Document of

The World Bank

tF!LE lOYFOR OFFICIAL USE ONLY

Report No. 4119-SE

STAFF APPRAISAL REPORT

SENEGAL

ELEVEN CENTERS WATER SUPPLY PROJECT

February 1, 1985

Western Africa Projects DepartmentWater Supply Division

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

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CURRENCY EQUIVALENTS

Currency Unit - CFA Franc (CFAF)!/US$1.00 - CFAF 435CFAF 1.00 - US$0.0023CFAF 1,000 - US$2.30

WEIGHTS AND MEASURES

1 meter (m) - 3.28 feet1 kilometer (km) - 0.62 miles1 liter (1) - 0.26 US gallons1 cubic meter (m3) - 264 US gallons1 cubic meter/second (m3/s) - 31.5 million cubic meters

per year or 22.8 millionUS gallons per day

1 liter per capita per day (lcd) - 0.26 US gallons per capitaper day

ABBREVIATIONS AND ACRONYMS

AfDB African Development BankBADEA Banque Arabe de Developpement Economique de l'AfriqueBCEAO Banque Centrale des Etats de l'Afrique de l'OuestBP Brigade de PuitsCCCG Cahier des Clauses et Conditions GeneralesCEAO Communaut6 Economique des Etats de l'Afrique de l'OuestCGES Compagnie Generale des Eaux du S6negalCNA Caisse Nationale d'AmortissementDAS Direction de l'Assainissement (MH)DEH Direction des Etudes Hydrauliques (MH)DEM Direction de l'Equipement et de la Maintenance (MH)DER Direction de l'Equipement Rural (MH)DHPS Direction de l'Hygikne Publique et de la Sante (Ministry of Health)DHR Direction de l'Hydraulique Rurale (MH)DHUA Direction de l'Hydraulique Urbaine et de l'Assainissement (MH)DHUR Direction de l'Hydraulique Urbaine et Rurale (MH)EEC European Economic CommunityFAC Fonds d'Aide et de Coop6ration, FranceICS Industries Chimiques du SenegalIGIP Ingenieur-Gesellschaft fur Internationale Planungsaufgaben mbHKfW Kreditanstalt fUr WiederaufbauMH Ministere de l'HydrauliqueOCAM Organisation Commune Africaine et MalgacheSMIG Salaire Minimum Interprofessionel GarantiSOMH Service des Operations et de la Maintenance Hydraulique (MH)SONAFOR Societe Nationale de ForagesSONEES Societe Nationale d'Exploitation des Eaux du SenegalSRHER Service R6gional de l'Hydraulique et de l'Equipement Rural

FISCAL YEAR

Government: July 1 - June 30SONEES: January 1 - December 31

1/ The CFA Franc is tied to the French Franc at the ratio of 1 FrenchFranc to CFAF 50. The French Franc is currently floating.

SENEGAL FOR OFFICIAL USE ONLY

STAFF APPRAISAL REPORT ON THEELEVEN CENTERS WATER SUPPLY PROJECT

TABLE OF CONTENTS

Page No.

I. THE WATER SUPPLY AND WASTE DISPOSAL SECTOR ................... 1

A. Country Background. .................................. 1B. Population ....... *................................ ................ 1C. Water Resources.. ... ... . .. ........................... 1D. Sector Organizationg... ... at o....... 2E. Present Service Levels and Goals ..... .......... . 4

1. Urban Water Supply - Dakar Arear................. 42. Urban Water Supply - Secondary Centerst....... 53. Urban Sanitation.....*.... .... 0........., ..... 54. Rural Water Supply and Sanitation............... 65. Government Objectives for Rural Water Supplies... 7

F. Public Health ............ ....................... 7

II. THE PROJECT AREA ..................................... 8

A. Location .... 0...... 8B. Existing Water Supply Systems ......................... 8C. Population Served and Standards of Service............. 9D. Population Projections and Demand for Service ......... 10

III. THE IMPLEMENTING AGENCY........... . .. .......... ............. 10

A. Reponsibilities and Legal Aspects ...................... 10B. Enterprise Contract ..........................#........... 11C. Organization and Management ............................ 11D. Office Space ................. .... .. .... ........ 12E. Operations, Staffing and Training ................ ..... 12F. Meter Reading, Billing and Collection .................. 13G. Accounting ............................... ............ 14H. Data Processing ................................ 14I. Budgeting and Planning..... .... .................. 15J. Audits ... o............... .. O.. . ........ .*.......... 1 5K. Taxation .................... .... O .0.. ea*..v** ... *¢e* @... 1 5L. Insurance ......... O *..0.#..................... 15M. Monitoring Indicators............ *..a*................. 16

This report was prepared by Messrs. H. Nickel, Sr. Financial Analyst,A. Locussol, Sanitary Engineer, and S. Katsu, Economist based on an appraisalmission conducted in Senegal in February/March 1982. Mr. A. Vogel, SanitaryEngineer of WHO, participated in the appraisal and the report under theWHO/IBRD Cooperative Program. Miss E. Yan processed the successive drafts ofthe report.

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

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Table of Contents (Continued)

Page No.

A. Project Genesis... ........... .... 16

B. Project Objectives.... .............. .... ... .. ...... *.. 16C. Description of Project Components.me..... t... 17D. Replenishment of SONEES' Working Capitalp...... a....... 17E. Project Coss... .......... 0.0 e....* **¢ 1 8F. Project Financing and Lending Arrangements ............ 19G. Project Preparation Facility ........................... 20H. Implementation ........ me ............ .............. ... 21I. Procurement ... ........meo............................ 21J. Disbursemeits ..o*0.0.0.Oo*.*...... 4-00-0 O 0 22

D. FINANCIAL AN AebS.. 24

A. I ntroduction d ....orReme................. ........... 0 24B. SONEES' Past and Present Financial Performance .................... 24C. Sector Fixed Assets*..* ......... 26D. Sector Debt S i .... ................. . 26E. Tariffs and S etor Revenues ......................... 27F. SONEES' Future Financial Performance ..*... ................... o 29G. F inancing Plane...ie... ... P..Ov..... ..r ............. 32

VI. ECONOMIC AND SOCIAL ANALYSIS ..... ....*..O ................. 3 .4

A. G eneral .........C. ......................... 34B. Least Cost Solutions. .......... ......o........ 34C. Domestic Connections and Public Standpipes Policy ............................... 35D. Affordability .. ............ ........ .a..... *00.. 35E. Marginal Cost and Rate of Return .......... . .......... ... 36F. Population Benefitted: Urban Poverty Group ....... . .................... 37G. Project Risks..,.. .........meo..... o...., 37

VII. AGREEMENTS REACHED AND RECOMMENDATION .*--s.....o.......................... 38

A. Agreements ...... 0... .................... l ... 38Bo Recommendationo..o ....................... seem 40

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LIST OF ANNEXES

1-1 Total Population According to Size of Agglomeration1-2 Ministry of Hydraulics - Present Organization Chart

2-1 Water Consumption and Production Forecasts forthe Eleven Centers

2-2 Service Levels in the Eleven Centers

3-1 SONEES - Present Organization Chart3-2 SONEES - Proposed Organization Chart3-3 SONEES - Operations, Staffing and Training3-4 SONEES - Proposed Monitoring Indicators

4-1 Description of Proposed Project Components4-2 Physical Project Components by Center4-3 Technological Alternatives and Service Standards4-4 Total Project Cost4-5 Investment Ratios4-6 Breakdown of Project Components into Contracts

and by Financing Sources4-7 Implementation Schedule4-8 Schedule of Disbursement

5-1 SONEES - Income Statements 1981-19935-2 SONEES - Sources and Applications of Funds 1981-19935-3 SONEES - Balance Sheets as of December 31, 1981-19935-4 SONEES - Ratio Statements 1981-19935-5 Assumptions for SONEES Financial Projections5-6 Components of Water Tariff

6 Marginal Cost Calculations and ERR Analysis

Mak. Senegal - Eleven Centers Water Supply Project (IBRD Map No. 16700R)

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SENEGALEleven Centers Water Supply Project

DOCUMENTS AND DATA AVAILABLE IN THE PROJECT FILE

File Code

1. Water Supply in Eleven Secondary Centers of Senegal ) 129.955 (A1-17)Feasibility Study - IGIP - Darmstadt, Germany - 1981. )

2. Sector Organization Study. ) 125.372 (D & G)SONEES Organization Study. ) under CR.S;23-SETraining Needs. ) and 129.955 (B1-6)IDET/CEGOS - Boulogne Billancourt, France - 1981. )

3. Evaluation of SONEES' Training Needs. ) 129.955 (C)Fondation de l'Eau, Limoges, France - 1982. )

4. Water Tariff Study - SOPEA/ORGATEC, Paris, France - ) 129.955 (D)Dakar, Senegal - 1981. )

5. Financial Studies and Audits 1979 and 1980. ) 129.955 (E1-2) andArthur Andersen and Gaye, Dakar, Senegal. ) SONEES Yearly

) Audit Reports

6. Urban Sanitation in Senegal - Mr. Prigge - 1980. ) 129.955 (F)

7. Maintenance of Rural Water Supply Equipments, ) 129.955 (G)BRGM, Orleans, France - Dakar, Senegal - 1981. )

8. "Le Breviaire" (Operations and Financial Data) - ) 129.955 (H1-3)SONEES, 1978, 1979, 1980, )

9. Urgent Program for Rural Water Supply - ) 129.955 (I1-2)Ministry of Hydraulics.

10. Development Policies for the Senegalese Water Sector - ) 129.955 (J)Ministry of Hydraulics, July 1982. )

11. Legal Documents re. SONEES: ) 220.717 (A & B)- Law 83-73 of July 5, 1983 )- Statuts )- Cahier des Clauses et Conditions G6nerales )

12. SONEES' Enterprise Contract ("Contrat-Plan") ) 220.020 (Q)) under CR.1398-SE

13. Doubling of the Thies-Dakar transmission line- Feasibility studies and preliminary ) 221.848 (1-3)designs - Rhein Ruhr - Dortmund, Germany - 1981 ) 221.848 (4)

14. Water Supply of the Cap Vert area - Canal alterna- ) 221.849 (A1-2)tive-DHUA, Ministry of Hydraulics - Dakar - 1984 ) (B, C & D)

v

REPUBLIC OF SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

CREDIT AND PROJECT SUMMARY

Borrower: Republic of Senegal.

Beneficiary: Societe Nationale d'Exploitation des Eaux du Senegal(SONEES); Ministare de l'Hydraulique (MH).

Amount: IDA Credit of SDR 24.1 million (US$24 million equivalent)

Terms: Standard.

Relending Terms: US$9.5 million equivalent of the IDA Credit would be onlentto SONEES on IBRD terms (20 years, including 5 years ofgrace). SONEES would bear the risks related to exchangerate and interest rate variations. US$9.5 millionequivalent would be passed on by the State as contributionto SONEES' equity.

Proiect In line with the Government's policy to redress andDescription: restructure the parapublic sector, the objectives of the

proposed project would be to assist the Government instrengthening the urban water and sanitation sector bytransforming SONEES into an entity with a capacity todevelop and operate the sector without recourse toGovernment subsidies. The project would also aim atassisting the Government in defining the best solution forthe expansion of the Dakar/Cap Vert water supply system, indeveloping sound investment planning, maintenance and costrecovery in the rural water supply sector, as well as inpromoting appropriate technologies in the urban sanitationsubsector. In support of these objectives, the projectwould include: (i) a rehabilitation component for SONEES,including technical assistance, consultancy services, officespace, training, as well as additional working capital;(ii) construction and rehabilitation of boreholes, watertreatment, storage, transmission and distributionfacilities, house connections and standpipes in elevensecondary centers; (iii) feasibility studies for theDakar/Cap Vert water supply system, (iv) rural water supplytechnical assistance and institutional/policy studies; and(v) urban sanitation studies.

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Project Benefits: The proposed project would support the Government'sobjective of enhancing the economic performance of thesector through improved investment planning, programming,project design and cost recovery. By 1991, it would benefitan additional 280,000 people in the eleven centers coveredby the project (an increase of 66%) through domesticconnections or access to standpipes, half of the additionalpopulation served belonging to the urban poor.

Project Risks: Project risks relate to possible cost overruns caused bydelays in procurement and construction, to improperoperation and maintenance by SONEES, and to the generalability of the latter to meet the demanding challenges ofinstitutional development. The risks relating to costoverruns have been minimized by basing projections on actualcost of similar works being undertaken in the country and byusing the regional profile for the project implementationschedule and sufficient contingencies for foreign and localcurrency expenditures. Operational and maintenance risksare being reduced by technology which takes into accountlocal technical capabilities and by a substantial technicalassistance program to strengthen SONEES's operations. Theinstitutional development risk, while real, is mitigated bythe Government's determination to redress the parapublicsector and its commitment to this investment; moreover,SONEES's performance would be closely monitored.

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Estimated Cost: Local Foreign Total(Excluding Taxes) US$ million -Water Supply Systems in Eleven Centers 4.0 6.5 10.5Relhabilitation of SONEES' Operations 1.0 8.3 9.3Water Supply and Sanitation Studies 0.3 1.3 1.6

Base Cost 5.3 16.1 21.4

Physical Contingencies 0.8 1.5 2.3Price Contingencies 3.2 4.1 7.3

Project Cost 9.3 21.7 31.0

Refinancing of IDA Engineering Credit 0.5 2.0 2.5(CRoS-23-SE)

Initerest during Construction 1.8 0.7 2.5

Total Financing Requirements 11.6 24.4 36.0

Financing Plan:

IDA 5.1 18.9 24.0CCCE 2.8 4.8 7.6SONEES 3.7 0.7 4.4

Total Financing 11.6 24.4 36.0

EstimatedDisbursements: FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93

----- US$ million ----------------

Annual 8.5 3.4 2.5 2.6 2.4 2.0 1.4 1.2Cumulative 8.5 11.9 14.4 17.0 19.4 21.4 22.8 24.0

Internal Economic Rate of Return: 9%, using agreed water tariffs as a proxyfor benefits.

President's Report: No. P-3850-SE of February 8, 1985

Map: IBRD No. 16700R

WAPWSFebruary 1985

I. THE WATER SUPPLY AND WASTE DISPOSAL SECTOR

A. Country Background

1.C)1 Senegal is situated at the extreme western part of the AfricanCorLtinent. It has an area of 196,772 km2 with an Atlantic coastline 550 kmlong. It is a flat country, the altitude being generally less than 50 malthough some mountains in the south-east reach a height of 445 m. Thecli-mate is of a tropical sub-desert region with distinct wet summer and drywinter seasons. Annual rainfall increases steadily from the north (300 mm) tothe south (1,500 mm), and is approximately 600 mm at Dakar. Three-quarters ofSenegal's territory lies in the Sahel zone, characterized with low rainfall,high temperatures and periodic droughts. Lower temperatures and greaterrainfall are found in the coastal zone, a relatively narrow strip of some40 km width, and in the south eastern part of the country (Eastern Casamance).

1.02 Senegal is divided into eight administrative regions each of which isheaded by a governor. Regions in turn are divided into departments headed bya prefect. Departments are further sub-divided into arrondissements withruural populations usually between 10,000 - 35,000 people. The number ofvil]lages per arrondissement varies from 100 to 600. Municipalities arelabeled Urban Centers and all regional and departmental capitals have thisstatus. Unless they form municipalities, villages of up to 5,000 inhabitantsare considered as rural.

B. Population

1.03 Projections of the 1976 census give a 1981 total population of5.9 million of which approximately 3.75 million (64%) are classified as ruralliving in some 13,000 villages having populations ranging from less than 200to 5,000 inhabitants. About 60% of the rural population is concentratedwilthin some 150 kn of Dakar in the central groundnut basin where populationdensities often exceed 100 per km . Dakar, the capital of Senegal has anes timated 1981 population of approximately 1 million and is expected to have1.5 million by 1990. The Cap Vert region, including Dakar, which forms oneme-tropolitan area, has about 1.2 million inhabitants. The remain1i7g 0.95mi:Llion urban population live in some 36 secondary urban centers_ . Overallpo'pulation growth rate is estimated at 2.8% per annum. It is also estimatedthat 44% of the population is less than 15 years old. Annex 1-1 presents asummary grouping of the total population according to size of agglomeration.

C. Water Resources

1.04 Three major river systems cross the country in a general east to westdirection. All three have sluggish flow and, because of the flat topography,are estuaries for a substantial distance inland. The Senegal River forms the

1/ All cities other than Dakar are being referred to as secondarycenters in this report.

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northern boundary of the country in a flat shallow valley which is subject toinundation at times of peak run-off, The Gambia River to the south is enclosedby the Gambian nation along its lower hundred kilometers--its upper reachesdrain the high areas in the southeastern part of Senegal. The Casamance Riveris a relatively small system in terms of the area it drains but is especiallyimportant because of the high rainfall (1,200 - 1,500 mm/year) in itscatchment area. The Lao de Guiers, part of the Senegal River system anddraining an area to the south of the main river valley is important from thepoint of view of water resources. It is the only Large, natural storage basinin the country and part of its capacity is used to supply potable water toDakar, 250 km away as well as providing water to towns and villages enroute. The cities of Saint Louis, Richard Toll, Dagana, Podor, Matam, Bakeland Kedougou also obtain their drinking water from surface sources. Ingeneral, surface water sources are unevenly distributed and meager. Most ofthe streams which are tributary to the main three rivers are intermittent andare completely dry for as much as four months per year during the dry season,March to June.

1.05 Groundwater constitutes the major source of water supply for humanand animal consumption in Senegal and is also a significant water source! forthe irrigation of vegetables and fruits grown on relatively small plots.Senegal's groundwater resources have been investigated on an ad hoc basis anda firm assessment of the capacity and potential yields of its known aquifers,especially the maestrichtian, is still lacking. The maestrichtian aquiferextends over 75% of the national territory and constitutes a major source ofwater supply; however, its renewable and non-renewable resources are rela-tively unknown. A study covering simulation models for exploitation of thisdeep aquifer will be carried out by the Ministry of Hydraulics (MH) under aFrench Fonds d'Aide et de Cooperation (FAC) financing.

1.06 The best aquifers in terms of quality are the shallow ones found inthe areas around the Ferlo River sands of the "Continental Terminal" (eocenelimestones), the Niaye sands, the Diourbel area, and the area near the borderwith The Gambia. Most of the exploited groundwater sources for both the urbanand rural population are derived from these and other shallow aquifers ofSenegal. The deep maestrichtian aquifer, is semi-artesian and often carrieshigh concentrations of salts, fluorides and iron oxides.

D. Sector Organization

1.07 Sector responsibilities have been redefined in order to endow SocieteNationale d'Exploitation des Eaux du Senegal (SONEES) with comprehensiveresponsibilities for the water and sewerage sector (paras 1.11 and 3.01 seq.),following a sector organization study financed under the IDA Water SupplyEngineering Credit S23-SE and several subsequent IDA missions to assist theSenegalese authorities in the restructuring of the sector. Overallresponsibilities for urban and rural water supply as well as urban sanitationand drainage are placed in MH. Responsibilities for operation and maintenanceof urban water supply, sewerage and piped drainage systems are entrusted toSONEES. Preparation and implementation of projects is gradually beingtransferred from MH to SONEES, starting with the proposed project.

Responsibility for maintenance of open drains is with the Municipalities. TheMinistry of Health through its Directorate of Hygiene and Sanitation (DHPS) isresponsible for rural sanitation. In addition there are a number of non-governmental and mainly religious organizations which are active in the ruralwater supply sub-sector.

1.08 The Ministry of Hydraulics has four directorates: Studies (DEH),Urban and Rural Water Supply (DHUR), Sanitation (DAS) and Rural Infrastructure(DER). In addition, there are eight regional offices located in the capitalcities of each region (Annex 1-2). Total MH staff was 522 in 1981. TheDivision of Rural Water Supply (DHR), part of DHUR, has responsibility forplanning, project implementation and monitoring of operations in the ruralwater supply subsector. Drilling of deep wells is subcontracted to a seriesof drilling companies established in Dakar, some of which are foreign-owned.The Subdivision for Mechanical and Hydraulic Equipment (SOMH), also part ofDHUR, is responsible for day-to-day operation and maintenance of allmechanically driven pumps in rural areas. There are also well diggingbrigades (BP), under the regional offices, which are responsible for allaspects of construction, repair and maintenance of dug wells. The "Code del'Eau" (Law 81-13 of 1981) established the general legal framework for the useof water, pollution control, priority uses, public and private rights andobligations.

1.0'9 The rural water supply subsector is not operating effectively;performance of SOMH and BP has been poor with high capital and recurrent costrequirements as well as frequent breakdowns of installations. Due to theabsence of realistic sector policies and targets, there are inadequacies inthe planning and programming of installations as well as a lack ofappreciation of the importance of cost recovery.

1.10 The Ministry of Hydraulics is being reorganized with an objective tostreamline its operations. The reorganization will shift more responsibilityto SONEES for urban water supply and sewerage and strengthen MH's role in therural water supply subsector, in line with the objectives of the proposedproject. The present functions of the DHUR and DAS will be reallocated amongtwo new directorates, namely Urban Water Supply and Sanitation (DHUA) andRurial Water Supply (DHR). In addition, a new Directorate of Operation andMaintenance (DEM) will be created with the assistance cf a Kreditanstalt furWiederaufbau (KfW) financing, gradually replacing SOMH. Regarding the ruralwater sub-sector, the proposed project would finance:

(i) an expatriate technical assistant to MH for a three-yearperiod to help define realistic objectives and sectorpolicies as well as reorganize existing institutions(Annex 4-1, 4); and

(ii) studies to analyze possibilities of implementation ofalternative goals and appropriate technologies, andreductions of unit costs and for preparation of specificrural water supply projects (Annex 4-1, 4).

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1.11 The Government has agreed to develop SONEES to become a nationalenterprise with responsibility to prepare and implement all urban water supplyand sewerage projects and operate the systems. To implement this, NH hastransferred to SONEES the responsibility for execution of the proposed projectas well as other new urban water supply projects. A few smaller projectsstarted by MH before 1984, will be completed by MH. Sewerage projects alsowill continue to be implemented by MH for the near future as SONEES will needtime to build up its own project implementing capacity. The proposed projectwould provide adequate technical assistance and training for SONEES to enhanceits capacity to prepare, implement and operate appropriately the projectsentrusted to it (Annex 4-1, 2). During negotiations, assurances were obtainedthat by December 31, 1988 the Government will transfer project implementationresponsibility to SONEES for all urban water and sewerage projects that mightstill be with MH at that date. Dispositions for the preceding 5-yeartransitory period are included in SONEES' Contrat-Plan (para 3.03 seq.).Existing water supply and sewerage installations have been transferred fromthe State to SONEES by Law 83-73 of July 5, 1983 establishing SONEES as anational enterprise.

E. Present Service Levels and Goals

1. Urban Water Supply - Dakar Area

1.12 Water for the Dakar area is supplied from 37 boreholes in five dif-ferent groundwater zones in and outside the Cap Vert region (total capacity108,000 m3/day) and from the N'Gnith treatment plant on the Lac de Guiers nearthe Senegal River (capacity 50,000 m3/day). Chlorination is applied at fourof the five groundwater production zones while the surface water receives fulltreatment. The distribution system comprises 20 reservoirs with a combinedcapacity of 66,200 m3 and about 800 km of water mains. About 30% of thepopulation is served by private connections and an additional 50% have accessto the 766 public standpipes, the consumption of which is billed to the Muni-cipalities. It is assumed that the remaining 20% obtain their water fromshallow wells and vendors. Domestic consumption accounts for about 45% of thetotal consumption, with the rest being divided up by commercial establishments(29%), industries (15%) and Government administration, including the army(11%). The total number of connections is about 40,000.

1.13 The quantity of water delivered to the Cap Vert area by the 250 kmLac de Guiers transmission line has been reduced over the past years by enroute tapping for irrigation of small truck farming plots. Exploitation ofthe aquifers in the Cap Vert region is being extended to the maximum safeyield level. Feasibility studies, financed by the Federal Republic of Germany(KfW) have recently been carried out to analyze the possibility of increasingboth the water production and transfer capacities of the Lac de Guiersscheme. The first phase of the proposed expansion, which wrould be sufficientto cover the water demand until 1990 only, is estimated to cost aboutUS$50 million; it would include extension of the G'nith treatment plant,drilling of additional boreholes, installation of boosters on the transmissionline and replacement of old pipes in the Cap Vert area. The Federal Republicof Germany has already shown interest in financing such a project and should

appraise it in 1985. For the medium and long terms, proposals made fordoubling, then tripling, the existing transmission line would lead to veryhig'h investment (US$250 to 300 million) which both the urban water sector andthe Senegalese economy would have difficulties to afford. The proposedproject will provide for additional feasibility studies to consideralternatives, particularly a multipurpose canal to be built between the Lac deGuiers, the only viable water resource for the long term, and the Cap Vertarea; this canal would also supply water to small irrigation schemes to bedevelopped en route, and recharge the over-exploited aquifers of the Cap Vertarea (Annex 4-1, 2). Furthermore, the proposed project will provide apre'liminary assessment of possibilities for re-use of the Dakar area sewageeffluent in order to limit the use of drinking water for irrigation(Annex 4-1, 5). A Bank mission, to which the other major donors alreadyinvolved in the sector will participate, is scheduled for FY85; its mainpurposes will be to review the investment program for the urban and ruralwater supply and urban sanitation sectors as well as to carry out apreliminary assessment of the financial and economic viability of alternativesfor expansion of the Dakar area water supply.

2. Urban Water Supply - Secondary Centers

1.14 Piped water systems exist in 36 secondary centers (including theEleven Centers) with a total population of about 950,000 inhabitants in1980. The average water production is about 37,000 m3/d of which 75% comefrom groundwater resources. Estimated system efficiency is about 70%.Installed storage capacity of 49 reservoirs is 34,000 m or 90% of averagedaily production. Total length of the distribution networks is 610 km (ofwhich 470 km is in the Eleven Centers) and the total number of connections isabout 21,200 (of which 10,500 is in the Eleven Centers).

1.115 It is estimated that approximately two-thirds of the urban populationin secondary centers is served by the public water supply systems leaving asignificant part of the population to obtain their drinking water fromunprotected shallow wells. Further details are available in Annex 2-2 and inthe project file.

3. Urban Sanitation

1.115 Public sewerage systems exist only in the larger cities of Dakar,St. Louis, Kaolack, Thies and Louga, but the services provided are restrictedto the central areas of these cities and to a relatively small part of thepopulation. Tne remainder of the urban population has individual disposalsystems: latrines, privies and septic tanks. Several of the larger secondarycenters, especially in peripheral flat areas where shanty towns have beenbuilt, suffer regularly from flooding during the rainy season, with gravethreats to public health. Where natural basins exist, they are often blockedby dwellings due to disorganized urbanization. Existing open drains are notproperly maintained, being often used for dumping of solid wastes by thepopulation. The piped sewer systems, where they exist, often do not functionand are blocked by sand since most streets, except for downtown Dakar, are notpaved. Moreover, the maJority of inhabitants can neither afford the cost of

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plumbing installations in their dwellings nor the cost of connection to thepublic sewerage system which is about US$170.

1.17 Sewerage systems recently constructed in Kaolack and Louga have beendesigned without adequate consideration of appropriate technology and do notfunction effectively. So far there has been little interest to connect on thepart of potential customers in view of the high cost; in Kaolack for exampleonly 120 connections have been made although the network and the treatmentplant have been constructed, to meet requirements well beyond the year 2000.Storm drainage systems in these cities are presently blocked by sand depositsfrom roads without bitumen surface. Construction of a similarly overdesignedand high cost system is nearing completion in Thies. Master plans along suchlines have also been prepared for the cities of Saint Louis, Diourbel,Tambacounda and Ziguinchor. Such ambitious plans, if implemented, wouldresult again in very high investment costs out of context with economicconstraints and local needs. Collection and disposal of solid wastes aregrossly inadequate, especially in the larger centers and presents a threat topublic health. Moreover organizational and institutional requirements havenot been dealt with as necessary, further aggravating system inefficiency.The proposed project would include a study of the urban sewerage sector,including feasibility of transferring sector debt as well as responsibilityfor implementation of new projects to SONEES (Annex 4-1, 4). Duringnegotiations, assurances were obtained that the Government will review therecommendations of this study with IDA and give due consideration to theirimplementation. SONEES' Contrat-Plan stipulates that during preparation ofthis study no new sewerage projects would be undertaken. The project wculdalso include consultancy services for definition of action to be taken to putpiped sewerage systems existing in secondary centers into effective operationand for proposals of alternative methods of collection and disposal withemphasis on technology adapted to local urban and housing conditions(Annex 4-1, 4).

4. Rural Water Supply and Sanitation

1.18 Most of the rural population derive their water supply from tradi-tional dug wells. There may be as many as 40,000 of them, mostly in anadvanced state of deterioration of which about 10,000 yield water only duringpart of the wet season. Such wells are usually built by artisans unable todig lower than the water table; due to the resulting insufficient waterdepth, installation of handpumps is almost impossible even in the perennialwells. Extraction of water from most wells is by means of rope and bucket,and most water from dug wells is contaminated. In addition, there are about750 modern dug wells and 367 operating drilled deep wells including 131equipped with power pumps (serving primarily for stock watering), 102 equippedwith handpumps and 134 boreholes wells (forage-puits). It is estimated thatless than 20% of the rural population has reasonable access to safe water, Atpresent, the provision of rural water supply from wells is free of charge.

1.19 Comprehensive planning for human waste disposal in rural areas hasnot yet been made. Rural latrine construction is essentially the result oftechnical assistance provided through sanitarians attached to primary health

care programs with all costs for ccnstruction borne by the householders. Thiseffort is mainly concentrated in the larger agglomerations and has not spreadto the smaller villages nor to the dispersed rural population. It is esti-mated that less than 20% of the rural population have adequate means ofexcreta disposal.

5. Government Objectives for Rural Water Supplies

1.20 The Government is presently committed to a sector objective with abroad, long-term program of providing adequate rural water supply, based on35 lcd, within a period of some 20 years. Levels of sarvice would vary fromperennial shallow wells where water would be extracted with rope and bucketfor the smaller villages (less than 200 inhabitants), to drilled wells withpowered pumps, elevated storage atid elementary distribution systems in thelarger ones (more than 2,000 inhabitants). In addition perennial supply forthe watering of animals every 10 kn of pastorage areas would be provided.Total investment to meet the above objectives is estimated by Government atCFAF 94 billion (US$216.0 million equivalent).

1.21 The Revised VIth Development Plan (1981/82 - 1984/85) for rural watersupply includes 43 projects amounting to CFAF 31.6 billion (US$72.6 millionequivalent) of which 35% were implemented during the first two years of thePlan period. As a comparison, CFAF 7.1 billion had been included in the VthPlan (1977/78 - 1980/81) and CFAF 3.3 billion in the IVth Plan (1973/74 -1976/77). For the VIth Plan expenditures, foreign financing of CFAF 21.7 billion(US$49.9 million) has been secured, and CFAF 1.6 billion (US$3.7 million)would come from the Government's capital expenditure budget. Financing ofabout; CFAF 8.3 billion (US$19.1 million) has still to be identified.

1.22 Major rural water supply projects of the VIth Plan include aCommunaute Economique des Etats de l'Afrique de l'Ouest (CEAO) program of 250water points (CFAF 5.25 billion; US$12.1 million equivalent) financed byKuwait and Banque Arabe de Developpement Economique de l'Afrique (BADEA) andthe "'Urgent Program for Rural Water" of CFAF 14.1 billion (US$32.4 million)for '314 villages whose first phase is included in the VIth Plan withCFAF 6.65 billion (US$15.3 million), to be cofinanced by Saudi Arabia, Kuwait,Italy, and the Federal Republic of Germany.

F. P'ublic Health

1.23 There are few reliable statistics on specific waterborne andsanitation associated diseases although morbidity due to common enteric andparasitic diseases is shown to be high throughout the country. The morecommonly observed of the imaportant water-related diseases in Senegal aremalaria, various diarrhoeas, dysenteries and parasitic infections directlyattributable to environmental deficiencies. River blindness remains prevalentin areas bordering the rivers of southern and eastern Senegal. Excess offluorides in wells in the Sine-Saloum Region causes mottled teeth.

1.24 Tne Bank is financing a first health project with the objective ofsupporting Senegal's primary health care strategy by:

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(i) strengthening the Ministry of Health's central andregional institutional capability in health sectorplanning, budgeting, personnel management, healtheducation, maintenance, and the implementation,monitoring and evaluation of projects;

(ii) establishing a reliable, efficient, cost effective drugprocurement and distribution system aimed at theprovision of essential drugs at the village level; and

(iii) improving the functions, performance and back-upcapability of the intermediate health facilities inperipheral urban areas.

1.25 Under the proposed project, a program of public relations, consumerinformation and product promotion is proposed to encourage a maximum number ofcustomers to be connected to the public water supply systems operated bySONEES (Annex 4-3, B). This campaign will also include sanitary education inorder to increase the health benefits from improved water supply. It willconcentrate on the sanitary collection, transport, storage and proper use ofwater. SONEES will be responsible for coordination with other concernedauthorities and institutions (para 4.12).

II. THE PROJECT AREA

A. Location

2.01 The proposed project includes funds for the expansion andrehabilitation of water supply systems in eleven urban centers includingcapitals of six out of the country's eight administrative regions (Louga,Thi6s, Diourbel, Kaolack, Tambacounda and Ziguinchor) plus five other centers(Linguere, Bambey, Fatick, M'Backe and Kolda). As shown on the attached map,all but three of the Eleven Centers are located within some 200 km from Dakarand all but two in areas of low rainfall.

B. Existing Water Supply Systems

2.02 In principle, the water supply systems are similar in all ElevenCenters, consisting of one or several wells in different areas, each wellpumping into a reservoir and thence to the distribution system. In some ofthe centers, several recently constructed wells without individual reservoirs,feed into already existing reservoirs. There are a total of 28 wells an,1 20reservoirs with a total capacity of 12,320 m3 and total distribution systemlength of 469 km. A detailed description and analysis of each of the existingsystems is contained in the report of the consultant IGIP (included in theproject file) and summarized in Annexes 2-1 and 2-2.

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2.03 Of the Eleven Centers, Thies, Diourbel, M'Backe, Kaolack, Kolda,Linguere, and Bambey obtain their water supply from the deep maestrichtianaquifer through 16 wells ranging in depth from 238 m to 625 m. Fatick andTambacounda obtain their supply from the eocene limestone around 170 m deepand Ziguinchor has four wells around 50 m deep in the sands of the continentalterminal and one well is 240 m in the oligocene limestone. Louga obtains mostof its supply from the Lac de Guiers transmission line.

2.04 Most of the existing installations are old and have become inadequatefor a number of reasons, namely: delays in distribution system extension tonew:Ly urbanized areas, poor spacing of standpipes, decreased well productivityand poor location of reservoirs resulting in insufficient supply and lowpressures in certain zones. In the major centers with several wells, theexisting system is the result of piecemeal development without master planningand. as a result, interconnections are sometimes complicated and not well-knowfn. Excessive age and degradation of existing installations have resultedin diminished system efficiency and interruptions of service and this has beencompounded by poor execution of a number of recently constructed wells andreservoirs. Existing chlorination installations have recently been upgradedand new facilities installed where necessary. As a result disinfection hasgreatly improved. It is also to be noted that for Louga, there has recentlybeen a major investment in network expansion. Special problems are caused byhigh fluoride, iron and chloride contents as well as aggressivity due to highC02 and low pH. As a result of objectionable taste, people often resort toother water sources of even more questionable bacteriological quality such asunprotected shallow wells and vendors, thus, further aggravating existingpubLic health problems.

2.015 Urban master plans have been prepared for Louga, Bambey, Diourbel,M'Back6, Fatick, Kolda and Ziguinchor. For Thies, such a plan is beingcompleted but for Linguere, Tambacounda and Kaolack such plans do not yetexist. These master plans are however not being systematically implemented.Almost all existing cadastral plans are incomplete and only partial plansexist of recently built up areas. Growth of peripheral zones has been withoutadequate provision of infrastructure and utilities, especially concerningset-tlement areas of the urban poor in the larger centers.

C. Population Served and Standards of Service

2.06 In 1981, there was a total of 10,500 domestic connections and 600pubLic standposts throughout the Eleven Centers. The estimated populationserved of 421,000 people (75% of the total population) included 150,000inhabitants or 27% on house connections and 271,000 or 48% on standposts. Asfurther detailed under Annex 2-2 total system coverage varied from a low of35% for Kolda (10% on house connections) to a high of 90% for Linguere, Thiesand Kaolack (40%, 33% and 40% respectively on house connections). Bambey(population 11,300, overall system coverage 85%), has the highest ratio ofpopulation served by house connections; i.e. 46%. Domestic connections aregenerally paid for by the consumers although, in several cities there is apossibility to obtain municipal and/or Government subsidy toward the cost ofconnection which averages around US$110. However, administration of these

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subsidies is rather complex and depends on the availability of funds.Therefore, overall density of connections per unit length of distributionsystem is low, averaging only 22 per km. The project includes funds for10,000 house connections representing the anticipated demand in the ElevenCenters during the project implementation period, which would increase thedensity to 28 connections per km on the average (Annex 4-1, 1).

2.07 Production meters are either non-existent or give faulty readings,and it is estimated that about a quarter of domestic meters are not read on aregular basis. As a result, it is difficult to determine accurate productionand consumption figures. Unaccounted-for water is estimated to be about 30%,which is not very high. While leakages do not appear to be excessive, theunaccounted-for water mainly relates to inadequate metering. For 1980, totalproduction averaged 21,700 m3/day providing 39 lcd gross which resulted in anaverage net consumption of 27 lcd. As further detailed under Annex 2-2,production varied from a low of 12 lcd for Kolda to 53 lcd for Koalack.

D. Population Projections and Demand for Service

2.08 Population projections prepared by the consultant IGIP and based onlatest available 1976 census figures give an estimated population of 794,000for the Eleven Centers by 1990, i.e., an average annual increase of 4%. Theproject would meet a gross average daily demand of 39,750 m3/day in 1990) (83%increase over present production) which would satisfy an average gross demandof 50 lcd, ranging from a low of 36 lcd for Kolda to a high of 61 lcd forKoalack. Expected system efficiency would improve to at least 78% mostly frommore comprehensive metering. Estimated overall system coverage would be 89%serving 706,000 people including 302,000 or 38% by house connections, rangingfrom a low of 30% for five centers to 40% for four centers and 45% for Bambeyand Koalack. The proposed project would therefore serve an additional 285,000people including 152,000 by house connections. Standpipe consumption isexpected to stabilize at around 15% to 20% of total consumption while nosignificant developments of commercial or industrial consumption are expectedexcept in Kaolack. Population and demand projections have been reviewed bythe mission and found to be reasonable.

III. THE IMPLEMENTING AGENCY

A. Responsibilities and Lel es

3.01 SONEES' shares are held 100% by public entities, i.e. 97% by theGovernment and 3% by eight municipalities. It was founded in 1973, replacingthe former Compagnie Generale des Eaux du Senegal (CGES). Following a sectororganization study carried out under Credit S23-SE, the Government hasaccepted to restructure the responsibilities in the urban water supply andsewerage sectors and to entrust the water authority SONEES with comprehensiveresponsibilities for project preparation, implementation and operation

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(para 1.11). SONEES' status as a "Societe Nationale" was confirmed byLaw 83-73 of July 5, 1983. Its rew statutes have become effective with thePresidential Decree of August 1, 1983. Supervision of SONEES ("tutelle") is,the responsibility of MH.

3.0:2 By an agreement (Convention Generale) with the Government, SONEES hasbeen entrusted with the operation of water supply and sewerage installationsin ,some 37 urban centers, including the capital city of Dakar. Its rights andobligations, relations with customers, etc. were outlined in SONEES' "Cahierdes Charges" of 1975. SONEES' increased autonomy and responsibility isreflected in the new "Cahier des Clauses et Conditions G&nerales (CCCG)"replacing the mentioned "Cahier des Charges". The draft has been reviewed byIDA and approved by Senegal's Supreme Court; signing of the new "CCCG" by theGovernment and SONEES (which occurred on January, 1985) was a condition forpresentation of the proposed project to the Board.

B. Enterprise Contract

3.03 SONEES has prepared a draft enterprise contract ("Contrat-Plan"),assisted by management consultants financed under a PPF of the SecondParapublic Sector Project of FY84. This Contrat-Plan is to become anagreement between the Government and SONEES to define targets and mutualcommitments. It covers the calendar years 1984 to 1988. SONEES' Contrat-Planis a pilot exercise for the Senegalese public sector and will probably bereplicated by other public enterprises. IDA has reviewed the draft Contrat-Plan. The conclusion and signing of a Contrat-Plan satisfactory to IDA (whichoccurred on January, 1985) was also a condition for Board presentation.

3.04 SONEES' Contrat-Plan indicates agreed targets in the areas of waterproduction and sales, service levels and quality, as well as billing andcollection. It stipulates periodical tariff increases to insure SONEES'financial viability. It includes targets for payment of public sector arrearsand current consumption (paras 3.13 to 3.14). It also includes detailedprovisions to insure a smooth transfer of implementation responsibility forwater supply and sewerage projects still with MH. During negotiations,assurances were obtained that the Government and SONEES will carry out suchtransfer in accordance with the provisions of the Contrat-Plan.

C. Organization and Manageent

3.05 SONEES consists of three headquarters' departments (technical,financial and administrative) and four regional departments covering areasoutside of Dakar: Fleuve, Thies, Sine-Saloum and Casamance. (For SONEES'present organization chart see Annex 3-1). There is no regional departmentfor the Dakar/Cap Vert operations, including the Lac de Guiers-Dakar scheme,which represent about three-quarters of SONEES' operations; they are includedin the central technical department. This department also includes thestudies and new works division, laboratories, workshops and warehouses. Themain divisions of the finance department are general and cost accounting,purchase of supplies, billing and collection, data processing and treasury. Abudgetary control division has recently been created. The administrative

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department is rather small and consists essentially of the personnel and legaldivisions. The four regional departments and the "general control" divisionreport directly to the General Manager.

3.06 The main problem of SONEES' present set-up is excessive centrali-zation. An organization study was carried out by the consultant IDET-CEGOS,financed under the Engineering Credit S23-SE. Its main recommendation isdecentralization, especially of the Dakar/Cap Vert operations. It wasrecommended that they should become a separate new regional department withfour divisions: production, including operation of the N'Gnith treatmentplant, the various groundwater production units and the 250 km pipeline fromN'Gnith to Dakar; two distribution divisions for Dakar South (center of thecity) and North (suburban Dakar/Cap Vert), and one sewerage division. Theproposed organization chart is in Annex 3-2. SONEES has requested assistanceby management consultants to implement this decentralization, and the proposedproject includes six months of such assistance in the form of several missionsspread over about three years (para 4.03 and Annex 4-1, 2).

D. Office Space

3.07 SONEES' headquarters departments are scattered over the downtown areain several insufficient and expensively leased downtown quarters and separatedfrom its technical operations, creating serious organizational and managerialproblems. SONEES' responsibilities for urban water supply and sewerage haveincreased significantly (paras 1.11 and 3.01 seq.). SONEES' office spaceneeds at headquarters, including the proposed training department, willincrease with these additional responsibilities, and therefore the issue ofoffice space should be solved during the early stage of projectimplementation. It is proposed to finance an extension (3,500 m2) of theexisting buildings of the Hann technical center to relocate SONEES' headquartersclose to its technical operations (para 4.03 and Annex 4-1, 2).

E. Operations, Staffing and Training

3.08 The water supply facilities are operated in good conditions;however, absence of preventive maintenance has caused operating problems andpremature deterioration of works. Efficiency of sewerage operations is ratherlow. Certain departments (warehouses, water meters and other workshops) areoverstaffed and not sufficiently skilled. A Division of Studies and New Worksrecently created within SONEES employs six Senegalese engineers and is headedby a qualified expatriate engineer; his position will be extended and backedup by an additional expatriate engineer under the proposed project (para 4.03and Annex 4-1, 2). This division, assisted by consultants, would implementthe proposed project in the Eleven Centers as well as other urban w&ter supplyand sewerage projects, introduce a preventive maintenance program and trainthe Senegalese engineers. Further details on SONEES' operations are given inAnnex 3-3.

3.09 SONEES employed 1,237 staff at the end of 1982, including 48 profes-sionals and 204 intermediate level staff; at the end of 1983, total staff was1,313. The general manager and department head positions are staffed with

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competent Senegalese professionals, the foreign technical assistance currentlybeing limited to three positions (i.e. the heads of the technical department,the Dakar water production division and the studies and new works division).The proposed project would finance an expatriate advisor to the generalmanager to assist adapting SONEES to the enlarged responsibilities andreinforcing operational and financial control (para 4.03 and Annex 4-1, 2).Further details on staffing are given in Annex 3-3.

3.10 To address the training needs at all levels an important three-yeartraining program would be financed through the proposed project. This programwould (i) create a training department within SONEES, (ii) improve skills ofhigh level staff, and (iii) especially focus on training technicalintearmediate level staff (para 4.03 and Annex 4-1, 2). Further details on thetraining program are given in Annex 3-3.

F. Meter Reading, Billing and Collection

3.11 SONEES has retained the principle of general metering of waterconsumption. There were about 72,700 subscribers at the end of 1983. Billingis done on a bimonthly basis and computerized.

3.12 A major problem is the exceedingly high level of unpaid customerreceivables; they amounted to CFAF 10.1 billion (US$23.2 million) atDecember 31, 1983 (water and works invoiced), representing about 12 months ofbillings. Those most difficult to collect are owed by the Administration, theMunicipalities, and the parastatal authorities, totalling CFAF 6.3 billion(US$14.5 million) at that date. In order to alleviate the resulting cashshortage SONEES has been retaining the funds it has collected from customerson behalf of, and which normally it would forward to, the National DebtAmortization Fund (CNA) (see para 5.13 on tariff components). At the end ofDece3mber 1983, the amount billed for but not passed on to the CNA was aboutCFAF 5.3 billion (US$12.2 million), including CFAF 4.5 billion (US$10.3 million)collected, and CFAF 0.8 billion (US$1.8 million) not yet collected by SONEES.

3.13 As part of the Contrat-Plan preparation (para 3.03) the Governmentand SONEES have evaluated mutual arrears as of June, 30, 1984. Theseestimates amount to CFAF 5.9 billion (US$13.6 million) that SONEES owed CNA(CFAF 5.7 billion) and the municipalities (CFAF 0.2 billion), andCFAF 6.6 billion (US$15.2 million) that Government (CFAF 3.2 billion) andmunicipalities (CFAF 3.4 billion) owed SONEES. The parastatal authorities,which owed SONEES CFAF 0.6 billion (US$1.4 million) as of June, 30, 1984 havenot been included in this estimate. The Government has agreed to offset theamolnt owed by SONEES to CNA against public sector arrears in the sameamoant. During negotiations, assurances were obtained that the balance ofabout CFAF 0.7 billion (US$1.7 million) in favor of SONEES will be paid by theGovernment within 30 days after the 1984/85 budget ("loi de finances 1984/85")has been modified. Effective payment of the net arrears in favor of SONEES(completed in January 1985) was a condition for presentation of the proposedproject to the Board.

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3.14 Regarding current consumption, assurances were obtained duringproject preparation that budgets of public sector entities includingmunicipalities will specify amounts for water consumption (instead of theprevious lumpsum amounts for all public utilities), that such budgets will bebased on consumption forecasts prepared by SONEES, and that invoices will bepaid within four months. This procedure is confirmed by the Contrat-Plan.SONEES has provided Government with 1984/85 consumption estimates for alldepartments. Modification of the 1984/85 budget which provided for aninsufficient water consumption allocation for the central Government aglenciesin the amount of OFAF 1.1 billion (US$2.5 million) was approved in January1985. This was also a condition for Board presentation.

3.15 Water consumption billed to private domestic and commercial customersand not collected represented about four to five months of billing at the endof 1983. SONEES continues its efforts to reduce these arrears bystrengthening its billing and collection procedures, including disconnectioncampaigns. Assurances would be sought that SONEES will reduce parapublic andprivate sector receivables to below four months of billings by end December1985.

G. Accounting

3.16 SONEES has a commercial double entry accounting system, based onaccrual accounting principles. It uses the OCAM chart of accounts which isthe official chart of accounts nationwide in most French-speaking West Africancountries. Cost center accounting provides revenue and cost data for thevarious centers and at the regional level. SONEES has one of the betteraccounting systems among West African water authorities. However, short-comings do exist regarding: (i) accounting for fixed assets previously ownedby the Government and now transferred to SONEES, and (ii) analysis and follow-up on Government arrears. Work on the latter has started with the help of theauditors. Improvement of records on the previously Government owned fixedassets will need a physical inventory and evaluation. Preliminary studies andplanning for this major exercise have been included in the PPF (para 4.11).

H. Data Processing

3.17 SONEES has been using an IBM 3/12 computer for about ten majorapplications in the areas of accounting, billing/customer accounts, stocks,fixed assets, and cost center accounting. The financial studies financed bythe Engineering Credit 323-SE have highlighted major problems: theapplications are not integrated, control of data input is insufficient, manycalculations that could easily be performed by the systems are still donemanually (e.g. work under construction, disposal of fixed assets,depreciation) or not performed at all (revaluation of fixed assets). Costcenter accounting and budgetary control are two separate and overlycomplicated systems. A restructuring of SONEES' information system is urgent,and preparation of a data processing master plan by consultants--included inthe PPF (paras 4.03 and 4.11 and Annex 4-1, 2) --would be the first step.This master plan should cover about five years and design a new informationsystem, including specification of needed hardware and software, space, as

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well as related cost. The master plan should also evaluate existing staff,future staff needs, and the possible need for technical assistance to the dataprocessing department.

I. Budgeting and Planning

3.18 Annual operating and capital expenditure budgets are prepared forSONEES' overall operations and the regions. However, medium-term financialplanning does not yet exist on a regular basis. Therefore, duringnegotiations assurances were obtained from SONEES that it will prepare eachyear, together with its annual budgets, financial projections at least for thefoLlowing three years (including income statements, funds flow statements andbalance sheets) and transmit them, together with the annual operating andcapital expenditure budgets for review to IDA, not later than one month beforethe beginning of the fiscal year concerned.

J. Audits

3.19 SONEES' financial statements for FYs79-82, its accounting, budgetingand internal control procedures as well as its data processing system havebeen audited by Arthur Andersen, Gaye & Partners, Dakar. These audits werepartly financed by the Engineering Credit S23-SE and partly by the mentionedPPF. In view of the shortcomings identified (paras 3.16 to 3.17), furtheraudits together with technical assistance to the improvement of accountingsystems and procedures, are included in the proposed project (para 4.03 andAnnex 4-1, 2). Terms of reference would request that each annual audit reportinc:Lude a detailed analysis of systems and procedures, progress achieved, andrecommendations for further action. Technical assistance would be provided asnecessary to implement the required improvements, it would also includeimplementation of a system for revaluation of fixed assets, to be appliedannually, starting with the December 31, 1985 closing, i.e. once the fixedassets transferred from the State to SONEES will have been inventorized andevaluated. Assurances were obtained during negotiations that (i) SONEES willsubmit audited annual financial statements to IDA together with the auditreport, within eight months of the annual closing date, and (ii) that annualrevaluation of fixed assets in operation will be carried out on a pro formabas,is starting with the December 31, 1985 closing. The required audits wouldalso cover the project expenditures to be effected by MH and for which MH willkeep accounts.

K. Taxation

3.20 SONEES' net income before taxes is subject to a 33 1/3% corporateincome tax.

L. Insurance

3.21 SONEES has insurance against all normal commercial risks, such asthird party liability, fire, other risks to SONEES' property and inventories,and vehicle insurance.

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M. Monitoring Indicators

3.22 During negotiations, assurances were obtained that SONEES willperiodically report to IDA on its operating and financial performance, usingthe monitoring indicators shown in Annex 3-4.

IV. THE PROJECT

A. Project Genesis

4.01 Following several years of difficult dialogue between the Senegaleseauthorities and the Bank on the institutional set-up of the sector and alloca-tion of responsibilities, it was agreed at first to commission consultantstudies to prepare a possibLe water supply project for 11 secondary centers.An IDA Engineering Credit was approved by the Board in April 1979 and providedfinancing for 15 reconnaissance wells in Louga, Diourbel, Kolda, Kaolack,Ziguinchor and Tambacounda, feasibility studies and detailed designs for watersupply in the Eleven Centers, organization, financial and tariff studies, aswell as technical assistance. All components have been implemented, tenderdocuments for water supply facilities in the Eleven Centers are ready, andsome of the contracts have already been awarded.

B. Project Objectives

4.02 The objectives of the project can be summarized as follows:

(i) help develop SONEES into a national enterpriseresponsible for preparation and implementation of allurban water supply and sewerage projects, as well asoperation of the systems;

(ii) rehabilitate and expand water supply facilities in theEleven Centers where existing systems are operating atdesign capacity and to provide for an increase inpopulation served from about 420,000 to 705,000;

(iii) strengthen SONEES' financial structure by replenishingits working capital;

(iv) assist Government define acceptable solutions forexpansion of the Dakar/Cap Vert water supply;

(v) help Government formulate the policies as well as theinstitutional arrangements for implementation andmaintenance of facilities in the rural water supplysubsector; and

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(vi) assist Government promote appropriate seweragetechnologies and investigate possibilities of sewageeffluent re-use in the Dakar area in order to limit theuse of drinking water for irrigation of small truckfarming plots.

C. Description of Project Components

4.03 The project would include the following components (for a detaileddescription, see Annex 4-1):

(i) expansion of water supply facilities in the Eleven Centersincluding: drilling of 12 new wells and rehabilitation of15 existing wells; supply and installation of 25chlorination units, one neutralization plant, 13 km of PVCtransmission pipes, 6 reservoirs and 328 km of distributionnetwork, supplies for 10,000 small domestic connectionsincluding the meters, and 186 standpipes;

(ii) rehabilitation of SONEES' operations through: technicalassistance, expansion of office space, consultancy in thefields of organization, accounting and consumerinformation, technical training program and increase inSONEES' working capital including supply of spare parts;

(iii) consultants services for feasibility studies of theDakar/Cap Vert water supply expansion;

(iv) technical assistance to MIT as well as institutional andpolicy studies for rural water supply; and

(v) consultants services for urban sewerage studies.

Annex 4-2 gives the physical project components by centers and Annex 4-3 givesa description of the technological alternatives tihat were considered and theservice standards chosen.

D. Replenishment of SONEES' Working Capital

4.04 Due to slow payments for public sector water consumption as well aspast postponement of tariff increases, SONEES has accumulated importantarrears towards suppliers, first of all the power authority SENELEC, and hasused all its overdraft facilities with local banks. The proposed projectwou:Ld include a contribution to SONEES' working capital to be most likelydisbursed over the first year of project implementation. Part of thiscomponent would replenish SONEES' stock of spare parts (US$3.00 million), andthe rest be disbursed against chemicals bills (US$3.00 million). Thesefigures include retroactive financing for spare parts and chemicals purchasedsince January 1, 1984 in an amount not exceeding US$2.00 million. Theresulting improved cash position would help SONEES to pay off the mentionedpasl; due supplier invoices and overdrafts with local banks while carrying thepublic sector arrears.

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E. Project Cost

4.05 The estimated cost of the project, excluding taxes and duties, andfinancing requirements are summarized below and given in more detail inAnnex 4-4. The investment ratios for each of the Eleven Centers are shown inAnnex 4-5. Total project cost is estimated at CFAF 13,505 million(US$31.00 million equivalent) with a foreign component of CFAF 9,445 million(US$21.70 million) representing 70%. Total financing requirements includingrefinancing of the IDA Engineering Credit and interest during construction areestimated at CFAF 15,675 million (US$36.00 million equivalent) with a foreigncomponent of CFAF 10,625 million (US$24.40 million) representing 67.8%.Components financed under the US$0.75 million PPF (para 4.11), of whichUS$0.60 million in foreign exchange, have been integrated in the project cost.

SumXay Project Cost% of

Foreign Local Total Foreign Local Total. Total--- CFAF million -- -- U$ Million

Project ComponentsWater Supply in the Eleven Centers 2,805 1 ,750 4,555 6.45 4.02 10.47 33.8Rehabilitation of SONES 3,625 430 4,055 8.34 .95 9.29 30.0Dakar Water Supp1y Studies 320 70 390 .73 .16 .89 2.9Rral Water Supply 130 35 165 .30 .08 .38 1.2Urban Sanitation Studies 135 35 170 .31 .XB .39 1.3

Bse Cost as of end 193 7,015 2,320 9,335 16.13 5*29 21.42 69.2

Physical Contingencies 635 340 975 1.46 .78 2.24 7.2Price Contingencies 1,795 1,400 3,195 4.11 3.23 7.34 23.6Total Project Cost 9,445 4,060 13,S5C5 21.70 9.30 31.00 100.0

Refinancing of IDA Thgineering Credit 870 215 1,085 2.00 .50 2.50Interest during Construction 310 775 1,C85 0.70 1.80 2.50

Total nhiancing Requirements 10,625 5,050 15,675 24.40 11.60 36.00

% of Total 67.8 32.2 100.0 67.8 32.2 100.0

4.06 The project cost is based on preliminary designs and on quotationsobtained for similar works tendered for in Senegal and other West Africancountries during recent years. Estimates for consulting services and variousstudies are based on available quotations for some of the proposed services aswell as proposals for similar studies in Senegal. All costs have beenadjusted to reflect unit prices as of end 1983. No taxes and duties onimported goods as well as taxes on works are included in the project cost assuch taxes will not be applied to this project.

4.07 Allowances for physical contingencies on construction work at theaverage rate of 15% are provided. For technical assistance, training andstudies, physical contingencies have been estimated at 10% of base cost,

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except for the Dakar/Cap Vert Water Supply feasibility studies for which 15%are provided. In addition allowance has been made for price contingencies atthe rates of 3.5% in 1984, 8% in 1985, 9% in 1986, 1987 and 1988, 7,5% in1989 and 6% thereafter for foreign exchange components; and for local costcomponents 12% in 1984, and 10% thereafter.

F. Project Finan-cing and Lending Arrangements

4.08 An IDA Credit of US$24.00 million is proposed. Caisse Centrale deCocperation Economique (CCCE) of France would co-finance the proposed projectwith an amount of CFAF 3.30 billion (US$7.60 million equivalent); the CCCEloan, for which SONEES would be the borrower and which would be guaranteed byGovernment, would be repayable over 16 years including 6 years of grace withan interest of 5% and a commitment fee of 0.5%. The remaining US$4.40 millionequivalent would be financed by SONEES. The proposed financing plan issummarized below and further detailed in Annex 4-6:

Proposed Financing Plan(US$ million)

IDA SONEES CCCE TOTAL

Project ComponentsWater Supply in the Eleven Centers 9.10 0.90 7.35 17.35Rehabilitation of SONEES 9.90 1.00 .25 11.15SONEES Component 19.00 1.90 7.60 28.50

Dakar Water Supply 1.40 - - 1.40Rural Water Supply .55 - - .55Urban Sanitation Studies .55 - - .55MH Component 2.50 - - 2.50

Total Project Cost 21.50 1.90 7.60 31.00

Refinancing of IDA Engineering Credit 2.50 - - 2.50Interest during Construction - 2.50 - 2.50Total Financing Requirements 24.00 4.40 7.60 36.00

% of total 66.7 12.2 21.1 100.0

The IDA Credit and CCCE loan would cover 100% of the foreign component and79.6% of the local component of the project cost, or 100% of the foreigncomponent or 62.1% of the local component of total financing requirements.

4.09 The Government of Senegal would be the borrower of the IDA Credit.US$9.50 million of the IDA Credit would be passed on as a contribution by theGovernment to SONEES' equity. US$9.50 million of the IDA Credit would beonlent to SONEES on IBRD terms (20 years term, including 5 years grace,interest rate about 10.0%). SONEES would assume the risks related to exchangerate and interest rate variations. The remainder of the IDA Credit would

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finance the Dakar/Cap Vert water supply, rural water supply and urbansanitation components for which MH would be responsible (US$2.50 million) andrefinance the IDA Engineering Credit (US$2.50 million).

4.10 The IDA Credit wouLd finance:

(i) for expansion of water supply facilities in the ElevenCenters: drilling of boreholes, civil works, supply andlaying of pipes in 8 centers (Thies, Kaolack, Fatick,Louga, Linguere, Bambey, Diourbel and M'Backe), and thesupervision of construction;

(ii) the component; for rehabilitation of SONEES' operations;

(iii) the Dakar/Cap Vert water supply feasibility studies;

(iv) the rural water supply component; and

(v) the urban sanitation component.

CCCE would finance:

(i) for expansion of the water supply facilities in theEleven Centers: all supply and works for Tambacounda,Ziguinchor and Kolda except drilling of boreholes andconstruction supervision; electrical and pumpingequipment for the other eight centers; and supply ofmaterial for domestic connections, standpipes andmeters; and

(ii) the detailed designs and the construction supervision ofSONEES' building.

SONEES would bear the cost related to the construction of domestic connec-tions, contribute the land for its building, participate in the financing ofthe building and its equipment, and finance interest during construction.

G. Project Preparation Facility

4.11 In order to firm up data on underground water resources for three outof the Eleven Centers, the first phase of the drilling program included in theproject will have to be carried out, consisting of four boreholes, one each inLouga and Diourbel, and two in Ziguinchor (Annex 4-3). Also, evaluation ofsector fixed assets should be started (para 3.16), SONEES' 1982 accounts wereto be audited (para 3.19), the two expatriate engineers for SONEES' studiesand new works division should be in place prior to the beginning of works(para 3.08) the data processing system master plan should be established assoon as possible (para 3.17), bids for works in the Eleven Centers have to beevaluated (para 4.13) and final designs for the SONEES building have to beinitiated (para 3.07). A PPF of US$0.75 million to cover the cost of theabove has been approved by the Regional Vice President. The PPF would berefinanced from the proposed IDA Credit.

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H. Implementation

4.12 SONEES will be responsible for implementing the works for the ElevenCenters as well as the rehabilitation components. Its execution capacity willbe strengthened through the technical assistance and training components ofthe project (paras 3.08 to 3.10, Annex 3-3). MH will be responsible for theDakar/Cap Vert water supply, rural water supply and urban sanitationcomponents.

4.13 Detailed designs and tender documents have been financed under theEngineering Credit S23-SE; bids were called for in Summer 1984 and some of thecontracts have already been awarded. Minor modifications could occur oncepumping tests on boreholes to be drilled under PPF financing have beencompleted. For supervision of construction and for implementation of SONEESrehabilitation, SONEES would be assisted by consultants selected in accordancewith Bank Group procedures prior to Credit effectiveness. It is expected thatconstruction will start by mid-1985 and extend to mid-1990 with mostconstruction to be completed by mid-1989 (Annex 4-7).

I. Procurement

4.14 Procurement arrangements are summarized in the following table:

Procurement Method(US$ million)

TotalProject Element ICB LCB Other N.A Cost

Civil Works 10.00 - 5.35 - 15.35(9.25) (-) (-) (-) (9.25)

Equipment _ .15 3.05 _ 3.20

TA, training, consultant - - 6.45 - 6.45services (-) (-) (6.25) (-) (6.25)

Increase in Working Capital:

- Spare parts - - 3.00 - 3.00(-) (-) (3.00) (-) (3.00)

- Chemicals bills - - 3.00 - 3.00(-) (-) (3.00) (-) (3.00)

Total Project Cost 10.00 .15 20.85 - 3100(9.25) (-) (12.25) (_) (21.50)

Note: Figures in brackets are the amounts financed by IDA

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4.15 A breakdown of the project into contracts is given in Annex 4-6. Thecomponent related to the expansion of water supply facilities in the ElevenCenters will be divided into ten major contracts of which five would befinanced by the IDA Credit (para 4.10). These five contracts as well as theone for construction of the office building will be awarded through ICB inaccordance with Bank Group guidelines. All contracts are expected to be aboveUS$1.00 million each and prior review of bidding documents by Bank staff willbe required. No domestic preference will apply to contracts, even for locallyproduced PVC pipes since they represent only a small part of the contractscovering both supply and construction of networks and Senegal is not eligiblefor domestic preference regarding civil works contracts. Spare parts andchemicals will be provided either by international shopping, with thequotation of at least three suppliers, or by direct negotiated purchase fromone manufacturer or supplier in accordance with Bank Group guidelines. SONEESwill establish an annual budget of spare parts and chemicals to be purchased,with indication of procurement methods, and submit it to IDA for review notlater than one month before the beginning of each fiscal year. Approval ofthese budgets by IDA is a condition of disbursements for the spare parts andchemicals purchases.

4.16 Contracts financed by CCCE (parallel financing) would be awarded inaccordance with their own procedures. The construction of domesticconnections (US$.90 million equivalent financed by SONEES) would be carriedout by SONEES' own work force. Equipment for SONEES' building(US$0.15 million equivalent financed by SONEES) would be purchased locally(local shopping).

4.17 All engineering and technical assistance contracts would be awardedin accordance with Bank Group Guidelines for the use of Consultants.

J. Disbursements

4.18 The proposed Credit would be disbursed as follows:

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Allocation and Disbursement of the IDA Credit

% ofAmount Expenditure

Category US$ million Financed

A. Components to be implemented by SONEES

(i) Civil works- Supply and Construction forExpansion of Water Supply in theEleven Centers (la) 7.05 100

- Construction of Office Building (lb) 1.10 64

(ii) Technical Assistance, TrainingProgram, Engineering Studies andConsultant Services (2) 3.05 100

(iii) Increase in Working Capital- Supply of spare parts (3) 3.00 100- Supply of chemicals (4) 3.00 100

(iv) Refinancing of PPF (6) .75 Amount dueSubtotal 17.95

B. Components to be implemented by MH

Technical Assistance, studiesand consultant services (5) 2.35 100

C. 'Refinancing of IDA Engineering Credit (7) 2.50 Amount due

D. lJnallocated (8) 1.20Total 24.00

4.19 The estimated schedule of disbursements given in Annex 4-8 is basedon the average disbursement profile for water supply projects in WestAfrica. The closing date of the Credit would be June 30, 1993.

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V. FINANCIAL ANALYSIS

A. Introduction

5.01 Presently SONEES is in a transitional stage, from a mere operatingcompany to a utility owning all installations it operates, and being fullyresponsible for all financial aspects of the sector including financing of newprojects and sector debt service. Until 1983 urban water supply and sewerageinstallations were owned by the State, debt service was assumed by theNational Debt Amortization Fund (CNA) in the Ministry of Finance andEconomics. Two funds at MH used to finance repairs, replacements, networkextensions and connections. The water and sewerage installations weretransferred from the State to SONEES by Law 83-73 of July 5, 1983 establishingSONEES as a "soci6te nationale". Revenues previously transferred to CNA forwater sector debt service and to the two MH funds have started to accrue toSONEES from January 1, 1984, and SONEES will assume from that date on thewater sector debt and debt service as well as expenditures previously effectedby the two NH funds. Sewerage sector debt will remain with CNA for the nearfuture until another solution (e.g., transfer to SONEES and coverage by anadditional water tariff component) can be implemented (para 1.17).

B. SONEES' Past and Present Financial Performance

5.02 SONEES' past financial statements and future financial forecasts aregiven in Annexes 5-1 through 5-4 and the major assumptions made in thefinancial projections are provided in Annex 5-5. The company's incomestatements for the period 1979-83 are summarized below:

SONEES - Summary Income Statements(CFAF million, if not otherwise stated)

Year ended Dec. 31 1979 1980 1981 1982 1983

Water Sold (million m3) 43.0 46.1 48.4 55.5 60.6

Average SONEES Revenue 72.4 75.1 79.6 77.9 88.0(CFAF/m3)

Total Revenues 3,712 4,464 5,028 5,148 6,209

Operating Costs 3,740 4,387 4,877 5,563 6,299

Operating Income (28) 77 151 (415) (90)

Net Income (45) 21 35 (454) (120)

Working Ratio i/(%) 93.4 90.6 94.0 105.0 98.0

Operating Ratio (%) 100.8 98.3 97.0 108.1 101.4

1/ Additional ratios are given in Annex 5-4.

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Total revenue includes, in addition to water sales, works carried out bySONEES as a contractor to the Government or to other customers. Normally suchworks amount to some 10% to 20% of total revenue. The related expenses areincluded in operating costs. Until 1983, operating costs include depreciationfor the fixed assets owned by SONEES (mainly tools, furniture and fittings,and vehicles), but not for the Government owned fixed assets. They alsoinclude provisions for doubtful customer accounts. SONEES' fiscal year is thecalendar year.

5.03 SONEES' earnings situation had been eroded by inflation; costincreases had not been offset by sufficient tariff raises until September 1983when an important increase was granted (para 5.12 seq.). 1982 and. 1983yielded substantial operating deficits. In the past, SONEES had neither beenexpected to contribute to the expenditures for new water or sewerageinstallations nor has it had to assume any related debt service. Actually, noself'-financing had been expected from overall sector operations; investmentshad been financed externally and with contributions from the Government'sEquipment Budget.

5.04 SONEES' assets and liabilities for the period 1979-83 are summarizedbelow:

SONEES - Summary Balance Sheets(CFAF million, if not otherwise stated)

December 31 1979 1980 1981 1982 1983

Assets

Net Fixed Assets 433 519 596 824 1,040Current Assets 6,187 6,849 8,364 9,665 11,203Total Assets 6,620 7,368 8,960 10,489 12,243

Equity & Liabilities

Equity 755 776 833 379 259Long-Term Debt -- -_ -_ __ __Current Liabilities 5,865 6,592 8,127 10,110 11,984Total Equity &Liabilities 6,620 7,368 8,960 10,489 12,243

Debt Service Coverage 2.8 4.9 3.3 (3-1) (1.9)

Current Ratio (%) 1.06 1.04 1.03 0.96 .94

5.05 Fixed assets referred to above are the ones owned by SONEES and donot include the installations owned through 1983 by the State and operated bySONEES; the latter are shown in para 5.06 below. Current assets includemostly customer receivables (para 3.11 seq.).

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C. Sector Fixed Assets

5.06 Water supply and sewerage installations owned through 1983 by theState and operated by SONEES were transferred to SONEES by Law 83-73 of July5, 1983. The Law provides that facilities of the State's "private domain" aretransferred to SONEES' property, while for facilities of the State'suntransferable "public domain" (mainly underground pipes) SONEES is entrustedwith full physical, accounting, and financial administration. These assetshave the historical book values summarized in the following table:

Previously State-Owned Water and Sewerage Installationsas of December 31, 1983

(CFAF million)

Water Supply Sewerage TotalGross Fixed Assets in Operation 16,435 1,168 17,603Accumulated Depreciation 5,678 506 6,184Net Fixed Assets in Operation 10,757 662 11,419

5.07 The Lac de Guiers treatment plant and 250 km pipeline supplying waterto Dakar and villages en route represent about 60% of the net value of watersupply assets in operation. The 1983 annual depreciation for the Governmentowned fixed assets amounted to CFAF 433 million. There has been norevaluation of sector fixed assets yet. Implementation of a system forperiodic revaluation of fixed assets would be part of the terms of referencefor the audits and technical assistance included in the proposed project(para 3.19). The mentioned legal transfer from the State to SONEES makes aphysical inventory and evaluation of the sector installations necessary.Initial steps for this will be financed under the PPF (para 4.11).

D. Sector Debt

5.08 Long-term debt of the urban water supply and sewerage sector outstandingat the end of 1983 amounted to CFAF 18.1 billion (US$41.5 million). Maincharacteristics of the long term debt are as follows:

Urban Water Supply and Sewerage Sector Debt(CFAF million)

Financing OutstandingObtained Disbursed Reimbursed 12/31/83 a/

Urban Water Supply 15,047 12,570 797 12,067Sewerage 9,269 5,720 85 6,001Total 24,316 18,290 882 18,068

a/ Outstanding amount as of December 31, 1983 include capitalizedinterests on rescheduled debt.

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5.09 Debt service had stayed at a reasonable level in the past, as themajor part of the sector assets, namely the Lac de Guiers scheme, has beenfinanced on concessionary terms by the Federal Republic of Germany (KfW).However, the sewerage installations recently built or under construction incertain secondary centers (para 1.17) have been financed at very short termsand their debt service inspite of several reschedulings will be a heavy burdenduring the next few years. The debt service schedule related to the debtcontracted before end 1983 is as follows, after rescheduling:

Sector Debt Service on Debt Contractedbefore December 31, 1983

(CFAF million)

1984 1986 1988 1990

UrbaLn Water Supply 924 1,258 1,298 1,110Sewerage 612 773 624 536Total 1,536 2,031 1,922 1,646

5.10C The water tariff includes a special component as contribution tocovering the debt service related to water supply installations (para 5.12).In 1983 the corresponding revenue was CFAF 778 million (US$1.8 million)coveiring 89% of the sector debt service. Since January 1, 1984 this revenueaccrues to SONEES as the water sector debt has been transferred from CNA toSONEES following the transfer of the water supply installations. SONEES is toassume the debt service for all existing water supply installations as well asfutuLre projects, including the proposed Eleven Centers project.

5.11 The Contrat-Plan (para 3.03) stipulates that sewerage debt willcontinue to be serviced by CNA for the near future as SONEES' tariff does notyet provide for its coverage and that the Senegalese authorities will decideon an appropriate solution, possibly an additional tariff component, beforethe end of 1986. This would yield the necessary revenue so SOiiEES could takeover the sewerage sector debt and debt service from CNA, thereby charging thewater consumers for the sewerage services instead of relying on CNA tosubsidize such services by assuming the related debt service. The Contrat-Plan. also requests that the Government will continue to assume major repairsand renewals until an alternative solution will have been implemented. Duringnegotiations, assurances were obtained from the Government (and SONEES, seepara. 5.25) that no investments exceeding US$1.0 million equivalent would beundertaken in the urban water supply and sewerage sectors without priorconsultation with IDA and the presentation of an acceptable financing plan.

E. Tariffs and Sector Revenues

5.12 The revenue source for the urban water and sewerage sector is acharge on the quantity of water consumed. A new tariff structure has beenintroduced, effective September 1, 1983, based on the tariff study carried outunder Engineering Credit S23-SE. The previous tariff had been in effect sinceJuly 1, 1980. It represents an average increase of about 43% (13% in realterms) while protecting the social tariff which has been raised by only 8%.

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This tariff adjustment had been a condition for negotiations of the proposedproject.

5.13 The new tariff applicable in cities with sewerage systems is shownbelow, the complete set of tariffs is shown in Annex 5-6:

Water Tariff for Cities with Sewerage Systems(CFAF/m3)

Full Tariff(Domestic, SmallIndustry, Vegetable

Public Sector, GrowersLarge Vegetable Social Public (less than 1500 m

Components Growers) Tariff Standpipes per month)

(a) SONEES 109.18 81.63 109.18 35.27(b) CNA 47.95 - - _(c) Small Works Fund 14.75 - -

(d) Renewal Fund 29.50 - _(e) Social Connections

Fund 7.65 - - -

Subtotal 209.03 81.63 109.18 35.27Added-Value Tax 7.64 5.71 7.64 2.47Municipal Tax 2.50 - - -Total 219.17 87.34 116.82 37.74

5.14 The full tariff corresponds to US$0.50/m3. The new tariff includessatisfactory indexation formulas for each component, linking the tariff to thevariations of prices for major inputs such as salaries, energy, chemicals, andpipes. SONEES' CCCG provides for semi annual indexation (theoreticallyJanuary 1 and July 1 of each year); the first indexation was effective onSeptember 1, 1984 i.e. after the CCCG has been approved.

5.15 With the reallocation of responsibilities in the water sector(paras 1.11 and 3.01 seq.), funds from all components have started to accrueto SONEES from January 1, 1984 onward. Revenue from the newly introducedsocial connections component ((e) above) will finance small diameterconnections, free of charge to the customer (paras 6.05 and 6.08), so thatthis policy can also be applied in towins other than the Eleven Centers (e.g.,Dakar). In the Eleven Centers such connections would be financed by theproposed project as a pilot undertaking.

5.16 The social tariff (second column of above table) is applied to thefirst 10m3/month of all domestic 15 mm diameter connections. Standpipeconsumption is paid by the municipalities. The SONEES component includescoverage of sewerage operating costs; for centers where no sewerage facilitiesexist, the SONEES component of the full tariff is CFAF 14.61/m3 lower, i.e.CFAF 94.57 instead of CFAF 109.18. Introduction of a surcharge to cover thedebt service related to sewerage installations has been postponed (para 5.11).

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5.17' Sector revenues for water consumption were as follows (added valueand municipal taxes excluded):

Total Sector Revenue from Water Consumption(CFAF million, if not otherwise stated)

Revenue 1979 1980 1981 1982 1983Accruing to:

SONEES 3,112 3,464 3,853 4,323 5,288CNA 1,196 1,171 1,375 1,577 1,663Small Works Fund 173 241 259 340 434Renewal Fund 270 294 386 455 773Social ConnectionsFund - - - - 141Total 4,751 5,170 5,873 6,695 8,299

Average Revenue(CFAF/m3) 110.5 112.1 121.3 120.6 136.9

As part of the financial s-;udies financed under the Engineering Credit S23-SEthe auditors have prepared in 1981 an estimate of revalued sector fixedassets. Based on this information, the rate of return on net revalued fixedassets in operation for the sector as a whole could be estimated at aboutminus 0.5% for 1979 and 1980. Following the tariff increase ofSeptember 1, 1983, average revenue is estimated at about CFAF 169/m3(excluding taxes). T"his substantial increase and the subsequent indexation ofthe tariff should lead to a positive rate of return for 1984 and thereafter.

F. SONEES' Future Financial Performance

5.18 The following summarizes SONEES' projected earnings for the years1984 to 1993 in current terms. Detailed financial projections which wereupdated by Bank staff together with SONEES officials during negotiations are,as noted previously, shown in Annex 5-1 through 5-4 and their majorassumptions in Annex 5-5.

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SONEES - Forecast Income Stateaents(CFAF million, if not otherwise stated)

FY (endL g December 31) 1983 1984 1985 1986 1983 1990 1993actual

Water Sold 60.6 62.4 63.7 64.9 67.3 70.6 73.8(millions of mn)

Average SONEES Revenuefrom Water Sales 88.0 169 182 198 236 280 363(CFAF/mJ)

Total Revenmes 6,209 11,599 13,054 14,464 17,8B4 22,252 30,161

Cperating Costs 6,299 9,721 10,768 11,996 14,945 18,494 25,248

Operating Income (90) 1,878 2,286 2,468 2,939 3,758 4,913

Net Income (120) 989 1,18w 1,386 1,568 1,769 2,621

Woridng Ratio, % 98.0 66.0 66.5 66.5 66.2 66.6 68.5

Operating Ratio, % 101.4 83.8 82.5 82.9 83.6 83.1 83.7

Contribution to CapitalExpenditures: - 2,136 2,037 2,251 2,7C8 3,318 4,521

as % of Revemie - 18.4 15.9 15.6 15.1 14.9 15.0

as % of Capitalxpenditures plus

Non Cash WokdingCapital Incrase - 102.3 41.7 41.9 45.9 99.4 116.4

5.19 The above revenue projections for SONEES take into account the tariffincrease of September 1, 1983 (para 5.12 seq.). After September 1, 1983,tariff increases of 90% of inflation have been assumed as provided for bySONEES' CCCG. Since January 1, 1984, the revenues previously accruing to theRenewal and Small Works Funds and the revenues for servicing the water sectordebt accrue to SONEES. Maintenance expenses and capital expenditurespreviously effected by MH, and debt service for the water supply installationstransferred from the State to SONEES have been included from this date on3.

5.20 Based on these assumptions (Annex 5-5) SONEES would be able to coveroperating costs and debt service, and generate a contribution to capitalexpenditures. This contribution expressed as a percentage of revenue isexpected to be about 18% for FY84 and 15% thereafter (Annex 5-4 - Ratios).

5.21 Although feasibility studies are underway on additional waterresources for the Dakar area, no financial information is yet available onpossible projects. Therefore the projections only include for the 1984/1993period the proposed project (CFAF 9.80 billion or US$22.5 million), the SaintLouis Water Supply project financed by the Federal Republic of Germany (KfW)(CFAF 2.50 billion or US$5.7 million) and some limited extensions (CFAF 3.75billion or US$8.6 million). This, and the assumed long implementation period

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of the proposed project lead to the apparent high percentages for SONEES'annual contributions to capital expenditures plus working capital needs.

5.22 Assurances were obtained from the Government during negotiations thatit will take actions, including tariff adjustments, which would permit SONEESto generate a contribution (internally generated funds minus debt service) tocapital expenditures and working capital needs of at least 15% of SONEES'total revenues from 1985 on. A cash generation covenant as a percentage ofreveinues is thought to be appropriate for assuring SONEES' financial viabilityduring the initial phase of project implementation. Reference to revenueseems more feasible than to capital expenditures, as capital expenditure plansare not well defined at present. The covenant would be easy to monitor.SONEES' debt service is fairly predictable, and subsidies from Government toalleviate it are very unlikely. A rate-of-return covenant would becomefeasible for SONEES following inventory and revaluation of sector assets andintroduction of a periodical revaluation procedure for these assets(para 3.19).

5.23 SONEES' projected assets and liabilities are summarized below.Details are given in Annex 5-3:

SONEE! ~m= Balance aeets(CFAF million, if not otherwise stated)

December, 31: 1983 1984 1985 1986 19B 1990 1993

Actual

Assets

Net Fixed Assets 1,040 27,055 28,664 30,959 3B,119 36,984 32,114Current Assets 11,203 5,346 6,019 7,930 10,240 14,507 21,889

Total Assets 12,243 32,451 34,683 38,889 48,359 51,491 54,003

Equity and Lblities

Equity 259 16,581 18,684 21,130 25,829 29,603 36,640long-Trm Debt - 10,679 11 ,702 14,07 18,941 17,126 11,712Current Liabilities 11,984 5,141 4,297 3,7(2 3,589 4,762 5,651

Total Equity andLiabilities 12,243 32,401 34,683 38,889 48,359 51,491 54,003

Debt/Eluity Ratio - 39:61 39:61 40:60 42:58 37:63 24:76Debt Service

Coverage - 3.3 2.5 2.5 2.4 2.3 2.7Current Ratio .93 1.04 1.40 2.14 2.85 3.C0 3.87

5.24 The increase of SONEES' fixed assets reflects (i) the capitalexpenditures financed under the proposed project; and (ii) the transfer of

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the already existing assets from the State to SONEES (para 5.06). The currentnet value of these installations is not precisely known and will have to beestablished during 1985. For forecasting purposes a value of CFAF 27.4 billion(US$63.0 million) has been assumed. Annual depreciation has been included inthe financial projections on this basis. The debt related to these assetsestimated at CFAF 12.1 billion (US$27.8 million) will also be transferred toSONEES. The transaction will increase the Government's equity share in SONEESby an amount equal to the current value of the assets minus the mentioneddebt. This equity increase is estimated at about CFAF 15.3 billion(US$35.2 million).

5.25 With no other than the proposed Eleven Centers and the Saint Louiswater supply projects identified, the debt/equity ratio would reach 42% in1988 and decrease thereafter to about 25%, which is deemed acceptable. Toprotect SONEES' debt/equity structure, assurances were obtained duringnegotiations that SONEES would consult with IDA and present a financing planbefore undertaking any capital expenditure project whose financingrequirements would exceed US$1.0 million equivalent. SONEES debt servicecoverage is projected to stay about 2.5 through 1993. As a safeguard againstexcessive future debt or unfavorable debt terms assurances were also obtainedthat the debt service coverage based on projected future net revenues wouldnot be lower than 1.5.

5.26 Current assets and liabilities should decrease from end 1983 to end1984 because amounts owed by SONEES to CNA are to be set off against past duewater bills the public sector owes SONEES (para 3.13).

5.27 The current ratio would improve from 0.94 at the end of 1983 to 3.87at the end of 1993, reflecting the much needed increase of SONEES' workingcapital. This improvement is especially significant from 1984 to 1985, due tothe proposed working capital contribution of US$6 million (para 4.04).

G. Financing Plan

5.28 SONEES' capital investment requirements during the projectimplementation period 1985 to 1991, along with the sources from which theywould be met, are summarized on the following page. Detailed funds flowstatements are given in Annex 5-2.

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SONEES - Financing Plan 1984-1991

CFAF US$million million _%

Requirements

Capital Expenditures:Proposed Project (excl. WorkingCapital Increase) 9,790 22.5 23.9Interest during Construction 1.085 2.5 2.7Other 15,767 36.2 38.4Total Capital Expenditures 26,642 61.2 65.0

Increase in Non-Cash Working Capital 10,424 24.0 25.5Cash Increase 3,855 8.9 9.5

Total Requirements 40,921 94.1 100.0

Sources

Internal Funds 36,558 84.0 89.2Less Debt Service (13,443) (30-9) (32.8)

Net Internal Funds 23,115 53.1 56.4

Proposed IDA Credit 8,280 19.0 20.2Proposed CCCE Loan 3,300 7.6 8.1Other Loans 6,226 14.4 15.3

Total External Funds 17,806 41.0 43.6

Total Sources 40,921 94.1 100.0

5.30 This financing plan does not cover capital expenditures other thanthe proposed project, the Saint Louis water supply project, the other smallextension projects listed in the Contrat-Plan and the renewal programpreviously under MH responsibility (para 5.21); in particular, it does notcover capital expenditures for expansion of the Dakar/Cap Vert water supplysystem. Details of the financing for the proposed project are given inpara 4.08 seq.

- 34 -

VI. ECONOMIC AND SOCIAL ANALYSIS

A. General

6.01 The primary benefits of the project would be improved water supplyfor eleven interior centers in Senegal, both through rehabilitating oldexisting installations and construction of additional facilities to meetdemands through the Decade. The project would be the vehicle for the Bank topursue the paramount institution building objective for SONEES to become acompetent national entity responsible for urban water supply and seweragefacilities (para 1.11). In particular it would create project implementationcapacity within SONEES; additionally, the various technical assistancecomponents proposed would lead to improved operation and maintenance, and moreefficient management of SONEES to meet the increasing responsibilities. Thesewould be complemented by the! establishment of a manpower development policy tobe initiated through the training component, as well as the small pilot publicinformation service component (responsible for various campaigns to sensitizethe public) in order to assist in achieving the institution building objec-tives. While these benefits would not be easily quantified, a measure oftheir catalytic effects would be the increased efficiency of SONEES operationsdocumented through the decreasing percentages of unaccounted-for water.

6.02 Further, the proposed Dakar water supply feasibility studies, ruralwater supply and urban sanitation sector studies would contribute to morerealistic sector planning which is a high priority.

B. Least-Cost Solutions

6.03 In designing the project, two principal constraints had to be dealtwith:

(i) the small size of the centers with low densities, whichnecessarily has led to somewhat expensive solutions inthe absence of benefits derived from economies of scale;

(ii) the location of aquifers in deep-lying zones, with partlystill unknown resources, which necessitates deep wellsand extensive trial drillings.

Against this background, solutions were sought to assure the most economicresults while meeting project objectives.

6.04 Thus the project proposes to seek groundwater resources on siterather than risk high investmaent and pumping costs through long transmissionlines (Annex 4-3) which, as experience elsewhere in Senegal has shown, wculdbe vulnerable to tampering. Defluoridation will not be done for now, with noadditional negative effects; however in any case disinfection would beapplied.

- 35 -

C. Domestic Connections and Public Standpipes Policy

6.05' Presently, two main constraints limit the possibility of providingdomestic connections: firstly, the low density of the secondary distributionsystem and secondly, the ability of the potential customer to pay forconnections (at least CFAF 27,000, i.e. US$62 and often considerablyhigher). One of the main goals of the project will be to promote domesticconnections and make them more affordable in order to:

(i) improve the quality of service and especially thesanitary conditions of water distribution;

(ii) reduce the percentage of water consumed at publicstandpipes, which cannot easily be paid for by theMunicipalities; and

(iii) increase the quantity of water billed and paid for by theconsumers which would improve the financial situation ofSONEES.

Within the framework of the present project, it is therefore proposed toimplement a connection policy which would consist of providing the new smallconsumers with a 15 mm diameter connection largely free of charge. The newcustomer would have to pay an advance of about CFAF 15,000 (US$35) repre-senting about six to eight months of water consumption in order to protectSONEES against possible unpaid bills.

6.06 However, in the near future, it will not be feasible to serve theentire population of the Eleven Centers through domestic connections. Inspite of implementation of the social connection policy, public standpipeswill be necessary in the presently urbanized part of the centers and in theirextensions as well. The project proposes however a better distribution ofpublic standpipes within the municipal limits, resulting in the provision ofnew standpipes in poorly served areas and in the elimination of superfluousstandpipes in others.

D. Affordability

6.07 To provide affordable services especially to the poorer segments ofthe urban population, a social tariff is in effect of OFAF 87.34/m3(US$0.20/mr) for up to 10 m3 per month for all connections of 15 mm diameter(para 5.16). Assuming a family size of seven (average family size in thecenters), the full use of the social block would allow for a per capitaconsumption of up to 48 li ers/day. Compared with the resulting charge, i.e.,873 CFAF/month, the SMIG 1 is presently CFAF 24,480 (US$56.28) and thus afamily with only one revenue earner at the SMIG level would then spend about3.6% of their monthly income, which would be judged affordable.

1/ Salaire Minimum Interprofessionel Garanti. BCEAO data shows a SMIGof CFAF 174.84/hour as of July 1, 1983. It is assumed that the SMIGearner would work 140 hours a month.

- 36 -

6.08 However, as mentioned in para 6.06, the real constraint of makingwater supply more affordable for the urban poor lies in the connection fees,which would amount to more than 1.4 month's salary at SMIG level. It isobvious that relatively few privileged people can afford to pay this amount ina lumpsum installment. To alleviate this constraint, the project proposes toinclude 10,000 of 15 mm diameter connections as part of the investment programfor the Eleven Centers. Cost recovery of this expenditure as well as fundsfor social connections in other centers will be obtained through the newsocial connections tariff component of CFAF 7.65/i 3 (para 5.15). The newsocial connections policy will substantially benefit wide parts of thepopulation without causing too much of an increased burden.

E. Marginal Cost and Rate of Return

6.09 The estimated long-run marginal costs for the incremental watersupply provided under the project range from CFAF 133/m3 (US$0.31/m 3 ; forThies to CFAF 547/m3 (US$1.26/m 3 ) for Fatick, and average CFAF 171/m)(US$0.39/m 3 ) for the Eleven Centers as a whole 1%. This compares to SONEES'average estimated 1983 tarif'f of CFAF 170/m3 ._(US$0.39/m 3 ). Annex 6 showsthe summary calculation of the Average Incremental Cost and the Internal Rateof Return.

6.10 The long-term marginal cost of future sector-wide investments ishighly sensitive to the evolution of investments for the Cap Vert zone, andthe extension of the N'Gnith-Dakar scheme. At this point, no reliableinvestment figures are available, nor has a realistic time frame for the majorinvestments been established. Thus, a meaningful marginal cost analysis ofsector investments is not possible at this time. However, the Bank is in acontinuous dialogue with Government and other donors to assist the Senegaleseauthorities in arriving at optimum investment decisions, including properphasing (para 1.13). A sector-wide investment review, to be carried out inFY85 together with the other donors already involved in the sector (KfW, CCCE,and Italy), will be a vehicle for this important aspect of sector dialogue.

6.11 The economic rate of return (ERR) has been calculated using agreedwater tariffs as proxy for benefits. On that basis the ERR is 9%. _/However, this figure does not reflect full benefits which include improvedsanitary condition and health which are not quantifiable; also the consumers'surplus are not captured. The actual expressed willingness to pay by some

1/ At an opportunity cost of capital of 10%, at constant end 1982prices, with application of a Standard Conversion Factor of 0.95.

2/ This average SONEES tariff is shown after applying the StandardConversion Factor. The average tariff in domestic prices is CFAF 180/m3including, and CFAF 172,/m3 excluding, taxes (para 5.17).

3/ Border pricing has not been incorporated here as appropriateparameters/conversion factors are only now being studied by an ongoingBank exercise.

- 37 -

consumers (who pay up to the equivalent of CFAF 1,250/m3 (US$2.87/m3) for thefirst 25 lcd for water provided by private vendors) gives an indication as tothe real value of incremental supplies and is far higher than the averagefuture tariff.

6.12 As for pricing considerations, it would be important to link thefuture tariff structure to the major investments proposed for the Dakar watersupply system. Projects (e.g. extending treatment and transmission capacityof the Lac de Guiers-Dakar scheme) have not yet been decided or studied indetail; however, an active dialogue will be pursued with the SenegaleseGovernment during project execution in order to assure a tariff policycompatible with the resource cost to the economy as a whole. Thus assuranceswere obtained during negotiations that a formal tariff review mechanism forboth level and structure would be installed, which would periodicelly in linewith SONEES' Cahier des Clauses et Conditions G6nerales examine sector-widewater tariffs taking into account the sector-wide investment programs, andlead to tariff adjustments as necessary (para 5.22). The principles oftarification to be retained would ensure as minimum the coverage of allfinancial requirements, and adoption, over a transitional period, of marginalcost pricing, whenever the economic cost per unit of cubic meter is higher.

F. Population Benefitted: Urban Poverty Group

6.13 The project would benefit an additional 285,000 people by 1990, theassigned horizon of the project, providing 152,000 with domestic connectionsand 133,000 with access to standpipes. While reliable income figures andincome distribution estimates are scarce, it has been estimated that around55% of the population in the Eleven Centers would fall into the povertycategory if the SMIG is adopted as the benchmark figure for the urban povertythreshold for Senegal. It is expected that by 1990 this group will consumeabout 35% of total domestic consumption mainly through standpipes. Of theportion of the project cost directly allocated to the Eleven Centers, aboutUS$6.5 million or 37% ie urban poverty lending of funds exclusivelybenefitting the poor.

G. Project Risks

6.14 Potential project risks relate to the cost overruns which may becaused by delays during the procurement process and the construction perioditself. Furthermore, some risks pertain to improper operation and mainte-nance, and the general ability of SONEES to meet the demanding challenges ofinstitutional development.

6.15 Yet, the construction costs are not likely to exceed the projectedcosts by a substantial amount since the projections are based on actual costof similar works being undertaken in the country; also enough safety marginvis-a-vis possible delays has been included in the implementation schedule.The project is of high priority to Government authorities and SONEES, who arecommitted to its successful and timely implementation. The risks pertainingto operation and maintenance should be decreasing, as the technology appliedtakes into account local technical capabilities, and also as SONEES'

- 38 -

operations would be strengthened throughout the project through continuedtechnical assistance.

6.16 The tariff adjustments are very important, as they pertain directlyto the objectives of SONEES' financial viability as well as sound overallsector development.

6.17 Project risks are not higher than those of other ongoing projects inthis sector in the Region; close supervision and monitoring should be able tocontrol these risks.

VII. AGREEMENTS REACHED AND RECOMMENDATION

A. Agreements

7.01 The water tariff adjustment put into effect as of September 1, 1983had been a condition for invitation to negotiations (para 5.12).

7.02 Implementation of the following were conditions for Board presentation:

(i) the signing of SONEES' "Cahier des Clauses etConditions Generales" by the Government and SONEES(para 3.02);

(ii) the conclusion and signing of the "Contrat-Plan"between the Government and SONEES (para 3.03);

(iii) the arrangement to offset Government and municipalitiesarrears against amounts owed by SONEES to the CNA as ofJune 30, 1984 (para 3.13); and

(iv) the inscription in the FY 84/85 budgets of waterconsumption allocation for the Government and themunicipalities based on forecasts prepared by SONEES(para 3.14)

7.03 A condition of disbursement for spare parts and chemicals purchaseswould be that IDA approves SONEES' spare parts and chemicals budgets (para 4.15).

7.04 During negotiations assurances have been obtained from the Governmentand SONEES that:

(i) the Government will transfer all urban water andsewerage project implementation responsibility stillremaining with MH to SONEES by December 31, 1988 (para1.11);

- 39 -

(ii) the Government will review the recommendations of theurban sewerage sector study with IDA and give dueconsideration to their implementation (para 1.17);

(iii) the Government and SONEES will carry out Contrat-Planprovisions for the 5-year transitional period regardingproject implementation responsibilities (para 3.04);

(iv) Government and municipalities budgets will specifyamounts for water consumption based on SONEES'forecasts (para 3.14); current Government andmunicipalities consumption will be paid within fourmonths (para 3.14);

(v) SONEES will reduce parapublic and private sectorreceivables to below four months of billings by endDecember 1985 (para 3.15);

(vi) SONEES will each year prepare operating and capitalexpenditure budgets for the next fiscal year, as wellas financial projections covering at least three years,and submit them for review to IDA not later than onemonth before the beginning of the fiscal year concerned(para 3.18);

(vii) SONEES will submit audited financial statements andaudit reports to IDA within six months of the end ofeach fiscal year. The audits will also cover projectexpenditures effected by MH (para 3.19);

(viii) SONEES will annually revalue its fixed assets inoperation on a pro forma basis, starting with itsDecember 31, 1985 closing (para 3.19);

(ix) SONEES will periodically report its operational andfinancial performance to IDA, using agreed monitoringindicators (para 3.22);

(x) SONEES will each year prepare a budget of spare partsand chemicals to be purchased, with indication ofprocurement methods and submit it for review to IDA notlater than one month before the beginning of eachfiscal year (para 4.15);

(xi) the Government would present a financing plan andconsult with IDA before undertaking any capitalexpenditure project in the urban water supply andsewerage sector whose financing requirements wouldexceed US$1 million equivalent (para 5.11);

- 40 -

(xii) SONEES will generate a contribution to capitalexpenditures and working capital of at least 15% ofSONEES' total gross revenue (para 5.22);

(xiii) SONEES' debt service coverage, based on projectedfuture net revenues, will not be lower than 1.5(para 5.25);

(xiv) SONEES would present a financing plan and consult withIDA before undertaking any capital expenditure projectin the water supply or sewerage sectors whose financingrequirements would exceed US$1.0 million equivalent(para 5.25); and

(xv) the Government will implement a periodical tariffreview mechanism in line with SONEES' Cahier desClauses et Conditions Generales (para 6.12).

B. Recommendation

7.06 On the basis of the above agreements, the proposed project issuitable for an IDA Credit of US$24.0 million equivalent.

WAPWSFebruary 1985

- 41 -

ANNEX 1-1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

TOTAL POPULATION ACCORDING TO SIZE OF AGGLOMERATION(1978 Estimate)

PopulationSize of Agglomeration Number in million %

1,000,000 1 1.010 19

100,000 - 150,000 2 0.250 5

50,000 - 100,000 3 0.230 4

20,000 - 50,000 4 0.140 2

10,000 - 20,000 11 0.160 3

5,000 - 10,000 25 0.190 4

1,000 - 5,000 250 0.780 14

500 - 1,000 650 0.490 9

200 - 500 2,250 0.750 14

200 9,850 1.400 26

TOTAL 13,046 5.400 100

WAPWSSeptember 1982

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

MINISTRY OF HYDRAULICS

PRESENT ORGANIZATION CHART

Minister

Director of Cabinet

Technical Advisers

Directorate Directorate Directorate of Directorate ofof Studies of Sanitation Urban and Rural RuralDEH DAS Water Supply Infrastructure

- t DHUR DER

Division of 8 RegionalAdministration Officesand Finance SRHERA

| Well Digging IBrigadesB.P.

WAPWS

June 1983

- 43 -

ANNEX 2-1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

WATER CONSUMPTION AND PRODUCTION FORECASTS FOR THE ELEVEN CENhTERS

AVERAGE AVERAGEBASIC DATA I AVERAGE CONSUMPTION CONSUMPTION PRODUCTIONI =3/d (TOTAL) (TOTAL)

Connec- . Do-stic Pblic Netuork PeakTotal Pop. tion Service Conec- Stand- Indus- Adminis- Effi- Ddaly

Year 103

Inhab. Ratio Ratio tion pipes tries tratiams 3 6 ecy 6 Pmi% = /d 10On /Y m /d 103 /y m /d

Louga 81 40.6 24 85 393 601 1S 238 1,250 0.46 .70 1,780 0.65 2,315

8 64 45.9 24 85 432 661 20 262 1,275 0.50 .70 1,965 0.72 2,555

90 58.8 40 92 1,010 250 232 289 2,080 0.76 .78 2,665 0.97 3,465

Linguere 81 9.5 40 90 136 145 1 58 340 0.12 .70 485 0.18 630

84 10.7 40 90 13O 160 1 64 375 0.14 .70 535 0.20 695

90 13.6 40 93 240 120 20 160 540 0.20 .78 690 0.23 900

Thiea 81 132.7 33 90 1,658 1,093 327 1,232 4,310 1.57 .70 6,160 2.25 8,000

84 149.0 33 90 1,824 1,202 360 1,354 4,740 1.73 .70 6,775 2.47 C,810

90 187.7 40 93 3,266 1,690 1,278 2,287 8,520 3.11 .78 10,925 3.99 14,205

Bambey 81 11.3 46 85 205 60 10 35 310 0.11 .70 440 0.16 570

84 12.4 46 85 225 65 10 40 340 0.12 .70 485 0.18 633

90 15.1 45 91 295 135 40 60 530 0.19 .78 680 0.25 885

Diootbel 81 62.5 19 80 433 544 211 352 1,540 0.56 .70 2,200 0.80 2,860

84 69.5 19 80 478 598 232 387 1,695 0.62 .70 2,420 0.88 3,145

90 85.9 30 90 1,116 896 370 398 2,780 1.01 .78 3,565 1.30 4.635

MNBacke 8! 34.9 12 60 137 152 15 81 385 0.14 .70 550 0.20 715

84 41.3 12 60 151 167 17 89 425 0.16 .70 605 0.22 785

90 57.9 30 34 730 520 90 330 1,670 0.61 .76 2,140 0.78 2,780

Fatick 81 11.1 22 85 90 170 - 60 320 0.12 .70 455 0.17 590

84 12.1 22 85 100 185 - 65 350 0.13 .70 500 0.18 650

90 14.5 30 94 192 156 25 68 440 0.16 .78 565 0.21 735

Kaolack 81 112.7 40 90 1.743 1,360 115 925 4,415 1.51 .70 5,920 2.16 7,700(Iocludi.g 84 120.7 40 90 1,360 1,495 130 1,020 4,565 1.67 .70 6,520 2.38 8,475IodoatclalArea) 90 150.1 45 94 2,960 1,295 1,915 970 7,140 2.61 .78 9,155 3.34 11,900

Tambacounda 81 30.8 11 50 115 75 65 335 590 0.22 .70 840 0.31 1,090

84 34.9 11 50 130 85 70 370 655 0.24 .70 935 9.34 1,215

90 45.0 80 80 570 405 190 3135 1.480 0.54 .78 1.900 0.69 2,470

Ziguinchor 81 86.3 21 50 715 170 405 490 1,780 0.65 .70 2,540 0.93 3,300

84 97.9 21 50 790 190 445 540 1,965 0.72 .70 2,810 1.03 3,655

90 126.1 40 83 2,170 975 570 750 4,465 1.63 .78 5,725 2.09 7,440

Kolda S1 25.4 10 35 ! 90 35 5 80 210 0.08 .70 300 0.11 390

84 29.6 10 35 100 40 5 90 235 0.09 .70 335 0.12 435

90 40.4 30 75 535 325 40 220 11120 0.41 .78 1,435 0.52 11865

Tot._l 81 __________ _ 558.0 5,700 4,400 1,200 3,900 15,200 5.55 .70 1,700 7.92 28,200

81 5568.0 52703 4,400 1,200 3,200 15,200 5.55 .70 12700 7.92 2 31

84 628.0 6,300 4,850 1,300 4,250 16,700 6.00 70 23,900 8.22 31,100

90 794.0 13.050 7,100 4,800 5,850 - 30,800 11.23 .78 39,450 14.40 51,300

WAPWS

September 1982

SENEGAL

ELEVEN CENTERS WATER SUPPLY PROJECT

SERVICE LEVELS IN THE ELEVEN CENTERSPRESENT SITUATION 1981

Technical Data

Length Density No. of Average Average

Connected Served of No. of of Stand- Water Network WaterTotal pop. population Population Network Connec. Connec. pipes Production Efficiency Consumption

Units/km10 Inhab. 10 Inhab. % 103 Inhab. 2 km of Network m

3/d 1/c/d X /d l/c/d

Louga 40,6 9.7 24 34.5 85 53.0 675 12.7 55 1,780 44 70 1,250 31

Linguere 9.5 3.8 40 8.5 90 11.6 320 27.7 31 485 51 70 340 36

Thi's 132.7 43.8 33 119.4 90 120.6 3,110 25.8 63 6,160 46 70 4,310 32

Bambey 11.3 5.2 46 9.6 85 11.6 350 30.2 37 440 39 70 310 27

Diourbel 62.5 11.9 19 50.0 80 54.7 730 13.4 76 2,200 35 70 1,540 25

M'Backe X 34.9 4.2 12 20.9 60 17.2 900 52.5 62 550 16 70 385 11

Fatick I 11.1 2.4 22 9.4 85 20.2 190 9.4 24 455 41 70 320 29

Kaolack 112.7 45.1 40 101.4 90 85.1 2,875 33.8 195 5,920 53 70 4,140 37

Tambacounda 30.8 3.4 11 15.4 50 23.3 185 7.9 13 840 27 70 590 19

Ziguinchor 86.3 18.1 21 43.2 50 57.0 995 17.5 33 2,540 29 70 1,780 21

Kolda 25.4 2.5 10 8.9 35 15.2 160 10.5 12 300 12 70 210 8

FiT ue)d 558.0 150.0 27 421.0 75 469.0 10,500 22.4 600 21,700 39 70 15,200 27

(Continued)

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SERVICE LEVELS IN THE ELEVEN CENTERSFUTURE SITUATION (1991)

Technical Data

Length Density No. of Average AverageConnected Served of No. of of Stand- Water Network Water

Total pop. Population Population Network Connec. Connec. pipes production Efficiency Consumption

3 3 ~~~~~~3 Units/km 3 -3

103 Inhab. 103 Inhab. % 10 Inhab. % km of Network m /d l/c/d/ % m /d l/c/d

Louga 58.8 23.5 40 53.5 92 58.0 1,625 28.0 35 2,665 45 78 2,080 35

Linguere 13.6 5.4 40 12.7 93 16.6 460 27.7 10 690 51 78 540 40

Thies 187.7 75.1 40 174.6 93 156.6 5,750 36.7 89 10,925 58 78 8,520 45

Bambey 15.1 6.8 45 13.8 91 19.6 520 26.5 11 680 45 78 530 35

Diourbel 35.9 25.8 30 77.3 90 81.7 1,580 19.3 48 3,565 42 78 2,780 32

M'Backe 57.9 17.4 30 48.6 84 55.2 1,740 31.5 37 2,140 37 78 1,670- 29

Fatick 14.5 4.4 30 13.6 94 34.2 360 10.5 18 565 39 78 440 30

Kaolack 150.1 67.5 45 141.1 94 125.1 4,310 34.5 82 9,155 61 78 7,140 48

Tambacounda 45.0 13.5 30 36.0 80 50.3 740 14.7 26 1,900 42 78 1,480 33

Ziguinchor 126.1 50.4 40 104.6 83 97.0 2,750 28.4 59 5,725 45 78 4,465 35

Kolda 40.4 12.1 30 30.3 75 46.2 765 16.6 27 1,435 36 78 1,120 28

Total (Round 794.0 302.0 38 706.0 89 740.0 20,600 27.8 440 39,450 50 78 30,800 39figure)

WAPWS

September 1982

I'ml'

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES - PRESENT ORGANIZATION CHART

General Manager

Secretary General.

General Control Public RelationsManagement Control AdviserOperation Control

Rgonal Departments|

, j , , | _ l . | _ i - Fl~~~~~~~~~~~~euveFinancial Department |Administrative Department Technical Departments

I _ _ L_______ __ I L___________ -Sine Saloum

Accounting - Personnel Laboratory CasamanceD ata Processing - Legal Affairs Designs andCustomers - Social and Medical Construction-Treasury - Services Operations-Purchase -Sewerage

Repair Shop,Warehouse

Gnith TreatmentPlant

WAPWSJune 1983

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES - PROPOSED ORGANIZATION CHART

LGeneral Manager

Legal AffairsInternal Audit General Secretariat Public Relations

. - G~~~~~~~~~~~~entral Secretariat

Technical Departmaent Financial Department Administrative Department DepartmentL_ab_oratoy Human Resources-Laboratory - Treasury Data Processing } e -o-

-Maintenance policy Planning and Budgeting Organization Method aersonal-Central Warehouse General Accounting Social and-Designs. - Cost Center Accounting medical Services-Construction Management Control TrainingLGeneral Means - Purchase i

DAKAR REGIONS

Cap Vert Cap Vert Cap Ver Cap Vert Fleuve Thi es Sine Saloum CasamanceProduction Distribution 1 Distribution 2 Sewerage

- Gnith Operation - idem idem

Boreholes Maintenance- Operation - Warehouses l- Maintenance Customers - Operation (Production, distribution, sewerage)- Warehouses - Personnel |- Maintenance (Production, distribution, sewerage)

- Accounting F- Warehouses- Customers- PersonnelL Accounting

WAPWS

June 1983

- 48 -

ANNEX 3-3Page 1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES OPERATIONS, STAFFING AND TRAINING NEEDS

A. Operations

1. The water supply facilities in the Dakar area (production,transmission as well as distribution) are operated in good conditions. Theprofessional staff is experienced and competent. However, lower level staffneeds training.

2. The sewerage facilities in the Dakar area, including the waste waternetwork, pumping stations and two small treatment plants are also operated bySONEES, but the efficiency of the division in charge of this task is ratherlow. Within the framework of its new decentralized organization, which wouldinclude a separate sewerage division as part of the new Dakar/Cap Vertregional department, SONEES expects to improve sewerage operations by givingmore emphasis and autonomy to this activity and by providing adequateequipment. On the other hand, responsibility for secondary centers sewerageoperations will be given to each regional department.

3. The staff in charge of stock management, warehouses, various work-shops as well as repair of water meters is too large and not sufficientlycompetent, and many tasks (e.g., car repairs, mechanics, woodwork) could bedone by private subcontractors. On the other hand, the workshop of meterrepairs is not able to meet the demand. A reorganization of these services isdesirable.

4. SONEES recently created the division of studies and new projects,which employs six engineers. It is in charge of small water supply andsewerage designs as well as construction supervision. This division, assistedby consultants, would implement the proposed water supply project in theEleven Centers. It is headed by a qualified expatriate engineer, financedunder the engineering Credit S23-SE. The proposed project includes anextension of this position, as well as an additional expatriate engineer'sposition, each for three years.

5. The four regional divisions are currently in charge of water supplyin 37 centers and sewerage in Saint Louis, Louga, Thies and Kaolack.Operations are performed in reasonably good conditions. However, operatingthe sewerage facilities of these four cities may lead to high recurrent costsduring the coming years as the installations are not well adapted to theneeds.

6. Absence of a preventive maintenance program for the existing waterand sewerage facilities has caused operating problems and prematuredeterioration of the works. The above-mentioned studies and New WorksDivision would be in charge of introducing a preventive maintenance program.

- 49 -

ANNEX 3-3Page 2

B. Staffing

7. SONEES employed 1,237 staff at the end of 1982, including 48professionals and 204 intermediate level staff. SONEES had one employee per53 connections, which is an acceptable ratio compared to other West Africancountries (Ivory Coast 1:72, Togo 1:28; Cameroon 1:59). The general managerand department head positions are staffed with competent Senegaleseprofessionals, except for the director of the technical department, who is anexpatriate engineer. SONEES' staff requirements by 1986 were estimated by theconsultant IDET-CEGOS at about 210 additional positions, of which 21 would befor reinforcement of the higher level staff of the Financial Department (+ 6positions), the Human Resources Department (+ 6 positions) as well as the 8Operational Departments (+ 9 positions). Reinforcements are also required atthe intermediate and lower staff levels, especially in the OperationalDepELrtments where about 180 positions, mostly technical, should be created.

8. SONEES' employees do not have civil servant status. Their relationswith SONEES are governed by the common law regulating labor relations.SONEES' salary level and structure are part of a "Convention Collective"negotiated between the Ministry of Labor and the trade unions.

9. The foreign technical assistants are currently limited to threepositions:

(i) the director of the technical department;

(ii) the technical responsible for the water production division;and

(iii) the head of the Studies and New Works Division.

The first two positions are provided under a technical assistance contractbetween SONEES and SAUR (Societe d'Amenagement Urbain et Rural, France). Thethird position is financed under the engineering Credit S23-SE and would beextended under the proposed project which includes also a second expatriateengineer for this Division (see para 3.08 of main report and para. 6 above).

I

10. The proposed project would also finance an expatriate advisor to thegeneral manager for three years, who would have two tasks:

(i) assist the general manager in adapting SONEES to the enlargedresponsibilities it will gradually take over from MH, namely,the implementation of new projects; and

(ii) reinforcing operational and financial controls at the generalmanager's level. The way of doing this would be to vitalizethe "General Control" section responding directly to thegeneral manager.

C. Training Needs and Proposed Training Component

11. The only training action taken in recent years was alphabetization ofilliterate workers, who represent close to half of SONEES' lower level

- 50 -

ANNEX 3-3Page 3

staff. Training needs of both existing and additional staff have beenappraised by a consultant from "Fondation de l'Eau" (Limoges, France) andestimated at about 60 man-months of training and seminars for higher technicallevel staff and at least 100 man-months of on-site training of intermediateand lower level technical staff.

12. To address the training needs at all levels, an important three-yeartraining program would be financed through the proposed project. To implementit, SONEES would be assisted by a foreign entity, either a water supplycompany or an institution specialized in training of water supply staff. Theprogram would:

(i) create a training department within SONEES. This would beachieved through:

a) the assistance of a high level training expert (3man/months spread over 3 years),

b) on-site technical assistance by a specialized instructor(24 man/months),

c) training of 6 Senegalese instructors (20 man/months ofoverseas training), and

d) the supply of technical and training equipment;

(ii) improve training of high level staff through:

a) seminars at SONEES' headquarters and regional offices onwater treatment, transmission and distribution, includingpreventive maintenance,

b) training in foreign water supply companies with emphasison management, and

c) training in Dakar for administrative staff.

(iii) train technical intermediate level staff in Dakar and in thesecondary centers; this would be the most important componentof the training program, as intermediate level staff would notonly be trained on technical aspects but also be taught how totransfer their skills to lower level staff. On-site workshopswould focus cn operation and preventive maintenance oftreatment plants, pumping stations and distribution networkand would teach pipe laying and making connections. Two"mobile training workshops," i.e., vans equipped with tools,parts, etc., one for water production and quality control andanother for water distribution would be provided by theproject.

WAPWSAugust 1983

- 51 -

ANNEX 3-4Page 1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES - PROPOSED MONITORING INDICATORS

I. Project Implementation Reporting Frequency

- Current Project Construction Schedule )

- Current Project Cost Estimate ) every 4 months

- Report on Project Implementation )Covering Each Component )

II. Operations

- Water Volume Produced X

) Total: every 4 months- Water Volume Billed )

- New Distribution Pipes Layed )

- No. of Customer Connections )

- No. of Social Connections )

- No. of Service Connections ) Total: every 4 months;) by center: anually

- No. of Standpipes )

- No. of Sewage Connections )

- Percentage of Population Served ) annually

III. Staff

- No. of Employees by category and )center )

) annually- No. of Connections per Employee, )

total and per center )

- 52 -

ANNEX 3-4Page 2

IV. Financial

- Average Tariff, Billings, Customer )Receivables, No. of Days Billings in ) every 4 monthsReceivables, by major customer )categories )

- Income Statement, Funds Flow, Balance ) annually, not laterSheet and Ratio Statement (similar to ) than 6 months afterAnnex 5.04) ) closing date

- Audit Report including detailed )analysis of fixed assets, accounts ) annually not laterreceivable and payable, debt, etc. ) than 8 months afterand also revalued fixed assets as ) closing datesuppl. information )

- Operating and Capital Expenditure )Budget ) annually, one month

) before start of- 3-year Financial Projections (Income ) fiscal year

Statements, Funds 'Flow, Balance )Sheets, Ratio Statements) )

V. General

- Current Tariff ) annually

- Changes in Legislation, Tariffs, ) every 4 monthsOrganization, Pay Scales, New Projects)Under Consideration, Other Important )Developments. )

WAPWSJanuary, 1985

- 53 -

Annex 4-1Page 1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

DESCRIPTION OF PROPOSED PROJECT COMPONENTS

1. Expansion of Water Supply Facilities in the Eleven Centers

(i) Drilling of 12 new boreholes and supply and installation ofcorresponding pumping equipment; rehabilitation of 15 existingboreholes and pumping facilities;

(ii) Installation of 25 chlorination units able to produce an averagequantity of one gram of active chlorine per cubic meter of waterproduced and one neutralization plant with a capacity of 320 m3/h;

(iii) Supply and laying of 13 km of PVC transmission pipes (diameter 150mm to 315 mm);

(iv) Construction of 5 elevated reservoirs (with capacities from 100 m3to 1,000 m3) and one ground level reservoir (700 m3);

(v) Supply and laying of 328 km of primary and secondary distributionnetwork (diameter 63 mm to 315 mm) of which about 58 km wouldreplace existing old pipes and about 270 km would be forextensions;

(vi) Supply of material for 10,000 domestic connections with a diameterof 15 mm (of which 8,200 would be for new connections and 1,800 toreplace existing ones);

(vii) Construction of 186 new standpipes and elimination of about 345existing redundant standpipes;

(viii) Supply of 10,000 water meters with a diameter of 15 mm.

For description of the physical project components by center, see Annex 4-2.

For details on technological alternatives and on service standards, seeAnnex 4-3.

2. Rehabilitation of SONEES' Operations

(i) Construction of about 3,500 m2 of office space at SONEES'technical center in Hann to relocate SONEES' headquarters (para3.07).

(ii) Management consultant to assist the General Manager of SONEES inimplementing the recommendations of the organization study (6 man-months, para 3.06);

:-54 -

ANNEX 4-1Page 2

(iii) Expatriate adviser to the General Manager of SONEES with highqualifications in the area of budgetary control and performancecontrol in general (36 man-months, para 3.09);

(iv) One expatriate Chief Engineer and one expatriate deputy ChiefEngineer for SONEES new works and studies division (72 man-months,para 3.08);

(v) Assistance in improving SONEES' accounting systems and financialmanagement, including audits and overhaul of SONEES' dataprocessing (paras 3.17 to 3.19);

(vi) Training program focussing essentially on SONEES' middle and lowerlevel technical management (para 3.10; Annex 3-3 C);

(vii) Consultancy services to SONEES for a consumer information andhealth education campaign (para 1.25); and

(viii) Working Capital Contribution including supply of spare parts (para4.04).

3. Dakar/Cap Vert Water Supply Component

(i) Consultancy services for (a) a review of the Dakar/Cap Vert Waterdemand, (b) a study of possibility of irrigation schemesdevelopment between the Lac de Guiers and the Dakar/Cap Vert areaand (c) an analysis of truck farming products marketing;

(ii) Consultancy services for feasibility studies of aquifer rechargein the Dakar/Thi,as area, including geophysical surveys, drillingof test boreholes, recharge tests and operation of mathematicalmodels;

(iii) Consultancy services for the finalization of the Dakar/Cap VertWater Supply feasibility studies including detailed analysis ofthe canal alternative; and

(iv) Consultancy services for the financial and economic analysis ofthe proposed solutions including proposals for modifications ofthe water tariff structare.

4. Rural Water Supply Component

(i) Expatriate advisor to M{ to define and implement realisticobjectives and institutional solutions in the rural water supplysub-sector (para 1.10);. and

(ii) Studies for analysis of alternative investment programs,appropriate technologies, reduction of unit costs, cost recoverymechanisms, and preparation of specific rural water supplyprojects (para 1,,10).

- 55 -

ANNEX 4-1Page 3

5. Urban Sanitation Component

(i) Consultancy services for an urban sewerage sector study, includingfeasibility of transferring sector debt as well as responsibilityfor implementing new projects to SONEES;

(ii) Consultancy services for analysis of actions to be taken to putexisting piped sewerage networks in secondary centers intooperation and proposal of technical alternative solutions adaptedto local urban and housing conditions; and

(iii) Consultancy services for preliminary investigations of sewageeffluent re-use in the Dakar area in order to limit the use ofdrinking water for truck farming.

WAPNSJanuary, 1985

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

PHYSICAL PROJECT COMPONENTS BY CENTER

Transmission

Boreholes Treatment Plants Lines Reservoirs Distribution Connections

Expec- Neutra- New

ted lization Groundlevel Elevated Connec- Connec- Stand- Stand-

Capa- Capa- Dia- Capa- Capa- Repla- Exten- Dia- tion to tion to pipes to pipes to

Aqui- city Chlo- city Length meter city city cement sion meters be Re- be be be Elimi- Water

No. fer I/ m3

/d rinat No. m3/d (km) (mm) No. (m3) _ (m3) (km) (km) (mm) placed Built Built nated Meters

LOUGA 1 Lut. 4,000 1 _ _ 2.00 315 - - _ _ 1.80 5.0 63/200 35 815 10 30 860

LINGUERE - - - 1 - - 3.50 5.0 63/250 90 95 3 24 190

THIES 2 Maest. 5,200 5 - _ 0.20 200 - - - - 6.65 36.0 63/315 285 1.935 47 21 2,270

BAMBEY - - - 1 - _ 0.60 160 - - 1 250 7.70 8.0 63/200 195 130 4 30 330

DIOURBEL 2 Eoc. 3,200 4 - - 3.00 200/250 - - - - 2.35 27.0 63/250 50 730 12 40 790

M'BACKE I Maest. 2,000 2 - _ 0.10 200 - - 1 1,000 4.10 38.0 63/315 75 640 10 35 725

FATICK 1 Maest. 2,000 1 _ _ 0.05 160 - - - - - 14.0 63/200 - 145 6 12 150 a

KAOLACK 2 Maest. 5,600 3 - - 1.90 z0o - - 1 100 21.50 40.0 63/315 850 1.090 22 135 1,960

TAMBACOUNDA 1 Maest. 2,800 2 - _ 1.75 200/250 - - - - 2.30 27.0 63/250 45 505 16 3 565

ZIGUII!ICHOR 2 Olig. 2,200 4 1 6,400 3.30 300/200 1 700 1 500 3.00 40.0 63/315 115 1,545 37 11 1,700

C.T.

KOLDA - - - 1 - _ 0.20 250 - - 1 600 4.10 31.0 63/250 40 550 19 4 610

TOTAL 12 - 27.000 25 1 6,400 13.10 - 1 700 5 2,450 57.00 271.0 - 1,780 8,180 186 345 10,150

1/ Lut. = Lutetian LimestonesMaest. = MaestrichtianPaleoc. = Paleocene LimestoneOlig = Oligocene LimestonesCT = Continental TerminalEoc = Eocine Limestone

ts

WAPWS

August 1983

- 57 -

ANNEX 4-3Page 1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

TECHNOLOGICAL ALTERNATIVES AND SERVICE STANDARDS

A. Water Resources

1. Groundwater resources will be used to supply the Eleven Centers atleast up to the year 2000. In order to reduce the cost of transmission, thenew boreholes have been located in or near the centers. While no majorproblems in terms of availability of water for most centers are expected,investigations are still needed for 3 centers (Louga, Diourbel and Ziguinchor)on well-siting in order to prepare the final designs. Therefore 4 out of the12 proposed boreholes must be drilled before summer 1985; they will befinanced under a PPF (para 4.11). In 9 centers, water is presently or will beobtained from the deep maestrichtian aquifer underlying most of Senegal. Thequantity of available water will be sufficient to supply these urban centers,but the possible evolution of the water table has to be assessed (para 1.05).

2. A delicate technical aspect is the reduction of the high content ofdissolved salts (NACl) in the water distributed in 5 centers (Bambey,Diourbel, M'Back&, Fatick, and Kaolack). The poor taste of water from thepublic system leads the population to buy polluted water from private vendorsobtained from shallow wells. Reduction of the high content of dissolved saltto improve the taste of distributed water would require either anion exchangetrea'tment, which is a very sophisticated and costly technology, or mixing withfresh water resources located far away from the cities (35 km in the case ofKaolack and 17 km in the case of Bambey and Fatick), the transmission of whichwould also result in high investment and operating costs. It therefore hasbeen decided for the medium-term to disregard these solutions; however, it isexpected that the proposed consumer information and health education campaign(para 1.25 and Annex 4-1, 2 (vii)) will encourage the population to use thepotalble piped water, in spite of its taste, and avoid the polluted water fromshalLow wells for drinking and washing purposes. Another delicate technicalaspect of the project is the reduction of the fluoride content in the same 5centers which is higher than the WHO standard (maximum 1.5 mg/l). Averagecontents are: Bambey, 2.5 mg/l; Diourbel, 3.0 mg/l; M'Backe, 2.5 mg/l;Fatick, 5.0 mg/l and Kaolack, 3.5 mg/l. A result of this high fluoridecontent is a significant incidence of mottled teeth. In order to reduce thishigh content of fluoride, a solution consisting of filtration on locallyproduced aluminium phosphate was tested in a pilot plant, during thepreparation of the project. This process proved unfeasible, thus the fluoridecontent can not be reduced at low cost; however it may be noticed that itseffects are more of a cosmetic problema than a serious health hazard. It issimply proposed to carry out, within the framework of the project, anionexchange test runs in Kaolack to ascertain the feasibility of such a processin t;he Senegalese conditions.

- 58 -

ANNEX 4-3Page 2

3. Both neutralization and deferrization of water distributed inZiguinchor are required; the proposed treatment plant will be easy to operateas it will consist of a filtration through locally produced limestone.

B. Domestic Connections and Public Standpipes Policies

4. SONEES will implement a connection policy providing the smalldomestic consumers with 15 mm diameter connections free of charge. Thisshould reduce water consumption at public standpipes--which is billed to themunicipalities but in most cases exceeds their financial capability--andincrease SONEES' water sales to private consumers. The proposed projectincludes 10,000 domestic connections (para 6.05 and Annex 4-1, 1 (vi)).

5. However, for a long time to come, it will not be feasible to servethe entire population of the Eleven Centers through domestic connections, andthe public standpipes will continue to be necessary, (Annex 2-2). On theother hand, in certain town centers the distances between standpipes are veryshort, encouraging high consumption. The project provides for both newstandpipes in poorly served areas, as well as elimination of redundantstandpipes in the over-equipped areas (para 6.06).

WAPWSJanuary 1985

- 59 -

ANNEX 4-4Page 1

ELMJEW CRENES WATE SUPPLY PROJECT

TAL PROCJT COST

Foreign -Local Total Foreig Local Total- - CFAF million - - UE$ni llion - -

A. E>xalsion of Water japp]y Facilities

i) Water Supply in Eleven CentersWells and Ponping Equipnents 585 290 875 1.34 .67 2.01Treatment Plants 140 80 220 .32 .19 .51Transoission Systems 175 9D 265 .40 .21 .61Reservoirs 245 185 430 .56 .43 .99Distribution Networks 1,195 795 1,990 2.76 1.81 4.57Connections, Standpipes, Meters 240 245 485 .55 .56 1.11Base Cost as of end 1983 2,583 1,685 4,265 5.93 3.87 9.80

Rhysical Contingencies 385 250 635 .89 .56 1.45Price Contingencies 1,095 1,070 2,165 2.52 2.48 5.00Total 4,060 3,0C5 7,065 9.34 6.91 16.25

ii) Supervi5ion of ConstructionConsultant Services 225 65 293 0.52 .15 0.67Base Cost as of end 1983 225 65 293 0.52 .15 0.67

Physical Contingencies 35 15 50 0.08 0.04 0.12Price Contingercies 95 45 140 0.22 0.09 0.31Total 355 125 480 0.82 0.28 1.10

B. Rehabilitation of SONEES

i) Technical AssistanceAdviser to the General Nuanager 95 25 120 .22 .05 .27Chief Ehgineer for Studies and New Worik 95 25 120 .22 .05 .27aigineer for Studies and New Works 85 15 100 .20 .02 .22

lbse Cost as of end 1963 275 65 340 .64 .12 .76

Physical Contingencies 30 5 35 .07 .02 .09Price Contingencies 8e 30 110 .18 .08 .26

Total 355 103 485 .89 .22 1.11

ii) Constraction of Office SpaceLand - 60 60 - .14 .14Construction of Tailding 360 150 510 .83 .34 1.17Equipnent of Offices - 40 40 - .09 .09Detailed Design and Supervision 45 20 65 .10 .05 .15Base Cost as of end 1933 4 270 675 .93 .62 1.55

Rrysical Contingencies 65 40 105 .15 .10 .25Price Contingencies 175 130 305 .40 .29 .69

Total 645 440 1,035 1.48 1.01 2.49

iii) Consultancy ServicesConsultancy for Mangesnt 25 5 30 .06 .01 .07Audit and Ovefiaul of Data Processing 120 35 155 .28 .07 .35Consultancy for Consuner Information 15 5 20 .03 .02 .05

Bse Cost as of end 198 160 45 205 .37 .10 .47

Physical Contingencies 20 5 25 .05 .01 .06Price Contingencies 65 30 95 .15 .07 .22

Total 245 ao 325 .57 .18 .75

- 60 -

Annex 4-4Page 2

SENEGALELEVE CMTMS WATER SUPPLY PROJECT

TOTAL PROJECT COST

Foreige Local Total Foreige Local TotalCFAF million - - U m llion--

B. Rebabilitation of SONEES (contirmed)

iv) Trainin Program 175 50 225 .40 .11 .51ase Cost as of end 19S3 175 50 225 .40 .11 .51

Physical Contingencies 20 5 25 .05 .01 .06Price Contingencies 70 30 100 .16 .07 .23

Total 265 85 350 .61 .19 0.8O

v) Increase in SONEES' oikng CapitalSupply of spare parts 1,305 - 1,305 3.00) - 3.0DChemjcals bills 1,305 - 1,305 3.00 - 3.00

Total 2,610 - 2,610 6.0o - 6.00

C. Dakar Water Supply Studies

Aquifer recharge surveys 110 20 130 .25 .05 .30Water dernnd and agricultural surveys,Feasibility of schemes 210 50 260 .48 .11 .59

Base Cost as of end 1933 320 70 390 .73 .16 .89

Physical Contingencies 5D 10 60 .11 .02 .13Price Contingencies 130 40 170 .29 .09 .38

Totsl 50X 120 620 1.13 .27 1.40

D. Sure]l Water Supply

Rural Water Supply Technical Assistant 95 25 120 .22 .06 .28Rurel Water Supply Studies 35 10 45 .03 .02 .10

Base Cost as of end 1933 130 35 165 .30 .08 .38

Physical Contingencies 15 5 20 .03 .01 .04Price Contingencies 4C 15 55 .09 .04 .13

Total 185 55 240 .42 .13 .55

E. Urban Sanitation Studies

Base cost as of end 1983 135 35 170 .31 .OS .39

Physical Contingencies 15 5 ZD .03 .01 .04Price Contingencies 45 10 55 .10 .02 .12

Total 195 50 245 .44 .11 .55

F. Total Project Cost

Water Supply in Eleven Centers 2,805 1,750 4,555 6.45 4.02 10.47Rehabilitation of SOIEES 3,625 430 4,055 8.34 .95 9.29Dakr Water Supply Studies 320 70 390 .73 .16 .89ural Water Supply 130 35 165 .30 .CS .38

Urban Sanitation Studies 135 35 170 .31 .08 .39Bse Cost as of end 1983 7,015 2,320) 9,335 16.13 5.29 21.42

Physical Contingencies 635 340 975 1.46 .78 2.24Price Contingencies 1,795 1,400 3,195 4.11 3.23 7.34

Total 9,445 4,060 13,505 21.70 9.30 31.0D

G. Refinancing of IDA Engineering Credit 870 215 1,085 2.00 .50 2.50

H. Interest during Construction 310 775 1 ,0c5 .70 1.80 2.50

I. TOTAL FIMNCING RMU EIS 10,625 5,050 15,675 24.40 11.60 36.0)0

WAPWSDecember, 19S4

- 61 -

ANNED 4-5

SEDALELEB CMFEh WATER SUPPLY HROJBT

DNVEM RATIOS

Served Ppulation ('ooo inhab.) Unit Cost per AdditionalInvesteaent Served Population

in 1981 in 1991 Additional CFAF mi.Lon!/ CFAF/Inab. US$/IhAmb.

ICugEL 34.5 53.5 19.0 220 11,600 26.6

LinigLere 8.5 12.7 4.2 100 23,800 54.7

Thies 119.4 174.6 55.2 575 10,400 23.9

BRmbey 9.6 13.8 4.2 180 42,900 98.5

Diourbel 50.0 77.3 Z7.3 445 16,300 37.5

M'Bakc 20.9 48.6 27.7 515 18,600 42.7

Fatick 9.4 13.6 4.2 135 32t100 73.9

KaoT]h3ck 101.4 141.1 39.7 715 18,COO 41.4

Tambacournda 15.4 36.0 20.6 300 14,60C 33.5

Ziguinchor 43.2 104.7 61.5 1,020 16,60X 38.1

Kolda 8.9 30.3 21.4 350 16,400 37.6

TOMAL 421.0 706.0 285.0 4,555 16,0O0 36.7(Round fie) - _

1/ BSe costs as of end 1983;Btysical Works and Construction Sapervision

WANiSDecEnber 1984

*1

- 62 ^

AM 4-6

ELEf2I C5t2 WATER SUPPll EOJECT

I1EAKWRI OF PROMBT OJIF T ID ODM l'RACTS ANDRI FfACf 8WRCE

HWsical Price Pisical PriceBase Contin- Conn- Base Contirn Contin-Cost gens enies Total Cost geneies gencies Total IA"' S NEES CCCE

- CFAF million - - US millon - U$ million -

A. WATER SUPPZ IN ELEV8 CENTERS

1 . Expansion of facilitiesExecution. of 4 borehole, 110 15 - 125 .26 .03 - .29 .29 (.29)Drecution of 8 boreholes 285 45 175 505 .65 .10 .40 1.15 1.15 ( _ )Zlectrioal and Psaping Bqulpoant:

(a) Tanb., Ziguinchor, Kolda 165 25 65 275 .38 .06 .20 .64 - (-) - .64(b) 8 other centes 390 55 200 645 .90 .13 .46 1.49 - (-) - 1.49

Civil Works:(a) Tamba., Zigainchor, Kol.da 4C0 60 20 660 .92 .14 .46 1.52 - ( - ) _ 1.52(b) 8 other oenters 265 35 150 450 .61 .08 .34 1.03 1.03 (-) - -

Supply and laying of pipes:(a) TIaba., Ziguinchor, Kolda 750 115 355 1,220 1.72 .26 .82 2.80 - ( - ) 2.80(b) Toils, Kaolaek, Fatick 705 105 405 1,215 1.62 .24 .94 2.80 2.80 ) - -(c) 5 other centers 685 105 390 1,180 1.57 .24 .91 2.72 2.72 ( - )-

Supply of naterial for connections 305 40 55 400 .70 .09 .13 .92 - ( - ) - 0.92Construction of connectiors 205 35 150 390 .47 .08 .34 .89 - (-) .89 -

Sub-total 4,265 635 2,165 7,065 9.8) 1.45 5.0 16.25 7.99 T297 .89 7.37

2. Super-ision of Corstruction 290 50 t40 480 .67 .12 .31 1.10 1.10 (.02) - -

T_AL 4,555 655 2,305 7,545 10.47 1.57 5.31 17.35 9.09 (.31) .89 7.37

B. RBEABILITATION OF SWEE

1. Technical AssistanceAdviser to the Gen. Mnager 120 12 33 165 .27 .03 .08 .38 .38 ( -)Chief nsineer for Studies

and N1ew Woici 120 12 33 165 .27 .03 .08 .38 .38 (.17) - _Bag. for Studies and New Wods 100 11 44 155 .22 .03 .10 .35 .35 ( - )

Sub-total 340 35 110 485 76 .09 .26 1.11 1-11 (.17)

2. Construction of Office SpaewLand 60 - - 60 .14 - - .14 - (-) .14Construction 510 85 270 865 1.17 .20 .61 1.99 1.25 (.02) .73Office equigpnt 40 5 15 60 .09 .01 .04 .14 - (- 1) .14Dstailel desigr. snd eupervision 65 15 20 100 .15 .04 .04 .23 - (-) - .23

Sub-total 675 105 305 1,759 1.55 .25 .69 2.49 1.25 (.02) 1.01 .23

3. Consultants ServicesConwltancy for mnagent 30 3 17 50 .07 .01 .03 .11 .11 - -)Aiudit and overhsul of data processing 155 20 70 245 .35 .05 .16 .56 .56 (.25)Consultancy for consnir infonotion 20 2 8 30 .05 - .03 .03 .08 ( -)

Sab-total 2(5 25 95 325 .47 .06 .22 .75 *75 ( .25

4. T-ing Pro 225 25 10) 350 .51 .06 .23 30 .80 ( -)

6. Increase in Working C3pitalSupply of ssre parts 1,305 - - 1,305 3.00 - - 3.00 3.0) ( - ) - -

hi.cal bills 1,305 - - 1,305 3.0) - - 3.00 3.0- ( - ) _ _Sub-total 2,610 - - 2, 6.10 60 - - 6.-0) r C T--

TOTAL 4,055 190 610 4,855 9.29 .46 1.40 11.15 9.91 (.44) 1.01 .23

C. DAKAR WATER SUPPL TDIES 390 60 170 620 .89 .13 .38 1.40 1.40 (-) - _

D. REUAL WATER SUPPL SCDIES

R Tedhnical Assistant 120 15 30 165 .28 .03 .07 .38 .38 ( -)RWS Stuiies 45 5, 25 75 .10 .01 .06 .17 .17 ( -)

TOI'AL 165 20 55 240 .38 .04 .13 .55 .55 T- -

E. UBAN SANrLTION AT1 DI 170 20 55 245 .39 .04 .12 .55 .55 (-) _ (-)

F. TOTAL PROJECT OSr 9,335 975, 3,195 13,505 21.42 2.24 7.34 31.00 21.50 (.75) 1.90 7.60

G. FMA CMG OF mDA E8Gt. CREDIT - - - 1,085 - _ _ 2.50 2.50 ( - ) - _

H. 21TREST 2Ef l 1CI - _ _ 1.085 - _ - 2.50 -- -) 2.50 -

I. 'TAL R ACII10 REQUIREMNS_ 15,675 36.0) 24.00 (.75) 4.40 7.60

a/ Figures between brackets indicate the amount financed under the PPF.

WAPWSDecember, 1984

_ 63 -

ARNMF 4-7

E C WATER S PE

Caldar Yesa t 1984 t985 t1986 1987 t99B 1999 t99

Water i in 1 1 enters- Drill2ig of 4 wells (P1F) ////C,n ..... I

- Drilling of 8 wll /////// ............ 3 -

- Mectrical andt p8Ti n 00 r ............ ssquipn1t

- Civil Works / / / / . S ............. a

- 8applZr and laying of pipes //CC///.//. . ........ ,

- aipp4r aed execution of /////// ............. onnections

- Work tRupervrisim IIHIIIII tm.li////// DOO...........' s .._

Canstruct..on of Offioe Spam

- Studi*e arA supervisic ..

- Oonst]niotion ..... /I/ OOx ....... s __

DeohiicElI Assistawcs

- Advisar to the General bnegrof 3ES

- Chief Engineer for stuties and i -_ -r. works

- FSineer for studies andnow wDrks

Consultants Services

- Consultancy for menegs nt ; _-_

- Adit and overhaul of data (YEF)

processing

- Consultancy for o r.st ri.inforirtion

TrainigPrg __ _

Sapply of' Spere Purts endF

DaIkr Water 8opp3y Studies __

hial Water Supply Studies

- ME- 9bolbnioal Assistant

- RWS tudies_ _

Urban Sanitation Studies . . _ .

I//I PRlepation of tender documentsOXO Rsview of draft tander donmnnts

x ender Period. Contract sigtng

- Construction or execution* Credit effectiveness

WAPWSJanuary 1985

- 64 ANNEX 4-8Page 1

I d

4 C T..

*u .~

T'; I I,

PI .- _7 . .

'~~~~~ -T r4' -i ~. i n;

r7

'' '- F C - - --- -

4~~ ~~~ n i r t 5 c S

WAP W S

- T; i si ..... C W ! , -. . i;

-65 ANNEX 4-8

Page 2

22fs- wrJd ,~4

24~~~~~~~~~~~~~~~~~~~~~5

22 t1 F Y '

o 0

14 14

12ii 80 -/i

i q?,6 1 9..87 1988 1 9389 1939.0 199 1 l iJ 9 I7 1 <.J9 I' 1994

Ba,]n k flDA fY10- EFrlM.AftnE 7 U llI ..

s JkL Or , I.-C.. -.n . VC t :I1F - r. ,,; a- i '2

'.'u14 '' 'I-! -;~r T ie.1 i-ec c i3 r rTJ it F: em Pte. s;-

Ey ;:. 3 6 7-i ' 't . - .;e ero ;. '1i o':p r: 4t>';m

- ' + : '; ';~~~~ -1 : T ;r ;-h-X'. . I ea, n - ri 3 e C.'7.- a a- / ; '

WAPWS

4 ee.e /> -

- 66 -

ANNEX 5-1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES - INCOME STATEMENTS(CFAF million)

1981 1982 191s3 1984 1985 1986 1987 ISA8 1989 1990 1991 1992 1993ACTUAL ACTUAL ACTUAL ESTIMATE FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST

WATCR PROD. 1000 CUBOMTRS 65,804 72,005 76,800 79,760 82,840 84,260 85,790 07,430 89,170 90,490 91,840 93,210 94,600ErFICIENCY % 74 77 79 78 77 77 77 77 77 78 78 78 78WATER COLD, 0000 CUsOMTRS 48,432 55,514 60,60C 6I,400 63,787 64,880 66,05a 67,321 68,661 70,582 71,635 72.704 73,78e

SONEES TARIFF, CFAF(M3 80 73 87 169 182 198 216 23t 257 Z20 305 333 363

RIV EN JtCS

WATER SALES 3,853 4,323 5,288 10,546 111 06 9 2,846 14,269 15,8I 8 17,646 19,763 21 ,849 24,210 26,785

WORKS INVOICED 1,143 761 853 1,008 1,391 1,541 1,713 1,906 2,11a 2,371 2,622 2,905 3,214

0711ER 32 64 68 45 70 77 86 95 106 119 150 145 161

TOTAL REVENUES 5,021 5,148 6,209 11,599 13,070 14,464 06,068 17,889 19,870 00,253 24,60Z 27,260 30,16A

EXPENSES

surPLIES 2,547 2,906 3,117 3,626 4,061 4,540 5,085 5,700 6,396 7,140 7,972 8,c90 9,936

T7IANSPORT 47 45 57 66 75 84 94 106 119 133 148 165 185

OTCER SERVICES 523 509 602 1,322 1,467 1,62a8 1a,8 2,006 2,242 2,507 2ao03 3,133 3,49a

MISCELLANEOUS 38 1i9 152 177 196 218 242 269 298 331 367 408 453

rERSONNEL 1,559 1,761 I,060 2,396 2,659 2,952 3,276 3,637 4.066 4,546 5,082 5,682 6,352TAXES 11 63 68 79 90 101 113 127 142 159 177 198 2Zl

CASH OPER EXP. 4,725 5,403 6,05S 7,666 8,549 9,523 10,619 11,845 13,263 14,815 16,549 18,486 20,645

RECCIVASLCS PROVISION (32) 148) 'l) 316 348 385 428 477 529 593 655 726 804

DEPRECIATION 184 208 244 1,739 1,870 2,086 2,347 2,623 2,863 3,084 3,304 3,541 3,797

TOTAL OPERATING EXP 4,877 5,563 6,29') 9,721 10,767 11,994 13,393 14,945 16,655 18,492 20,509 22,753 25,245

OPERATING INCOME 151 1415) (91) 1,878 0,303 2,470 2,674 2,944 3,215 3,761 4,292 4,507 4,915

GAIN (LOSS) ON ASSETS 3 4 6 8 9 10 11 13 Is 16 19 21 24OTHER EXPENSES (281 (171 (391 45 53 59 66 74 83 93 104 116 129

INCOMC BCFORE INTEREST 182 (394) (40) 1,841 2,259 2,421 2,619 2,885 3,147 3,604 4,007 4,412 4,810

INTEREST 97 60 74 365 585 614 779 939 1,008 1,041 989 982 896

INTEREST - CONSTRUCTION - - - - 116 264 369 39a 221

INTEREST - OPERATIONS 97 60 74 365 469 350 410 541 787 1,041 989 982 896

INCOMC BLFORE TAXES 85 (4541 (119) 1,476 1,790 2,071 2,209 2,342 2,359 2.643 3,018 3,430 3,914

INCOME TAXES 50 1 487 597 690 736 781 786 881 1,0a6 1,143 1,305

NET INCOME 35 (4541 (120 989 1 ,194 1,381 1,473 1,561 1,573 1,762 20012 2.287 2,610

RETAINED EARNINGS STATEMENT

RET CARN.BEGINNING YEAR 13 47 (4C07 (5071 439 1,574 2,885 4,3403 ,904 7,477 9,239 10,I25 153,55

NET INCOME 35 (4541 (120 989 1,194 1,381 1,473 1,561 1,573 1,762 2,012 ,2087 2,610OPEDAT SUBSIDIES RECEiVED - - - - - - - - - - - - -

DIVIDENDS - - - - - -

TRANSrERED TO RESERVES I - - 23 59 69 15 - - - - - -

RCTAINLD EARNINGS 47 (407) (527) 439 1,574 z,885 4,343 5,904 7,477 9,239 11,251 13,538 16,148

WAPWSUpdated January 29, 1985

- 67 -

ANNEX 5-2

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES - SOURCES AND APPLICATIONS OF FUNDS(CFAF million)

1981 1982 1983 1984 1985 1986 1987 19B8 19t9 1990 1991 199Z 19;3ACTUAL ACTUAL ACTUAL ESTIMATE FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST

GENERATION OF INTERNAL FUNDS

INCOME BEFORE INTEREST 182 1394) (45) 1,841 2,259 2,421 2,619 2,883 3,147 3,684 4,007 4,412 4,810DEPRECIATION 184 208 189 1,716 1,844 2,057 2,314 2,586 Z,821 3,037 3,251 3,481 3,729

MINUS INCOME TAX 50 a 1 487 597 690 736 781 786 881 1,006 1,143 1,305

TOTAL INTERNAL FUNDS 316 (186) 143 3,070 3,506 3,787 4,197 4,689 5,181 5,840 6,253 6,749 7,234

NOV OF FIXED ASSETS SOLD 26 29 33 38 42 48 54 di 69 78NON-CASH WORK.CAP.INCREASE (65) (663) (405) 1,730 1,641 1,238 956 950 1,172 1,660 1,071 992 1,493

DC3T SERVICE

TOTAL DEBT AtCRTIZATION 0 0 0 559 829 928 924 1,045 988 1,488 1,742 1,847 1,829TOTAL INTEREST - LOANS 0 0 0 365 585 614 779 939 1,008 1,041 989 982 896OTHER INTERESI 97 60 74 - - - - - - - - - -

TOTAL DEST SEFIVICE 97 60 74 924 1,414 1,542 1,703 1,984 1,996 2,529 2,731 2,829 2,725

NET AVAILABLE FFiOM OPER. 284 417 474 442 480 1,040 1,575 1,797 2,061 1,704 2,512 2,997 3 ,094

CAPITAL EXPENDITURES

ELEVEN CENTERS - - - 780 1,375 3,060 2,490 1,445 435 205 -

OTHER FINANCING - - - - 1,602 1,935 2,250 360 - - - - -OTHER SONEtS 261 431 405 357 904 811 1,098 2,111 1,472 1,244 1,579 1,626 2,389

TOTAL CAP EXPENDITURE 261 421 405 357 3,366 4,121 6,408 4,961 2,917 1,679 1,784 1,626 2,389

TO BE FINANCED 123) 14 691 (55) 2,886 3,081 4,833 3,164 856 125) (72a) (1,371) (705;

LOANS

TOTAL LOANS 0 a 0 0 1,951 3,279 4,057 2,860 1,385 330 105 0 0

EOUITY - - - - 915 1,060 905 740 380 40 100 - -

CASH iNCREASE (DECREASE) 23 (14) 69 85 (20) 1,28s 129 436 609 395 933 1,371 705CASlt BCEINNING sF YEAR 104 127 113 182 247 247 1,505 1,635 2,070 2,679 3,075 4,007 5,379

CASH END OF YEAR 127 113 182 267 247 1,505 1,635 2,170 7,679 3.075 4,007 5,379 6,084

WAPWSUpdated January 29, 1985

- 68 -

ANNEX 5-3

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES - BALANCE SHEETS AS OF DEC. 31(WFY -1tii)

1981 1982 1983 1984 1985 IS86 1987 1988 1989 1990 1991 1992 1993ACTUAL ACTUAL ACTUAL ESTIMATE FORECAkST ORECAST FORECAST FORECAST FORECAST FORECAST iORECAST FORECAST FORECAST

ASSETS

GROSS FIXED ASSETS IN OPER. 1,35 1,6Z5 2,100 29,474 29,594 30,182 33,879 38,355 44,936 49,843 52,699 54,309 56,013ACCUM. DEPRECIATION 750 904 1,093 2,809 4,653 6,709 9,023 11,609 14,430 17,467 20,718 Z4,199 27,927

NET FIXED ASSETS IN OP 565 721 1,00' 26,665 24,S41 23,473 24,855 26,746 30,506 32,376 31,981 30,110 28,088rIXED ASSETS UNDER CONSTR. 31 103 33 390 3,723 7,487 10,529 11,369 7,878 4,596 3,463 3,410 4,015

TOTAL riXED ASSETS 396 B24 1,041J 27,055 28,664 30,960 35,384 38,115 38,384 36,972 35,444 33,520 32,103

CURRENT ASSETS

INVENTORY 453 776 B55 995 1,156 1,294 1,591 1,775 2,123 2,735 3,072 3,337 3,032CUSTOnER RECEIVABLES 7,041 8,517 9,981 3,066 4,357 4,821 5,356 5,963 6,823 7,410 8,201 9,007 10,053RESERVE roR CUST. RECEIV. 371 34S 36; 406 436 482 536 396 662 742 820 909 1,005SHAREHOLDERS OOTHER CURRENT ASSETS 314 608 552 624 705 796 900 1,017 1,449 1,999 2,267 2,458 2,874CASH AND BANKS 127 113 182 267 243 1,500 1,630 2,066 2,675 3,070 4,003 5,374 6,079

TOTAL CURRENT ASSETS 8,364 9,665 11,203 5,346 6,025 7,929 8,949 10,225 12,208 14,480 16,723 19,347 21,033

TOTAL ASSETS 8,960 10,489 t2,Z43 32,401 34,680 38,8S9 44,334 48,340 50,592 51,452 52,166 52,067 53,936

EOUITY S LIABILITIES

CAi iTAL 750 750 750 16,083 16,998 18,058 18,963 19,703 20.083 20,123 20,223 20,223 20,223RESERVES 36 36 36 59 118 187 202 202 202 202 202 202 202RETAINED EARNINGS 47 (4071 15271 439 1,574 2,885 4,343 5,904 7,477 9,239 II,Z51 13,538 16,148

TOTAL EGUITY 033 379 259 16,531 10,690 2,130 23,308 25,809 27,762 29,564 31 ,676 33,963 36,573

DONG TERM DEBT

IDA 920 1,775 2,875 3,615 3,714 3,483 3,312 3,036 2,760CCCE 19 6805 1,670 2,485 3,015 3,038 2,763 2,474 2,170OTIIER 841 2,650 4,742 6,047 3,914 3,601 5,288 4,975 4,662DEBT TRANSFERED 10,679 9,731 8.827 7,78 6,794 5,895 5,004 4,021 3,070 2,119

TOTAL LONC TERM DEBT 0 0 0 10,679 11,702 14,057 17,069 lB,941 18,530 17,126 15,384 13,355 11,712

TOTAL EiUITY S L.T.DEBT 833 379 259 27,260 30,392 35,187 40,577 44,750 46,300 46,690 47,060 47,538 48,285

CURRENT LIABILITIES

SUPPLIERS 1,513 2,088 2,864 2,227 1,634 1,563 1,456 1,302 1,459 1,630 1,821 2,033 2,270COSTUMER DEPOSITS 358 408 451 468 487 506 356 547 569 592 616 640 666

SHORT TERM PART OF L.T. 1,388 928 924 1,045 988 1,488 1,742 1,847 1,829 1,843BANKS 375 459 394 390 559

OTHER 3,881 7,155 8,275 668 689 709 730 752 775 798 822 847 872

TOTAL CURRENT LIAB. 8,127 10,110 11,984 5,141 4,297 3,70Z 3,757 3,589 4,Z91 4.762 5,106 5,340 5,631

TOTAL EQUITY & LIA2. 8,960 10,4b9 12,243 32,401 34,689 38,889 44,334 48,339 50,591 51,452 52,166 52,867 53,936

a 0 0 0 0 101 5 a 0 0 a 0 0

WAPWSUpdated January 29, 1985

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

SONEES - RATIO STATEMENTS

1961 [982 1983 I984 1985 1986 1987 I988 1989 1990 1991 1992 1993ACTUAL ACTUAL ACTUAL ESTIMATE FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST

EFFICIENCY RATIO 74 77 79 78 77 77 77 77 77 78 78 78 78AVER.SONEES TARIF (CFAFIM3) 80 78 87 169 182 198 216 236 257 280 305 333 363WORKING RATIO 0 94 1.05 0.98 0.66 0.65 0. 66 0 66 0 66 0 67 0.67 0. 67 0. 68 0. 68OPERATING RATIO 0.97 1.08 1.01 0. 84 0.82 0.83 0.83 8 4 0. 84 0 83 0.83 0.83 0.84

TOTAL INTERNAL FUNDS 11 316 (186) 143 3I070 3,506 3,787 4,197 4.689 5,181 5,840 6,253 6,749 7,234(cash cont to cap expend.)MINUS DEBT'SERVICE It (97) e60) (74) (924) (1,414) (1,542) (1,703) (0,984) (1,996) (2,529) (2,731) (2,829) (2,725)

CAC) ICONTRODIUTION 1I 219 (246) 69 2,146 2,092 2,245 2,494 2,705 3,185 3,311 3,522 3,920 4,509

% OF IREVENUS 4.36 (4.78) 2. 1 18.50 16.00 15.52 15.52 05.12 16.03 14.88 14 32 14.38 14.95% - CAF.EXP.+WORK.CAP.INCR. l1l.73 106.03 - 102.83 41.79 41 89 33 86 45.76 77 89 99.14 123.35 149.74 116.15DEBT SERVICES.COVERAGE 3.26 (3 10) 1 93 3.32 2 48 2.46 2.46 2.36 2. 60 2.31 2.29 2.39 2.65DEET/EGUITY & LONG TERM DEBT 0.0 0.o00 0 o0 39 17 38.50 39.95 42.07 4233 40 04 36 .68 32.69 28.53 24 26CURnENT RATIO 1 03 0.96 0.93 1.04 1.40 2.14 2.38 2.85 2.84 3.04 3 28 3.62 3.86

It CFAF MILLION

WAPWSUPDATED 01/3011985

I'4131

- 70 -

ANNEX 5-5Page 1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

ASSUMPTIONS FOR SONEES FINANCIAL PROJECTIONS

General

1. The financial projections shown in Annexes 5-1 to 5-4 were updeLtedduring negotiations by Bank staff together with SONEES officials. They arebased on SONEES latest projections (October 1984).

Income Statements

2. Water quantities produced for the Dakar/Cap Vert area assumed toincrease through 1984 by about 4% p.a., the additional quantities coming fromthe new Pout Nord and Pout Kirene wells; thereafter production is assumed tolevel off as no major projects to develop additional water resources for Dakarhave yet been decided upon. The Dakar area represents 70% to 75% of totalvolume. Tne Eleven Centers production will increase by the additionalcapacity generated by the proposed project, i.e. an average 7.3% over the1983-1993 period. Quantities produced in the remaining smaller secondarycenters are projected to increase by 5% p.a. The overall efficiency ratio(quantities sold/quantities produced) should improve from 75% in 1983 to 78%in 1993, partly due to more comprehensive metering, but also followingcampaign for detection of leaks and illegal connections.

3. SONEES' tariff includes the September 1, 1983 increase (para 5.12 ofmain report). The revenues of the Renewal Fund and the Small Works Fundpreviously administered by MH accrue to SONEES starting January 1, 1984, andalso the revenues that previously had to be transferred to CNA for servicingthe sector debt. The water supply installations previously owned by the Statewere transferred to SONEES by Law 83-73 of July 5, 1983 and should beaccounted for by SONEES starting January 1, 1984. SONEES will depreciate thetransferred assets from this date on and assume the debt service. Followingthe September 1, 1983 restructuring, the tariff is assumed to increase by 90%of inflation as provided for by SONEES' "Cahier des Clauses et ConditionsG6nerales".

4. Cash operating costs are assumed to increase proportionally with thevolume of produced water; they also include an inflation rate of 10% from1984 on, which is the rate assumed for the local costs of the proposedproject. Maintenance costs include the charges previously covered by the MHadministered funds. An annual provision for doubtful customer accounts of 3%of water sales has been included in operating expenses. Depreciation chargesare assumed to decrease from 15.7% of gross fixed assets in operation for 1981

- 71 -

ANNEX 5-5Page 2

to 6.9% in 1993 because previously fixed asseuz consisted essentially offurnitures and fixtures, vehicles, tools etc., i.e. assets with relativelyshort useful lives, while at the end of the forecacting period they includethe Eleven Centers water supply installations to b'e financed under theproposed project, the water supply installations of Saint Louis to be financedby KfW, as well as installations transferred from the State to SONEES.Interest during construction has been capitalized with fixed assetc.

Funds Flow Statements

5. SONEES' capital expenditures include the proposed project, the SaintLouis water supply project, the other small extension projects listed in theContrat-Plan, the renewal program previously under'the responsibility of MH,and some small expenditures for building improvemefnts, tools, vehicles, etc.No other major projects to be implemented by SONEES, particularly in theDakar/Cap Vert area, are identified at present. IbA and CCCE financings anddebts are based on the terms outlined in para 4.08 of the main report. KfWloans conditions are as follows: repayment over a 40 year period including 10years of grace, interest rate: 3.4%, commission on non-disbursed amounts:1.4%. For other projects to be debt-financed, the following conditions havebeen taken in account: repayment over a 16 year period including 4 years ofgrace, average interest rate: 5%.

Balance Sheets

6. SONEES' fixed assets are stated at historical values. Transfer ofexisting water supply installations from the State to SONEES as ofJanuary 1, 1984 has been assumed at a current value of CFAF 27.4 billion(US$63.0 million).

7. Annual increases in inventories, other current assets and cashreflect the growth of SONEES' operations and inflation. Gross customerreceivables, expressed as number of months of billing should decrease to about4 months by the end of 1985 and for the time thereafter, due to thecompensation of Government arrears with amounts SONEES owes the Government,reduction of the still remaining arrears through periodic Government payments(para 3.13), and generally improving collection performance.

8. SONEES' equity would be increased by (i) the mentioned transfer ofthe State owned water supply installations (para 6 'above), and (ii) thepassing on of half of the IDA funds as Government equity contribution.

9. Short term liabilities (suppliers, customer deposits, other) reflectthe growth of SONEES' operations and price escalation. The balance due to theCNA is assumed to be set off in 1984 with Government arrears mentioned inpareL 7 above and para 3.13 of the main report. The'decreasing short termborrowing reflects the improving working capital situation of SONEES.

WAPWSJanuary 1985

SENEGALELEVEN CENTERS WATER SUPPLY PROJECTSONEES - COMPONENTS OF WATER TARIFF

I. CITIES WITH SEWERAGE SYSTEMS

Added Small Social Tax on Debt ServiceCustomer Type SONEES Value Renewal Works Connections Excessive Component Municipal TOTAL

Component Tax Fund Fund Fund Consumption (CNA) Tax

Private Customers with Meters of 15mm:- Up to 10 m3/month 81.63 5.71 - - - 87.34- Exceeding 10 m3/month 109.18 7.64 29.50 14.75 7.65 - 47-95 2.50 219.17

Other Private, Commercial, Adminis- 109.18 7.64 29.50 14.75 7.65 - 47.95 2.50 219.17tration Consumption

Consumption exceeding normal limit2/ 109.18 7.64 29 50 14.75 7.65 32.88 47.95 2.50 252.05

Public Standpipes 109.18 7.64 - - - - - - 116.82

Vegetable Growers:- 0-1,500 m3/month 35.27 2.47 - - - - - - 37-74- 1,500-10,000 m3/month 50-05 3.50 - - - - - 53.55- Exceeding 10,000 m3/month 109.18 7.64 29.50 14.75 7.65 - 47.95 2.50 219.17

1/ Defined for each connection diameter.

WAPWSSeptember 1983

SENEGALELEVEN CENTERS WATER SUPPLY PROJECTSONEES - COMPONENTS OF WATER TARIFFII. CITIES WITHOUT SEWERAGE SYSTEMS

Added Small Social Tax on Debt ServiceCustomer Type SONEES Value Renewal Works Connections Excessive Component Municipal TOTAL

Component Tax Fund Fund Fund Consumption (CNA) Tax

Private Customers with Meters of 15mm:- Up to 10 m3/month 81.63 5.71 - - - - - - 87.34- Exceeding 10 m3/month 94.57 6.62 29.50 14.75 7.65 - 47.95 2.50 203.54

Other Private, Commercial, Adminis- 94.57 6.62 29.50 14.75 7.65 - 47.95 2.50 203.54tration Consumption

Consumption exceeding normal limit.l/ 94.57 6.62 29.50 14.75 7.65 30-53 47.95 2.50 234.07

Public Standpipes 94.57 6.62 - - - - - - 101.19

Vegetable Growers:- 0-1,500 m3/month 35.27 2.47 - - - - - - 37.74- 1,500-10,000 m3/month 50.05 3.50 - - - - - - 53.55- Exceeding 10,000 m3/month 94.57 6.62 29.50 14.75 7.65 - 47.95 2.50 203.54

m mx

1/ Defined for each connection diameter.

WAPWSSeptember 1983

- 74 -

ANNEX 5-6Page 3

Connections

Expenditures for new connections are charged to customers. The pricefor the smallest connection, called social connection (15 mm diameter, notexceeding a length of 5 meters) was CFAF 27,000 (US$62) in 1982. There is nocharge for the water meter which is part of the state-owned fixed assets. Inaddition to a one time charge for the connection, a new customer has to make adeposit corresponding to about 2 months of consumption. For a 15 mmconnection the deposit would be CFAF 3,822 (US$8.8).

WAPWSSeptember 1983

- 75ANNEX 6Page 1

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

MARGINAL COST CALCULATIONS AND ERR ANALYSIS(million CFAF)

YEAR TOTAL 1983 1984 1995 1906 1997 1t8 1999 1990 1991 1992 1993 1994 2022 2023

INCRERENTAL: (C000 CU N)PRODUCTION 547 1204 2012 2943 4170 5583 6343 6851 7379 7928 S494 8494SALES 501 1098 1826 2671 3770 5052 5645 6103 6581 7080 7597 7.5Q7

CAPITAL INVESTMENTS (10 6 CFA.F) (PROJECT ONLY)------------ _-------------------------------------

CIVIL WORKS.PlPESFOREIGN COST 2403 100 207 848 723 446 78LOCAL COST 1258 53 108 444 379 234 41

SUB--TOTAL 3661 153 315 1292 1102 680 119

BOREHOLES.CONNECTIONSFOREIGN COST 539 49 64 97 113 70 64 82LOCAL COST 390 36 46 71 81 51 46 59

SUB--TOTAL 929 S5 110 168 194 121 110 141

MACHINERY & EOUIPMENTFOREIGN COST 269 23 93 123 30 23LOCAL COST 11 ' 39 51 12 9

SUB-TOTAL 380 32 132 174 42 32

SUBGERSIBLE PUMPSFOREIGN COST 11M 24 84 11 YOe 11LOCAL COST 41 8 29 4 37 4

SUB-TOTAL 160 .32 113 15 145 15

SUHN/ARY CAPITAL INVESTMENTFOREIGN CoST 3330 49 211 482 1095 82.3 510 160 108 11 23LOCAL COST ISOO 36 116 246 580 442 280 100 37 4 9

TOTAL 5130 85 327 728 1675 1265 790 260 145 15 32

7N$TALLED VALUE 85 412 1140 2815 4080 4870 51.30 5130 5130 5130 5130 5130 5130 5130

INCREI£ENTAL RECURRENT COST (UNTIL CAPACITY EXHAUSTED)

ENEROLFOREIGN COST 15 25 36 49 65 86 92 98 104 Ill 1IS 118LOCAL COST 2 3 4 5 7 9 10 11 12 12 13 13

SUB-TOTAL 17 28 40 55 72 96 102 109 116 124 131 131

CH£E11CALSFOREIGN COST 2 4 b 9 13 17 19 21 22 24 25 25LOCAL COST 0 1 2 2 3 4 5 5 t 6 6 b

SUB-TOTAL 2 5 8 11 16 22 24 26 28 30 32 32

PERSONNELLOCAL COS7 15 33 55 82 116 158 174 IS 203 219 235 235

OVERHEADFOREIGN COST 4 9 15 22 31 42 48 51 55 59 eb4 64LOCAL COST7 4 9 15 22 31 42 48 51 55 59 64 64

SUB-TOTAL 8 IS 30 44 63 84 95 103 111 119 127 127

MAINTENANCE'FOREIGN COST (LI e5 7 18 27 32 33 33 33 33 33 33 33 33LOCAL COST (V.) 35 4 10 14 17 18 IS 18 IS IS IS IS IS

SUB-TOTAL 11 28 41 49 51 51 51 51 51 51 51 51

SUNM. RECURRENT COSTSFOREIGN CoST 29 56 84 112 143 179 192 203 215 228 241 241LOCAL COST 25 56 90 129 175 231 254 274 294 315 337 337

TOTAL 54 III 174 241 318 411 446 477 509 543 577 577

SUMBI. COSTSFOREIGN COST 49 211 510 1151 907 622 303 287 203 203 215 250 241 241LOCAL COST 36 116 271 b36 532 409 275 269 258 274 294 324 337 337

TOTAL 85 327 782 1786 1439 1031 578 556 461 477 509 575 577 577

WAPWS

September 1983

SENEGALELEVEN CENTERS WATER SUPPLY PROJECT

MARGINAL COST CALCULATIONS AND ERR ANALYSIS(million CFAF)

YEAR 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 2022 2023

STANDARD CONVERSION FACTOR : 0.95

PROJECT COST IN BORDERPRICES:

FOREIGN COST 49 211 510 1151 907 622 303 287 203 203 215 250 241 241LOCAL COST 34 110 258 604 505 388 262 255 245 260 279 308 320 320

TOTAL 83 321 76S 1755 1412 1011 564 542 448 463 494 558 561 561

DISCOUNT RATE 0.10

PV OF TOTAL COST 6852

PV OF INCREMENTALHATER SOLD 40050

A I C (CFA.F/CU H) 171.08

BENEFIT STREAMAT TARIFFS(CFA.FICU Jof

A) 163.40 a, o 0 82 179 298 436 616 826 922 997 1075 1157 1241 1241

NET STREAH fBEN. - COST):A) -85 -327 -700 -1607 -1140 -595 38 270 462 520 566 582 664 664

RATE OF RETURN:

A) 8.65 Z

a/ Average end 1983 tariff level for the 11 centers.

WAPWS

September 1983

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