SCCD: G.G.

AFRICAN DEVELOPMENT FUND Language: English Original: English

REPUBLIC OF KENYA

GREEN ZONES DEVELOPMENT SUPPORT PROJECT

APPRAISAL REPORT

NB: This document contains errata or corrigenda (see Annexes)

AGRICULTURAL AND RURAL DEVELOPMENT DEPARTMENT ONAR NORTH-EAST AND SOUTH REGIONS AUGUST 2005

TABLE OF CONTENTS Page Project Information, Currency and Measures, Abbreviations and Acronyms, (i-xiv) Executive Summary, Logical Framework Analysis Matrix, Basic Data Sheet 1. INTRODUCTION AND BACKGROUND 1 2. THE AGRICULTURE SECTOR 2

2.1 Structure and Performance 2 2.2 Land Use and Land Tenure 3 2.3 Sector Development Constraints, Policies and Strategies 3

3. THE FORESTRY SUB-SECTOR 5

3.1 Overview 5 3.2 Poverty, Gender and Health Issues 6 3.3 Institutional Framework 7 3.4 Forestry Development Constraints, Policies and Strategies 9 3.5 Donor Interventions and Lessons Learnt 10

4. THE PROJECT 12

4.1 Concept and Rationale 12 4.2 Project Area and Beneficiaries 13 4.3 Strategic Context 14 4.4 Project Objectives 15 4.5 Description of Project Components 15

A. NATURAL FOREST CONSERVATION 15 A.1 Natural Forests Rehabilitation 15 A.2 Participatory Natural Forest Management 16 A.3 Restoration of County Council Hilltops and Watersheds 17

B. BUFFER BELT WATERSHED MANAGEMENT 17 B.1 Restoration of Natural Forest in Environmentally Sensitive Areas (ESA) 17 B.2 Establishment of Fuelwood Plantations 17 B.3 Consolidation of Tea Buffer Belts 18

C. SUPPORT TO FOREST ADJACENT COMMUNITIES 18

C.1 Woodlots Establishment on Farms 18 C.2 Agro-Forestry Development 18 C.3 Household Livelihoods/Income Enhancement 19

D. PROJECT COORDINATION AND MANAGEMENT 19

4.6 Production, Markets and Prices 20 4.7 Environmental Impacts 20 4.8 Project Costs 22 4.9 Sources of Financing 23

5. PROJECT IMPLEMENTATION 24 5.1 Executing Agency 24 5.2 Institutional Arrangements 24 5.3 Supervision, Implementation and Expenditure Schedules 25 5.4 Procurement Arrangements 26 5.5 Disbursement Arrangements 29 5.6 Monitoring and Evaluation 30 5.7 Financial Reporting and Auditing 30 5.8 Aid Co-ordination 30

6. PROJECT SUSTAINABILITY AND RISKS 31

6.1 Recurrent Costs 31 6.2 Project Sustainability 31 6.3 Critical Risks and Mitigation Measures 32

7. PROJECT BENEFITS 33

7.1 Financial Analysis 33 7.2 Economic Analysis 33 7.3 Social Impact Analysis 34 7.4 Sensitivity Analysis 35

8. CONCLUSIONS AND RECOMMENDATIONS 35

8.1 Conclusions 35 8.2 Recommendations 36 A. Conditions Precedent to Entry into Force of the Loan Agreement 36

B. Conditions Precedent to First Disbursement of the Loan 36 TABLES 4.1 Summary of Cost Estimates by Components 22 4.2 Summary of Cost Estimates by Category of Expenditure 23 4.3 Sources of Finance 23 5.1 Expenditure Schedule by Components 26 5.2 Expenditure Schedule by Source of Finance 26 5.3 Procurement Arrangements 27 BOXES Box (a): Matrix of Current and Planned Donor Support in the Sub-sector 11 Box (b): Matrix of Responsibilities –Implementing /Collaborating Institutions 25 Box (c): Maximum Contract Value for NCB, NS and Direct Purchase for Items 29 This Appraisal Report was prepared by Chiji Ojukwu (Chief Agricultural Economist and Mission Leader), Charles Omoluabi (Senior Forestry Officer), Lalla Maiga (Gender Expert), Consultant Environmentalist/Community Forestry Expert), Consultant Agriculturist, and Consultant Infrastructure Specialist). Contributions were received from Laeticia Mukarasi and Sunita Pitamber (Gender Experts), and from Vinay Sharma (Procurement Specialist) and Titus Edjua (Legal Officer). Further information on this report can be obtained from Mr. A. Beileh, Manager, ONAR.1 (Ext 2139).

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ANNEXES 1 Map of Kenya showing Project Areas 2. Project Organisational Structure 3(a) Summary of List of Goods and Services/Categories of Expenditure 3(b) Summary of Financing by Components 3(c) GOK/ADF Financing of Recurrent Costs 4 (a) Project Implementation Schedule (Jan. 2006 - Dec. 2012) 4 (b) Supervision Schedule During Implementation Highlights of Project Preparation and Review Process 6. Status of Agric. Sector Audit Reports and Project Completion Reports 7. Summary of Financial and Economic Analyses 8. Environmental and Social Management Plan Summary 9. Bank Group Operations in Kenya Project Information Documents (PIDs)

Working Paper 1: Detail Cost Tables and Summaries Working Paper 2: EMSP Working Paper 3: Infrastructure Development Working Paper 4: Forest Conservation Working Paper 5: Support to Forest Adjacent Communities

WEIGHTS AND MEASURES 1 hectare = 10,000 m²

1 hectare = 2.47 acres 1 kilogram = 2.2046 pounds 1 kilometre = 0.624 miles 1 metric ton = 1,000 Kg 1 metric ton = 2,240 pounds

CURRENCY EQUIVALENTS

(June 2005) UA 1 = KSH 113.337

FISCAL YEAR July – June

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AFRICAN DEVELOPMENT FUND B.P. 323

1002 Tunis Belvedere, Tunis, TUNISIE Tel: (216 71) 10 2037 Fax: (216 71) 334 335

Website: www.afdb.org

PROJECT INFORMATION Date: June, 2005 The information provided hereunder is intended to provide some guidance to prospective suppliers, contractors, consultants and all persons interested in the procurement of goods and works for projects approved by the Boards of Directors of the Bank Group. More detailed information and guidance should be obtained from the Executing Agency of the Borrower. 1. COUNTRY : Kenya

2. PROJECT TITLE : Green Zones Development Support Project

3. LOCATION : Natural Forests and Tea Buffer Zones in four (4) provinces: Central, Eastern, Rift Valley and Western (see Annex 1).

4. THE RECIPIENT : Republic of Kenya 5. EXECUTING AGENCY : Ministry of Agriculture,

P.O. Box 30028, Nairobi, Kenya, Tel: 254-20-2718870; Fax: 254-20-2711149, Email: psagric@wanachi.com

6. DESCRIPTION : The project comprises four components: i) Natural Forest Conservation, with three sub-components (natural forest rehabilitation, participatory natural forest management, and restoration of county council hilltops and watershed); ii) Buffer Belt Watershed Management, with three sub-components (restoration of natural forest in environmentally sensitive areas, establishment of fuelwood plantations, and consolidation of tea buffer belts); iii) Support to Forest Adjacent Communities, with three sub-components (woodlot establishment, agro-forestry promotion, and Household Livelihoods/Income Enhancement); and iv) Project Coordination and Management 7. TOTAL COST : UA 31.51 million Foreign Cost : UA 11.67 million Local Cost : UA 19.84 million 8. BANK GROUP LOAN/GRANT

ADF Loan : UA 25.04 million 9. OTHER SOURCES Government : UA 4.52 million Communities/Beneficiaries : UA 1.95 million

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10. ESTIMATED STARTING DATE AND DURATION : January, 2006, for 6 years. 11. PROCUREMENT OF GOODS

AND WORKS : Goods and works will be procured according to Bank Rules of Procedures. International Competitive Bidding for Supervision Vehicles and Input Trucks; National Competitive Bidding for improvement of access roads, construction of fire towers, control posts and related works, and National Shopping for procurement of bicycles, motorcycles, agricultural inputs, office and other light equipment.

12. CONSULTANCY SERVICES REQUIRED AND STAGE OF SELECTION : Selection of Consultants/Technical

Assistance will be through Limited Competition on the basis of a shortlist. These include regional/national consultants: Forester (36 person-months), Gender Specialist (48 pm), Community Participatory Expert (36 pm), Socio-Economist (36 pm) and Technical Implementation Officer (36 pm). Others services include those for audit preparation, baseline study, design and supervision of infrastructure, forest growth model development, forest product pricing and local area network. Most of these will be required from PY1.

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ABBREVIATIONS

ADF : African Development Fund ASAL : Arid and Semi-Arid Lands AWP/B : Annual Work Plan and Budget CCF : Chief Conservator of Forests CBO : Community Based Organisation CSP : Country Strategy Paper DFO : District Forest Officer DTIC : District Technical Implementation Committee ERS : Economic Recovery Strategy (For Wealth and Employment Creation) ESA Environmentally Sensitive Area ESMP : Environmental and Social Management Plan FAO : Food and Agriculture Organisation FFS : Forest Field Schools FD : Forest Department GDP : Gross Domestic Product GIS : Geographic Information System GOK : Government of Kenya GPN : General Procurement Notice ha : hectare ICB : International Competitive Bidding ICRAF : International Centre for Research on Agro-forestry ITN : Indigenous Tree Nurseries KARI : Kenya Agricultural Research Institute KEFRI : Kenya Forestry Research Institute KRDS : Kenya Rural Development Strategy KSH : Kenyan Shillings KTDA : Kenya Tea Development Authority KWS : Kenya Wildlife Service MDG : Millennium Development Goal MENR : Ministry of Environment and Natural Resources MOA : Ministry of Agriculture MOF : Ministry of Finance MoU : Memorandum of Understanding MT : Metric Ton MTR : Mid Term Review NCB : National Competitive Bidding NDP : National Development Plan NEMA : National Environmental Management Authority NEPAD : New Partnership for African Development NGO : Non Governmental Organization NS : National Shopping NTZDC : Nyayo Tea Zones Development Corporation NTZIFCP : Nyayo Tea Zones Improvement and Forestry Conservation Project NPV : Net Present Value PCR : Project Completion Report PCU : Project Coordinating Unit PFM : Participatory Forest Management PIDs : Project Information Documents PRSP : Poverty Reduction Strategy Paper PSC : Project Steering Committee PSP : Permanent Sample Plot PY : Project Year UA : Unit of Account

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EXECUTIVE SUMMARY 1. PROJECT BACKGROUND This Appraisal Report follows a request from the Government of the Republic of Kenya (GOK) for Bank Group assistance to finance the Green Zones Development Support Project, within the context of its Economic Recovery Strategy for Wealth and Employment Creation 2003-2007 (ERS) and the Strategy for Revitalisation of Agriculture 2004 – 2014 (SRA) that recognise that forestry as an important productive sector that impact positively on rural incomes and environment. Kenya’s dependence on the natural environment is profound. The environment underpins most sectors, including agriculture and horticulture, tourism, wildlife, and the energy. Eighty percent of all energy comes from wood and rural dependence is almost total. Closed forest cover (about 1.7% for indigenous forests) is the lowest in East Africa, and water has become a major constraint to agricultural production. It is against this background that concerns over management of Kenyan forest resources have occupied a position of some importance. In attempting to stem the decline in environmental resources, the Government, through its Forest Policy Sessional Paper No. 9 of 2005; the Forest Bill 2005, that has just been approved by Parliamentary (August 2005), and statements on the implementation of a Green Revolution in Kenya, has emphasised the need to protect and conserve forests as a base for water, food, wood and nutritional security. It is in this context that the Government of Kenya requested the Bank in September 2004 to revisit its earlier request in July 2002 for support to a forestry conservation project in Kenya. Earlier (October 2002) the Food and Agriculture Organisation Investment Centre (FAO/IC), on behalf of the GOK and the Bank, prepared a forest conservation project. The Bank responded by fielding a follow-up mission in March 2005 to present the highlights of the preparation report and review with relevant institutions for technical improvement and response to policy and institutional changes that have occurred since 2002. This report is the outcome of a Bank mission that was in Kenya in May 2005 to appraise the project. The appraisal mission was preceded by a stakeholders’ workshop. The stakeholders validated and endorsed the proposed project activities and implementation modality. The proposed Green Zones Development Support Project is anchored on the Bank’s Agriculture and Rural Development Policy, with particular emphasis on natural resource management and environmental protection; the Pillar I of the Kenya Result-based Country Strategy Paper (2005 – 2007) which aims at reducing vulnerability and improving equity through agricultural and rural development; the core MDG objectives of poverty alleviation and sustainable development; and the comprehensive agriculture mandate of the NEPAD initiatives. It is in support of the Kenya’s ERS, which aims to restore economic growth, generate employment opportunities, and reduce poverty levels. It builds on the experiences gained from the Bank-financed Nyayo Tea Zones Development and Forest Conservation Project as well as from several donor-financed pilot projects in Kenya. The project is also designed to deepen beneficiaries impact through improving the sustainability of farm incomes, accelerating conservation through community participation and capacity building of the concerned institutions in forestry policy formulation, planning and management. The choice of forest conservation as an area of intervention is in line with the ADF X strategy on selectivity. This proposal is the third intervention of the Bank in the natural resources conservation sub-sector. Thus the project will reinforce recent Bank-financed interventions such as the Ewaso N’giro North Natural Resources Conservation Project, which includes catchments conservation in some upland and ASAL areas. The Bank Group subscribes to the

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harmonisation principles of the GOK, which is anchored on the new forest policy. New investments in the sub-sector are jointly reviewed under the Ministry of Environment and Natural Resources, and collaboration is being strengthened. The Forest Department, proposed as one of the two implementing agencies, has been involved in the implementation of most conservation projects as part of ongoing harmonisation of implementation arrangements. The Bank is also moving towards harmonising its procurement procedures with those of the other MDBs. This project has been designed with all these in view. 2. PURPOSE OF THE LOAN/GRANT The ADF loan amounting to UA 25.04 million will finance 91.8%, of the investment costs, as well as 29.6% of the recurrent costs. This represents 79.5% of total cost financing. (Details in Annex 3(a) and 3(b) and Working Paper 1 (Detail Cost Tables). 3. SECTOR GOAL AND PROJECT OBJECTIVES The overall sector goal is to contribute to poverty reduction. It also aims at improvement in forest cover for water and biodiversity conservation in Kenya. The project objectives are to promote forest regeneration and conservation for environmental protection, and to improve rural livelihoods and incomes of communities living adjacent to the forests. 4. DESCRIPTION OF PROJECT OUTPUTS In order to attain these objectives, the project will implement activities under the following components: i) Natural Forest Conservation, comprising three sub-components: i) Natural forests rehabilitation; ii) Participatory natural forest management; and iii) Restoration of county council hilltops and watersheds. This component is aimed at re-vegetating 11,400 ha of degraded natural forests in gazetted forest reserves; protecting and sustainably managing 48,000 ha of natural forests through community participation, as well as re-vegetating 4,800 ha of county council hilltops and watersheds; and 150 km of forest roads improved. ii) Buffer Belt Watershed Management, comprising three sub-components: i) Reforestation of 500 ha of natural forests in environmentally sensitive areas (ESA); ii) Establishment of 5,000 ha of fuelwood plantations, and iii) consolidation of 1,500 ha of tea buffer belts; 232 km of access roads improved; about 1.6 million m3 of fuel wood and 3,500 tons of tea leaves produced by PY8. iii) Support to Forest Adjacent Communities, including; i) Promotion of woodlot establishment (6,000 ha, involving 7,200 households, (of which 1,944 are female-headed) and 300 schools)); ii) agro-forestry development on 10,800 ha involving 7,200 households, of which 1,944 are female-headed; and iii) household livelihoods/ income enhancement involving over 17,000 households, of which 6,800 (40%) will be represented by women. Benefit models at household levels show an NPV of KSH 208,000 for woodlot establishment and NPV of KSH 405,260 for agro-forestry development, as well an annual net benefit of KSH 146,000 for micro-irrigation and KSH 109,400 for bee keeping; About 2.61 million m3 of fuelwood produced by PY8. iv) Project Coordination and Management, including support to the two implementing agencies – the Forest Department (FD) and the Nyayo Tea Zones Development Corporation (NTZDC).

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5. PROJECT COST The total project cost is estimated at UA 31.51 million of which UA 11.67 million (37%) will be in foreign exchange and UA 19.84 million (63%) will be in local currency. 6. SOURCES OF FINANCE The Bank Group, the Government of Kenya (GOK), and the Communities living adjacent to the natural forests and tea buffer zones, will finance the Project. The ADF loan amounts to UA 25.04 million or 79.5% of total costs. The GOK will contribute UA 4.52 million or 14.4% of total costs towards financing all incremental salaries and allowances. The Communities will contribute UA 1.95 million or 6.1% of total costs, which consists of 20% of the cost of the community initiative activities. 7. PROJECT IMPLEMENTATION The project will be implemented over a 6-year period beginning January, 2006. Project coordination and implementation will be undertaken by the Ministry of Agriculture (through the Nyayo Tea Zones Development Corporation), in consultation with the Ministry of Environment and Natural Resources (through the Forest Department). Actual implementation will take place in 24 districts in four provinces: Central, Eastern, Rift Valley and Western. Field implementation will be undertaken by participating communities and households, with support from service providers, various NGOs/Associations and KEFRI. 8. CONCLUSIONS AND RECOMMENDATIONS Conclusions Forest degradation is a major environmental problem in Kenya, with closed forest cover having rapidly declined from 16% to an estimated 1.7% of the country’s land area. The Strategy for Revitalising Agriculture has set a target of increasing this to 4% in 4 years. Current unsustainable management of Kenya’s natural resource base upon which agriculture depends impinges considerably on food security. While the problem of unsustainable extraction of forest resources can be tackled through a variety of measures, including better policies and sector reforms, investment programmes in the environment and forestry sectors will remain crucial to increasing the vegetative cover of Kenya. Protecting the environment and improving the forest cover under the project will be achieved through a two-pronged approach of natural forest conservation, including protection of watershed in environmentally sensitive areas (ESA), as well as empowering communities living adjacent to the forest to participate as partners through offering of incentives that create alternative employment and resources. In the final analysis, Kenya’s level of vegetative cover will improve, biodiversity will be protected and the water catchments of the country will be secured, not only for today but also for the generation yet unborn. Altogether, the project will be protecting 88,000 ha of forest areas over 6 years. This will increase the current forest cover from 1.7% to 1.9%. These have existence or intrinsic values and immensurable benefits. A positive impact on women will include social and economic empowerment as well as improved household livelihoods.

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To minimize the risk of slow disbursement, separate disbursement lines have been created for each of the two implementing agencies. Provision is also made for the recruitment of an Operations Specialist to assist the GOK in designing an operational manual in the first year for the procurement of goods and services under the support to forest adjacent communities, and for activities involving use of casual labour. The project will also support the engagement of competent External Auditors to ensure transparency and early delivery of annual audit reports. The current Management Information System Unit of the Coordinating Agency (NTZDC) will be further strengthened to enhance its capacity to provide financial information, and project performance assessment and impact data. The project has been designed to empower beneficiary communities and implementing agencies for the assurance of long-term sustainability of forest ecological functions and economic values. The project is in conformity with the Bank Group’s Result-Based CSP for Kenya and the development strategies of the GOK, both of which focus on poverty reduction and sustainable environmental protection. The project is technically feasible, environmentally sound, and socially desirable. The Project Economic Rate of return is estimated to be 13.3%, which is considered satisfactory given that this is a conservation project, with mainly long-term and limited immediate quantifiable benefits. Recommendations It is recommended that an ADF loan not exceeding UA 25.04 million be granted to the Republic of Kenya for the purpose of implementing the Green Zones Development Support Project as described in this report.

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GREEN ZONES DEVELOPMENT SUPPORT PROJECT: RESULT-BASED LOGICAL FRAMEWORK

Hierarchy of Objectives Expected Results Reach (Target

Population) Objectively Verifiable Indicators

Means of Verification

Important Assumptions (which need to be monitored)

Sector Goal 1. To contribute to poverty reduction 2. To improve forest cover for biodiversity and water conservation in Kenya.

1. Proportion of population living in poverty reduced from 56% to 26% by 2010. 2. Closed canopy forest increased from 1.7% to 4% of land area in 4 years. Increased water resources

1. Rural population 2. National population

1. Household income growth rates. Reaches 5% growth rate per annum by 2007 2. Proportion of annual conservation targets achieved (based on qualitative and quantitative assessments). Increase in soil water retention and river flows.

1. PRSP and ERS Progress Reports 2. Annual reports of MENR, MENR, NTZDC and KEFRI.

Objectives (Medium term outcome): To promote forest regeneration and conservation for environmental protection To improve rural livelihoods and incomes of communities living adjacent to the forests.

1. Forest cover in gazetted forests increased by 0.2% by PY6. 2. Income of forest adjacent communities increased from KSH 25,000 to KS 81,000 from PY2

1. Populations around the five ‘water towers’ in the four provinces. 2. 300,000 Households of forest adjacent communities of which 81,000 are female-headed.

1..Percentage achievements in annual conservation and reforestation activity targets 2. Increase in income of participating households from PY2.

1.FD, NTZDC and KEFRI reports 2. Project socio-economic surveys

1. Rainfall remains within normal range 2.Government Departments successfully implement activities detailed in the ERS 3.Implementation of Forest Bill 2005

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Hierarchy of Objectives Expected Results Reach (Target population) Objectively Verifiable Indicators Means of Verification Important Assumptions Outputs (Short term outcome): A1. Natural forest conserved (UA 7.42 million) A2.Participatory forest management developed (UA 2.30 million) A3. County Council Hilltops and Watersheds restored (UA 2.27 million) B1. Natural forest restored in ESA in tea buffer belts (UA 0.70 million) B2. Fuelwood plantations established in tea buffer belts (UA 3.92 million) B3. Tea buffer belt consolidated (UA 4.99 million) C1. Woodlot establishment promoted on farms (UA 2.42 million) C2. Agro-forestry developed (UA 1.80 million) C3. Household income/livelihoods enhanced (UA 3.22 million) D. Project managed effectively and efficiently (UA 2.48 million)

A1.Increase in natural forest cover in the gazetted forest reserves A2. Increased income and environmental benefits, and enhanced community participation in conservation. A3. Improved forest cover in local authority areas B1. Conservation effectiveness of NTZDC buffer belt increased B2. Increased income from buffer belt for adjacent communities B3. Enhanced stability of tea belt ecosystem achieved C1. Increased tree cover in farmlands and schools C2. Increased fruit tree cover in adjacent areas and increased household incomes C3. Increased NTZDC involvement with the adjacent communities leading to higher household incomes D. Enhanced Capacity of Forestry Institutions in forest conservation and management

A1. Gazetted forest in 19 Districts A2. 7,200 households, 1,944 female headed, in 24 Districts A3. 20 Districts B1. 17 NTZDC zones B2. 17 NTZDC zonesB3. NTZDC 17 zones B3. Forest adjacent communities in Tea Zones C1. 6000ha; 7,200 households; 1,944 female headed 90,000 school pupils C2. 10,800ha; 7,200 households; 1944 female headed C3. 17,000 households, 6,800 female headed. D. (Internal goal)

A1. 11,400 ha reforested by PY 6 A2. 48,000 ha forest under community management by PY 6 A3. 4,800ha reforested by PY6 B1. 500ha restored in Districts shown in Appraisal report by PY6 B2. 5,000ha fuelwood plantations established by PY6 B3. 1,500ha tea established to fill gaps in the buffer zone C1. Participating households income increased by NPV over 24 years of KSh 208,000 C2. Participating households income increased by NPV over 24 years of KSh 405,000 C3. Participating household income increased by : Irrigation KSh 146,000 annually from PY5; Beekeeping KSh 109,000 annually from PY5; Fruit trees KSh 19,000 annually by PY5. D. Implementation achievements, cost effectiveness and scheduling

FD reports NTZDC annual reports Socio-economic study, M&E services Quarterly progress reports Project annual reports Mid-term Review Supervision Reports

A. Continued community and FD support. B. NTZDC managed efficiently. Ploughs back own revenues for environmental and community work. D. Effective Community Participation and fairness in selection of participants ensured.

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Hierarchy of Objectives Expected Results Reach (Target population)

Objectively Verifiable Indicators Means of Verification Important Assumptions

A1. Activities: A1.1 Forest roads improvement A1..2 Forest patrol posts rehabilitation A1.3 Fire towers construction A1.4 Capacity building for conservation A1.5 Tree planting and tending operations

A1.1 Improved access for conservation activities A1.2 Reduced forest encroachment A1.3. Reduced forest fires and illegal activities A1.4 FD strengthened to manage forests A1.5 Planting targets achieved

A1.1 50km roads improved annually in PY 1 - PY3 A1.2. 24 Kilometres rehabilitated by PY 2 A1.3. 13 Fire towers built by PY 3 A1.4. 6 MSc courses completed by PY 3, (at least 2 of those trained will be women); Short courses completed as planned, A1.5. 3800 ha planted out in PY 2 and in each year thereafter

Mid-Term Review Project annual reports Quarterly progress reports

Effective functioning of Forest Department Road Maintenance Unit

A2. Activities A2.1 Communities selected A2..2 Community Groups formation A2..3 Preparation of Forest Management plans A2.4 Plans implemented A2..5 Boundary surveys made

A2. Sustainable forest management achieved through participation of local community and incomes from forest products increased

A2. 7,200 households 1,944 female headed participating effectively in forest conservation

A2. 1. 120 communities selected by PY2 A2.2. 3 groups formed in each community by PY 3 A2.3. 120 plans made by PY4 A2.4. Plans covering 48,000 ha implemented by PY6 A2.5 120 boundaries surveyed and mapped by PY6

Mid-Term Review Project annual reports Quarterly progress reports Maps published by FD

Participants fairly and equitably selected. Effective Community Participation

A3. Activities

A3.1 Operational funds made available to FD District Offices

A3.2 Service providers engage community A3.3 Provide Capacity building A3.4 Reforestation undertaken

A.3 Alternative sources of wood to natural forest developed A3. Watershed protection outside of gazetted forest enhanced

A3.1. Funds available in 20 Districts from PY 1 onwards A3.2 Service providers active in 20 Districts by PY3 A3.3 Training courses and study visits for community groups in 20 Districts by PY4 A3.4 Minimum of 800ha planted up from PY 2 onwards

Mid-Term Review A3.1 FD annual reports A3.2 NGO/CBO reports A3.3 NGO/CBO reports A3.4 FD annual reports Quarterly progress reports

District capacity strengthened on procurement and financial management. Early expectation of benefits met through efficient joint coordination between FD and NTZDC

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Hierarchy of Objectives Expected Results Reach (Target population)

Objectively Verifiable Indicators Means of Verification Important Assumptions

B1. Activities B1.1. Nurseries established B1.2 Seedlings purchased from communities B1.3 Planting out and tending B1.4 Impact assessment made

B1. NTZDC restores environmentally sensitive areas in its zone to natural forest

B1.2: 32 local suppliers each year

B1.1: 17 nurseries established by PY1 B1.2: 64,000 seedlings purchased annually from communities from PY 1 to PY5 B1.3: 100ha planted out each year from PY2 to PY6 B1.4: KEFRI report available PY5

Mid-Term Review NTZDC annual reports Quarterly reports Published report

Private nurseries supply sufficient planting material

B2. Activities B2.1 Civil works B2.2 Nurseries established B2.3 Seedlings purchased from farmers B2.4 Woodlots planted up B2.5 Capacity building

B2. Conservation value of buffer belt enhanced while providing alternative fuel wood source to natural forest

B2.3: 300 local suppliers each year B2.5: 4,500 farmers

B2.1: 232km access roads ready by PY3 and 17 Zonal stores built by PY 2 B2.2: 15 nurseries established by PY 1 B2.3: 400,00 seedlings purchased from farmers by PYs 2-6 B2.4:1000ha planted up each year PY 2-6 B2.5: Farmer and staff training completed by PY6

Mid-Term Review NTZDC annual reports Quarterly reports

Private nurseries supply sufficient planting material

B3. Activities B3.1 Tea plantation establishment B3.2 Provide capacity building

B3. Gaps in tea plantations filled for more efficient operations and enhanced conservation value

B3.1: 300ha established each year PY2-6 B3.2: Team building training for 36 zonal managers completed by PY 3; 55 block supervisors trained by PY 5; other training completed as per appraisal

Mid-Term Review NTZDC annual reports

Forest adjacent communities adequately motivated and mobilised

C1. Activities

C1.1 Civil works on resource centres completed

C1.2 Provide consultancy services C1.3 Farmers trained C1.4 Procurement undertaken

C1.1 Adequate community information centre provided C1.2 Enhanced community participation in conservation and enhanced income from trees growing.

C.1. Forest adjacent communities, Schools and other institutions. C.1.2 Consultants, CBOs and other Service Providers

C1.1: 4 resource centres completed by PY3 C1.2: 60mm TA socio-economist PY1-5; 48mm TA marketing expert engaged PY2-5 C1.3: 120 farmer field schools held by PY4; 120 farmers groups trained in forest extension by PY4; 72 study tours organized by PY5 C1.4: High value tree seeds for 1,200 ha procured annually PY1-5

Mid-Term Review Project Annual Reports Quarterly reports

Local Contractors Performance and FD capacity to manage contracts ensured.

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Hierarchy of Objectives Expected Results Reach (Target population)

Objectively Verifiable Indicators Means of Verification Important Assumptions

C2. Activities C2.1 Provide inputs C2.2 Provide specialist services C2.3 Provide capacity building

C2. As for C1 but on an extensive basis not discrete woodlots

C2.2: 300 schools, 250 urban centres, 7,200 households, 1,944 female headed

C2.1: 7,200 nursery water pipes in PY1; 360,000 grafted fruit trees by PY3 C2.2 service providers contracted by PY1; KEFRI provides specialist extension PY1 to PY5 C2.3:576 farmer training sessions by PY5

Mid-Term Review Project Annual reports Quarterly reports

Transparent procurement and fiduciary practices established.

C3. Activities C3.1Civil works completed for micro-irrigation systems and tea collection. C3.2 Inputs provided C3.3 Capacity building undertaken C3.4 Specialist services provided C3.5 Consultancy services provided

C3.1 Enhanced income for Households growing tea and involved in micro-irrigation

C.3.1 Households growing tea and involved in micro irrigation C3.3: 17,000 participants 6,800 female

C3.1: 340 shallow wells constructed by PY4; 20 tea collection centres by PY3 C3.2: Irrigation equipment and specialist equipment for bee keeping etc bought by PY5 C3.3: 272 farmer training courses held by PY5 C3.4: 300 groups supported through specialist services by PY5 C3.5: 72mm community participation expert provided PY1-6

Mid-Term Review Project Annual reports Quarterly reports

Effective Community Participation

D. Activities D.1 Staff trained D.2 Consultancy services provided D.3 Inputs provided D.4 Environmental Impact monitored and mitigation measures implemented

D. Speedy and problem free implementation Annual Environmental audits produced

Project Staff Consultants, CBOs and other Service Providers

D.1 Technical committee meets every 3 months PY1-6; annual reports and audit produced on time for PY1-PY6; regular M&E reporting; Training provided as indicated in appraisal D.2: 36 mm technical officer implementation provided PY1-3; 36mm Rural sociologist PY1-3; 2 forestry consultancies PY4 D.4 Environmental Officer in place; 6 Annual Environmental audits submitted.

Mid-Term Review Project Annual reports Quarterly reports Annual Reports

Kenya Country Office set up; Harmonisation with donor partners ensured. Timely project management at both centre and districts Both implementing agencies adhere to transparent procurement and fiduciary practices No major negative environmental impacts

Critical Inputs: 1.Civil works completed in a timely fashion

1.Procurement follows appraisal report timing

Mid-Term Review Project annual reports

Transparency in procurement ensured

Total Project cost UA 31.51 million

ADF Loan: UA 25.04 million GOK: UA 4.42 million Beneficiaries: UA 1.95 million

Mid-Term Review Quarterly Reports 1. Project annual reports

Flow of Funds assured

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1. INTRODUCTION AND BACKGROUND 1.1 Kenya’s dependence on the natural environment is profound. The environment underpins most sectors, including agriculture and horticulture, tourism, wildlife, and the energy. In some rural areas, for instance, the forest contributes three quarters of the cash income to forest-adjacent households. Eighty percent of all energy comes from wood and rural dependence on wood is almost total. Much of the non-wood energy comes from hydropower stations that are also highly dependent on the environmental functions of forests in the five major water catchments. Closed forest cover (about 1.7% for indigenous forests) is the lowest in East Africa, and water has become a major constraint to agricultural production. 1.2 It is against this background that concerns over management of Kenyan forest resources have occupied a position of some importance. In attempting to stem the decline in environmental resources, the Government, through its Rural Development Strategy, 2001 –2016; Economic Recovery Strategy for Wealth and Employment Creation (ERS); Strategy for Revitalisation of Agriculture, 2004-2014; Forest Policy, 2005; Forest Bill, 2005, that has just been approved by Parliamentary; and statements on the implementation of a Green Revolution in Kenya, has emphasised the need to protect and conserve forests as a base for water, food, wood and nutritional security. It is in this context that the Government of Kenya requested the Bank in September 2004 to revisit its earlier request in July 2002 for support to a forestry conservation project in Kenya. The Nyayo Tea Zones Improvement and Forest Conservation Project (NTZIFCP) that was implemented between 1995 and 2001 provided valuable experience which has been incorporated into the design of this Project. Specifically the need to fully involve the Forest Department (FD) and the communities living adjacent to the natural forests; and to ensure that civil works are undertaken early in the project life. 1.3 In October 2002, the Food and Agriculture Organisation Investment Centre (FAO/IC), on behalf of the GOK and the ADB, prepared the ‘Kenya Forest Conservation Project’ as a result of Government’s request of July 2002. In February 2005, the GOK requested for an acceleration of the processing of the project. The Bank responded by fielding a mission in March 2005 to consider the highlights of the preparation report and review with relevant institutions for technical improvement and response to policy and institutional changes that occurred since 2002 in the Agriculture and Environment sectors, including the Forestry Sub-sector. This report is the outcome of a Bank mission that was in Kenya in May 2005 to appraise the project. The Bank’s appraisal mission was preceded by a stakeholders’ workshop. The stakeholders validated and endorsed the proposed project activities and implementation modality. 1.4 The proposed project is anchored on the Bank’s Agriculture and Rural Development Policy, especially on natural resources management and environmental protection; the Pillar I of the Kenya Result-based Country Strategy Paper (2005 – 2007) which aims at reducing vulnerability and improving equity through agricultural and rural development; the core MDG objectives of poverty alleviation and sustainable development; and the NEPAD’s Comprehensive African Agricultural Development Programme’s Companion Document relating to forestry development. It lends support to the Kenya’s ERS, which aims to restore economic growth, generate employment opportunities, and reduce poverty levels. It will impact directly on beneficiaries through improving the sustainability of farm incomes, accelerating conservation through community participation and capacity building of the concerned institutions in forestry policy formulation, planning and management. The choice of forest conservation as an area of intervention is in line with the ADF X strategy on selectivity. Thus the project is consistent with previous Bank’s support in conservation for the successful NTZIFCP, and will reinforce recent Bank-financed intervention, such as the Ewaso N’jiro North Natural Resources Conservation Project, which includes catchments conservation in some upland and ASAL areas. The Bank subscribes to the donor harmonisation

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principles, which will include joint programming through joint assistance strategies, use of common implementation arrangements, move towards MDBs procurement harmonisation procedures, and a move towards sectorwide approaches. This project has been designed with these principles in view.

2. THE AGRICULTURE SECTOR

2.1 Structure and Performance 2.1.1 Agriculture is the dominant activity in the rural economy, and providing household incomes to 75% of the population. The sector has been the basis for much of the country’s economic growth, export earnings and employment generation, in addition to the fact that it is also the source of food security and a stimulant to the growth of off-farm employment. What is significant, however, is the fact that agriculture’s overall contribution to Gross Domestic Production (GDP), although higher than other sectors has declined from about 37% in the early 1970s to 25% in 2004. While the sector grew in the first two decades after independence at an impressive 5-6% per annum, it began to slow from the early 1980s. Between 1980 and 1990, the growth rate declined to about 3.5% per annum, and between 1990 and 2000, it further declined to below 1% per annum. Sector growth rate in 2003 was however estimated at 1.3%, showing an improvement over 2002 that was estimated at 0.8%. It has also been estimated that Kenya’s agricultural sector has a large growth multiplier estimated at 1.64, as compared to the non-agricultural sector growth multiplier of approximately 1.23. Given the above, agriculture is the most important sector in the economy and its favourable performance is critical for Kenya’s overall development. 2.1.2 Kenya’s agriculture can be discussed under three main production zones, the high rainfall zone occupies less than 20% of the productive land but has 50% of the country’s population. It is dominated by smallholder mixed farming with food crops including maize, rice, sorghum, potatoes, cassava, beans, vegetables; tea and coffee are the main cash crops. Forestry is important not only for environment but also for the supply of construction timber and fuelwood for on-farm use and food processing. The natural vegetation of dense forest has been replaced everywhere except for the gazetted forests, demand for wood products is high leading to steady depletion of the remaining trees on farm land. Livestock is also an important component of the agricultural sector that is characterised by cattle and small stock, including sheep and goats, that are kept at low density in the sparsely populated Arid and Semi-arid Lands (ASALs). Population pressure has led to significant outward migration from the high rainfall zone to the medium rainfall zone where cattle and other livestock are kept and drought tolerant crops are grown. While subsistence crops account for more than half of the agricultural output, tea and coffee remain important export commodities, although coffee production and exports have declined dramatically in recent times. At the same time, production of non-traditional exports such as fresh fruit, vegetables and flowers have increased significantly. 2.1.3 Women are key to agricultural production in Kenya. They contribute up to 80% of all labour in food production and 50% in cash crop production: while receiving only 7% of agricultural extension information. In addition to labour contribution, women are increasingly becoming farm managers and heads of farm households, with estimates that over 40% of all smallholder farms are managed by women. On most farms in villages in Kenya, women provide over 80% of labor directly in food production in addition to fuel- wood collection, pole-wood for construction, fetching of water for domestic use, cooking and feeding of the family, and treatment of common rural ailments.

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2.2 Land Use and Land Tenure 2.2.1 The shortage of high-quality arable land and the rapidly increasing population are two factors threatening natural resource conservation and constraining the future development of the agricultural sector in Kenya. Only about 16% of Kenya’s land mass of 576,000 km2 is considered to be high and medium potential land favourable to agricultural development, the rest is classified as arid and semi-arid lands (ASALs). Crop and grazing lands occupy 31 and 30% respectively of the high and medium potential land, game parks (12%) and urban areas, homesteads and infrastructure covering the rest. Indigenous high forest area is now less than 2% of country land area. 2.2.2 Three systems of land tenure are found in Kenya, namely: (i) individual (freehold), (ii) public and (iii) communal (customary). Individual title confers security of tenure by registering the absolute rights of ownership to the holders after adjudication, encourage investment on land, make farmers more credit worthy, create land market, minimize land disputes, and promote intensification of agriculture. The public tenure system applies to land owned by the government or associated statutory bodies. Under this tenure system, the right to control, apportion and use of such land is vested with the state, who may confer right of occupation and use for a given period, usually 99 years, and is generally subject to conditions of use and of payment of rent. Communal land tenure is found mainly in the ASALs. This is land held in trust by the respective county councils for different ethnic groups. Trust lands are governed by customary law, which does not provide for subdivision of land among individuals of the user communities or alienation and transfer for individualised use. Women in Kenya own 1% of the registered land, yet they form 75% of the agricultural labour force. Given the patriarchal nature of Kenyan society, and the adherence to customary law in which land is communally owned but the right to use it is passed on through the male line, women’s access to and control of land is rather limited. 2.2.3 With over 85% of the population living in rural areas and depending directly or indirectly on land-based employment, the resultant high population density per km2 of agricultural land has thus put pressure on arable land. The escalating land pressures have consequently resulted in progressive subdivision of smallholdings and large group-owned farms, thereby increasing landlessness and migration into marginal areas. In addition, inheritance laws also tend to divide the already small non-viable pieces of land into smaller and less viable pieces of land for each beneficiary of the family. The shortage of high-quality arable land and the rapidly increasing population are thus the major constraining factors affecting the future development of the agricultural sector in Kenya. However, most of the conservation activities of the proposed project will be undertaken in gazetted public land where tenure problems will not impact negatively on achieving the project objectives.

2.3 Sector Development Constraints, Policies and Strategies

2.3.1 Constraints: Agricultural growth has been well below potential, as a consequence of the combination of an unfavourable macro-economic environment, an unfavourable external environment for the major export crops and an inappropriate legal and regulatory framework, in addition to: i) non-availability of quality seeds and inappropriate production technologies, especially for smallholder farming; ii) high cost of farm inputs; iii) poor and inadequate rural infrastructure, especially feeder roads, power supply and market facilities: and iv)poor governance of key supporting institutions such as cooperatives and farmers organisations. In the high rainfall zone rising population density has reduced the size of holdings to uneconomically small units that are cultivated annually under poor soil fertility management regimes. There is thus, a growing soil fertility problem and environmental degradation that are impacting negatively on land, water

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resources and crop yields. As a result, many indicators of rural livelihood have been deteriorating, indicating an increase in rural poverty. 2.3.2 If the agriculture sub-sector is to contribute to national growth and increase rural wealth, it has to grow at about 4-6% per annum. This growth will follow only if a variety of measures are undertaken. These include: building an effective and efficient participatory extension and technology delivery service; undertaking affirmative action by ensuring the participation of women in agriculture; establishing an efficient rural finance and credit supply system for smallholders and rural primary agro-processors; ensuring an investor-friendly institutional and legal framework, implementing sound land use, water and environmental policies; facilitating long-term investments in farm improvements; empowering farmers and improving coordination of investment activities; protecting water catchments and developing forest plantations and rehabilitating natural forests for the supply of essential products and agricultural land protection. 2.3.3 Policies and Strategies: The Government’s strategy to address the above issues has been presented in three documents that provide a road map for the future development of the country. They are: (i) Economic Recovery Strategy for Wealth and Employment Creation (ERS); (ii) the Kenya Rural Development Strategy (KRDS); (iii) the Poverty Reduction Strategy Paper (PRSP); and (iv) the Strategy for Revitalising Agriculture (SRA) 2004 – 2014. 2.3.4 Economic Recovery Strategy for Wealth and Employment Creation (ERS) 2003-2007: The ERS is one of the main current strategies for reviving the economy and creating jobs. The Strategy spells out an ambitious goal in next five years to: i) create 500 000 jobs annually; ii) reduce poverty level by at least 5% from the current 56.8% level; iii) raise GDP growth rate from 1.1% per annum in 2002 to 7% in 2006; and iv) contain the annual inflation rate to below 5%. The Strategy, covering the time span 2003-2007, takes into account existing government policy documents, particularly the PRSP issued in 2001. In order to improve the monitoring of the ERS a result-based logical framework matrix, which is consistent with the strategies and priorities of the ERS and the PRSP has been developed. Investment in Agriculture and Rural Development, including Forestry and infrastructure has been highlighted in the ERS, as a priority development need. 2.3.5 Poverty Reduction Strategy Paper (PRSP) 2001. The PRSP was formulated after an extensive process of stakeholder participation at the district and community levels. The Kenya PRSP aims at the twin objectives of poverty reduction and economic growth and has the following five basic policy objectives: i) facilitating sustained and rapid economic growth; ii) improving governance and security; iii) increasing the ability of the poor to raise their incomes; iv) improving the quality of life of the poor; and v) improving equity and participation. The PRSP also outlines a list of immediate priorities in governance, through measures that include increasing transparency of procurement, accounting and audit procedures; raising the income opportunities of the poor through measures that include promoting rural non-farm employment. Detailed sector goals and priorities, including those of agriculture and Environment are outlined in the PRSP. 2.3.6 Kenya Rural Development Strategy (KRDS) 2001-2016. The principal objective of KRDS is to establish a road map to: promote equitable growth; expand farm and non-farm income earnings to attain food security for all; reduce disease and ignorance; achieve sustainable natural resource management; security, good governance, safety and rule of law; and improvement in the rural sector’s physical and social infrastructure. KRDS is to be implemented with the mutual assistance of civil society, local authorities, the private sector, cooperatives and the central Government. The strategy recognises the participation of beneficiary communities with a wide spectrum of stakeholders in project implementation. It also recognises the need to shift some of the burden of project planning and implementation from the civil service to institutions of elected

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representatives (local authorities). This is consistent with the increasing involvement of communities in forest management in Kenya. 2.3.7 Strategy for Revitalising Agriculture (SRA) 2004 - 2014: This strategy paper focuses on resolving the two major challenges facing Kenya, namely, unemployment and poverty, through development of the agricultural sector. The aim is to raise production thereby increasing profits and employment by working on constraints such as infrastructure (mainly roads for market access), trade barriers, taxation and governance of farmers organisations, and at the same time reforming the extension and research services to help farmers diversify and commercialise their enterprises. Coordination of agricultural development with other sectors is stressed, particularly environmental management for sustained development and reduction of the impact of natural disasters like floods and drought that have hit Kenya in recent years. It calls for the development of modalities to ensure active participation of communities in forest management for enhanced rural livelihoods. This has received a wide donor endorsement. 2.3.8 Water Policy: In accordance with the Water Act (2002) the Ministry of Water and Irrigation (MWI) has overall control of water resources. The Ministry has the duty to promote the investigation, conservation and proper use of water resource throughout Kenya and is responsible for policy making. The Water Resources Management Authority (WRMA), Catchment Area Advisory Committees (CAACs) and River Water Users Associations (RWUAs) regulate water use. The RWUAs are associations of water users, comprising riparian landowners and other stakeholders within a sub-basin.

3. THE FORESTRY SUB-SECTOR

3.1 Overview 3.1.1 Kenya’s forest resources cover a total of some 1.24 million ha, which is 1.7% of the country’s land area. It is largely confined to the semi-humid and humid parts of the country and occurs at altitudes of up to 3,000 metres in two main regions. The first of these is the Western Rainforest Region, which has nearly 19,000 ha of forest and includes the Kakamega and Nandi forests. This is a remnant of the East African Equatorial Forest, characterised by a diversity of hardwood species and an average rainfall of about 1,600 mm per annum. The second is the Montane Forest Region in the central highlands, which has 748,500 ha of indigenous forest and 102,800 ha of plantation. Included in the Montane Forest Region are Mt Kenya forests, the Mau forests and the Aberdares/Kikuyu escarpment. They represent an overwhelming portion (over 90%) of Kenya’s gazetted forests. In addition, there are the riverine and coastal forests, including mangrove forests and forests in the arid and semi-arid areas composed mostly of bushland and savannah covering a major part of the country. Of the total area of reserved forest, roughly 65% is indigenous forest, 10% is exotic plantation and one quarter is covered by vegetation other than trees. 3.1.2 The forest areas are important water catchment areas for some of the country’s most important rivers. The Mount Kenya and Aberdares forests protect the headwaters of the Tana, Athi, Ewaso Nyiro and Chania rivers in the eastern and central provinces. To the west, the Kakamega, Nandi and Mount Elgon forests comprise the upper catchments for rivers flowing towards Lake Victoria. The Kataga and Kiptaber forests have importance for rivers flowing to Lake Victoria and Lake Baringo. The Mau, Trans Mara and Olpusimori forests have hydrological importance for several rivers in the Rift Valley, including the Mara, Sondu and Kipsonai.

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3.1.3 Now much depleted in size, the closed canopy forest contains about 30% of Kenya’s total tree resources, the bulk of which resides in the very much larger areas of semi-arid land. The montane forests are, however, of major importance from the point of view of biodiversity, wildlife and hydrology. The forests also provide a wider environmental benefit, as carbon sinks. They protect catchments that supply water for rural and urban populations and for irrigation and power generation. The Mount Kenya and Aberdare forests are especially important in this respect, as they are the main catchment areas for the Tana River, from which most of Kenya’s hydropower is generated. Nairobi, with a population of 3 million entirely depends on the Aberdares for its drinking water. Silting is reducing the capacity of dams. 3.1.4 The depletion of resources over time has been due to both uncontrolled and haphazard logging, as well as to population pressure and agricultural encroachment. Cutting licenses were issued relatively freely in the past. To control earlier forest destruction, the GOK has chosen an extreme option of maintaining a total ban on logging in natural forests. This option has increased the cutting of trees on farms and urban environments. Overexploitation of farm trees will impact negatively on agro-ecosystem stability and crop yields. The promotion of forest regeneration activities nationally in addition to bringing in some new areas under forest protection, is essential if Kenya’s development goals are to be met. The development of Kenya’s ASALs for sustainable agriculture also has to be pursued to lessen the pressure on the high potential lands.

3.2 Poverty, Gender and Health Issues 3.2.1 Kenya ranks as the 22nd poorest country in the world and has the 3rd most skewed distribution of income amongst low-income economies. More than 56% of the population live on less then one US dollar per day. Only 50% of the rural population have access to potable water and in some areas safe water is only available to 20% of the population. In some rural areas, water collection consumes up to 40% of a women's time, averaging from 3 to 5.25 hours daily. The total fertility rate has fallen dramatically over the past 20 years, from an estimated 8.1 to 4.7 children per women between 1976 and 2000. Progress has been made in reducing the HIV prevalence rate among the working age group (15-49) from 14% experienced in 1998 to 6.7% at end-2003, with new infections dropping to around 80,000 each year. However, trends indicate that the annual number of AIDS deaths is still rising steeply and has doubled over the past six years to about 150,000 deaths per year. Since the emergence of HIV/AIDS in 1984 in Kenya, the scourge has had a devastating effect on Kenya economy. Apart from the health problems of AIDS, malaria is also a debilitating ailment. 3.2.2 Women use forests to supplement fuel and food sources from own land e.g. fuel wood (trees planted on farms and other agro-forestry projects are owned by men), nuts and fibres, wild fruits, vegetables, tubers, honey and wild bush meat. Women have extensive knowledge of medicinal plants available in the forest and which cater for most rural healthcare. In the past, before it became illegal to graze in natural forests, this was a popular use. Therefore, women are the key users and beneficiaries of forest products and their conservation is directly linked with their activities and gender roles. The majority of the labour on tea plantations are women, as men tend to easily migrate in search of better income. Women are usually employed as tea-pickers and transporters of back-loads of tea to storage areas. Due to this labour-intensive work, especially during peak seasons, women tend to suffer from exhaustion, skin problems on the hands and feet, as well as back and chest pains related to the heavy load carrying. 3.2.3 The Ministry of Gender, Sports, Culture and Social Services (MGSCSS) has the overall coordination role related to gender issues in the sectors as well as in the national policy framework. The Forestry Department has a gender focal person who is in charge of mainstreaming gender issues into the department’s activities as well as coordinating with the districts on gender sensitive

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planning and reporting. However, the gender focal person needs further support, in terms of training of technical staff and community members, to effectively ensure integration of gender issues at the community level.

3.3 Institutional Framework 3.3.1 Nyayo Tea Zone Development Corporation (NTZDC): The NTZDC is a parastatal of the Ministry of Agriculture. It was first established under the State Corporations Act in 1986 as a special measure to undertake the protection of forest areas and manage tea plantations. In Kenya’s Government Gazette Supplement No. 15 of 8 March 2002 (State Corporations Act, Cap 446), NTZDC’s mandate was further expanded to manage some forests in tea and fuelwood growing zones in consultation with the Chief Conservator of Forests. NTZDC thus supports the efforts of the Forest Department (FD). This arrangement reflects an assessment that the FD alone cannot protect the diminishing forest resources of Kenya. The NTZDC approach involved the creation of buffers, approximately 100 m wide, around ecologically sensitive major forest areas by the planting of tea and trees. The corporation maintains a tea/forest corridor of about 19,000 ha. A Memorandum of Understanding (MOU) was signed between NTZDC and the FD in 1999 in order to enhance the collaboration of the two agencies. GOK policy is to disengage parastatals from processing and marketing agricultural produce, but there are no plans at the moment to privatise NTZDC with its essentially environmental protection role. All of the land managed by NTZDC is inside the gazetted forest reserve and as such will remain under conservation management even if NTZDC were to be dissolved. NTZDC successfully implemented a Bank financed project between 1992 and 2001 that was aimed at protecting Kenya’s forest reserves from encroachment through the establishment of forest plantations and tea belts as physical buffers to natural forests. The project components included forest conservation and tea improvement measures. Thus the corporation has sufficient capacity to execute and manage similar projects. 3.3.2 The Forestry Department (FD): The FD is part of the Ministry of Environment and Natural Resources (MENR). Established in early 1901, it is responsible for policy-making and programme development for the entire sub-sector. Its mandate includes managing all the gazetted forest reserves and the promotion of forestry and agro-forestry. In addition to protection of forests, it provides seedlings to farmers, schools and other institutions interested in the plantation development and contributing to the national reforestation effort. It is structured in three major Divisions under a Deputy Chief Conservator of Forests (CCF), covering Planning and Development, Management and Conservation and Forest Extension and Planning. District forest offices further support the structure, and district forest officers are responsible for all technical functions. The overall staff numbers are now at about 6 200, much reduced by retrenchment from its size before 1997, when it stood at about 20,000. 3.3.3 Historically, the FD has been the principal agency of Government involved in the protection and coordinated extraction of forest resources. As such, it has also been involved in the implementation of a number of donor-assisted projects such as the JICA Social Forestry Project and the EU Farm Forestry and Forest Conservation Projects. It has the technical staff and the capability to provide the required support for the protection and development of the forestry sub-sector of the country. Over time, however, the combined impact of shrinking budgetary resources and, more importantly, the substantial reduction of external assistance has had a debilitating impact on both its ability and morale. FD was already responding to the new forest policy in anticipation of the recently approved Forest Bill (August 2005), by supporting community-based initiatives in sustainable forest management. Thus the FD has some experience in managing donor-funded pilot projects.

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3.3.4 Kenya Forestry Research Institute (KEFRI): KEFRI is a public research institute under the Ministry of Environment and Natural Resources entrusted with forestry research. In the past, the institute has carried out research that enabled the country to introduce fast growing exotic tree species. During recent years, the institute has diversified its activities into research covering farm forestry, natural forests, dryland forestry and forest plantations. KEFRI activities have outreach components that benefit the forest development arms of Government. GOK is the main sponsor of KEFRI. A few donors (JICA, FRG, EU, Belgium) have also assisted in the development of research infrastructure in the institute. KEFRI assists development programmes through its six national research centres, five regional centres and five sub-centres. The location of these centres is based on agro-climatic consideration and the forest development programme. KEFRI has about 100 university graduate scientists and 900 support staff. It collaborates with other Ministries, Departments, and Non-Governmental Organization (NGO) and has special relations with the FD. KEFRI is the only national research institute in forestry in Kenya with extensive experience in on-farm applications. 3.3.5 Kenya Wildlife Service (KWS): The KWS is responsible for the management of forests within national parks, nature reserves and game sanctuaries. The KWS works with the FD in the preservation of some forests. A memorandum of understanding (MOU) between the two agencies for the joint management of the Mount Kenya areas has been agreed upon. A distinctive feature of the joint approach is the direct and active participation of the people in the area. The park patrol activities of KWS have been very beneficial to the protection of forest outside national parks. 3.3.6 The National Environment Management Authority (NEMA): The Environmental Management and Co-ordination Act 1999, which came into force in January 2000 established two administrative instruments to manage the environment in a holistic manner. The National Environmental Council has the responsibility of formulating policies, setting the framework for coordination among the stakeholders. Whilst, the National Environment Management Authority, which was established in 2002, supervises and coordinates overall matters related to the environment and is the principle overseer of implementation of all policies related to the environment. NEMA also functions as the Clearing House for the Convention on Biological Diversity. It acts as the central coordinating hub and facilitates the access to data and information by all stakeholders. The EU and USAID are currently providing some capacity building support to NEMA. 3.3.7 Other Public Sector Institutions: The International Centre for Research in Agro-forestry (ICRAF) implements some local programmes through the National Steering Committee for Agro-forestry with KEFRI and the Kenya Agro-Forestry Research Institute (KARI). Further, one of the other major institutions involved in Kenya’s agriculture and forestry is the Permanent Presidential Commission on Soil Conservation and Afforestation, which is mandated to promote, oversee and coordinate all soil conservation and afforestation programmes throughout Kenya, providing maps and soil analysis services. 3.3.8 Non-Governmental Organizations (NGOs): A number of NGOs have been involved in forestry issues, particularly in discussions leading to the drafting of the Forestry Bill pending before Parliament. The Kenya Forests Working Group is a sub-committee of the East African Wildlife Society that has a wide membership drawn from government, academic and NGO circles. Similarly the Forest Action Network (FAN), a networking organisation linking people and organisations, has been involved in forestry, water catchments management and related aspects of natural resource management. It has established links with over 2,500 individuals and organisations, and has been working in collaboration with NGOs, government departments, community-based organisations (CBOs), research and training institutions, inter-governmental institutions and the private sector, to build a consensus in policy formulation, planning and management of natural resources.

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3.4 Forestry Development Constraints, Policies and Strategies 3.4.1 Development Constraints: The current problems of forest conservation and management in Kenya include, the lack of budgetary resources, poor infrastructure such as access roads, illegal exploitation; political instabilities in neighbouring countries that cause influx of refugees in woodlands; the poor participation of the communities and the private sector in the development of the resource and weak forestry institutions, including extension, and the shortage of on-farm technologies. While the problem of unsustainable extraction of forest resources can be tackled through a variety of measures including better policies and sector reforms, investment programmes in the environment and forestry sectors will remain major to increasing the vegetative cover of Kenya and biodiversity protection. 3.4.2 Policies and Strategies: The Forest Policy Sessional Paper No. 9 of 2005 is intended to replace the former forest policy that dates from 1968. The new policy defines seven policy objectives that aim to: i) increase Kenya’s forest and tree cover; ii) conserve biodiversity; iii) contribute to sustainable land use; iv) contribute to poverty alleviation; v) manage forest resources efficiently; vi) maximise the benefits of forest-based industry; and vii) reflect international environmental and forest-related conventions and principles. The key features of the policy are: i) the restructuring of the FD into an autonomous body, the main functions of which will be regulation, the management of natural forest and provision of extension services; ii) the privatisation of industrial plantation management; iii) a stipulation that all gazetted indigenous forest shall remain reserved; iv) an emphasis on sustainable forest management which recognises people’s needs; v) the according of priority to subsistence needs, especially those for domestic fuelwood, shelter and fodder; vi) an emphasis on the sustainable production and efficient use of fuelwood; vii) an emphasis on farm forestry in the high potential areas of the country, which include a wider use of indigenous species in industrial plantations; and viii) innovative forms of indigenous forest management involving local communities’ participation; and ix) an emphasis on non-extractive uses of natural forest. 3.4.3 Forest Law: The Forest Bill (2005), which will translate the policy into law, was passed in August 2005 by the Kenyan Parliament. The bill provides for the transformation of FD to a Kenya Forest Service, a corporate body with more powers and mandate. The objective is to make the present FD stronger for undertaking policy, regulatory and extension functions, and the management of indigenous forest in the state forests. In its present form, the bill makes de-gazetting and excisions of forest lands considerably more difficult than is the case at present, as parliamentary approval is required for any changes to forest boundaries. Forest conservation committees are to be created at local level. A key element of the bill is the provision for the participation of forest communities, which are defined as being traditional forest users (for livelihood, cultural or religious purposes) living within 5 km of the forest. The bill also requires that, to be recognised, a user group or community should be registered as a “forest association”. On the recommendation of the local conservation committees, the Forest Service can enter into agreements with registered associations for the joint management of the forest. Passage of the Bill is important for the long-term sustainability of conservation interventions. 3.4.4 Labour Management Practices in Forest Conservation: Forest conservation activities, including tree nurseries management, plantation establishment, forest stands tending and protection are generally labour intensive. In Kenya, conservation labour is managed at district levels by District Forest Officers (DFOs). The procedure involves the engagement of men and women that are willing to work for forestry from the forest adjacent communities on casual basis. Service periods are usually short (1- 6 months) for operations such as land clearing, tree planting and forest roads maintenance. However, those engaged in nursery operations, usually 80% women, work for

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years as they become skilled in managing seed germination, seedlings transplanting in beds, and the grafting of fruit trees through training. 3.4.5 Forest labour is usually managed in districts at four levels: i) district level, by the DFO; ii) forest units, by Forest Superintendents; iii) operations levels (such as planting and nursery management), by Field Attendants; and iv) activity levels (such as polypots filling and seedlings transportation), by Headmen, who are also part of the engaged labour. In addition to this supervisory arrangement, daily time sheets are kept at the levels of the field attendants who are responsible for generating the basic data for monthly or daily payments. Also in use for labour performance monitoring and management are labour output guides that have been derived from long time studies of productivity. For example, forest conservation tasks such as pot filling, weeding and planting have guides on daily outputs. Labour payment, usually on the field, is the responsibility of the district account officers of projects. Past and ongoing forestry projects in Kenya such as the Bank supported Forest Conservation Project, between 1992 and 2001 and the JICA funded Intensified Social Forestry Project (ISFP), have used the current labour management practices in Kenya effectively. Process monitoring includes work plan preparation and budgets for forest units, and sporadic work supervision by monitoring officers.

3.5 Donor Interventions and Lessons Learnt 3.5.1 Most of the ongoing donor assistance in forestry is small in nature with financial allocation usually less than Euro 5 million. Current support in the sector includes: i) JICA (about US $ 2.48 million) for Social Forestry Intensification in the ASALs; ii) Belgium (Euro 4.27 million) for forest conservation activities in Ngare Ndare forests; iii) EU (Euro 4.36 million) for two activities involving farm forestry and forest conservation in the Arabuko-Sokeke-Goshi; and iii) USAID (US $3.5 million) for a number of activities aimed at rangeland rehabilitation in various locations. Other donors currently supporting pilot activities include the UNDP and the IUCIN. The UNDP is also proposing a project to support GOK’s efforts at reducing illegal timber exploitation. The JICA funded Intensified Social Forestry Project (ISFP) in Kenya has developed a ‘Group Farmer Field School Approach’ which has been considered as a success story. These interventions have shown that the community-based approach has worked well even without passage of the Forestry Bill. Finland is initiating activities to support institutional reforms, participatory forest resources management, and forest inventory in some ecological zones. The World Bank is also planning to provide some support for the development of lease arrangement for the commercialisation of some forest plantations. The FAO has been involved in capacity building in the sector and also plans to support the development of participatory forest management. 3.5.2 The Bank supported a conservation project, Nyayo Tea Zones Development and Forest Conservation Project, between 1992 and 2001 (UA 15.11 million) that was satisfactorily implemented. The project activities have been relatively sustained by the executing agency. However, the project only covered certain areas in the tea buffer belt. The Project conservation activities established about 2,000 ha of forest. This has helped to improve national forest cover and was instrumental in the re-emergence of dried-up rivers and streams. The Bank in April 2005 also approved the Ewaso N’giro North Natural Resources Conservation Project (UA 16.5 million), which includes participatory water catchments conservation in some upland and ASAL areas. Box (a) presents the matrix of current and planned donor support to the sub-sector.

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Box (a): Matrix of Current and Planned Donor Support in the Sub-sector Donor Natural

Forest Conservation

Social & Farm Forestry

Industry & Plantations

Policy & Legislation

Resource Survey & Planning

Research & Forestry Education

ADB X X X Belgium X DFID X EU X X X X IUCN X X JICA X X FAO X X FINNLAND X X X DANIDA X GTZ X X IFAD X USAID X X X X World Bank X X UNDP X X X

3.5.3 The general understanding among donors is that country investment requirement in natural resources conservation is huge. A sector-wide investment approach in which donors can create niches is thus envisaged in responding to national needs. Currently, identified areas for support include: i) Natural forest conservation; ii) Social Forestry (farm forestry and agro-forestry); iii) Capacity building for project implementation, research and education; iv) Policy and Legislation; v) Resource Survey and Planning; and vi) Forest Industrial Development including plantations and wood-based industries. Each donor is expected to identify a niche within this general framework. The ongoing and the proposed Bank interventions focus on national capacity building for natural forest conservation, and farm income enhancement through farm forestry and agro-forestry. This project is particularly designed to create a more favourable path for the entry of other donors. 3.5.4 Lessons Learnt: In terms of technical design, experience from the above operations has shown that participatory processes, including support for communities living adjacent to the natural forests, are important to achieving success in natural resources management interventions. The implementation of the concept of the establishment of buffer belts around sensitive natural forest areas to halt gradual encroachment and regenerate river flows, as implemented under the Bank-financed Nyayo Tea Zones Improvement and Forest Conservation Project (NTZIFCP) was innovative and effective. In general, past and current interventions have been aimed at addressing issues related to food security and poverty reduction through sustainable forest management in collaboration with forest adjacent communities. Efforts are also placed on development of appropriate policies and legislations that could enhance community and private sector participation in forest resources management. In addition, programmes are increasingly focussing on: i) diversifying income sources of forest adjacent communities; improving community social and economic infrastructure; iii) building capacities at all levels of project implementation; iv) development of extension for enhanced inputs and technical services delivery; v) women empowerment; and vi) decentralisation of project implementation in support of GOK’s goal of improving governance and community participation. It has also become evident that the efforts required to conserve Kenya’s declining forest cover is so huge that no single donor can finance alone. 3.5.5 It is recognised that past donor operations, including those of the Bank, made very little impacts on the ground. For the Bank projects, performance was hindered by the limited country knowledge of Bank procurement and disbursement procedures. The past Bank operations also

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suffered from: i) GOK delays in fulfilling the conditions precedent to first disbursement; ii) inadequate accounting procedures which led to the intermittent suspension of disbursements for some projects; iii) long delays in resolving audit issues; and iv) inadequate counterpart funding. However, as a result of past experience, the GOK has removed the major causes of disbursement delays. For example, Bank approved projects no longer go to GOK Parliament for ratification. Project Units are also now empowered to open accounts in Commercial Banks acceptable to the Fund at Headquarters and in districts. The speed at which the Bank-financed ASAL-based Livestock Development and Rural Livelihoods Support Project became disbursement effective shows the tremendous improvements in these areas. This commitment must be built upon. From the Bank side, country capacity building is being strengthened through in-country procurement training. The Bank is also devolving power to its Country Offices in the areas of procurement and disbursement management. This is expected to be a great help in the implementation of Bank projects. 4. THE PROJECT 4.1 Concept and Rationale 4.1.1 The protection and restoration of the natural forest in the gazetted forest reserves, the ‘water towers’ of Kenya is essential for the well being of the Nation. Environmental degradation is already impacting negatively on agricultural soils, rural water supply sources, and plant and animal diversity that are important for sustaining life and the tourism industry of Kenya. 4.1.2 In the past, the Government has been perceived as weak on forest protection. The new Forest Bill innovatively aims to redress the situation by involving the local communities and allowing them to benefit from non-destructive use of the forests. Experience has shown that no amount of policing can protect the forest if the community is not behind it. Once the benefit to the community of the forest exceeds that of alternative uses they will be active in conservation. This project will play an important role in initiating the envisaged improvement needed in forest management as stipulated in the bill. 4.1.3 Building on the successes of the NTZIFCP in establishing buffer zones around the gazetted forest, the Project will extend conservation to areas within the forest both by physical restoration of the natural forest and by promoting participatory management and benefit sharing by local communities. Within and adjacent to the buffer zones the Project will promote benefit sharing for sustainability of the buffer belt approach. Part of this is to increase incomes from non-wood forest products by introducing improved technologies and marketing. Women form a majority of the beneficiary community and Project design pays particular attention to their inclusion. 4.1.4 There are still some gaps in the buffer belt in critical areas, to halt further encroachment these gaps will be filled by consolidation with tea and fuelwood plantations. The gazetted forest, although an important part of the water catchment area is limited in area. The Project will extend the tree based conservation work beyond the gazetted forest and into settled areas, working with farmers on agro-forestry and private fuelwood plantations for income, conservation, and to reduce the pressure on the forest for wood products. 4.1.5 Local authorities control areas of vulnerable hilltops and steep lands outside of the gazetted forest. In the past, little has been done to conserve or rehabilitate these areas. As part of the outreach into the community the Project will work with County Councils on these areas. Schools, and other public institutions will also be included in tree promotion activities.

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4.1.6 The lessons of experience discussed in para 3.5.5 have been taken into consideration in the design of the project. The use of two implementation agencies, namely FD and NTZDC poses a challenge to the administrative aspects of implementation but also offers real opportunities for capitalising on the comparative advantages of each of the two institutions. Since both work for the conservation of gazetted forests, developing a close working relationship between them and other agencies such as KEFRI is a secondary goal of the project. FD possesses in-depth technical ability that can be combined with the less bureaucratic procedures of a parastatal organisation, such as NTZDC, for effective project implementation. NTZDC possesses experience in procurement and disbursement relating to Bank financed activities. The Project steering and technical committees will assure coordination and collaboration in implementation.

4.1.7 The project components have been chosen carefully in order to extend the benefits as widely as possible, particularly income generation for forest adjacent communities, whilst not loosing the conservation focus. In the interest of sustainability, the Project will make use of the existing staff of FD supplemented by limited use of consultants. Community activities will be facilitated by existing local NGOs and CBOs and other service providers. In some cases, local farmers will be contracted to provide goods and services such as seedlings and conservation work. They will receive capacity building to enable them to provide these services. Thus, some project resources will be invested in the local community. This approach is in line with Bank’s policy on poverty reduction. The involvement of KEFRI in on-farm demonstration is considered necessary for choice of appropriate technologies and tree species, including controlled planting of eucalyptus in drier areas except for use as fuelwood.

4.2 Project Area and Beneficiaries 4.2.1 The project will be implemented in the following four (4) provinces; Central, Eastern, Rift Valley and Western, essentially addressing protection of Kenya’s water towers facing rapid degradation. The project area comprises nearly 7,000 km2 in and around the margins of 21-gazetted forests in the highland areas of the country, and is located in 24 districts with a population of about 300,000 households, of which at least 81,000 (27%) are female-headed. Within this, two specific jurisdictional sub-project areas are identified. The first relates to the existing tea buffer zone plantation area, nominally a strip of 100 m width, and the adjacent and contiguous community area, where communities are within walking distance of about five kilometres. This would comprise the project area under the coordination of the NTZDC. The Corporation’s existing operating area comprises nearly 19,000 ha along the periphery of the forests at those sections vulnerable to encroachment. Some 25% of this plantation area has already been developed with tea and fuelwood, and it is planned to expand this further mainly by the establishment of fuelwood plantations. The associated adjacent community area is estimated at about 6,250 km2, assuming a nominal width of 5 km. The second covers the rest of the gazetted natural forest under the jurisdiction of the FD. 4.2.2 The project area occupies the Afro-Alpine and Equatorial ecological zones, with a climate influenced by altitude, ranging from humid to dry humid, and to temperate at higher elevations. There is a wide range in temperatures depending on the region, ranging from daily minimums of 10-18ºC in dry to 22-34ºC in wet season. The rainfall is bimodal with annual averages, which also vary widely from about 1,000 mm in Trans Nzoia district in the west of Rift Valley province, to around 2,700 mm in Murang’a district of Central province. The upland soils are generally red in colour, and volcanic in origin with deep and well-drained profile