IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF TF TF-99027) ON A MULTI DONOR TRUST FUND (MDTF) GRANT

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR2485 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF TF TF-99027) ON A MULTI DONOR TRUST FUND (MDTF) GRANT IN THE AMOUNT OF USD MILLION TO THE GOVERNMENT OF SOUTHERN SUDAN AND GOVERNMENT OF SOUTH SUDAN FINANCING OF USD 0.6 MILLION FOR THE SOUTHERN SUDAN PRIVATE SECTOR DEVELOPMENT PROJECT Private & Financial Sector Development Africa Region March 27, 2013

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2012) Currency Unit = Sudanese Pounds US$ 1.00 = 2.61 Sudanese Pounds FISCAL YEAR July 1 June 30 ABBREVIATIONS AND ACRONYMS BDS Business Development Services BPC BOSS Business Plan Competition Bank of South Sudan CES Central Equatoria State CPA Comprehensive Peace Agreement FAO Food and Agriculture Organization FIAS Foreign Investment Advisory Service FM Financial Management FMR Financial Management Reports GDP Gross Domestic Product GOS Government of Sudan GRSS Government of the Republic of South Sudan IDP Internally Displaced Persons IFC International Finance Corporation IFMIS International Financial Management Information System ISN Interim Strategy Note JICA Japan International Cooperation Agency JAM Joint Assessment Mission MCII Ministry of Commerce, Industry and Investment MEMI Ministry of Industry and Mining MDTF Multi Donor Trust Fund M&E Monitoring and Evaluation MFI Micro Finance Institution MOJ Ministry of Justice MOU Memorandum of Understanding NGO Non Governmental Organization PAR Portfolio at Risk PIU Project Implementation Unit PSD Private Sector Development SME Small and Medium Enterprises SSBF South Sudan Business Forum SSCCIA South Sudan Chambers of Commerce, Industry and Agriculture SSMDF South Sudan Microfinance Development Facility

3 TA TOR UN UNIDO USAID WB Technical Assistance Terms of Reference United Nations United Nations Industrial Development Organization United States Agency for International Development World Bank Vice President: Makhtar Diop Country Director: Deborah Bird Sector Director: Gaiv Tata Sector Manager: Irina Astrakhan Project Team Leader: Andres F. Garcia ICR Team Leader: Megha Mukim

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5 SOUTH SUDAN Southern Sudan Private Sector Project Data Sheet A. Basic Information B. Key Dates CONTENTS C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Annex 1: Project Costs and Financing Annex 2: Outputs by Component Annex 3: Economic and Financial Analysis Annex 4: Preparation and Implementation Annex 5: Beneficiary Survey Results Annex 6: Summary of Grantee's ICR Annex 7: List of Supporting Documents MAP... 54

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7 A. Basic Information Country: South Sudan Project Name: Project ID: P L/C/TF Number(s): MDTF South Sudan Private Sector Development TF-90186,TF ,TF ICR Date: 03/27/2013 ICR Type: Core ICR Lending Instrument: SIL Grantee: Original Total Commitment: Revised Amount: USD 10.02M Environmental Category: B GOVERNMENT OF SOUTH SUDAN (GOSS) USD 7.88M Disbursed Amount: USD 10.02M Implementing Agencies: Ministry of Commerce, Industry and Investment Ministry of Finance (Central Equatoria State) Bank of Southern Sudan Ministry of Industry and Mining Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 09/01/2006 Effectiveness: 06/29/ /24/2007 Appraisal: 04/16/2007 Restructuring(s): Approval: 05/10/2007 Mid-term Review: 06/16/ /14/2011 Closing: 10/31/ /30/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Grantee Performance: Moderately Satisfactory Moderate Moderately Satisfactory Moderately Satisfactory

8 C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Unsatisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately Satisfactory Implementing Moderately Agency/Agencies: Unsatisfactory Overall Bank Overall Borrower Moderately Satisfactory Performance: Performance: Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Moderately Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector Micro- and SME finance Theme Code (as % of total Bank financing) Infrastructure services for private sector development Legal institutions for a market economy Micro, Small and Medium Enterprise support Other financial and private sector development E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Bella Deborah Mary Bird Ishac Diwan Sector Manager: Irina Astrakhan Antony Thompson Project Team Leader: Andres F. Garcia Magdi M. Amin ICR Team Leader: Megha Mukim ICR Primary Author: Megha Mukim

9 F. Results Framework Analysis Project Development Objectives (from Legal Agreement) The development objectives of the project are to: (a) develop the enabling environment for private sector growth; and (b) sustainably increase formal employment. (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Number of businesses registered in Southern Sudan Value N/A quantitative or Qualitative) 0 Note. Indicator added 06/16/2011 8,900 10,784 Date achieved 06/30/ /30/ /16/ /29/2012 Comments (incl. % Target met (exceeded) achievement) Indicator 2 : Streamline number of steps to register a business Value N/A quantitative or Qualitative) 10 Note. Indicator added 06/16/ Date achieved 06/16/ /16/ /30/ /30/2011 Comments (incl. % Target met (exceeded) achievement) Indicator 3 : Formal employment by the enterprises supported by the BPC loans Value N/A quantitative or Qualitative) 0 Note. Indicator added 06/16/ Date achieved 06/30/ /16/ /16/ /30/2012 Comments (incl. % Target met (exceeded) achievement) Indicator 4 : Growth in the number of clients served by MFIs Value quantitative or Qualitative) 7,096 N/A Note. Indicator added 06/16/ ,000 30,442 Date achieved 06/30/ /16/ /16/ /31/2012 Comments (incl. % achievement) Target not met: The October 2011 ISR reported a total of 49,701 [12,566(M) and 43,135(F)]. The decline at closing was because one of the largest MFIs had to write off 60% of its portfolio. Indicator 5 : People with access to finance through targeted MFIs and BPC

10 Value quantitative or Qualitative) Non-existent N/A Note. Indicator added 06/16/ (BPC) 3,000(MFIs) 45 (BPC) 8,454 (MFIs) Date achieved 06/30/ /16/ /16/ /30/2012 Comments (incl. % Target met (Exceeded) achievement) Indicator 6 : People with access to finance through targeted MFIs and BPC of which the beneficiaries are female Value N/A 25 (BPC) 25 (BPC) quantitative or Non-existent Note. Indicator 2,000 (MFIs) 5,291 (MFIs) Qualitative) added 06/16/2011 Date achieved 08/30/ /16/ /16/ /30/2012 Comments (incl. % Target Met (Exceeded) achievement) (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative or Qualitative) Original Target Values (from Baseline Value approval documents) Microfinance policy is presented to Cabinet Not existent Formally Revised Target Values Policy presented to Cabinet and framework drafted Actual Value Achieved at Completion or Target Years Draft has been developed Date achieved 06/30/ /16/ /30/2012 Comments (incl. % Target not met achievement) Indicator 2 : Public-Private Dialogue Forum is established Value PPD has been (quantitative Non existent PPD established established or Qualitative) Date achieved 06/30/ /16/ /30/2012 Comments (incl. % Target met achievement) Indicator 3 : M&E systems developed are functioning and regularly updated by the MCI Value (quantitative or Qualitative) Non existent M&E systems functioning well M&E systems are not functioning well Date achieved 06/30/ /16/ /30/2012 Comments Target not met (incl. %

11 achievement) Indicator 4 : Number of businesses supported through BPC Value (quantitative or Qualitative) Non existent Date achieved 06/30/ /16/ /30/2012 Comments (incl. % Target met achievement) Indicator 5 : Laws to improve the enabling environment for business are presented to Cabinet Value 5 laws (quantitative or Qualitative) Non existent presented to Cabinet 5 laws drafted Date achieved 06/30/ /30/ /30/2012 Comments (incl. % Target not met achievement) Indicator 6 : Southern Sudan Microfinance Development Facility is established Value (quantitative or Qualitative) Non existent SSMDF has been established SSMDF has been established Date achieved 06/30/ /16/ /30/2012 Comments (incl. % Target met achievement) Indicator 7 : Number of new microfinance institutions (MFIs) operational in Southern Sudan Value (quantitative or Qualitative) Date achieved 06/30/ /30/ /16/ /31/2012 Comments (incl. % Target met (Exceeded) achievement) Indicator 8 : Number of loans by gender Value N/A Women: 3,548 (women) Women: 20,989 (quantitative Note. Indicator 25,000 3,550 (men) Men: 9,453 or Qualitative) added 06/16/2011 Men:16,000 Date achieved 06/16/ /16/ /16/ /30/2012 Comments (incl. % Target not met achievement) Indicator 9 : Value of loans by gender Value (quantitative or Qualitative) Women:1.75 million Men: 1.90 million N/A Note. Indicator added 06/16/2011 Women: 5million Men: 9 million Women: million Men: 4.89 million Date achieved 06/16/ /16/ /16/ /30/2012 Comments Target largely met

12 (incl. % achievement) Indicator 10 : Portfolio at Risk - Microfinance Value (quantitative or Qualitative) 3% N/A Note. Indicator added 06/16/ % 14.71% Date achieved 06/16/ /16/ /16/ /30/2012 Comments (incl. % Target not met achievement) Indicator 11 : Industrial Competitiveness Strategy is completed Value Strategy (quantitative Non existent completed or Qualitative) Strategy completed Date achieved 06/30/ /16/ /29/2012 Comments (incl. % Target met achievement) Indicator 12 : Mining Act and supporting regulations are developed Value (quantitative or Qualitative) Non existent Mining Act and Regulations are developed Mining Act and Regulations developed Date achieved 06/16/ /16/ /30/2012 Comments (incl. % Target met achievement) Indicator 13 : Staff of the MCI and MEM are trained Value (quantitative or Qualitative) Date achieved 06/16/ /30/ /30/2012 Comments (incl. % Target not met achievement) Design of the wholesale market is Indicator 14 : completed Design of the Value wholesale (quantitative Non existent Design completed market is or Qualitative) completed Date achieved 06/16/ /30/ /30/2012 Comments (incl. % Target met achievement)

13 (a) Original PDO Indicator(s) Indicator Indicator 1 : Value Comments Indicator 2 : Value Comments Indicator 3 : Value Comments Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Number of businesses registered in Southern Sudan 25% increase per year Indicator N/A over five years modified Unavailability of baseline and annual data made it difficult to measure changes over time. The modified indicator measures the absolute number of businesses registered. Number of licenses issued in Southern Sudan 10% increase per year Indicator N/A over five years replaced Indicator reflects very similar outcomes to Indicator 1. The new indicator measures the steps taken to register a business. Employment by formal, registered private sector in Southern Sudan 20% increase per year Indicator N/A over five years modified Unavailability of baseline and annual data makes it difficult to measure changes over time. The modified indicator measures employment created by enterprises supported by the Business Plan Competition. It is also supplemented by two additional indicators to measure the impact of microfinance loans on entrepreneurial activity. G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 12/20/2007 Satisfactory Satisfactory /17/2008 Satisfactory Satisfactory /29/2008 Satisfactory Moderately Satisfactory /22/2009 Satisfactory Moderately Satisfactory /24/2009 Satisfactory Satisfactory /30/2010 Satisfactory Satisfactory /27/2011 Moderately Satisfactory Satisfactory /26/2011 Moderately Satisfactory Satisfactory /28/2012 Moderately Satisfactory Satisfactory 10.02

14 H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in USD millions 06/16/2011 MS S /14/2011 MS S 9.54 Reason for Restructuring & Key Changes Made Extension of closing date from June 30, 2011 to Jan 31, 2012 and revision of Results Framework Additional financing amounting to US$0.675 million from (MDTF-SS) and extension of closing date from Jan 31, 2012 to June 30, 2012 I. Disbursement Profile

15 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country and Sector Background 1. At the time of project design in , Southern Sudan was amongst the poorest regions in the world, with 90 percent of the population earning less than US$ 1 per day. The 20 year war had destroyed physical capital, institutions and had prevented the emergence of entrepreneurs. The Government of the Republic of Southern Sudan (GRSS 1 ), which was installed in 2011 as the first government of a new nation South Sudan. The Government was committed to sustained peace, through the provision of jobs and growth of the private sector. Private sector development was a constitutional objective in the Interim Constitution. This was based on experience from other postconflict settings which suggested that a competitive and growing private sector offered an opportunity to the South Sudanese to extricate themselves from poverty through employment, through capital investment, and to generate tax revenues necessary to invest in service delivery and reduce dependence on the petroleum sector or other transfers. The emphasis on private sector growth presented the GRSS with a dramatic challenge, requiring action on a number of fronts, such as the enabling environment, financing, building skills and infrastructure. 2. At the time of project appraisal, GRSS had embarked on a number of critical actions, establishing the key responsible line ministries (Commerce, Trade and Supply, Industry and Mining), reviewing all major foundational laws supporting private sector development, including commercial laws, investment law, bankruptcy laws and contract law. Rationale for Bank Assistance 3. The PSD project was based on the results of the Joint Assessment Mission (JAM) 2, carried out jointly by the World Bank and the United Nations, which explained that promoting private sector development was central to the challenge of sustainable peace and development in Southern Sudan, would require substantial policy and program efforts. The JAM recommended a regulatory framework for the private sector, microfinance programs and market centers. The preparation of the project was led by the 1 2 The GRSS was established after the Comprehensive Peace Agreement was signed in January Before independence in January 2011, the government was the Government of Southern Sudan. This ICR will use the acronym, GRSS, when referring to the Government over the entirety of the project period. This was published in a synthesis report on March 18, There is currently no Country Assistance Strategy for South Sudan. The World Bank s Interim Strategy Note (ISN) for South Sudan was approved by the Board on March1,

16 Ministry of Commerce, Trade and Supply 3, the Bank of Southern Sudan, the Ministry of Industry and Mining and Central Equatoria State (CES). 4. The magnitude of the challenge called for a robust multi-year, multi-donor, programmatic response. Accordingly, the investments proposed in the project complemented and worked in partnership with programs of donors, including USAID, which had supported legislative development as well as economic growth and microfinance programs through various consulting firms; advisory support being provided by DFID on trade and private sector development; USAID, UNDP and FIAS support to the Ministry of Legal Affairs and Constitutional Development; UNDP s rule of law program; UNIDO and JICA s vocational training support; and FAO and USAID support on agricultural marketing. 1.2 Original Project Development Objectives (PDO) and Key Indicators 5. The development objectives of the project were to: (i) develop an enabling environment for private sector growth; and (ii) to sustainably increase formal employment in Southern Sudan. 6. There was a discrepancy between the wording of the development objectives in the Final Project Proposal and the Grant Agreement. The wording of the objectives within the Grant Agreement stands. 7. The achievement of the PDO was to be measured by the following outcome indicators: PDO1: Develop an enabling environment for private sector growth 1. Number of businesses registered in Southern Sudan (Target: 25 percent increase per year over five years) 2. Number of licenses issued in Southern Sudan (Target: 10 percent increase per year over 5 years) PDO2: Sustainably increase formal employment 1. Employment by formal, registered private sector in Southern Sudan (Target: 20 percent increase per year over 5 years) 8. The above PDOs were complemented by the following Intermediate Results (IR), for which the respective intermediate indicators were adopted: 1. IR1: Develop policy and M&E capacity in targeted ministries 1.1. Private sector development strategy endorsed by Cabinet or Parliament 3 This Ministry was subsequently renamed the Ministry of Commerce, Industry and Investment (MCII). The remainder of this document will use the acronym MCII to denote this Ministry. 2

17 1.2. Land policy developed and adopted 1.3. Property registry in use 1.4. Business registry in use 1.5. Microfinance policy and regulatory framework developed and adopted 1.6. Public-private dialogue forum established 1.7. M&E system in use 2. IR2: PSD policies adopted and efficient systems and procedures in operation 2.1. Starting a business, time (days) 2.2. Starting a business, cost (percent of income per capita) 2.3. Dealing with licenses, time (days) 2.4. Dealing with licenses, cost (percent of income per capita) 2.5. Registering property, time (days) 2.6. Registering property, cost (percent of income per capita) 2.7. Time for export, time (days) 2.8. Time for import, time (days) 3. IR3: Strengthened microfinance sector 3.1. Southern Sudan Microfinance Development Facility Established 3.2. Number of new microfinance institutions (MFIs) operational in Southern Sudan (Target: 4) 3.3. Number of MSME recipients (Target: 8,000 new clients) 4. IR4: Increase business start-ups 4.1. Number of start-ups established through business plan competition each year (Target: 10) 4.2. Number of start-ups established through business plan competition that survive after one year in operation (Target: 5) 4.3. Number of businesses and trade associations that receive training 5. IR5: Facilitate establishment of functioning wholesale marketing system 5.1. Fruit and vegetable wholesale market established (Y/N) 5.2. Southern Sudanese wholesalers operating in the market (Target: At least 50) 5.3. Wholesale market output (Target: 18,800 tons per year) 5.4. Produce from at least three Southern Sudanese states traded in wholesale market 5.5. Market price information collected and disseminated (number of radio announcements and SMS sent) 5.6. Three assembly markets established 3

18 1.3 Revised PDO and Key Indicators, and Reasons/Justification 9. The PDO was not revised. However, the original outcome indicators were changed (dropped, replaced or modified) by the project restructuring in June The revised PDO outcome indicators are presented below: PDO1: Develop an enabling environment for private sector growth 1. Number of businesses registered in Southern Sudan (Target: 8,900) - Revised 4 2. Streamline number of steps to register a business (Target: 4 steps) - New PDO2: Sustainably increase formal employment 1. Formal employment by the enterprises supported by the BPC loans (Target: 40 jobs) Revised 5 2. Growth in the number of clients served by MFIs (Target: 39,000) - New 3. People with access to finance through targeted MFIs and BPC (disaggregated by gender) New 10. Of the 27 original intermediate indicators 13 were dropped and 14 indicators remained after restructuring, as follows: 1. IR1: Develop a national microfinance policy and supporting regulations 1.1. Microfinance policy is presented to Cabinet 2. IR2: Establish an efficient investment climate 2.1. Public-Private Dialogue Forum is established 2.2. M&E Systems developed are functioning and regularly updated by the MCII 2.3. Number of businesses supported through BPC 2.4. Laws to improve the enabling environment for business are presented to Cabinet 3. IR3: Develop viable microfinance institutions 3.1. Southern Sudan Microfinance Development Facility is established 3.2. Number of new microfinance institutions (MFIs) operational in Southern Sudan 3.3. Number of loans by gender 3.4. Value of loans by gender 3.5. Portfolio at Risk 4. IR4: Facilitate creation of higher value-added industries 4 5 Previous target was set at a 25 percent increase per year for 5 years. Previous target was set at 20 percent increase per year for 5 years. 4

19 4.1. Industrial Competitiveness Strategy is completed 4.2. Mining Act and supporting regulations are developed 4.3. Staff of the MCII and MEM are trained 5. IR5: Facilitate the establishment of a functioning wholesale market 5.1. Design of the wholesale market is completed 11. The main reasons underlying the change in the PDO and intermediate indicators for the project were the lack of adequate or baseline data and the unsuitability of the original indicators to measure the real impact of project activities. For instance, annual percentage increases of business registrations were difficult to measure given the lack of baseline data. In addition, because of data unavailability on licenses issued, the project decided instead to measure the ease with which businesses could be registered. Similarly, as employment figures for registered enterprises were not possible to obtain, the new indicator measured employment created by the business plan competition beneficiaries. And lastly, the post-restructuring list included new indicators on the number of MFI clients and people with access to finance (disaggregated by gender) that were important additions to measure the impact of project activities on financial access. 12. The results framework was revised in June, 2011, six months before the project was scheduled to close (the project was later extended by an additional year). Project implementation was very slow at the start and only picked up speed in with the hiring of the project coordinator and procurement of key consultancies. It was only by this time that it became clear that it would be next to impossible to measure the outcomes associated with the inputs and outputs. Thus, restructuring was actually quite timely given the slow rate of implementation in the first two-three years of project period. 13. There was also a strong rationale for setting new targets at the point of restructuring in the project. While a large part of the funds had already been disbursed, the project development objectives could not be properly tracked since the outcome indicators were difficult to measure. The set of indicators in the revised results framework allowed the project to track outcomes in line with project inputs and outputs. The first PDO, referring to the number of businesses registered, remained unchanged, except that it was the absolute number of registrations that were being measured instead of comparative changes given the lack of baseline data. The original PDO measuring the annual percentage change in the number of licenses issued did not provide any additional information. On the other hand, the modified indicator, that measured the steps taken to register a business, provided an indication of the ease with which the enabling environment for business registrations had been improved. 14. The measurement of employment created by formal, registered enterprises was not possible, given the resources that would be needed to collect information on individual firms, especially in the absence of any official survey or census of firms in South Sudan. Instead, the project refocused its attention on measuring the jobs created by enterprises supported by the Business Plan Competition. And importantly, it included indicators that provided an assessment of the private entrepreneurial opportunities created by the provision of microfinance loans. The loans supported a viable and growing 5

20 number of grassroots entrepreneurs in different parts of South Sudan, in areas both urban and rural. And while a large majority of these small businesses were in the informal sector, they led to full-time employment for the entrepreneurs and their staff who were able to establish credit histories and save and re-invest in productive ventures. Thus, the original PDO indicators were changed and the new indicators were designed, such that, under the prevailing conditions, they could fully capture the achievement of each of the PDOs. 1.4 Main Beneficiaries 15. The Final Project Proposal identified a number of potential beneficiaries relating to the different project components and sub-components. In terms of capacity building and technical assistance, the key beneficiaries were the Ministry of Commerce, Trade and Supply 6, the South Sudan Chamber of Commerce, Industry and Agriculture (SSCCIA), the Ministry of Industry and Mining (MEMI), the Bank of Southern Sudan (BOSS) and Micro-Finance Institutions (MFIs). Micro, Small and Medium-Scaled Enterprises (MSMEs) were to benefit from access to finance, training, access to markets and a better business environment. The target beneficiaries did not change when the project was restructured. 1.5 Original Components (as approved) 16. At approval, the project had five components (four technical and one administrative) as follows: 17. Component 1: Trade and Investment Policy Framework (US$ 1.85 million). The MCII was the implementing agency for this component. This component consisted of four sub-components. The first (long-term policy capacity) was aimed at establishing an efficient investment climate by building capacity within the MCII to develop, articulate and execute a coherent legal and policy framework to foster private sector development. The second sub-component (establishment of public-private dialogue forum) aimed at creating a structured, regular dialogue between the public and private sectors on the legal and policy agenda related to private sector development. The third sub-component (catalyzing entrepreneurship) focused on providing resources, financial and technical, to new South Sudanese entrepreneurs to mobilize them into sustainable economic units. The fourth sub-component (monitoring and evaluation) aimed at designing and executing a system of monitoring indicators to measure the growth and the health of the private sector. 18. Component 2: Establishing Commercially-Viable Microfinance Institutions (US$ 1.52 million). The BOSS was the implementing agency for this component. This component aimed to stimulate the creation of a viable microfinance sector to provide banking services to the unbanked and economically-active poor. The component 6 The Ministry was later renamed the Ministry of Commerce, Industry and Investment the MCII. This acronym will be used throughout this document. 6

21 consisted of three sub-components. The first (policy and enabling environment for microfinance) aimed to support the development of the legal and regulatory framework for microfinance. The second (Southern Sudan microfinance development facility manager) aimed to establish a facility that would support the establishment of new MFIs through the provision of financing, training and donor-resource management. The third sub-component (technical assistance and financing to microfinance providers and to the sector) was to support the start-up and expansion of microfinance providers and services. 19. Component 3: Building Industrial Capacity (US$ 1.50 million). The MEMI was the implementing agency for this component. This component consisted of four subcomponents. The first (building industrial strategy and policy capacity) aimed to enhance the capacity of the Government to support industrial strategy and policy formulation. The main focus was on the MEMI. The second sub-component (analysis of competitiveness and assessment of mineral potential) aimed at identifying the industrial and resource potential of the country, mainly through surveys of existing and potential capacity and through the promotion of investment opportunities. The third sub-component (development of private sector support institutions) aimed at developing a network of support institutions to serve the common interests of the formal and the informal private sector. The fourth sub-component (catalyzing business linkages through BDS) aimed at addressing bottlenecks to the development of an entrepreneurial class through the provision of training in technical and business skills. 20. Component 4: Marketing System Development (US$ 5.41 million). The Ministry of Finance within the State Government of Central Equatoria was the main implementing agency for this component. The main objective of this component was to establish a market institution to lower transaction costs, to facilitate the flow of products, information and credit between producers and consumers, and to demonstrate an effective public-private partnership for infrastructure. The three sub-components (establishment of a wholesale market, establishment of associated assembly market system and rural-urban linkages, and building backward linkages and market information systems) were designed to produce an efficient marketing system for promoting and commercializing agricultural production. The planned activities included the leasing of land, construction of the wholesale market and the provision of the associated legal and regulatory framework. 21. Component 5: Project Management (US$ 0.52 million). The MCII was the agency overall coordinator for this component. The component aimed at financing the necessary personnel and resources for the project. This included the project coordinator, financial management and procurement personnel, and administrative support for each of the four technical components. This component was also meant to finance office, vehicles and equipment for the project. 1.6 Revised Components 22. The project was initially meant to have been implemented in two phases I and II. US$ 20.2 million was allocated in total for both phases of the project. US$ million was allocated for Phase I, of which the GRSS was meant to contribute US$ 4.3 million. The project was meant to be implemented over 5 years, with 18 months aside for 7

22 Phase I. As Phase II was meant to deal primarily with the Wholesale Market Component, this phase did not take place as the market was not built in Phase I. 23. The components as envisioned in the design remained generally intact throughout project implementation. However, some planned activities were dropped mainly within the fourth component, i.e. the building of the wholesale market and the associated market assembly system and market information systems. 1.7 Other Significant Changes 24. Other significant changes involved restructuring of the project, two extensions of the closing date for a cumulative period of 12 months, reprioritizing activities, and changes to the sources and the volume of funding. These changes are described below in chronological order. 25. In July 2009 the Gender Action Plan (GAP) provided a grant of US$ 1 million, to be shared equally between the Business Plan Competition (BPC) and the Access to finance sub-components. These additional funds were to benefit 25 women entrepreneurs selected under the BPC and assist in strengthening institutional and financial capacity of MFIs to enhance their ability to provide microfinance services to female entrepreneurs. 26. The Grant Agreement was amended in September 2009 to provide additional MDTF funding of US$ 1.67 million to cover the shortfall of GRSS contributions, thus bringing the total MDTF funding under Phase I to US$ million. 27. On June 16, 2011 the MDTF was restructured to extend the closing date from June 30, 2011 until January 31, 2012, when it was clear that more time would be required to complete outstanding project activities. The Ministry of Industry and Commerce prepared an action plan including an implementation plan to meet the revised project closing date. 28. On December 14, 2011, the MDTF was restructured, for the second time. Additional financing amounting to US$ million was drawn from the Multi-Donor Trust Fund for Southern Sudan (MDTF-SS) and the closing date of the project was further extended from January 31, 2012 to June 30, The additional financing was required to finance the completion of original project activities which were due to an unanticipated cost overrun and financing gap in the MDTF-SS funded PSD project. The activities included: (i) completing the establishment of an M&E system for private sector development in South Sudan, and training of the Ministry of Commerce, Industry, and Investment (MCII) personnel in using the system to generate baseline data and indicators; (ii) following up the performance of BPC winners; (iii) completing the contract for the management of the South Sudan Microfinance Development Facility (SSMDF) and monitoring the performance of microfinance institutions; (iv) supporting the publicprivate dialogue; and (v) supporting project management. 29. Component 4 relating to the construction of the wholesale market was not completed since the funds allocated to this component were grossly insufficient. However, the preliminary designs for the wholesale market were finalized. Funds from 8

23 Phase II of the PSDP in the amount of US$ 0.5 million were re-allocated to support the establishment of a public private partnership law to help identify a private sector investor under a PPP framework to build and operate the wholesale market Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design, and Quality at Entry 30. The project was developed under OP8.0 (rapid response to a crisis or emergency) and served the strategic interests, both immediate and intermediate, of the country. It built on the comprehensive evaluation of the Joint Assessment Mission and the Bank s experience in post-conflict countries. In addition, the specific approach for the four components was arrived at after several workshops and reviews with a range of stakeholders for each of the project components. The team reviewed and identified lessons learnt from previous engagement with the GRSS (see Annex 9 for supporting documentation). However, the Final Project Proposal did not refer to lessons learnt from the then on-going IDA-IFC pilot program for the development of micro, small and medium enterprises in Africa, which had had a mixed experience with interventions centered on improvements in the business environment and access to finance. In addition, the project structure was somewhat complex with four components, each with a different implementing agency, given that the country was a fragile state. 31. A Quality at Entry (QAE) review on this project was prepared in October The project was rated 2 (satisfactory) with regards to the clarity and realism of the PDO, and the extent to which past experience and the Bank s own knowledge base was reflected in the project s approach. Although the QAE rated the clarity and realism of the PDO as satisfactory, the likelihood of achieving the development objectives was rated as 3 (moderately satisfactory). Indeed, the Final Project Proposal pointed out that conditions in the country - a post-conflict country in combination with the significant uncertainties in the macroeconomic framework, evolving nature of sectoral policies, security environment and nascent governance arrangements posed a risk to the achievement of the PDO and outcomes. However, the QAE rated the risk to development outcomes as moderate, since there was strong commitment of GRSS, and of donors, to undertake the four project components. In fact, the project was an excellent example of a high-risk high-return operation, with the risk-reward tradeoffs highly appropriate to the country/sector context. The QAE did raise concerns with regards to the implementation arrangements in that it considered the time frame to be unrealistic given the country conditions. However, since the primary focus of the project was on capacity building, this risk was not considered to have serious consequences. 32. Although the Final Project Proposal recognized the difficult operating environment, it under estimated the extent of the risks to implementation. In particular, 7 Under Phase II of the project, this is yet to take effect. 9

24 not enough attention was paid to properly evaluating the capacity of the implementing agencies at project design, and the possible challenges to attracting a competent pool of consulting firms and talent was also grossly underestimated. In addition, the project did not build in a framework for monitoring and evaluation for each of the components, and very few resources were set aside for systematic monitoring of outcomes at every stage of project implementation. 33. Given that South Sudan was a new country being built from scratch, it is not clear to what extent the risks to implementation could have been estimated with confidence. Government capacity was very weak and there was dearth of basic infrastructure. At the same time, because of the devastation caused by decades of conflict, there was an urgent need for Bank intervention, and expectations on the donor and the client side were high. 2.2 Implementation 34. The project was implemented over a period of five years, from effectiveness on May 24, 2007 until closing on June 30, 2012 (following a one-year extension). The project was supervised by three different Task Team Leaders (TTLs) over the life of the project. The TTLs at project design and closing were based in Washington, DC, while the TTL during most of the implementation period was based in Khartoum, Sudan. The four components of the project were managed by four different project implementation units (PIUs), all of which reported to the Project Coordination Unit (PCU). The PCU was based at the MCII, which was also responsible for Component 1. The Bank of Southern Sudan was responsible for Component 2, the Ministry of Industry for Component 3, and the Ministry of Finance in the State Government of Central Equatoria for Component 4. Although a high-level steering committee had been proposed in the original PAD and was constituted, it did not meet or function properly to ensure effective oversight. 35. The implementation structure described in the Final Project Proposal was straightforward, with each of the PIUs coordinating with the PCU. The PCU was to be staffed by the project coordinator, a financial officer and a procurement officer, and the PIUs were to include a project manager and administrator. However, the implementation of the project immediately faced problems, in large part due to the difficulty in recruiting staff for the dedicated PCU and in the recruitment of key policy advisors. In particular, it was very difficult to attract talent because of the post-conflict nature of the environment and the problem was only marginally ameliorated with offers of higher salaries. Even when personnel were identified and hired, there was high turnover and retaining talent was a significant bottleneck. In addition, there were significant delays in procurement owing to weak capacity and uncertain procedures in reviewing and authorizing government contracts at the Ministry of Legal Affairs and Constitutional Development (MOLACD). In fact, owing to the slow implementation progress the mid-term review was postponed from November 2008 to October The project coordinator was hired in August 2009 and policy advisors to the MCII and to the BOSS started work in July 2009, after two years of project implementation. Project coordination during the first two years was carried out by the PSD Directorate of the MCII. Since a suitable procurement specialist could not be found, procurement transactions were handled by a private sector consulting firm. The PSD Directorate took 10

25 over the tasks of the financial management (FM) until a FM specialist could be hired (the previous hire was in July 2008 who left after two months in the position). Project disbursements were managed by a private sector accounting agent until their contract expired at the end of Thereafter, all withdrawal applications were routed through a Project Financial Management Unit in the MoF. After much prompting from MDTF donors, by May 2009 the Government waived the MOLACD clearance requirements 8 for all contracts and procurement processes accelerated going forward. 37. Despite these challenges total MDTF disbursements under the project amounted to US$ 8.06 million as of December 15, 2010, which accounted for 95.3 percent of the original grant of US$ 8.46 million 9. The GRSS contributions remained at US$ 0.6 million and had not increased since June 2009 when the Government requested the MDTF to contribute the shortfall in counterpart funding owing to the fiscal crisis resulting from the global financial crisis 10. Since the funds were almost fully disbursed by the end of 2010, and in view of the unanticipated cost overruns (see section on Efficiency and Annex 1 for details) the project was restructured (for the second time) in December 2011 and additional financing amounting to US$ million was made available and the closing date was extended by (yet another) six months. 38. Because project implementation involved several entities, the progress of each of the components is described below. Component 1: Trade and Investment Policy Framework 39. The first component was implemented by the MCII, primarily by the Directorate of Private Sector Development. Under the first sub-component, which was aimed at developing long-term policy capacity, legal bills on insurance, competition and counterfeit goods were developed and submitted to the Ministry of Legal Affairs for legislative procedures. In addition, a trade and investment policy document was drafted and submitted to the Council of Ministers. Implementation of this sub-component was slow to start since the hiring of consultants was fraught with difficulties there were several delays in procurement owing to lack adequate responses to job advertisements and protracted salary and other negotiations. 40. The MCII decided to use the services of the IFC/FIAS to manage the subcomponent dealing with the creation of a structured and regular public-private dialogue. The South Sudan Business Forum (SSBF) was established in January 2009, after a few delays in recruitment of staff, and was officially launched by the President of South Sudan a few months later. Owing to uncertainty in funding, there was high staff turnover by the end of the project. A MoU between the Government and the private sector to The MOLACD clearance requirements included reviewing all government contracts above US$ 20,000, contracts to be signed by consultants at MOLACD offices (requiring the former to travel to Juba), and fees of US$ 750 for reviewing contracts. See ISR 7, dated March The global financial crisis led to a drop in oil prices, and this affected the Government s oil revenues and subsequently its contribution to the project. 11

26 establish the legal structure and secretariat has been signed and the details are to be finalized in March, The implementation of the sub-component dealing with catalyzing entrepreneurship was brisk. Applications to the Business Plan Competition (BPC) were received in the first half of 2008, and the proposals were evaluated, short-listed applicants trained, and by October 2009, 45 winners were selected and awards were made starting early The Kenya Commercial Bank (KCB) Sudan Ltd 11 was the financial intermediary for the grants, which were provided as loans with a 4 percent rate of interest. On the successful repayment of the principal and the interest, the BPC winners had the option of opting for another loan at the same rate of interest (which was very competitive compared to market rates) or the funds were to be made available as a grant. There were delays regarding the disbursement of funds, and this was particularly problematic for those BPC winners who were in the agri-business sector and dealt with seasonal produce. 42. The fourth sub-component was aimed at developing an M&E system for the PSD Directorate to monitor the performance of the private sector. After several delays, a private firm was awarded the contract in January Implementation of this subcomponent was slow. Quality of staff at the firm was variable, and turnover was high, which slowed down the rate of ownership and take-up of the M&E framework within the MCII. After pressure from the PSD Directorate and from the supervision missions, implementation picked up towards the end of the project. Component 2: Establishing Commercially-Viable Microfinance Institutions 43. This component was managed by the Bank of Southern Sudan (BOSS) and implementation was generally brisk once procurement issues were dealt with. There were a number of delays in the recruitment of the senior policy advisor for microfinance, and while the draft of the microfinance bill was finalized in May 2011, the bill continues to languish with the BOSS for review and onward submission to the Council of Ministers. 44. BOSS held a pilot round of microfinance competitions in February 2008, and provided training and loan capital to a number of MFIs. At the same time, the Frankfurt School of Management and Finance was selected to manage the South Sudan Microfinance Development Facility and began operations in April The new board of the SSMDF met for the first time in June of the same year, and assumed oversight of the microfinance competition. Apart from the provision of capital and training to MFIs, the SSMDF has also been active in stimulating demand for its services in several states and continues to provide a number of resources to MFIs. Component 3: Building Industrial Capacity 45. The third component was implemented by the Ministry of Industry. A private consulting firm was contracted to carry out an analysis of industrial competitiveness. The final report, based on detailed sector-based surveys, was submitted in April 2011 on three 11 Henceforth referred to as KCB. 12

27 competitiveness clusters 12, and was considered highly relevant and useful. A different private sector consulting firm was contracted to provide technical assistance for capacity building in mining and submitted its final draft of the legal and regulatory framework in January This framework led to the draft of the mining bill, which was submitted to Parliament at the end of the project and which became law in November The sub-components associated with policy support to the Directorate of Industry (within the MCII) and to the private sector, and the development of the market for business services was managed by UNIDO (the contract was signed in May 2008). Implementation was poor there were a number of delays and shortcomings in the procurement of goods and personnel, capacity building to the private sector was sorely lacking and the market for business services was not developed. There were also serious concerns regarding record-keeping of financial disbursements 13. Component 4: Marketing System Development 47. This component was implemented by the Ministry of Finance in the Government of the Central Equatoria State (CES). The land lease was signed between the Bari community and the CES Government in October However, early on in the project, it had already become clear that additional funding would be required for this component, owing to costs of landscaping, construction and service costs being vastly under-appraised during project design 15. A contract was signed with Newtech Industrial and Engineering in March 2009, and the firm submitted the final designs for the wholesale market, including design of legal tender for public-private bidding, by October 2010, after which no new activities were undertaken under this component. Component 5: Project Management 48. The project encountered a number of delays in procurement at the start. This was partly owing to weak capacity of the MOLACD with regard to the clearance of finalized contracts, and partly owing to problems in finding skilled consultants and firms given the difficult post-conflict operating environment and resources allocated. Since necessary personnel, such as the project coordinator, financial management specialists were not hired early on 16, this led to slow implementation in the first two years of the project. With the hiring of the project coordinator, implementation picked up speed 2009 onwards. In addition, the project office block was constructed and office furniture, equipment and computers were delivered in a timely fashion. Project disbursements were also managed Livestock, cereals and high-value fruits and vegetables. For instance, payments were made to the University of Juba for English-language training services without any formal contracts. The PIU did not submit a report documenting the consultations of the CES with the Bari Community for the land lease arrangement. See Aide Memoire 5 (August 2008) Offers made were turned down due to higher salaries being paid elsewhere in the country. In fact wages in South Sudan were three time higher than in neighboring Uganda. 13

28 well, initially by a private accounting firm and later by the Project Financial Management Unit at the MoF Monitoring and Evaluation (M&E) Design, Implementation and Utilization 49. M&E Design and Implementation: The outcome indicators chosen by the team in the original Final Project Proposal were in line with the PDO. However, the project design did not factor in the extent to which data requirements and collection would be a challenge in an environment as difficult as the one in South Sudan. Each of the outcome indicators required data to be collected on an annual basis to be able to track year-on-year progress. With the exception of the first component, no M&E system was built into the design of the project so as to collect and track the required data on a regular basis. While an attempt was made to include M&E activities within individual consultant TORs, no guidance or resources were provided in a systematic way for continuous monitoring. In addition, the 27 intermediate indicators chosen in the original Final Project Proposal were far too many, and again some of these required continuous data collection. The second project restructuring simplified the outcome and the number of intermediate indicators, which provided for much better monitoring and evaluation of the project, while at the same time continuing to reflect the original PDOs. 50. M&E Utilization: The use of the M&E framework was adequate during the project period for the first component but not sustainable beyond. The M&E system designed by the contracting firm for the first component did a passable job, but not enough ownership was built within the MCII to continue these activities beyond the lifetime of the project. During the lifetime of the project baseline data on the new outcome indicators was collected and progress monitored by the different PIUs to the best of their capacity. However, in the absence of a focused approach and lack of dedicated personnel to monitor and track, data collection was sporadic and limited to when resources could be made available. For example, while it was easier to track progress of policy drafts and the movement of bills, data on the BPC winners was not always available 18. The SSMDF collected information on the portfolios of the MFIs it provided resources to, but data on how final beneficiaries used the microfinance loans was not collected by the individual MFIs themselves. 2.4 Safeguard and Fiduciary Compliance 51. There were no safeguard issues under the project since the fourth component relating to the construction of the wholesale market did not take place. 52. With regards to procurement, the project dealt mainly with the selection of consultants and the purchase of some goods, furniture and vehicles. The project was in In fact, at the request of the Project Financial Management Unit, the ceiling in the Designated Account was increased from US$ 0.6 million to US$ 1.5 million so as to cover the increased pace of payments. The Kenya Commercial Bank was meant to systematically track the progress of the BPC winners over time, but it failed to do so owing to (a) the high costs of transport which made it difficult to monitor those who were based away from the big cities, and (b) the lack of mobile communications for several BPC winners. 14

29 compliance with Bank guidelines, although the lack of a dedicated procurement specialist within the project did lead to a number of delays, and the private agent contracted to handle procurement did not perform well. For instance, the quality of documenting and technical evaluation reports was low and additional information had to be requested. There were some issues with contract management that reflected the low capacity of the project unit, for instance, cash was paid out in advance for some purchases. Delays in the recruitment of consultants were explained by the difficulties in attracting talented firms and persons to a post-conflict environment. This was especially problematic since the resources budgeted were far from adequate for instance, the difference in salary for technical assistants in South Sudan versus those working in Uganda were three-to-one. Although the project took into account the post-conflict environment, it vastly underestimated the true costs of procurement. 53. Throughout the life of the project good financial management systems were maintained. The overall risk rating for the project was moderate owing to the mix of inherent and control risk, wherein the former was substantial but the latter was low since the Project Financial Management Unit was in place and staffed with skilled personnel. Quarterly Interim Financial Reports and annual audits were done in a timely manner. In addition, on-site supervision missions were conducted once a year and desk review of activities was undertaken on a continuous basis 19. FM ratings were satisfactory and this was true of all ISRs. A pooled account was maintained with counterpart funds and this was also well managed monthly financial statements were prepared, withdrawal applications were done in a timely manner and at no point were project activities stifled because of a lack of funds. Disbursements were slow at the start but then picked up and were at 100 percent at project closing. 2.5 Post-completion Operation/Next Phase 54. Most of the activities implemented under the MDTF-SS Private Sector Development Project have continued under the South Sudan Transition Trust Fund (SSTTF) Private Sector Development Project, which became effective a few months after the closure of the MDTF project. The project team extended much time and effort in mid to late-2010 to procure funding from the oversight committee for continuation of activities under the next phase. The SSTTF project continues to support the private and financial sectors through the Business Plan Competition, the South Sudan Microfinance Development Facility, and the South Sudan Business Forum. The project has retained most of its core staff, proving the required continuity to facilitate project implementation. Lastly, the MCII and the project continue to monitor the progress of the policies and bills developed under the MDTF project, communicating through the Ministry's management when follow up is required with other government entities. 19 This was also facilitated by having the FM specialist in the field, which provided easy access and support to the project on troubleshooting issues. 15

30 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design, and Implementation Rating: Substantial Relevance of Objectives: High 55. Private sector development remains a constitutional objective for the Government of South Sudan, particularly since it gained independence in The PDO of establishing an enabling environment for private sector development and increasing formal sector employment was, and remains, a significant development priority for South Sudan. A key lesson of post-conflict experience in Africa is that peace and security must be cemented by economic opportunity. The Joint Assessment Mission also stated that promoting private sector development was central to the challenge of sustainable peace and development. Indeed, the wealth-sharing provisions of the 2005 Comprehensive Peace Agreement strongly echo the message that peace would be undermined if there were insufficient opportunities for employment. 56. Not only were the objectives highly relevant at the time of project design, they continue to remain relevant now and in the near future. The World Bank s Interim Strategy Note (ISN) FY for South Sudan is informed by the Bank s strategy in Africa, which calls for the building of economic resilience and competitiveness in postconflict countries and by the New Deal for Engagement in Fragile States 21. It includes the creation of an enabling environment for the private sector to generate jobs and economic opportunities as one of the critical development tasks that will be needed in the future. In addition, the South Sudan Development Plan , which clearly articulates the Government s priorities, states as one of its main objectives Diversified private sector-led economic growth and sustainable development which improves livelihoods and reduces poverty. Thus, the relevance of the project objectives, then and now, remains very high. Relevance of Design: Modest 57. As mentioned in Section 2, the design of the project was underpinned by comprehensive evaluations and reviews with a range of stakeholders. The four components of the project reflected the PDO and the core interventions had a clear causal relationship with the intended outcomes. Specifically, component 3 (building industrial capacity) and component 4 (marketing system development) were focused on the first part of the PDO, i.e. developing an enabling environment for private sector development. The different sub-components of components 1 and 2 (trade and investment policy See here: link. The New Deal Initiative was announced in November 2011 where the G7+ group of 19 fragile and conflict-affected countries (including South Sudan), development partners and international organizations endorsed an agreement on a new global direction for engagement with fragile states. 16

31 framework and establishing commercially-viable microfinance institutions) focused on the second part of the PDO, to increase formal employment and also on the enabling environment. 58. The interventions were clearly linked to outputs and outcomes. For instance, the grants provided by the BPC targeted mostly mid-size start-ups, while the loans provided by the microfinance institutions targeted small businesses, both of which were aimed at generating employment and providing opportunities to South Sudanese entrepreneurs. The relevance of the design was also apparent given that the activities of other partners, such as the IFC, were closely intertwined with the MDTF-funded sub-components. In addition, the design of the project wherein the PCU oversaw the activities of the different PIUs, helped in coordination and lower transaction costs for the client. 59. However, while the project design recognized the weak capacity of the Government and the nature of the post-conflict operating environment, insufficient attention was paid to some of the details which led to a few problems during implementation. The design could have considered the degree of cost escalations and might have closely assessed the difficulties faced in other post-conflict settings, and the impact on procurement and implementation arrangements. Also, although capacity building was built into each component of the project, a more careful assessment of the capacity of the implementing institutions should have been carried out well in advance. 60. Notwithstanding these design issues, it should be recognized that the situation in South Sudan at the time of project design was extraordinarily difficult. The region had been in the midst of conflict and turmoil for almost five decades. In fact, the region was in the process of putting in place the institutions for a newly-independent country. There were political economy pressures on the project team to aim for the highest objectives in a war-torn region and client expectations were high. At the same time, there was little or no infrastructure or professional capacity on the ground. As Section 3.2 will detail, this was an extremely high risk environment wherein the opportunities for returns on investment were also very high. Relevance of Implementation: Substantial 61. There were several delays in the implementation of the project, as described in Section 2.2, and the life of the project was extended by 12 months by two separate project restructurings. As noted, the design of the project under-estimated the difficulties of operating in a post-conflict environment, and in particular of finding skilled consultants and personnel to run the PCU. In spite of these problems, implementation accelerated in 2009, disbursements picked up, and the project was able to meet almost all of the core and intermediate targets. 62. The Bank s implementation support was responsive to changing needs. For instance, additional funds from the Gender Action Plan were tapped to provide 25 additional women with grants through the BPC sub-component. Similarly, the client and project teams demonstrated flexibility by shifting resources from activities that were no longer enthusiastically supported. For example, once it became clear that the project design had vastly under-estimated the costs of constructing the wholesale market, 17

32 resources were moved to other components. Thus the team was flexible enough and willing to invest more where there was success and to pull back where there was less ownership or readiness. In addition, the 2011 project restructuring put in place better, and more-readily measurable, indicators to track progress. 3.2 Achievement of Project Development Objectives Rating: Substantial 63. A solid case can be made that the project substantially achieved its development objective to develop an enabling environment for private sector growth and to sustainably increase formal sector employment. These achievements are remarkable given the postconflict landscape in which the project was designed and implemented. Even in the capital city, Juba, there was little or no infrastructure (especially transport, housing and power); buildings to house government ministries were in the process of being constructed, and legal and regulatory structures were lacking. At the same time, MDTF projects were to be ambitious and expedient in the face of political expectations, especially those of the client. Develop an enabling environment for private sector growth PDO indicators: The number of businesses registered in South Sudan Streamlined number of steps to register a business Intermediate results indicators: Microfinance policy is presented to Cabinet Public-Private Dialogue Forum is established M&E Systems are functioning and regularly updated by the MCII Laws to improve the enabling environment for business are presented to Cabinet South Sudan Microfinance Development Facility is established Industrial competitiveness strategy is completed Mining Act and supporting regulations are developed Staff of the MCII and MEM are trained Design of the wholesale market is completed 64. The first part of the PDO was attained as reflected by the achievement of the two associated PDO indicators, and most of the intermediate outcome indicators. The achievement of these two PDO indicators can be directly attributed to project activities. Indeed, the achievement of the first indicator follows from the achievement of the second, wherein streamlining the steps to register a business in South Sudan led to a rise in the number of formal registrations. 65. At the project outset, registering a business required dealing with four different levels of government in South Sudan. Indeed, after the SSBF was created in 2009, one of the first issues raised was the simplification of steps to register a business. The issue was discussed in working groups, composed of private and public stakeholders, and was discussed with the Ministries of Finance, Justice and Commerce, leading to the drafting 18

33 and enacting of bills into law 22 dealing directly with business entry. The procedure to set up and register a business was accordingly streamlined 23 (PDO outcome) as a direct result of the consultations held as part of the public-private forum (intermediate output) established by project activities. The streamlining of procedures and the growth in the number of registrations is noteworthy given that it was a product of World Bank and IFC activities working in tandem, wherein the former contributed to the setting up of the forum and the latter to funding procedural activities 24. While the meteoric rise in registrations (from 44 in 2006 to over 10,784 in February 2012) was facilitated by the easing of procedures and the setting up of a business registry (currently maintained by the Ministry of Justice and funded by the IFC), most of the increase 25 can also be attributed to special grain import declarations by the Government in 2008, which allowed only registered companies to be awarded contracts. However, although the increase in business registrations might have been driven by exogenous changes in regulations, the project was directly responsible for facilitating the development of an enabling environment for formal private sector growth. 66. Project inputs and activities also led directly to outputs in the form of drafts of policies and bills. However, as the non-achievement of 3 out of 9 of the intermediate outcome indicators shows, some of these outputs have not yet resulted in laws. A notable achievement is the Mining Bill that is now law, and whose main tenets were drafted under component 3. Owing to the presence of and the dependence on natural resources, this was a crucially important piece of legislation for South Sudan. However, other bills are yet to be submitted to Cabinet and are not yet enacted. The delay is attributed to a lack of a champion in Government to make sure that the bill goes through Parliament. This can be attributed partly to the long list of bills and policies waiting to be approved by the Parliament, and partly to the frequent changes of key staff at the ministerial level and offices. For the time being, these bills continue to be debated and modified within different parts of Government. 67. The need for these bills arose from consultations with private and public sector actors while the project was being implemented using the SSBF as a setting for discussion. However, the project could have firstly, ascertained whether there was strong interest in codifying these into law; secondly, identify the types of legal provisions that different actors were willing to support; and finally it might have facilitated a process to bring together all the actors that were necessary to design the bill and enact it into law These included the Companies Act, Partnerships Act, Limited Partnerships Act and Business Names Act. It now takes 24 hours to register a business in South Sudan. The IFC provided consultants and paid their fees, while the World Bank financed operational expenses, including staff salaries. The rate of growth of business registrations a month jumped from approximately 1 percent to 13 percent from 2007 to 2008, and strongly continued thereafter. 19

34 Only then would it have been eminently within the scope of project activities that a law that would have been passable would have been drafted Some of the intermediate indicators deal with the setting up of institutions and how well they function. In this, there have been some notable successes. The SSBF has served very efficiently as a forum to facilitate public-private dialogue, especially through the creation of sector and issue-specific working groups, which in turn have led to a number of reform initiatives being discussed and enacted. Indeed, the institution is engaged at the level of Parliament and no bills that might impact the private sector can be concluded without consultations with the SSBF The SSMDF continues to be a sustainable 27 institution and is formidable in its ability to provide loan capital and technical assistance to MFIs in South Sudan. For example, a number of microfinance lenders interviewed during the ICR missions praised the regular training activities provided by the SSMDF, and the technical assistance provided to enable these providers to increase efficiency was also found to be very useful 28. The SSMDF also monitors the performance of MFIs and given the lack of an approved microfinance policy, it serves as a crucial link between the Bank of South Sudan and the MFI market in South Sudan. 69. The M&E systems developed within the MCII were not functioning well at the time of the ICR mission, owing to lack of resources and adequate numbers of trained staff. While some staff within the Commerce and Mining Ministries were well-trained, any sustainable impact on the enabling environment would require a much wider range of technical assistance interventions in light of the weak capacity in most government institutions. And lastly, the design of the wholesale market was well received, and indeed the original design of the component raised much awareness, expectations and excitement and continues to remain relevant. However, owing to the lack of funds, and without a central-state government cost and revenue sharing arrangement, the possibility of a private-public partnership for the construction of the market seems improbable at this stage. Sustainably increase formal employment PDO indicators: Formal employment by the enterprises supported by the BPC loans Growth in the number of clients served by MFIs People with access to finance through targeted MFIs and BPC People with access to finance through targeted MFIs and BPC of which the beneficiaries are female 26 Part of the problem was the cross-cutting nature of private sector development, which required coordination across ministries to champion the proposed bills. An effective steering committee could have served this function. 27 Sustainability here refers to the high demand for the services of the institution and to a competent and well-functioning staff. However, given the lack of government funds and a substantial private sector, the ability of the institution to survive without donor assistance would be tenuous for another few years. 28 In particular, one of the MFIs, FSL, mentioned how the technical assistance provided by the SSMDF helped them to identify the loopholes within their business model and helped them to build a healthy portfolio. 20

35 Intermediate results indicators: Number of businesses supported through BPC Number of new MFIs operational Number of loans by gender Value of loans by gender Portfolio at risk (microfinance) 70. For second part of the PDO, that dealing with increasing formal employment, 3 out of 4 of the PDO indicators were met. Formal direct employment created by the enterprises exceeded 148 workers in May, , far above the target value of 40 workers. In fact, the impact of the BPC grants went far beyond the creation of formal jobs. According to a BPC Beneficiary Analysis conducted in March 2011, the firms indirectly benefitted communities in which they were operating, through the provision of financial credit, seeds and farming equipment, medical supplies, and through support to widows, orphans and students. 71. The remaining three PDO indicators reflect the number of clients served by the MFIs, and the number of persons with access to finance, disaggregated by gender, either through targeted MFIs or through the BPC 30. The total number of clients of MFIs that were given loan capital by the SSMDF 31 was 30,487 (of which almost three-fourths were women). While, the SSMDF did not account for the entire loan portfolio of these institutions, it can be argued that the impact of the project went far beyond the provision of capital. Project activities provided the first tranche of funding to the largest MFIs in the country (which accounted for 98 percent of the market). In addition, the SSMDF, when it took over from the Bank of Southern Sudan, became a vehicle to stimulate the growth of microfinance through state-level knowledge visits, trainings and meetings. It also continues to provide technical assistance to most mid-sized and large MFIs in South Sudan on a regular basis. Notwithstanding these gains, the target value of 39,000 clients served by MFIs was not met at the time of closing, although the number of clients served by MFIs totaled 46,701 in October 2011 (see ISR 8 dated December, 2011). This was because BRAC, one of the largest MFIs with over 25,000 clients and which received US$ 0.2 million in funding from the SSMDF, had to write off 60 percent of its portfolio in mid There were no systemic reasons behind the default, and BRAC s misfortune was a result of the collapse of Nile Commercial Bank that handled its deposits See BPC Awardees Monitoring and Progress Evaluation Report. The figure of 148 is based on a sample of 16 BPC winners who were interviewed and in all probability constitutes a very low base for the actual number of formal jobs created. Growth in the number of clients refers to the total number of MFI clients within South Sudan. People with access to finance refer to those who received funding as a direct result of project activities and funds. The SSMDF disbursed a total of US$ 1.6 million to 6 MFIs from 2008 to There was no deposit insurance system at the time, and these accounts were BRAC s microfinance program operational accounts. The MFI is now trying to recover some of the losses following up aggressively with the Nile Commercial Bank, the Bank of South Sudan and the GRSS. 21

36 72. The number of persons who took out loans 33 and who were direct beneficiaries of the project totaled 8,499 at project closing, of which 62.5 percent were women. Targeted MFI clients are a sub-set of total MFI clients, and the ratio of targeted clients to total clients equals the ratio of SSMDF loan capital to total capital 34. These numbers far surpass the target values for the PDO indicators. Workshops conducted with beneficiaries during the ICR mission also revealed the different ways in which these micro-loans have helped to lift families out of poverty, for instance, by helping small businesses start, recover or grow, by creating credit histories for previously un-banked persons and by encouraging savings habits, especially among women. In addition, the MFI clients received basic financial management and business skills training along with the loan capital, assistance which many considered crucial in their ability to use the loan amounts wisely. 73. While the link between the jobs created by the BPC sub-component is clear, it could be argued that the link between micro-finance loans and the PDO is not obvious. This argument assumes that formal employment could mean employment created by formal firms or employment that is accompanied by formal benefits, such as salaries and other benefits. In this case, given the post-conflict nature of the environment, the PDO could be interpreted to mean that people were employed on a full-time and productive basis, and not on an informal or part-time basis. Given this definition, it is clear that the jobs created by the microfinance loans were mostly of an entrepreneurial nature, although there is no data on how many of these were formally registered if at all. A number of people were gainfully employed as entrepreneurs and they were part of the system in that their businesses maintained accounts, handled cash, hired employees and maintained credit histories. For more details on the microfinance market and its impact as gleaned from focus group meetings and interviews conducted on the ICR mission, see Box The intermediate results indicators refer mostly to the extent to which project activities have impacted entrepreneurial opportunities within South Sudan. The number of businesses supported by the BPC totaled 45, as envisaged by the target. The support provided by the project went far beyond just the provision of capital. For example, the shortlisted applicants were provided with a two-week long training on different aspects of business management (finance, record keeping, human resources management, etc), which was rated as very useful and which led to improvements in the functioning of startups and of existing businesses. The BPC winners have also acquired credit histories and would be in a position to access loans with the KCB and other commercial banks in the future of the total number (of which 25 were women) were the BPC winners who took out loans with the Kenya Commercial Bank. The remainder took out loans with different MFIs. Take the example of the MFI called Rural Finance Initiative (RUFI). The SSMDF accounted for 43 percent of RUFI s total loan portfolio. Thus, the number of people (women) that were targeted through project activities and with access to finance equals 43 percent of RUFI s total number of clients (female clients), i.e. 43 percent of 1,942 (1,126), which equals 837 (485). 22

37 Box 1: Microfinance in South Sudan and the Project The environment for credit in South Sudan is unlike any other. Owing to nearly five decades of conflict, a large part of the population is nomadic. The poor lack basic business skills and training and have little knowledge of dealing with credit institutions. The country is sparsely populated and transport and communications infrastructure is abysmal, while the security situation remains tenuous. To add to this dispiriting mix of challenges, because of their experience with the donor community the South Sudanese associate foreign institutions with aid and hand-outs that do not need to be repaid, leading to skewed expectations. To survive and flourish in this environment, microfinance institutions have had to wield a variety of techniques. A substantial part of their time and resources is spent in familiarizing people with the idea of credit, imparting basic accounting skills and regular capacity building for their staff members. In addition to financial capital, the SSMDF has provided extensive capacity building to a number of MFIs and their staff in this regard. Most MFIs loans are in the form of group or community loans, wherein the members are jointly responsible for regular repayments in the absence of any collateral. The average loan size tends to be small (USD 200) and repayments are made on a weekly basis. MFIs tend to focus their activities in select geographical areas since the cost of monitoring activities is high (fixed addresses and mobile phones are rare), and the relationship between the loan officer (who is usually local and speaks the language) and the clients is crucial. The impact of MFI activities has been enormously encouraging. Typically, loans are taken by small groups of households, often by women, who use the money to pay school fees, and for building small businesses. While there are examples of start-ups failing, sometimes owing to health-related shocks to income, a large proportion have prospered and have graduated to individual loans. There is demand for asset loans with longer repayment periods, for investments in building, machinery and vehicles. For instance, one community used a proportion of the micro loans to build school buildings and employ teachers. In short, the market for microfinance has contributed to the growth of a nascent private sector and directly alleviated household and community-level poverty. 75. The total number of MFIs operational in South Sudan increased from 4 in 2007 to over 10 in While the increase in the number cannot be held directly attributable to the project, an average of 20 percent of the loan portfolio of the earliest and the largest MFI players in the market came from the project. The SSMDF also helped stimulate the demand for microfinance loans by spreading information about the activities of MFIs and by providing training to local personnel hired by different MFIs. 76. The project did not meet entirely the targets for the number and value of loans by gender. While the number of loans to both men and women fell short of the targets, the value of loans to women far exceeded the target. The overall shortfall for the number of loans is partially explained by the writing off of BRAC s portfolio. However, a number of other problems plagued the microfinance market, most of which were related to the difficult operating environment 35 and which were outside of project control. 77. The project targeted an acceptable level of portfolio at risk (PAR) at 12 percent for microfinance institutions. This figure is what is considered minimally acceptable in 35 For example, the MFI SUMI lost a large part of its portfolio when the Government decided to destroy squatter settlements in Juba at short notice. In addition, resumption of hostilities, high rates of inflation and non-payment of salaries have lowered the rates of new loans since

38 the long run and so anything above this would imply unsustainable levels of risk 36. The weighted PAR as of June 2012 was percent, higher than the acceptable limit. However, the weighted PAR is driven by a single outlier, i.e. by the extremely high risk of BRAC s portfolio (61 percent). If BRAC is excluded, the weighted PAR for the remaining MFIs is at 8.83 percent, much below the limit. 78. The indicators measuring performance of the microfinance component were numerous, and the ones measuring the number and performance of all MFIs run the risk of conflating project impact with exogenous trends. However, the indicators were also targeted at measuring different aspects of the development of the microfinance market in South Sudan. In the absence of any real MFI market at the start of the project and with the setting of the SSMDF to build capacity across all MFIs, it could be argued that these indicators were worth measuring to track the performance of the project. The very large number of indicators did preclude regular data collection and subsequent monitoring. 3.3 Efficiency Rating: Modest 79. The Final Project Proposal included economic and financial analysis for the wholesale market component only, as the remainder of the project focused mainly on technical assistance. Since the wholesale market was not constructed due to lack of funds the analysis is no longer applicable, and alternative considerations are used to substantiate the different aspects of project efficiency. The rating is based on an analysis of the component cost breakdown provided in Annex The final costs at project closure were US$ million 37, which, at the outset, compare favorably with the estimated costs of US$ million at appraisal. Despite these financial results there were some changes over the life of the project which raises value-for-money concerns. Of the original cost estimate, US$ 6.78 million were to come from MDTF funds, and US$ 4.27 million were to be contributed by the GRSS. However, GRSS was only able to contribute US$ 0.6 million, and additional funding had to be secured from the MDTF, whose final contribution totaled US$ million. Importantly, since the wholesale market was not constructed, about 94 percent of the funds from that component were re-allocated to other components, all of which faced high cost overruns. In particular, the costs of the different consultancies were much higher than what had originally been budgeted for. Given the project s reliance on multiple consultancies, efficiency was affected not only by monetary costs but also by The 30-days past due PAR below 5 percent is considered as a low default risk (excellent performance), while anything between percent is considered relatively risky (weaknesses can be remedied within the normal development of business). Anything above 15 percent is considered unsustainably risky (the institution is having fundamental problems). See Management Information Systems for Microfinance Institutions, by Charles Waterfield and Nick Ramsing, Consultative Group to Assist the Poorest, US$ million from the MDTF, and US$ 0.60 million from the GRSS. 24

39 substantial transaction costs accrued through the length of time required to meet procurement procedures and fill the positions 38. While some of these consultancies tapped important expertise and contributed greatly to the project objectives, some did not provide a good return on investments. 81. Notwithstanding these issues and the unrealistic budget assumptions, the project funding did yield significant achievements. Laws targeting the business environment in South Sudan have made it easier for small and medium-sized entrepreneurs to start operations and increased access to finance has helped many entrepreneurs to grow their businesses. This has led to a discernible and direct impact on the ability of the private sector to rely on its own for growth and employment. Institutions like the SSBF and the SSMDF have fostered better working relationships between the public and the private sectors, especially with regard to policy consultations. In addition the project also leveraged Bank and other development partner resources. The best illustration of this was the close collaboration with the IFC with regard to the public-private dialogue, a partnership which continues to bear fruit with regard to successive laws being enacted after consultations within the SSBF. In addition, the project team tapped resources from trust funds and partner initiatives such as the Gender Action Plan. All these outcomes bode well for the economic return of the project. 82. The final costs relating to project management were over four times the appraisal estimates, i.e. US$ 2.21 million, compared to the estimated US$ 0.52 million. The big difference can be explained by the costs of hiring trained personnel and operating costs far outstripping those budgeted at the time of appraisal. This problem was systemic across different projects operating around the same time in South Sudan, owing to the post-conflict nature of the environment 39. The cost of construction of the office block (US$ 0.38 million), purchasing of motor-vehicles, office furniture and maintenance was also included in this component, which had not been planned for in the project design. 83. While the final disbursement figure was 100 percent, amounts totaling approximately US$ 0.18 million were cancelled since they were not spent. This was owing to changes in the exchange rate, and also because some of the operating cost reimbursable funds were not used by some of the consultants. Based on ICR mission interviews, there were no outliers observed in terms of recognized norms for consultancies or training. Total Bank administrative costs for project supervision (not including ICR preparation) were US$ 1.17 million, which equaled US$ 0.23 million annually on average. This is over twice the Africa regional average, which can be explained the intensive level of supervision in a fragile country with very weak capacity, the number and costs of missions, and the recruitment of full-time staff in the country office to facilitate close interaction and follow-up with the client Indeed, in a number of cases, a candidate or firm would be shortlisted for the position, only to turn down the offer. Other projects that were operating around the same time and that had to make amendments to the original budget and to the allocation of funds across components to suit the realities of project management and implementation were the Core Fiduciary Systems Support Project (TF56336, TF97653), the Umbrella Health Project (TF96243) and the Rapid Impact Emergency Project (TF55976). 25

40 84. It bears repetition that all of these achievements took place in an extremely demanding post-conflict environment, where costs, not just of procurement, but also of transportation, housing and services were very high. Not only did these lead to cost escalations but also delays, as the project team had to re-visit budgets and considerable resources went into negotiating contracts. Given the resources at hand, and the time and effort involved in using these efficiently to produce outputs and outcomes, the achievements are especially remarkable. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 85. The overall outcome rating is moderately satisfactory. This takes into account the substantial relevance of objectives, design and implementation at the time of design as well as at completion, the substantial achievement of project development objectives, and modest project efficiency. The above factors have been elaborated in Section 3 of this ICR, and provide the main justification for the rating. The project receives a moderately satisfactory rating mainly because of modest relevance of design and modest efficiency in the use of resources. This constitutes a moderate shortcoming in the project achievement and hence justifies the rating, according to evaluation criteria for ICRs. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 86. The overarching impact on poverty for the project as a whole is difficult to assess, since no social impact study was conducted at the time of appraisal, making it impossible to measure the post-project impact. However, an attempt was made during the ICR mission to qualitatively assess anecdotal evidence for particular project components. The support provided to MFIs in South Sudan through SSMDF in the form of loan capital had a direct impact on some of the poorest social groups in South Sudan, the majority of them women. Meetings conducted with beneficiaries of different MFIs during the ICR mission revealed the extent to which micro-loans had enabled entrepreneurs, especially women, to start small businesses and save money for reinvestment, or for social expenditures such as school fees, health and food consumption. A number of MFIs rely on community and group-based lending models (in particular BRAC lends only to women) and this led to large spillovers within the local community. For instance, one group of women in Kajokeji (a small town near Juba) used a small proportion of the funds to pay for salaries for school teachers. 87. The project also mobilized funding from the Gender Action Plan to provide 25 women with grants under the BPC sub-component. The additional funds also helped these grant-winners to set up a women s entrepreneurs association, which continues to function as an independent body, facilitating business contacts and knowledge exchange across businesswomen in South Sudan. In addition, while this was not the intention of the project, almost 69 percent of the total loans by the MFIs were made to women. And although, there was no data collected on the breakdown of job created by gender, 26

41 anecdotal evidence based on ICR interviews and focus group meetings suggests that female entrepreneurs tended to run service-sector businesses (such as restaurants and hotels) and a majority of the staff hired were female 40. (b) Institutional Change/Strengthening 88. A number of project activities were geared towards building capacity within different ministries Commerce and Industry, Mining and Industry. In particular, under Component 3, i.e. building industrial capacity, many staff were trained in information technology and project management skills. In addition, M&E training was provided to the team in-charge of maintaining these systems for the MCII in the future. While there was a discernible, short-term impact of these project activities on the functioning of the institutions, it remains to be seen if this impact will continue to spillover to others in the medium and long-term. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 89. Three beneficiary focus group meetings were organized during the November- December 2012 ICR mission. Two of these meetings focused on beneficiaries of MFI loans, in Juba (7 participants) and in the town of Nimule (>40 participants), while the third focused on the BPC winners (5 participants). The aim of the discussion was to gain a clear understanding of how the provision of finance, either through micro-loans or through business plan grants, and capacity building was perceived by the beneficiaries and if there were any important issues that needed to be flagged. 90. Participants in all three meetings recognized the importance of the technical assistance and training that was provided along with the loans and grants, which was instrumental in laying the foundations and skills for proper utilization of the funds. For most of the participants, this was the very first experience of accessing credit and the importance of their new credit histories was also highlighted. The BPC grantees emphasized the need for better coordination between the central and state governments, especially if the provision of finance was made to those in rural area. The MFI clients highlighted the need for micro-savings and insurance products, and the need for better assessment of assets and credit histories to make switching across different MFIs easier. Annex 5 provides a detailed summary of the issues raised during the meetings and the participants recommendations for the future. 40 The high female statistics could also be a function of the post-conflict environment where many families lost the male breadwinner in years of war. 27

42 4. Assessment of Risk to Development Outcome Rating: Moderate 91. The risk to sustaining the project s main accomplishments and development outcomes is moderate, based on the following areas: capacity building within Government (risk to longer-term impact: high), creation of new institutions (risk to continuation of activities: moderate), and contribution to private-sector policy (risk to changes in policy: negligible). 92. The development of the enabling environment for the private sector and the creation of employment remain high in the list of Government priorities. Thus, the risk to changes in policy is negligible. In addition, there are a number of draft legislative bills that are expected to become law, and which also directly impact the functioning of markets, e.g. counterfeit goods, competition etc. 93. The project also created new institutions, in particular the SSBF and the SSMDF. Both institutions have shown themselves to be indispensable in the discharge of their responsibilities the SSBF to providing a forum for private-public discussions, and the SSMDF as an institution to assist and monitor MFIs. The risk to the continuation of their activities is moderate, mainly since there has been a shortfall in funding for the SSBF after project closing and without proper legal status 41 there is some question of the sustainability of its activities. 94. Project activities also contributed to capacity building in existing institutions within the Government. The risk to the longer-term impact of these activities is significant. The numbers of staff trained under project activities are too few to sustainably impact the functioning of these institutions over time, and in the absence of enough spillovers, there is a risk that staff turnover might leave things virtually unchanged. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory 95. The project design was anchored in a series of consultations and analyses. The project objectives and the main activities as designed were consistent with the GRSS and World Bank strategies. The project design also reflected a substantial level of strategic 41 Currently, the SSBF lacks a clear legal structure, i.e. a functioning secretariat and board. An MoU between the private sector and the Government has been signed, but it needs to be passed by the MCII for the process of legalization to be completed. 28

43 relevance at the time of preparation, and the project continues to be relevant at the time of ICR preparation. The design of the project included a broad range of activities, bringing together many beneficiaries and institutions within Government. Significant attention was paid to the fiduciary framework and to risk assessment. 96. The quality at entry, however, is rated as moderately unsatisfactory given the following shortcomings: The project would have benefitted from a much more careful consideration of the risks associated with the lack of in-country technical capacity and the Government s readiness. Ideally, detailed comparisons with other post-conflict situations 42 with regard to the sorts of costs and difficulties associated with operational capacity and quality would have been useful. The implementation horizon of 18 months for the project (Phase 1) was quite unrealistic (also pointed out by the QAE review), given the difficulties on the ground and the complexities of the project. Phase 1 of the project, from approval to closing, lasted for 5 years. A more streamlined and incremental design would have been appropriate in the South Sudan setting. Starting with a few simple activities and using these as building blocks towards more complex activities may have been an approach to consider in the low capacity, high risk environment described. The choice of indicators at project design was inappropriate given the lack of data and baseline numbers. Accordingly, the results framework was modified in 2011 during project restructuring. There should have been more emphasis on M&E systems in the design of the project with more resources, money and personnel dedicated to monitoring. 97. It should be noted that the context within which the project was designed was quite exceptional. Some of the problems on the ground were similar to those in other post-conflict environments in that there were problems of security and rapid escalation of costs. But since South Sudan was a new country, and a region that had been devastated by decades of war, it lacked basic infrastructures 43, clear structures of government, with a nomadic population and those of productive age involved in conflict. The relevance and need for Bank assistance was high, but so were the pressures under which the team were required to design and deliver an ambitious project. As noted by the 2013 ISN for South Sudan, initial pledging events and aspirational rhetoric raised expectations and the MDTF For instance, project documents from Bank experience in West-Bank and Gaza, Afghanistan, East Timor could have been considered. However, South Sudan was unique in that this was a new country, with no previous institutional capacity or legacy and with little or no infrastructure, even with regard to the capital city Juba. As detailed by the Interim Strategy Note for South Sudan, the infrastructure base is a small fraction of its neighbors and one of the lowest on earth. This applies to transport density, power generation and transmission and telecommunications infrastructure. 29

44 projects were loaded with mandates but were unprepared for the vast scale of problems. These factors contributed to some of the deficiencies related to the quality at entry. (b) Quality of Supervision Rating: Moderately Satisfactory 98. Supervision was conducted regularly with the number of missions per year, varying between two to five a year 44. Over the course of the project s life, there were three different TTLs, and there were no discontinuities in the dialogue with the Government. The project benefited greatly from the fact that during implementation (and almost all the way to project closing) the TTL was based in Khartoum ensuring close interaction between the World Bank team and the PIU. The Aide Memoires from supervision missions indicate that most missions were conducted as scheduled, that the teams had a clear appreciation of the issues and the reports were thorough and candid in their assessments. The Bank also took action when problems were identified in project implementation, including those in procurement. 99. In addition, the project was flexible in that it adjusted its need for time, resources and other parameters as soon as it became clear that these problems needed to be dealt with. For instance, as soon as the pace of implementation picked up and it was clear that the original indicators were no longer feasible to measure, the project was restructured to provide a clearer set of indicators to measure the impact of the project. The resources that were allocated at the start proved to be insufficient for the post-conflict context and the restructuring provided additional funds and time for better implementation However, there were some shortcomings that impacted the overall quality of Bank supervision: The team disproportionately concentrated effort on issues related to procurement. This was necessary 45 but the team should have focused similar effort on M&E (see Box 2 for the importance of monitoring). This could have been done by ensuring a clearer M&E framework and system for every component of the project and by designing the inclusion of a dedicated M&E officer in the PCU. ISR ratings seemingly reflected the achievements of outputs rather than outcomes. The IP ratings correctly reflected the implementation progress, but M&E data was not available for the DO ratings for all but the last two ISRs 46, basing progress on project activities rather than results. In addition, the action items outlined in the supervision There were approximate two-three missions for most years, although there were 5 missions in This is explained by the visits made by the TTL from Khartoum when project activities and implementation picked up speed in This was especially true given the weak capacity, the post-conflict environment and subsequently, the heavy burden of bank procurement procedures.. The last ISR was archived after project closing. 30

45 documents could at times have been more forceful, given that some sub-components (particular within component 3) failed to perform. In terms of costs versus benefits the project was not proactive in taking bold steps such as cancelling contracts that were not delivering according to the terms of reference. However, given the difficulties in procurement, this would also have run the risk of substantive delays in implementation and it is not entirely clear how underor non-performing consultancies in post-conflict situations should be dealt with given the very real need for project activities and outputs in these environments. Notwithstanding these shortcomings, and reflecting the difficult conditions, tight deadlines, inadequate budgets and limited Government capacity, the team carried out its supervision tasks well. The team was competent and dedicated, spent much energy and resources on overcoming implementation obstacles given the weak capacity in the GRSS and the need for just-in-time support on a constant basis 47. In addition, the task team leader during implementation was based in Khartoum and there was a full-time team member in Juba, which allowed for concentrated and cost-effective supervision. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 101. The overall Bank performance is rated moderately satisfactory given the moderately unsatisfactory rating for quality at entry and moderately satisfactory for supervision. The project was implemented in a post-conflict environment that was fraught with a number of difficulties, mainly pertaining to the ability to find skilled people and firms in a timely and cost-effective manner, and subsequently, the ability to come up with a credible and well-functioning M&E framework. In addition, the guidelines 48 indicate that if the overall rating for the project is moderately satisfactory, then a case can be made for a similar rating for overall bank performance. 5.2 Grantee Performance (a) Government Performance Rating: Moderately Satisfactory 102. The Government s support and ownership were important at the project preparation stage. In addition, the two requests from the GRSS for extending the project s The ISN notes that successful implementation of MDTF projects in South Sudan required intensive support going well beyond the Bank s normal support role, including (1) adequate face-time contact between Bank staff and their local counterparts to explain roles and build trust, (2) intensive and proactive engagement by TTLs, (3) monitoring agents to provide an extra set of eyes and ears, and (4) continual awareness of the fiduciary challenges that Bank procedures imposed on the Government. Impact Evaluation Group ICR Guidelines Pages state that when the rating for one dimension is in the satisfactory range and the other dimension is in the unsatisfactory range, the rating for overall bank performance normally depends on the overall outcome rating. 31

46 closing date signaled interest and appreciation of the project activities. This also reflected the Government s continuous commitments to the objectives of the project throughout the implementation phase. Although the ICR mission was carried out almost 6 months after project closing, the GRSS extended its full co-operation and took an active interest in the preparation and smooth execution of the mission. The preparation of Government input for the preparation of this ICR and comments on the draft were also received in a timely manner The main Government counterpart was the Ministry of Commerce, Industry and Investment (MCII). The Ministry s project management capacity was quite limited and yet in the absence of a suitable project coordinator, the Directorate of PSD did a fair job of managing project activities. The performance of the BOSS, which managed the microfinance component, was also satisfactory owing to strong ownership of the project. These achievements are impressive given the weak capacity of the Government While the personal commitment and dedication of selected individuals at the PSD Directorate and the BOSS are noteworthy, similar ownership of the project was lacking more generally. Indeed, strong Government commitment to an effective, high-level PSD steering committee would have speeded up project implementation. There were also a number of procurement-related delays, attributed to weak capacity at the MOLACD, and delays with pushing bills through parliament due to lack of coordination between the MoJ and MCII. In addition, the MCII did not always extend its cooperation with regard to matters of staffing and space, which lead to delays and hindered the proper functioning of consultants and staff. (b) Implementing Agency Rating: Moderately Unsatisfactory 105. The PCU only became fully operational in 2009 after the hiring of the project coordinator and other key staff. Owing to the different components, it required significant capacity to coordinate the moving parts and this expertise was missing for the first two years of the project. Moreover, because of uncertainty of funding towards the end, there was some staff turnover, which might also hinder the transfer of knowledge to subsequent projects and activities The management of monitoring and evaluation activities was found to be lacking, especially in the face of an over-ambitious results framework. There was no dedicated M&E officer and this led to a sporadic and mostly ineffective system for monitoring of activities, with most of the emphasis on outputs and processes instead of outcomes and results. This was mostly a factor of insufficient resources set aside for M&E activities, but also because of lack of ownership for such activities within the counterpart ministries Once the key staff was in place the pace of implementation and activities accelerated and the PCU demonstrated considerable commitment to achieving the development objectives. The project coordinator also maintained clear accounts of project activities, although reports on the wholesale market land-lease consultations were unavailable for inspection during the ICR mission. There was also significant learning- 32

47 by-doing on the side of the Ministries and the project team, especially in terms of procurement and financial management, and this remains one of the legacies of the project 49. The impression from various interviews conducted during the ICR mission is that the majority of the staff consisted of capable professionals and this is evidenced by the fact that many are being sought out by development partners and the private sector. (c) Justification of Rating for Overall Grantee Performance Rating: Moderately Satisfactory 108. The overall grantee performance is rated as moderately satisfactory, given that the performance of the grantee is above the line and that of the implementation agency is below the line, wherein the overall outcome rating (i.e. moderately satisfactory) is taken into account. This rating takes into consideration the strong commitment of the Government to the overall objectives of the project and to successful implementation of its activities, and it also reflects the shortcomings of the implementing agencies in ensuring timely and accurate accounting of results. 6. Lessons Learned 109. This ICR emphasizes the important lessons drawn from the project, particularly those that would be applicable in other post-conflict environments: Projects designed in post-conflicts regions need a heavy dose of realism. Complicated projects with a large number of components and sub-components are unlikely to fare well in post-conflict countries. Programs in such countries should be sequenced instead of pursuing multiple goals simultaneously. This is particularly with regard to the capacity of the counterpart to implement the project. The very weak capacity within institutions should be assessed at the outset and then should be buttressed with significant technical assistance. Constant supervision is indispensable and resources ought to be organized accordingly. Projects in post-conflict countries will require constant supervision, owing to the nature of the environment and the need for much just-in-time support. The role played by team members based in the country office is crucial. In addition, monitoring agents, such as those currently operating across multiple projects in South Sudan, can help monitor expenditures, procurement and conduct periodic reviews of project outcomes. The costs and difficulties of attracting and retaining qualified personnel are considerable. Projects in difficult, post-conflict environments, besieged by security and infrastructure problems, need to assess and budget adequate resources early on to 49 The ISN for South Sudan notes that building supervision and implementation capacities in core government bodies and line ministries has been one of the effects of a number of MDTF-SS projects. 33

48 be able to get the right people and firms on board. The outcomes of the MDTF project would have been significantly improved if it has the resources to recruit from the right pool of talent. However, even with a large pool of resources, it is not entirely clear that talent would be attracted to fragile states 50. M&E Systems should be established and funded before others. Well-functioning monitoring and evaluation is crucial to achieving outcomes, especially in data-poor and uncertain environments, where attention is too easily and invariably focused towards the immediate problems of implementation rather than the larger problems of monitoring (see Box 2 for the importance of monitoring). High-level Steering Committees are key. This is necessary to establish project ownership at the right levels of Government, to ensure sustainability of activities after completion, and to have appropriate oversight in place when things start to go awry. World Bank procedures must be capable of responding to post-conflict environments. Given the weak capacity of the implementing agencies, an inordinate amount of time and effort is dedicated to being in compliance with Bank procedures. While the need for quality control in high-risk environments is also high, it should be recognized that quick wins are also essential. The ISN for South Sudan identifies how flexible arrangements for legal, financing, procurement and other operational management could support timely implementation of program activities. 50 Indeed, as noted by the ISN procurement in South Sudan takes place in a low governance and nontransparent environment, which in turn has seriously hampered the ability to deliver efficient and effective outcomes. These are problems that cannot be addressed simply by expanding project resources for hiring staff and consultants. 34

49 Box 2: BPC and the Importance of Monitoring The aim of the Business Plan Competition was to identify and support start-ups and existing businesses that would (a) have spill-on effects on the rest of the community through employment, and (b) serve as a successful example of entrepreneurship in the South Sudanese context. The competition received applications from across the spectrum geographical, sectoral and from new and existing firms. 45 winners were chosen and USD 20,000 per winner was disbursed by the Kenya Commercial Bank. The funds were provided as a loan which would be returned as a grant to the BPC winner on repayment of the original amount. The monitoring of BPC winners was to be carried out by the KCB, which was responsible for collecting repayments and for checking on the progress of the firms. However, only repayment records were maintained and there was no systematic monitoring of BPC winners. A large proportion of the loans went to start-ups, there was no way to track winners if they re-located their place of business and there were no incentives to repay. Consequently, 27 of the winners could not be traced since the first tranche of the loans was granted (ranging between USD 12,000-14,000). Of the remainder, 11 BPC winners regularly paid off their loans with the KCB, while the rest were made irregular payments. In short, just about 1/4 th of the original grant winners remained true to the contract of the competition. The rest could not be tracked or were struggling to make repayments. The most important lesson from what ought to have been a hugely successful project component was that without proper systems in place for monitoring project inputs run the risk of being squandered. In this case, the firms that were followed up with created employment and contributed in other ways to their communities, but not much is known of the rest. Budgets for monitoring and evaluation need to be funded upfront, and a matching grant or guarantee on behalf of the firm and/or commercial bank would also build-in incentives to attract those serious about making big investments to grow their businesses. Proper monitoring combined with well thought through incentives might help in reducing attrition. 35

50 Annex 1: Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate Actual/Latest Estimate Percentage of Appraisal Policy Component % Microfinance % Industrial Capacity % Wholesale Market Center % Project Management % Total Project Costs % Notes: The appraisal estimates are taken from Table 6, Annex 4 of the Final Project Proposal. The actual estimates include US$ million from the MDTF, and US$ 0.60 from the Government of South Sudan. (b) Financing Source of Funds Appraisal Estimate Actual/Latest Estimate Percentage of Appraisal GRSS % MDTF-SS % 36

51 Annex 2: Outputs by Component 110. The project development objectives were to develop an enabling environment for private sector growth and to sustainably increase formal employment in South Sudan. To this end the project financed four main components, which are discussed in this Annex. The table below lists the project s main outputs and outcomes by each component and sub-components for ease of reference. Table 1: Main Outputs and Outcomes Main Implementing Agency Ministry of Commerce, Industry and Investment (MCII) Bank of Southern Sudan (BOSS) Ministry of Industry and Mining (MEMI) Executing Entity MCII IFC MCII MCII Sub-Component Trade and Investment Policy Framework Public-Private Dialogue Forum Catalyzing Entrepreneurship Monitoring and Evaluation Outputs Component 1 - Trade and Investment Policy - 4 Legal Bills Outcomes - Policy submitted to Council of Ministers (COM) - Draft bills with MoJ - SSBF launched in Helps pass laws affecting business registration - BPC awards 45 grants - 19 awardees invest and generate employment - No data on remainder - M&E System developed - Staff trained Component 2 BOSS Capacity Building - MF Unit within BOSS set up staff recruited and trained - MF Adviser hired to work on MF policy Frankfurt School BOSS OTF Group UNIDO Sudan Microfinance Development Facility Technical Assistant and financing to Microfinance providers and to sector Sector Identification and competitiveness strategy Public Sector Capacity Building - SSMDF set-up, Board and staff trained - Microfinance competitions to provide loan capital and TA - Legal Bill Component 3 - Sector Growth Strategy for medium term industrial competitiveness - Chief Technical Advisor hired - Capacity Building - Equipment purchased - M&E Framework no longer functional - MF Unit functioning well - MF Policy drafted but not yet submitted to CoM - SSMDF functioning well, sustainable institution - US$ 1.67 million of loans and TA provided - SSMDF monitors MFI performance and accounts - Draft Microfinance Bill submitted to MoJ - Submitted to Economic Cluster of CoM - Project planning and management trainings were considered useful 37

52 Main Implementing Agency Ministry of Finance, and Government of Central Equatoria State Executing Entity Adam Smith I. UNIDO UNIDO Newtech Sub-Component Mining Study Support to Private Sector Institutions Business Development Services Capacity Design of Wholesale Market Construction of Wholesale Market Outputs - Legal and Regulatory framework - None - Business Directories for several cities Component 4 - Juba Wholesale Market designed along with financial feasibility study - Moved to Phase II (later cancelled) Outcomes - Mining Law - Business directories for Juba, Wau andmalakal towns Component 1: Policy, Regulation and Promotion of Investment and Trade Sub-Component 1.1: Trade and Investment Policy Framework 111. This component aimed at the provision of policy advice focused on the establishment and continuous improvement of trade and investment policies in South Sudan consistent with the Government s private sector development priorities. A Senior Policy Advisor after a significant delay in July 2009 to develop the legal and regulatory framework for Trade and Investment policy. The draft was finalized and submitted to the Economic Cluster of the Council of Ministers in May 2011 for deliberation and possible submission to Parliament A legal consultant was also hired in May 2010 and submitted drafts for the following bills in November 2010 Competition, Counterfeit Goods, Insurance and Financial Institution Instruments. These bills have been submitted to the Ministry of Justice for legislative procedures but are yet to be enacted into law. Subcomponent 1.2: Public-Private Dialogue Forum 113. The main aim was to provide a forum for public-private dialogue focused on resolving policy problems that affected the competitiveness of the private sector in South Sudan. The South Sudan Business Forum (SSBF) was launched in The project utilized the services of IFC/FIAS to benefit from IFC s global experience in Public Private Dialogue. Funds for this component were used to purchase equipment and to pay for staff. The IFC provided technical assistance and training to SSBF staff. Working Groups were formed in five priority policy areas: (i) land, agriculture and agro-industry; (ii) financial services; (iii) SMEs; (iv) trade and taxation; and (v) infrastructure development, all of which had strong private and public sector representation. One of the earliest issues raised was the steps to simply business registration, and the issue was 38

53 discussed at length at the SSBF. The consultative forum played an important role in pushing for the enactment of various bills aimed at easing business entry The SSBF serves as an example of successful World Bank-IFC collaboration, wherein the Bank funded the administrative and other costs of running the SSBF, while the IFC provided technical assistance. The SSBF continued to work as a successful organization throughout the life of the project. It delivered outreach activities at subregional level, worked closely with the Chambers of Commerce to identify key priorities for the private sector and was engaged at the parliament level in that bills impacting private sector development could not be concluded without consultations with the SSBF Owing to resource uncertainty at the end of the project, many SSBF staff were poached by private sector firms and at the time of the ICR mission the organization was yet to be formally legalized, and the details of its Board and organizational structure were to be worked out by March Subcomponent 1.3: Catalyzing Entrepreneurship 116. This sub-component involved the Business Plan Competition (BPC) which aimed at generating mobilizing key entrepreneurs in South Sudan to compete for start-up grants to create increase awareness, build confidence and create role models. The BPC was launched in February 2009, and received a total of 1,610 applications from all 10 states in the country, and across all sectors, agriculture, services and manufacturing. Of these 60 applicants were short-listed and were provided training in business development skills by the New Sudanese Indigenous NGO s Network (NESI Network). Of these 60 applicants, 20 BPC winners were finally selected. The project received additional funding from the Gender Action Plan, which enabled 25 additional female BPC winners, bringing the total number to 45 the breakdown of the winners across different states is shown in Figure The winners invested in diverse sectors including agricultural production, agro industries (e.g. bakery and leather crafts), health clinics, computer services, tailoring, and hotels. Interviews held with five of the BPC winners revealed that whilst the training received was tremendously useful, there was no additional technical assistance provided once the first tranche of the loan had been provided. Indeed, there was little or no monitoring and evaluation of the winners. The KCB, which reneged on its agreement to keep tabs on the grantees, only collected information on repayments. As of November 2012, 19 of the winners were paying back their loans (of which 2 had paid back a 100 percent of the start-up capital), while the remainder had not made any repayments since the loan amount was granted While it is clear that some of the awardees made good use of the start-up capital (some of whom, mostly in the services industry, continue to perform well), most BPC winners seem to have disappeared with the first tranche of funding and can no longer be tracked, leave alone their progress evaluated. The bulk of analysis presented on BPC winners and the corresponding employment created is based on the assessment of lessthan half of the original winners and there is little or no information on the remainder. 39

54 Figure 1: Regional Distribution of BPC Winners Distribution of BPC Winners by Region Warrap Upper Nile Unity Lakes Jonglei Northern Bahr el Ghazel Western Bahr el Ghazal Western Equatoria Eastern Equatoria Central Equatoria Men Women Source: Ministry of Commerce, Industry and Investment (MCII)-PSD Directorate 119. The experience of this sub-component strongly underlies how important, nay how critical, a system of monitoring and evaluation is to proper functioning of the project. In addition, the ICR would strongly recommend that any additional BPC competitions in the future should clearly advertise loans, and not grants. Interviews with BPC winners, with the KCB and with the Chambers of Commerce lead to the conclusion that World Bank grant competitions invariably attract applications from those not planning to go ahead with the business plan once the first tranche of funding is provided. Making sure that the funds are made available as a loan would ensure that only those really interesting in using credit to invest in businesses will apply. Sub-Component 1.4 M&E System 120. The objective of this sub-component was two-fold: (i) establishing a framework for the ongoing monitoring and evaluation of progress towards the goals of private sector development; and (ii) establish an M&E system for measuring the performance of the PSD Project A private consulting firm was hired in November 2008 to undertake the contract and did a poor job of implementation. There were several delays in the design of the framework, and frequent turnover among staff made coordination with the PIU difficult. There were severe problems in data collection, as the firm had not envisaged the scale of costs owing to logistic and security issues. The contract was amended to reflect higher costs, but the final output provided by the firm was not satisfactory. This was primarily because the final design of the M&E framework was not of very high quality, and importantly, it only reflected M&E activities for the project and not for the performance 40