may occur.
Furthermore, the undisbursed amount of the loan will be subjected to a commitment charge of O.5% per annum on undisbursed amount during the grace period.

With the above terms, the cost of the loan is indicated in the table 7; ll.2 l,oan Conditions 1 11 lll lv.

Submission to the Agence Frangaise de Ddvelopment (AFD) of the Attorney General's legal Opinion certifying that the Financing Agreement has been duly executed and ratified, and is legally binding on the Republic of Uganda.
Provision to the Agence Frangaise de Development (AFD) of documents approving the terms and conditions and authorizing government to borrow the loan.

Provision to the Agence Frangaise de D6velopment (AFD) Documents authorising a specified person or persons to execute the Agreement on its behalf; Provision to the Agence Frangaise de Development (AFD) a certificate issued by a duly authorised representative of the Borrower listing the person(s) autlrorised to sign, on behalf of the Borrower, the Draydanty.
Requests and any certificate in connection with the loan; Evidence that the drawdown of the Facility will not breach any borrowing limit, or any other similar limit binding on the Borrower.

vi.
vi.

An o Lender's no objec \-V of the On-granting tion, duly executed Agreement havin by the Bo er 20 R$\ g received thq and .the Final \-/ *-:* Benehciary and, where applicable, accompanied by evidence that all the formalities required for the entry into, performance and enforceability against third parties of such have been satisfied.
vl1 A certificate of the Bank Account certifying that the Project Account has been opened in the n€une of the Project and providing account details for such Project Account.
11.3 Level of Concessionality of the Loan Table 8: Level ofconcessionallty ofthe loan ITEM Maturity period Grace period Debt Service of the loan PV ofTotal Debt Discount rate Grant Element Source: Drafi Loan Agreement, and PBO Staff Comtrrutations VALUE 2l years 7 years Euros 179.I4 million Euros 96.42 million 5 o/o 36Yo From table 8, tJre present discounted value of the loan (Euros 96.42 million) is smaller than the nominal value of the loan contracted (Euros 150 million).
This shows that the future payment of the loan is cheaper than the proposed amount to be borrowed in present terms.

The total payment of the loan will amount to Euros t79.14 million after the loan period of 21 years.

The loan is concessional since its grant element (36%) is higher than the PDMF, 2013 threshold of 35%.
11.3 Budgetary Implications Annual Approved budget estimates for FY 20l8l19 indicate that Ushs 2.5 billion (GoU Development Budget) was provided for the Kampala water - Lake Victoria Water and Sanitation II (KW-LVWATSAN II) project.
This is to deliver istra on and the following project outputs that include project Ad 27 il\ \s' Management Support (Ushs 0.110 billion); Improved sanitation services and hygiene (Ushs 0.0450 billion); Monitoring, Supervision, Capacity building for Urban Authorities and Private Operators (Ushs 0.225 billion); Acquisition of Land by Government (Ushs 0.120 billion); and Construction of Piped Water Supply Systems (Urban) (Ushs 2.155 billion).
12.O THE LOAN AND THE CURRENT DEBT SITUATION OF THE COUNTRY This loan will increase the country's public debt that has been on the rise over tJre years.

The provisional total public debt stock (at nominal value) as at end of June 2018 stood at Ushs 42,084.7 billion (42.O5o/o of GDP) (Bank of Uganda Annual Report 2Ol7/18).

This is an increase of 21.6 percent relative to June 2017.
13.O COMPLIANCE WITH PARLIAMENTARY APPROVAL GIIIDELINES The committee on National Economy developed guidelines to be considered when scrutinizing all loans that require approval of Parliament.
The guidelines were adopted by Parliament and require performance information and impact assessment for previous projects by a ministry or government agency; evidence of project appraisal; consistency with the national planning framework; institutional framework for project implementation; procurement plan; evidence of implementation of the Resettlement Action plan; provision of counterpart funding; evidence of project readiness for implementation; and financing mechanism.
Below are the scores submitted documents Ministry of Water and Environment rey.l.
based on 22 .l Table 9: Compliance with Parliamentary Approval Guidelines Indicator Performance of previous projects Consistency with the National Planning Framework Institutional framework Procurement Resettlement Action Plan Budgetary Implications Implementation Readiness Financing Target acore 5 3 2 1 4 3 8 6 Inetltutlonal score 3 J c o.5 , c 6 5 Total Source: DAS & PBO StaffComlnttq.tlons s2 23.5 Perforaance (7o) 6Oo/" 100% IOOYo 5Oo/o 5Oo/o 67o/o 7 5o/o 83o/o 73o/o I4.O OBSERVATIONS AND RECOMMENDATIONS The Committee made the following observations and recommendations Climate Change effects and Pollution of Water Sources il The committee noted the negative effects of climate change that are beginning to manifest in NWSC Operational Areas.
For example in 2OO6, water supply to the towns of Kampala, Jinja and Entebbe, was threatened by the drastic drop in Lake Victoria levels.

Other than the drop in lake levels, the quality of Lake Victoria raw water source is continuously deteriorating due to heavy human and industrial activities.

The water sources for all the other towns are either swamps or river sources which are heavily silted due to human activities upstream.
The river flows and water available in the swamps have greatly reduced over the years leading to water rationing in some of the towns during dry seasons.

The negative effects of climate change have compelled NWSC to her efforts towards redevelopment of water abstraction infras cture ocus 23 instead of concentrating on water and sanitation system capacity upgrading and expansion programmes.

These unanticipated costs invariably constrain the already limited resources for expansion activities.
Due to the increasing backlog in infrastructure development activities mainly attributed to inadequate funding, services in a number of towns namely; Kampala, Gulu, Bushenyi/Ishaka, Arua, Mbarara, Masaka and Mbale, have reached or are about to reach crisis levels.
The committee recommends the following; e The Ministry of [Iater and Environment should urgently address the low compliance to water and environmental laws and regul,ations in the country that has contlnuously led to the deterloratlng quality of raw water source in the country especially (Lake Victoria ) due to hearry human and industrial activities, by strengthening the law enforcement and regulatory capaclties of the agencies in the water and euvironment sector.
a The Ministry of trIater and Environment should promote appropriate sanltatlon technologies on al[ raw water source especlally on islands in order to improve on the quality of raw water aourcea in the country.

This will reduce on the high water treatment costs incurred in making this raw water fit for household use.
ffl Performance of K1II-trIATSAN Phase I The committee noted that Phase 1 of the Kampala Water Lake Victoria WATSAN Project was faced by implementation delays due to a number of challenges that included court cases and cost variations which took long to conclude, discordance in multi-sectoral interagency collaboration (e.g, multiple agencies UNRA, KCCA, NEMA, Utility Companies etc), in joint implementation of critical infr e.g.
the contract (sign c ed on Sft June 2O1 7l for uyA orks 24 I L on the 46km Transmission main (from Nsumba Hill to Ssonde Hill), Reservoir of 15,000 litres at Ssonde hill and Booster station at Namugongo; stalled due to delayed signing of the MoU with UNRA for use of Katosi road reserve.

The committee recommends the following; a a Government should strengthen collaboration amougst the MDAs in the implementatlon of debt financed projects in order for the timely achievement of project objectives and outcomes.
For this proJect National trIater and Sewerage Corporation will interface with key partners and should urgently where applicable ensure that the required Memorandums of Understanding (MoUsf with these key project implementation partners are in place.
These include Mukono District Local Government, National Environment Mauagement Authority, National Forestry Authority (NFAI, Uganda National Roads Authority (UNRA), Kampala Capital City Authority (KCCA), Uganda Pollce Forces (UPFI, and the Ministry of Lands, Housing and Urban Development (MoLHUD).

NWSC should urgently start the process of acquiring land rights to key sites ofthis project aa soon as identified in the approved proJect design reports.
Acquisition for all other land titles should be started in a timely manner and as outlined ln the proJect schedule.

( iiil fiIater and Sewerage infrastructure The committee noted that most of the water and sewerage infrastructure in NWSC towns is old having been developed over fifty years.
In the last two decades, Uganda as whole has experienced rapid urbanization and this rapid growth has put unprecedented pressure on the limited water a ds tation 25 infrastructure in the towns under NWSC operational jurisdiction.

Whilst significant amounts of development funds were put into water and sewerage system expansion and rehabilitation from the mid eighties to mid nineties, funding for the sector at country level has been on the decline.
The recent efforts in infrastructure development cannot match service needs.

The NWSC geographical coverage has increased from 218 towns as at 30th June 2017 to 236 towns as at 30th June 2018, an addition of 18 towns.

This translates into a target population of 14.2 million people.
With the increased number of non- viable towns whose management the corporation has been compelled to take over, the ability of NWSC to generate cash surpluses to contribute towards capital development programmes is constrained.

This scenario is worsened by the fact that the current tariff charged by the Corporation is not full cost recovery.
The Committee recommends that the institutional capacity of National trIater and Sewage Cotporation should be strengthened further to enable it address the increasing backlog in the water and sewerage infrastructure development activities maiuly attributed to inadequate fundiug.
ivl Justificatlon for Additlonal Financing The committee noted that when NWSC initiated the KW-LWVATSAN Project in 2OlO, the Project Financing of Euro 222 rrillion was secured based on Preliminary Studies, on the understanding that more detailed and definitive studies would be carried out as part of the Project interventions.
However, when detailed studies were eventually carried out under the Kampala Water and Sanitation Master Plan, it was realized that the funding was grossly inadequate to meet the Project objectives.
It therefore meant that the envisage scope of the KW-LVWATSAN Project could not be fully im lemented within the available financial envelope \A 26 sil The Committee recommends the following; r Government should ensure that public iuvestment management reforms undertake credible due diligence on all project feasibility studies to lmprove cost estlmatlon of proJects.
r The audltor general should undertake a forensic audit on the process of undertaking the feasibility study that grossly underestimated project costs leading to a substantial increase in costs of clvll works, wlth a view of ldentifylng the peraons responsible.
14.O Concluslon The Committee recommends that the request by Government to borrow up to Euro 150 million from the French Development Agency (AFD) to support the Kampala water - Lake Victoria Water and Sanitation II (KW-LWVATSAN II) Project be approved, subject to the above recommendations I 27 tu I \ REPORT OF THE COMMITTEE ON NATIONAL ECONOMY ON THE PROPOSAL BY GOVERNMENT TO BORROW UP TO EURO 15O.O MILLION FROM THE FRENCH DEVELOPMENT AGENCY (AFD) TO SUPPORT THE KAMPALA WATER - LAKE VICTORIA WATER AND SANITATION PHASE II (KIII-LVTTATSAN rr) PROJECT NO NAME CONSTITUENCY 1 Hon.
Bbumba Syda Namirembe C/P Nakaseke North Count 2 Hon.

Bategeka Lawreace V/CP Hoima Munlclpallty (S 3 Hon.

Tayebwa Thomas Ruhinda North 4 Hon.

Muyanja Johnson Senyonga Mukono South Countv 5 Hon.

Kamara John Ninzeyimana Bufumbira North 6 Hon.

Kalule Sengo Emmanuel Gomba East County Hon.

Migadde Robert Ndugwa Buvuma Islands County 8 Hon.

Okello Anthony Kioga County 9 Hon.

Musoke Paul Sebulime Buikwe County North 10 Hon.

Kibalya Henry Moris Bugabula South 11 Hon.


Guma Gumisiriza David Ibanda North County T2 Hon.

Nambeshe John Baptist Manjiya County 13 Hon.

Ikojo John Bosco Bukedea County l4 Hon.

Angura Fredrick Tororo South County 15 Hon.

Katoto Hatwib Katerera County 16 Hon.

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