Document of

The World Bank

Report No:

PROJECT BRIEF

ON A

PROPOSED GRANT FROM THEGLOBAL ENVIRONMENT FACILITY TRUST FUND

IN THE AMOUNT OF USD 10 MILLION

TO THE

GOVERNMENT OF KENYA

FOR A

AGRICULTURAL PRODUCTIVITY AND SUSTAINABLE LAND MANAGEMENT(KAPSLM) PROJECT

August 29, 2005

CURRENCY EQUIVALENTS

(Exchange Rate Effective {Date})

Currency Unit == US$1

US$ = SDR 1

FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development BankALRMP Arid Lands Resource Management Project, KenyaAPL Adaptable Program LoanATIRI Agriculture Technology and Information Response Initiative,

KenyaBMPs/BMTs Best Management Practices/Best Management TechnologiesCAS Country Assistance StrategyCBD Convention for Biological DiversityCBOs Community Based OrganizationsCIRAD Centre de Cooperation International en Recherche

Agronomique pour le DeveloppementESMF Environment and Social Management FrameworkFAO United Nations Food and Agriculture OrganizationFFS Farmer Field SchoolFMS Financial Monitoring SystemGEF Global Environment FacilityGEO Global Environment ObjectiveICRAF International Center for Research in AgroforestryIFAD International Fund for Agriculture DevelopmentINM Integrated Nutrient ManagementIP-ERS The Investment Program for the Economic Recovery

Strategy for Wealth and Employment Creation, KenyaKAPP Kenya Agricultural Productivity Project KAPSLMP Kenya Agricultural Productivity and Sustainable Land

Management ProjectKAPSLMP-SC Kenya Agricultural Productivity and Sustainable Land

Management Project Steering CommitteeKARI Kenya Agriculture Research InstituteKEFRI Kenya Forestry Research InstituteKSC KAPP Steering CommitteeLADA Land Degradation Assessment ProjectM&E Monitoring and Evaluation

NALEP National Agriculture and livestock Extension Programme, Kenya

NAP National Action Program for Addressing Land Degradation in the Context of the UNCCD, Kenya

NARP National Agriculture Research Program, KenyaNBSAP National Biodiversity Strategy and Action PlanNCB National Coordination BoardNEMA National Environment Management Agency, KenyaNEPAD The New Partnership for Africa’s DevelopmentNGOs Non-Governmental OrganizationsNRM Natural Resource ManagementNTFPs Non-Timber Forest ProductsOP Operational Program (GEF)PDO Project Development ObjectivePRA/RRA Participatory Rural Appraisal/Rapid Rural AppraisalSIDA Swedish International Development Cooperation AgencySLM Sustainable Land ManagementSRA Strategy for Revitalizing Agriculture, KenyaSSA Sub-Saharan AfricaSTAP Scientific and Technical Advisory ProgramUNCCD United Nations Convention for Combating DesertificationUNDP United Nations Development ProgramUNEP United Nations Environment ProgramUNFCCC United Nations Framework Convention on Climate ChangeWRMA Water Resources Management Agency

Vice President: Gobind NankaniCountry Manager/Director: Colin Bruce

Sector Manager: Karen McConnell BrooksTask Team Leader: Berhane Manna

KENYAAgricultural Productivity and Sustainable Land management (KAPSLM)

CONTENTS

Page

A. STRATEGIC CONTEXT AND RATIONALE......................................................................1

1. Key sector issues..................................................................................................................1

2. Rationale for Bank and GEF involvement...........................................................................3

3. Higher level objectives to which the project contributes.....................................................5

B. PROJECT DESCRIPTION..................................................................................................5

1. Lending instrument..............................................................................................................5

2. Project development objective and key indicators..............................................................6

3. Project components..............................................................................................................7

4. Lessons learned and reflected in the project design..........................................................11

5. Alternatives considered and reasons for rejection.............................................................13

C. IMPLEMENTATION.........................................................................................................14

1. Partnership arrangements...................................................................................................14

2. Institutional and implementation arrangements.................................................................15

3. Monitoring and evaluation of outcomes/results................................................................16

4. Sustainability and Replicability.........................................................................................17

5. Critical risks and possible controversial aspects...............................................................17

6. Loan/credit conditions and covenants...............................................................................18

D. APPRAISAL SUMMARY..................................................................................................19

1. Economic and financial analyses.......................................................................................19

2. Technical............................................................................................................................19

3. Fiduciary............................................................................................................................20

4. Social.................................................................................................................................20

5. Environment......................................................................................................................22

6. Safeguard policies..............................................................................................................23

7. Policy Exceptions and Readiness......................................................................................23

Annex 1: Country and Sector or Program Background..........................................................24

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies..................27

Annex 3: Results Framework and Monitoring.........................................................................29

Annex 4: Detailed Project Description......................................................................................38

Annex 5: Project Costs................................................................................................................44

Annex 6: Implementation Arrangements..................................................................................46

Annex 7: Financial Management and Disbursement Arrangements......................................49

Annex 8: Procurement Arrangements.......................................................................................55

Annex 9: Economic and Financial Analysis..............................................................................61

Annex 10: Safeguard Policy Issues.............................................................................................62

Annex 11: Project Preparation and Supervision......................................................................63

Annex 12: Documents in the Project File..................................................................................64

Annex 13: Statement of Loans and Credits...............................................................................65

Annex 14: Country at a Glance..................................................................................................67

Annex 15: Incremental Cost Analysis........................................................................................69

Annex 16: STAP Roster Review.................................................................................................86

Annex 17: Maps...........................................................................................................................100

A. STRATEGIC CONTEXT AND RATIONALE1. Key sector issuesDeclining economic growth. Kenya’s economic performance is not keeping up for its population of 30.1 million with an annual growth of 2.3 percent. In fact, it declined since the 1970’s from about 7 percent to just over 2 percent in the 1990’s and averaged at 1.4 percent in 2001-03. Poverty and food insecurity have increased in the same period. According to the Investment Program for the Economic Recovery Strategy (IP-ERS), the proportion of the population living in poverty rose from about 49% in 1990 to more than 56% in 2003. These figures reflect the poor performance of major sectors, including agriculture and are due, in part, to the unprecedented drawdown of natural capital resulting in productivity losses.

Poor performance of agriculture. Agriculture, the largest sector of the economy accounting for 26 percent of the GDP, 60 percent of total employment and 75 percent of merchandize exports, remains the key rural development challenge for Kenya. The growth rate in agriculture has been declining over the last 25 years, recovering partially in 2003 (2.6 percent) but falling again in 2004 (1.4 percent). Structural weaknesses such as market distortions, poor infrastructure, low labor productivity and inadequate support services and external factors including low international commodity prices and climate change are determinants. The impact on the poor is severe given that 67 percent of the population and 80 percent of the poor live in rural areas and are largely dependent on sector activities. The Government of Kenya’s Strategy for Revitalizing Agriculture (SRA) places a high priority on agricultural growth and identifies land degradation and its associated threats to the ecology as a key constraint to agricultural growth.

Kenya constitutes one of the most degraded areas of the About 70 percent of Kenya’s population live in the 12 percent of total land area (581,679 square kilometres) which is classified as being of medium to high potential for agriculture and livestock production. The growing population and the resulting increase in demand for land, energy and water is putting tremendous pressure on the natural resources.

Land degradation is widespread and manifests itself in multiple ways including: Over-exploitation and poor use of the natural resource base; Excessive soil erosion, gullying and increased sediment loading of water bodies; Nutrient depletion due to burning of biomass1; Reduced ground cover and lower carrying capacity of pastures; Continued loss and degradation of forest areas as well as clearing of farm forestry; Reduced flows of water, drying up of water courses, worsening water quality; Habitat loss and threats to biodiversity Loss of carbon sinks Increased damages from cycle of droughts and floods as well as increased degree and

frequency of such extreme events; Increased vulnerability of and gradual reduction in incomes of rural families;

1 Recent estimates by the World Agro-forestry Center indicate that in the Nyando River Basin alone, soil worth US$42.7 million is lost every year (estimations are based on a soil value of US$ 12/MT). Since 1962, 3.2 million MT of soil have been washed into the Lake Victoria and over 50% of the land in Western Kenya has been abandoned due to depletion of soil nutrients.

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There are multiple issues that underpin the trend of increasing land degradation in Kenya. Some of the major barriers that facilitate land degradation or constrain sustainable land management are:Lack of Community Awareness and Social Factors

Lack of awareness of Land degradation issues and access to SLM technologies Untenable traditional land management practices – such as fallowing to restore fertility –

due to high population density and fragmentation Social issues, including inheritance and burial practices Lack of champions for sustainable land management

Policy Factors (including lack of incentives for SLM): Unclear property rights implying lower investments in sound land and natural resources

management Inadequate control over forest reserves, leading to the treatment of land as a patronage

tool within a context of increased electoral competition Increased demand for wood-fuel and charcoal2 and high prices for charcoal in an active

commercial market Deficiencies in the policy framework, including barriers to adoption of, and investment

in, sustainable land management technologies Weakness in the legislative and legal framework, in particular lack of cross-sectoral

coordination on land management (NRM is covered under 77 different statutes that are limited to a specific sectoral or functional focus)

Insufficient mechanisms to address environmental externalities and lack of incentive structures to promote environmental management (such as payments for environmental services3)

Low Investment and Institutional Factors: Inadequate investments in agriculture and weak extension systems Absence of alternate livelihood opportunities Lack of sustainable rangeland management regimes leading to overgrazing and

loss/degradation of vegetation Inadequate land-use management and protection in the country’s catchment areas Weaknesses of research programs (targeting, applicability, cost effectiveness, demand

drivenness, etc.) and lower attention to the use of indigenous knowledge Absence of regular and accurate assessments and monitoring of natural resources,

combined with the lack of capacity to analyze and develop decision support information systems

Persistent diminishing productivity and the absence of significant investment to raise land productivity have generated recent policy debate and highlighted the need to address land

2 Charcoal demand is currently at 20 million metric tons.3 PES systems can provide incentives to maintain land uses that generate or protect ecosystem services. Farmers who adopt practices that, for example, reduce downstream impacts or increase carbon sequestration could potentially receive payments that compensate them for their costs on the basis of the value of benefits generated or accrued elsewhere.

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degradation and improve natural resources management through interventions at the macro as well as at the farm and community levels.

The Government StrategyThe Government recognizes the need for raising land productivity to raise rural incomes and improving the sustainability of land use and has responded through its various strategies (ERS, SRA, NAP etc.) Its development strategy, articulated in the Economic Recovery Strategy for Wealth and Employment Creation (ERS) (2003-2007), identifies agriculture as among the prime drivers of the recovery program and places particular emphasis on sustainable agricultural growth as a critical element in poverty reduction. The Government adopted its, Strategy for Revitalizing Agriculture (SRA), 2004-2014) which recognizes the lack of a coherent land policy as one of the impediments to sound land use leading to environmental degradation. A comprehensive land policy covering use and administration, tenure security, and delivery systems is under preparation/review. The draft policy is expected to have far reaching implications on: (i) existing legislation and the institutions mandated with the management of natural resources; (ii) land management; and (iii) the extent to which local communities can participate in these activities.

A National Action Programme (NAP) for addressing land degradation, in the context of the United Nations Convention to Combat Desertification (UNCCD) was prepared in 2002 through a thorough consultative process. The following are priority areas of the NAP:

A robust enabling environment that enables communities to access and manage local resources;

Development of ecologically sound land use policies and plans; Information and knowledge base for addressing land degradation; Implementation of a targeted awareness to foster cooperation and a common

understanding on sustainable land management; Capacity building of stakeholders; Support to local community initiatives to develop long-term financial mechanisms. Sectoral Foci: Energy, Vegetation cover, energy, forest conservation, Agriculture and

pastoralism, soil and water resources management. Cross-Sectoral Foci: Gender mainstreaming, science and technology, poverty and

environment linkages, use of early warning systems.

The National Biodiversity Strategy and Action plan (NBSAP, 2000) recognizes encroachment for agriculture and the resulting loss of vegetation as a major threat to biodiversity. Further, it notes the link between soil erosion resulting from hillside and dry land cultivation and monoculture. The project is in response to these threats and addresses a key objective of the NBSAP by providing increased support to local communities towards sustainable farming practices that conserve agro-biodiversity and maintain ecosystem services.

2. Rationale for Bank and GEF involvementEfforts to address land degradation have generally had limited success in Kenya. The implementation of measures to control and reverse land degradation require comprehensive and integrated approaches to sustainable land management. The Government has explicitly highlighted environmental management as key element of the Government poverty reduction strategy and is already engaged in related activities. The ongoing policy dialogue on land and

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natural resources management (i.e., the preparation of a revised land policy and a new Forest Bill) is the result of the Government’s initiative. Despite the many efforts by the Government in implementing its program, it is impeded by resource and capacity constraints; this project is in response to the Government’s request for additional support to achieve the desired results.

The scale of the land degradation and the need to maintain globally significant ecosystem services, under threat, call for GEF’s involvement. GEF incremental support will promote the integrated watershed approach and contribute to the maintenance, conservation and restoration of the structural and functional integrity of critical ecosystems in the targeted catchment and operational areas mitigating threats to globally significant biodiversity and genetic resources, above and below-ground carbon sequestration and the health of international water systems.

The proposed project is consistent with the GEF operational program (#15) on Sustainable Land Management and addresses its strategic priorities - (I) capacity building, including mainstreaming of SLM in national development frameworks, policy reforms and institutional strengthening, and (II) implementation of innovative and/or indigenous SLM practices through on-the-ground investments and community capacity. The proposed project will support implementation of the Government’s National Action Program (NAP) priorities – strengthening the enabling environment, capacity building, knowledge sharing and awareness-raising – by helping to address some of the barriers preventing the widespread uptake of, and improving the incentives for sustainable land management activities, supporting land use and tenure policy reform, strengthening involvement of local communities in decision making and management processes, knowledge sharing and awareness creation, and capacity building.

Moreover, the cross-sectoral nature of the problem involves the need to mainstream into sectoral and national priorities, an area of competitive advantage for the Bank. The project will complement KAPP, which focuses on institutional strengthening and reform in the agriculture sector (including revamping of public service delivery including research and extension, promoting empowerment of farmers and wider uptake of improved technologies). The project will be able to draw comprehensively on Bank and GEF supported land management initiatives and existing knowledge with land management. It will also draw synergies from other on-going and planned Bank operations in the sector (e.g., Arid Lands Resource Management Project (ALRMP), Western Kenya Integrated Ecosystem Management Project, the Western Kenya Community Driven Development Project, and the proposed Kenya Natural Resource Management Project).

The proposed project also fits with the latest Country Assistance Strategy (CAS) for Kenya, prepared in May 2004, with one of its four main themes focusing on reducing vulnerability and strengthening communities by: (i) increasing agricultural productivity and competitiveness, (ii) improving environmental management; (iii) strengthening local governments; and (iv) implementing measures targeted at poor regions and communities. Further, it corresponds to the priorities of the New Partnership for Africa’s Development (NEPAD) on agriculture, environment and empowerment. In particular, the project will support Thematic Area One of NEPAD Action Plan for combating land degradation and desertification.

Lastly, the Bank has convened the TerrAfrica Partnership, a multi-partner platform that aims to scale-up SLM across SSA, providing a built-in scale-up mechanism that the project will access to leverage impact. Activities center on building coalitions at regional and national levels to

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promote SLM across sectors, share knowledge, and help coordinate investments, thereby maximizing efficiencies and impacts. The TerrAfrica partnership is inclusive, involving SSA countries, civil society and research organizations, multilaterals and bilaterals (i.e., the AfDB, European Commission, FAO, GM of the UNCCD, IFAD, NEPAD, UNCCD Secretariat, UNDP, UNEP, and the World Bank).

EligibilityKenya ratified the UNCCD in 1997 and developed its National Action Program (NAP) in 2002. The activities proposed in AP-SLM are consistent with UNCCD’s call for implementation of activities aimed at preventing and/or reducing land degradation, rehabilitating partly degraded lands and reclaiming of degraded lands through National Action Programs. They also have an excellent fit within the strategic considerations of the GEF operational program on Sustainable Land Management (OP15), including mainstreaming into national development frameworks, promoting cross-sectoral approaches to land management (building on synergies with the programs of partners and other development agencies) and using an integrated ecosystem based approach, enhancing participation of stakeholder (especially producers and local decision-makers, with a particular emphasis on participation of women), strengthening the policy environment, information base and capacity as well as on the ground investments.

In addition, Kenya signed the Convention on Biological Diversity (CBD) in 1992 and ratified it in 1994. Further, it has signed and ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1994.

3. Higher level objectives to which the project contributesThe proposed project seeks to promote sustainable use of natural resources for higher productivity and incomes for the rural farmers of Kenya and the maintenance of critical ecosystem functions in degraded and environmentally sensitive areas. The project will help to mainstream sustainable land management into rural agricultural programs, through local investments and capacity building, and to strengthen the policy, regulatory and economic incentive framework to facilitate wider adoption of sustainable land management practices. It will also: (i) provide tangible and measurable local and global environmental benefits at the farm and catchment levels through the promotion of sustainable land management technology packages and practices that have local and global benefits - global benefits will accrue in agro-biodiversity, enhanced carbon sinks, and secured services from freshwater systems, as well as in adapting production systems to climate change; (ii) contribute to income generation and poverty reduction, by improving productivity, as elucidated in various Government policies and strategies (such as ERS, SRA NAP) and Bank documents (CAS); and (iii) encourage the use of indigenous knowledge and resources.

B. PROJECT DESCRIPTION1. Lending instrumentIn light of the need for grant funding for the wider promotion of SLM methodologies as well as the global benefits accruing from an integrated ecosystem management of environmentally critical catchment areas, a GEF grant is being proposed as the instrument for this project, which will be closely linked to the KAPP, a phased Adaptable Program Loan.

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2. Project development objective and key indicatorsThe development objective (PDO) of the proposed project is that agricultural producers and other natural resource users increasingly adopt profitable and environmentally-sound land management practices and alternative livelihood strategies in the targeted operational areas.

The global environment objective (GEO) of the proposed project is to reduce and mitigate land degradation in the targeted operational areas and to contribute to maintenance of critical ecosystem functions and structures.

Specifically, the project will:

Make resources available and strengthen the capacity of agricultural producers and other resource users to: (i) adopt SLM practices and technologies to mitigate land degradation and achieve greater productivity of crops, trees and livestock; and (ii) adopt sustainable alternative livelihood options to diversify and increase income, and reduce the pressure on the natural resources.

Enhance the institutional capacity of all relevant stakeholders to promote sustainable land management practices and alternative livelihood strategies based on participatory and demand-driven approaches.

Evaluate the impact of existing policies affecting the management of natural resources and contribute to the removal of barriers hindering the widespread adoption of SLM practices.

Facilitate the exchange of information on best practices in sustainable land management among farmers, communities, extension agents, researchers, development partners, and policy makers.

The project aims to address land degradation and improve land management in five operational areas: Taita-Taveta, Tugen Hills, Kinale-Kikuyu Cherangani Hills, and Yala catchements. Monitoring of performance will be based on outcome indicators and would include the following:

Outcome Indicators at PDO/GEO level: Area (in ha) on which promoted SLM technologies and practices have been adopted (total;

total per watershed) % of income of farm and non-farm households increased in targeted watersheds due to

adoption of promoted technologies and strategies (in average for all households; in average for households per watershed; in average for landless; in average for female-headed households)

Percent of soil loss reduced in targeted watersheds Percent of land under vegetative cover in targeted watersheds % increase in soil moisture content (soil samples on selected plots) Sedimentation rate of selected reservoirs reduced by X % % increase in carbon storage capacity

3. Project componentsIt is proposed that the project would have 4 components: (1) Building capacity for SLM; (2) Investments in community SLM micro-projects; (3) Strengthening the enabling environment for

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SLM; and (4) Coordination, monitoring and evaluation of project activities. Investment in monitoring and impact evaluation will be integral to each activity in these windows.

Component 1: Building Capacity for Sustainable Land Management (GEF Increment USD 3.70 million, Government and Beneficiary contribution USD 0.87 million, Baseline USD 13.02 million)This component recognises the critical need for capacity at multiple levels for the implementation of the objectives of the project and seeks to address these gaps. It will target communities and service providers for training and capacity enhancement as well as help build a broader awareness of the potential and impact of SLM.

Community capacity building This subcomponent will support capacity building among producers and resource users within communities and empower households to analyse opportunities, identify and experiment with alternative interventions, and generate and share knowledge on adaptive management of natural resources. It will help communities create consensus for and develop micro-catchment land use plans through participatory approaches, involving local communities, advisory service providers, and researchers as well as support farmer groups and communities in developing and implementing demand-driven micro-projects that come out of micro-catchment plans. To the extent possible the project will focus its capacity building efforts on existing CBOs and farmer groups. Particular emphasis will be placed on social inclusion to ensure adequate representation of women, landless, and other disadvantaged groups.

Community capacity would be support in both thematic (information on the best management practices (BMPs) and technologies (BMTs), and alternate options for income generation) and methodological areas (preparing micro-project proposals, credit financing and savings, areas, accessing market information and so on). Some of the issues are: (i) soil and water conservation technologies; (ii) appropriate fertility management practices; (iii) environmentally positive production systems (conservation tillage, agro-forestry, forages, zero grazing, INM etc); (iv) water management (e.g. conservation and harvesting techniques, irrigation planning); (v) integrated pest management; (vi) conservation and utilization of biodiversity; (vii) alternative livelihoods (e.g. tree nurseries, ecotourism, apiculture, medicinal plants, fisheries, emerging livestock); (viii) consensus building and conflict resolution mechanisms; (ix) early warning systems (vulnerability); (x) marketing and value addition; (xi) efficient use and alternatives to fuel wood; and (xii) compliance to environmental policies (including flood and fire control).

Information and training will be provided among communities through workshops, on farm demonstrations, exchange visits of farmers and publications aimed at the farmer/resource user. Reliance will be on participatory tools, including Participatory Rural Assessment (PRA), Rapid Rural Appraisal (RRA), transect works and extension methodologies such as ATIRI, Farmer Field Schools (FFS), farmer to farmer extension and demonstration training, focal area approach, and model farmer etc. In particular, community opinion leaders will be sensitized on various land management issues such as identification of community priorities; development and implementation of community plans; resource use conflicts and resolution, and policies/regulations related to NRM. Moreover, local organizations will be trained in output and

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outcome based participatory monitoring and evaluation; data collection methodologies and record keeping; and identification of resource degradation indicators.

Services Providers Capacity This component will address weaknesses in service provision by building local capacity on the available technological solutions for sustainable land management. It will build on KAPP support activities on extension reform and target public and private extension agents and service providers (including CBOs and NGOs) at the division and district. It will enable them to transfer information and locally adaptive technologies and practices to the communities under a demand-driven and competitive service provision framework. Capacity will be enhanced through appropriately targeted training (e.g. through learning workshops, exchange visits and publications) and field based learning (e.g. site visits, demonstration plots, and pilots) provided by qualified national and international research and extension institutions. Capacity building efforts will focus on both technical and methodological areas. The former include: sustainable resource use planning and management; livestock management; crop management practices; water harvesting and irrigation practices; marketing strategies; agro-forestry systems; marketing; agro-processing and other alternative livelihood strategies. The latter include project management methods, participatory research and extension methods; participatory and outcome based monitoring and evaluation; conflict management and consensus building among others.

The component will seek to mainstream the objectives and methodologies of SLM within the extension reform program under KAPP and the national agricultural and livestock extension (NALEP) program supported by the Government of Kenya and Swedish International Development Cooperation (SIDA). KAPP and to some extent NALEP will help restructure the entire extension system and support the formulation, adoption and implementation of a revised extension policy as well as extension pilots and capacity building of services providers in 20 districts. These activities will clarify and rationalize the roles and functions of public, private and civil society organizations streamline and develop more effective and responsive public services and enhance the capacity of non-public extension service providers.

Component 2: Investments in community SLM micro-projects (GEF Increment USD 4.00 million, Government and Beneficiary contribution USD 0.61 million, Baseline USD 3.50 million)This component will support community micro-projects that are identified within the micro-catchment plans developed by communities to address land degradation and/or provide alternate means of livelihoods.

Communities will select from a menu of technologies and practices to address land degradation and generate income that are examined through cost-benefit analysis and adapted to the agro-ecological conditions of the targeted project areas, and apply these BMPs and BMTs through micro-projects. They will access the necessary technical assistance from public and private service providers. The menu includes BMPs and BMTs on soil and water conservation, water harvesting, reseeding of degraded lands, forest rehabilitation, pasture management, high yielding crop and livestock varieties and genotypes, soil fertility maintenance etc.

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The component would also support micro-projects that are identified within the micro-catchment plans that promote alternate livelihoods and income generation, creating incentives for environmentally sensitive land management. Investments would be in the areas of value addition of NTFPs (such as medicinal and aromatic plants, Gum Arabica, sisal etc) and agroforestry (promoting trees such as Jatropha curcas, oil palm, Hibiscus, Gum Arabic, Prunus africana etc) and processing; diversification into high value crops; marketing information networks and strengthening marketing channels where feasible; ecotourism including facilitating community and private sector partnerships; apiculture technologies and community honey processing, packaging and marketing channels; fisheries including appropriate fish varieties, processing and links to market outlets; and promoting emerging livestock (e.g. ostrich, guinea fowls, camel) and identifying market opportunities.

These investments will build on KAPP and other baseline activities which seek to develop institutional and financial mechanisms that will give farmers control over extension and research services and increase their access to productivity enhancing technologies. KAPP will support the effort to establish and develop farmers’ fora, a principal tool for farmers’ empowerment, at the national, district and grassroots level; and will provide targeted support to scale-up application of technology innovations. Investments under this project will be directed towards NRM technologies that complement production technologies supported through KAPP.

Another important initiative towards sustainable land use management is the promotion of biogas technology at the rural household level through a more efficient use of animal waste. Installation of family-size biogas would be a significant step towards reduction of pressure on the country’s depleting woody biomass, amelioration of the lot of rural women, soil conservation, and improved environmental outcomes. The project would make a provision to help plan and commence the work based on a review of technical, financial and economic justification.

Component 3: Strengthening the enabling environment for SLM (GEF Increment USD 1.80 million, Government and Beneficiary contribution USD 0.61 million, Baseline USD 46.47 million)This component will strengthen the enabling environment necessary for mainstreaming sustainable land management approaches through the policy and institutional landscape. It will seek to address gaps in the policy framework, support for institutional capacity for planning and for monitoring and improved coordination between agencies.

Towards a sound policy framework This component will support the Government in implementing its policy objectives, as elucidated in the NAP, related to sustainable land and natural resources management. It will support various studies and analyses that assess the current and proposed policy and regulatory frameworks (including land and forest policies) for potential implications on land degradation. The studies will seek for a better understanding of the linkages between and the impact of policies and institutions (such as regulation, incentives/disincentives in agricultural production, marketing, and resources management; subsidies, tariffs, and pricing of agricultural inputs and commodities; environmental laws) on the management and use of natural resources, specifically, factors affecting the widespread adoption of sustainable NRM practices and technologies.

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The component will also support stakeholder consultations on these various policy issues as well as seek to remove existing policy and legal barriers through a consultative process involving communities, CBOs, government agencies and research institutions. Policy makers will also be exposed to SLM & NRM issues through consultative policy meetings, workshops and dialogue.The results of the studies and the consultative process, will contribute to the development of an agenda of actions for better land and natural resource utilization and a shift in the approaches towards addressing degradation. In addition, this component will support the piloting and operationalization of payments for environmental services programs, by developing on the knowledge base, identifying appropriate buyers and producers of environmental services (water, carbon, biodiversity etc), building capacity and promoting dialogue.

Towards an improved knowledge and information base The component will also address the gaps towards a sound information system that would link outcomes to adaptive decision-making (relying less on ‘control’ measures and more on market signaling and incentive measures) and support mainstreaming SLM into sectoral program areas such as energy (demand management for woodfuel, improving efficiencies for biomass, strengthening institutional planning), forests (link with the new Forest Bill currently being considered by Parliament, which shifts the emphasis for management and conservation of forests to local communities and the private sector), wildlife (coordination with KWS to reduce incidence of wildlife related conflicts), biodiversity (addressing invasive species, maintaining and enhancing agro-biodiversity and indigenous species), water resources (support for integrated water resources management and coordination) as well as gender issues and technology dissemination. A sound information system relies to a significant degree on an adequate M&E framework. The project will strengthen the ongoing Government efforts for an improved M&E system by:

Establishing baselines and developing a simplified monitoring framework for the collection and use of socio-economic and environmental data relevant to improving land and natural resources management at the local level, which can then be aggregated upwards for decision-making at the district, provincial and national levels.

Building capacity to analyze and interpret data for decision-making and management. Building capacity to identify and address NRM links to poverty and cross-sectoral issues. Valuing the economic cost of degradation and demonstrating benefits from alternate

approaches.

Towards stronger institutions This component will strengthen institutions relevant to the promotion of sustainable land management by supporting capacity enhancement and improved coordination and information sharing. In-country training (including site-visits for policy makers) will be organized and agencies that will be targeted include the relevant ministries (Agriculture, Environment, including forests, wildlife, NEMA, Lands, Water and Community development), research institutes and related organizations. Regional and international training, where necessary, will be conducted as appropriate and may include workshops, conferences and study tours. Capacity building would cover topics such as stakeholder consultation and conflict resolution, environmental and social impact assessment, land degradation, biodiversity conservation (themes) and methods (policy analysis and development, project management, data management, analysis and modeling, participatory methods etc.).

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Component 4: Project coordination and monitoring (GEF Increment USD 0.50 million, Government and Beneficiary contribution USD 0.34 million, Baseline USD 7.20 million)The implementation period for this project is six years. This component will support project coordination and implementation at the national, district and grassroots level, both through institutional structures created under the KAPP and those adapted or created under the project as necessary. The project coordination organ will include competitively selected personnel with the required skill-mix (agronomy and economics, SLM/NRM, communications, community and social development, M&E etc).

This component will also coordinate the activities related to project monitoring and evaluation (M&E) as well as impact assessment. The detailed institutional arrangements for project co-ordination and implementation, to be supported under this component are detailed in section C2 below.

4. Lessons learned and reflected in the project designThe proposed KAPSLMP will build on experiences and lessons learned from sustainable natural resource management projects supported by the Bank, GEF, and Government of Kenya. It will also build on the GEF STAP Review and UNDP assessment reports.

A. Lessons learned from Bank supported projects(i) Sao Paulo Land Management Project, Brazil (Project ID: P006474):In order to optimize integration and collaboration of the different institutions and agencies, the project will set out: (i) management and implementation structure with clear responsibilities at all levels, and emphasis on strong local participation; (ii) strategies based on technological changes adapted to local needs and conditions to produce immediate benefits; (iii) provide extension workers with intensive training in group dynamics and use of participatory methods; (iv) participatory methods for selecting micro-watersheds and activities based on technical, environmental, and social criteria; and (v) a robust monitoring and evaluation system. It will also carry out studies to inform the country’s legal framework, including sanctions against activities detrimental to the environment and community efforts.

(ii) Matruh Resource Management Project I and II, Egypt (ID: P005153/P074075)As a first step, the project was designed to implement adequate training and capacity building as prerequisites to the start-up and implementation of activities particularly those requiring beneficiary participation.

(iii) Loess Plateau Watershed Rehabilitation Project I and II, China (ID: P003540/P056216)

The proposed project will seek farmer-to-farmer exchange to pilot/project areas and use a comprehensive awareness campaign to publicize project objectives and activities for a sustained period of time.

(iv) National Agricultural Research Project II, Kenya (ID: P001354)Experience from NARP I and II centered around the emphasis on the need for clarity and specificity regarding benchmarks and indicators as well as paying special attention to the quality of monitoring and evaluation in place, and greater focus on end users and integration

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with country broad strategy. The project’s M&E will be carried out with a strong technical and scientific component associated with biophysical and social measurement. The proposed implementation arrangement for the project was also influenced by the generally positive implementation experience of NARP I and to use the administrative capacity within KARI particularly on the fiduciary aspects.

(v) Kenya Agricultural Productivity Project (KAPP, Project ID: P082396)Recognizing that delays in the flow of funds is one of the main reasons for the current slow implementation; the proposed project has designed a financial management system that would allow uninterrupted flow of funds. Community organization will receive funds using impress accounting system where funds will be released in advance and beneficiaries will submit accountability reports in respect of amount already spent during the period.

B. Lessons learned from GEF supported projectsThe operational program on land degradation (OP 15) was approved by the GEF Council in 2003 and since then 19 projects have been approved so far. The first project – Agricultural Rehabilitation and Sustainable Land Management Project, Burundi - was endorsed by the GEF CEO only in May 2004 and therefore, lessons learned during implementation are very limited.

C. Recommendations from GEF STAP Reviews(i) Community-Based Land Management Project, Republic of Guinea (ID:

P081297)The project was designed to deal effectively with the local variations in causes and effects of land degradation and would support locally-adapted and less blueprint oriented technical approaches. The experiences from Guinea show that: (i) local participation in selection of activities, technology development and adaptation, and monitoring was crucial for the success of the project; (ii) ownership of the land degradation agenda should be at both the local and national levels; (iii) sustainability of project activities will depend on profitability of selected investments activities, strong support from all levels of government, and involvement of local communities in all aspects of project design, implementation, and evaluation. The proposed project supports community driven projects and community participation for effective implementation; has well focused activities; and has both the government support through the ongoing development of a policy on land management.

(ii) Agricultural Rehabilitation and Sustainable Land Management Project, Burundi (ID: P064558)

Sustainable land management projects need to deal effectively with the economic and social issues. Experience for Brazil also show that outcomes from sustainable management practices are unlikely to benefit evenly and compensation mechanisms for “losers”, if any should be identified. The proposed project will support adoption of sustainable land management practices and linking conservations objectives with production and income objectives.

(iii) Sustainable Land Management in Semi-Arid Sertao, Brazil (ID: 2373)

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Questions have been raised regarding the lack of information and a thorough understanding related to the causes and effects of land degradation. Funds under PDF-B were used to support KARI to carry out a study and the recommendations were used in the project design.

D. Lessons learned from Government/KARI supported projects A review of the ATIRI program carried out in 2002 acknowledges that the program could serve as a desperately needed model for other projects where projects are anchored on multidisciplinary /multi-institutional working mechanisms and participatory approaches. The review indicates that the project objectives need to be clarified to all stakeholders at national, district and farmers levels during project development, greater emphasis should be placed on capacity building programs at all levels and to all stakeholders (implementers and services providers, e.g. the NGOs, CBOs, private trade and business partners) and competitive selection of local service providers could avoid risk that new entities would become overly bureaucratic. The proposed project will, proactively pursue the promotion of various stakeholders’ partnerships to add value to the implementation and management of the project once it is underway.

E. Land degradation-related projects supported by GEFA review of the “GEF Land Degradation Linkage Study” from 2001 recommended that: (i) projects should not only focus on redressing the effects of land degradation, such as soil erosion, vegetation destruction, and water pollution, but also the drivers of land degradation; and (ii) monitoring and evaluation of land degradation projects. The project will support development and implementation of a viable monitoring and evaluation system that will include environmental and social indicators.

F. Lessons from UNDP AssessmentThe lessons learned from a UNDP assessment of 8 land degradation projects supported by GEF included that: (i) the development of viable alternative land use systems requires a substantial investment in high-quality targeted research; and (ii) large and rapid impacts on land degradation may be obtained by addressing policy and economic structures affecting land use. These lessons have been incorporated into the current project by including components aimed at informing policy makers through studies and project activities likely to put pressure on several policy areas where reforms are needed for the development of a favorable policy environment.

5. Alternatives considered and reasons for rejectionThe project was initially designed as part of a larger IDA program (KAPP). The instrument selected for the KAPP is an APL. While KAPP is ongoing, the preparation of KAPSLMP has lagged behind because of the need for additional data to underpin the preparation. Given the timeline, it was proposed to classify this project as partially blended GEF project linked to IDA KAPP. Similarly, activities under KAPSLMP, like those under KAPP, are long-term and require sustained efforts, support, and flexibility (development of institutions, generation and adoption of technologies, etc.) throughout the project life. Therefore, even if the activities are fairly small, it was agreed to extend the project duration to six years.

Four alternatives were considered for addressing the problems of land degradations in Kenya and determining the project intervention areas: (i) reducing the number of operational intervention

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areas; (ii) stretching the intervention areas to embrace more watersheds; (iii) focusing only on alternative livelihoods interventions given the degraded natural resource situation and consequently lower potential for agriculture; and (iv) seeking alternative implementation arrangements dedicated to project coordination and accountable through its Head to the President’s Office.

The arguments for enlarging the project intervention areas are that land degradation is widespread in Kenya and increasing the number will increase the impact of the project. The counter-argument is that this approach will increase the complexity of project design and implementation and the project’s approach should be to look for workable entry points in order to mitigate implementation difficulties.

The alternative of increasing the project intervention areas does not offer good prospects of significant impact, when it is clear that, in the past, similar projects have not made noticeable differences in addressing land degradation issues because of implementation difficulties with large areas of intervention.

Seeking remedies other than investment in land degradation was also considered. The rationale is that it will be hard for some of these watersheds to become self-sufficient. Off-farm employment opportunities, however, will be harder to develop because agriculture is still the source of growth linkages and one that could stimulate off-farm employment and income generation schemes.

The project will require an appropriate institutional structure which will continue to operate beyond the end of the project. The argument for an alternative implementation arrangement arose on account of the work load in KARI. The counter-argument is that KARI through its past activities has gained substantial experience in implementing World Bank projects. As such, it has significant institutional experience and a wealth of knowledge generated over the years that will have applicability in this project. Therefore, it is proposed that a Lead Consultant reporting to the KAPP Secretariat will be contracted under a TA component to carry out the day-to-day responsibilities of project management. In addition, the Government Steering Committee set up in consultation with the Bank to oversee the implementation of KAPP will include representatives of the Ministries of Land and Water. Similarly, the Interagency Forum will include Permanent Secretaries of these two Ministries to advise Government on matters related to sustainable land management and natural resource use.

C. IMPLEMENTATION1. Partnership arrangements The success of the project will depend largely on participation by stakeholders at the different levels and empowering local communities to ensure a sense of ownership and responsibility for project outputs/outcomes. The development of alternative livelihoods is also dependent upon the voluntary participation of local communities and the participatory identification of suitable livelihood alternatives.

Stakeholder participation and ownership both during project design and implementation is the corner stone of the project. The design of the project was based on extensive consultations with stakeholders at various levels. National level and district level workshops within catchments

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were conducted as were Participatory Rural Appraisals (PRAs) that targeted farmers and village communities in the catchments, to fully incorporate local priorities. A socio-economic survey was also conducted to elicit farm level inputs.

NGOs and other community based organizations will have an important role to play in project implementation and success. A wider audience will be engaged through the community awareness campaign, to be designed with local conditions in mind. Checklists will be developed for discussions of the main components of the project and project interventions. The M&E framework will include mechanisms for a steady flow of information among stakeholders.

Stakeholder groups will include: (i) local communities and resource users; (ii) Service providers (NGOs, CBOs and Government implementing agencies) as well as research organizations (such as KARI, KEFRI, ICRAF) involved in the development and delivery of demand driven research and extension; and (iii) government agencies in the context of policy analysis and reform.

Coordination between donor agencies, especially GEF projects in Kenya, and government institutions has been recognized as vital to avoid, if not minimize, duplication, improve effectiveness of activities and to scale-up outputs. The linkages between agencies including UNDP, UNEP, FAO, IFAD, CIRAD, ICRAF, KEFRI, KARI, etc., are being developed into a more structured coordination mechanism, through consultations between partners and the Government (NEMA and sectoral ministries).

2. Institutional and implementation arrangementsThe implementation arrangements for this project will have a considerable degree of linkage with the KAPP structures already set up by the Government in consultation with the Bank. The KAPP Steering Committee (KSC) which includes Government officials from the Ministries of Agriculture, Livestock and Fisheries, Cooperatives, Environment, and Local Government, will be expanded to include the representatives of Ministries/Agencies of Water (both the Ministry of Water and the Water Resources Management Authority, WRMA) and Land, as well as representatives of the National Coordination Board (NCB) established within the NAP for UNCCD.

The KAPSLMP-SC, chaired by Director, the Ministry of Land, will provide lead coordination, adopt activity plans for the project, pay special attention to inter-sectoral coordination, and promote integrated solutions. The Inter-Ministerial Coordination Committee established following the launching of the SRA will provide direction to the KAPSLMP-SC to ensure that results meet the targets set by the project and address any emerging policy constraints.

The KAPSLMP-SC will be closely linked to the KAPP implementing structure but will include a skill-mix that is required by the multi-disciplinary nature of the program. A competitively hired/seconded person (with significant project management skills) will Head the Secretariat and will be accountable to the President’s Office. A team of technical specialists will handle the functional requirements of developing and implementing the program including: (i) developing a master annual work program based on the work program for each component; (ii) developing an associated disbursement plan and releasing funds, in a timely fashion; (iii) maintaining proper accounts; (iv) coordinating project activities at the national and the catchment levels; (v) implementing a monitoring system that is integral to each activity and is effectively linked to

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planning for periodic adjustments in activities, when necessary; and (vi) monitoring and evaluating the project to ensure effective implementation.

KARI will assume the fiduciary responsibilities given its extensive experience with Bank-financed projects. Accordingly, KARI will be responsible for the project’s financial management system. Much of the procurement in the project will be split between transactions taking place at the cluster catchments levels and procurement organized at KARI headquarters.

More detailed implementation arrangement is in Annex 6.

3. Monitoring and evaluation of outcomes/resultsThe responsibility for this task will lie with the KAPSLMP-SC for supervision and strategic planning of project activities and functionally with the coordination group. The monitoring and evaluation system will be linked to two elements – land protection and household transformation - of the overall program purpose, as well as objectives and outputs. Given the wide array of players involved in project activities, implementation will require a simple and effective monitoring and evaluation framework that is based on monitoring (and data collection) being an integral component of each project activity, data starting at the community level and flowing upwards. While this approach will involve greater planning and capacity assistance up-front, it will reduce costs and be sustainable over time as opposed to periodic internal evaluations that are costly and often seen as extraneous demands for information.

The envisaged M&E system, supported under the project, is designed as a two-track monitoring and evaluation system involving an internal monitoring and an independent evaluation of project impacts. The internal monitoring system is central to sound management and keeps project management informed on day to day performance, and provides early warning for mid-stream corrective actions on a continuous manner. The project will also provide funds for independent evaluations using existing and future surveys on project outcomes and impacts.

During the preparation of the project, partial baselines have been developed in the 3 operational areas (Kinale/Kikuyu, Tugen Hills, Taita Hills) and are ongoing for the other two (Yala River and Cherangani Hills). Additional baseline activities are planned during preparation as well as in early implementation, including market access, hydrological, water quality, soil erosion and GIS mapping of degradation (based on data for vegetation and forest cover, water flows and quality and soil erosion). Overlays of these maps with poverty and suitability assessments will help prioritise activities and implementation as well as assist local development of micro-watershed plans. In-turn, community based ground-truthing and local knowledge will enrich the information base.

A Monitoring and Evaluation Plan (MEP) will also be developed to facilitate monitoring of project activities and performance, define the structures, roles and responsibilities of the various stakeholders, and establish the structures and mechanisms (including web-based) for data and information sharing. The system will be closely linked to the emerging regional M&E systems of the TerrAfrica regional platform. TerrAfrica will be working over the next year to finalize this. Good work in this area is being pioneered and tested by FAO, a TerrAfrica partner, under their LADA project (Land Degradation Assessment).

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4. Sustainability and ReplicabilityThe main issue of sustainability is whether the project will result in effective gains in productivity and income in targeted communities to the degree that the communities will be economically self-sustaining over time. Replication will be promoted through: (i) technologies/practices developed and adapted under the project; and (ii) mainstreaming of SLM issues into broader strategies and multi-sector work. The former will be addressed through component 1 (particularly through capacity building of service providers), and component 2 (particularly through identification and adaptation of technologies/practices). The latter will be addressed mainly through component 3 (by improving the knowledge and information base; and by promoting stronger institutions). In particular, lessons learned through this project would be very useful in scaling-up, especially considering the diversity in land-use patterns among the five project operational areas, and are expected to be applied to policy and project development throughout Kenya. SLM methodologies identified as good practices, policy studies and impact assessments will also be useful in the design and scale-up of land management activities through the TerrAfrica and Strategic Investment Program for SLM in Sub-Saharan Africa, which provide mechanisms for sharing of capacity, technical information and learning.

The greatest threats to project sustainability will be institutional arrangements and public participation. Sustainability of the project will be attained through continued stakeholder participation and institutional capacity building. The proposed GEF project is closely associated with an IDA APL for a period of twelve years. The intention is that over the six years of GEF project implementation, sustainable land management issues will be successfully mainstreamed into decision making and processes through concrete and visible benefits from project interventions, reforms to the policy framework and strengthening of institutions.

The project will also result in visible livelihood benefits and other economic incentive structures at the local level and the development of an information sharing network. Consequently, many of the activities carried out through this project are likely to be implemented without project funding once the benefits of implementing such practices have been demonstrated.

5. Critical risks and possible controversial aspectsOne of the main risks relates to the sustainability of the various sub-components supported under the project. The project design incorporates several features to mitigate this sustainability risk. First, the basic approach is to ensuring sustainability is to route service provision along multiple providers. Second, the project will aim to introduce low cost technologies so that the incentive and ability to make profits makes it worthwhile for the farmers to use these technologies and for the service providers to continue in business.

The second risk relates to the speed at which funds will be able to flow as exemplified in the slow movement of the KAPP, and its implications for the speed of implementation. The project will adopt report based disbursement method and simplified accounting arrangements to ensure timely financing of on-going activities.

The third risk is that women could be discriminated against due to the customary laws in rural areas. The project recognizes the central role of women in land and proposes special attention to gender matters during project implementation. Accordingly, the project will develop gender

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sensitive planning procedures, highlight issues of importance to women, mobilize, through mass awareness programs, women as active project partners and stakeholders. Project training will address gender relations and project monitoring and evaluation plan will develop indicators that are gender sensitive.

The fourth risk is that some stakeholders and communities may choose not to participate in the program or are not able to work together to manage communal resources. First, the project is designed to maximize stakeholders and community participation. Second, the project will undertake need assessments and demonstrate the potential benefits and use “converts” as part of the outreach program. Third, given that the project activities will reflect community priorities and implemented by them, there is no reason to anticipate a shift in the willingness not to participate.

The fifth risk is the lack of capacity to implement the project. Timely implementation of project activities will depend on the capacity of implementing agencies and degree of collaboration. It is recognized that there are fundamental capacity gaps and weaknesses in several areas and at all levels. The project has identified the important capacity needed with regard to SLM and will support strengthening and seek competitive provision of services. However, there remains a capacity related risk that exceeds the scope of the project. The project will build on the existing coordination structures (KAPP, SRA, NAP coordination, etc.) and link with related ongoing and proposed interventions (projects including ARLMP, WKCDD, NRM etc) in defining its capacity building efforts and to enhance cross-sectoral collaboration.

While efforts will be made to minimize the risk by introducing tested technologies, providing technical assistance, and building the capacities of the stakeholders, at this stage, it is not possible to rule out the concern that one or more of the stakeholders will not function effectively having a significant adverse effect on the project’s ability to meet its targets. The concern could be mitigated by identifying and encouraging community and national level champions to play a key role in the project.

Other project specific risks and proposed mitigating arrangementsRisk Rating Mitigating arrangements

a) Misuse of and failure to account for project funds

S Institution of independent and effective internal audit and risk management function

b) Ineffective audit functions S Adoption of a risk based audit approach and employ international best practices

Institution of Board Audit Committee

c) Delayed funds flow S Streamlining of quarterly FMR reporting arrangements and adoption of report based disbursement method

d) Low accounting capacity in community based initiatives

S Adoption of simplified accounting arrangements Ongoing capacity enhancement initiatives

6. Loan/credit conditions and covenantsActions required prior to negotiations:

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Action1 Financial Management Manual updated, reviewed and agreed 2 Arrangements for efficient remittance of funds agreed3 Head office FM staffing completed4 FM manual revision completed and simplified guidelines for CBO reporting

prepared, reviewed and accepted

Actions required prior to credit effectiveness:Action

1 Adoption of a risk based internal audit approach and establishment of Board Audit Committee

2 Quarterly financial monitoring reporting arrangements, including arrangements for collating community initiative inputs in place

D. APPRAISAL SUMMARY1. Economic and financial analysesA framework will be developed to carry out economic analysis prior to appraisal. Both cost-benefit and cost-effectiveness approaches will be used in the design of the framework for micro-projects. Moreover, the economic cost of land degradation under a business as usual scenario will be analyzed and estimated within the economic analyses.

The economic benefits associated with specific SLM practices within the operational areas fall into two main categories: (i) benefits in the upper watersheds from reduced soil erosion, reversal of degradation of land and increased productivity from sustainable forest, pasture and agricultural land management; and (ii) benefits in the lower watersheds from reduced flooding and sedimentation of water courses and thus less damage to infrastructure, agricultural crops, etc., as well as improved land productivity.

The overall ERR for the project, will cover upstream and downstream benefits as well as increased incomes from non-farm opportunities (sustainable marketing and use of NTFP and other NR products). The economic analysis will consider three aspects: a) Quantifiable benefits: This will include economic benefits generated from increased production (fodder, NTFPs such as medicinal plants and herbs; fuelwood, timber; crops, agro-forestry etc) as well as reduced losses due to environmental risks (forest/bushfires, flooding and related damage to infrastructure, soil erosion etc) – these direct benefits will result from the implementation of the micro projects; b) Non-quantifiable benefits: significant values accruing from biodiversity protection, enhancement, regeneration and recovery of natural vegetation, stabilization of land resulting in less soil erosion and sedimentation of water courses, and reduced risk of landslides; and c) Sensitivity analysis: The response of the rate of return on the key variables will be analyzed to refine project activities. For instance, the number of hectares of forest and pasture land rehabilitated in each micro-catchment would be compared with the percentage reduction in annual costs repairing downstream flooding (damage) towards integrated planning of land and water resources.

2. TechnicalThe project technical design is appropriate to the country’s need. Special attention will be paid to identifying land management technologies and estimating the likely effect of these various

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technologies on productivity and environmental benefits. Technical capacity is likely to be a constraint on program implementation at all levels. Moreover, in light of the move towards a land policy by the country the project places special emphasis on increasing capacity for information gathering, analysis and use at different levels – for management at the local level using practical and simple tools and for detailed assessments to inform policymakers at the provincial/national level. Communication is a key feature for the success of project activities. A sound communication strategy at the local level will spread interest among communities and will increase their participation, while communication of issues and results at the sectoral ministry level will enhance coordination. The project will support capacity building (workshops, training courses, distance learning and on the job training), development and implementation of a communication strategy including the use of mass media (radio, schools, etc.) in local languages for local awareness and capacity building, and the development of a monitoring and information system (including community monitoring and feeding into decision-making). A major challenge relating with increasing agricultural productivity is the largely degraded land and resource base. Project activities will seek the twin track approach of enhancing the ecological base for greater yields as well as of promoting income generating activities and off-farm employment opportunities that would reduce the degree of dependence of households on natural resources under pressure.

3. FiduciaryThe project’s financial management risk is assessed as being moderate provided that the following proposed critical actions are implemented as provided in the financial management action plan:

i. An effective and independent project oversight function vested in the Board Audit Committee that will conduct independent institutional risk management on an ongoing basis, monitor compliance with laid down policies and procedures, review and recommend enhancement of accounting and internal controls. Internal Audit will adopt a risk based audit approach and report directly to the PSC.

ii. FMRs have been identified as the preferred basis of funding disbursement. Quarterly FMRs will be expected to contain sufficient details to support (i) fund accountability; (ii) procurement progress; and (iii) discussion on project progress including highlights of issues requiring attention, thereby improving project progress monitoring. The proposed form of presentation will be agreed during project negotiations.

iii. Inefficiencies in the flow of funds and accountability are eliminated through adoption of simplified accounting procedures and elimination of bureaucratic payment approval processes. Agreed procedures, including benchmark timelines will be agreed and confirmed during negotiations.

A World Bank Financial Management Specialist (FMS) will review and refine the financial procedures during appraisal.

4. SocialAbout half the population in the project operations areas is below the poverty line, and dependent on small farming, agro-pastoralism, forest resources and other NRM based livelihoods such as apiculture, charcoal burning, fishing, and casual labor etc. Opportunities for increased land

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productivity are expected to have social impacts that provide incentives for community solutions to problems of land degradation and improve community responsibility for the environment, reduce the consequences resulting from resource-abusing practices, and ensure sustainable use of their lands while maintaining or enhancing the ecological base..

A social analysis will be carried out as part of the project preparation. The analysis will rely on the following approaches:

(i) Data gathering from secondary sources. This includes: (a) World Bank social analysis studies such as the Kenya country social analysis, social assessments from related projects such as Arid Lands, Agricultural Productivity, as well as studies commissioned for this project, (b) local statistics and other GOK data of the project areas, (c) research and academic published materials on the relevant project issues in these areas, and (d) other donors and NGO reports that address social development issues in relation to natural resource management and use.

(ii) The Environment and Social Management Framework (ESMF). The framework will include social safeguard issues and will screen for projects that have the potential to trigger the World Bank safeguard policies. It will identify in detail the conditions under which a particular policy is triggered and indicate that any sub-project triggering it will be ineligible for funding. The framework will also screen for sub-projects impacting indigenous peoples as defined by the World Bank safeguard and direct such sub-projects to the relevant mitigation plan which is being prepared under this project.

(iii) Field work. Depending on the quality of the available data, the study would focus on using a range of participatory techniques (open and closed interviews, focus group discussions, participant observation, case history and PRA) to derive the required information to fill the identified gaps.

The understanding of relevant issues of social dynamics, institutional set up, vulnerable sub-groups and sub project impacts, will feed into the drafting of the operational manual. The aim is to ensure that project processes and structures reflect the understanding of social issues and are designed to maximize positive impacts, especially on the most vulnerable sub-groups.

It is expected that groups in 3 of the watersheds fall into the category of Indigenous Peoples. An anthropologist will develop an action plan that ensures that special needs of such groups are taken into consideration in accordance with the World Bank safeguard policy.

The social assessment will use the above approach. Where necessary recommendations will be specific to a watershed to accommodate maximum appreciation for the varied cultures and production systems (farming, pastorals, gatherers, agro-business etc.):

In order to identify interventions/strategies to respond to specific needs of vulnerable groups (e.g. female headed households, landless labor, share-croppers, and foragers) in the context of sustainable land management, the analysis will include:

A description of current resource use patterns (formal and informal) with an analysis of patron client and other social and economic relationship (e.g. lineage and clan) that influence productive behavior.

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Identification of sub-groups with regard to community decision making processes, use of common property resources, social stigmas and economic vulnerability. An attempt will be made to analyze their specific needs and target interventions (and budget) to address these. Recommendations will also be made with regard to consultation and participation of these groups in community decision making in the project

A set of monitorable indicators to measure project impact on the targeted sub-groups.

Also, the analysis will identify sources of conflict, with special attention to available mechanisms for conflict management including the following:

An assessment of the social and economic relationships between groups residing in each watershed, with special attention to current patterns of natural resource use and potential for conflict. The analysis will cover both formal and informal patterns of use, identify past and existing clashes over resource use and identify any sub-groups that are particularly vulnerable.

A description on the effectiveness of traditional and formal grievance channels and recommend on appropriate avenues to include in project design; to the extent possible, the roles of key players such as community leaders, religious heads, traditional judges etc. will be analyzed and recommendations made.

Specific attention paid to existing conflict areas between farmers and pastoral communities, including tensions with indigenous group’s dependant on forest resources.

Finally, the analysis will include: (i) institutional structures involved in regulating land management in the identified areas (e.g., public, private, small NGOs, religious NGOs, CBOs, traditional technical experts such as water readers); and (ii) guidelines/channels for effective consultation and participation of all project beneficiaries and other impacted sub-groups.

5. EnvironmentThis is an environmental project that proposes to promote technologies for the sustainable management of land and related natural resources. No major negative environmental issues are anticipated for the project. The project beneficiaries include the farmers and communities within the operational areas who participate voluntarily in project activities. The key stakeholders include the farmers, communities, CBOs and NGOs, local government, research and environmental management institutions and the relevant sector ministries (agriculture, water, environment, lands and communities). Since this project seeks to affect land use and change it has been rated as category B.

An ESMF will be developed based on inputs generated during workshops and consultations with all stakeholders and will include appropriate processes for screening for environmental safeguards in micro-projects. The capacity development component will include training to address capacity constraints for environmental screening as well as for implementing the ESMF. The ESMF will include a mechanism and procedures for screening potential environmental and social impacts of the proposed subprojects. It will assess potential environmental and social

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impacts, and propose mitigation measures. It will also establish institutional arrangements for monitoring of subprojects, and include in the ESMF an Integrated Pest Management (IPM) checklist to minimize the need for chemical pesticides. During the screening process, should it be found that a safeguard policy will be triggered by a sub-project; a subproject specific environmental management plan will be prepared before the subproject is approved. The ESMF will include the necessary format for such management and/or mitigation plans.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment (OP/BP/GP 4.01) [X] [ ]Natural Habitats (OP/BP 4.04) [X] [ ]Pest Management (OP 4.09) [X] [ ]Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [X]Involuntary Resettlement (OP/BP 4.12) [ ] [X]Indigenous Peoples (OD 4.20, being revised as OP 4.10) [X] [ ]Forests (OP/BP 4.36) [ ] [X]Safety of Dams (OP/BP 4.37) [ ] [X]Projects in Disputed Areas (OP/BP/GP 7.60)* [ ] [X]Projects on International Waterways (OP/BP/GP 7.50) [ ] [X]

7. Policy Exceptions and Readiness

The project will comply with all applicable Bank policies. The procurement documents for the first year activities will be completed and ready for the start of project implementation. Also, the project implementation plan (PIP) will be developed and appraised in terms of realism and quality. Finally, condition of Grant Effectiveness will be agreed during negotiations.

In addition to access to the Quality Enhancement Team (chaired by the Sector Manager, AFTS2) throughout project preparation for vetting key design issues, the team will seek a formal Quality Enhancement Review early in the preparation process.

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

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Annex 1: Country and Sector or Program Background

KENYA: Agricultural Productivity and Sustainable Land management

Key sector issuesDeclining economic growth. Kenya’s economic performance is not keeping up for its population of 30.1 million with an annual growth of 2.3 percent. In fact, it declined since the 1970’s from about 7 percent to just over 2 percent in the 1990’s and averaged at 1.4 percent in 2001-03. Poverty and food insecurity have increased in the same period. According to the Investment Program for the Economic Recovery Strategy (IP-ERS), the proportion of the population living in poverty rose from about 49% in 1990 to more than 56% in 2003. These figures reflect the poor performance of major sectors, including agriculture and are due, in part, to the unprecedented drawdown of natural capital resulting in productivity losses.

Poor performance of agriculture. Agriculture, the largest sector of the economy accounting for 26 percent of the GDP, 60 percent of total employment and 75 percent of merchandize exports, remains the key rural development challenge for Kenya. The growth rate in agriculture has been declining over the last 25 years, recovering partially in 2003 (2.6 percent) but falling again in 2004 (1.4 percent). Structural weaknesses such as market distortions, poor infrastructure, low labor productivity and inadequate support services and external factors including low international commodity prices and climate change are determinants. The impact on the poor is severe given that 67 percent of the population and 80 percent of the poor live in rural areas and are largely dependent on sector activities. The Government of Kenya’s Strategy for Revitalizing Agriculture (SRA) places a high priority on agricultural growth and identifies land degradation and its associated threats to the ecology as a key constraint to agricultural growth. .

Kenya constitutes one of the most degraded areas of the About 70 percent of Kenya’s population live in the 12 percent of total land area (581,679 square kilometres) which is classified as being of medium to high potential for agriculture and livestock production. The growing population and the resulting increase in demand for land, energy and water is putting tremendous pressure on the natural resources.

Land degradation is widespread and manifests itself in multiple ways including: Over-exploitation and poor use of the natural resource base; Excessive soil erosion, gullying and increased sediment loading of water bodies; Nutrient depletion due to burning of biomass4; Reduced ground cover and lower carrying capacity of pastures; Continued loss and degradation of forest areas as well as clearing of farm forestry; Reduced flows of water, drying up of water courses, worsening water quality; Habitat loss and threats to biodiversity

4 Recent estimates by the World Agro-forestry Center indicate that in the Nyando River Basin alone, soil worth US$42.7 million is lost every year (estimations are based on a soil value of US$ 12/MT). Since 1962, 3.2 million MT of soil have been washed into the Lake Victoria and over 50% of the land in Western Kenya has been abandoned due to depletion of soil nutrients.

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Loss of carbon sinks Increased damages from cycle of droughts and floods as well as increased degree and

frequency of such extreme events; Increased vulnerability of and gradual reduction in incomes of rural families;

There are multiple issues that underpin the trend of increasing land degradation in Kenya. Some of the major factors that help explain or facilitate land degradation are:

Inadequate investments in agriculture and weak extension systems; Weaknesses of research programs (targeting, applicability, cost effectiveness, demand

drivenness etc) and lower attention to the use of indigenous knowledge Inappropriate and unsustainable agricultural practices such as cultivation on steep slopes,

in marginal areas etc Overgrazing, and loss/degradation of vegetation; Untenable traditional land management practices – such as fallowing to restore fertility –

due to high population density and fragmentation; Inadequate land use management and protection in the country’s catchment areas; Unclear property rights implying lower investments in sound land and natural resources

management; Inadequate control over forest reserves leading to the treatment of land as a patronage

tool within a context of increased electoral competition; Absence of alternate livelihood opportunities; Increased demand for wood-fuel and charcoal5 and high prices for charcoal in an active

commercial market; Deficiencies in the policy framework including barriers to adoption of, and investment in,

sustainable land management technologies; Weakness in the legislative and legal framework, in particular lack of cross-sectoral

coordination on land management (NRM is covered under 77 different statutes that are limited to a specific sectoral or functional focus);

Absence of regular and accurate assessments and monitoring of natural resources combined with the lack of capacity to analyze and develop decision support information systems;

Insufficient mechanisms to address environmental externalities and lack of incentive structures to promote environmental management (such as, payments for environmental services6);

Social issues including inheritance and burial practices; Lack of awareness among the groups contributing to the degradation regarding the

impacts of their actions; and Lack of champions for sustainable land management (a reflection of its cross-sectoral

nature)

Persistent diminishing productivity and the absence of significant investment to raise land productivity have generated recent policy debate and highlighted the need to address land

5 Charcoal demand is currently at 20 million metric tons.6 PES systems can provide incentives to maintain land uses that generate or protect ecosystem services. Farmers who adopt practices that, say, reduce downstream impacts or increase carbon sequestration could potentially receive payments that compensate them for their costs on the basis of the value of benefits generated or accrued elsewhere.

25

degradation and improve natural resources management through interventions at the macro as well as at the farm and community levels. Further details on land degradation in the proposed project areas are in Annex 1.

The Government StrategyThe Government recognizes the need for raising land productivity to raise rural incomes and improving the sustainability of land use and has responded through its various strategies (ERS, SRA, NAP etc.) Its development strategy, articulated in the Economic Recovery Strategy for Wealth and Employment Creation (ERS) (2003-2007), identifies agriculture as among the prime drivers of the recovery program and places particular emphasis on sustainable agricultural growth as a critical element in poverty reduction. The Government adopted its, Strategy for Revitalizing Agriculture (SRA), 2004-2014) which recognizes the lack of a coherent land policy as one of the impediments to sound land use leading to environmental degradation. A comprehensive land policy covering use and administration, tenure security, and delivery systems is under preparation/review. The draft policy is expected to have far reaching implications on: (i) existing legislation and the institutions mandated with the management of natural resources; (ii) land management; and (iii) the extent to which local communities can participate in these activities.

A National Action Programme (NAP) for addressing land degradation, in the context of the United Nations Convention to Combat Desertification (UNCCD) was prepared in 2002 through a thorough consultative process. The following are priority areas of the NAP:

A robust enabling environment that enables communities to access and manage local resources;

Development of ecologically sound land use policies and plans; Information and knowledge base for addressing land degradation; Implementation of a targeted awareness to foster cooperation and a common

understanding on sustainable land management; Capacity building of stakeholders; Support to local community initiatives to develop long-term financial mechanisms. Sectoral Foci: Energy, Vegetation cover, energy, forest conservation, Agriculture and

pastoralism, soil and water resources management. Cross-Sectoral Foci: Gender mainstreaming, science and technology, poverty and

environment linkages, use of early warning systems.

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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

KENYA: Agricultural Productivity and Sustainable Land management

Sector Issue Project Latest Supervision (ISR) Ratings

Bank-financed

Drought Management and CDD

Agricultural Research

Environment

Water Management

Civil SocietyEmpowermentDecentralization

Arid Lands Resource Management Project (second phase ongoing)

Second National Agricultural Research Project (closed)

Lake Victoria Environment Management Project (ongoing)

Western Kenya Integrated Ecosystem Management Project

Watershed Resources Development and Management (planned)

Western Kenya CDD (planned)Local Government Reform (planned)

IP

S

S

S

DO

S

S

S

Other DevelopmentAgencies

SIDA

EU

IFAD

FAO

USAID

DFID

National Agricultural and Livestock Extension Project (NALEP)

Agricultural Research Support Project (ongoing and planned)

Horticulture and traditional Crops project

Central Kenya Dry Area Smallholder

S. Nyanza CDD (planned)

Special Program for Food Security (SPFS)

Environment & Natural Resource Management

Kenya Dairy Project Kenya Maize Development

Project Horticultural Drops

Development Project

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GTZ

DANIDA

JICA

AfDB

Kenya Agriculture Biotechnology Support Program

North Eastern Pastoral Development Program

Smallholder Dairy Development Project

Agriculture Policy Reform Project (planned)

Promotion of Private Sector Development in Agriculture

Agricultural Sector Support Project (ongoing and planned)

Smallholder Horticulture Empowerment Project (planneds)

Smallholder Irrigation Project (planned)

Baringo Integrated RD Project (planned)

Support to Livestock Development

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Annex 3: Results Framework and Monitoring

KENYA: Agricultural Productivity and Sustainable Land management

PDO Project Outcome Indicators Use of Project Outcome Information

Project Development Objective (PDO):

The PDO of the proposed project is that agricultural producers and other natural resource users increasingly adopt profitable and environmentally-sound land management practices and alternative livelihood strategies in the targeted operational areas.

Global Environmental Objective (GEO): The GEO of the proposed project is to reduce and mitigate land degradation in the targeted operational areas and to contribute to maintenance of critical ecosystem functions and structures.

Area (in ha) on which promoted SLM technologies and practices have been adopted (total; total per watershed) – area needs to be specified for each major technology

% of income of farm and non-farm households increased in targeted watersheds due to adoption of promoted technologies and strategies (in average for all households; in average for households per watershed; in average for landless; in average for female-headed households)

Percent of soil loss reduced in targeted watersheds (field measurements or estimated through USLE or similar models)

Percent of land under vegetative cover in targeted watersheds (GIS measurements)

% increase in soil moisture content (soil samples on selected plots)

Sedimentation rate of selected reservoirs reduced by X % (field measurements or quantitative models)

% increase in carbon

Help to assess the impact of the project and indicate if changes in project design are necessary.

Help determine if technology generated and disseminated meet real needs of farmers and producers and improve environmental integrity.

Help determine/assess if component outcomes are successfully translated into desired outcomes at PDO/GEO level or whether disconnect exists.

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storage capacity (method to be discussed with scientists)

Intermediate Outcomes Intermediate Outcome Indicators

Use of Intermediate Outcome Monitoring

Component 1: Building capacity for sustainable land management

Communities in operational areas have the capacity to systematically plan interventions aimed at sustainable land management and alternative livelihood strategies

Service providers have the capacity to effectively provide demand driven SLM services and support for alternate livelihood strategies.

Number of micro-catchment plans developed and approved

Client satisfaction with SLM oriented service provision at capacity planning stage (percent of positive responses or ratings, with particular focus on women)

Number of service providers who successfully completed SLM training

% of service providers trained who continue to provide relevant service after completion of training

Indicate whether community capacity building is translated into effective SLM planning.

Help to demonstrate if service providers have acquired appropriate skills to promote SLM options and alternative livelihood options.

Help determine if service providers are able to adequately met NRM needs of resource users and if further improvements in demand-driven service delivery are needed.

Component 2: Investment in SLM micro-projects and promotion of alternative livelihoods systems

Communities in targeted watersheds are empowered and have the resources to adopt SLM practices/ technologies and alternative livelihood options

Number of producers adopting promoted land management technologies (total; total per watershed; women)

Number of households adopting alternative livelihood options (total;

Evaluate relevance and responsiveness of selected technical and methodological approaches to promote SLM practices and alternative livelihood strategies.

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total per watershed; total female-headed)

Client satisfaction with SLM oriented service provision at implementation stage (percent of positive responses or ratings, with particular focus on women)

Number of SLM/alternative livelihood micro-projects approved and received funding (particular focus on micro-projects implemented by women)

Number of SLM/alternative livelihood micro-projects rated as satisfactory (particularly micro-projects implemented by women).

Assess if capacity building efforts are translated into increased adoption of SLM practices/technologies.

Help flag unsuccessful implementation of SLM micro-projects and take corrective measures.

Indicate whether institutional set-up of project implementation needs revision.

Component 3: Strengthening the enabling environment for SLM

Policy-makers and other relevant stakeholders are enabled to make informed decisions about SLM issues

Number of studies and background papers on SLM prepared and disseminated through workshops/seminars and publications.

Number of relevant sectoral programs in which NRM issues have been successfully mainstreamed

Number of policies drafted and regulation formulated to address core issues of SLM

SLM information system established to

Help determine changes needed in policies and the incentive climate to encourage uptake of sustainable land management practices

Demonstrate the commitment of policy makers to addressing NRM and poverty reduction issues

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inform political decision-making process

Component 4: Project coordination and monitoring

Implementing unit (KAPSLMP Secretariat) efficiently functions as a facilitator of decentralized project management and coordination

Implementing unit developed annual master work program based on work programs submitted by implementers in time (as threshold number of days/weeks after agreed deadline for master plan can be used)

Funds released to micro-projects in a timely fashion against agreed work plans (number of days elapsed since agreed deadline)

% of annual progress and M&E reports delivered from CBOs and supporting stakeholders to PIU in time (as threshold number of days after agreed deadline for submission)

% of micro-projects for which community-based M&E has been undertaken

Evaluate performance of the project coordination unit and determine if corrective measures are needed.

Evaluate implementation of a decentralized and participatory M&E system.

Evaluate efficiency of resource use.

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Arrangements for Results Monitoring

Data Collection and ReportingOutcome Indicators Baseline YR1 YR2 YR3 YR4 YR5 YR6 Frequency and

ReportsData Collection

InstrumentsResponsibility

for Data Collection

PDO/GEO Level Area (in ha) on which

promoted SLM technologies and practices have been adopted – area needs to be specified for each major technologyo Total (in all

watersheds)o Total per watershed

% of income of farm and non-farm households increased in targeted watersheds due to adoption of promoted technologies and strategieso in average for all

households in all watershedso in average for

households per watershedo in average for

landlesso in average for

female-headed households

% of soil loss reduced in targeted watersheds

To be determined

tbd tbd tbd tbd tbd tbdYearly project summary report by PIU, with results from micro-projects progress reports

See above

See above

Interviews/focus groups with participating farmers/ communities, supplemented by baseline survey and follow-up surveys

See above (surveys will not be conducted annually)

Field measurements; alternatively parameters for selected modeling

Executing agencies/service providers, research institution hired for surveys, and PIU

See above

Scientists from national/ international institutions; PIU

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% of land under vegetative cover in targeted watersheds

% increase in soil moisture content (in each watershed)

% decrease of sedimentation rate of selected reservoirs

% increase in carbon storage capacity (in total for all watersheds)

See above

See above

See above

See above

approach will be determined (e.g. USLE)

GIS/satellite images

Collecting and analysis of soil samples

Field measurements will be conducted and/or parameters for selected modeling approach will be determined

Data collection methods to quantify above ground and soil carbon sequestration have to be identified based on discussion with ICRAF scientists

Scientists from national/ international institutions; PIU

Scientists from national/ international institutions; PIU

Scientists from national/ international institutions; PIU

Scientists from ICRAF and other institutions; PIU

Results Indicators for Each

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ComponentComponent 1: Building Capacity for SLM

Number of micro-catchment plans developed and approved

Client satisfaction with SLM oriented service provision at planning stage

Number of service providers who successfully completed SLM training

% of service providers trained who continue to provide service after completion of training

Annual progress reports prepared by service providers

Annual progress reports prepared by service providers

Annual PIU progress report

See above

Numbers as indicated in progress reports will be summarized and synthesized in annual PIU report

Focus groups and interviews with targeted beneficiaries

Participation will be monitored by executing agencies

List of providers participated in training to be compared with register of service providers

Service Providers and PIU (watershed coordinator)

PIU (watershed coordinator)

Executing agencies, PIU (watershed coordinator)

PIU (watershed coordinator)

Component 2: Investments in Community SLM Micro-Projects

Number of farmers adopting promoted land management technologieso Total in all

watershedso Total per watershed o Women in all

watersheds

Yearly project summary report by PIU, with results from micro-projects progress reports

Interviews/focus groups with participating farmers/ communities supplemented by baseline survey and follow-up

Executing agencies/service providers, research institution hired for surveys and PIU

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Number of households adopting alternative livelihood options o Total in all

watershedso Total per watershed o Female-headed

households in all watersheds

Client satisfaction with SLM/alternative livelihood options oriented service provision at implementation stage

Number of SLM/alternative livelihood micro-projects approved and received funding

Number of SLM/alternative livelihood micro-projects rated as satisfactory

See above

Annual progress reports prepared by service providers

Yearly project summary report by PIU, with results from watershed progress reports

Depends on the duration of micro-projects (as soon as micro-project is finished an evaluation will be conducted)

surveys

See above

Focus groups and interviews with targeted beneficiaries

Watershed coordinator will monitor and present this information in progress reports

Focus groups and interviews with beneficiaries

See above

PIU (watershed coordinator)

PIU (watershed coordinator)

Independent institution hired for evaluation

Component 3: Strengthening the enabling environment for SLM

Number of studies and background papers on SLM prepared and disseminated through workshops/seminars and publications

Number of relevant sectoral

Yearly project summary report by PIU

See above

Number of studies and papers will be captured through overall monitoring process

See above

PIU

See above

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programs in which NRM issues have been successfully mainstreamed

Number of policies drafted and regulation formulated to address core issues of SLM

SLM information system established to inform political decision-making process

See above

See above

See above

See above

See above

See above

Component 4: Project Coordination and Monitoring

Implementing unit developed annual master work program based on work programs submitted by implementers in time (number weeks after agreed deadline for master plan)

Funds released to micro-projects in a timely fashion against agreed work plans (number of weeks elapsed since agreed deadline)

% of annual progress and M&E reports delivered from CBOs and supporting stakeholders to PIU in time (number of weeks after agreed deadline for submission)

% of micro-projects for which community-based M&E has been undertaken

Yearly project summary report by PIU

See above

See above

See above

Through overall monitoring process

See above

See above

See above

PIU under supervision of PSC and other project overseeing units

PIU

PIU and watershed coordinator

PIU (watershed coordinator)

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Annex 4: Detailed Project Description

KENYA: Agricultural Productivity and Sustainable Land management

The development objective of the proposed project is to reduce and mitigate land degradation in targeted operational areas by accelerating uptake of locally driven sustainable land management practices, contributing to maintenance of critical ecosystem functions and structures.

Specifically, the project will:

Make resources available and strengthen the capacity of agricultural producers and other resource users to: (i) adopt SLM practices and technologies to mitigate land degradation and achieve greater productivity of crops, trees and livestock; and (ii) adopt sustainable alternative livelihood options to diversify and increase income, and reduce the pressure on the natural resources.

Enhance the institutional capacity of all relevant stakeholders to promote sustainable land management practices and alternative livelihood strategies based on participatory and demand-driven approaches.

Evaluate the impact of existing policies affecting the management of natural resources and contribute to the removal of barriers hindering the widespread adoption of SLM practices.

Facilitate the exchange of information on best practices in sustainable land management among farmers, communities, extension agents, researchers, development partners, and policy makers.

The project aims to address land degradation and improve land management in five operational areas: Taita-Taveta, Tugen Hills, Kinale-Kikuyu Cherangani Hills, and Yala catchements.

Project componentsIt is proposed that the project would have 4 components: (1) Building capacity for SLM; (2) Investments in community SLM micro-projects; (3) Strengthening the enabling environment for SLM; and (4) Coordination, monitoring and evaluation of project activities. Investment in monitoring and impact evaluation will be integral to each activity in these windows.

Component 1: Building Capacity for Sustainable Land Management (GEF Increment USD 3.70 million, Government and Beneficiary contribution USD 0.87 million, Baseline USD 13.02 million)This component recognises the critical need for capacity at multiple levels for the implementation of the objectives of the project and seeks to address these gaps. It will target communities and service providers for training and capacity enhancement as well as help build a broader awareness of the potential and impact of SLM.

Community capacity building This subcomponent will support capacity building among producers and resource users within communities and empower households to analyse opportunities, identify and experiment with alternative interventions, and generate and share knowledge on adaptive management of natural resources. It will help communities create consensus for and develop micro-catchment land use plans through participatory approaches, involving local communities, advisory service providers, and researchers as well as support farmer groups and communities in developing and

38

implementing demand-driven micro-projects that come out of micro-catchment plans. To the extent possible the project will focus its capacity building efforts on existing CBOs and farmer groups. Particular emphasis will be placed on social inclusion to ensure adequate representation of women, landless, and other disadvantaged groups.

Community capacity would be support in both thematic (information on the best management practices (BMPs) and technologies (BMTs), and alternate options for income generation) and methodological areas (preparing micro-project proposals, credit financing and savings, areas, accessing market information and so on). Some of the issues are: (i) soil and water conservation technologies; (ii) appropriate fertility management practices; (iii) environmentally positive production systems (conservation tillage, agro-forestry, forages, zero grazing, INM etc); (iv) water management (e.g. conservation and harvesting techniques, irrigation planning); (v) integrated pest management; (vi) conservation and utilization of biodiversity; (vii) alternative livelihoods (e.g. tree nurseries, ecotourism, apiculture, medicinal plants, fisheries, emerging livestock); (viii) consensus building and conflict resolution mechanisms; (ix) early warning systems (vulnerability); (x) marketing and value addition; (xi) efficient use and alternatives to fuel wood; and (xii) compliance to environmental policies (including flood and fire control).

Information and training will be provided among communities through workshops, on farm demonstrations, exchange visits of farmers and publications aimed at the farmer/resource user. Reliance will be on participatory tools, including Participatory Rural Assessment (PRA), Rapid Rural Appraisal (RRA), transect works and extension methodologies such as ATIRI, Farmer Field Schools (FFS), farmer to farmer extension and demonstration training, focal area approach, and model farmer etc. In particular, community opinion leaders will be sensitized on various land management issues such as identification of community priorities; development and implementation of community plans; resource use conflicts and resolution, and policies/regulations related to NRM. Moreover, local organizations will be trained in output and outcome based participatory monitoring and evaluation; data collection methodologies and record keeping; and identification of resource degradation indicators.

Services Providers Capacity This component will address weaknesses in service provision by building local capacity on the available technological solutions for sustainable land management. It will build on KAPP support activities on extension reform and target public and private extension agents and service providers (including CBOs and NGOs) at the division and district. It will enable them to transfer information and locally adaptive technologies and practices to the communities under a demand-driven and competitive service provision framework. Capacity will be enhanced through appropriately targeted training (e.g. through learning workshops, exchange visits and publications) and field based learning (e.g. site visits, demonstration plots, and pilots) provided by qualified national and international research and extension institutions. Capacity building efforts will focus on both technical and methodological areas. The former include: sustainable resource use planning and management; livestock management; crop management practices; water harvesting and irrigation practices; marketing strategies; agro-forestry systems; marketing; agro-processing and other alternative livelihood strategies. The latter include project management methods, participatory research and extension methods; participatory and outcome based monitoring and evaluation; conflict management and consensus building among others.

39

The component will seek to mainstream the objectives and methodologies of SLM within the extension reform program under KAPP and the national agricultural and livestock extension (NALEP) program supported by the Government of Kenya and Swedish International Development Cooperation (SIDA). KAPP and to some extent NALEP will help restructure the entire extension system and support the formulation, adoption and implementation of a revised extension policy as well as extension pilots and capacity building of services providers in 20 districts. These activities will clarify and rationalize the roles and functions of public, private and civil society organizations streamline and develop more effective and responsive public services and enhance the capacity of non-public extension service providers.

Component 2: Investments in community SLM micro-projects (GEF Increment USD 4.00 million, Government and Beneficiary contribution USD 0.61 million, Baseline USD 3.50 million)This component will support community micro-projects that are identified within the micro-catchment plans developed by communities to address land degradation and/or provide alternate means of livelihoods.

Communities will select from a menu of technologies and practices to address land degradation and generate income that are examined through cost-benefit analysis and adapted to the agro-ecological conditions of the targeted project areas, and apply these BMPs and BMTs through micro-projects. They will access the necessary technical assistance from public and private service providers. The menu includes BMPs and BMTs on soil and water conservation, water harvesting, reseeding of degraded lands, forest rehabilitation, pasture management, high yielding crop and livestock varieties and genotypes, soil fertility maintenance etc.

The component would also support micro-projects that are identified within the micro-catchment plans that promote alternate livelihoods and income generation, creating incentives for environmentally sensitive land management. Investments would be in the areas of value addition of NTFPs (such as medicinal and aromatic plants, Gum Arabica, sisal etc) and agroforestry (promoting trees such as Jatropha curcas, oil palm, Hibiscus, Gum Arabic, Prunus africana etc) and processing; diversification into high value crops; marketing information networks and strengthening marketing channels where feasible; ecotourism including facilitating community and private sector partnerships; apiculture technologies and community honey processing, packaging and marketing channels; fisheries including appropriate fish varieties, processing and links to market outlets; and promoting emerging livestock (e.g. ostrich, guinea fowls, camel) and identifying market opportunities.

These investments will build on KAPP and other baseline activities which seek to develop institutional and financial mechanisms that will give farmers control over extension and research services and increase their access to productivity enhancing technologies. KAPP will support the effort to establish and develop farmers’ fora, a principal tool for farmers’ empowerment, at the national, district and grassroots level; and will provide targeted support to scale-up application of technology innovations. Investments under this project will be directed towards NRM technologies that complement production technologies supported through KAPP.

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Another important initiative towards sustainable land use management is the promotion of biogas technology at the rural household level through a more efficient use of animal waste. Installation of family-size biogas would be a significant step towards reduction of pressure on the country’s depleting woody biomass, amelioration of the lot of rural women, soil conservation, and improved environmental outcomes. The project would make a provision to help plan and commence the work based on a review of technical, financial and economic justification.

Component 3: Strengthening the enabling environment for SLM (GEF Increment USD 1.80 million, Government and Beneficiary contribution USD 0.61 million, Baseline USD 46.47 million)This component will strengthen the enabling environment necessary for mainstreaming sustainable land management approaches through the policy and institutional landscape. It will seek to address gaps in the policy framework, support for institutional capacity for planning and for monitoring and improved coordination between agencies.

Towards a sound policy framework This component will support the Government in implementing its policy objectives, as elucidated in the NAP, related to sustainable land and natural resources management. It will support various studies and analyses that assess the current and proposed policy and regulatory frameworks (including land and forest policies) for potential implications on land degradation. The studies will seek for a better understanding of the linkages between and the impact of policies and institutions (such as regulation, incentives/disincentives in agricultural production, marketing, and resources management; subsidies, tariffs, and pricing of agricultural inputs and commodities; environmental laws) on the management and use of natural resources, specifically, factors affecting the widespread adoption of sustainable NRM practices and technologies.

The component will also support stakeholder consultations on these various policy issues as well as seek to remove existing policy and legal barriers through a consultative process involving communities, CBOs, government agencies and research institutions. The results of the studies and the consultative process, will contribute to the development of an agenda of actions for better land and natural resource utilization and a shift in the approaches towards addressing degradation. In addition, this component will support the piloting and operationalization of payments for environmental services programs, by developing on the knowledge base, identifying appropriate buyers and producers of environmental services (water, carbon, biodiversity etc), building capacity and promoting dialogue.

Towards an improved knowledge and information base The component will also address the gaps towards a sound information system that would link outcomes to adaptive decision-making (relying less on ‘control’ measures and more on market signaling and incentive measures) and support mainstreaming SLM into sectoral program areas such as energy (demand management for woodfuel, improving efficiencies for biomass, strengthening institutional planning), forests (link with the new Forest Bill currently being considered by Parliament, which shifts the emphasis for management and conservation of forests to local communities and the private sector), wildlife (coordination with KWS to reduce incidence of wildlife related conflicts), biodiversity (addressing invasive species, maintaining and enhancing agro-biodiversity and indigenous species), water resources (support for integrated water resources management and coordination) as well as gender issues and technology

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dissemination. A sound information system relies to a significant degree on an adequate M&E framework. The project will strengthen the ongoing Government efforts for an improved M&E system by:

Establishing baselines and developing a simplified monitoring framework for the collection and use of socio-economic and environmental data relevant to improving land and natural resources management at the local level, which can then be aggregated upwards for decision-making at the district, provincial and national levels.

Building capacity to analyze and interpret data for decision-making and management. Building capacity to identify and address NRM links to poverty and cross-sectoral issues. Valuing the economic cost of degradation and demonstrating benefits from alternate

approaches.

Towards stronger institutions This component will strengthen institutions relevant to the promotion of sustainable land management by supporting capacity enhancement and improved coordination and information sharing. In-country training (including site-visits for policy makers) will be organized and agencies that will be targeted include the relevant ministries (Agriculture, Environment, including forests, wildlife, NEMA, Lands, Water and Community development), research institutes and related organizations. Regional and international training, where necessary, will be conducted as appropriate and may include workshops, conferences and study tours. Capacity building would cover topics such as stakeholder consultation and conflict resolution, environmental and social impact assessment, land degradation, biodiversity conservation (themes) and methods (policy analysis and development, project management, data management, analysis and modeling, participatory methods etc.). Policy makers will also be exposed to SLM & NRM issues through consultative policy meetings, workshops and dialogue.

Component 4: Project coordination and monitoring (GEF Increment USD 0.50 million, Government and Beneficiary contribution USD 0.34 million, Baseline USD 7.20 million)The implementation period for this project is five years. This component will support project coordination and implementation at the national, district and grassroots level, both through institutional structures created under the KAPP and those adapted or created under the project as necessary. The project coordination organ will include competitively selected personnel with the required skill-mix (agronomy and economics, SLM/NRM, communications, community and social development, M&E etc). This component will also coordinate the activities related to project monitoring and evaluation (M&E) as well as impact assessment. The detailed institutional arrangements for project co-ordination and implementation, to be supported under this component are detailed in section C2 below.

Districts covered by KAPSLM in each operational area

Operational Area/Catchment

Administrative Districts Coverage (percent)

Cherangani Hills Trans-Nzoia* 55West Pokot* (50-85% ASAL)

15

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Keiyo (30-50% ASAL) 15Marakwet (30-50% ASAL) 15

Tugen Hills±± Baringo (50-85% ASAL) 60Koibatek 30Keiyo (30-50% ASAL) 10

Yala Butere Mumias* 25Siaya* 20Kakamega* 20Nandi 15Vihiga 15Bondo 5

Kinale-Kikuyu Kiambu 60Nyandarua* 15Nakuru* 10Kajiado 10Narok (30-50% ASAL) 5

Taita Hills Taita Taveta* (85-100 % ASAL)

100±± Operational area with no KAPP districts* KAPP districts

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Annex 5: Project Costs

KENYA: Agricultural Productivity and Sustainable Land management

Project Cost By Component and/or ActivityLocal

US $millionForeign

US $millionTotal

US $million

Total Baseline CostPhysical ContingenciesPrice Contingencies

Total Project Costs1

Interest during constructionFront-end Fee

Total Financing Required

1Identifiable taxes and duties are US$m ___, and the total project cost, net of taxes, is US$m___. Therefore, the share of project cost net of taxes is ___%.

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Co-financing by Component (in USD millions)

The project would be financed from two sources. These sources are (GEF, to provide US $ 10 million; (b) GoK, to provide US$ 2.43 million.

GEF Funds will be used to support capacity building including participatory planning at community and appropriate levels of government for sustainable land management, investment in community SLM activities and technical assistance. The project will also support activities to strengthen the policy and institutional frameworks. The GOK contribution would cover all taxes and duties related to government expenditure and staff salaries.

The project is linked to KAPP, financed by IDA and Government and will build on the latter’s support of government structures created to implement the SRA i.e. the inter-ministerial coordination committee, which will have an oversight of SLM activities and oversee the implementation of a coherent over-all framework in the sector.

Component IDA Govt. KAPP

Baseline Total

GEF Increment

Govt. & Benef.

KAPSLMP

KAPSLMPTotal

I Building Capacity for Sustainable Land Management

3.80 9.40 13.20 3.70 0.87 4.57

II Investments in community SLM micro-projects

3.50 3.50 4.00 0.61 4.61

III Strengthening Enabling Environment

26.50 19.97 46.47 1.80 0.61 2.41

IV Project Coordination and Monitoring

6.20 1.00 7.20 0.50 0.34 .84

Total 40.00 30.37 70.37 10.00 2.43 12.43

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Annex 6: Implementation Arrangements

KENYA: Agricultural Productivity and Sustainable Land management

The implementation arrangements for this project will have a considerable degree of linkage with the KAPP structures already set up by the Government in consultation with the Bank. The KAPP Steering Committee (KSC) which includes government officials from the Ministries of Agriculture, Livestock and Fisheries, Cooperatives, Environment, and Local Government, will be expanded to include the representatives of Ministries/Agencies of Water (both the Ministry of Water and the Water Resources Management Authority, WRMA), Communities and Land, as well as representatives of the National Coordination Board (NCB) formed within the NAP for UNCCD. The KAPSLMP-SC, chaired by Director, the Ministry of Land, will review progress in project implementation, adopt activity plans for the project and pay special attention to inter-sectoral coordination and policy issues and promote integrated solutions. It will provide lead coordination, and ensure that results meet the targets set by the project.

The functional responsibility for project coordination and implementation will be with a cross-sectoral coordination and technical unit (KAPSLMP-CTU), located in the XXXX and overseen by the KAPSLMP-SC. This unit will be closely linked to the KAPP implementing organization structure but will include a skill-mix that is required by the cross-sectoral, multi-disciplinary nature of the program. A competitively hired/seconded project coordinator (with significant project management skills) as well as a team of technical specialists in land economics, agronomy, natural resources/ecology, social development, communication/community programs etc. will handle the functional requirements of developing and implementing the program within the KAPSLMP-CTU. This operating group will (i) develop a master annual work program based on the work program for each component, in consultation with the various implementers/stakeholders (Community based organizations, CBO & Non Governmental organization, NGOs/ district agencies, research institutes/universities/technical experts); (ii) develop an associated disbursement plan and release funds, in a timely fashion, against agreed work plans and monitored outcomes; (iii) ensure that the institutions utilizing project funds have proper accounting systems and maintain proper accounts (the financial management system and processes as managed by KARI under KAPP will also be used for the KAPSLMP); (iv) coordinate project activities at the national and the operational area levels by guiding and overseeing the activities of the operational area coordinators (see below); (v) implement a monitoring system that is integral to each activity and is effectively linked to planning for periodic adjustments in activities, when necessary; and (vi) evaluate the project, including community evaluations, to ensure effective implementation.

Each operational area will have a operational area coordinator, five in all, located in the KAPP District Service Unit, DSU; (in the case of one operational area, Tugen Hills, which does not fall under the KAPP operational area, the operational area coordinator can be located at the KARI centre in Koibatek). The role of the coordination unit (KAPSLMP-CTU) is to ensure that the objectives and the implementation goals of the KAPSLM are achieved on the ground in the operational area. The coordinator will monitor activities, identify barriers, be a conduit for

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information, resources and technical assistance/capacity building, foster community development of micro-watershed plans, design and implementation of micro-projects (including monitoring and safeguards), and link with provincial and district development and environment committees and officers (DDO, PDO, DEO, PDE) in order to implement broader program activities. There will be periodic field visits by and meetings and ongoing communication between the technical and coordination group at the center and the operational area coordinators to ensure that the thematic and operational priorities of the program are in focus.

The KAPSLMP-SC, supported by the coordination and technical group (KAPSLMP-CTU), will regularly brief and sensitize the Inter-Ministerial Coordination Committee, ICC (composed of the Permanent Secretaries of the lead Ministries and was set up following the launch of the SRA in 2004) as well as other relevant national bodies advising the government on policy (sectoral such as agriculture, water, energy, forests and cross-cutting environment, gender, poverty etc).

Public and private service providers including community-based and non-governmental organizations (CBOs & NGOs), extension and others, after selection, will produce work programs including capacity building, technical assistance and service provision that will be guided and reviewed by operational area coordinators and the technical team. DSUs, CBOs, and NGOs will be trained to support farmers and village communities in designing, developing and implementing micro-projects that are consistent with the micro-watershed plans and meet the criteria set out in the PIP (guided by the OP 15). They will also act as a channel for dissemination information on land management technologies and practices and stimulating interest/action in taking advantage of the opportunities offered under the project.

KARI will assume the fiduciary responsibilities given its extensive experience with Bank-financed projects. Under the proposal, KARI will be responsible for the project’s financial management system. Funds will flow from the GEF special account to the project Special Account, maintained by the Ministry of Finance in accordance with GOK procedures. The Ministry of Finance will transfer funds to a local currency project operating account administered by KARI. Payments for centrally procured items will be made directly by KARI Headquarters, in line with existing KARI approval procedures. Community organizations and other implementing agencies will receive and account for funds from KARI using a system of imprest accounting. Additional accountability enhancement proposals expected to be instituted during the life of the project comprise (i) vesting of overall project oversight and risk management responsibilities in the Board Audit Committee; (ii) a coordinated internal audit function that will report directly to the Board Audit Committee; (iii) streamlining fund remittance and accountability processes; (iv) adoption of simplified accountability for community initiatives; and (iv) adoption of a report-based method of disbursement, using quarterly financial monitoring reports (FMR).

Much of the procurement in the project will be split between transactions taking place at the cluster operational areas levels and procurement managed centrally at KARI headquarters. Financing for community projects generated at cluster level will depend on applications received for communities and procurement would be carried out in accordance with the simplified

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procurement procedures provided in Bank’s procurement guidelines. More detailed implementation arrangement is in Annex 6. This will also be refined during appraisal.

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Annex 7: Financial Management and Disbursement Arrangements

KENYA: Agricultural Productivity and Sustainable Land management

A FINANCIAL MANAGEMENT ARRANGEMENTS

Financial Management Assessment Summary

iv. The purpose of the project’s financial management assessment was to determine whether the financial management system is capable of producing timely, understandable, relevant, and reliable financial information that would allow the Bank, other donors and Government to plan and implement the project, monitor compliance with agreed procedures, and appraise progress towards its objectives. The assessment aimed at determining the project’s readiness to adopt report-based disbursement, the preferred method of disbursement for projects with significant community based activities.

v. The project will, as much as possible, rely on KARI’s mainstream financial management systems. It will also build on existing systems relied upon during implementation of an ongoing IDA – financed project, LVEMP and KAPP. A brief of the findings following financial management assessment is as follows:

vi. Risk management and internal control arrangements - A number of fund accountability weaknesses observed in previous projects implemented by KARI is attributed to the absence of an effective internal audit function. It is proposed that a strong and independent internal audit arrangement responsible for oversight of the activities of the KAPP accounting and internal control functions and community based initiatives is required. The function will also conduct independent institutional risk management on an ongoing basis, monitoring compliance with laid down policies and procedures, and reviewing and recommending enhancement of accounting and internal controls.

vii. Funds flow and accountability arrangements – Unnecessarily long fund remittance and payment processes should be reviewed. KARI should conduct internal reviews and assessments of payment processing procedures with a view to improving efficiency, effective control and timeliness. Key considerations in the process will include (i) adoption of simplified accountability guidelines and procedures for community initiatives; and (ii) realigning the role of technical oversight functions from involvement in routine transaction processing to conducting independent reviews. KARI should also develop benchmark processing timelines to be adopted and monitored.

viii. Quarterly financial monitoring reporting – Financial Monitoring Reports (FMR) have been identified as the preferred basis of funding disbursement. However, a number of difficulties are envisaged:

(a) Collation of monthly accountabilities – Given the large number of implementing units, it is critical that the capacity of reporting units to prepare comprehensive, yet simplified and standardized monthly statements of expenditure and fund balances is developed as soon as possible. Under this arrangement, it is expected that KS collates and submits implementing units’ financial accountability and project implementation progress information on a timely basis.

(b) FMR preparation capacity – KARI’s capacity to prepare and submit quarterly FMRs is assessed as weak for the reason that heavy reliance is placed on a few individuals. It is recommended that a large pool of competent personnel be developed ahead of credit effectiveness.

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ix. Financial management manual - KAPP’s current accounting and internal control procedures are documented in a Financial Management Manual. The manual incorporates MoF financial management guidelines as well as guidelines developed by KARI. The manual should however, be revised to take account of proposals in this assessment, notably the role of internal audit and the revised responsibility of the KS. The manual should also include guidelines for operations of community initiatives. It will subsequently be subject to review and approval by the IDA ahead of credit effectiveness.

x. Institutional and staffing arrangements –KAPP will be responsible for the overall financial management of the project. Project activities will as far as possible, be based on existing institutional arrangements, including the KAPP accounting and reporting systems. Matters requiring attention in order to ensure the establishment of reliable accounting and internal control systems include:

1. Financial management staffing at KAPP - There is need to enhance the technical capacity of KAPP’s financial management staff, particularly the training of key staff in financial monitoring reporting. At present, too much reliance is placed of limited staff for FMR reporting purposes and the grant accounting function considered weak.

2. Financial management capacity - Ongoing initiatives to build financial management capacity at community level under KAPP should be expedited.

xi. Annual financial reporting and independent audit arrangements – Under Kenyan legislation, the responsibility to audit all Government funds and activities is vested in the Kenya National Audit Office, which is mandated to subcontract such services in the event of capacity or other constraints. Due consideration will be taken of the KNAO capacity and commitment to ensuring compliance with Government and Development Partners’ requirements for timely auditing and reporting. There has been significant improvement in the office’s ability to ensure timely auditing and reporting of donor-funded projects’ financial statements. The KARI institutional audit has, however, often been delayed beyond the required reporting deadline.

xii. Financial management action plan - The outcome of this review is included in a financial management improvement plan comprising actions to be completed prior to project negotiations, prior to credit effectiveness and ongoing actions to be followed up during project implementation.

Country issues

xiii. The current Government that came into office in December 2002 has made a commitment to strengthen the financial management and control environment in order to achieve economy, efficiency and effectiveness in the use of public funds. With the support of a number of donor assisted initiatives, including the IDA-funded Public Sector Management Technical Assistance Project (PSMTAP), Government is seeking to rapidly enhance the financial accountability framework, particularly through strengthening legislation related to public financial management and the audit of public funds.

xiv. The most recent piece of diagnostic work that provides an up to date critical assessment of issues that may impact on this operation at country level is an ongoing Country Integrated Fiduciary Assessment (CIFA). A new Country Assistance Strategy (CAS) was effected in May 2004. Both these works have reviewed government’s performance since the last Country Financial Accountability Assessment (in 2001) and CAS (in 1998). A recurring theme is that policy changes agreed under past and ongoing projects have not been implemented consistently. Project implementation has generally been slowed down by constraints in the flow of resources and limited absorptive capacity arising from bureaucratic processes in Government.

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xv. The 2004 Country Portfolio Performance Review (CPPR) highlights Government’s commitment to improving portfolio performance, particularly in the last three years, and agreement was reached on several key issues, some of which have been applied in the design of this operation. These include actions to improve audit compliance, closer monitoring of project performance by MoF and improvements in the flow of project resources.

Financial management systems

xvi. Internal controls and financial management guidelines - The project’s internal controls are based on the KARI’s established accounting and internal control systems and documented in financial operations manual and guidelines. The manual is currently being revised and will be subject to review by the IDA FMS prior to project effectiveness.

xvii. Planning and budgeting - Budgeting for the project has been undertaken centrally by KARI in consultation and with extensive detailed input by the respective implementing entities. The budget is based on the Government Medium Term Expenditure Framework (MTEF). Proposed periodic reporting guidelines require periodic activity, cash flow and procurement projection, analysis and review on an ongoing basis, included in quarterly FMRs that will form the basis of requests for reimbursement of funds.

xviii. Books of accounts and list of accounting codes - The project’s accounting records will be maintained on KARI’s computerized accounting system, FoxPro™. The system is currently being upgraded. The codes relating to the project are integrated in KARI’s Chart of Accounts that matches the classification of financial statements.

Audit arrangements

xix. Internal audit - There is need to realign the functioning of KARI’s internal audit along best practice guidelines issued by the international Institute of Internal Auditors, including implementation of an independent systems compliance and risk based approach. The effectiveness of internal audit is expected to be complemented by the institution of a Board Audit Committee that will support the demand for internal audit services and follow-up of internal audit findings. It is recommended that the KARI audit committee be established as soon as possible, ahead of credit effectiveness.

xx. External audit - Under Kenyan legislation, the responsibility to audit all Government funds and activities is vested in the Kenya National Audit Office, which is mandated to subcontract such services in the event of capacity or other constraints. There have been significant improvements in the office’s ability to ensure timely auditing and reporting. The office is considered to be sufficiently independent, applied internationally acceptable auditing guidelines and therefore, acceptable to IDA. Reporting and monitoring

xxi. Financial monitoring reports – The form and content of periodic financial monitoring reports will be developed and agreed ahead of project negotiation. Primary contents of quarterly FMRs will comprise (i) Financial Reports, including a statement of sources and uses of funds by funding source, a statement of uses of funds by project activity/component; and fund balance statements supported by bank statements (ii) Physical progress (output monitoring) report and (iii) a procurement plan and progress report. FMRs will cover all project activities, including counterpart funding and non-cash contributions wherever reasonably quantifiable. xxii. As FMRs will form the basis of periodic funding disbursements by IDA, they will include a

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detailed report of projected cash requirements for each ensuing 6 months period supported by (i) a procurement progress report and related cash flow projection and (ii) a fund balance statement supported by bank balance certificates and reconciliation statements.

xxiii. Annual financial statements – KARI’s financial statements shall be prepared in accordance with International Public Sector Accounting Standards (which inter alia includes the application of the cash basis of recognition of transactions). Indicative formats of financial statements will be agreed during negotiations.

xxiv. IDA funding agreements require the submission of audited financial statements, taking into consideration the 2003 Audit Policy Guidelines of the World Bank, within six months after the year-end.

Implementation support plan

xxv. IDA implementation support missions will be conducted at least every six months. The mission’s objectives will include that of ensuring that strong financial management systems are maintained for the project throughout its life. In addition, Statement of Expenditure reviews will be carried out regularly to ensure that expenditures incurred by the project remain eligible.

B DISBURSEMENT ARRANGEMENTS

Report based disbursement

xxvi. Requests for disbursement by IDA for activities to be financed from pooled funds will be made on the basis of approved work plans cash flow projections for eligible expenditures (report-based disbursements). IDA will make advance disbursements from the proceeds of the Credit into the project Special Account to expedite project implementation. Advances will be used by the borrower to fund eligible project expenditures.

Alternative disbursement methods

xxvii. Upon credit effectiveness; the borrower will be required to submit a withdrawal application for an initial deposit into a separate, non-commingled Special Account, in an amount specified in respective funding agreements. Replenishment of funds to the Special Account will be made upon evidence of satisfactory utilization of the advance, reflected in SOEs and/or on full documentation for payments above SOE thresholds. Replenishment applications would be required to be submitted regularly.

xxviii. Another acceptable method of withdrawing funds is the direct payment method, involving direct payments to suppliers for works, goods and services upon the borrower’s request. Payments may also be made to a commercial bank for expenditures against pre-agreed special commitments. The IDA Disbursement Letter will stipulate the minimum application value for direct payment and special commitment procedures.

Remedies

xxix. If ineligible expenditures are found to have been made from the Special Account, the borrower will be obligated to refund the same. If Special Accounts remain inactive for more than six months, IDA may reduce the amount advanced.

xxx. IDA will have the right, as to be reflected in the funding agreement, to suspend disbursement of the funds if significant terms of funding agreement, including reporting requirements, are not complied

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with.

C OVERALL RISK ASSESSMENT

xxxi. Summary of project-specific risks and proposed mitigating arrangements

Risk Rating Mitigating arrangements1 Misuse of and failure to

account for project fundsS Institution of independent and effective internal

audit and risk management function

2 Ineffective audit functions S Adoption of a risk based audit approach and employ international best practices

Institution of Board Audit Committee

3 Delayed funds flow S Streamlining of quarterly FMR reporting arrangements and adoption of report based disbursement method

4 Low accounting capacity in community based initiatives

S Adoption of simplified accounting arrangements

Ongoing capacity enhancement initiatives

xxxii. Overall risk assessment

Type of Risk Risk Rating

Risk Mitigating Measures

Inherent Risk1. Corruption S Government anti-corruption action plan to be

considered and monitored 2. Poor governance S Government anti corruption action plan to be

considered and monitored 3. Weak Judiciary S Government has prepared a governance action

plan that has been considered and is being monitored

4. Weak Management capacity

M Appropriately qualified and competent management staff have recently been recruited in KAPP

Overall Inherent Risk S

Control Risk1. Implementing Entities M There are ongoing initiatives to improve the

technical capacity of various implementing entities

2. Funds Flow S The 2004 CPPR action plan is monitored on a quarterly basis

3. Staffing M There are ongoing initiatives to improve the technical capacity of various implementing entities

4. Accounting Policies and M The project’s FM manual will be developed to

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Procedures take account of lessons learnt from previous projects

5. Internal Audit S Significant strengthening of the function is included in prior actions

6. External Audit M The capacity of the National Audit Office has improved significantly and is being monitored

7. Reporting and Monitoring

M A report based disbursement mechanism is proposed under this operation

8. Information Systems M KARI’s existing systems are assessed as sufficiently capable of accounting for project activities

Overall Control Risk M

xxxiii. The project financial management risk is assessed as being moderate provided that the financial management arrangements are properly implemented and the financial management action plan satisfactorily addressed.

D Financial Management Action Plan

xxxiv. Actions required prior to negotiationsAction

1 Financial Management Manual updated, reviewed and agreed 2 Arrangements for efficient remittance of funds agreed3 Head office FM staffing completed4 FM manual revision completed and simplified guidelines for CBO reporting

prepared, reviewed and accepted

xxxv. Actions required prior to credit effectiveness Action

1 Adoption of a risk based internal audit approach and establishment of Board Audit Committee

2 Quarterly financial monitoring reporting arrangements, including arrangements for collating community initiative inputs in place

xxxvi. Actions required following credit effectivenessAction

1 Project independent audit arrangements completed 2 FM capacity of community initiatives improved3 Arrangements for KARI’s timely financial statements reporting in place

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Annex 8: Procurement Arrangements

KENYA: Agricultural Productivity and Sustainable Land management

The last Kenya Country Procurement Assessment Review (CPAR) was conducted in 1997. Following the findings and recommendations of the CPAR, the Government of Kenya (GOK) applied for the Bank’s support to implement the recommendations of the CPAR, and subsequently received from the Bank an IDF grant which was approved in 1998. Using the proceeds of the grant, GOK started a procurement reform program. The main outcomes of the reform program were (i) the establishment and gazetting in March 2001 of National Public Procurement Regulations, (ii) the production of a myriad of standard bidding documents, and (iii) a Procurement Bill, which is currently awaiting Presidential assent, passed by Parliament in 2005. The National Public Procurement Regulations of 2001 govern procurement under all public procuring entities. The Public Procurement Regulations allow the Bank procedures to take precedence over any contrary provisions in the national regulations. The Government's standard bidding documents and procedures for NCB have been reviewed by the Bank and found to be acceptable.

Procurement of goods and works for all GEF-financed components will be carried out in accordance with the Bank’s Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995 and revised in January and August 1996, September 1997 and January 1999).

Consulting services by firm or individuals financed by GEF will be awarded in accordance with the Bank’s Guidelines: Selection and Employment of Consultants by World Bank Borrowers (January 1997, revised in September 1977 and January 1999, and May 2002). The appropriate World Bank standard bidding documents will be used for all International Competitive Bidding (ICB) and the World Bank’s standard Request for Proposals (RFP) for the selection of consultants.

Procurement PlanA procurement plan covering goods and consultancy service contracts for the first year of project implementation is under preparation and will be finalized duration appraisal. The plan includes relevant information on goods, works and consulting services under the Project as well as the timing of each milestone in the procurement process. The procurement schedule will be updated once every six months and reviewed by IDA during supervision missions. As community demand-driven investments cannot be identified up-front, an operational manual that provides all the guidelines that will be used in preparing, screening, and implementing sub-projects is under preparation and will be finalized before project effectiveness.

AdvertisingTwo General Procurement Notices (GPN) - one for consulting services and one for goods - will be prepared for the Project and published in the United Nations Development Business (UNDB). GPNs will describe all ICB for goods, as well as consulting assignments costing US $200,000 equivalent or more per contract.

Procurement Implementation

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Consultancy services and technical assistance, and ICB and NCB contracts for goods will be procured centrally by the KAPP Secretariat (KS) and KARI under their respective project components. However, procurement of goods, works, and services for community-related activities under the Farmer Empowerment Component will be carried out by beneficiary communities under the guidance and supervision of the respective District Services Units (DSUs). Procurement of community-based requirements could be classified into two categories: (i) Simple procurements that communities can carry out themselves and (ii) relatively complex procurements for which communities may need external technical expertise. For the latter category of procurement, communities will seek assistance from the relevant district Government departments or KS through the DSUs. DSUs will be responsible for the procurement of their unit-specific needs, but will also be overseeing the smooth implementation of community procurements and preparing periodical reports on the procurement status of their respective communities, and submitting such reports to KS.

GoodsThe GEF will finance goods estimated to cost the equivalent of US$2.45 million in addition to goods required as inputs in community sub-projects. The non-community goods include office equipment, vehicles, laboratory equipment and farm inputs which will be procured centrally by the KAPP Secretariat. Contracts costing the equivalent of US $150,000 or more per contract will be procured by KS through ICB procedures. Procurement for community sub-projects will be carried out by beneficiary communities in separate small contracts.

Goods estimated to cost less than the equivalent of US $150,000 per contract will be procured through NCB procedures.

Goods that are estimated to cost less than US $50,000 equivalent per contract will be procured through shopping procedures in accordance with the procedures set forth in the Operational Manual. The request for quotations will be made in writing to at least three qualified suppliers.

Direct purchase: Procuring directly from the supplier without getting other quotations may be allowed when there is only one supplier and/or the amount is small as prescribed in the Operational Manual.

WorksThe GEF will finance only the costs of such works that may be required as part of community sub-projects budgeted under the Grants to Community component. Works contracts under this component will be awarded through one of the following procedures:

Quotations: Contracts of works estimated to cost the equivalent of US $50,000 or less per contract may be procured under lump-sum, fixed-price contracts awarded on the basis of quotations obtaining in writing from at least three local contractors. The request for quotations will include description of the works, including plans and technical specifications as appropriate, required completion time, and a standard form of contract acceptable to IDA.

Force account: Communities may implement subprojects using its own resources (skilled/unskilled labor, materials, equipment), or hiring labor and purchasing materials

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themselves and subcontracting the rest of the work to petty contractors by obtaining three quotations.

Direct Contracting: Direct contracting of one contractor without getting other quotations may be allowed, upon prior clearance of the Community Sub-project Committee, when there is only one qualified contractor and/or the amount is small as prescribed in the Operational Manual.

Consultant servicesThe total cost of IDA-financed consultant services and technical assistance, excluding costs of services of trainers, external facilitators of workshops, or TA that may be needed for community sub-project, is estimated at about US$0.4 million equivalent. Except as detailed below, consulting services will be selected through competition among qualified short-listed firms based on Quality- and Cost-Based Selection (QCBS).

Consultants for financial audits and other repetitive services estimated to cost less than US$ 50,000 equivalent per contract will be selected through Least Cost Selection (LCS) method.

Consultants' services for training estimated to cost more than US$15,000 equivalent per contract will be procured through the Selection Based on Consultants' Qualifications (CQ) method.

In exceptional cases when selection of consultants through competitive process is not practicable, the borrower may, upon prior clearance with the Bank, hire consultants through the single-source selection method stipulated in paras 3.8-3.11 of the Guidelines.

Consultants for services meeting the requirements of Section V of the Consultant Guidelines will be selected under the provisions for the Selection of Individual Consultants (IC) method. Individual Consultants will be selected through comparison of job description requirements against the qualifications of those expressing interest in the assignment or those approached directly.

Communities which may not be capable of implementing their sub-projects may procure the service of NGOs and other consultants to provide technical assistance and help them manage community sub-projects. KS or DSUs will assist such communities in the selection of NGOs following the procedure prescribed in paragraph 3.14 of the Consultants’ Guidelines.

To ensure that priority is given to the identification of suitable and qualified national consultants, short-list for contracts estimated under US$ 200,000 equivalent per contract may be comprised entirely of national consultants (in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines), provided that a sufficient number of qualified firms (at least three) are available. However, if foreign firms have expressed interest, they will not be excluded from consideration. The RFP as developed by the Bank will be used for requesting proposals, and for selection and appointment of consultants.

Bank ReviewsProcurement of GEF-financed goods contracts estimated to cost US$ 150,000 equivalent or more as well as consulting contracts of US$ 100,000 equivalent or more for firms and US$ 50,000

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equivalent or more for individual consultants will be subject to prior review by IDA. Post reviews of contracts awarded below the above threshold levels will be carried out selectively by IDA during supervision missions and/or by an independent procurement auditor. Terms of Reference (TOR) for all consultancy contracts as well as all single source selections, irrespective of the contract value, will be subject to prior review.

KS will prepare and submit to the Bank for its review an annual training program, as part of the project annual work plan. The training will, inter alia, identify: (a) the training envisaged; (b) the personnel to be trained; (c) the selection methods of institutions or individuals conducting such training; (d) the institutions which will conduct training, if already selected; (e) the duration of proposed training; and (f) the cost estimate of the training.

Expenditure Category ICB Procurement

NCB Method1

Other2 N.B.F. Total

Cost

1. Works 0.00 0.00 0.00

2. Goods 0.25 0.20 1.80 0.00 2.25(0.25) (0.20) (1.80) 0.00 (2.25)

3. Services 0.00 0.00 0.40 0.00 0.40(0.00) (0.00) (0.40) (0.00) (0.40)

4. Training 0.00 0.00 0.10 0.00 0.10(0.00) (0.00) (0.10) (0.00) (0.10)

5. Meetings & Workshops

0.00 0.00 0.10 0.00 0.10

(0.00) (0.00) (0.10) (0.00) (0.10)5. Grants to Communities

0.00(0.00)

0.00(0.00)

6.60(6.60)

0.00(0.00)

6.60 (6.60)

6. Operating Costs 0.00(0.00)

0.00(0.00)

0.55(0.55)

0.00(0.00)

0.55 (0.55)

Total 0.25 0.20 9.55 0.00 10.00(0.25) (0.20) (9.55) (0.00) (10.00)

Table A: Project Costs by Procurement Arrangements (US$ million equivalent)

1/ Figures in parentheses are the amounts to be financed by the IDA Credit. All costs include contingencies.

2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

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Table A1: Consultant Selection Arrangements (optional) (US$ million equivalent)Consultant Services

Expenditure Category QCBS QBS SFBSelection

LCSMethod

CQ Other N.B.F.Total

Cost1

A. Firms 0.160 0.00 0.00 0.40 0.00 0.00 0.00 0.20(0.160) (0.00) (0.00) (0.04) (0.00) (0.00) 0.00 (0.20)

B. Individuals 0.00 0.00 0.00 0.00 0.00 0.20 0.00 0.20(0.00) (0.00) (0.00) (0.00) (0.00) (0.20) (0.00) (0.20)

Total 0.00 0.00 0.00 0.00 0.00 4.68 0.00 0.40(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.40)

1\ including contingencies

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc.N.B.F. = Not Bank-financedFigures in parentheses are the amounts to be financed by the Bank Credit.

Table B: Thresholds for Procurement Methods and Prior Review1

Expenditure CategoryContract Value

Threshold(US$ thousands)

Procurement Method

Contracts Subject to Prior Review(US$ millions)

1. Works > 150,000 NCB >50,000 >150,000

2. Goods >=150,000> 50,000<200,000

ICBNCB

>150,000

3. Services(Firms)=<50,000=50,000

QCBSLCSCQ

>100,000

3.(a) Individual consultants

IC >50,000

Total value of contracts subject to prior review:Overall Procurement Risk Assessment: Average

Frequency of procurement supervision missions proposed:

One every six months (includes special procurement supervision for post-review/audits)

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Procurement situation and proposed course of actionIn line with the proposed institutional arrangements for the implementation of the project, procurement will be carried out directly by or under the guidance and supervision of KARI and the yet to be established KAPP Secretariat. Procurement decisions under the KARI project component will be executed through the existing institutional management structure of KARI. Procurement of inputs to Non-KARI components will be carried out at three levels by the KAPP Secretariat (KS), KAPP District Offices (DSU), and Community Sub-project Implementation Committees (CSIC). The proposed minimum number of people that would be required for managing the procurement function at the three levels, the minimum procurement capacity, and their duties are summarized in the Matrix below.

KARI, as an institution, has a long experience in Bank procurement procedures as it has completed implementation of two Bank-funded projects (i.e. NARP I and NARP II) and is currently implementing the Lake Victoria Environmental Management project (LEMP) – which is financed by a GEF grant administered by the Bank. That notwithstanding, at the moment, KARI has no procurement staff that is well conversant with the Bank procurement procedures. It has lost its only experienced procurement officer as a result of the Government directive issued in May 2003 on the suspension of all procurement officers in the entire public sector. The suspension has been lifted, and some of the suspended procurement officers who are below 50 years have been reinstated and posted to central Government ministries and departments. Parastatals, like KARI, were left out in the postings.

Immediate employment of a qualified procurement officer(s) by KARI will not only be crucial for the implementation of its component under the project, but it will also be a necessary condition for the envisaged KARI’s institutional support to the KAPP Secretariat.

As the KAPP Secretariat is expected to carry out central procurements of the project, and supervise and give guidance to other institutions in all matters of project implementation, including procurement procedures and decisions, it is imperative that special consideration be given to timely identification of appropriate procurement personnel for the KS.

It is expected that KARI will have recruited a procurement proficient officer(s), and KAPP Secretariat will have been established and staffed with adequate personnel including a procurement officer by project appraisal. Procurement capacity assessment be carried out during appraisal and a plan action will be recommended.

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Annex 9: Economic and Financial Analysis

KENYA: Agricultural Productivity and Sustainable Land management

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Annex 10: Safeguard Policy Issues

KENYA: Agricultural Productivity and Sustainable Land management

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Annex 11: Project Preparation and Supervision

KENYA: Agricultural Productivity and Sustainable Land management

Planned AcutalPCN reviewInitial PID to PICInitial ISDS to PICAppraisalNegotiationsBoard/RVP approvalPlanned date of effectivenessPlanned date of mid-term reviewPlanned closing date

Key institutions responsible for preparation of the project:

Bank staff and consultants who worked on the project included:

Name Title Unit

Bank funds expended to date on project preparation:1. Bank resources:2. Trust funds:3. Total:

Estimated Approval and Supervision costs:1. Remaining costs to approval:2. Estimated annual supervision cost:

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Annex 12: Documents in the Project File

KENYA: Agricultural Productivity and Sustainable Land management

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Annex 13: Statement of Loans and Credits

KENYA: Agricultural Productivity and Sustainable Land management

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

P083131 2005 KE-Energy Sector Recovery Prj (FY05) 0.00 80.00 0.00 0.00 0.00 83.46 -0.25 0.00

P083250 2005 Financial and Legal Sec TA 0.00 18.00 0.00 0.00 0.00 18.50 0.00 0.00

P085007 2005 MSME Competitiveness 0.00 22.00 0.00 0.00 0.00 21.38 -0.75 0.00

P049618 2004 KE-Nairobi Wtr & Swg Inst Rst SIL (FY04)

0.00 0.00 0.00 0.00 0.00 13.69 1.43 0.00

P078209 2004 KE-Dev Learning Centre LIL (FY04) 0.00 0.00 0.00 0.00 0.00 2.42 0.29 0.00

P082396 2004 KE-Agricultural Productivity Prj (FY04) 0.00 27.00 0.00 0.00 0.00 37.34 0.16 0.00

P082615 2004 KE-Northern Corridor Trnsprt SIL (FY04) 0.00 207.00 0.00 0.00 0.00 196.28 2.25 0.00

P078058 2003 KE-Arid Lands 2 SIL (FY03) 0.00 60.00 0.00 0.00 0.00 46.92 -3.09 0.00

P082378 2003 Free Primary Educ. Support 0.00 0.00 0.00 0.00 0.00 6.64 -4.55 0.00

P066490 2002 PUB.SEC.MGMT.TA 0.00 15.00 0.00 0.00 0.00 6.07 7.92 0.00

P070920 2001 HIV/AIDS Disaster Resp. (Umbrella) 0.00 50.00 0.00 0.00 0.00 11.04 6.97 0.00

P070718 2001 Regional Trade Fac. Proj. - Kenya 0.00 25.00 0.00 0.00 0.00 14.78 11.00 0.00

P066486 2001 Decentr. Reprod. Health & HIV/AIDS 0.00 50.00 0.00 0.00 0.00 32.69 24.04 24.04

P046871 1997 KE-GEF Lake Victoria Env SIL (FY97) 0.00 9.80 0.00 9.80 0.00 4.16 4.19 0.00

P001319 1996 URBAN TRANSPORT 0.00 115.00 0.00 0.00 0.00 25.88 34.92 0.00

Total: 0.00 678.80 0.00 9.80 0.00 521.25 84.53 24.04

KENYASTATEMENT OF IFC’s

Held and Disbursed PortfolioIn Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2000 AEF AAA Growers 0.46 0.00 0.00 0.00 0.46 0.00 0.00 0.00

1997 AEF Ceres 0.93 0.00 0.00 0.00 0.93 0.00 0.00 0.00

1997 AEF Deras Ltd. 1.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00

1996 AEF Equitea 0.33 0.00 0.00 0.00 0.33 0.00 0.00 0.00

2000 AEF Lesiolo 3.08 0.00 0.00 0.00 3.08 0.00 0.00 0.00

1998 AEF Locland 0.15 0.00 0.00 0.00 0.15 0.00 0.00 0.00

2000 AEF Magana 1.15 0.00 0.00 0.00 1.15 0.00 0.00 0.00

1997 AEF Makini 0.18 0.00 0.00 0.00 0.18 0.00 0.00 0.00

1997 AEF Redhill Flrs 0.30 0.00 0.00 0.00 0.30 0.00 0.00 0.00

1982 Diamond Trust 0.00 0.80 0.00 0.00 0.00 0.80 0.00 0.00

1998 GBHL 1.75 0.00 3.00 0.00 1.75 0.00 3.00 0.00

2001 Gapco Kenya 14.38 0.00 0.00 0.00 9.38 0.00 0.00 0.00

IPS(K)-Allpack 0.00 0.36 0.00 0.00 0.00 0.36 0.00 0.00

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IPS(K)-Frigoken 0.00 0.06 0.00 0.00 0.00 0.06 0.00 0.00

IPS(K)-Prem Food 0.00 0.11 0.00 0.00 0.00 0.11 0.00 0.00

1994 Intl Hotels-Ken 2.89 0.00 0.00 0.00 2.89 0.00 0.00 0.00

1996/99 K-Rep Bank 0.00 0.43 0.00 0.00 0.00 0.12 0.00 0.00

2003 Kenair 15.00 0.00 0.00 0.00 6.53 0.00 0.00 0.00

1983/91 LIK 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00

2000 Mabati 4.00 0.00 4.50 0.00 4.00 0.00 4.50 0.00

2004/05 Magadi Soda Co. 2.50 0.00 0.00 0.00 0.57 0.00 0.00 0.00

1994/96 Panafrican 15.58 0.00 0.00 0.00 15.58 0.00 0.00 0.00

1972 TPS (Kenya) 0.00 0.04 0.00 0.00 0.00 0.04 0.00 0.00

2000 Tsavo Power 12.98 0.83 1.04 17.12 12.98 0.83 1.04 17.12

Total portfilio: 76.66 2.66 8.54 17.12 61.26 2.35 8.54 17.12

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2004 BP Kenya 0.00 0.00 0.00 0.00

2003 Kenair 0.00 0.00 0.00 0.00

2005 Kongoni 0.00 0.00 0.00 0.00

Total pending committment: 0.00 0.00 0.00 0.00

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Annex 14: Country at a Glance

KENYA: Agricultural Productivity and Sustainable Land management

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Annex 15: Incremental Cost Analysis

KENYA: Agricultural Productivity and Sustainable Land management

This annex includes a brief review of the environmental situation in Kenya, with focus on land degradation; Project development goals and global environmental objectives, the baseline scenario without GEF financing versus the alternative scenario of a GEF project blended with the IDA Kenya Agricultural Productivity Project (KAPP) and presents the incremental cost analysis.

Land and Natural Resource DegradationOnly 17 percent of the land in Kenya is arable of high to medium potential for agriculture and livestock production. Land use is therefore intensive in these areas. About 87 percent of Kenyans live in rural areas relying on land for their livelihoods. Increasing population (a current growth rate of 2.3 percent), poverty and climate shocks have impacted the natural environment while unsustainable agricultural practices, use of marginal and ecologically sensitive lands and weak governance are driving the degradation.

The section in the PAD on land degradation lists many of the factors that contribute the worsening trend in Kenya. Land degradation driven by factors such as untenable traditional land management as a result of high rural population growth, deforestation, over-grazing, loss of soil/fertility due to inadequate application of soil amendments and soil and water conservation measures, stream/riverbank cultivation, destruction of water catchments and wetlands, biodiversity loss, livelihood opportunities, is a major cause for low crop productivity in Kenya. Poor management of the nation’s water catchments has led to excessive soil erosion, increased cost of water treatment, rapid siltation of reservoirs and a reduction in their economic life. Recent estimates by the World Agro-forestry Center indicate that in the Nyando River Basin alone, soil worth US$42.7 million is lost every year (estimations are based on a soil value of US$ 12/MT). Since 1962, 3.2 million MT of soil have been washed into the Lake Victoria and over 50% of the land in Western Kenya has been abandoned due to depletion of soil nutrients. Soil erosion and siltation and reduced flows in a number of important rivers (Nzoia, Turkwell, Sosian, Chepkoilel, Kapteret, Suguta, Kerio and many important tributaries drain into Lake Victoria, Turkana and Baringo Bura, Kishushe, Mbololo, Mwatate, Paranga and Voi Gatamaiyu, the latter being a source of water to the highly populated Kimende area and Nairobi City and also tributaries of Athi River) due to watershed degradation,is seriously undermining the value of water resource investment and to water ecosystems. Catchment degradation is threatening critical habitats for biodiversity of local and global significance. The country has over 35,000 identified species of animals, plants and micro-organisms, many of which are endemic only to Kenya/Eastern Arc. But with substantial loss of forest cover and degradation of other natural ecosystem, the fragmented landscape and isolated patches of forests are no longer providing corridors for biodiversity dispersal and have resulted in decreased long term viability of many species. Wetlands in the country are diverse in type and distribution and cover 2-3% of the country’s surface area. Some of Kenya’s wetlands such as Lake Naivasha and Lake Nakuru have been included in the Ramsar List of Wetlands of international importance. Other wetlands include Lake Baringo, Chemeron dam (Tugen Hills) and Lake Chale in Taita. The dramatic reduction in the depth Lake Baringo, from over 15 metres

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in 1921 to an average of 1.5 metres today is partly due to reduced inflows and partly due to the increased sediment load from surrounding catchments, a consequence of poor land management.

Adverse policy incentives, lack of sound policy and regulatory frameworks, poor governance as well as low long term investments in the land are root causes while resource use planning is hampered by poor monitoring and lack of environmental and natural resource related data. The main land degradation issues and primary focus for sustainable land management in the five Catchments are presented in the table below.Operational Area (OA)

Kinale-Kikuyu Taita Hills Tugen hills Cherangani Hills

Yala

Main Land degradation Issues

Soil erosionLow soil fertilityWater pollutionLand conversion to inappropriate usesCharcoal burning

Nutrient runoffLoss of organic matter and nutrientsLow fertilitySalinationSodicity

Soil erosionSevere wind erosion Flash floodsSoil acidityLow soil fertilityCharcoal burning

Loss of nutrient bases through runoffLoss of organic matter and nutrientsLow fertilityCharcoal burning

Soil erosionLow soil fertilityWater pollutionLand conversionInappropriate farming methods

Primary focus for sustainable land management

Soil conservation measuresSustainable use of fertilizer inputsIntegrated nutrient management (INM)Integrated Pest management (IPM)Agroforestry & afforestation

AgroforestryPromoting indigenous trees species Prevention of runoff, gully erosionTerraces, strip cropping, grass stripsSustainable use of fertilizer inputs and INMIrrigation design and managementWater harvesting and management IPM

Agroforestry & afforestationRangeland ManagementWater harvesting and management (Gabions check dams)Improving Irrigation water use efficiencyDrought resistant and Indigenous speciesIPM and INMAddressing salinityFarm stoneline and trashline constructionGrass strips and windbreaksContour farming

AgroforestryGully rehabilitationRestoration of upper catchment with indigenous speciesTerraces, strip cropping and grass stripsSustainable use of fertilizer inputs and INM

Soil conservation measuresSustainable use of fertilizer inputs and INM Agroforestry & afforestation

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KAPSLMP –Development and Global Environment Objectives The development objective of the proposed project is that agricultural producers and other natural resource users increasingly adopt profitable and environmentally-sound land management practices and alternative livelihood strategies in the targeted operational areas.

The global environment objective of the proposed project is to reduce and mitigate land degradation in the targeted operational areas and to contribute to maintenance of critical ecosystem functions and structures.

It will address land degradation in selected watersheds in order to ensure continued ecosystem functions, reduce risks to globally significant environmental assets and help sustain rural livelihoods. This will be accomplished through the promotion of sustainable land management technology packages and practices that have local and global benefits. This will involve the integrated utilization of soil, water, air, and floral and faunal bio-diversity for physical and socio-economic development, paying particular attention to the maintenance and restoration of ecosystem integrity.

Specifically, the project will: Make resources available and strengthen the capacity of agricultural producers and other

resource users to: (i) adopt SLM practices and technologies to mitigate land degradation and achieve greater productivity of crops, trees and livestock; and (ii) adopt sustainable alternative livelihood options to diversify and increase income, and reduce the pressure on the natural resources.

Enhance the institutional capacity of all relevant stakeholders to promote sustainable land management practices and alternative livelihood strategies based on participatory and demand-driven approaches.

Evaluate the impact of existing policies affecting the management of natural resources and contribute to the removal of barriers hindering the widespread adoption of SLM practices.

Facilitate the exchange of information on best practices in sustainable land management among farmers, communities, extension agents, researchers, development partners, and policy makers.

The project aims to address land degradation and improve land management in five operational areas: Taita-Taveta, Tugen Hills, Kinale-Kikuyu Cherangani Hills, and Yala catchements (please see additional details on the catchments in the appendix).

While land degradation is recognized as a priority for action, there remain several barriers preventing the widespread uptake of sustainable land management activities. This include the lack of tested, locally applicable and easily accessible integrated technologies, human and financial resource capacities, inadequate coordination between various service delivery providers leading to a haphazard access to solutions, lack of incentives for improved management, and weaknesses in the policy and monitoring frameworks.

The proposed project is closely associated with the Kenya Agricultural Productivity Project (KAPP), which was approved by the World Bank in June 2004. The KAPP is a broad based program that is seeking to contribute to the sustainable increase of Kenya’s agricultural productivity

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and improvement of the livelihoods of its rural communities through the improved performance of the agricultural technology supply and demand system.

GEF funds will supplement IDA financing and strive for incremental benefits accruing from establishing the basis for sustainable land management while fostering secondary global environmental benefits such as preventing losses in biodiversity as well as in carbon sinks. The program will promote community directed micro-projects addressing land degradation, advancing sustainable agricultural systems and targeting some of the root causes of driving encroachment and degradation of forests, wetlands and other ecologically sensitive ecosystems through an integrated micro-watershed approach, and including research and pilots, capacity building, and institutional strengthening. It will seek ‘win-win’ options in enhancing the ecological and economic value of land use. It will enhance the institutional and technical capacities of communities, service providers and agencies to achieve sustainable land productivity and management.

Global benefits accruing from Project activities will also help Kenya in meeting some of its global environmental obligations as represented by its participation in international environmental conventions:

United Nations Convention to Combat Desertification, ratified in 1997 Convention on Biological Diversity, ratified in 1992 Contracting party to the Ramsar Convention on Wetlands in 1990 United Nations Framework Convention on Climate Change, ratified in 1994

Baseline Scenario - KAPPThe new Government’s development strategy articulated in the Economic Recovery Strategy 2003-07 (ERS) and its sectoral priorities outlined in the Strategy for Revitalizing Agriculture (SRA) set the directions that the country is seeking to move in to address decline in agricultural growth, productivity and increase in poverty.

KAPP, supported by IDA is broad based program focusing on the restructuring of the agricultural technology and services system. In the first phase, the emphasis is on overhauling the research institutional structure and on establishing the coordinating mechanisms and consultative towards improved access to information that would help guide the implementation of the Government’s Strategy for Revitalizing Agriculture.

SLM is part of KAPP's strategy for increasing agricultural productivity. KAPP is focusing on (i) the establishment of a pluralistic research system; (ii) building consensus on the reform of the extension system and the empowerment of the clients; (iii) pilot interventions in 20 districts to test innovative and decentralized extension/research/education activities; and (iv) initiation of activities for improved management of soil and water in 5 selected watersheds. The last focus area will be addressed by KAPSLM. Hence, KAPP and KAPSLM have to be seen as very much integrated and complementary projects.

The Government for its part has taken some action in halting the processes that led to the gross violations of environmental safeguards occurring in the prior years, but is hampered to a large extent by the lack of resources, capacity, coordination needed to make a significant impact on the

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ground in implementing its strategy for combating land degradation as laid out in the National Action Program. Meanwhile, the reform process, especially of the research sector provide a very useful opportunity to scale up the uptake of identified and tested technologies that would lead to increased productivity, restore soil quality and lead to sustainable land management and reduce the threat to vulnerable environmentally important ecosystems.

Alternative Scenario: GEF supported KAPSLMP Under the GEF alternative scenario – the IDA financed KAPP will be supplemented by the GEF financed KAPSLMP, a jointly coordinated project, with the global environmental objective to promote a community driven integrated approach towards improved management of natural resources within five critical catchments in order to combat key land degradation problems. Overall goals will focus on the maintenance of critical ecosystem functions including hydrological cycles, nutrient cycling, and carbon sequestration fostering multiple global benefits through maintenance of healthy watersheds, reducing threats to natural habitats (forests and wetlands) agrological and wetland biodiversity (including the preservation and sustainable management of critical habitat for a broad range of bird species) and carbon sinks (the climate change literature indicates that levels of 0.5 t/ ha/ annum carbon could be sequestered through improved land management, and 2PgC of the global 3PgC currently building up per annum could potentially be absorbable by agriculture, indicating a solid synergy of local and multiple global benefits from SLM activities.)

KAPSLMP will focus on three key areas, consistent with the strategic priorities of the GEF under the operational program on sustainable land management, including capacity building of producers, communities, service and information providers, implementers and relevant government agencies; funds for financing micro-projects planned and implemented by the communities, with technical support, (including piloting of mechanisms that enhance the financial sustainability of the activities) as well as support to the development of a sound policy framework, including targeted mainstreaming of SLM priorities within national and sectoral programs. Further detail is provided in the main section of the PAD.

While, there are other ongoing and planned GEF activities in Kenya (see attached matrix), they do not address the project focus areas, both in spatial and thematic terms. The various implementing agencies, including the UNDP, UNEP, FAO, IFAD and the World Bank among others, are coordinating closely and developing measures to enhance coordination on these issues within the Government as well in order to promote project to project linkages and the establishment of a network of technical practitioners for periodic sharing of information and capacity. As a part of this, an analysis of the objectives of these projects, coverage areas, themes, is ongoing to ensure that duplication and overlaps do not occur. It is proposed that the KAPSLM be the main opportunity for establishing the coordination mechanisms and dialogue towards a country partnership program.

On-site and off-site effects of land degradation will be assessed, qualitatively and - to the extent possible - quantitatively as part of a project preparation study. This study would include issues of global environmental significance such as carbon sequestration, sedimentation into water bodies and biodiversity. (Please see annex II for a draft template)

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Table 1: Incremental cost matrix for GEF fundingComponent Cost

CategoryCost US$M

Domestic Benefits

Global Benefits

Building capacity for sustainable land management

Capacity building of producers and communities in targeted operational areas/watersheds to enhance the uptake of sustainable land management practices

Capacity building of service providers to improve quality of SLM related service provision

Baseline:

IDA

Government

13.70

3.80

9.40

Improved capacity and quality of service provision, farmer empowerment, reduced conflict, Increased income diversification and income levels; improved farmer- market linkages.

Capacity building efforts are likely to have positive externalities through improvements in the Ag. Sector. Activities aiding the revitalization of the sector are likely to have environmental benefits through improvements in research and service provision quality, albeit more defused and general.

GEF alternative:

IDA

Government +Beneficiaries

GEF Increment

17.77

3.80

10.27

3.70

Provides communities with immediate options to address land degradation that threaten agricultural productivity and condition of natural resources.Capacity in a wide variety of thematic and technical areas empower communities, help expand their planning horizon, and contribute to their development vision. Micro-watershed catchment plants provide frameworks for

Specific and targeted capacity building will create momentum for processes and activities that have a sustained impact on the trends of land degradation. Capacity building among producers and natural resource users targets many of the gaps that contribute land degradation and provide tools for directing investments in land management.

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Component Cost Category

Cost US$M

Domestic Benefits

Global Benefits

integrated development initiatives.

Investment in SLM micro-projects and promotion of alternative livelihoods systems

Community initiated micro-projects to mitigate land degradation as well as to provide alternate income generation options and incentives for sustainable land management

Baseline:

IDA

3.50

3.50

Increased incomes and food security, alternate livelihood options, reduced vulnerabiltiy

Increased income and income diversity may reduce the vulnerability of farmers to economic and climactic shocks and thereby reduce the exploitation of natural capital.

GEF alternative:

8.11 Additional resources at the village level,

Efforts to address land degradation help to (i) maintain

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Component Cost Category

Cost US$M

Domestic Benefits

Global Benefits

IDA

Government +Beneficiaries

GEF Increment

3.50

0.61

4.00

longer term sustainability of on-farm and alternate investments enhanced Increased income diversification and income levels; improved farmer- market linkages; Integrated Ecosystem approach and PES ensure that sound management of land improve returns to land as well and reduce risk of income losses.

global values of trans-boundary water resources, (ii) conserve natural habitats and on-farm and wetland biodiversity, and (iii) preserve forest and wetland carbon sinksSubstantial improvement in the ability of relevant national agencies to meet global environment commitments. Promotion of alternative livelihood options contributes to reducing pressure on marginal lands and other scarce natural resources and creates incentives for SLM. Integrated Ecosystem approach and PES programs build in sustainability of efforts leading to lasting global benefits

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Component Cost Category

Cost US$M

Domestic Benefits

Global Benefits

Strengthening the enabling environment for SLM

Contributing to the development of a sound policy framework (including assessment of the land use policy and mainstreaming of SLM priorities into sectoral programs)Strengthening relevant institutions to achieve project objectives and in implementing some of the priorities of the NAP.

Baseline:

IDA

Government

46.47

26.50

19.97

Capacity enhancement of agricultural sector at three levels – research systems, extension services, and policy formulation.

Minor environmental benefits may accrue over time due to service decentralization and efficiency gains through improved agricultural technologies.

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Component Cost Category

Cost US$M

Domestic Benefits

Global Benefits

GEF alternative:

IDA

Government +Beneficiaries

GEF Increment

48.88

26.50

20.58

01.80

Long-term, holistic, and strategic planning of NRM policies through capacity building of policy-makers and other relevant stakeholders. Assessments, studies and other activities contribute to the development of a sound policy framework and support to institutions enhances its implementation, addressing barrier removal and enabling widespread adoption of sustainable land management practices.

Global benefits will occur through policy formulation which aims at reducing the degradation of natural resources and its negative environmental and socio-economic benefits. Without an adequate NRM policy framework global benefits are unlikely to occur. Without institutional support, weakened agencies will continue to remain ineffective in stemming the trend.

Project coordination and monitoring

Baseline:

IDA

Government

7.20

6.20

1.00

Capable staff in place to manage and coordinate project activities, which largely focus on agriculture sector reforms.

Minor global environmental benefits arising from application of environmental safeguards.

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Component Cost Category

Cost US$M

Domestic Benefits

Global Benefits

GEF alternative:

IDA

Government +Beneficiaries

GEF Increment

8.04

6.20

1.34

0.50

Decentralized management, coordination, and M&E of NRM investments will enhance local participation and thereby improve efficiency and effectiveness of project activities. Inclusion of SLM specialists to manage and coordinate issues at multiple levels, champion SLM activities and act as focal points for information sharing.

Improved management and coordination of NRM project activities will help to harness full global environmental benefits of proposed investments.

Total Baseline (total):

IDAGovernment

70.37

40.0030.37

GEF alternative:

IDAGovernment +BeneficiariesGEF

82.80

40.0032.80

10.00

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ATTACHMENT 1Assessment of Natural Resources and Biodiversity in the Catchments7

An assessment of biodiversity issues, threats and conservation needs in the operational areas of KAPSLM was conducted. The selected sites are: Taita Hills; Tugen Hills; Cherangani Hills; Kinale Forest and Yala Swamp. Kinale forest catchment and Yala swamp catchment are different from other sites because they are not hills and do not show an altitudinal gradient found in other sites. Kinale forest is protected forest. Yala swamp on the other hand has a big part with permanent water that keeps people off from intensive cultivation.

In all the sites, the most common threat to biodiversity is cultivation, human harvesting of natural resources and grazing. There are many policy gaps especially in the integration of the many sectoral regulatory documents and the capacity of the extension personnel to link up the different sectors involved. There are positive developments towards involvement of local communities in the conservation of biological diversity in their own areas but more is needed in the recognition of local communities’ contributions by government and in the sharing of benefits from biodiversity conservation.

LAND USE / LAND COVER IN OPERATIONAL AREAS Land use has been categorized into protected areas, mono-cropping areas, mixed cropping areas, grazing areas, forests, natural vegetation and settlements. The following is a summary of land use in the catchments:

Table 1. Indicators for land use patterns in the CatchmentsLand Use Taita Hills Tugen Hills Cherangani

Hills Kinale forest

Yala Swamp

Protected Areas

Partial None None Forest None

Mono-cropping

Foot hills Not known Hill slopes and foot hills

Around the forest

Not known

Mixed- cropping

Hill slopes and foot hills

Hill slopes and foot hills

Hill slopes and foot hills

Small holder mixed and dairy farms

Small holder mixed farms

Grazing Hill slopes and foot hills

Hill slopes; foot hills and whole catchment

Hill slopes; foot hills and whole catchment

In small holder farms and roadsides

In small holder farms; roadsides and swamp

Forests Hill top and hill sides

Hill top and hill sides

Hill top and hill sides

Protected forest

None

Natural vegetation

Hill top and hill sides

Hill top and hill sides

Hill top and hill sides

Within forest area

Papyrus swamp

Settlements Sparse hill sides and

Sparse on foot hills

Sparse on hill sides and dense

Dense and encroaching

Dense and encroaching

7 Details are available in the report by Joseph Maitima (International Livestock Research Institute) and Harrison Rware (Dept. of Range Management, University of Nairobi)

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dense on foot hills

and whole catchment

on foot hills into the forest

into the swamp

TAITA HILLSThe Taita hills are found in Taita-Taveta district, southwest of the Coast province 25km west of Voi town. The hills form a series of steep ridges once capped by rich montane forests, which comprise the only portion of the eastern arc range of forests in Kenya. The forests have over a long period of time been isolated ecologically from other forests and as a result evolution has resulted in many groups of flora and fauna being endemic to the region, including 13 taxa of plants and 9 taxa of animals. Among the plants is a rare coffee species (Caffea fadenii). Furthermore, 22 species of plants and 3 of animals represent the rare eastern arc type of flora and fauna. Scant attention has been paid to the foothill woodlands that are becoming more vulnerable as a result of expansion in human settlements and cultivation caused by rapid population growth.

The indigenous forests on the hilltops are further classified as Upland/Moist forests and are distinguished into at least two forest types Ocotea forest: which occur in the highest parts (>1,600 a.s.l) and Newtonia forests: occurring at 1,250-1,800 meters above sea level. Mbololo forest, which are part of Taita hill forest, contains the African Violet (Saintpulia teitensis) a plant, which if well managed for its economic and aesthetic potential can act as a source of income to the local community as an alternative income-generating activities.Taita hill forests hold very unique avifauna biodiversity birds such as Taita white eye, Taita apalis, the Taita thrush and the restricted range Abbot’s starling. They also host globally threatened species including the Taita falcon, Abbott’s sterling (also range restricted) and the Southern banded snake eagle, and the regionally threatened Ayre’s hawk eagle, the Red-capped Robin and a host of rare mammals and plants, and is listed as an important bird area (IBA) (Nature Kenya). Other wildlife present include primates (monkey species - Cercopithecus mitis, nocturnal primates- Bushbabies, Greater Galago-Otolemur garnetti and the Dwarf Galago-Galagoides orinus) and mammals(over 15 species of rodents, 10 species of insectivores and one elephant shrew).

Important rivers such as Bura, Kishushe, Mbololo, Mwatate, Paranga and Voi, as well as Njoro have their origin from these forests and play an important role in the Taita, Kilimanjaro and coastal Kenya ecosystems. Exotic softwood plantations have been established, while demand for pole wood and charcoal has increased at an alarming rate. The gradual disappearance of forests is attributed to the demographic pressure for agriculture, firewood, timber and other wood related demands from the forests.

Taita hills have been settled by the Taita people for several centuries. The Taita people are cultivators producing a variety of crops in small scale farming systems on hill slopes. Further down the slopes vegetation grades into dry savanna rangelands and some parts of the hills border with the large Tsavo east National Park. Some areas within the savanna rangelands that are suitable for cultivation the have? major crops is such as sisal grown with plantations extending all the way to Voi town on Nairobi Mombasa road some 25 km. Taita hills form a major water catchment and a source of several rivers some of which provide water for a rice irrigation scheme. TUGEN HILLS

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Tugen Hills are located on the eastern flanks of Kerio valley and rise up to nearly 3000 meters above sea level from the low lying plains of Lake Baringo basin to the east and the Kerio Valley to the west. The hills are characterized by thickets and dry woodland vegetation types with high variation. The soils are sandy and the terrain is characterized by deep erosion gullies that form seasonal rivers during the wet months. Although most prominent land use in the area around the hills and the surrounding lowlands is grazing, much of the area within the hills is cultivated. An important urban center Kabarnet is located there. There is little information on the biodiversity of Tugen hills but the area is known as a habitat for reptiles and bird species, including flamingos around the lake.

Tugen hills are seriously degraded (deforested and exposed hill sides, loose weathered ground surfaces), resulting in reduced precipitation and high siltation of the river courses emanating from it. Currently the single most important threat to biodiversity in the area is that of soil degradation through surface runoff into Lake Baringo. Recent studies have shown that current high rates of sedimentation in lake Baringo is due to sediment deposits by surface runoff that is accelerated by increasing land use activities within the catchment. Studies should be done to determine the impacts of these high surface runoff on biodiversity especially the invertebrates, and the below ground biodiversity.

Lake Baringo is the lifeline of the communities living in its basin especially within the vicinity of the lake, including the Pokots to the North, Tugens to the east and Ilchamus to the south and eastern sides. The latter form about 50 percent of the riparian population who are mainly pastoralists. The Ilchamus and Pokots mainly practice agro-pastoralism while Tugens are more of agriculturalists. Politically the communities are marginalized especially the Ilchamus and the Pokots. In this regard, they have remained to poorer with limited access to water, health facilities and other services. Over-grazing is a major problem in this area Dry seasons are critical periods and most cattle graze along the lakeshore thereby interfering with the ecosystem of the lake. The land tenure system is group ranch and grazing is communal. An area of conflict is cattle rustling which creates friction between communities in the basin hence limiting collective responsibility in management of the lake and its basin.

CHERANGANI HILLS Cherangani hills are part of the rift valley system, extend to about 60km from the north east of Eldoret, and are located at the northern fringe of Kenya, crossing West Pokot, Elgeiyo Marakwet, and Trans Nzoia Districts, covering an area of about 32,000 hectares.. They form the western wall of Elgeyo Escarpment which rises to 1830 meters. Cherengani Hills have forests that are part of the upland (montane) forest found at an altitude of between 2000m to 3500m above sea. These forests contain numerous plant species found nowhere else in Kenya and also important habitat for several wild animals and birds. This indigenous forest is a water catchment area in the country for most of the rivers that feed Kenya’s lakes and forms one of the countries five water towers. The major rivers from here include Nzoia, Turkwell, and Sosian, Chepkoilel, Kapteret, Suguta, Kerio and many important tributaries drain into Lake Victoria, Turkana and Baringo. The communities make use of the water from the forests through major dam projects such as Chabara, Kaptagat, Karadich and Turkwel Gorge dam, which also has electricity, based on the Turkana River.

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The hills are home for the Marakwet people who are part of the greater Kalenjin group who migrated here from the north several centuries ago. The area is well provided with streams useful in agriculture as most of the area has low rainfall. The hills provide the best farming environments for the Marakwet people and are an area with intensive land use. Other indigenous groups include the west Pokots. Traditionally, all the indigenous communities in the forest areas have developed elaborate systems for managing their natural resources and for regulating their use.

However, the potential in this catchment has been greatly reduced in the last century, largely by agricultural encroachment and the incidences of high timber extraction. For the last ten years the Cherengani Forest has suffered heavy destruction, especially when the people who lived in Kerio valley moved to the highlands around Embibut, Kapyego, Kipkiluur, Chemunata, encroaching on the forest and bringing with them their intensive farming methods. This encroachment has interfered with the area’s biodiversity, and rivers and streams like Embobue, Embonem, Embo, Arror, Morun and Nzoia are drying up.

Recently due to economic liberalization and farm enterprise diversification, coffee growing has become an important form of land use in areas around the hills. Also, tea factory has been built to process tea produced in the area. Plans to improve roads network in the area may also increase land use activities. Another phenomenon that is perhaps unique in this area among all the sites is that this area has for a long time experienced civil unrest due to intertribal cattle rustling that resulted into occasional sometimes serious unrest although the situation appears to be changing.

KIKUYU/ KINALE Of all the sites discussed in this report, Kinale forest catchment has the highest amount of rainfall and with the highest agricultural potential. It is a catchment for several rivers including Gatamaiyu, which is a source of water to the highly populated Kimende area and Nairobi City and also tributaries of Athi River (Wangenye, Gatamaiyu, Nyanduma and Kamunga).Within the catchment there is intensive cultivation with a number of large scale tea and coffee farms. However, most of the farming is by small scale production of highland crops like Irish potatoes, snow peas, several varieties of vegetable and other quick maturing annual / seasonal crops. On the drier but cold western flanks of the escarpment the major crop grown is pyrethrum. Kinale has more challenging conservation problems than most of other sites due to high population pressure and high commercial value of land.

Pit sawing, Charcoal burning and excessive fuel wood collection have been some of the threats. Other important contributory factors the extremely high land value due to its proximity to Nairobi and the lack of sustainable harvesting of timber and wood. This has resulted in massive deforestation around the forests. Large areas of deforested land are planted with commercial plantations of pine, podocarpus and cedar trees both for timber and paper industries. Kinale supplies the most of the timber used in Nairobi for construction. Illegal felling of hardwoods mainly Camphor (Ocotea usambarensis) has been going on for years until recently when law enforcement was stepped up. The Kikuyu escarpment has been a major breeding ground for some of the rare bird species in the African Savanna. The forests contain pure stands of indigenous trees and cover 6 types of vegetation zones (Evergreen seasonal forest, Evergreen forest, Evergreen xeromorphic forest,

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Evergreen riverine forest, and Evergreen bamboo forest). About 20 bird species found here are considered rare, and regionally threatened species such as the African green ibis, Ayres hawk eagle, Crowned hawk eagle, Abbott's Starling (Cinnyricinclus femoralis) listed by the IUCN and Birdlife International as vulnerable to extinction and Red- chested owlet.

YALA Yala catchment is in a low rainfall area where the main cash crop is cotton. This is a complex of wetlands in the delta of the Yala River, on the northeast shores of Lake Victoria. The site has three main components which include, the Yala swamp itself (currently 6,500 ha after drainage of the eastern 20 percent), Lake Kanyaboli in the north-eastern corner, a 3-m deep lake of 1,000 ha, and Lake Sare, the most southerly of several outlets of the Yala river into Lake Victoria, 5 m deep and 500 ha in area. The swamp is largely uncultivated but plans are under way for a large scale rice production scheme that will clear most of the natural vegetation to give room for paddies. Yala swamp is home for many fish species some of which would be threatened as a result.

The Yala flow has been diverted directly into the main swamp, and a silt-clay dike cuts off Lake Kanyaboli, which receives its water from the surrounding catchment and through back-seepage from the swamp. The predominant vegetation is papyrus Cyperus papyrus, with Phragmites mauritianus in shallower areas and swamp grasses around the periphery. The swamp acts as a natural filter for a variety of biocides and other agricultural pollutants from the surrounding catchment, and also effectively removes silt before the water enters Lake Victoria. The site supports an important local fishery industry for the Luo and Luhya people who live to its south and north, respectively.

Drainage of the Yala swamp began as early as 1956, and there are still plans to extend the ‘reclaimed’ area over much of the present swamp even though it has not proved productive and a substantial part has reverted to swamp. This is an intensely controversial issue, pitting the obvious needs of a swelling population for agricultural land against the less conspicuous values of wetlands—for instance, water filtration, flood control, and protection of fish stocks. Yala is an important site for protecting the increasingly threatened site of papyrus birds, as well as one of the last remnants of Lake Victoria’s extraordinary cichlid radiation. The area around the swamps is densely populated, and most people make a living from agriculture and fishing. Lake Kanyaboli shows considerable potential for ecotourism, which could potentially be developed through a local site-support group as at other sites.

Apart from drainage, major threats to wetlands include water off take for irrigation upriver, intensification of fertilizer and biocide inputs, and unsustainable exploitation of papyrus. In addition, large-scale cutting, mainly for the mat-making industry, and extensive burning to open up land for cultivation are taking their toll on the swamp, despite the remarkable regenerative abilities of papyrus.

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ATTACHMENT II

Draft template for assessment of alternate land uses (local and global benefits)

  Global Environmental Concerns Agronomic Sustainability National concerns Small holder concerns

land use systems

Carbon storage aboveground tC/ha

Biodiversity aboveground (plants # species per standard plot)

Soil Structure

Nutrient Export

Crop-protection

potential profitability $/ha

Labor requirements

Returns to Labor

Household food security

Forest                  Oil Palm                  Extensive cash crop                  Intensive cash crop                  Food crop/long fallow                  Food crop/ short fallow                  Pasture                  Other                  

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Annex 16: STAP Roster Review

KENYA: Agricultural Productivity and Sustainable Land management

STAP TECHNICAL REVIEW

By

WILLIAM CRITCHLEY

Vrije Universitiet Amsterdam

15 August 2005

1. PREAMBLEThis document comprises a re-review of “Agricultural Productivity and Sustainable Land Management Project” (KAPSLMP) hereafter referred to as “KAPSLMP” or “the project”. An original review was carried out in June 2005, and the Project Appraisal Document (PAD) was duly revised in the light of that report.

It is noted that there are several improved and expanded sections in the revised PAD. These include, amongst others (a) a bulleted list on factors explaining land degradation, (b) project development objectives and indicators, (c) lessons learnt (under component 4), (d) institutional and implementation arrangements, (e) critical risks, and (f) appraisal summary.

The current review follows the agreed terms of reference (TOR) relating to the project appraisal document. The thirteen issues in the TOR are covered, including the eight sub-questions under the first issue. There is also a general comment section. The re-review is based on the original (16 June 2005) review. Issues that have been addressed in the revised PAD are acknowledged (or simply removed from the review), while attention is drawn to issues where the document still needs improvement. These are highlighted as issues to address under each section.

2. GENERAL COMMENTSThe draft Project Appraisal Document (PAD) is now at an advanced stage, despite the fact that there is still some editing required8. Overall the PAD sets out a case for a project with merit, and one that can be recommended to the GEF for support. The connection between poverty and the agricultural land that the majority of Kenyans (and the majority of the poorest Kenyans) depends on is clear. The need for improved agricultural production coupled with, and achieved through, better natural resource conservation is at the heart of “sustainable land management” (SLM): this theme is core to the project and central to the OP 15 funding window of GEF. The PAD follows a GEF path, but fails to emphasise well enough the global implications: the connection to climate change through carbon sequestration and potential impact on biodiversity, and specifically agro-biodiversity.

8 In addition to the issues that still need addressing there are various small errors, including inconsistencies in data (see the “Key Sector Issues” at the beginning of the document and then compare with Annex 15) as well as mistakes in botanical names and place names in the catchment description sections – sections that are generally rather weak.

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Issue to address: There clearly is potential global environmental significance in terms of both biodiversity and carbon storage. This requires more prominently highlighting in the PAD. Response: Various sections of the document (rationale, outcome indicators, RF, ICA) have been amended to highlight the considerable global environmental significance of the project. Moreover, an assessment will be made during the project preparation to study the on-site and off-site effects of land degradation both, qualitatively and - to the extent possible – quantitatively. This study (see draft TOR in attachment I) would include issues of global environmental significance such as carbon sequestration, sedimentation into water bodies and biodiversity. This data will be reflected in the document as well as in the ICA.

The strength of, and rationale for, the project is its attempt to establish a model to follow in improving land management in marginal areas. In this sense it is informed by, and builds on, the “catchment approach” originally developed under the Government of Kenya/ Sida-supported National Soil and Water Conservation Programme (NSWCP) and modified under the National Agriculture and Livestock Extension Programme (NALEP) as the “focal area approach”. KAPSLMP intends to take these basic approaches further into zones where there have been “...uncoordinated and frequent shifts on mandate of dryland development”. This is undoubtedly a valid goal. KAPSLMP correctly concentrates on a potentially powerful cocktail of what is already known in terms of technologies and management practices – which is where the bulk of the GEF money (nearly two thirds) is dedicated. It eschews the “silver bullet” approach of a single solution which has failed in the past. There is also an important acknowledgement that investment is essential in creating an enabling environment in which to nurture SLM. Despite its omissions and further editing needs, this reviewer strongly supports the proposal for KAPSLMP in principle, and both its relevance and eligibility for GEF funding.

3. SPECIFIC ISSUES REVIEWED

3.1. Scientific and Technical SoundnessThere is no doubt that land degradation is a major on-site and downstream threat in many (if not most) Kenyan watersheds, both to ecosystem function and also as a contributor to rural poverty. The antithesis, sustainable land management associated with improved agricultural performance, can help lift farmers out of poverty while providing local, watershed level and (when on a large enough scale) global environmental benefits. One sees figures in the climate change literature of 0.5 t/ ha/ annum carbon which can be sequestered through improved land management, and 2PgC of the global 3PgC currently building up per annum being potentially absorbable by agriculture. Issue to address: This potential win-win scenario – and its global implication - is central to the current proposal and should be emphasised more. Response: Addressed

Will the approach achieve objective of addressing land degradation?The general approach adopted by the project is correct: there is a solid on-site, on-farm, focus (in contrast to wasting money on the more spectacular reclamation of “badlands” and gullies by structural methods such as gabions, which should always remain a secondary concern, but became a fad in Kenya some years ago). As has been noted, the link between conservation and production – where conservation is addressed through vegetative and biological means - is clearly spelt out. Two more points are worth making here: the first is that the project underscores

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the importance of making use of already known technologies and management practices, namely the “good management practices” or GMPs, and the “good management technologies” or GMTs (examples however are not given). That is a refreshing change from projects that are founded on the basis that technologies (or approaches) are the limiting factor and need to be developed. The basis answers are indeed available already after decades of formal and informal research and on-farm verification. The second extra point is that the five-year horizon of KAPSLM is much more realistic than the conventional three-year intervention typical of so many projects. Issue to address: An annex or simply an expanded box in the text, giving some examples of GMTs and GMPs and their impact on sustainable land management would add value to the PAD.Response: While some of these technologies/practices are listed in a box in Annex 15, a more detailed list, along with analysis of their cost effectiveness will be included in the Project implementation manual (PIM).

Risks and constraints associated with project?There are a number of risks associated with this project, but these can be largely avoided through skilful and sensitive management. The first is that there may be “territoriality” (unhealthy competition) between this project and other similar interventions. Sound working relationships and synergies need to be established at the start. There may also be a danger of “fatigue” amongst farmers and staff who have seen projects and programmes come and go: can KAPSLMP present itself in a novel and stimulating way? Public relations are important. Flow of funds is recognised in the proposal as a potential constraint, and this reviewer agrees. A further risk is that monitoring and evaluation (which is correctly highlighted) may prove more complicated than envisaged, and should not be taken as a “given”: experience tells that, in the field, M&E is rarely given the priority that it requires. Two further, rather more specific risks regard farmers. The first is that the poorest farmers may be left behind by a demand-driven, semi-privatised extension system, if indeed such a system emerges in Kenya. This is a current worry expressed by some in Uganda with the new NAADS programme. The second potential risk is the danger of over-concentration on “model farmers” and local opinion leaders: the message here is beware of the “favoured farmer syndrome” where jealousies can be aroused.

Gaps?As was pointed out in the introduction there is little attention given to carbon sequestration – nor potential payments for carbon sequestration: what of the Bank’s BioCarbon fund? or Kyoto’s clean development mechanism? Another intriguing new dimension to SLM is payment for environmental services. Perhaps this subject is still too young to be adopted by KAPSLMP, but at least some thought should be given to it. There could also be potential for using marketing channels in another way to support SLM: that is certification of organic/ sustainably farmed produce. Another underplayed aspect is water development. In several of the watersheds mentioned, provision of domestic water is a severe constraint and may limit the project’s effectiveness. Returning to this reviewer’s support for concentrating on existing, known, technologies and approaches it is gratifying to see that the revised document now furthermore acknowledges the potential gains from keeping an eye out for local innovative solutions to specific problems. It is also important not to over-emphasise individual land users at the expense of common property/ community issues. Turning now to outcome indicators, KAPSLMP is, naturally, intimately concerned with increase in soil organic matter, increase in biodiversity/

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agrobiodiversity and hydrological function of the watersheds. Will they be included as indicators? Several of these points are highlighted below, but other “gaps” are also included.Issue to address: How will the water question be addressed (directly or indirectly)?Response: Water issues are an integral part within the integrated ecosystem approach that the project seeks to promote. Hydrological studies are planned during the project (component 3) to help guide the community watershed plans in conjunction with other bio-physical data. The stakeholders involved include the Ministry of water, the Water Resources Management Agency of Kenya as well as water users associations and relevant NGOs. Further, water issues (quality, flows timing and volume, sedimentation etc.) are a key area for payments of environmental services programs which the project seeks to promote.Issue to address: What attention will be given to market mechanisms for carbon sequestration, environmental services or certification of organic/ sustainably farmed produce?Response: Promotion of alternative livelihoods (see component 1) to reduce the pressure and unsustainable use of land, Eco-agriculture and payments of environmental services (carbon, water etc.) are a few of the market based mechanisms that the project will actively support. Issue to address: Soil organic matter, biodiversity, hydrological function: how will these be monitored? Are they to be included as outcome indicators?Response: The Alternatives to Slash and Burn (ASB) template is a model for incorporation and monitoring of global and local environmental as well as economic profitability indicators. A matrix of these indicators is included as attachment II in Annex 15. However, the detailed M&E framework to be developed as a part of the preparation before appraisal will provide detail on the monitoring and specific outcome indicators (including soil organic matter, structure, hydrological indicators etc.).

Controversial aspects?There are few controversial aspects envisaged. It would be hard to argue with the rationale for the project, other than from a cynical viewpoint. There may perhaps be some discussion about how the watersheds have been chosen (from a political/ ethnic standpoint) but that is inevitable. Nevertheless if the issue under 3.4 is addressed, this will assist in justification.

Aspects requiring extra research?Little detail is given regarding the aspects to be monitored in relation to SLM and its benefits. How, for example, can a monitoring system capture whether a hectare of land (or a micro-watershed) is being sustainably managed or not? Or its status has improved? This could provide an opportunity for useful and interesting participatory research. While the GMPs and GMTs are accepted to be valid, there is a dearth of information on their technical and economic validity. Again, here emerges a topic which is researchable during the span of the project intervention.

How will model of sustainable use be developed? How effective will it be?It is not very clear precisely what this question means: if it refers to the technical and management packages on offer, then there is considerable potential for development of a sustainable model of land use. One starting point would be to visit areas of Eastern and Central Kenya and see how the various practices are combined successfully there. Naturally these will need to be tailored (through participatory methods) to the technical and socio-economic requirement of the watersheds under the project.

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Sufficient evidence that project offers best long-term solutions?In answer to this question, the evidence alluded to certainly exists in solid experience (though mainly from smaller interventions) and is supported extensively in the literature, both within Kenya and outside. KAPSLMP (when the PAD is further developed) will be a project that embraces most elements of a new and enlightened approach to SLM and poverty.

3.2. Global environmental benefits Sustainable land management is, by definition, the explicit focus of KAPSLMP. And SLM is at the heart of ecosystem function with its positive impacts on biodiversity (particularly agrobiodiversity), above and especially below ground, and carbon sequestration. The latter, carbon sequestration, addresses climate change. There are no drawbacks envisaged.

3.3. Project’s context within GEF goalsKAPSLMP fits well within the GEF context. Its focus on sustainable land management in the face of serious land (water and biodiversity) degradation and related poverty - and thus relevance to OP 15 - is self-evident. Thus, the link to carbon sequestration and climate change which, as mentioned already, needs to be brought out more clearly in the document. There is also a strong connection with OP 12 through the proposed better management of crop, pasture and other forms of land use, including wooded areas, and thus an integrated ecosystem approach. Beside these technical aspects, KAPSLMP is explicitly committed to the interests of stakeholders, both in terms of its demand-drivenness and participatory involvement in planning and activities.

3.4. Importance of the area of intervention from a conservation perspectiveThis is one aspect where there is a lack of clarity in the proposal. There are five “key catchment areas” and talk of “critical ecosystem functions in degraded and fragile areas”. There are two points here that need clarification. The first is the selection criteria. Is it on the basis of “fragility”? Or lack of NSWCP/ NALEP intervention previously or currently? Or in order to cover a range of agroecological zones? Or with indigenous peoples in mind9? Or (probably) a mix of all of these and other considerations. The second point is: what is the precise unit of intervention? Though “watershed” and “catchment” are the terms mentioned throughout, these are confused by talking of (for example) “Tugen Hills” “Taita Hills” or “Cherangani Hills”. These ranges are not discrete hydrological watersheds. Neither precise administrative zones. It should be recollected that many of Kenya’s main successes have been based on community units within watersheds (though under the NSWCP this was confusingly termed the “catchment approach”). Equally there have been implementational problems when interventions cut across administrative or community boundaries. Issue to address: Within the PAD (in brief initially, in full later) there needs to be an explanation of the selection criteria used in identifying the “catchments”. This then should be supplemented by a map with the catchment boundaries and the main river systems associated with each catchment.Response: The selection of the watersheds was based on numerous socio-economic and agro-ecological criteria (including poverty incidence, population density, agro-climatic conditions, and severity of land degradation). While an initial assessment has been conducted which is

9 The indigenous communities mentioned in respect to the Cherangani Hills are unlikely to be found there: the slopes of Mount Elgon more probably? The Cheranganis are home basically to the Marakwet, the Pokot (towards the north) and some immigrant individuals

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describing these broad categories, KARI will hire a consultant to conduct a more in-depth study in order to analyze the factors behind these categories (see draft TOR attached as attachment II). The study is supposed to be available before appraisal.

3.5. Scope for replication of the projectPotential replicability is a real strength of KAPSLMP and surely a precondition for such a project in the first place. What is done in the five areas is vital – but what can spread both within and outside Kenya is potentially even more important. There is indeed mention of “similar eco-regions” (again a plea: what eco-regions are actually covered in the 5 watersheds?) and “outside” spread. Certainly this can be the case and development of a model for dissemination of the overall approach should be a priority. In this connection it needs to be stressed that whatever is set up in this phase should be as far as possible through institutional embedding and not exclusive to the project. The exit strategy (which deserves a mention?) would then be to withdraw extra support funding, but leave in place the enduring institutions and pathways. Issue to address: An institutional organogram would be useful and instructive. Issue to address: Is the establishment of the “catchment coordinators” intended to be eventually a model for the whole country? If not, who would carry out this function elsewhere?Response: Please see institutional arrangement for details. A detailed organogram will be developed and added after the implementation arrangements are finalized at appraisal. The replicability of institutional arrangement will also be assessed as a part of the institutional arrangements. A key priority is to work with existing governmental institutions that have been established previously or as a part of KAPP. However, given the cross-sectoral nature of the issue (SLM) it may become necessary to add/modify appropriate local structures.

3.6. Potential for continuation of changes the project aims to achieveMany of the comments in 3.5 are relevant to this question also. Furthermore, there will be continued support from the 12-year IDA APL as is pointed out in the PAD. That is a real bonus, and will help “extend” the 5-year planned intervention. On another level, the fact that the project concentrates on-farm, while establishing an enabling environment for SLM should certainly help launch an enduring process of conservation through production – as pointed out in the PAD. The proposed monitoring system will enable continued changes to be tracked.

3.7. Consistency of project design with operational strategies of other focal areas.The focus on SLM implies that biodiversity and climate change are addressed, as already noted. The direct relevance of this project to integrated ecosystem management is also self-evident. It is hard to envisage any negative impacts.

3.8. Linkage to other programmes/ action plansA large number of other programmes and action plans have connections with KAPSLMP: this is well covered in the PAD. At a continental level NEPAD’s thematic area # 01 is supported. There is mention of the GOK’s two relevant recent strategies (Economic Recovery and Revitalisation of Agriculture) as well as the PRSP and NAP. It is demonstrated also how the project builds on the KAPP and the 12-year IDA APL. A matrix of 12 Kenya GEF SLM-related projects is provided also, though discussion of the connections that will be forged is as yet missing. While the link with FAO’s Farmer Field Schools is mentioned in passing, there is also a good match to be made with FAO/ UNDP’s “FFS- Promoting Farmer Innovation” project. What about the

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obvious future connection to LADA (which will assess land degradation in drylands as well as looking for successes in SLM)? Another link-up that could be very worthwhile is with WOCAT – the World Overview of Conservation Approaches and Technologies (www.wocat.net) which (a) provides a monitoring and evaluation format dedicated to soil and water conservation/ SLM as well as having a network in Kenya and (b) has several Kenyan SLM successes documented and analysed including the catchment approach, the farmer innovator approach, the success of Grevillea robusta in Central Kenya, and an example of “conservation agriculture”: these and others all highly relevant to KAPSLMP. Issue to be addressed: Important Kenyan, non-GEF links such as those mentioned above need to be made explicit in the PAD. Response: Noted. Efforts to coordinate closely with other GEF projects/implementing agencies as well as to link with relevant programs/institutions (LADA, FAO/UNDP FFS, CGIAR institutes) will be done through the project. Dialogue between GEF agencies in Kenya has already commenced. And TerrAfrica (a multi-partner platform that aims to scale-up SLM across SSA) provide potent mechanisms to strengthen GEF and non-GEF relationships. Activities center on building coalitions at regional and national levels to promote SLM across sectors, share knowledge, and help coordinate investments, thereby maximizing efficiencies and impacts. The TerrAfrica partnership is inclusive, involving SSA countries, civil society and research organizations, multilaterals and bilaterals (i.e., the AfDB, European Commission, FAO, GM of the UNCCD, IFAD, NEPAD, UNCCD Secretariat, UNDP, UNEP, and the World Bank) Moreover, it is envisaged that several CGIAR agencies will be closely involved in the implementation of project activities.

3.9. Mechanisms for participation and influence on management of the projectIt is encouraging to note that the project design has been steeped in a participatory process, involving a range of stakeholders. It is noted that CBOs will be involved in work plans, and farmers and communities in the development of micro-projects. Throughout the PAD there is a participatory theme, but of course putting this into practice so that it influences management will depend on multiple factors, including awareness raising and appropriate training. The mechanisms to achieve this, however, are basically in place.

3.10. Other beneficial or possible damaging environmental effectsAs (rather briefly) mentioned in the PAD, there will be positive effects downstream, especially with respect to sediment delivery and hydrological regimes. In some of the intervention areas (Tugen Hills and Cherangani Hills at least) many people have agricultural/ livestock interests both upstream and downstream. Damaging environmental effects are highly unlikely.

3.11. Capacity building There is a good – if currently rather general - description of the planned capacity building in the PAD (page 10). This will evidently be a strong component of the project, and would benefit from being described in a little more detail. It is refreshing to see that this capacity building is planned to take place at all levels. Turning the concept around, it is pleasing also to see that the existing capacity of the farmers/ land users is acknowledged and will be tapped. Experience suggests that perhaps the biggest challenge will be in changing the attitudes of project/ Ministry staff, many of whom will have been trained under a conventional “transfer of technology” model, furthermore focusing on high potential areas. NGOs will be key in delivering and facilitating training.

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3.12. Innovativeness of the projectThe overall approach of the project – drawing a strong connection between conservation and production under the umbrella of sustainable land management - is innovative, at least on this scale. Other innovative elements are the search for alternative livelihood sources – focussing on indigenous plant products for the international market (Neem tree, Azadirachta indica, and Balanites aegyptiaca also perhaps?) again, on this scale, as many smaller projects (in Kenya and elsewhere) have looked into this. The degree of commitment to M&E is refreshingly new, and the explicit use of “opinion leaders” is also novel. Finally, KAPSLMP will, while relying on technologies and management methods already on the shelf, keep an eye open for local innovation in both SLM and alternative livelihoods by the farmers and communities themselves.

3.13. Potential for impact based on lessons and best practices from other projectsKAPSLMP must be careful to beware “institutional amnesia” which is precisely the point of this question. There is a wealth of experience in SLM in Kenya – both current and historical, both failures and success. “Lessons learned and reflected in the project design” is a new and important section in the revised PAD, yet still the Bank’s experience under the “Baringo Pilot Semi-Arid Area Project” (1980 onwards) is missing. Much could be gleaned from literature (official: but mainly “grey”). That would be a good, perhaps even essential, starting point for the project itself.Issue to be addressed: Some lessons from BPSAAP should be mentioned – including for example: the need to respond to local priorities, the key element of water provision, importance of access roads to improve marketing, difficulties associated with operating projects which cut across administrative boundaries, and the constraint of ineffective financial mechanisms for transfer of funds.Response: The lessons learned section notes key points from several relevant projects, including many of the aspects mentioned above. Participatory approaches, market access and related issues, integrated ecosystem development and financial mechanisms for longer term sustainability (PES etc.) are recognized as integral to addressing the barriers to adoption of SLM and incorporated within the project design as far as possible within the scope of the project.

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ATTACHMENT I

Terms of Reference for Economic and Financial AnalysisAgricultural Productivity and Sustainable Land Management Project, Kenya

BackgroundThe World Bank is supporting the Agricultural Productivity and Sustainable Land Management Project (KAPP-SLM) in Kenya. The development objective of the proposed project is that agricultural producers increasingly adopt profitable and environmentally-sound land management practices and alternative sustainable livelihood strategies in the targeted watersheds. It is proposed that the project would have four components: (1) Promotion of SLM best management practices and best management technologies; (2) Promotion of alternative livelihoods systems; (3) Strengthening the enabling environment for SLM; and (4) Coordination, monitoring and evaluation of project activities. KAPP-SLM will probably be implemented in five watersheds in Western and Southern Kenya, namely Cherangani Hills, Taita-Taveta, Tugen Hills, Kinale-Kikuyu and Yala Watersheds. Project implementation would be supported by a GEF Grant of US$ 10 million. The proposed consultancy would address a crucial element of project preparation, the economic and financial analysis.

Economic and Financial Analysis

The economic and financial analysis would consist of three major components: (i) analysis of the biophysical and socio-economic setting in the targeted watersheds; (ii) cost-benefit analysis, both from the private and social perspective; and (iii) fiscal analysis to assess fiscal implications and financial sustainability.

1. Analysis of the biophysical and socio-economic setting The economic and financial analysis of the project should begin with analyzing the biophysical and socio-economic setting in the targeted watersheds. The analysis of the former would aim at gaining a better understanding of the biophysical causes and the severity of land degradation in the selected project sites. The consultants would have to identify the major forms of natural resource degradation, e.g. whether land degradation is mainly associated with nutrient depletion due to low use of inorganic and organic fertilizer coupled with declining fallow periods, and/or with soil erosion due to deforestation, crop production on steep slopes with limited investments in soil and water conservation measures. The analysis should be strengthened with some quantitative information which indicates the extent of the major forms of land degradation in the watersheds (e.g. nutrient balances, amount of soil loss) and its impact on yields (e.g. yield trends for major crops).10 The analysis of the socio-economic setting would aim at assessing the incentives for agricultural producers and other resource users to conserve the natural resources. This part would include the analysis of markets, services, institutions, and distortions (e.g. taxes and subsidies) affecting land management decisions. Experiences from other countries have shown that farmers are rational decision-makers and hence the study could help to identify external economic and policy factors which hinder the adoption of presumably more sustainable land management practices and technologies. Understanding the incentives faced by agricultural producers is necessary, if patterns of resource use are to be understood and appropriate responses

10 However, it is important to note that yield trends only reflect the impact of land degradation if other factors are held constant.

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to the degradation problem formulated. The results of this section are crucial for project design and implementation, because it will help to identify the optimal interventions for promoting the adoption of sustainable land management practices and technologies.

2. Cost-Benefit AnalysisAs a next step, the consultants would be expected to conduct a cost-benefit analysis to assess whether the project is financially and economically justified. Hence, the overall objective would be to estimate the costs and benefits of the proposed project (or at least components of the project) and determine common indicators for economic returns (i.e. Internal Rate of Return and Net Present Value). While the exact methodology will depend on the specific form of land degradation in the targeted watersheds (which is supposed to be identified in the first component), the basic principles of the analysis are universal and straightforward. First, the effects of continued erosion (or other types of land degradation) on productivity are estimated for the time horizon of interest. These are then used to estimate returns at each point in time and reflect the situation without any project intervention (“without project” scenario). Second, the calculations are repeated under the conditions that would be experienced if a specific conservation practice were adopted (“with project” scenario). The returns to the investment are then obtained by taking the difference between the streams of discounted costs and benefits in the cases with and without the adoption of the respective conservation practices. It is important to note, that the approach described thus far estimates only the returns to the specific conservation measure being examined, not to conservation per se or the project as a whole.

Data requirements would comprise (i) biophysical data for the quantification of degradation rates and yield losses; and (ii) economic data (mainly input levels and prices for crop production budgets). The effects of land degradation/soil and water conservation can be estimated directly based on statistical methods or by modeling the biophysical environment and translating effects of land degradation (e.g. soil loss) on yields for example through regression analyses. The statistical method could be based on the estimation of time trends of yields. This approach requires a time series of yields both with and without the specific management practice/technology under consideration. In addition, it requires information on changes of any other variables that might affect yield over the same period. This approach is associated with several problems, including data availability and reliability, and restrictions on the use of results. An alternative would be to develop a detailed parametric model of the biophysical environment. A relatively simple model would be the Universal Soil Loss Equation (USLE), which aims at estimating the amount of soil loss. Hence, as a next step the relationship between cumulative erosion and yield would need to be established. If yield data could be obtained together with the amount of soil loss on the same plots, a regression analysis could be applied. The constraints of this approach are related to the fact that they require a detailed qualitative and quantitative knowledge of the biophysical environment which makes building and validating the model a complex endeavor. To conclude, both approaches have advantages and disadvantages and the approach to choose is mainly driven by data availability.

The economic data requirements are mainly determined through the data needs for crop production budgets. The first step would be to estimate the level of the use of various inputs. The consultants would have to ensure that input levels adequately reflect practices in the areas being studied. Input levels for activities which have not yet been adopted might be obtained from experiment stations or other regions where these practices have already been adopted. One

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difficulty in estimating input levels for inter-temporal analysis is that they are unlikely to remain constant over the entire period of the analysis. At some point, returns under the degrading practices might become so low that cultivation would cease entirely. As in the case of input levels, the most important need for data on prices and costs (including labor costs and discount rates) is to ensure that they accurately represent the situations in the different study areas. This would probably require some field work by the consultants.

Once the consultants have estimated the returns to a specific technology/practice (i.e. the Internal Rate of Return (IRR) and Net Present Value (NPV), he/she would have to extent the analysis to the regional, i.e. watershed, and project level. Therefore, the consultants would need to estimate (i) the pattern of degradation at the aggregate level; and (ii) the adoption rates of the various technologies under consideration. The consultants would also have to determine whether and how project overhead costs should be accounted for.

The analysis described so far has been carried out in private terms, i.e. it provides estimates of the costs and returns to conservation practices as perceived directly by farmers (this type of analysis is often referred to as ‘financial analysis’). However, private costs and benefits might diverge from the social costs and benefits for natural resource/land conservation, because (i) market failures or policy-induced distortions might distort signals perceived by agricultural producers; and (ii) externalities caused by land degradation might impose costs on the society in addition to the decline in productivity on the fields where degradation occurs, e.g. the siltation of reservoirs and flooding (analyses who account for social cost and benefits are often referred to ‘economic analysis’). While the correction for distortions is straightforward (see for example Gittinger, 1982), it is more challenging to reflect the effect of externalities in the economic analysis. Methodologies for quantification and valuation of externalities will be developed in collaboration with the consultants, the Bank team, and KARI.

As mentioned above, the overall objective of the analysis is to calculate the expected IRR and NPV for the proposed project, or at least project components. Since it can be expected that many assumptions will be made for the calculation of the economic indicators, the consultants would also be expected to extensively conduct sensitivity analyses by changing the values of certain parameters and variables, such as the estimated impact of land degradation on yields, adoption rates, and prices. The consultants would have to compare the study results with the results from economic and financial analyses of comparable investments and projects in Kenya, Sub-Saharan Africa, and other regions. Other project benefits are difficult to quantify in economic terms, but the consultant would be expected to mention and discuss them in detail. Such potential benefits could include biodiversity protection and enhancement, regeneration and recovery of natural vegetation, reduced risk of landslides, and forest rehabilitation.

3. Fiscal AnalysisThis analysis seeks to estimate the fiscal implications beyond project implementation and provides therefore valuable information on the expected financial sustainability of activities initiated under the project. In other words, the fiscal analysis aims at assessing the likelihood that sustainable local sources of funds will be available at the end of the project to take over from funds provided under the project. As part of this analysis, the consultant would have to determine the expected recurrent costs at the end of the project (based on the project cost tables provided by the project team) and make projections on the fiscal impacts of sustaining activities. To do so,

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the consultants would also have to accurately account for the impact of cost-sharing mechanisms, including beneficiary contributions to advisory service and investments.

Expected OutputsAs the first output the consultants have to develop a list with data needs for the proposed analyses. This list will be submitted to the local consultant, who will start with data collection before the arrival of the international consultant. As the main output the consultants are expected to prepare report of 25-30 pages, single spaced, excluding any annexes. The report has to cover all the issues mentioned in the TOR, and is expected to include the calculation of the common economic indicators for project analysis, i.e. economic rate of return (ERR), net present value (NPV) etc. The report has to discuss in detail how these indicators have been calculated and which data have been used. Two weeks before the final deadline the consultant has to submit a draft report to the Project Implementation Unit and the World Bank Team for review. The consultant is expected to incorporate the comments in the final report. An executive summary of the final report of 8-10 pages would have to be prepared for Annex 9 of the Project Appraisal Document. Moreover, the consultants are expected to develop electronic files and spreadsheets which would be used to perform the economic analysis. These files would have to be submitted to the project teams with the final report.

Type of ContractTwo consultants will be hired in the period September 1 – November 30, 2005: one international consultant (for 40 days) and one local consultant (for 25 days). The international consultant will have the overall responsibility for conducting the analysis and submitting the final report. The local consultant will support the international consultant, in particular regarding data collection efforts and during the mission.

TimelineDeliverable DeadlineDraft Report October 14th, 2005Final Report (plus summary and electronic files)

November 30th, 2005

Required QualificationsThe consultants are expected to hold a Master’s degree (or PhD) in economics, agricultural economics, or natural resource economics. They need to have a strong background in the economics of sustainable land management/natural resource management in developing countries. Moreover, the consultants should have strong quantitative skills. Extensive experience with project work in collaboration with international development agencies, in particular related to economic and financial analysis, is desired.

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ATTACHMENT II

Terms of Reference for Study on Selection Criteria of Project SitesAgricultural Productivity and Sustainable Land Management Project

BackgroundKARI selected five watersheds in Western and Southern Kenya as target areas for the Agricultural Productivity and Sustainable Land Management Project (KAPP/SLM-P). Background papers prepared by KARI indicate that site selection was based – among other criteria – mainly on poverty indices, population density, and biophysical factors. While these broad categories seem to be relevant and meaningful for site selection in the context of land degradation (or more generally natural resource degradation), it is essential for project appraisal and implementation to get a better and more thorough understanding of the factors describing these categories.

Study objectives and structureThe major objective of the analysis is to provide justification for site selection and support for project design and implementation. The consultant would be expected to (i) determine the specific criteria/factors for the selection of the five watersheds; and (ii) collect and analyze information and data on these criteria/factors for each watershed. The consultant would have to focus the analysis around the following pre-selected criteria/factors for each watershed:

I. Socio-Economic Criteria:1. Poverty incidence (% of people below poverty line in all Provinces and Districts captured by the project)11

2. Population density (number of persons per sq.km in all Provinces and Districts captured by the project)12

3. Road and market access (km of all-weather roads per 100 sq.km in all Provinces and Districts captured by the project; distances from selected communities in each watershed to nearest 3-5 towns with reasonable market size)4. Farming systems and alternative livelihoods in each watershed (including major crops; importance of livestock; importance of off-farm and non-farm activities)5. Land tenure systems (description of types and their importance, e.g. leasehold, freehold, customary etc.)

II. Agro-ecological Criteria:1. Agro-climatic conditions for each watershed (e.g. humid, semi-humid, semi-arid, arid)2. Soil fertility classes for each watershed3. Nutrient depletion and soil loss over time for each watershed (to quantify the severity of land degradation)4. Yield trends (of major crops) for each watershed5. Major environmental threats for each watershed (in addition to land degradation; e.g. extinction of particular species).

11 The project team has identified the 1997 Welfare Monitoring Survey and the 1999 Population and Housing Census as potential data sources. However, the consultant would have to explore the availability of more recent data.12 The project team has identified the Statistical Abstract from 2003 as a potential data. Again, the consultant would have to explore the availability of more recent data.

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Another important criterion for site selection, which the consultant would have to address, is the intended overlap with KAPP and the targeted area of other projects and programs.

Expected outputs and timelineThe consultant would have to summarize his/her findings in a report of 15-20 pages (single-spaced, without any annexes). The reported has to be submitted to KARI and the World Bank Team by September 30th, 2005.

Required qualificationsThe consultant is expected to hold a Master’s degree in agricultural or natural resource economics, or agricultural sciences. He/she needs to have extensive experience with the analysis of farming systems, and their socio-economic and agro-ecological environment in Kenya.

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Annex 17: Maps

KENYA: Agricultural Productivity and Sustainable Land management

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