AFRICAN DEVELOPMENT FUND

MULTINATIONAL

REGIONAL INSTITUTIONAL SUPPORT PROJECT ON

PUBLIC FINANCIAL GOVERNANCE

(RISPFG)

OSGE/GECL DEPARTMENTS

May 2016

Pu

bli

c D

iscl

osu

re A

uth

ori

zed

Pu

bli

c D

iscl

osu

re A

uth

ori

zed

TABLE OF CONTENTS

Acronyms and Abbreviations

Currency Equivalents, Fiscal Year, Weights and Measurement

Grant Information

Project Summary

Results-based Logical Framework

Project Timeframe

I - STRATEGIC THRUST & RATIONALE 1.1 Project Linkages with Country Strategy and Objectives

1.2 Rationale for Bank’s Involvement

1.3 Donors Coordination

II – PROJECT DESCRIPTION

2.1 Project Components

2.2 Technical Solution Retained and Other Alternatives Explored

2.3 Project Type

2.4 Project Cost and Financing Arrangements

2.5 Project’s Target Area and Population

2.6 Participatory Process for Project Identification, Design and Implementation

2.7 Bank Group Experience, Lessons Reflected in Project Design

2.8 Key Performance Indicators

III – PROJECT FEASIBILITY

3.1 Economic and Financial Performance

3.2 Environmental and Social Impacts

IV – IMPLEMENTATION

4.1 Implementation Arrangements

4.2 Financial Management, Disbursement and Audit

4.3 Procurement Arrangements

4.4 Monitoring and Evaluation

4.5 Governance

4.6 Sustainability

4.7 Risk Management

4.8 Knowledge Building

V – LEGAL INSTRUMENTS AND AUTHORITY

5.1 Legal Instrument

5.2 Conditions Associated with Bank’s Intervention

5.3 Undertaking

5.4 Compliance with Bank Policies

VI – RECOMMENDATION

i

ii

iii

iv

v

vii

1

1

1

4

5

5

7

8

8

9

9

9

10

11

11

11

12

12

12

13

14

14

15

15

15

16

16

16

16

16

16

LIST OF TABLE

Table 2.1 Project Description 6

Table 2.2 Project Alternatives Considered and Reasons for Rejection 7

Table2.3 Project Cost Estimates by Component 8

Table 2.4 Sources of Financing 8

Table 2.5 Project Cost by Category of Expenditure USD’000 8

Table 2.6 Project Cost by Category of Expenditure UA’000 9

Table 2.7 Expenditure Schedule by Year 9

Table 2.8 Lessons Learned from Previous Operation 10

Table 4.1 Project Implementation Supervision 14

Table 4.2 Risk and Mitigation Measures 15

Annex

Annex I: Results and Lessons Learned from Past Regional ISPs

Annex 1I: List of Regional ISPs designed and implemented by OSGE (2002-2012)

i

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank

ADF African Development Fund

AGI Africa Governance Institute

ANRC African Natural Resource Center

ATAF African Tax Administration Forum

BSI Budget Strengthening Initiative

CABRI Collaborative Africa Budget Reform Initiative

RISPG Collaborative African Budget Reform and Tax Administration Forum

CPIA Country Policy and Institutional Policy Assessment

CSP Country Strategy Paper

DFID UK Department for International Development

DRM Domestic Resource Mobilization

FRMB Partnerships and Financial Resource Mobilization Department

GECL General Counsel Department

GIZ German Agency for International Cooperation

IFMIS Integrated Financial Management System

ICT4 ICT for Development

IMF International Monetary Fund

ISP Institutional Support Project

JAS Joint Assistance Strategy

ODI Overseas Development Institute

OFSD Financial Sector Department

ONRI NEPAD and Regional Integration Department

OPSM Private Sector Department

ORVP Operational Vice Presidency

OSGE Governance, Economic and Financial Management Department

PCR Project Completion Report

PFM Public Financial Management

PRSP Poverty Reduction Strategy Paper

RAS Regional Assistance Strategy

RSA Republic of South Africa

SARC South Africa Regional Resource Center

SECO Switzerland’s State Secretariat for Economic Affairs

WB World Bank

ii

CURRENCY EQUIVALENTS

As of January 2016

1 UA = ZAR 21.54

1 USD = ZAR 15.55

1 € = ZAR 17.55

1 UA = USD 1.40

1 UA = € 1.27

1 € =USD 1.10

FISCAL YEAR

1st January -31st December ATAF

1st April -31st March CABRI

WEIGHTS AND MEASUREMENTS

1 METRIC TONNE = 2204 POUNDS (LBS)

1 KILOGRAMME (KG) = 2.200 IBS

1 MILIMTRE (MM) = 0.03937 INCH (“)

1 KILOMETRE (KM) = 0.62 MILE

1 HECTARE = 2.471 ACRES

iii

GRANT INFORMATION

Clients Information

RECIPIENTS : ATAF and CABRI

EXECUTING AGENCY: ATAF and CABRI (both based in South Africa)

Financing Plan

Source Amount (UA’000) Instrument

Regional Public Goods Component I (CABRI) 2.670 Grant

Regional Public Goods Component II (ATAF) 2.608 Grant

TOTAL COST 5.278 Grant

Timeframe-Main Milestones

Concept Note November 2015

Appraisal January 2016

Project Approval May 2016

Effectiveness June 2016

Mid-term-Review July 2017

Completion December 2018

Closing Date June 2019

iv

PROJECT SUMMARY Project

Overview

Project Name: Regional Institutional Support Project on Public Financial Governance (RISPFG) to

support ATAF and CABRI.

Geographical Area: African Continent

Implementation timeframe: 2016-2018

Project cost: UA 5.278 million (ATAF UA2.608 m and CABRI UA 2.670m)

Expected outputs and outcomes: Expected outputs under component I include: policy brief and reports

on budget reforms published, report on public investment management practice, peer learning and

exchange network for senior budget officials strengthened, PFM knowledge hub fully operational, report

on partnership for greater accountability published, research paper on use of country system to better

management of aid information and flow of funds; policy brief on agriculture financing, publication of

budget documents and calendar, and increased membership and network of budget experts.

Expected outputs under Component II include: tax payers education tools and materials developed, network

of policy advisers and tax administration officers established, improved tax regulatory framework

developed, informal sector taxations system guideline developed, and peer learning mechanisms for tax

administration agencies strengthened.

Expected outcomes includes effective contribution toward improved capacity of member countries for

domestic resource mobilization and budget management transparency and accountability.

Project Direct Beneficiaries: The project’s direct beneficiaries are ATAF and CABRI. ATAF will benefit

in the form of financial assistance to scale up and deliver its mandate for capacity building of the network

of senior tax administrators. CABRI will also benefit from the Bank’s financial assistance to strengthen its

work on budget transparency and accountability reforms. RMCs will benefit indirectly from technical

assistance and capacity building support provided by these two network of tax administration, and budget

practitioners.

Needs

Assessment

Governance and institutional capacity remains a priority in regional member countries. Africa

experienced impressive economic performance recently, but this growth has not been inclusive in part due

to governance shortcomings among other things. Inequality is still high. African women still have less

access to productive resources, youth unemployment remains high. More is needed to take Africa to the

middle income status that its people aspire to. The Sustainable Development Goals (SDGs), and the Third

International Conference on Financing for Development reaffirmed that there have to be significant

improvements in Domestic Resource Mobilization, and building effective, accountable and inclusive

institutions at all levels in order to promote inclusive growth and improve the quality of people's lives.

African countries and their development partners, including the African Development Bank have

prioritized governance and accountability as one of their strategic priorities. CABRI and ATAF in

collaboration with member states that endorsed the 2012 “Declaration on Good Financial Governance”,

are committed to promote good Public Finance Management (PFM) and Domestic Resource Mobilization

(DRM) practices. They have also developed a strategic plan which calls for increased investment to

strengthen institutional and human capacity to further improve public financial management and tax

administration in the continent.

Bank’s Added

Value

The project builds upon Bank’s previous operation and support to PFM and tax administration reforms in

RMCs. It will scale up and complements other development partners’ interventions. The Bank, through

support to CABRI and ATAF, will leverage existing resources from the ADF regional public goods window

to promote knowledge management and advisory services to support public financial governance reforms

at country and regional levels. The project will bring synergy between the regional and country level

initiatives on tax administration and budget reforms.In addition, the Bank, ATAF and CABRI are seen by

RMCs as reliable and trusted partners for beneficial change.

Knowledge

Management

The Project will contribute to knowledge building through peer learnings, networking, skills and

knowledge transfer, and partnership among the tax and budget officials in the member countries. The

establishment of the PFM Knowledge Hub will play a critical role and serve as an effective platform to

share knowledge and centre for PFM knowledge and analysis. The Bank will capture and disseminate

knowledge and experience through sharing the findings of supervision missions, progress reports, and the

Project Completion Report. Lessons learned and experience gained will be available to inform future

operations.

v

Result-based Logical Framework

Country and project name: Regional Institutional Support Project on Public Financial Governance (RISPFG) for ATAF and CABRI.

Purpose of the project: To strengthening budget and tax management in regional member countries.

RESULTS CHAIN

PERFORMANCE INDICATORS MEANS OF

VERIFICATION

RISKS/MITIGA

TION

MEASURES Indicator

(including CSI) Baseline Target

IMP

AC

T

Impact

Contribute to

improved public

financial management

and governance

1. Open Budget

Index (continental

average)

2. Domestic tax

revenues as a

percentage of GDP

3. Ibrahim Index of

African

Governance

1. OBI improved

by 9.4% from

2012-2015

2. Low income

countries currently

mobilise about

17% of their GDP

in tax revenue

3. Overall

governance

average score was

50.1 in 2015

1. OBI to improve by 15% from

2016 to 2018

2. Low income countries to

mobilize about 20% of their

GDP in tax revenue by 2018

3. Overall governance average

score to reach 51 by 2018.

1.CABRI and ATAF

progress and status

reports

2. Reports from

Budget Directors and

Tax Commissioners

from Ministries of

Finance.

3. OBS and IIAG

report

Risk 1:

Implementation

capacity

constraints.

Mitigation:

Existing Project

management teams of each organization

will be in place to

manage and coordinate project

implementation.

The project will provide additional

capacity in the two

institutions to further enhance

project management

capacity

Risk 2:

Sustainability:

Mitigation: The

two institutions

are committed to

increasing their

membership to be

able to pay for

their operating

cost from

membership fees

and reduce donor

dependency

Risk 3: Fiduciary

risk. Mitigation: Project support

will improve

fiduciary

environment..

Compliance with

the Bank’s

procurement of

goods and

services, and

submission of

annual audit

reports.

OU

TC

OM

ES

Improved budget

credibility and

effectiveness in tax

administration

1. Aggregate

expenditure out-turn

compared to original

approved budget

2. Improved

comprehensiveness

and public access to

key fiscal

information

1 Policy proposals

are not linked to

fiscal strategy

2. Poor selection

and planning of

Investment

projects.

3. Aggregate out

turn varies widely

1. Fiscal impact of policy

proposals assessed in 2018.

2. Improved public investment

project selection framework

developed by CABR

3. % reduction of variance

between 2016 and 2018

1. AfDB CPIA

Scores and PEFA

reports (Cluster D

Indicator)

2. OBI Reports.

4. Effectiveness in

collection or tax

payments

4. 1.Weak revenue

administration

4.2. No tax payer

education

5. Lack of ICT

systems

especially at border

points.

.1Information on revenue

collections available in

Selected RMCs in 2018

4.2. Taxpayer education material tools

developed and distributed to all TAF

Members by 2018.

5. An integrated ICT

System developed and distributed to

member

States.

Progress reports

from ATAF and Tax

Commissioners.

Component 1: Support for strengthened budget reform

OU

TP

UT

S

Output 1.1. Improved

fiscal and budget

policy

Public investment

management

capacity developed.

Public investment

management

practice introduced

in member

countries

Report on public investment

management practice

published in 2017.

Blended training programme

for agriculture budget analysist

in fifteen African countries in

2018.

1.CABRI progress

and status reports

2. Supervision

mission reports

3. Workshop and

conference reports

Output 1.2: Enhanced

budget transparency

and accountability

Member countries

established

mechanisms for

fiscal transparency

and accountability

partnerships and use

of country systems

by donors.

NA Policy briefs on fiscal

transparency and

accountability developed in

2018 by member countries

2 Case studies and report on

partnerships for fiscal

transparency and

accountability published in

2018

Guideline and action plan

developed for use of country

systems in Senegal in 2016

vi

Output 1.3: Enhanced

institutional

capabilities in budget

management

Establishment of

PFM knowledge

hub

Knowledge sharing

events

CABRI annual

conference PFM Information Hub

functional and used by RMCs

# networking and peer learning

events

# PFM training for finance

ministers and budget/PFM

officials

CABRI conference

Component 2: Enhanced Capacity for Domestic Resource Mobilization

Output 2:

Improved Tax

administration systems

Research

publications on tax

administration

Knowledge sharing

events

NA

2.1. Informal sector taxation

system guideline developed by

2018

2.2 Network of policy advisers

and tax administration officers

established by 2018.

2.3Taxpayer education tools

distributed to all ATAF

Members by 2018

2.4 Report on effective and

efficient Tax systems

developed by ATAF and used

by RMCs

1. Progress reports

from ATAF

Component 3: Project Management Support

Output 3: Improved

project

implementation and

coordination

Periodic reports Audit report Annual audit report

Bi-annual progress report

Impact/result assessment report

by 2019

ATAF and CABRI

reports

KE

Y A

CT

IVIT

IES

COMPONENTS INPUTS

Component 1: Support for strengthened budget reform (UA 2.441 million) Activities:

Strengthening central public planning agencies

Dialogue on aide transparency and use of country systems

Twining two countries to learn from one another on transparency and accountability;

Creation of PFM knowledge Hub (Centers of excellence);

Institutional Capability building on budget credibility.

Networking and research

Component 2 : Enhanced Capacity for Domestic Resource Mobilization (UA2.379m) million

Activities:

Develop an effective taxation system for informal sector

Develop a network of policy advisors and tax administration officers

Develop tools on taxpayer education, advocacy and outreach and an Integrity Assurance

Programme

develop an African approach to implement efficient and effective revenue administration ICT

systems

Develop ICT guide for RMCs in 2017

Develop and operationalize integrity assurance programme for RMCs

Component 3: Project Management Support (ATAF & CABRI, UA 0.458 m): Activities: (i)

Recruitment of two finance officers and a procurement expert; M&E and result reporting; and impact

assessment.

ADF Grant (RPG Window)

= UA 5.278 million

vii

Table i: Project Implementation Schedule

Activities/Years 2016

2017 2018 Action By

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Project Processing

and Management

Grant Approval Bank

Signing Grant

Agreement ATAF/CABRI

and Bank

Project

Effectiveness ATAF/CABRI

Project Launching Bank

Project

Implementation ATAF/CABRI

Mid-term Review ATAF/CABRI

/BANK

Project Completion ATAF/CABRI

Audits ATAF/CABRI

/Bank

1

REPORT AND RECOMMENDATION OF THE MANAGEMENT TO THE BOARD

OF DIRECTORS ON A PROPOSED GRANT TO THE REGIONAL INSTITUTIONAL

SUPPORT PROJECT ON PUBLIC FINANCIAL GOVERNANCE (IRSPFG)

Management submits the following Report and Recommendations on a proposed grant total of

UA 5.278 million to the Collaborative Africa Budget Reform Initiative (CABRI) and the

African Tax Administration Forum (ATAF) to finance the Regional Institutional Support

Project on Public Financial Governance (RISPFG).

I STRATEGIC THRUST AND RATIONALE

1.1 Project Linkages with Regional Strategy and Objectives

1.1.1 The project is aligned with the Bank’s Regional Integration Policy and Strategy

(2014 – 2023). Specifically this operation will support the harmonization of financial

governance and standards by strengthening institutional capacity and leveraging partnership

with regional networks of public finance and tax administration practitioners and policy

makers. It is also aligned with Pillar 1 (Public Sector and Economic Management) of the Bank’s

Governance Strategic Framework and Action Plan (2014-2018) that focuses on enhancing

Public Finance Management (PFM) frameworks and support for domestic resource

mobilization in Regional Member Countries (RMCs). The proposed operation is consistent

with the Bank’s Framework for Enhanced Engagement with Civil Society Organizations

(2014-2018) which encourages deeper engagement with non-state actors to enhance policy

dialogue and achieve greater development impact. Consistent with the Bank’s operational

objectives, the project will strengthen capacity of RMCs to mobilize and better manage

domestic revenue to create fiscal space for greater investment in sectors critical to achieve the

Bank’s institutional priorities1.

1.1.2 The proposed project fits firmly within the strategic business plans of CABRI and

ATAF (Technical Annex I). CABRI identified four priorities in its comprehensive three-year

strategic plan for the period 2015/16-2017/18, namely: (i) Fiscal and budget policy; (ii)

Transparency and accountability; (iii) Institutional capabilities; and (iv) Network governance.

ATAF business plan (2016-2020) also identified four strategic priorities: (a) developing

institutional capability; (b) fostering efficient and effective tax administrations; (c) developing

knowledge hub on tax matters; and (d) advancing African voice in regional and global

discourses on tax matters. The proposed operation will help to deliver these priorities through

peer-learning and networking, knowledge and advisory services, technical assistance and

capacity building, collaboration and partnership at country and regional levels.

1.2 Rationale for Bank’s Involvement

1.2.1 Building governance and institutional capacity remains a priority in regional

member countries. Over the past decade, the African continent has experienced an impressive

economic performance, and this is set to continue with the rise of extractive industries

initiatives and expansion of the service sector. While growth has many causes, it could not have

happened without some improvements in governance. However, whatever impressive this

economic performance is, it is still below Africa’s needs, at least a growth of 7% for two

decades to eliminate poverty. Significantly too, this growth has not been inclusive in part due

to governance shortcomings. Inequality is still high. African women still have less access to

1 The new High-5 recently announced by the President of the Bank Group that will drive the Bank’s work as it implements its current ten

year strategy are: (a) Light up and Power Africa; (b) Feed Africa; (c) Integrate Africa; (d) Industrialize Africa, and (e) Improve quality of life

for the people of Africa

2

productive resources, youth unemployment remains high. More is needed to take Africa to the

middle income status that its people aspire to. The Sustainable Development Goals (SDGs),

and the Third International Conference on Financing for Development reaffirmed that there

have to be significant improvements in Domestic Resource Mobilization, and building

effective, accountable and inclusive institutions at all levels in order to improve the quality of

people's lives. The proposed operation will scale up the role of ATAF and CABRI in

strengthening domestic revenue mobilization and public financial management in member

countries.

1.2.2 The 2015 African Capacity Report, states that capacity, in its various dimensions,

remains a challenge across the continent (Box 1). The report reveals binding constraints

associated with domestic resources mobilization, including a very narrow tax base, high levels

of capital flight, tax evasion and avoidance, proliferation of tax exemptions, lack of legitimacy

of tax administrations, lack of human, technical, legal, and regulatory capacity to deal with

elicit financial flows. It is therefore a necessary requirement at national, regional and

continental level to develop policies and initiatives to address these constraints, as well as

simplify and rationalize tax systems. In addition, the Open Budget Survey 2015 reveal that the

vast majority of people live in countries that have inadequate systems for ensuring accountable

budgets. Most countries provide insufficient information for civil society and the public to

understand or monitor budgets, and only a small fraction of countries have appropriate

mechanisms for the public to participate in budget processes. Formal oversight institutions also

frequently face limitations in performing their function of holding governments to account.

Public finance management and tax administration reforms remains a priority to improve

transparency and accountability in the use of public resources.

1.2.3 The Bank is committed to support key regional or pan-African organizations to

improve governance and accountability as well as the quality of services that citizens of

Africa receive. CABRI and ATAF in collaboration with relevant RMCs endorsed the 2012

“Declaration on Good Financial Governance”, whose overarching objective is to promote good

Public Finance Management (PFM) and Domestic Resource Mobilization (DRM) practices.

Further CABRI and ATAF have developed into pan-African network organisations on tax and

budget reform initiatives by creating a platform for peer learning and capacity building support

to member countries. ATAF’s business plan (2016-2018) is geared towards improving the

capacity of African tax administration and tax reform programmes to contribute towards a more

inclusive economic growth. CABRI’s initiatives are also guided by a three-year strategic plan

(2015-2018) which focuses on strengthening budget transparency and accountability,

improving the quality of public spending and institutional capabilities through knowledge

management, networking and peer learning. Both organisations are creating knowledge hubs

to support networks of practitioners on tax and budget matters, and further the African voices

on domestic resource mobilisation and public finance transparency and accountability. The

Proposed Project will contribute to effectively deliver the three-years strategic plans of the two

organisations (Technical Annex I).

3

Box 1 : Capacity Challenges in Public Finance and Domestic Resource Mobilisation

Weak institutional/management capacity remains a persistent challenge across the continent in the RMCs and

RECs. The Africa Capacity Building Foundation (ACBF) has systematically assessed Africa’s capacity

development landscape in its Africa Capacity Index (ACI). Of the different clusters of the index, capacity

development outcomes have consistently remained the lowest. According to ACI 2015, 91% of African

countries are rated low or very low on this cluster pointing to capacity development as the most pressing

challenge. With respect to capacity, African countries have not been converging toward advanced country

levels of capacity.

According to ACI, the African continent has made much progress in increasing tax revenues, but a number of

countries lag behind. Compared with other regions of the world, tax collection systems in Africa remain

expensive and inefficient. Several countries need to hire more and better trained staff members, who must be

retained through financial and nonfinancial career-advancement incentives. Further, building capacity for

domestic resource mobilization is not merely about increasing tax revenue or savings. It also encompasses

promoting good democratic governance, financial inclusiveness, and social justice—and creating the

conditions and incentives for productive investments. The ACI report also highlighted the need to build

institutional and human capacity for scaling up domestic resource mobilization including the rules and

regulations must be in place to ensure sound public financial management so that domestic resources promote

inclusive and sustainable development.

In 2014, Afro barometer survey data, covering 29 countries in Sub-Saharan Africa revealed widespread citizen

commitment to the principle of taxation and to taking responsibility by paying their taxes for national

development. But taxation systems across the continent remain opaque to a large majority of people, perceived

corruption among tax authorities remains significant, and evidence suggests these perceptions undermine

public commitment to the integrity of the tax system and increase the likelihood of non-compliance. In line

with the above challenges, ATAF has done much over the past few years and its scope of activities has widened

with the aim to improve tax systems in Africa through exchanges, knowledge dissemination, capacity

development and active contribution to the regional and global tax agenda. The project will provide support to

ATAF to further promote and facilitate mutual cooperation among RMCs to improve efficacy of their tax

administration.

Over the past ten years, CABRI has deepened its understanding of public financial management through the

challenges and experiences shared by African finance ministries. It provides a platform for collaboration,

exchange and learning among peers, serve as a center of expertise and leadership on appropriate PFM policies,

procedures and practices. It does this by strengthening the organizational, implementation and analytical

capabilities of finance ministries, broadening and deepening of budget management reforms in RMCs.

CABRI's work focuses mainly on the following: accountability (good public financial governance),

transparency, strengthening PFM systems, value for money, institutional capability, information sharing

(budget management resource center) and facilitating professional networking.

1.2.4 Managing public finances in a transparent, accountable and effective manner is a

corner stone for good governance and sustainable economic and social development in

Africa. CABRI’s mission is to ensure that across Africa, public financial resources are

managed with integrity, transparency and accountability for efficient and effective service

delivery, sustainable economic growth and development. To this end, CABRI enhances public

finance management (PFM) in regional member countries through serving as a center of

expertise and leadership on appropriate PFM policies, procedures and practices. The CABRI

network is the only PFM peer-learning and exchange community, established and run by

practitioners for practitioners. Its membership base is composed of Senior Budget Officials

representing ministries of finance and planning across Africa. There are currently 13 official

member countries that have acceded to the CABRI’s international agreement2. However, as an

2 The six founding member countries - Ghana, Kenya, Mali, Rwanda, Senegal and South Africa – signed the legal

agreement in June 2007. In April 2010, Mauritius became an official member, followed by Central African

Republic (April 2011), the Kingdom of Lesotho (November 2011), Liberia and Burkina Faso (both in August

2013), The Gambia (December 2014), and Cote d’Ivoire (July 2015).

4

inclusive network, other African countries and senior budget officials also benefit from

CABRI’s work, while engaging with them to accede to the agreement. The Proposed Operation

will scale up CABRI’s work by focusing on: enhancing public investment management

capacity and quality of public spending in infrastructure and agriculture; promoting budget

transparency and accountability and use of country systems in selected member countries; and

creating PFM knowledge hub to foster learning, experience and information sharing, and policy

space for budget reform.

1.2.5 Mobilising domestic resources continue to be a priority for member countries in

financing national development agendas including funding state expenditure on

infrastructure, economic and social development programs. In this regard, ATAF is

established with the aim to build effective and efficient tax administration in Africa, and

membership to ATAF is open to tax administrations of all African states who commit to

ATAF’s objectives and contribute towards the annual membership fee. There are currently 38

member countries3 but only 18 countries have ratified the international agreement. ATAF

provides a platform for sharing experiences and knowledge dissemination, peer learning,

conducting relevant research and technical assistance on tax administration systems and good

practice. The Proposed Operation will enhance ATAF’s work by focusing on knowledge and

tax research and technical assistance to member countries.

1.2.6 The proposed project complements the previous support to these organizations.

The Bank supported a flagship report on “Status Report on Good Financial Governance 2011”

which was prepared by CABRI and ATAF. The project will leverage existing resources from

the ADF regional public goods window to promote knowledge management and advisory

services to support public financial governance reforms at country and regional levels. This

project will complement Bank direct support to RMCs through projects and programs aimed

at improving public financial governance, as well as other regional projects aimed at improving

the lives of African people. The Bank also supported these initiatives on budget reforms and

transparency, tax administration reforms and domestic resource mobilization for development

finance in RMCs. The proposed operation will complement and build on these activities and

scale up Bank’s support to take forward good public financial governance and accountable

governance agenda.

1.3 Donors Coordination

1.3.1 Mechanisms are in place to better coordinate development partners’ support to

CABRI and ATAF. The main partners supporting ATAF include Switzerland (SECO),

Norway, Finland, Irish Aid, Netherlands, Denmark, European Union (EU) and the

Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ)

implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, and

the South African Revenue Service. CABRI receives bilateral support from SECO,

Development for International Development (DFID), EU and BMZ implemented by GIZ, and

the South Africa National Treasury, as well as three foundations, namely the William and Flora

Hewlett Foundation Fund, Bill and Melinda Gates Foundation and the Global Fund (Technical

Annex VI). There is common objective and strong relationship between the proposed operation

3 Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Chad, Comores, Cote ‘d’Ivoire, Egypt, Eritrea, Gabon, Gambia, Ghana, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, South Africa, Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, Zimbabwe

5

and ongoing donors’ support to these two organization. The Bank will strengthen its

collaboration with the development partners with a view to providing a coordinated support to

regional initiatives on good public financial governance. At present, there are periodic program

implementation review and coordination meetings. The proposed operation will complement

the ongoing Development Partners technical assistance and project support to budget reforms,

fiscal transparency and accountability, and tax administration capacity building initiatives. The

project design has benefitted from the extensive consultation held with development partners

and participation at the quarterly review meeting held in February 2016.

II PROJECT DESCRIPTION

2.1 Project Components

2.1.1 Project Objective: The development objective of the proposed operation is to promote

efficiency, transparency and accountability in management of public resources. The project

specifically aims at stepping up Bank’s support to both ATAF and CABRI in strengthening

budget and tax administration reforms through technical assistance, knowledge and advisory

services and peer learning among community of tax and budget practitioners in RMCs.

2.1.2 Project Components: The proposed project has three components: (1) Improving

budget transparency and accountability; (2) Improving tax administration and domestic

resources mobilization capacity, and (3) project management support. The project will provide

financial assistance to CABRI and ATAF to scale up their technical assistance and knowledge

services to regional member countries in the areas of budget management and tax

administration systems. The major activities under each component are summarized in Table

2.1 below, while the detailed description of the project components and costs is presented in

Technical Annex II and III.

6

Table 2.1: Project components

Components & estimated cost UA’000

Policy Objectives

Programme Activities

Indicative targets by 2018 at output level

Gen

era

l

To strengthening budget and tax management, as well as transparency and accountability in RMCs

Co

mp

on

ent

1:

Su

pp

ort

fo

r st

ren

gth

ened

bud

get

ref

orm

U

A 2

,44

1 m

illi

on

1. Strengthen the institutional capacity for budget credibility, transparency and accountability

Subcomponent 1.1 Improving fiscal and budget

policy. Key activities will include:

Strengthening public investment management

in infrastructure

Blended training programme for agriculture

budget analysts.

Subcomponent 1.2: Enhancing budget

transparency and accountability. Key activities

will include:

Partnerships for greater accountability

Budget reform and accountability

Aide transparency and use of country systems

in Senegal

Subcomponent 1.3: Enhancing institutional

capabilities. Key activities will include:

Running PFM knowledge hub (Centre of

Excellence on PFM) including reports on

budget practices and procedures, leadership

stories

PFM training for finance ministries

Networking and peer learning

Report on public investment

management practice

Case studies and Peer learning on

country partnership for greater

accountability published

Policy briefs and reports on budget

reforms published

Improvements on some key dimensions

of the use of country system and aid

being better integrated to Senegal’s

budget process in 2018

Guideline and action plan develop for

increased use of country systems in

Senegal

# Workshops, seminars and peer learning

and knowledge dissemination events

organised.

# PFM training received by Finance

ministries including %age of women

benefitted from the training program

Improved mechanisms for peer learning

among RMCs in 2018.

PFM Information Hub functional and used by RMCs.

# CABRI conferences and knowledge products published.

Co

mp

on

ent

2:

En

han

ced

C

apac

ity

fo

r D

om

esti

c R

eso

urc

e M

ob

iliz

atio

n

UA

2,3

79

mil

lio

n

2. Improve

domestic

resource

mobilization

capacity.

Key activities will include:

Develop an approach or framework for

informal sector taxation

Develop a network of policy advisors and tax

administration officers

Develop tools on taxpayer education, advocacy

and outreach, and an Integrity Assurance

Programme

Develop a framework to implement efficient

and effective revenue administration systems

including taxation of the extractive industries

Improved African tax regulatory

framework in 2018

Informal sector taxation system

developed by 2018

Direct link between policy formulation

and tax administration established

Taxpayer education tools distributed to

all ATAF Members by 2018

Effective and efficient tax systems

developed by ATAF and used by RMCs

7

2.2 Technical Solution Retained and Other Alternative Explored

2.2.1 During project preparation and appraisal, the following technical issues were explored

regarding areas of intervention, the scope and focus, the scale of investments in each

component and subcomponent, the implementation modality and value for money. Based on

these considerations and lessons from the Bank’s and other DPs’ capacity-building operations,

it was agreed to support the two institutions under one project. It will be the first support to the

two institutions using a project financing instruments. The support will assist the two

institutions to deliver their mandate in the continent which involves research and knowledge,

peer learning and capacity building in budget and tax administration reforms. Central to the

project design and appraisal approach is: (a) readiness and absorption capacity to manage and

deliver the project objectives and results; (b) ownership and complementarity – the project will

help to finance priorities set out in the strategic plans of the two organisations and complement

the ongoing donors support to CABRI and ATAF; (c) focus on developing institutions and

partnership through peer learning and networking, experience and knowledge sharing, and

technical assistance in applying new and enhancing budget management and tax administration

systems and practices. A summary of the technical consideration and project design options is

presented in Table 2.2 below.

Table 2.2. Project Alternatives Considered and Reasons for Rejection

Alternative Brief Description Reasons for Rejection

Selection of

funding instrument

and/or

modality

ATAF receives support in the form of pool funding and technical

experts/secondment. While CABRI’s donors provides their support using mix of instruments – basket funding, project

specific funding, and technical assistance. The appraisal team

concluded project investment grant as preferred instrument rather than basket/pooled funding.

The reasons for not using the pool funding modality are as

follows: (i) there is no medium term (three year) comprehensive and costed work plan. Funds are released by donors based on

annual work plans. (ii) Donors are using different funding

modality including targeted / project specific funding, block grant, and support in kind/technical assistance. (iii) The procurement

rules and procedures of the two organisations were assessed and

found not fully compliant to the Bank procedures. (iii) Though there are opportunity for the Bank to consider pooled funding in

near future, it was agreed that the Bank’s support should be

focused on specific interventions that are not covered by other partners and complement the ongoing capacity building support at

country level. However, it was agreed to use a common project

coordination and management arrangements including review and reporting to reduce transaction cost.

Focus areas

of the operation

and project

that support several

institutions

Initially the support was to cover three institutions, ATAF,

CABRI and AGI, as well as other like-mined institutions but due to complexity of the implementation arrangements and

geographical location it was decided to focus on a project that

support ATAF and CABRI which are membership-based technical organisations based in South Africa. A second project

could be considered to support other institutions working on

governance and accountability (e.g. AGI, AFROSAI-E, Pan-African Parliament).

The recent OPEV evaluation and lessons from previous operation

suggest the need to avoid many beneficiary institutions, particularly where the overall funding envelop is limited. The

project is more focused and provide targeted support to two

institutions.

Co

mp

on

ent

3:

Pro

ject

M

anag

emen

t S

upp

ort

(A

TA

F &

CA

BR

I )

UA

45

8 3. Enhance

monitoring and

evaluation and

capacity building

Key Activities

Recruitment of two finance officers and

procurement expert

M&E and result reporting

Impact assessment

Work programme and budget

Procurement plan

Audit reports and progress reports

Additional staff in place by June 2016

M&E and impact assessment reports

8

2.3 Project Type

2.3.1 The proposed operation is a stand-alone Institutional Support Project designed to

support ATAF and CABRI to strengthen their work on budget management and tax

administration systems in member countries. It promotes peer learning, and exchange of

information and knowledge through networking, partnership, and collaboration and

partnerships. This type of operation was selected to address the critical capacity building needs

of RMCs to pave way for efficient and effective use of public resource and enhanced domestic

resource mobilization.

2.4 Project Cost and Financing Arrangements

2.4.1 The estimated total cost of the project, net of taxes and duties, is UA 5.278 million. A

price contingency of 5%, has been factored in the project cost. Tables (2.3a) and (2.3b) present

the estimated project cost by component and sources of finance, whereas Tables (2.3c) and

(2.3d) present the estimated project costs by Category of Expenditure. Details of the project

cost by component and expenditure category are also presented in Technical Annex III. The

Bank will finance the project with a sum of UA 5.278 million.

Table 2.3: Project Cost Estimate by Component

COMPONENT

Total Cost ‘000 UA % TOTAL

Foreign Local Total

Component I: Support for strengthened budget reform (CABRI) 2,325 0 2,325 44

Component II: Enhanced Capacity for Domestic Resource

Mobilization (ATAF) 2,266 0 2,266 43

Component III: Project Management Support (ATAF and

CABRI) 436 0 436 8

TOTAL BASE COST 5,027 0 5,027 95

Price contingency5% of base cost 251 0 251 5

TOTAL PROJECT COST 5,278 0 5,278 100

Table 2.4: Sources of Financing

Source of Funding Costs in Thousands UA’000 % TOTAL

AFDB Public Goods Window Foreign Local Total

Total Project Cost 5,278 0 5,278 100

Table 2.5: Project Cost by Category of Expenditure in USD’000 for each grant recipient

Expenditure ATAF CABRI

Local Foreign

Local

Local Foreign

Local

TOTAL % TOTAL

Services 0 3,173 0 3,255 6,428 87

Operating cost 0 306 0 306 612 8

TOTAL BASE COST 0 3,479 0 3,561 7,040 95

Price contingency 5% 0 174 0 178 352 5

TOTAL PROJECT

COST

0 3,653 0 3,739 7,392 100

9

Table 2.6: Project Cost by Category of Expenditure in UA’000 for each recipient

Expenditure Foreign % TOTAL

ATAF CABRI TOTAL

Services 2,266 2,325 4,591 87

Operating cost 218 218 436 8

TOTAL BASE COST 2,484 2,543 5,027 95

Price contingency 5% 124 127 251 5

TOTAL PROJECT COST 2,608 2,670 5,278 100

Table 2.7: Expenditure Schedule by Component in USD’000

Component 2016 2017 2018 Total

Support for strengthened budget reform (CABRI) 1,269 785 1,201 3,255

Enhanced Capacity for Domestic Resource

Mobilization (ATAF) 1,097 1,003

1,072 3,173

Project Management Support (ATAF and CABRI) 125 300 187 612

TOTAL(including 5% contingency) 2,616 2,192 2,583 7,392

2.5 Project’s Target Areas and beneficiaries

2.5.1 The project’s direct beneficiaries are ATAF and CABRI who will benefit from the

project resources to implement their strategic plans. The indirect beneficiaries are the member

countries who receive technical assistance and capacity building support from ATAF and

CABRI. The support will help to effectively implement budget and tax administration reforms

by drawing on experience and good practices from peer countries and policy advice and

knowledge services offered by the network of tax and budget practitioners through ATAF and

CABRI.

2.6 Participatory process for project identification, design and Implementation

2.6.1 During and prior to Project preparation, the Bank Group held discussion with CABRI

and ATAF with a view to strengthen collaborative efforts to strengthen economic governance

in Africa. The project design is also informed by the following reports which are products of

consultative processes: (1) CABRI Strategic Plan 2015/16-2017/18, and (2) ATAF 2015 Work

Plan as well as the Strategic Plan 2016-2020. During project design, development partners were

consulted to solicit their input on the scope of the operation to ensure synergy and further

consultation will be held with a view to ensure effective project implementation and

coordination.

2.7 Bank Group experience and lessons reflected in project design

2.7.1 The design of this operation is guided by various analytical reports as well as

consultation during the project preparation missions (Table 5). Between 2002 and 2012,

the Bank approved UA 64 million for 11 Regional ISPs, of which four are still ongoing:

AFRITAC III (UA 4.7 m); EAC Payment System (UA 15 m); COMESA Projet d’Appui au

Renforcement des Capacités (UA 7 m); and the Payments Systems Development Project in

WAMZ, including the Supplement (UA 19 m). The Bank also supported sub-regional

organisations like COMESA on procurement reforms which was successful. Lessons illustrates

that in aggregate, Regional ISPs tend to perform fairly better than standalone ISPs in low

income countries and fragile states. This is partly explained by the knowledge transfer benefits

channeled from the more developed and better performing middle income countries to fragile

states and low income countries with often weaker capacity. The evaluation found that higher

10

satisfactory scores were obtained for Regional ISPs in terms of outputs, outcomes, timeliness,

and performance in project management. The complete list of the 11 Regional ISPs designed

and implemented by OSGE between 2002 and 2012, including their outcome rating is

presented in Annex II.

Table 2.8 Lessons Learned from Previous Regional Operations

Lessons Learned Actions taken to integrate lessons into the PAR

(i)Understanding the institutional and political

economy context was highlighted as important in

terms of understanding both the context within and

beyond the institution. The successful ISPs tended to

be based on solid needs assessments, and the designs

took the political economy in which the institution

operated within.

This project supports regional institutions who operate

in the continent and understands both political and

economic context of Africa.

(ii)Country ownership and leadership are critical.

Political obstacles also hindered project

implementation. Hence ISPs aligned to broader

capacity building and/or sector strategies contributed

to facilitation of ownership.

The beneficiary institutions (ATAF & CABRI) enjoy

support from member states as all reform initiatives

are led by the budget and tax administration officials

of member states. The proposed operation is aligned

to the strategic plan of the two organisations which is

approved by Governing body who represents member

states.

(iii) The realism of the time period. Institutions often

tend to be unrealistic about the time it takes to develop

institutional capacity. They often want to demonstrate

results quickly, and while outputs may be delivered

quickly, capacity development is a longer term

process and this was taken in to account in the design

and implementation of this operation

Capacity of the two institutions and their annual work

plans as well as Strategic plans have been taken into

account. The two institutions are aware of the reform

challenges and time it takes hence the results at RMCs

level are long term.

(iv) Clarity of objectives and implementation

flexibility both in the design and approaches used

during implementation. IDEV’s evaluation revealed

that opportunities to enhance project performance

were missed because of limited flexibility in the

implementation phase of some of the ISPs.

The design accommodated practices and capacities of

the two institutions. The objectives are aligned with

the Strategic Plans of the beneficiary institutions.

Supervision will be undertaken to improve

performance of the project.

v) Sound monitoring and evaluation where log

frames were found to be weak, the planned activities

and outputs did not directly lead to the desired

outcomes. Hence, it is critical to ensure that outputs

and outcomes are directly linked and are based on the

theory of change

Linkages between outputs and outcomes have been

strengthened and aligned to activities of the

institutions. Monitoring and evaluation will be

undertaken during implementation and appropriate

actions taken to improve project performance.

2.8 Key performance indicators

2.8.1 The key performance indicators identified, and the expected outcomes on project

completion, are set out in the Logical Framework. The expected outcomes includes effective

contribution toward improved capacity of member countries for domestic resource

mobilization and budget management transparency and accountability Expected outputs under

component I include: policy brief and reports on budget reforms published, report on public

investment management practice, peer learning and exchange network for senior budget

officials strengthened, PFM knowledge hub fully operational, report on partnership for greater

accountability published, research paper on use of country system to better management of aid

information and flow of funds; policy brief on agriculture financing, publication of budget

documents and calendar, and increased membership and network of budget experts. Expected

outputs under Component II include: tax payers education tools and materials developed,

11

network of policy advisers and tax administration officers established, improved tax regulatory

framework developed, informal sector taxations system guideline developed, and peer learning

mechanisms for tax administration agencies strengthened.

III PROJECT FEASIBILITY

3.1 Economic and Financial Performance

3.1.1 The economic and financial benefits from the project will be much higher than UA

5.278 million. The costs are quantifiable (section 2.4), the benefits are both direct and indirect,

ultimately delivered in improved capacity and performance in public finance, and tax

administration. The economic justification of the proposed project is its contribution to a better

functioning of government through improved transparency and accountability, which are key

pillars of good governance. Overall, the benefits of the project will be much higher than the

UA 5.2m and the benefit will derive from: (a) improved budget transparency and

accountability; (b) improved knowledge and capability in budget analysis and quality of public

investment; and (c) enhanced capacity in domestic resource mobilization which will provide

fiscal space to invest in critical sectors that drive potential growth over the medium term

leading to poverty reduction and improvement of people’s lives. The project will also support

the development of sustainable human resource capacity in budget and tax administration,

thereby ensuring that the benefits will be sustained over time.

3.2 Environment and Social Impacts

3.2.1 Environment and Climate Change: The proposed project is environmentally classified

as Category 3 by ORQR. The project will not have a negative impact on the environment as its

activities are limited to research and knowledge management, peer learning and networking,

technical assistance, and capacity building in fiscal transparency and accountability and tax

administration. Project activities that are focused on human and institutional capacity building

have no negative impact on the climate (Technical Annex II).

3.2.2 Social: The project is intended to contribute to improved economic governance through

improved budget transparency and accountability and capacity of key institutions responsible

for tax administrations. The project will contribute to strengthening transparency and

competency in fiscal policy and budget, public investment management, partnership for greater

accountability, and tax administration including taxation of extractive industries. Transparent

and accountable management of resources will lead to improved quality of governance and civic

confidence in government. This will enhance and leverage the impact of the national

development strategy on poverty reduction and job creation No negative social impacts are

expected from the project implementation (Technical Annex II).

3.2.3 Gender: ATAF and CABRI are committed to the promotion of gender equality to

ensure that all gender groups are able to fully contribute to the country’s development and

benefit from it. Some of CABRI’s work will provides budget officials with tools to measure

how budget impacts the vulnerable groups in society including women. Improved budget and

tax policy and administration will have impacts to different groups in society. CABRI will

undertake value for money work in health, water, sanitation and hygiene, with a view to

demonstrate to governments how monitoring and evaluating the links between spending,

service delivery outputs and outcomes for different segments of society can influence policy

formulation. Through these research activities, CABRI will demonstrate to RMCs how to

include different segments of the society in planning and budgeting and address issues of

12

gender disparity and inclusiveness. In last year’s events 41% of all CABRI’s activities

participants were women. The project will support CABRI and ATAF plans to further

implement gender mainstreaming policy in their operation/activities.

IV IMPLEMENTATION

4.1 Implementation Arrangements

4.1.1 The project will be implemented over a period of three years between May 2016 and

December 2018. The CABRI and ATAF Secretariats will be the Executing Agencies. The

project will be implemented through the existing CABRI and ATAF governance arrangements

and project administration teams (PAT). The Executive and Steering Committees of CABRI

and ATAF, will have oversight over the PAT. The Secretariats will provide reports to the Bank

and will be accountable for all the resources disbursed to them. Capacity of the Secretariats

have been assessed and appropriate mitigation measures put in place including recruitment of

additional finance officers and a procurement specialist.

4.2 Financial Management, disbursement and audit

4.2.1 Financial Management: The RISPFG project’s financial management will be handled

by the respective Executing Agencies (CABRI and ATAF) who will separately implement their

specific components under the project within their existing set-up for project implementation

and under the overall management of the respective Management Committee/Council and

General Assembly. The CABRI Secretariat will be responsible for the financial management

of Component 1 (Support for Strengthened Budget Reform) whereas the ATAF Secretariat will

be responsible for Component 2 (Enhanced Capacity for Domestic Resource Mobilisation). An

assessment of CABRI’s and ATAF’s financial management arrangements for the

implementation of the project (that included a review of the budgeting, accounting, internal

controls, flow of funds, financial reporting and auditing arrangements) indicates that they

satisfy Bank minimum requirements to ensure that the funds made available for the financing

of the project are used economically and efficiently and for the purpose intended (Technical

Annex IV). However, the assessment highlighted a need to augment the current finance staff

already in place in each agency, to effectively manage the increased activities going forward

for both CABRI and ATAF. In this regard, there is provision for capacity building support

through the provision of finance staff. The financial accountants to be financed from the project

(one each for CABRI and ATAF) will form part of the finance team in addition to the current

existing staff for the financial management of this and other projects being implemented by the

respective agencies.

4.2.2 The overall, governance, accountability and oversight arrangements in place together

with effective management for CABRI and ATAF are adequate to ensure proper financial

management of the project. In addition, external audit requirements already in place are further

measures towards effective corporate governance. Both agencies are currently implementing a

number of donor financed initiatives and are familiar with donor financial management

requirements. Training will also be given on the Bank’s specific financial management

requirements including for reporting and auditing during the launch of the project for adoption

in their existing systems.

4.2.3 In accordance with the Bank’s reporting and auditing requirements, CABRI and ATAF

will each be required to submit separate financial statements (within 45 days after the end of

each quarter) showing receipts by all sources and the expenditures by main project expenditure

classifications for their respective components. Physical Progress Reports linking financial

information with physical progress and highlighting issues that require attention will be

submitted bi-annually. In addition, both CABRI and ATAF will be required to submit their

13

respective annual entity audit reports as currently prepared including specific financial

information for the Project (with all Bank and other donor financing separately disclosed)

within six (6) months of the end of the respective fiscal year aimed at facilitating harmonised

reporting. The audit will be done by the respective Executing Agencies external auditors in

accordance with an audit terms of reference that includes the project.

4.2.4 Disbursement Arrangements: The disbursement method that will be used under the

Grant for each agency (CABRI and ATAF) is primarily the Special Account method with

separate bank accounts to be opened (one in foreign currency and in local currency) given the

nature of activities (that include Training and Workshops) to be financed. The opening of the

Special Accounts by the respective agencies will be conditions precedent to first disbursement

However, the Direct Payment and Reimbursement methods are also available for use with the

agreement of the Bank. In accordance with Bank procedures, disbursements under the Grant

would be made on submission of the proper documents by each of the implementing agency in

accordance with the Bank’s rules and procedures as laid out in the Disbursement Handbook as

applicable that can be accessed from the Bank’s website. In addition, the Bank will issue a

Disbursement Letter of which the content will be discussed and agreed during negotiations.

4.3 Procurement arrangements

4.3.1 CABRI and ATAF will be responsible for procurement actions under their respective

components. Main activities to be implemented within the two components of the project fall

under consulting services, non-consulting services, workshops/conferences and training. An

assessment of procurement policy and procedures of CABRI and ATAF was carried out to

ascertain their suitability in the procurement of goods and consultancy services under the

project. The assessment was done through interview of key staff as well as review of available

documentations presented to the Bank team. The documents reviewed include summary of

assessment report on ATAF systems conducted by DFID, sample of contracts, procurement

policy and procedures of CABRI, and template of bidding documents.

4.3.2 Outcome of the assessment revealed that both CABRI and ATAF have extensive

experiences in undertaking procurement using their policies and procedures with financing

from bi-lateral donors and global funds. Such procurements involve recruitment of consultants

(individual and firms), non-consulting services, and miscellaneous goods whose value are

within shopping threshold. As most of the activities under the components consist of

recruitment of individual consultants with low contract values, procurement policies and

procedures of both CABRI and ATAF could be used in implementing some of the activities.

Activities relating to travels, organising conferences / workshops, training and supply of

miscellaneous goods will be implemented using procurement policies and procedures of

CABRI and ATAF. Individual consultant’s recruitment with contract value less than UA50,

000 will also be carried out in accordance with procurement policies and procedures of both

CABRI and ATAF, using their simple templates. However, Bank’s standard provision

regarding Fraud & Corruption, and complaint handling mechanism to be included in the

bidding documents. Individual consultant’s recruitment with contract value greater than UA50,

000 will be carried out in accordance with Bank’s Rules and Procedures for the Use of

Consultants, May 2008 edition, revised in July 2012. Detailed procurement arrangement

including procurement plan for the first year of implementation are contained in Technical

Annex V.

4.3.3 Organizational capacity and staffing in both organizations were assessed, and observed

that capacity strengthening is required to ensure efficiency and effectiveness of procurement

transactions. In view of the low value of contracts, where it was established that both CABRI

14

and ATAF have experiences in procuring similar activities under this project, the overall risk

is found to be low. However, the risk in the procurement of consultancy services using Bank’s

Procurement Rules and Procedures and standard bidding documents appear to be high due to

lack of sufficient knowledge. Risk mitigation measures are proposed as contained in Technical

Annex III, which includes recruitment of experienced procurement specialist to serve both

components, and inclusion of standard Bank’s provisions in bidding documents of CABRI and

ATAF where their respective procurement policies and procedures are used.

4.4 Monitoring and Evaluation

4.4.1 The Bank will undertake supervision missions, at least, bi-annually. As per the Bank’s

general conditions, CABRI and ATAF will submit six monthly progress reports in line with a

harmonized reporting template agreed with development partners. The reports will review

progress made in light of the Project’s Results-Based Logical Framework and include a clear

presentation of activities undertaken during the period under review. The reports will also

analyze to what extent the activities undertaken have contributed to the realization of the

anticipated results/outputs and project objectives. The reports will offer recommendations to

address any issues encountered and present “time-bound” actions/work plans for the following

quarter. CABRI and ATAF will be required to prepare and submit, to the Bank, a Project

Completion Report within three months of the final disbursement, in accordance with the

Bank’s General Rules and Procedures. A project completion report will be undertaken to

evaluate progress against outputs and outcomes and draw lessons for possible follow-up

operation. Table 7 presents project implementation and monitoring schedule.

Table 4.1: Project Implementation Schedule Task / Milestone Responsible Party Time Frame

Grant Approval AfDB May 2016

Grant Effectiveness AfDB/CABRI/ATAF May 2016

Project Launching AfDB/CABRI/ATAF June 2016

First disbursement AfDB June 2016

Project Implementation CABRI/ATAF June 2016 – December 2018

Annual Audit Report CABRI/ATAF June 2017, 2018, and 2019

Supervision Mission AfDB in collaboration with

development partners

June/December 2016, 2017 & 2018

Mid-term Review AfDB June 2017

Project Completion Report AfDB/CABRI/ATAF December 2019

4.5 Governance

4.5.1 Robust governance arrangements have been put in place to manage the implementation,

monitoring, review and audit of this project, as outlined in sections 4.1, 4.2 and 4.2 above. The

implementing entities have been assessed as having enough capacity to implement the project,

utilizing the existing project management arrangements. The proposed project will contribute

towards strengthening capacity in financial and procurement management. The risks to project

governance arise in procurement and this will be mitigated through the preparation of a detailed

procurement plan, robust processes for contractors and recruitment of a procurement specialists

to strengthen the system and capacity of both organisations. Further training will be provided

to project secretariat to ensure that they are fully aware of the Bank’s procurement and financial

management requirements and regulations during the launching mission. An independent audit

of project financial accounts and procurement reviews will be undertaken every year.

15

4.6 Sustainability

4.6.1 CABRI aims to enhance its independence and sustainability by increasingly utilizing

membership fees for its operational costs. In this regard it is committed to growing its

membership base which currently is 13 to 20 by end of 2017/18. The strong commitment by

countries to improve policy reforms ensure longevity of the programmes, however CABRI will

continue to work hard and grow the membership and contribution to its budget with a view to

sustain it when donor funding dries up. ATAF’s membership was 36 by December 2014 and

intends to grow its support base. Membership contributions is not enough, around 16% of the

total revenue and there is need to increase the contribution to be able to sustain itself when

donor funding dries up. CABRI’s strategic objective is to enhance its independence by

increasingly utilising membership fees for its operational costs, while ATAF also aims to cover

its operational costs through membership fees in the medium term. A participatory approach

by both ATAF and CABRI will encourage RMCs’ willingness and commitment to become

members and contribute the total budget of their current strategies. All countries are potential

beneficiaries of the project and contribute to the operational priorities of ATAF and CABRI

programmes through membership fees, cost-sharing arrangements and hosting events.

4.7 Risk Management

The potential risks and mitigation measures for the project are summarized Table 4.2 below.

Table 4.2: Risk and Mitigation

Risks Probability/Impact Mitigation measures

Implementation capacity

constraints

Low probability and

impact

Project management team will be in place to manage and

coordinate project implementation. The project will provide

additional capacity in the two institutions to further enhance

project management capacity.

Sustainability of the project Medium probability

and impact

The two institutions are committed to increase

membership and collect membership fees to finance

operating cost and reduce donor dependency in the

medium to longer term.

Fiduciary risk Low probability, low

impact

Project support will improve fiduciary environment.

Compliance with Bank’s procurement of goods and

services, annual audit reports and training will also

mitigate the risk.

4.8 Knowledge building

4.8.1 The project will build knowledge and develop skills of budget and tax administration

officials in member states through research, peer learning and developing knowledge

management hub on budget and tax administration. The project through ATAF will promote

and facilitate mutual cooperation among Africa Tax Administrations with a view to improve

efficacy of their tax legislation and administration. It will also enhance capacity for Domestic

Resource Mobilization. The project will support CABRI Secretariat to train senior officials of

budget offices on fiscal transparency and accountability, public investment management and

public finance reforms. It will also support ATAF on providing training to RMCs on tax

administration. The joint supervision and result reporting and project completion report will

contribute towards knowledge management and lessons learnt to inform future interventions.

16

V LEGAL INSTRUMENTS AND AUTHORITY

5.1 Legal Instrument

5.1.1 The Bank will sign two Protocols of Agreements with each beneficiary institution

CABRI and ATAF for their respective grants financed from the Regional Public Goods

window.

5.2 Conditions associated with Bank’s intervention

5.2.1 Conditions Precedent to Entry into Force: The Protocols of Agreements shall enter

into force on the dates of their signatures by the respective Beneficiaries (Collaborative Africa

Budget Reform Initiative and African Tax Administrators Forum) and the African

Development Fund.

5.2.2 Conditions precedent to first disbursement: The obligation for the Fund to make first

disbursements of the Grant to CABRI and ATAF shall be conditional upon the entry into force

of the Protocols of Agreement and the fulfilment of the beneficiaries of the following condition,

in a form and substance acceptable the Fund:

(i) The opening of a US Dollar denominated Special Account and a local currency denominated

Special Account by each beneficiary in a bank acceptable to the Fund in which the proceeds of

the Grant will be deposited.

5.3 Undertaking

Within three (3) months of signing of the Protocol of Agreement, ATAF and CABRI, will sign

Memorandum of Understanding which sets out the functions, qualification, line management

and reporting arrangement of the procurement specialist which will be hired under the project

to provide procurement services to both organisations.

5.4 Compliance with Bank policies

This project complies with all applicable Bank policies.

VI RECOMMENDATIONS

6.1 Management recommends that the Board of Directors approve a total grant not

exceeding UA 5.278 million from the Regional Public Goods window, to the Collaborative

Africa Budget Reform Initiative, and African Tax Administrations Forum for the purposes of,

and subject to, the conditions stipulated in this report.

I

ANNEX I : Results and Lessons Learned from Past Regional ISPs

The Bank’s Independent Evaluation of ISPs provided the results and lessons learned for ISPs,

based on ISPs designed and implemented between 2002 and 2012 and these are presented

below.

I. Summary of Satisfactory ISP Results

Between 2002 and 2012, the Bank approved UA 64 million for 11 Regional ISPs, of which

four are still ongoing: AfriTAC III (UA 4.7 m); EAC Payment System (UA 15 m); COMESA

Projet d’Appui au Renforcement des Capacités (UA 7 m); and the Payments Systems

Development Project in WAMZ, including the Supplement (UA 19 m). The table below

illustrates that in aggregate, Regional ISPs tend to perform fairly better than standalone ISPs

in low income countries and fragile states. This is partly explained by the knowledge transfer

benefits channeled from the more developed and better performing middle income countries to

fragile states and low income countries with often weaker capacity. The evaluation found that

higher satisfactory scores were obtained for Regional ISPs in terms of outputs, outcomes,

timeliness, Bank and borrower performance. The complete list of the 11 Regional ISPs

designed and implemented by OSGE between 2002 and 2012, including their latest outcome

rating is presented in the Annex.

Table 1. Percentage of ISPs receiving satisfactory PCR ratings (2000-2012)

II. Lessons Learned from Past Regional ISPs

The IDEV evaluation also identified several lessons used to inform the design of this

operation:

(i)Understand the institutional and political economy context

Understanding the institutional and political economy context was highlighted as important in

terms of understanding both the context within and beyond the institution. The successful ISPs

tended to be based on solid needs assessments, and the designs took the political economy in

which the institution operated into account.

(ii)Country ownership and leadership

High level ownership and leadership are critical. Political obstacles also hindered project

implementation. Hence ISPs aligned to broader capacity building and/or sector strategies

contributed to facilitation of ownership.

Country category Relevance Outputs Outcomes Timeliness Bank

performance

Borrower

performance

Fragile states 82 53 41 59 47 44

Low income countries 81 69 38 63 88 69

Middle income countries

100 100 100 - 100 100

Regional Operations 80 80 60 80 80 75

Total 82 64 44 62 69 59

II

(iii)The realism of the time period

Institutions often tend to be unrealistic about the time it takes to develop institutional capacity.

They often want to demonstrate results quickly, and while outputs may be delivered quickly,

capacity development is a longer term process and this was taken in to account in the design

and implementation of this operation.

(iv) Clarity of objectives and implementation flexibility

The successful ISPs were those with a certain level of flexibility both in the design and

approaches used during implementation. IDEV’s evaluation revealed that opportunities to

enhance project performance were missed because of limited flexibility in the implementation

phase of some of the ISPs.

(v) Sound monitoring and evaluation

For past ISPs where log frames were found to be weak, the planned activities and outputs did

not directly lead to the desired outcomes. Hence, it is critical to ensure that outputs and

outcomes are directly linked and are based on the theory of change.

The IDEV evaluation also identified several factors that contributed to enhanced capacity and

performance:

Table 1: Factors affecting ISP results

Factors affecting activities and

outputs

Factors affecting contribution to

enhanced

capacity and performance

Factors

related to the

ISP context

Government commitment and

domestic policies

Familiarity with Bank

procedures in beneficiary

institutions

Capacity and availability of local

providers

Use of multi-donor PIUs within

host institution

Balanced relationship with host

and user institutions involved in

implementation.

Leadership

Staffing

Role of the human resources team

Government commitment to support

beneficiary institutions

Coordinated donor support

State of partnerships between key

institutions

Improvements or delays elsewhere in

the system

Demand for project benefits

Pace of wider public service reforms

Factors

related to ISP

design and

management

Knowledge of Bank procedures

in PIU or coordinating body

Size or capacity of the PIU team

Choice of conditions prior to

disbursement

Support from ADB HQ and

presence of field offices

Procurement procedures

Breadth of projects

Project duration

Flexibility in use of funds

Inclusion of project beneficiaries in

design and management

Good quality of consultancy output

Sustainable training and equipment

Monitoring soft outputs

Length of the Bank engagement

Multi-stakeholder approach

Effective use of conditions to address

contextual constraints.

III

Other critical factors affecting past ISPs’ implementation arrangements, procurement and

disbursement procedures, and design features are below

Implementation arrangements

For most of the ISPs included as part of the evaluation, the PIU teams were small. In most

cases, a new PIU was established each time a project started, and dissolved when projects were

completed. The recruitment processes took time and training in use of Bank procedures often

had to start afresh, hence getting new PIUs ready to implement project activities was found to

be time consuming. The poor sustainability of the standalone PIU model most often used by

the Bank was a concern. Conversely, while it is important to ensure that integrated units are

not overstretched, stakeholders agreed that this approach is preferable to the plethora of

standalone PIUs.

Understanding and appropriateness of Bank procedures and conditions

Bank procedures were also associated with many of the delays suffered by ISPs, and these

delays were found to be damaging for projects seeking to support governance institutions. In

particular, understanding of procurement and disbursement procedures was crucial not only on

the RMC side, but also for staff within the PIUs and PATs.

Trade-off between responding to complexity and spreading support too thinly

The evaluation also found that more focused projects perform better. For implementation, the

number of institutions supported proved to be challenging to manage both for the Bank and for

the PIUs. In terms of achieving outcomes, fragmentation of projects into small parts meant that

numerous institutions received small inputs, as opposed to one or two institutions receiving a

more comprehensive package of support. Hence, while three beneficiary institutions are

involved in this project, concerted effort will be made to ensure that the project remains

focused, while ensuring that the designated activities are aligned with the intended outcomes.

IV

ANNEX II: LIST OF REGIONAL ISPS DESIGNED AND IMPLEMENTED BY

OSGE (2002-2012)

No. Project Description Status Approval

Year

Region Window

Approval Amount

(in UA’000)

1 OHADA Registre de commerce et de Crédit Mobilier

COMP 2002 West ADF 150

2 Appui Institutionnel à la Cour Commune de justice et d'arbitrage

CLSD 2003 West ADF 795.7

3 Proposition Contribution AFRITAC - I CLSD 2003 Regional ADF 2,095.30

4 Projet de Renforcement des Capacités de la CEEAC

CLSD 2004 Center ADF 2,590.00

5 Enhancing Procurement Reforms - COMESA

CLSD 2006 South East

ADF 5,660.00

6 WAEMU Support of Public Procurement Systems Reform Phase II

COMP 2006 West ADF 4,000.00

7 African Regional Technical Assistance Centers AFRITAC-II

CLSD 2006 Regional ADF 3,020.00

8 Payments Systems Development Project in WAMZ + Supplementary

OnGo 2008 West ADF 19,000.00

9 AFRITAC III OnGo 2010 Regional ADB 4,700.00

10 East African Community (EAC) - Payments OnGo 2012 East FSF 15,000.00

11 Projet d’Appui au Renforcement des Capacités (CEEAC)

OnGo 2012 Regional ADF 7,000.00

Grand Total

64,011.00