PUBLIC. AIDE MEMOIRE Rural Sector Support Program (RSSP) RSSP 2 Implementation Support Mission RSSP 3 Preparation Mission 25 July-5 August 2011

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1 Public Disclosure Authorized AIDE MEMOIRE Rural Sector Support Program (RSSP) RSSP 2 Implementation Support Mission RSSP 3 Preparation Mission 25 July-5 August 2011 A. INTRODUCTION AND ACKNOWLEDGEMENTS PUBLIC Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized 1. From 25 July-5 August 2011, a World Bank and FAO team carried out a double mission for the current and pipeline phases of the Rural Sector Support Program (RSSP): RSSP 2 and RSSP 3, respectively. The team was composed of : Loraine Ronchi (Senior Economist, Task Team Leader); Hardwick Tchale (Senior Agricultural Economist, co-task Team Leader), Valens Mwumvaneza (Agriculture and Rural Development Specialist); Noreen Beg (Safeguard Specialist); Svetlana Khvostova (Safeguards Analyst); Edward Bresnyan (Senior Rural Development Specialist); Thierry Lassalle (Institutional and Value Chain Development Specialist, FAO); Amadou Soumaila (Lead Irrigation Specialist; FAO); Alberta Mascaretti (Senior Agricultural Officer, FAO); Toni Kayonga (Operations Officer); Diego Garrido (M&E Specialist); Otieno Ayany (Financial Management Specialist); Chantal Kajangwe (Procurement Specialist); and Belinda Mutesi (Team Assistant). Hild Rygnestad (EFA Consultant) provided desk support preparing the RSSP 3 economic and financial analysis (EFA). The team worked closely with the Government of Rwanda (GoR) RSSP team. Discussions were held with Dr. Agnes Kalibata (Minister of Agriculture), Mr. Ernest Ruzindaza (Permanent Secretary, MINAGRI); other Government officials, decentralized Project staff, service providers, and communities (see Annex 1 for list). The team expresses its appreciation for the assistance provided by those with whom the mission interacted. 2. The mission objectives were to support the GoR team in the final stages of RSSP 2 implementation and to jointly prepare RSSP 3 with them. The mission followed up on the RSSP 2 recommendations of the last implementation support mission at mid-term review (MTR) (See Annex 2) and provided implementation support for the timely closure of RSSP 2. Specific objectives for the preparation of RSSP 3 included: i) to jointly define the scope of RSSP3; ii) broadly articulate RSSP 3 project components and activities, including an implementation structure for the proposed merger of LWH and RSSP; iii) clarify to the extent possible the costing and proposed cost allocations among various components; iv) prepare for all safeguard instruments and processes; v) complete the initial monitoring and evaluation (M&E) framework discussed with GoR in February 2011; and vi) facilitate a workshop for LWH and RSSP M&E units in support of MINAGRI s proposed LWH/RSSP implementation merger. The teams also initiated EFA data collection, and reviewed the financial management and procurement arrangements of the merged LWH /RSSP units. This Aide Memoire reports on both implementation support outcomes for RSSP 2 and preparation activities for RSSP 3. B. CONTEXT 3. The project development objective (PDO) of RSSP 2 is to increase agricultural production and marketing in marshland and hillside areas targeted for development under the Project in an environmentally sustainable manner. The Project has three components: (1) Marshlands and Hillsides Rehabilitation and Development; (2) Strengthening Commodity Chains; and (3) Project Coordination and Support. The implementation progress of these is reported on in Section C below. Following the conclusions of the MTR in October 2010 and preliminary RSSP 3 identification activities in February 2011 (see Annex 3), the GoR requested the advanced closure of RSSP 2 due to early attainment of Project objectives, and the advanced preparation of RSSP 3. Subsequent to the Spring Meetings of 2011, the GoR formally requested USD 70 million for RSSP 3. A project concept note (PCN) was prepared and internally reviewed at the World Bank on 21 June World Bank management authorized the preparation of RSSP 3 and confirmed that the Project would be prepared using the fast track for low risk operations. In May 2011, MINAGRI proposed the Project Coordinator for RSSP, Ms. Jolly Dusabe, become the joint coordinator for both RSSP and LWH. As documented in the June 2011 Aide Memoire for the LWH, the World Bank supports, a priori, the proposed implementation

2 merger between LWH and RSSP as it builds on the merger of the two projects procurement and financial management units since MTR and is in line with the early RSSP 3 discussions with the GoR on the further merger of the two teams. It was agreed with World Bank management that as per the Financing Agreement (FA) for both Projects, establishing an institutional framework, functions, and resources satisfactory to the Association, including competent personnel in adequate numbers called for an assessment of the merger proposal during the RSSP 3 preparation mission, on which this Aide Memoire reports. C. KEY FINDINGS/PROGRESS OF IMPLEMENTATION FOR RSSP 2 4. The mission rates the overall implementation progress (OIP) of RSSP 2 as satisfactory. Status of Results and Achievement of Development Objectives 5. As shown by the detailed updated results framework (Annex 4), RSSP continues to have a very robust performance. On the production side, the mission found that yields in areas that have already been rehabilitated or developed have at least doubled, with rice yields rising from 3t/ha to more that 6t/ha. The capacity of cooperatives supported by the Project also shows strong improvements with 35 cooperatives increasing their revenue by at least 50%, surpassing the project-end target of 20 cooperatives. In addition, the number of cooperatives marketing certified maize or potato seeds has risen to fully 19, surpassing the original target of nine. cooperatives. Indicators that are linked to the completion of marshlands and hillsides are fully expected to show positive results once all works are completed (see below for implementation progress). Assessment of Implementation Performance for RSSP 2 Component 1: Marshland and Hillside Rehabilitation and Development 6. As at end of July 2011, 1,574 ha were completed under marshland rehabilitation/development works. There are currently 1,500 ha under execution (Muvumba 8) and a further 300 ha (Rwagitima) planned. Contractual deadlines have been exceeded with some contractors due to equipment and contract management issues. Despite delays in some contractual deadlines, the quality of works and execution of activities for this component as a whole are found to be satisfactory. See details below. 7. Upon completion of works under execution and those planned (Rwagitima), the total area developed under the project would be 3,374 ha. At MTR, the Project had a financing gap of USD4.96 million due to documented rises in costs outside the Project s control (see MTR Aide Memoire and MTR Technical Annex). The MTR suggested a number of options. The Project chose MTR Option 2: (i) postponing development of Cyili marshland and Kibaya dam to RSSP 3; (ii) dropping Gishoma dam as an RSSP marshland due to technical and economic infeasibility; and (iii) splitting secondary works on Muvumba VIII marshland for contracting with local firms. These savings were estimated at MTR to amount to USD5.88 million, closing the USD4.96 million gap and leaving a Component 1 surplus. Upon execution of these recommendations and budgeting for RSSP 3 feasibility studies for 2,200 ha, the net surplus for Component 1 is currently USD393,751, despite an unanticipated rise in costs for Muvumba VIII. 1 With respect to the latter, it became apparent that the land leveling work for Muvumba VIII could not be completed using beneficiary contribution (labor) as per the RSSP approach in other marshlands, and that this work had to be financed by the Project through contracts for works. The mission team confirms this technical conclusion (see Technical Annex for more detail). The need to contract primary and secondary leveling for Muvumba results in an additional cost for the marshland of USD2.2 million for primary leveling and USD1.8 million for secondary leveling using the HIMO approach. 2 The GoR has executed and financed contracts covering the primary leveling. If the HIMO approach is used, the Project budget 1 Further to savings foreseen at MTR, over USD 70,000 in penalties were paid by delaying contractors. 2 HIMO represents a high intensity labor approach under technical supervision, used with success in other projects, including the LWH. The mission concurs with the Project team assessment that HIMO is possible for this work and that it is the most cost effective option.

3 for Component 1 can cover the increased Muvumba costs and still remain with the surplus above. If mechanized contracts are used, these would result in a gap for Component 1 of USD306,649, for which there is no financing. Using the HIMO approach for final leveling, the mission expects RSSP 2 Component 1 activities to be completed by end of January 2012, including hillsides (scheduled for completion at end- December 2011). This timeline is acceptable for the RSSP 3 preparation schedule and, given the absence of further available financing for RSSP 2, the mission recommends the HIMO approach be implemented immediately on Muvubma VII. The Component 1 surplus should then be used towards financing the SDR exchange rate shortfall (see below). 8. The Project has implemented all foreseen technical and socioeconomic studies, has launched feasibility studies for 1,000 ha (Rwinkwavu marshland financed by the GoR) and begun procurement for an additional 2,200 ha (approximately USD1.1 million). The Project has carried out capacity building activities including training of 12 engineers and numerous artisans in construction and maintenance. The mission finds that the Irrigation Water Users Associations model presented by RSSP in accordance with a draft Ministerial Order from MINAGRI (see Technical Annex) establishing WUAs on all Rwandan rehabilitated/developed irrigation schemes is an adaptation of the international standard WUA. The WUAs will be composed of all marshland water users and be the only bodies in charge of irrigation water distribution and infrastructure maintenance, as well as the collection of water service fees. WUAs and cooperatives (in charge of production and marketing aspects) will be independent entities. Given these key aspects above, the mission concluded that the WUAs, once registered with legal status by the Ministry of Justice, could be considered legally, institutionally and technically as WUAs and that the RSSP 2 trigger relating to WUAs would therefore be met. The Project will provide the World Bank with the final Ministerial Order and WUA registration of RSSP water users with the Ministry of Justice to complete the negotiations package for the processing of RSSP 3. These formal procedures need to be completed by end-november In the process of creating WUAs, training on water distribution and maintenance has been provided to water use committees in 20 cooperatives composed of 1644 members, but support to Districts on WUA implementation has not yet taken place. 9. The project has protected 8356 ha of hillsides under various techniques including progressive and radical terracing and buffer zone protection through trees and grass planting. The remaining 1544 ha of hillsides to reach Project-end target of 9,900 ha are expected to be completed by end of December Component 2: Strengthening Commodity Chains 10. RSSP2 has worked with a total of 20 service providers, training 56 of their technicians, and finalizing training modules distributed to lead farmers and cooperatives. A total of 1,256 lead farmers have undertaken study tours to experienced cooperatives and 830 cooperative members visited the Agrishow in While cooperative performance will be independently evaluated by the impact assessment for RSSP 2 currently under procurement, the Project estimates that 50 of the 83 cooperatives are relatively strong and well-managed. Out of these, 15 have received awards from District authorities, the Rwanda Cooperative Agency (RCA), and the Ministry of Labour for good management and organization. Based on the information provided by the Project and observations by the Bank technical team during the mission, the mission documents the following significant results to date: (i) 83 cooperatives assisted in improving their organization (target was 80): 2,445 small groups formed; governance and management capacity improved; development of business plans benefiting 77,063 cooperative members and their families completed; (ii) 74 of the 83 cooperatives have finalized their business plans and the remaining 9 cooperatives have prepared drafts which will be finalized by December 2011; (iii) training of lead farmers (2,890) in improved crop production technologies (using Farmer Field Schools) has benefitted over 77,000 farmers and resulted in production of about 15,000 t/year of paddy on the 1,574 ha of marshland under production; and (iv) 27 cooperatives were supported to become certified seed producers (19 achieved). As at MTR, the Project should conduct a light review of the costs and revenues of the seed activity, as well as that of the business plans financed under RSSP 2. The results of such a review can simultaneously inform on sustainability and design for RSSP 3.

4 11. The percentage of users satisfied with rural infrastructure developed by RSSP2 (target is 75%) will be assessed through the independent impact assessment to be undertaken in the last trimester of A key observation of the MTR was for the Project to refine the business-oriented aspects of Component 2 s capacity building activities, including a review/design of training specifically for marketing committees and initiating support for cooperatives in analyzing how existing investments can leverage further investments through the Project s business plan process. Since MTR, the Project has designed a special module combining the RSSP1 module with material provided by the mission and from other sources (RCA). Three-day training sessions focusing on market analysis, marketing transaction costs, prospective outlets and product advertising, have been organized at regional level for all cooperative marketing committee members. It is recommended that such training be complemented through a series of short refresher training sessions (1-2 days) to keep market committees updated about market evolution, particularly marketing transaction costs and prospective outlets. On the second part of the MTR recommendation, concerning how analysis of existing investment can leverage further investments, this has not been incorporated as of yet. Since MTR, four more cooperatives have accessed finance through RIF, and a further two have successfully applied for loans from formal financial institutions. 12. Given the above information, the mission rates this component satisfactory. Component 3: Project Coordination and Support 13. Immediately after the MTR for RSSP2, an implementation support mission was held for the LWH Project in November During that mission, the World Bank received and assessed the request from MINAGRI to merge the procurement functions of the LWH and RSSP, as well as those of the two teams financial management units. The merger was assessed by World Bank fiduciary teams and the merger took place over several months. The merged units were subsequently assessed again with attenuate recommendations for staffing, in subsequent LWH missions (see relevant Aide Memoires). Further observations on the merged units are found in financial management and procurement sections below. At MTR, it was recommended that the salary review for RSSP be completed. This was put on hold awaiting the GoR civil service salary reform process with which MINAGRI wished to rationalize salary structures Ministry-wide. In February 2011, a draft salary structure was produced by MIFOTRA. The Project has yet to harmonize and update its staff salary structure. Rather, with the decision to close RSSP early and assess the proposal for a merged implementation team (see Section B above) with LWH, the Project elected to undertake the revision as part of RSSP 3 preparation. The mission finds that now that all information is in hand, including a jointly agreed draft implementation structure for RSSP 3 (see Annex 7), the Project should proceed with a review and update of Project staff salaries. The mission commends the Project for its smooth interim implementation following the appointment of the RSSP Project Coordinator as interim manager for both programs. The mission has not found lapses in implementation due to this interim measure and supports its finalization under the preparation of RSSP3. For this reason, despite the delays in MTR recommendations noted, Component 3 is rated satisfactory. Disbursement 14. The mission notes that as at August , the disbursement rate for the Project is 70% (in terms of USD). Disbursement of counterpart funding is fully 154%, due in part to GoR financing for unanticipated leveling costs in Muvumba 8. Given that as of the end of July 2011, the Project has completed 98% of its planned procurement activities, the mission finds disbursement progress to be satisfactory. Financial Management: 15. Following from the issue of the Project tax bill estimated at USD4.8 million at midterm, the Project has informed the mission that the Ministry of Finance (MINECOFIN) has instructed MINAGRI to cover the Project s tax liability out of their budget (see Annex 6). The Project has updated the information provided at MTR about the deteriorating exchange rate between SDR and USD and estimates that there is currently a USD 1.8 million shortfall in expected Project resources. Adding to this the USD1.1 million in RSSP 3 studies needed to be financed, the total shortfall in project financing is USD2.9 million. In discussion with GoR, the mission agrees with their request to (1) prepare a PPF under RSSP 3 of USD1.1 million for the preparation of RSSP 3

5 technical studies, currently foreseen (with gap) to be financed by RSSP 2; (2) postpone the work on Rwagitima Marshland (300 ha, 3 USD 1.1 million) to RSSP 3; and (3) apply the Component 1 surplus of USD393,351 to leaving approximately USD300,000 of the SDR exchange rate gap to be financed for Project closure. 16. Overall the RSSP II financial management systems remain satisfactory and the risk rating remains moderate. RSSP has followed several recommendations made at MTR. The Project should also implement the recommendations raised in the audit report for the year ended 31 December 2010 by sharing their action plan with the Bank for this purpose. Procurement 17. The mission reviewed procurement challenges faced in implementation since MTR and provided support specifically for the procurement of consultancy services to undertake the Project s final impact assessment, which sent out EOI twice, but failed to produce a six-firm list. The mission recommends that the Project Team proceed with the recruitment process. Failing a satisfactory outcome, they should proceed immediately to the use of consultant qualifications (CQS) to recruit the required expertise. 18. The merger of the LWH and RSSP procurement functions since MTR has been subject to multiple assessments by the Bank procurement team. Observations since MTR, both through prior and post reviews, lead to the conclusion that quality of procurement operations would benefit from an increase in the number of staff, given the merged volume of work (please see Technical Annex for a summary of post procurement review for RSSP). The merger was relatively more beneficial to LWH given that the LWH team was not adequately staffed for scale up at the time of merger (as discussed at appraisal for LWH scale-up under the Global Agricultural Food Security Program, GAFSP). While raising the level of experience, the mission finds that the merger still needs to make up staff numbers. Specifically, the mission recommends that at the central level, the merged team consist of three Procurement Officers and one Procurement Assistant in addition to the head of Procurement Unit. At decentralized level, one Procurement Officer per province is required for RSSP 3 going forward. Despite some errors attributed to workload discussed in the post review, the procurement function is rated as satisfactory, given the good performance of existing staff during a significant merger. The mission emphasizes, however, the need to complete recruitment as indicated above for RSSP3. Safeguards 19. Overall safeguards compliance is rated satisfactory. 20. Environment: Based on field visits and discussions with safeguards specialists, the mission finds that all recommended actions from MTR were implemented (see Annex 2). Based on the mission s findings, environmental safeguards compliance is rated as satisfactory. Further to those recommendations, the EIA/EMP was revised for Cyili Marshland (an RSSP 3 site). While the ecological flow assessment is found to be adequate, during the filling of the reservoir, it is important to ensure that in-flow is shared between dam storage and the downstream river/flow to avoid a temporary cessation of flow downstream. 21. Social Safeguards: The mission met with a group of Project Affected Persons (PAPs) on the Muvumba VIII site, who had been resettled to Nshuri village. All expressed satisfaction with the process and the compensation received (land provided by the District, and building materials provided by the Project). The mission noted that an updated RAP was submitted, and approved by the Bank on November , and should be re-disclosed on the RSSP website. The mission requested and received the latest progress report and confirms that the following information has been included as recommended in the MTR: roles and responsibilities of implementation agencies, grievances/complaints, and employment of the PAPs (and the project site community as a whole). The mission requests that upon resettlement of the remaining 2% awaiting resettlement due to water 3 Removal of 300 ha brings the Project s total ha of marshland developed to 91% of its 3,300 ha target.

6 damage at the new properties, a notification should be sent to the World Bank that resettlement is complete. All social safeguards are found to be satisfactory. M&E 22. All recommendations since MTR have been implemented and the activity is rated satisfactory. Specific progress is noted in the improved Excel M&E tool, notably improving data management and reporting. While the data collection strategy has been revised to cover remaining gaps (mainly though the planned impact assessment), the contract for a firm to undertake the impact assessment has not yet been awarded and (ii) there is uncertainty that the data from the National Institute for Statistics (NIS s) national household survey (EICV) will be available on time now that the Project is closing early. These two issues require the urgent attention of RSSP management. The mission commends the proactivity of the Project in including income data collection in the TOR of the impact assessment consultants, but emphasizes that any delays in the availability of good quality data coming from the impact assessment and/or the EICV could compromise the satisfactory rating of the Project performance at closing and delay the preparation of RSSP3, as some of the key indicators and triggers depend on the availability of that data. To this end, the mission attended a meeting between the EICV team and RSSP at the NISR. The RSSP team reiterated its data needs regarding the EICV. Colleagues from NISR clarified that data would not be available before December and with more certainty in January. Also, it was agreed that the RSSP team would organize a meeting between the firm selected for the RSSP 2 impact assessment and the EICV team to harmonize approaches and processes. The RSSP team will regularly follow up with the EICV team on the data availability come December. The mission emphasizes that Project will require the full data set to make needed income and poverty comparisons between RSSP recipients and the general population. Section D below provides recommendations. In addition to the data that is being collected on the Results Framework and on the Program indicators and triggers the RSSP team should undertake an exercise to identify any additional positive intended or unintended results and impacts that have been observed on the ground. This will enhance the Project s own ICR (draft due at appraisal) and provide additional information underscoring the good performance of RSSP2 at closing. The M&E team should work with each component and with the communication team to identify the needed information. D. RECOMMENDATIONS AND PENDING ACTIONS/NEXT STEPS FOR RSSP In addition to following up on the mission s feedback on the last mission s recommendations (Annex 2), Recommended Action Responsible Entity Deadline 1 The RSSP team continues its progress on creation of RSSP Project Prior to project end WUAs according to relevant international standards, and Management adjusts relating capacity building program, including WUAs and Districts. 2 The RSSP team provide the final Ministerial Order for WUAs and the RSSP WUA registration with Ministry of Justice for the legal package for RSSP 3 3 To reduce the financing gap, final land leveling of Muvumba 8 to be executed under the High Labour Intensity approach (HIMO) 4 It is recommended that the Project continue the marketing committees training to strengthen through a series of short refresher training sessions (1-2 days) about market evolution, particularly marketing transaction costs and prospective outlets. Based on the agreed draft RSSP/LWH implementation structure, Project salaries to be reviewed and rationalized. 5 AWPBs for both projects to be updated and sent for review 6 The RSSP M&E team should follow up the agreed steps with NISR regarding the EICV data and the impact RSSP Project Management RSSP Project Management RSSP Project Management RSSP Project Management RSSP Project Management and M&E Appraisal Project end Project end Appraisal As soon as the firm is selected for the

7 Recommended Action Responsible Entity Deadline assessment; namely organizing a meeting between the impact assessment firm and the EICV team to coordinate actions and regularly check in with the EICV team starting December to get the relevant data as soon as possible team meeting with EICV team December for checking on EICV data 7 The TOR for the impact assessment should be modified to include a review of costs and revenues of the seed activity for the relevant cooperatives and the business plans of RSSP2 cooperatives. 8 9 Complete in-country safeguard re-disclosure for Muvumba 8 RAP, ensuring removal of PAP names and details to prevent identification. Complete RSSP 2 safeguard disclosure for Muvumba 8 RAP at World Bank InfoShop, ensuring removal of PAP names and details to prevent identification. RSSP Project Management RSSP Project Management World Bank Safeguard Team Appraisal 15 August August 2011 GoR to complete the ICR before Project closure 10 The Project Team to finalize the procurement process for 11 the consultant to undertake the Independent Impact Assessment of RSSP 2 with enhanced TOR (see recommendation table below) 12 The project should implement the recommendations raised in the audit report for the year ended 31 December 2010 by sharing an action plan with the Bank for this. RSSP Project Management RSSP Project Management RSSP Project Management Project End RSSP3 Appraisal TBD E. OUTCOMES AND RECOMMENDATIONS FOR RSSP 3 PREPARATION Project Scope and Design 24. The bulk of the mission was spent in joint RSSP 3 project activity design with the GoR RSSP team. The scope was discussed at length in the context of objectives for RSSP 3 (see outcomes of results chain workshop in the Technical Annex): In keeping with the long term programmatic objective of the RSSP APL series, there is a common vision for the focus of the third phase to be on extending successful and sustainable marshland development with an emphasis on diversification of economic activities and better integration into value chains. There was joint agreement on objectives and principles for components and sub components, on their structure and on the broad categories of activities. The finalization of component objectives and activities will receive further development and articulation through preparation leading to appraisal. Components are summarized below (further detail can be found in the Technical Annex). As in RSSP 2, there will be three components: Component 1: Infrastructure for Marshland, Hillside and Commodity Chain Development The objectives of Component 1 will be to expand irrigated area of cultivated marshlands through rehabilitation and development, promote sustainable land management practices on associated hillsides, and improve economic infrastructure in support of commodity chain development. There are three sub-components: Sub-component 1.1: Marshlands Rehabilitation and Development This subcomponent focuses on rehabilitation and development of selected schemes in marshlands with high potential for commercialized production. Investments will be demand-driven and a clear selection framework will be applied including: (i) readiness for investment; (ii) stakeholder interest; (iii) access to markets and

8 proximity to roads; (iv) environmental and social sustainability; and (v) economic rate of return. The mission supports the Project s exploration of alternative and lower cost technologies in RSSP 3, which will contribute to the coverage possible under the Project Sub-Component 1.2: Sustainable land management on hillsides 25. Sub-component 1.2 Sustainable Land Management for Hillsides builds on progression from mere hillside protection in RSSP 1 to economically interesting sustainable land management (SLM) on hillsides, drawing from the successful approaches of the LWH. The second sub-component will therefore promote (i) costeffective soil and water conservation technologies on hillsides for agricultural production, and (ii) disseminate sustainable land management practices on hillsides immediately adjacent to the irrigation investments, using the 3:1 ratio used in RSSP 2. There was joint agreement on the principle that sustainability of the marshland infrastructures depends on soil erosion activities being economically interesting to hillside farmers. While the LWH approach has certainly proven to do this, it is costly, as noted by the GoR team and mission alike. The Project will need to develop and propose an affordable approach to RSSP 3 hillsides that still meets the Project objectives of making soil erosion protection on adjacent hillsides an economically interesting activity for hillside farmers. This is critical to ensure sustainability of both the infrastructures and the associated gains from irrigation. The proposed approach should be shared with the Bank prior to appraisal as the Project s Appraisal Document (PAD) is finalized. Sub-component 1.3: Infrastructure for commodity chain development 26. Sub-component 1.3 Infrastructure for Commodity Chain Development supports construction of economic infrastructure for developed marshlands and hillsides to support the firm integration of women and men into their value chain activity and/or diversification. Based on lessons noted at MTR regarding the excess demand for economic infrastructure (RSSP 2 Sub-component 2.3) and the need for greater cross-coordination across components and teams, this activity is found in RSSP 3 under Component 1 with a scaled up resource allocation. During preparation, the Project team expressed a preference for moving this to Component 2 on the basis that all value chain development work should fall under Component 2, where this work is driven. It was agreed that this would be discussed further as the PAD is finalized and that both options would be considered and reviewed by both teams. Rural investment for economic infrastructure concerns all infrastructure that supports the economic activities handled by cooperatives or small groups. Investment in infrastructure in this Component is driven by community demand and is directly linked to the establishment of a business plan developed by cooperatives with support from sub-component 2.3 (below). Such investments would require contributions from the community (either in-kind or through linkages with rural finance While these investments will cover all marshlands developed under RSSP 3, as well as Muvumba VIII, developed at the end of RSSP 2, criteria will be developed during Project preparation to prioritize the hillside cooperatives that can best benefit from similar investments. Finally, a portion (to be defined by appraisal) of sub-component 1.3 could support supra-cooperative initiatives for greater value chain integration. Component 2. Strengthening capacity for marshland and hillside commodity chain development 27. The objective of Component 2 is to support the firm integration of women and men in targeted marshland and hillside areas into markets, by intensifying production, promoting diversification into agricultural value addition or upstream markets, and expanding access to markets. The Project will focus on strengthening commodity chains for main food staples, including rice, potatoes, maize, and horticulture crops but it will remain responsive to broader proposals where tangible marketing opportunities exist. The project approach will

9 strengthen farmer communities to promote an inclusive development for all including the very poor, the landed and the land less by mainstreaming best practice community driven development (CDD) principles across all project target areas (see Technical Annex for further details). Component 2 will include three sub-components: Sub-component 2.1: Strengthening farmer organizations and cooperatives 28. RSSP3 will strengthen producer organizations, including WUAs and cooperatives, with the goal of improving their governance and management capacity so that they can deliver good quality services to their members. Activities are expected to include: (i) mobilization and group formation (particularly on the hillsides); (ii) governance and management training including book keeping and accounting for farmers organizations and cooperatives implemented in partnership with LSPs; (iii) specific support and training for WUAs in collaboration with RSSP3 engineers and the District; (iv) production and dissemination of reference training material; and (v) organization of exchange visits between cooperatives. See the specific activities in the Technical Annex. The focus of capacity development will depend on the level of maturity of the farmers organizations and cooperatives. For RSSP2 cooperatives, special attention will be on value-chain development through business plan development (see Sub-component 2.3) while in new cooperatives created by RSSP3, additional effort will be put on basic governance and production technology. Small group formation will form an integral part of the approach where appropriate, but particularly on hillsides and with women and men in Project areas involved in non-farm activities. As the project progresses and groups and cooperatives gain experience, they would increasingly qualify for receiving capacity support in more complex value chain integration (see 2.3). WUA, by definition, are considered as a separate organization to the cooperative and the sub-component will support their formation, training and formal registrations. Districts will be encouraged to include WUA support and activities in the District development plans. Sub-component 2.2: Improving production technologies 29. RSSP3 will support activities to improve production and productivity in the marshlands and hillsides adjacent to marshlands. In line with Government policy for extension and in collaboration with Rwanda Agricultural Board (RAB), the Project will support the up-scaling of the Farmers Field Schools (FFS). The FFS approach builds capacity and empowers farmers to use improved and economically viable practices for sustainable soil, water and pest management in view of increasing productivity and its profitability of agricultural activities. RSSP3 will continue supporting cooperatives to become certified seed producers. Project activities in this sub-component would include: (i) Training-of-trainers for the up-scaling of FFS in marshlands and hillsides for sustainable intensification; (ii) up-scaling of the FFS in the marshlands and in the hillsides to be developed by the project (RSSP2 and RSSP3); (iii) support interested cooperatives to become certified seed producers in cooperation with RAB linking to any ongoing seed projects; (iv) LWH extension approaches to support intensification of rainfed hillside production; and (vi) support to innovations for productivity. Sub-component 2.3: Capacity building for value chain development 30. Capacity building for value chain development is to be directly linked to the various levels of organized groups discussed above that are meant to play a role in the value chain starting with the individual producer. As a lesson learnt from RSSP2, it is crucial to allow individual farmers to better plan and develop their farming activities through a thorough understanding of the business. Participatory value chain approaches will be used in addition to the successfully applied methodology of lead farmers. The following three core modules will be delivered: (i) development of farm budgets/business planning to lead farmers; (ii) small enterprise management to lead farmers; and (iii) marketing of output to Marketing Committees. On another level, business plan training will be provided for cooperative management that links directly to investments discussed in sub component 1.3.

10 Beyond this core training, a mentoring program provided by professionally trained service providers in agribusiness and value chain development on retainer will focus on cooperatives leaders and marketing committees for at least the first three years of the program. Criteria can be developed to indicate when cooperative development graduates from the input that local RDB-supported business development centers (BDS) can provide to the (possibly cost-shared) higher level service on retainer under this sub-component. The hillsides benefitting from collective infrastructure under sub-component 1.3 will receive similar support. Building on the several success stories from RSSP 2 respecting access to RIF for cooperative business plan financing, the RSSP 3 should focus on supporting cooperatives to seek financing for innovations through RIF. This includes clear articulation of quality innovation investment proposals and full information for risk assessment by the financial institution. Component 3: Project Coordination and Support 31. In keeping with the commitment of Development Partners in the agricultural sector of Rwanda to support MINAGRI s progression to a SWAp implementation, RSSP2 will complete its implementation merger with LWH. The LWH implementation structure was designed to contribute to MINAGRI s One PIU in which each of four implementation teams implement one fourth of the GoR strategic plan for the agricultural sector (PSTA II). As part of the LWH scale-up under the GAFSP, the procurement and financial management units of the LWH were merged with the more experienced ones of RSSP2 in order to further the Bank s support to MINAGRI s streamlined implementation. The proposed RSSP3 implementation structure is therefore an incremental fulfillment of this commitment. The RSSP team proposed a merged structure which was discussed and agreed by the mission (see Annex 7 for the organigram). The mission finds that the proposed structure is adequate to implement both RSSP and LWH activities. The mission recommends that the Project now proceed with a review and update of Project staff salaries, and formulate terms of reference for all positions, prior to the appraisal of RSSP3. Scope 32. In terms of scope, the Project team proposed an irrigation target of 7000 ha and provided data on potential marshlands and technologies that could be used in reaching that target. The mission worked with the Project team to collect cost information from RSSP and LWH to examine the feasibility of the Project proposal. The table in Annex 5 indicates that even when a very low (relative to LWH) hillsides unit cost is used (USD500/ha) for hillside development, the target of 7000 ha would bring Project costs to almost USD67 million, leaving USD3 million for rural infrastructure (sub-component 1.3), for all of Component 2 (capacity building) and all of Component 3 (project implementation). Based on the agreed objectives, principles and activities documented above, the mission proposed that RSSP3 could instead support around 17 new marshland cooperatives (14 from newly developed marshlands and 3 from Muvumba 8 RSSP2 marshland), across approximately 14 marshlands, covering 5,300 ha of irrigated marshland and 15,900 ha of developed adjacent hillsides. 4 To arrive at this proposal, for indicative purposes only, the mission used a unit cost for hillsides (USD800), significantly below that of the lowest range from the LWH package (USD 3,300 4,200/ha). The mission worked with the GoR team to try to provide the minimum technical requirements for Components 2 and 3 in order to determine minimal costs for each component and sub component. While there was broad agreement 4 In addition, the Project would support an approximate further 25 marshland cooperatives from RSSP 2 in need of consolidation of capacities for sustainable commodity chain integration, as well as small-group formation development with adjacent hillside communities.

11 on the intensity and nature of activities in Component 2, the GoR team felt that they could be availed at lower costs than the mission team s estimate. The differences in cost estimates can be further reviewed during preparation but remain marginal compared to overall project costs. Component/sub-component Proposed Resource Allocation Component 1 USD 54 million Sub-component 1.1 USD36.3 million Sub-component 1.2 USD12.7 million Sub-component 1.3 USD 5.0 Component 2 USD 11 million Sub-component 2.1 USD 4.5 million Sub-component 2.2 USD 3.5 million Sub-component 2.3 USD 3 million Component 3 USD 5 million Total USD70 million 33. Subsequent to discussion of this proposal, the Project firmly reiterated: its preference for 7000 ha of developed marshland considering the national need for irrigation and the significant impact it has had on food security for project beneficiaries so far; that cost savings could be found on the capacity building activities of Component 2 where the project has a good capacity building model ongoing ; and that a more affordable hillside model which builds on what the project is already doing could be found. Given the empirical exercise of Annex 5, the mission indicated that even given a more affordable (than LWH) proposal for hillsides, 7000 ha was not technically and financially possible without further financing such as cofinancing. On the last day of the mission, the World Bank s Country Management communicated the proposal from MINECOFIN to allocate an additional USD 10 million of Rwanda s increased IDA 16 allocation to RSSP 3. Applying this extra financing to expand the area under irrigation would go some way to maintaining the critical ratio between the hardware and software aspects of the Project indicated in the table above, while coming much closer to the Project s desired target. Given the timing of the communication, the mission agreed to work with the Project to re calculate the above proposal on the basis of an USD 80 million Project allocation. Broad agreement was reached on every other aspect of Project design. Going forward, therefore, will require (i) a further review of the cost estimates aligned with the agreed sustainability principles for the project, particularly for hillside development; and (ii) updated projections for irrigated hectare targets. 34. Monitoring & Evaluation and Management Information System: The mission facilitated a workshop to develop the RSSP 3 results chain (see Technical Annex). Following the final definition of the RSSP3 results framework, it was agreed that updates to the MIS data collection would be made. A workshop on the merging of the LWH and the RSSP3 M&E and communication units took place during the mission to identify the key responsibilities of the merged unit and also to define an action plan to finalize the merger (see Technical Annex). 35. Economic and Financial Analysis: The mission discussed with the Project M&E and Agribusiness staff the data required to undertake the financial and economic analysis (EFA) for the RSSP2 Implementation Completion Report (ICR) as well as for the preparation of the RSSP3 EFA for the Project Appraisal Document (PAD). The mission also provided a data template to the Project to provide the data by 30 August 2011 the EFA.

12 36. Safeguards: Based on visits to two potential project sites, Rwinkwavu and Gacaca, and discussions with the Project team, the mission confirms that the environmental safeguard policies proposed at Concept Stage are applicable: OP Environmental Assessment, OP 4.04 Natural Habitats, OP 4.09 Pest Management, OP 4.11 Physical Cultural Resources, OP 7.50 International Waterways. The mission gave a technical briefing on all safeguards triggered, and guided the Project Team on the update of the Environmental and Social Management Framework (ESMF). When requested by the GoR, the mission will prepare and issue the Riparian Notifications, as per OP The mission reminded the Project Team that the updated safeguards instruments - ESMF and Pest Management Plan (PMP) must be disclosed prior to the start of appraisal. The mission agrees with the Project Team that the merged LWH/RSSP project should have one full-time Environment Officer (EO) focused on environmental compliance. The mission reminds the Project to ensure that water abstraction rates from sub-projects are in line with the need to maintain a minimum ecological flow sufficient to protect biodiversity and livelihoods downstream (see also Technical Annex). The mission further confirms that resettlement activities will be required, and that as proposed at Concept Stage OP 4.12 Involuntary Resettlement is applicable. The extent of resettlement activities will be determined by the design of the individual sub-projects. As above, the mission reminded the Project Team that the updated safeguard instruments Resettlement Policy Framework (RPF) must be disclosed prior to the start of appraisal. The mission agrees with the Project Team that the merged LWH/RSSP project should have two full-time members of the Community Development Team, focusing on social safeguard compliance. OP 4.37 Safety of Dams was triggered during PCN review. However, it is extremely unlikely that the sub-projects selected would require dams of over 15 m in height. Although there may be dams with a height of between m, these are unlikely to be located in areas classified as high risk by OP At the request of the GoR team, the mission will discuss the triggered status of OP 4.37 with World Bank management and inform the GoR of the final decision. The mission notes that with the compliance of LWH with OP4.37, preparation for this safeguard policy in the event of its trigger will be minimal for RSSP. Financial Management 37. The mission undertook an FM assessment of RSSP3 in accordance with the Financial Management Manual for World Bank-Financed Investment Operations, which became effective on March 1, The overall residual FM risk is found to be Moderate (Medium-I). The FM assessment has identified the following mitigating measures to ensure the arrangements put in place by the proposed implementation entity meet the Bank s minimum requirements for project FM. Specifically, the Project needs (i) to finalize and validate the new FM structure and the terms of reference with clear reporting lines as part of the wider merger of the project implementation unit that still remain in draft; (ii) ensure all FM positions are filled especially for the new accountants supporting decentralized teams and activities; (iii) undertake discussion with the software consultant on the merging the existing softwares currently in operation and defined by a coding system; (iv) harmonize the chart of accounts to help with unit synergies; (v) consider harmonizing the FM manuals for a more effective FM team; and (vi) harmonize the reporting frequency for both projects and with that of GoR, to be confirmed by appraisal. Details of the FM assessments for RSSP3 are summarized in FM assessment in the Technical Annex. Procurement 38. As per the assessment in section D above, the mission has assessed the merged unit and finds that it has been enhanced with the merging of the more experienced RSSP staff with that of LWH. Prior to closure, the Project should recruit staff to ensure that the merged team consists of three Procurement Officers and one Procurement Assistant in addition to the head of Procurement Unit. At decentralized level, one Procurement Officer per province is required for RSSP 3 going forward. Having appropriate number and qualified staff in place will increase efficiency in project implementation and minimize fiduciary risk. F. Recommendations and Next Steps for RSSP 3 Preparation Recommended Action Component Responsible Entity Deadline 1 The Project needs to prepare a costed hillside 1 RSSP Program 30 September (adaptedlwh) approach that will inform total ha of irrigation and hillsides, while meeting RSSP3 hillside Management 2011

13 2 Recommended Action Component Responsible Entity Deadline objectives to share with Bank team as part of ongoing preparation The RSSP team should undertake a participatory evaluation of the LSP and discuss the conclusions as well as the RSSP3 indicative capacity development plan with the LSP at a workshop. 3 The RSSP team should undertake a preliminary evaluation of the marshland cooperatives supported by RSSP2 to identify; (i) those that would be ready for more intensive support regarding value chain integration and (ii) those that need further support to consolidate their organization and management capacity. 4 The Project should proceed with a review and update of Project staff salaries prior to the end of RSSP2. 5 Project Team should ensure that TOR for each of the positions appearing in the proposed merged structure should be prepared and shared with the Bank for review before the appraisal of the RSSP3. The Project Team should update the MIS data collection following the definition of the RSSP3 Results Framework The Project Team should provide the data required for the EFA to enable the consultant to complete the analysis. Merged LWH/RSSP project to assign one full-time Environment Officer (EO) focused on environmental compliance, and two full-time members of the Community Development Team, focused on social safeguard compliance. Government of Rwanda to send formal request for the Bank to prepare and issue the Riparian Notifications, as per OP 7.50 Project should ensure that water abstraction rates from 10 sub-projects maintain a minimum ecological flow sufficient to protect biodiversity and livelihoods downstream. Confirm the trigger status of OP4.37 on the Safety of 11 Dams 12 Follow the action plan developed to finalize M&E merger (see Technical Annex) 2 Project Management Prior to Appraisal of RSSP3 (end Nov 2011) 2 Project Management Prior to Appraisal of RSSP3 (end Nov 2011) 3 MINAGRI/Project Management Prior to Appraisal of RSSP3. (end Nov 2011) 3 Project Management Prior to Appraisal of RSSP3 (end Nov 2011) 3 Project Management Appraisal of RSSP3 (end Nov 2011) 3 Project Team (Agribusiness and M&E) 30 August 2011 Safeguards Project Management By completion of LWH/RSSP merger Safeguards/ Legal Safeguards Project Management Environmental Specialist and Irrigation Specialist Preferably by August 12, 2011 Ongoing Safeguards World Bank 30 August 2011 M&E Project Management Appraisal (end Nov 2011) The Bank and MINAGRI confirm their understanding and agreement to publicly disclose this Aide Memoire. The disclosure of this Aide Memoire was discussed and agreed to with the Project and Ministry counterparts led by Permanent Secretary Mr. Ernest Ruzindaza at the wrap-up meeting that took place on 5 August 2011in Kigali.

14 Annex 1: List of People Met NAME TITLE INSTITUTION Kalibata, Agnes Minister of Agriculture MINAGRI Ruzindaza, Ernest Permanent Secretary MINAGRi President Cooperative Duterimbere Murundi Gacaca Secretary Cooperative Duterimbere Murundi Gacaca Evariste Ndayisaba Farmer Ntende Emmanuel Bisanukuri Farmer - Cooperative Icyitegererezo Gacaca Francois Nizeyimana Farmer - Cooperative Icyitegererezo Gacaca Marianne Nzamukosha Auditor - Cooperative Icyitegererezo Gacaca Zephanie Nyayigiziki Farmer Muvumba Rachel Nyirabizeyimana Farmer Muvumba Sande Bavakure Farmer Muvumba Augustine Mingi Farmer Muvumba Bunani Farmer Muvumba Stanley Muganwa Vice-Mayor in Charge of Finances and the Economic Development in Nyagatare District, Eastern Province Muvumba VEGI APPALA SATYANARAYANA Project Manager (SPENCON) Muvumba Augustin BUTERA Work Director (SPENCON) Muvumba HAROUNA Bukari Chief o f the supervision Mission (CIMA) Muvumba François MANIRAREBA Director of ECOMAF Muvumba Anastase KARAGIRE Director of ERGECO Muvumba Thomas RWAGASANA Director (EMMR) Muvumba Varundeep Singh Project Irrigation Engineer (SPENCON) Muvumba Jean de Dieu SINZAMUHARA Manager of the COPRORIZ Ntende Marc NGARSANGMADJI Chief of Mission of the Technical study for the development of Rwinkwavu Marshland Rwinkwavu Norbert Seindege Director General Agricultural Production MINAGRI Violet Nyirasangwa Programme II manager MINAGRI Amor Bayouli Irrigation technical Assistant KWAMP project Venant Gasangwa Irrigation engineer KWAMP project Laurent Gashugi Assistant Representative FAO- Rwanda Mary Strode EICV Consultant, Leader Statistics Oxford Policy Management, NISR Prof Andy McKay EICV Consultant, Professor of Economics University of Sussex, NISR Ms Emilie Perge Researcher in Economics University of Sussex, NISR Sebastian Manzi Researcher NISR

15 Annex 2: Follow Up on RSSP 2 MTR (October 201) Recommendations 1 Recommended Action Comp Responsible Entity Deadline Follow-up summary July, MINAGRI and Project Management Project should decide which option it intends to pursue in order to resolve the financing gap. 2 In the event of the cancellation of EGECOR contract, the appropriate GoR agencies to take appropriate action against the firm for future work. 3 Project formulates alternatives for works completion in the case of premature contract cancellation with EGECOR and share with the Bank team for review. 4 Project will use the resources provided by the mission to review/ design training for marketing committees. 5 The Project and its LSPs should initiate support for cooperatives in analyzing how existing investments can leverage further investments through the Project s business plan process. 1 MINAGRI/RPPA Date of contract cancellation 1 Engineering Unit and Project Management 2 Technical and Agribusiness Units 2 Technical and Agribusiness Units 5 November 2010 The Project chose MTR Option 2: (i) postponing of Cyili marshland and Kibaya dam; (ii) removal of Gishoma dam (dropped as RSSP marshland); and (iii) splitting secondary works on Muvumba VIII marshland to be contracted with local firms. These savings amounted to USD5.88 million, closing the USD4.96 million gap identified at MTR and leaving a Component 1 surplus of USD1.15 million Project Management maintained pressure on the contactor and works have been completed according to the agreed deadline 22 October 2010 Not applicable. Works were completed according to the agreed deadline, as above 15 November 2010 RSSP2 designed a special module combining the RSSP1 module with material provided by the mission and from other sources (MINICOM). December, 2010 Although cooperatives were trained on saving for depreciation for future maintenance, the Project has started this exercise and will continue to project end. It will be important also as part of review while planning for RSSP3.

16 6 MINAGRI to provide guidance on speed and process of PAC-approved salary harmonization process and salary upgrade. PUBLIC Recommended Action Comp Responsible Entity Deadline Follow-up summary July, MINAGRI 30 November 2010 GoR harmonized pay schedule issued. With the decision to advance preparation of RSSP 3 and a proposed implementation merger, with implications in numbers and levels of staff, this exercise was put on hold until RSSP preparation. 7 Project to resubmit the RSSP 2 training plan. 3 Project Management 15 November 2010 Training request has been forwarded to MIFOTRA but not yet resubmitted. 8 9 The Project should re-assess the volume of work of the two provincial procurement assistants in terms of assisting the 82 cooperatives in procurement and make appropriate recruitment decision. MINAGRI to discuss the constraint on Project outcome achievement of the tax bill with MINECOFIN as soon as possible Project confines future requirements for individual 10 consultants and key staff for firms to that of CV and certified diploma Terms of Reference (TOR), including expected 11 outputs with times and deliverables should be developed for the Communication Specialist 12 Further streamline the number of indicators being tracked through the new EXCEL-based M&E tool and finalize the migration of data All contractors should be enforced to provide PPE equipment to the workers with penalty for non 3 Procurement and Project Management 31 October 2010 The assessment showed that activities had reduced at the provincial level. With the merger of the RSSP and LWH procurement units, further recruitments were suspended. As per the June LWH mission recommendations, recruitment of a procurement assistant for the merged unit underway 3 MINAGRI 5 November 2010 MINECOFIN confirmed GoR will pay the tax liability documentation still to be provided to the Bank 3 Project Procurement Unit Effective immediately Implemented 3 Project Management 31 October 2010 Implemented 3 Project M&E Unit 15 December 2010 The M&E team has streamlined the excel data base tool, which has resulted in an improved management and input of data. Sfgds. Engineering Unit and Project Management Effective immediately Project team confirms that PPE equipment is provided to all

17 13 equipment to the workers, with penalty for non compliance. Workers should be encouraged to wear the equipment provided, for their own safety; At Mukunguli, insofar as feasible, a narrow verge 14 of grass should be maintained on the verge of the channels to limit damage caused by erosion and limit the introduction of fertilizer into the water PUBLIC Recommended Action Comp Responsible Entity Deadline Follow-up summary July, 2011 workers with instructions to use them. Sfgds Environmental Specialist At Mukunguri preparation Pennisetum is being planted as an as a soil erosion control measure, to limit fertilizer runoff. 15 Efforts to implement soil erosion control measures upstream from Mukunguri site should be encouraged or developed by MINAGRI 16 A minimum ecological flow assessment should be undertaken at Cyili using the methods suggested in the review of the EIA. 17 Submit a revised version of the Muvumba 8 RAP to the incoming Safeguards Specialist for review, clearance, and disclosure. 18 Revise and adjust the data collection strategy to include all the indicators and triggers (for eventual preparation of RSSP 3) Sfgds MINAGRI June 2011 Erosion control measures (e.g., buffer zones) used both on- and off-site, including upstream at Mukunguli Sfgds Sfgds Environmental Specialist, Engineering Unit, Project Mgt. Rural Sociologist Project Management Prior to RSSP 3 The ecological flow assessment is adequate, please note recommendation 7 in Section D of the Aide Memoire. 20 October 2010 Implemented 3 Project M&E Unit 15 December 2010 The M&E team has revised the data collection strategy and missing data for the Results Framework and Triggers will be collected mainly through the upcoming impact assessment.

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19 Introduction Annex 3: RSSP 3 Preliminary Identification Activities (February 2011) RWANDA Third Rural Sector Support Project (RSSP3) RSSP 3 Field Work and Strategic Planning Workshop February 2011 Technical Note 5 The purpose of this technical note is to summarize the activities and discussions with the Ministry of Agriculture and Animal Resources (MINAGRI) on the preparation of a third phase of the three-phase adaptable program loan (APL) for marshland development in Rwanda, the Rural Sector Support Projects (RSSP). Technical Field Work and a Strategic Planning Workshop were held in the field over February Government participants included Ernest Ruzindaza (Permanent Secretary, MINAGRI), Jolly Dusabe (Project Coordinator, RSSP 2), Esdras Byiringiro (Monitoring and Evaluation (M&E) Officer, RSSP 2), and Gaspard Niragira (Irrigation Engineer, RSSP 2). The World Bank team was composed of Loraine Ronchi (Senior Economist, RSSP 2 Task Team Leader) and Valens Mwumvaneza (Rural Development Specialist) with backstopping from the World Bank RSSP 2 Implementation Support Team: Amadou Soumaila (Irrigation Engineer), Alberta Mascaretti (Agricultural Officer), Thierry Lassalle (Institutional Development and Agribusiness Specialist), Noreen Beg (Senior Safeguards Specialist) and Diego Garrido (M&E Specialist). The objective of the field work and workshop included: (i) to discuss the updated the results framework and trigger table since MTR; (ii) to identify key issues/lessons learned through field visits to existing and potential sites; and (iii) to inform the drafting of a strategic plan for the early completion of phase 2 (RSSP 2) project activities and advance preparation for phase 3 (RSSP 3). Background The second-phase Rural Sector Support Project (RSSP 2) held its midterm review in October Within the overall APL objective (see Annex 1), RSSP 2 aims to sustainably rehabilitate and develop marshlands and hillsides and to strengthen commodity chains for increased commercialization of smallholder agriculture. The Project has three components: (1) Marshlands and Hillsides Rehabilitation and Development; (2) Strengthening Commodity Chains; and (3) Project Coordination and Support. The MTR for RSSP 2 concluded (see RSSP 2 MTR Aide Memoire) that the Project was well advanced in completion of its Component 1 activities and on schedule for Component 2. The MTR further documents the inflation of construction and materials costs in Rwanda since RSSP 2 effectiveness in 2008 and quantified the resulting financing gap. The MTR Aide Memoire laid out several options, developed and discussed with MINAGRI, for next steps. Of these options, MINAGRI officially communicated to the Bank that, given the advanced achievement of RSSP 2 triggers and results framework (RF) indicators, that it will close the Project early and commence preparation of the third and final phase of the APL (RSSP 3). The surplus savings from early closure will fund studies in preparation for RSSP 3; and fill the SDR/USD exchange rate gap. Activities and Outcomes Over the course of the activity, the joint Government-World Bank team visited two marshlands: Rugerimigozi Marshland (an existing RSSP 2 marshland) and Kamiranzovu Marshland (a potential RSSP 3 marshland). They visited an innovative extension model (One Acre) in Nyamasheke District and participated in a day long strategic 5 The Technical Note was filed as part of the World Bank Implementation Status and Results Report (ISR) in June 2011, with updated results framework as at June The technical note filed in the ISR also included the updated results framework as at February 2011, the time of field work.

20 planning workshop chaired by the Permanent Secretary, MINAGRI. In anticipation of the strategic workshop, the Government prepared an updated results framework and trigger table (Annex 1), an RSSP 2 Progress Summary (since MTR) presentation, and an RSSP 2 Activity Plan for the remainder of the life of the Project. These documents, as well as the environmental assessment for Kamiranzovu (completed during the preparation of RSSP 2), were virtually reviewed by the entire RSSP 2 World Bank implementation team with comments provided during the workshop. In term of outcomes and objectives: RSSP 2 Results Framework and Trigger Table: Review by both World Bank and Government M&E specialists confirmed the advanced state of indicator achievement for the Project; Engineers agreed that a projected completion date of works by December 2011 was ambitious but conceivable slippages are not likely to exceed March 2012; Identification of RSSP 3 Issues through Site Visits In addition to the core set of selection parameters developed and used by the RSSP team throughout the life of the APL (e.g. cost/ha threshold, environmental externalities, etc.) a visit to Kamiranzovu Marshland near the Nyungwe Forest highlighted possible positive stewardship effect RSSP can have in areas where intensive rice cultivation is already ongoing without systematic environmental assessment pest management training, etc.; 80 ha of this 120 ha of Rugeramigozi marshland was developed by RSSP 2 and farmers were harvesting a first crop of rice, indicated value chain challenges on the marketing side; marketing support and value chain activity is flagged for strengthening in RSSP 3; Rugeramigozi highlights the opportunity, on the engineering side, to extend irrigation hectarage under RSSP at lower cost (i.e. developing a range of cost alternatives to be elaborated during potential RSSP 3 preparation). Strategic Plan Draft Observations on progress of activities, on indicators, on triggers and from field visits led to a workshop for a strategic plan and timeline; Progress summary confirmed MTR observation that there were insufficient Project resources for Component 2 activities on Muvumba that would be covered under RSSP 3 WUA indicator is advanced, but missing the triple-translated texts, including Ministerial Order (Decree) which has to go to Cabinet (can take until May 2011), and all associated texts finalized; then collaborative work with the other Ministries needs to take place; Output from workshop includes a draft outline for the plan to complete RSSP 2 and prepare RSSP 3, to be developed by the Government Team by 30 April 2011; and World Bank preparation timeline to effectiveness, to be prepared by the Bank team and sent to RSSP/MINAGRI.

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22 Annex 4: Updated Midterm RSSP 2 Results Framework (including Phase 3 triggers) Indicator Project Outcome Indicators Baseline Project Target Progress 25 July 2011 Critical Assumptions and Remarks Comments By the end of the Project, production of rice in marshlands rehabilitated or developed under RSSP2 has increased by at least 100 percent relative to the baseline 5,527 tons 11,054 tons 1,358 tons Rice production in marshlands rehabilitated or developed during the last year of the project will increase after project completion. The progress on production is from an area of only 317 ha which was ready after rehabilitation during season 2011A. However, from season B, a total area of 1,574 ha was cultivated, and we expect at least 10,231 tons from that season alone, which will help to reach the target. By the end of the Project, at least 50 percent of farmers in marshland and hillside areas developed or rehabilitated by the RSSP1 and RSSP2 have adopted sustainable marshland or hillside intensification technologies 25% of HH 50% of HH Adoption of sustainable intensification technologies is defined as adoption of at least two of the following: soil fertility management, IPM, conservation tillage, contour bunding, construction of erosion control structures including terraces, vegetative strips, and agroforestry practices. Baseline value based on adoption observed among RSSP1 direct beneficiaries. The progress on this indicator will be measured during the Impact Assessment Survey planned in August We shall have the progress by October However, after 4 seasons of support, and after training in practice through the demonstration plots, Farmer Field Schools, study tours and training on erosion control; there is a significant increase of farmers who have adopted marshland and hillside intensification technologies. This is confirmed by the continuous increase of fertilizers used by farmers and the high percentage of more than 80% of survival rate and good maintenance of trees planted and terraces constructed for the protection of hillsides. By the end of the Project, at least 20 cooperatives with business plans and supported by RSSP2 have increased their revenues from sales by 50% relative to the baseline 0 coops 20 coops 35 coops Assumption is that coops will be able to report their revenues accurately. Baseline revenues will be determined once the coops to be supported are chosen Due to the difficulty of predicting the time path of this indicator, the change in revenue of each supported coop will be tracked as well. We have already met and surpassed the target. The number of cooperatives will certainly grow after the 2011B sales (the progress is after 2011A sales).

23 Intermediate Outcome Indicators Component 1: Marshlands and hillsides rehabilitation and development By the end of the Project, at least 3,300 additional ha of irrigated marshlands have been rehabilitated or developed by the Project (EDPRS/PSTA indicator) 3,110 ha 6,410 ha 4,684 ha By the end of the Project, at least 75 percent of the farmers in irrigated marshlands rehabilitated or developed by N/A 75% 77% the Project (RSSP1 and RSSP2) are paying water charges through WUAs By the end of the Project, at least 9,900 additional ha of hillsides have been sustainably developed by the Project (EDPRS/PSTA indicator) 14,485 ha Component 2: Strengthening commodity chains By the end of the Project, at least 80 cooperatives supported by the Project have quality business plans under implementation 24, 385 ha 22,841 ha 0 coops 80 coops 74 coops Currently there are no WUAs. WUAs will be established by the project Sustainable development of hillsides is defined as occurring when at least two of the following practices have been implemented: soil fertility management, IPM, conservation tillage, contour bunding, erosion control structures including terraces, planting of permanent crops or when the area is deemed unsuitable for productive use and protected through planting of permanent vegetation. Under implementation is defined as the execution of activities described in the business plan. Baseline and intermediate values will be updated once the coops to be supported are chosen PUBLIC All RSSP2 planned marshlands are complete except Muvumba VIII and Rwagitima extension (both totalizing 1,800ha). The 2 remaining marshlands are expected to be complete by December WUAs committees were elected and trained in all 20 marshlands. All things are in place, a ministerial order will be passed any time soon. Currently 77% of farmers are paying water charges. Out of 9,900 ha target; the Project has already covered 8,356ha after only two hillside protection seasons (2009 and 2010). By December 2011, this target will be met and surpassed as the total protected area will be more than 10,000 ha after the 2011 season. 74 cooperatives have finalized and started the implementation of their business plans. The number is still increasing, this because of the training of cooperatives on business planning. By the end of August 2011, the total of cooperatives with quality business plans under implementation will have surpassed 80 as 9 more business plans are at the draft level By the end of the Project, at During season 2011A, 24 cooperatives produced

24 least 5 additional cooperatives supported by RSSP2 are marketing certified maize or potato seed By the end of the Project, with at least 75 percent of the rural infrastructure sub-projects funded through the LDF, the majority of users are satisfied one year after the sub-project was completed Overall Program Indicators (a) Change in the average level of household incomes among Program direct beneficiary households (b) Change in the percentage of Program direct beneficiary households under the poverty line (c) Change in the average level of rice yields per hectare in districts having marshlands rehabilitated or developed by the Program Phase 3 Triggers By the end of the Project, at least 3,300 additional ha of irrigated marshlands have been rehabilitated or developed by the Project (EDPRS/PSTA indicator) By the end of Phase 2, average crop yields on farmed N/A 75% 48,840 FRW 65.66% 2.7 tons/ha 4.27 tons/ha 3,110 ha 6,410 ha 4,684 ha Rice: 3 t/ha Rice: 6 t/ha Rice: 6.05t/ha A simple questionnaire has been developed to assess the achievement of this indicator For this indicator, crops are defined as rice, maize, and potato. and marketed their seeds 2 of rice, 8 of maize, 7of potatoes, 4 of banana and 1 of cassava and 2 of wheat). The progress on this indicator will be known by October 2011 after the Impact Assessement Survey planned to start in August 2011 The ongoing EICV will provide the data, but the progress will also be measured during the Project Impact Assessment Survey. The IA survey firm will work closely with the NISR EICV team to provide a harmonised progress status The ongoing EICV will provide the data, but the progress will also be measured during the Project Impact Assessment Survey. The IA survey firm will work closely with the NISR EICV team to provide a harmonised progress status Baseline and progress are from MINAGRI crop assessments reports All RSSP2 planned marshlands are complete except Muvumba VIII and Rwagitima extension (both totalizing 1,800ha). The 2 remaining marshlands are expected to be complete by December Progress figures are from Project reports for direct beneficiary farmers. The figures may be

25 marshlands and hillsides developed under the Project are 100 percent higher relative to the beginning-of-phase-1 baseline By the end of Phase 2, cropderived incomes of farmers assisted by CETSEs are 50 percent higher relative to the end-of-phase-1 baseline By the end of the Project, at least 75 percent of the farmers in irrigated marshlands rehabilitated or developed by the Project (RSSP1 and RSSP2) are paying water charges through WUAs By the end of the Project, at least 20 cooperatives with business plans and supported by RSSP2 have increased their revenues from sales by 50% relative to the baseline Maize: 0.8 t/ha Potato: 8.6 t 48,840 FRW Maize: 1.6 t/ha Potato: 17.2 t/ha 73,269 FRW Maize: 4.02t/ha (ZM607 seed); 5t/ha (Hybrid seed) Potato: 17.5 t/ha N/A 75% 77% 0 coops 20 coops 35 coops Baseline values are national average yields reported by MINAGRI for The Impact Assessment calculated the incomes for the direct beneficiaries and included the following crops: banana, rice, wheat, cassava, maize, maracuja, moringa Currently there are no WUAs. WUAs will be established by the project Assumption is that coops will be able to report their revenues accurately. Baseline revenues will be determined once the coops to be supported are chosen Due to the difficulty of predicting the time path of this indicator, the change in revenue of each supported coop will be tracked as well. even higher after finishing the ongoing harvesting of season 2011B The ongoing EICV will provide the data, but the progress will also be measured during the Project Impact Assessment Survey. The IA survey firm will work closely with the NISR EICV team to provide a harmonised progress status WUAs committees were elected and trained in all 20 marshlands. All things are in place, a ministerial order will be passed any time soon. Currently 77% of farmers are paying water charges. We have already met and surpassed the target. The number of cooperatives will certainly grow after the the 2011B sales (the progress is after 2011A sales).

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27 Annex 5: Options for Component 1 (Infrastructure for Marshland, Hillside and Commodity Chain Development) Investment cost PUBLIC Option Description Intermediate cost (USD) Option Zero 5,000 ha of marshland 35,000, ha of low cost irrigation technologies 180,000 hillside development (USD 500/ha) 7,500,000 RI 5,000,000 Total Cost (USD) 47,680,000 Option 1 6,000 ha of marshland 500 ha of low cost irrigation technologies hillside development (USD 500/ha) RI Option 2 7,000 ha of marshland 800 ha of low cost irrigation technologies hillside development (USD 500/ha) RI Option Zero-bis 5,000 ha of marshland 300 ha of low cost irrigation technologies hillside development (as under LWH) RI Option 1 bis 6,000 ha of marshland 500 ha of low cost irrigation technologies hillside development (as under LWH) RI Option 2 bis 7,000 ha of marshland 800 ha of low cost irrigation technologies hillside development (as under LWH) RI 42,000, ,000 9,000,000 6,000,000 49,000, ,000 10,500,000 7,000,000 35,000, ,000 50,400,000 5,000,000 42,000, ,000 60,480,000 6,000,000 49,000, ,000 70,560,000 7,000,000 57,300,000 66,980,000 90,580, ,780,

28 Annex 6: MINECOFIN Taxation Letter PUBLIC

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30 Annex 7: Proposed Merged Organigram for LWH & RSSP Units 6 6 Note to RSSP Team: The proposed revisions made by the Bank Team to the structure proposed by RSSP include: the District Coordinators moved to the same level as the unit heads; Replace the Provincial Procurement Assistants with Procurement Officers (perhaps 2), because of the scope of works required to support community procurement and also provide capacity building; there is no need to have a financial officer/accountant in each district, instead there is need to have a few well qualified financial staff placed at the provincial level; under the Land Husbandry (LH) unit, there should be 2 Land Husbandry Specialist positions; under the Community Development (CD) unit, there should be 2 positions for Capacity Building Specialists (CBS), one responsible for non-business capacity and the other responsible for business capacity building. There is also need to include a position for group formation. The mission also discussed the desirability of a rice chain commodity expert to be added to the Agribusiness Unit. The existing value chain specialist covers both LWH and non-rice RSSP.