Document of
The World Bank
Report No: ICR00002957
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(IDA-42750, IDA-H2810)
ON A
Grant
IN THE AMOUNT OF SDR 2.8 MILLION
(US$4.2 MILLION EQUIVALENT)
AND A
CREDIT
IN THE AMOUNT OF SDR 2.6 MILLION
(US$3.9 MILLION EQUIVALENT)
TO THE
KINGDOM OF LESOTHO
FOR A
PRIVATE SECTOR COMPETITIVENESS AND ECONOMIC DIVERSIFICATION
PROJECT
December 17, 2013
Finance and Private Sector Development Unit
Country Management Unit for Southern AFR 1
Africa Region
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CURRENCY EQUIVALENTS
(Exchange Rate Effective December 17, 2013)
Currency Unit = Lesotho Maloti (LSL)
LSL 1.00 = US$ 0.10
US$ 1.00 = LSL 10.33
FISCAL YEAR
April 1 – March 31
ABBREVIATIONS AND ACRONYMS
AFR Africa Region
AGOA Africa Growth and Opportunity Act
BCL Business Counsel of Lesotho
BDS Business Development Services
CAADP Comprehensive Africa Agriculture Development Program
CAS Country Assistance Strategy
EDF Enterprise Development Facility
EIA Environmental Impact Assessment
ERR Economic Rate of Return
ESMF Environmental and Social Management Framework
EU European Union
FDI Foreign Direct Investment
GDP Gross Domestic Product
GISDC Garment Industry Skills Development Center
GOL Government of Lesotho
ICR Implementation Completion and Results Report
IDA International Development Association
IRIN Integrated Regional Information Networks
LBC Lesotho Business Council
LCT Lesotho Council of Tourism
LEAP Lesotho Enterprise Assistance Program
LHHA Lesotho Hotels and Hospitality Association
LHWP Lesotho Highlands Water Project
LIMS Lesotho Immigration Management System
LNDC Lesotho National Development Corporation
LTDC Lesotho Tourism Development Corporation
MAFS Ministry of Agriculture and Food Security
MCC Millennium Challenge Corporation
MHAPS Ministry of Home Affairs and Public Safety
MIP Minimum Infrastructure Platform
MOF Ministry of Finance
MOHAPSPA Ministry of Home Affairs, Public Safety & Parliamentary Affairs
MSME Micro, Small and Medium Sized Enterprise
MTEC Ministry of Tourism Environment and Culture
MTICM Ministry of Technology, Industry, Cooperatives and Marketing
NICS National ID Card System
NPV Net Present Value
OBFC One-Stop Business Facilitation Center
PAD Project Appraisal Document
PCG Partial Credit Guarantee
PHRD Japan Policy and Human Resources Development Fund
PMU Project Management Unit
PPP Public-Private Partnership
PPSC Public-Private Steering Committee
PRC Project Review Committee
PRS Poverty Reduction Strategy
PSC Project Steering Committee
PSFL Private Sector Foundation of Lesotho
SNP Sehlabathebe National Park
TOAL Tour Operators Association of Lesotho
UNESCO United Nations Educational, Scientific and Cultural Organization
WHL World Hotel Link
Vice President: Makhatar Diop
Country Director: Asad Alam
Sector Manager: Irina Astrakhan
Project Team Leader: Smita Kuriakose
ICR Team Leader: Xiaofeng Hua
KINGDOM OF LESOTHO
Private Sector Competitiveness and Economic Diversification Project
CONTENTS
Data Sheet………………………………………………………………………………………….i
A. Basic Information…………………………………………………………………………..i
B. Key Dates…………………………………………………………………………………..i
C. Ratings Summary…………………………………………………………………………..i
D. Sector and Theme Codes…………………………………………………………………..ii
E. Bank Staff………………………………………………………………………………….ii
F. Results Framework Analysis……………………………………………………………...iii
G. Ratings of Project Performance in ISRs………………………………………………….vi
H. Restructuring……………………………………………………………………………..vii
I. Disbursement Graph……………………………………………………………………...vii
1. Project Context, Development Objectives and Design ............................................... 1
2. Key Factors Affecting Implementation and Outcomes .............................................. 8
3. Assessment of Outcomes .......................................................................................... 16
4. Assessment of Risk to Development Outcome ......................................................... 21
5. Assessment of Bank and Borrower Performance ..................................................... 21
6. Lessons Learned ....................................................................................................... 24
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 25
Annex 1. Project Costs and Financing .......................................................................... 27
Annex 2. Outputs by Component ................................................................................. 29
Annex 3. Economic and Financial Analysis ................................................................. 33
Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 34
Annex 5. Beneficiary Survey Results ........................................................................... 36
Annex 6. Stakeholder Workshop Report and Results ................................................... 37
Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 38
Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 42
Annex 9. List of Supporting Documents ...................................................................... 43
MAP ………………………………………………………………………………….44
i
KINGDOM OF LESOTHO
Private Sector Competitiveness and Economic Diversification Project
DATA SHEET
A. Basic Information
Country: Lesotho Project Name:
Private Sector
Competitiveness and
Economic
Diversification
Project ID: P088544 L/C/TF Number(s): IDA-42750,IDA-H2810
ICR Date: 12/09/2013 ICR Type: Core ICR
Lending Instrument: SIL Borrower: KINGDOM OF
LESOTHO
Original Total
Commitment: XDR 5.40M Disbursed Amount: XDR 5.26M
Revised Amount: XDR 5.26M
Environmental Category: B
Implementing Agencies:
Ministry of Agriculture and Food Security
Lesotho National Development Cooperation
Ministry of Trade, Industry, Cooperatives and Marketing
Ministry of Home Affairs and Public Security
Lesotho Tourism Development Council
Cofinanciers and Other External Partners:
B. Key Dates
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 06/23/2005 Effectiveness: 10/05/2007 10/05/2007
Appraisal: 01/18/2007 Restructuring(s): 01/06/2012
03/09/2012
Approval: 03/21/2007 Mid-term Review: 09/01/2010 09/13/2010
Closing: 06/30/2012 06/30/2013
C. Ratings Summary
C.1 Performance Rating by ICR
Outcomes: Moderately Satisfactory
Risk to Development Outcome: Moderate
Bank Performance: Moderately Satisfactory
Borrower Performance: Moderately Satisfactory
ii
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank Ratings Borrower Ratings
Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory
Quality of Supervision: Moderately Satisfactory Implementing
Agency/Agencies: Moderately Satisfactory
Overall Bank
Performance: Moderately Satisfactory
Overall Borrower
Performance: Moderately Satisfactory
C.3 Quality at Entry and Implementation Performance Indicators
Implementation
Performance Indicators
QAG Assessments
(if any) Rating
Potential Problem Project
at any time (Yes/No): No
Quality at Entry
(QEA): None
Problem Project at any
time (Yes/No): Yes
Quality of
Supervision (QSA): None
DO rating before
Closing/Inactive status:
Moderately
Satisfactory
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing)
Central government administration 38 19
Crops 21 23
General industry and trade sector 13 16
Other industry 22 37
Vocational training 6 5
Theme Code (as % of total Bank financing)
Export development and competitiveness 28 23
Micro, Small and Medium Enterprise support 29 11
Other Private Sector Development 29 41
Regulation and competition policy 14 19
E. Bank Staff
Positions At ICR At Approval
Vice President: Makhtar Diop Hartwig Schafer
Country Director: Asad Alam Ritva S. Reinikka
Sector Manager: Irina Astrakhan Demba Ba
Project Team Leader: Smita Kuriakose Agata E. Pawlowska
ICR Team Leader: Xiaofeng Hua
ICR Primary Author: Xiaofeng Hua
iii
F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document)
The key objective of the project is to facilitate increased private sector investment by
improving the business environment and diversifying sources of growth. This goal will
be achieved by reducing the costs of doing business; strengthening the linkages and
integration of the Lesotho economy with the regional economy, especially with South
Africa; strengthening support for technical and business management skills thereby
improving productivity at the firm level, and improving access to finance for MSMEs.
These measures will also support the poverty reduction strategy dialogue and
implementation of agreed upon policy measures.
Revised Project Development Objectives (as approved by original approving authority)
n.a.
(a) PDO Indicator(s)
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target
Values
Actual Value
Achieved at
Completion or
Target Years
Indicator 1: Days required to start up a business
Value
quantitative or
Qualitative)
73 days <34 days <20 days 24 days
Date achieved 12/31/2006 06/30/2012 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target largely achieved
Source (Jun13 data): Bank team ISR (No. 12)
Indicator 2: Number of new jobs created in private sector
Value
quantitative or
Qualitative)
Nil 2,500 new jobs 2,500 new
jobs 3,072
Date achieved 12/31/2006 06/30/2012 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
End-target referred to new jobs created on LNDC premises in textile and garment
industry which might include those created through project interventions
Source (Jun13 data): LNDC data, Dec13
(b) Intermediate Outcome Indicator(s)
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion or
Target Years
Indicator 1: Days required to register a business
Value
(quantitative
or Qualitative)
28 days 1 days 1 days 7 days
Date achieved 12/31/2006 12/31/2010 06/30/2013 06/30/2013
iv
Comments
(incl. %
achievement)
Target not achieved although 75% reduction was made
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
Indicator 2: Days required for obtaining an industrial license
Value
(quantitative
or Qualitative)
35 days <7 days <7 days </= 5 days
Date achieved 12/31/2006 12/31/2010 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
Indicator 3: Trade license abolished and replaced by a notification procedure that takes one
day
Value
(quantitative
or Qualitative)
35-50 days
Trade license
abolished, and
replaced by a
notification
procedure (1 day)
Trade license
abolished, and
replaced by a
notification
procedure that
takes 1 day
15 days
Date achieved 12/31/2006 12/31/2010 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target not achieved although at least 57% reduction was made
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
Indicator 4: Visa issued at 5 pilot ports of entry by mid-term review
Value
(quantitative
or Qualitative)
Nil 5 pilot POEs 5 pilot POEs Nil
Date achieved 12/31/2006 12/31/2010 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target not achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
Indicator 5: Credit guarantee scheme established by mid-term
Value
(quantitative
or Qualitative)
Nil Credit guarantee
scheme established
Credit guarantee
scheme of LNDC
established
Date achieved 12/18/2007 12/31/2010 07/20/2011
Comments
(incl. %
achievement)
Target achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013 and
LNDC 2011 press release
Indicator 6: Leasing regulations in place by mid-term
Value
(quantitative
or Qualitative)
Nil
Leasing regulatory
framework in
place
Leasing
regulations in
place by mid-
term
Leasing regulations
in place
Date achieved 12/31/2006 12/31/2010 06/30/2013 04/25/2013
Comments
(incl. %
achievement)
Target achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013 and
Govt Gazette
Indicator 7: Average task efficiency per operator (no of pieces/worker/day)
v
Value
(quantitative
or Qualitative)
12 pieces 24 pieces
Date achieved 12/31/2006 06/30/2012
Comments
(incl. %
achievement)
Target dropped by Jan12 restructuring
Indicator 8: Average floor rejection/re-work rate
Value
(quantitative
or Qualitative)
30% 15%
Date achieved 12/31/2006 06/30/2012
Comments
(incl. %
achievement)
Target dropped by Jan12 restructuring
Indicator 9: % share of trainees placed from the training center increased
Value
(quantitative
or Qualitative)
Nil 95% 74%
Date achieved 12/31/2007 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target largely achieved
Target added by Jan12 restructuring
Source: PMU/MTICM ex-post project review, July 5, 2013
Indicator 10: Operational PPP model established for the two training centers
Value
(quantitative
or Qualitative)
Nil
Operational
PPP model
established for
the 2 training
centers
Private operator for
the 2 skills
development
centers in operation
Date achieved 12/31/2007 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target achieved
Target added by Jan12 restructuring
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
Indicator 11: Increased exports of horticultural products in pilot areas
Value
(quantitative
or Qualitative)
Nil 30% 30% 57%
Date achieved 12/31/2006 06/30/2012 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
Indicator 12: Improved income retention among farmers participating in the pilots
Value
(quantitative
or Qualitative)
No data 40% 40% 66%
Date achieved 12/31/2006 06/30/2012 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
vi
Indicator 13: Three new tourism concessions
Value
(quantitative
or Qualitative)
Nil
3 new
investments/conce
ssions in tourism
3 new
investments/co
ncessions in
tourism
4 concessions
signed and
operational
Date achieved 12/31/2006 06/30/2011 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013
Indicator 14: Increase in tourists from targeted market
Value
(quantitative
or Qualitative)
260,000 tourists 50% increase in
no. of tourists
50% increase
in no. of
tourists
63%
Date achieved 12/31/2006 06/30/2012 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Target achieved although might not be entirely attributed to project interventions
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013 and
LTDC 2006 annual report
Indicator 15: Supported firms increase their sale/turnover at a rate 10% higher than before
LEAP support
Value
(quantitative
or Qualitative)
Data no available
10% higher than
non-supported
firms
10% higher
than before
LEAP support
56%
Date achieved 12/31/2006 06/30/2012 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Revised target exceeded although might not be entirely attributed to the Project
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013 based
on LEAP report
Indicator 16: Supported chambers or associations increase their membership income at a rate
10% higher than before LEAP support
Value
(quantitative
or Qualitative)
Data not available
10% higher than
non-supported
firms
10% higher
than before
LEAP support
15%
Date achieved 12/31/2006 06/30/2012 06/30/2013 06/30/2013
Comments
(incl. %
achievement)
Revised target achieved
Source (Jun13 data): PMU/MTICM ex-post project review, July 5, 2013 based
on LEAP report
G. Ratings of Project Performance in ISRs
No. Date ISR
Archived DO IP
Actual
Disbursements
(USD millions)
1 11/21/2007 Satisfactory Satisfactory 0.60
2 02/24/2008 Satisfactory Satisfactory 0.60
3 08/25/2008 Satisfactory Satisfactory 0.85
4 09/23/2008 Satisfactory Satisfactory 0.95
5 12/18/2008 Moderately Satisfactory Moderately Satisfactory 1.38
6 05/10/2009 Satisfactory Satisfactory 1.54
7 12/15/2009 Moderately Satisfactory Moderately Satisfactory 2.19
vii
8 06/26/2010 Moderately Satisfactory Moderately Satisfactory 2.86
9 07/13/2011 Moderately Satisfactory Moderately Satisfactory 3.82
10 03/13/2012 Moderately Satisfactory Moderately
Unsatisfactory 4.44
11 11/30/2012 Moderately Satisfactory Moderately Satisfactory 5.81
12 06/26/2013 Moderately Satisfactory Satisfactory 7.74
H. Restructuring (if any)
Restructuring
Date(s)
Board
Approved
PDO Change
ISR Ratings at
Restructuring
Amount
Disbursed at
Restructuring
in USD
millions
Reason for Restructuring &
Key Changes Made DO IP
01/06/2012 MS MS 4.27
Readjustment of project scope
to focus on what was achievable
Reallocation of IDA resources
to reflect re-focused needs
Modification of intermediate
results indicators
Extension of closing date for 12
months
03/09/2012 MS MS 4.44
Correct mathematic errors in
IDA resource allocation of 1st
restructuring to finalize
reallocation of IDA financing
resources
I. Disbursement Profile
1
1. Project Context, Development Objectives and Design
1.1 Context at Appraisal
1. Country context: Lesotho is a small and landlocked country surrounded by
South Africa. The economy registered impressive growth in the first half of the 2000s.
GDP per capita of Lesotho had been in the range of USD400 in the large part of 1990s.
After a decline to the USD300s in 2001 and 2002, GDP per capita grew to USD510 in
2003 and USD736 in 2006.1 However, the economy was heavily dependent on three
main external factors, and was in need of diversification in income sources, exports
markets and job creation. The construction of Lesotho Highlands Water Project (LHWP)
resulted in an unusually large construction sector (23% of GDP).2 While the export of
water and electricity would continue to provide jobs and foreign exchange, the
completion of the LHWP was expected to lead to a contraction of the construction sector.
The second external factor was the employment dependency on South African gold mines
where more than half of the male Basotho workforce worked. When the gold mines
retrenched in 2000 – 2001, remittances from Basotho miners declined to 21 percent of
GDP (as compared to an average 36% in 1987-98), and unemployment rose to 23.2
percent (2002/2003).
2. The third factor was the concentration of foreign direct investment (FDI) in the
textile and garment industry (over 90%), and that of the export market (all went to the
U.S.). The growth of the industry was closely correlated with the changes of the trade
policies of the developed countries.3 There was an influx of FDI in the early 2000s
thanks to the 2000 U.S. Africa Growth and Opportunity Act (AGOA). By 2005 – 2006
the textile industry had become the backbone and the largest employer of the Lesotho
economy. However, when uncertainties emerged about the expiration of AGOA in 2004,
the sector contracted sharply with factory closures and job losses. While the extension of
AGOA for Lesotho to 2012 helped the FDI manufacturing companies to comeback, the
local private sector remained tiny and completely disconnected with the regional supply
chains.
3. Sector issues: Key constraints to private sector competitiveness were found in
the business environment, access to finance, skills and institutional support.
4. Business environment: The deficiencies of the legal and regulatory framework
were high barriers to doing business in Lesotho for domestic and foreign and large and
1 The World Ban Databank: http://data.worldbank.org/indicator/
2 LHWP is a water supply and hydropower scheme which diverts the abundant water from Lesotho to one
of South Africa’s largest industrial provinces. The project was implemented by a partnership between the
governments of Lesotho and South Africa. 3 Lesotho’s textile industry started to emerge when South African companies moved into the country in the
1990s to avoid trade sanctions on South African apparels imposed by the US and European countries.
Taiwanese investments flew in followed by renewed South African capital when the AGOA offered trade
preferences to eligible African countries for quota or duty-free entry of the US market.
2
small investors alike. It took 73 days to open a business in Lesotho (93 days in 2006 by
the 2013 Doing Business methodology). This placed the country at 36th
rank among the
45 SSA countries ranked for this indicator.4 After the cumbersome company registration,
a separate industrial license had to be obtained before a business could start operation and
it took 30 days to obtain the license. If the businessman planned to engage in trade, he
had to obtain another separate license (it took 2-5 weeks). Procedures for routine
applications for visas, work and residence permits, import permits and other basic
business documents were onerous and time consuming (as much as 24 months). Investor
protection was weak due to the outdated legal provisions for business operations, trade
and investments.
5. Access to finance: Nearly half of Lesotho firms reported high cost of financing,
and close to 40% rated access to financing as a major or severe constraint. This could be
attributed at least partially to the failure to protect property rights. Contract enforcement
took an average of 695 days and 58 procedures, which was 100 days more than the sub-
Saharan average. Another cause of the problem was the lack of competition in the tiny
financial sector. There were three commercial banks and all of them were South African
owned. Banks each had their own groups of clients and did not have common clientele
base (e.g. households). Financial intermediation by non-bank financial institutions
accounted for only 11 percent of total financial sector assets. Alternative financing
channels such as leasing did not exist.
6. Skills gap: Labor productivity in Lesotho was similar to Tanzania, Mozambique
and many other countries of the region, but was lower than in the most productive
African countries, such as Kenya, Senegal and South Africa. An important factor of the
gap was the availability of worker training programs and the level of workers education.
Only 28 percent of the companies in Lesotho provided formal training for their
employees, which was lower than in Kenya, Tanzania, Uganda and Zambia. Among
Basotho workers, only about 15 percent had a secondary or greater education, as
compared to over 50 percent in South Africa. Lesotho had the highest rate of HIV/AIDS
(24%) among all IDA countries and one in nine persons aged 15-24 was HIV-infected.
Stopping or slowing down the trend was critical to Lesotho’s productivity and
competitiveness.
7. Institutional support: In developed economies, market institutions such as
trade/business associations play an important supporting role in private sector
development. Trade associations could influence public policy or enhance industry
public image on behalf of their members through lobbying, advertising and publishing.
A main role of those institutions is to ensure collaboration between members and
standardization throughout the industry. Many provide training opportunities. In
Lesotho those institutions were unable to fulfill their basic functions. Many of them were
new and had not yet clearly defined their role. Business development services (BDS)
4 According to the 2013 Doing Business methodology, it took 93 days to start a business in Lesotho in
2005/2006. Among the 45 SSA countries ranked, the least number of days required was 13 days (Burundi)
and the most was 259 days (Guinea-Bissau). The median was 40 days (Burkina Faso and Guinea).
3
were provided mainly by public-sector institutions and were heavily subsidized, which
hindered the development of private sector BDS business. Local firms seldom utilized
BDS services available from the neighboring countries due to a lack of information or
funding.
8. Government strategy: Lesotho became a member of the Integrated Framework
for trade-related assistance for Least Developed Countries in 2002, which recommended
institutional capacity building, regional and multinational integration, business
environment improvements and infrastructure development. The 2006 Poverty
Reduction Strategy (PRS) of the Government of Lesotho (GOL) aimed to (i) achieve
rapid job creation through the establishment of an enabling environment for private sector
led economic growth; (ii) deliver poverty targeted programs to empower the poor and
vulnerable; and (iii) ensure that policies and legal and regulatory framework were
conducive to the implementation of the priorities. There was a consensus among the key
stakeholders of private sector development (public and private sector representatives and
the donor community) on the need to establish a minimum infrastructure platform (MIP)
for increased private sector investments, productivity improvements and economic
diversification. The MIP included business environment, trade and investment
facilitation regulations and institutions, human capital, financial services, and physical
and supporting infrastructure. An action plan to build the MIP was developed and the top
priority was economic diversification into broadly based FDIs, new industrial clusters,
agribusiness, sandstone mining and tourism.
9. Bank strategy: The World Bank’s 2006 Country Assistance Strategy (CAS) was
aligned with the GOL’s strategy and directed the Bank resources to focus on
Employment and income generation; Fighting HIV/AIDS; Human development;
Decentralization and public service delivery; and M&E improvement. The Bank in
collaboration with the GOL developed a private sector development strategy for Lesotho,
which highlighted the following objectives: (i) retain foreign investors beyond the
phasing out of trade privileges and attract more FDI; (ii) diversify FDI away from one
activity (garment industry) and one market (the U.S.); and (iii) integrate the domestic
private sector with the FDI sector and the economy of South Africa.
10. The Project: Guided by the above GOL and Bank strategies, the Bank decided to
support the Ministry of Technology, Industry, Cooperatives and Marketing (MTICM) for
the preparation and implementation of the Lesotho Private Sector Competitiveness and
Economic Diversification (PSCED) project (the Project). The Project was approved by
the Bank Board in March 2007 and became effective about seven months later.
1.2 Original Project Development Objectives (PDO) and Key Indicators (as
approved)
11. The original PDO as presented in the Project Appraisal Documents (PAD)5 is as
follows:
5 The World Bank: Project Appraisal Document (Report No: 37756-LS), February 26, 2007.
4
“The key objective of the project is to facilitate increased private sector
investment by improving the business environment and diversifying sources of
growth. This goal will be achieved by reducing the costs of doing business;
strengthening the linkages and integration of the Lesotho economy with the
regional economy, especially with South Africa; strengthening support for
technical and business management skills thereby improving productivity at the
firm level, and improving access to finance for MSMEs. These measures will also
support the poverty reduction strategy dialogue and implementation of agreed
upon policy measures.”
12. The Financing Agreement (FA) streamlined the PDO by removing the planned
measures in the PDO statement and maintaining the objective as follows:
“The objective of the Project is to facilitate increased private sector investment in
the Recipient’s economy by improving the business environment and diversifying
sources of growth.”
13. There were two outcome indicators (i.e. key indicators) when the Project was
approved:
Days required to start up a business reduced from 73 in 2006 to less than 34 by
project end; and
2,500 new jobs created in the private sector by project end
1.3 Revised PDO (as approved by original approving authority) and Key Indicators,
and reasons/justification
14. There was no revision of PDO or key/outcome indicators.
1.4 Main Beneficiaries
15. At appraisal no beneficiaries were clearly identified. Based on the project design
as presented in the PAD, the primary target groups of the Project appeared to be:
(i) Lesotho’s micro, small and medium sized enterprises (MSMEs) and their trade
organizations; (ii) people who were seeking employment in the garment industry; and
farmers who were willing to participate in the horticulture outgrower scheme.
Immigrants and tourists were also main beneficiaries. Those target groups remained the
same during project implementation, except for the group of immigrants (including guest
workers) as the related subcomponent was terminated through the project restructuring.
1.5 Original Components (as approved)
16. The Project as approved consisted of two main components and seven
subcomponents. There was a third component of project management.
17. Component One, Improving business environment: The main objective of the
component was to support the implementation of policies aimed to improve the business
5
environment and reduce cost of doing business. The component had three
subcomponents:
18. Subcomponent A – Company registration and licensing reform (by MTICM and
Registrar General’s Office): This subcomponent aimed to achieve company registration
reform through the following main activities:
(i) Support implementation of trade and licensing reform
(ii) Design, procure, install, operate and maintain an integrated and computerized
system for business licensing, notification and company registration
(iii) Design and conduct training programs for MCTIM staff to support new licensing
regimes
(iv) Design and conduct training programs for RGO staff
(v) Support publishing and printing of laws and regulations
19. Subcomponent B – Immigration and passport service (by MHAPS): This
subcomponent aimed to (i) streamline and simplify the procedures to issue visas, work
permits and residence permits; (ii) improve productivity, courteousness and efficiency of
IPS staff; and (iii) reduce corruption at border crossings and in the dispensation of
immigration benefits. Those objectives were to be achieved through the following main
activities:
(i) Design and conduct three pilots for: (a) Visa Pre-Clearance and Port of Entry
visa issuance; (b) partial computerization of adjudication and information
services within the Ministry of Home Affairs and Public Safety; and
(c) computerization at selected ports of entry enabling them to communicate
electronically with each other and with the IPS headquarters;
(ii) Roll out of the computerized system for the port of entries;
(iii) Develop and implement a historical baseline database capable of providing
information and generating periodic management status report for the GOL;
(iv) Carry out related analytical studies.
20. Subcomponent C – Improving access to finance (by LNDC): This subcomponent
aimed to address SMEs’ difficulties in access to finance through the following main
activities:
(i) Provide technical assistance to assist the Lesotho National Development
Corporation (LNDC) to design an Enterprise Development Facility (EDF). EDF
would provide guarantees for SMEs’ borrowing from commercial banks in lieu
of collateral;
(ii) Train EDF staff on commercial risk assessment;
(iii) Support the drafting, adoption and promulgation of a leasing act consistent with
the corresponding law in South Africa and including provisions on the rights,
duties and obligations of the parties involved;
(iv) Assist the design of a tax regime applicable to the leasing industry.
21. Component Two, Supporting economic diversification: The main objectives
of this component were to (i) strengthen the linkages with the regional economy,
6
particularly South Africa; (ii) strengthening institutional support for employable skills
and business management; and (iii) improve productivity at the firm level. The
component had four subcomponents.
22. Subcomponent A – Skills development for the garment industry (by two GISDCs):
This subcomponent aimed to (i) improve garment manufacturers’ productivity; (ii) add
more value to commodity-type of products and support the emerging product
diversification initiatives; (iii) slow down the erosion of Lesotho’s market position under
AGOA and support diversification of exports market into South Africa and EU; and (iv)
prevent any further withdrawal of investors and loss of employment and encourage new
investors in the garment sector Those objectives were to be achieved through the support
to the two Garment Industry Skills Development Centers (GISDCs) for the garment
industry in Maseru and Maputsoe:
(i) Provide consultant services for the establishment and operation of the two SDCs;
(ii) Acquire and install equipment for training and provision technical support
services at the SDCs;
(iii) Refurbish the SDCs’ buildings and acquire and install required utilities, health
and safety equipment and facilities;
(iv) Improve access roads to the centers.
23. Subcomponent B – Horticulture outgrower scheme (by two pilot managers): This
subcomponent aimed to (i) improve quality, volume and delivery capability of Basotho
farmers of vegetables and tree crops; (ii) support the transition from smallholder farming
into group or block farming methods; and (iii) support production of organic products to
tap into high-premium niche markets. Those objectives were to be achieved through the
partnership with two large-scale South African companies at two demonstration plots to
explore the financial, agronomic and social sustainability of partnership.6 The Project
would finance consulting services, training, workshops, goods, works and operational
costs.
24. Subcomponent C – Tourism industry support (by LTDC): This subcomponent
aimed to support (i) public sector delivery of new investments, brand development and
targeted marketing activities; (ii) the rolling out of a market access tool (WHL) for
tourism enterprises, and (iii) the skills and business development of tourism enterprises.
Those objectives were to be achieved through the following activities:
(i) Launch and support the WHL to strengthen the marketing outreach of local
hotels, guesthouses and other tourism businesses;
(ii) Support Lesotho council of Tourism (LCT), which was an umbrella association
representing Lesotho private tourism sector;
6 They were: Alpha farms partnership with Basotho farmer to grow vegetables crops; and Denmar estates
partnership with Basotho farmers to produce apple and cherry crops for the local, South African and EU
markets.
7
(iii) Strengthen Lesotho Tourism Development Corporation (LTDC) to target
investor missions to Lesotho to showcase potential concession sites for
investment; develop a Lesotho brand and stimulate market demand through a
range of targeted marketing and information provision activities.
25. Subcomponent D – Lesotho Enterprise Assistance Program (by LEAP program
manager): This subcomponent aimed to (i) build international competitiveness and
capacity of Basotho-owned MSMEs; (ii) strengthen professional associations and
chambers of commerce so that they would better serve their members; and (iii) support
institutionalizing the public-private dialogue. The supports would be provided via the
following matching grant scheme under the LEAP program:
(i) Mentoring assistance and cost-sharing grants for the use of specialized services
(60% by LEAP and 40% by individual firm of service fees and invoiced travel
costs)
(ii) Cost-sharing grant for capacity building of representative business and
professional associations and chambers (75% by LEAP and 25% by association
of service fees and associated travel costs for the use of external services)
(iii) Support to the Lesotho Business Council (LBC) in the first five years of its
establishment for regular public-private sector dialogue
(iv) LEAP HIV/AIDS grants for firms’ expenditures incurred in contracting outside
specialists to conduct on-site HIV testing (for firms which were not covered by
the existing schemes in six industries)
26. Component Three Project implementation support: The main objective of this
component was to finance: (i) the consultants positions (e.g. procurement, financial
management and M&E specialists) of the Project Management Unit (PMU) and the
LEAP Business Advisory Unit; (ii) training of PMU/LEAP managers and staff; and (iii)
operational costs and goods needed for the functioning of the PMU and the LEAP
Business Advisory Unit.
1.6 Revised Components
27. There was no formal removal or addition of approved components, although the
implementation subcomponent 1B (immigration and passport reform) was terminated
before the relevant intermediate result was achieved.
1.7 Other significant changes
28. There were two project restructurings, in January and March 2012.
29. First restructuring: The main changes of the first project restructuring included:
(i) Readjustment of project scope – Subcomponent 1B was terminated due to a lack
of government commitment to the development of a national immigration policy,
and the needed institutional and IT framework.
8
(ii) Reallocation of IDA funding – As a result of the re-prioritization (within
Component 1 and 2) and the recognition of the funding gap (for Component 3),
IDA funding for Component 1 was reduced by 25 percent; that for Component 2
increased by close to 10 percent; and that for Component 3 increased by more
than 10 percent. A new disbursement category of Goods was created and the
eligible cost was moved from under GOL financing to under IDA financing
through reallocation. IDA financing for Consulting services was increased by 26
percent while that for the Matching grants was reduced by 20 percent. The
originally unallocated IDA funding presented as contingencies in the PAD was
earmarked for the different disbursement categories.
(iii) Modifications of intermediate indicators – Two indicators for Subcomponent 2A
were replaced with new indicators and another two for Subcomponent 2D were
modified, to reflect the refocusing of Component 2 activities (see Section of the
Datasheet for details).
(iv) Closing date extension – The original closing date of the Project was extended for
a year to June 30, 2013 to allow the completion of the reform measures in
business registration and licensing, the Public-Private Partnership (PPP)
transaction for the skills centers, and the rollout of a tree crops pilot at the village
level.
30. Second restructuring: This restructuring was conducted three months after the
first restructuring to correct a mathematic error in the first restructuring, so that the IDA
credit financing of goods was increased by 600% while that for consultant services
reduced by 15%.
2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design and Quality at Entry
31. General: Project design was based on the Bank’s analytical work on Lesotho’s
economic structure and investment climate constraints. This enhanced the project
relevance in terms of alignment with the GOL and Bank strategies and targeting of
project interventions. Project design also benefited from a number of studies financed by
a Japanese Government PHRD grant of US$980,000 for project preparation (TF056152)7,
as well as extensive consultations between the main stakeholders including the
Government and the Bank. Thanks to the project preparatory work, the project design
was quite detailed with main activities planned and their cost estimated (which are basic
design requirements for a Specific Investment Lending operation). Previous lessons
considered were in four areas: Need for an integrated approach to nurture the private
sector; Presentation ability of the private sector in private-public dialogue; Importance of
integration with the South African economy; and Matching grant principles. Those
lessons guided the project design, for instance the inclusion of support to trade
7 Those PHRD funded studies were for/on a Design for a Matching Grant Scheme for the Private Sector in
Lesotho; Licensing, registration and immigration services reforms; Designing of a Credit Guarantee
Scheme; as well as Sectoral studies on horticulture, textiles and tourism.
9
organizations, a matching grant program, and the participation of South African
businesses under the horticultural pilots.
32. Scope of project: The Project was of a relatively lean design, having only two
main components and seven subcomponents, as compared to similar projects supporting
the financial and private sector development in Sub-Saharan Africa around the same time.
A common challenge of those projects was how to balance the need for adequate breadth
of support with that for effectiveness and efficiency of an operation. The main activities
were directly aimed at the main obstacles to private sector competitiveness and economic
diversification in Lesotho. However, complexity was a main issue raised at the Quality
Enhancement Review and the decision meeting in view of the limited IDA funding
available (USD8.1 million equivalent). The ICR review finds that the weakness was not
so much the complexity of design, but the overly ambitious project targets and a lack of
detailed design of implementation modality for the intended immigration and passport
reform. For instance the project was designed to deliver several important legal and
regulatory reforms from company registration to immigration regulation. While those
reforms were needed for improving the business environment, it seems that the
implications of the local legislative procedures for project implementation had been
overlooked at appraisal.8 The Bank has supported legal and regulatory reforms for
improving business environment in many client countries and is more effective when
local characteristics are given adequate consideration in project design and a good mix of
intervention models is used.9
33. Another omission in the project design was a realistic assessment of the local
capacity in developing and implementing several change programs in parallel within the
short life-span of the project (e.g. the interventions to shorten the administrative
processes for starting a business and those to improve immigration control practices).
Although the government’s request for support in all those areas was justified, there was
a need for prioritization and sequencing of Lesotho’s vast needs for development. The
Project could had a bigger impact if activities were more focused; for example on one or
two instead of three main hurdles of business environment or one potential source of
growth instead of two. Spreading the resources thin for each main activity affected the
effectiveness and efficiency of some of the project interventions.
34. Technical issues: Technically, the design of most of the main activities was
based on international experience (e.g. regarding company registration and licensing and
establishment of industrial skills development centers). The project design included the
development of a partial credit guarantee (PCG) scheme as the response to the limited
access to finance, probably in response to the government request. International
experience shows that the impact of PCGs in promoting access to finance is mixed and
failures are mainly due to moral hazard and elite capture concerns. On the other hand,
8 Legislative procedures worldwide including in many developed countries tend to be long processes as
they require different layers of reviews and approvals, and Lesotho was no exception. 9 See IFC publication: “Reforming Business Registration: A Toolkit for the Practitioners”, September 2013
www.wbginvestmentclimate.org
10
the PAD (based on the earlier investment climate assessment) highlighted the problem in
contract enforcement rather than a lack of guarantees among the main constraints to
access to finance. A partial guarantee scheme simply diverts that risk from lenders to the
guarantor (i.e. the LNDC under this Project), but cannot directly address some of the
identified important causes of credit risks, such as information asymmetry and contract
enforcement weaknesses.10
The inclusion of a PCG program could also be an attempt to
provide guidance on the international practices.11
It appears that the MTICM had
determined around the time of project appraisal to establish the program at the LNDC
which reportedly suffered heavy financial losses although was profitable around the time
of project appraisal. Furthermore, the local experience with several previous PCG
programs was not satisfactory.
35. The design of the horticulture outgrower scheme adopted the PPP approach which
was critical to achieving the final results (quality and early produce of fruits and access to
the nearby South African market). The objective of the scheme was clearly set as to add
value to horticultural products and to link the local farmers to the international markets.
However, the roles and responsibilities of the main stakeholders (District Agriculture
Offices, the participating farmers and the South African partners) were not well defined
at appraisal. While the role of the South African partners was generally described as
partner, it was not clear whether the pre-selected South African businesses would only
provide technical advice; or concurrently be an early-stage investor with a view to
commercial gains down the road.
36. Institutional arrangement: The Project was designed to have a multi-tier project
implementation arrangement. On the top of the institutional arrangement was a public-
private steering committee (PPSC) which would be led by a deputy prime minister and
involve five ministers and heads of three business associations. This committee might
have been too senior for the small project and in fact was never convened during project
implementation. The second tier management arrangement, i.e. a project review
committee (PRC) headed by the Principal Secretary of MTICM was more functional as it
was at the Principal Secretary level and supported by a Project Management Unit(PMU).
37. Risk and mitigation: Country-level risks were identified and appropriately rated
as substantial (e.g. those related to GOL’s implementation of an overall private sector
development agenda and provision of industrial land). Several project-level risks were
identified, ranging from weak private sector responses to low implementation capacity.
The risk of low implementation capacity was correctly rated as high but would take more
intensive mentoring programs than the proposed mitigation measures to manage.
38. The risk of weak supply response to the design of Component 2 (which was based
on the demand driven principles of supply chains) was rated as low at appraisal which
10 In many countries the problem of weak contract enforcement is addressed head-on with judiciary reforms
and adoption of out-of-court resolution procedures for example. 11
Many government funded partial credit guarantee programs were said to have led to elite capture where
elite groups took advantage of government programs.
11
turned out to be a much higher risk to implementation. This risk was to be mitigated
through project promotions and private sector management of the horticulture and
matching grant schemes. However, other aspects of the risk were not adequately
addressed at appraisal. For the horticulture outgrower scheme they included, inter alia,
challenges in turning maize growers into fruit growers, difficulties in consolidating small
landholdings into larger plots for block farming, and the time and political support
needed to establish a security buffer zone along the Lesotho/South African border. The
matching grant program experienced low uptakes for a number of years until the original
cost sharing proportions were changed. The experience shows that it would take more
than project promotions to get those schemes right.
2.2 Implementation
39. General: Project implementation overcame most of the design weaknesses and in
general achieved the expected results except for Component 1B (see the next paragraph).
Implementation started early and six months after the project effectiveness (in October
2007)12
a draft company law prepared by a consultant was ready for government review
although the conceptualization and consensus building of the draft law took a much
longer time thereafter. One of the two skills development center started to provide
training and the One-stop Business Facilitation Center (OBFC) was launched by
September 2008. Proactive actions were undertaken to address the major issues that
emerged, such as the financial viability of the two skills development centers and the
need to clarify the partnership arrangement for the horticulture outgrower scheme. The
Project Review Committee (PRC) met regularly to monitor progress and provide
guidance. The PMU performance had been consistently regarded as satisfactory.
40. Immigration and passport reform (C1B): Based on the feedback from the main
project counterpart (MTICM) and a number of project documents (e.g. the mid-term
review (MTR) report and the December 2011 project restructuring paper) it appears that
the proposed reform on immigration and passport service were not integrated into the
relevant line ministry’s reform agenda or strategy. While the need for reform was not
disputed and the whys were elaborated at appraisal, the whats and hows were not clear to
the staff and management of the implementing agency. The MTR conducted in
September 2010 found that implementation of the subcomponent was stalled and there
was no project task force or full time project manager at the implementing agency despite
the extensive reforms envisaged by project design. Actions to address the main causes of
the delays were recommended at the MTR (e.g. cabinet approval of a new immigration
policy and decision on system integration with South African Immigration) but had not
been undertaken by the time of the first project restructuring (January 2012). The lack of
ownership led to the termination of the subcomponent. 13
12 Project effectiveness took 180 days instead of the standard 90 days.
13 The only activity completed was the support to the design of a national ID system, which was to be
implemented under a MCC financed project. Due to the lack of a national immigration policy, the other
activities including visa preclearance and port of entry visa issuance and other IT support systems, could
not be implemented.
12
41. Horticulture outgrower scheme (C2B): The pre-selected South African partner
of the vegetable block farming pilot withdrew from the project shortly after the project
effectiveness, mainly out of security and other concerns. That part of the designed
horticulture scheme was then cancelled. The partnership arrangement for the tree crop
pilots was redesigned in 2008 and intensive mentoring was provided to the officials of the
Ministry of Agriculture and Food Security (MAFS) and the participating farmers. In
addition, the project restructuring allocated more financing for a community-based
(village-level) rollout program to test the feasibility of commercialization. In addition to
the provision of seedlings, equipment and inputs, the rollout program consolidated the
landholdings of the participating farmers into one single plot, organized the farmers into
an association and had the farmers company registered.
42. During the first year the planted fruit tree seedlings were damaged when poorly
set up hail nets collapsed. Commercial yields were achieved at the three pilots in
2011/2012 when hail-nets were set up properly, irrigation equipment installed and trees
replanted. The first export from the three pilot farms to South Africa (albeit only 54 kg)
took place in March 2012 after the signing of an agreement with the South African
partner to make the latter’s marketing network available to the Basotho produce. Another
problem addressed during project implementation was the livelihood of the participating
farmers, who turned their land to grow trees rather than the traditional maize. The GOL
provided livelihood support to the three participating farmers.
43. Mid-term review: The October 2010 mid-term review carried out detailed
analysis of the progress made and the challenges encountered in project implementation.
The recommendations were specific and practical. The PPP approach eventually
alleviated the financial viability concerns of the two skills centers. The recommended
increase of the government contribution and the changes of the matching grant
procedures enabled the program to take off.14
The recommendation to take the project
fiduciary function back into the PMU helped improve the project’s performance in
procurement and financial management. However, the MTR was conducted when there
were only 18 months left before the original project closing date. If the MTR were
conducted per the original schedule (September 2009) rather than one year later, the
Project could have been made more relevant, effective and efficient in achieving the
objectives.
44. Project restructuring: The two project restructurings in early 2012 re-oriented
project implementation to what was more achievable mainly by formalizing the MTR
recommendations. The increase in the IDA financing of subcomponent 1A (Company
registration and licensing reform) supported continuous industry licensing reform. IDA
funding for the horticulture scheme (C2B) was increased substantially to finance the
14 The grant contribution to matching grant and the changes in the individual companies was increased
from 65% to 80% while that to business associations remained at 75%. Direct payments were adopted
rather than letting the beneficiaries to pay the service providers first. Prior review threshold was raised
from US$15,000 to US$20,000.
13
acquisition of additional hail-nets, irrigation equipment and farming. This enabled the
scale-up of the horticulture pilots of three farmers to a village-level rollout program.
Originally goods were financed by the Government, but by June 2012 the counterpart
funding had been overspent.
45. The modifications of the intermediate results indicators of subcomponent 2A
(Skills development for garment industry) made the component-level targets more
realistic. However, for reasons unknown to the ICR review, the unrealistic PDO indicator
on job creation was maintained although as early as the MTR time there was recognition
of the problem. The project restructuring also failed to remove the component level
targets of subcomponent 1B although it was formally terminated. The restructuring
should have been conducted at least one year earlier, so that the project resources would
have been more effectively used.
46. Other: The LNDC’s partial credit guarantee program (US$1 million equivalent)
was established in July 2011 and by project closure had benefitted 16 borrowers. The
uptake was low as banks still found it difficult to find bankable borrowers. The Ministry
of Finance (MOF)’s review and approval of the LNDC PCG was slow for a while as the
finance ministry was establishing its own PCG at the time (US$5 million and 20
beneficiary borrowers by project closure). The on-line booking system (WHL) for
tourism accommodations and activities was installed by 2011, but utilization was low.
The development of a concession arrangement for the Sehlaba Thebe National Park (SNP,
a UNESCO designated world heritage) started in the second half of 2008 and a
concession agreement was finally signed off by project closure. The Lesotho Enterprise
Assistance Program (LEAP, the matching grant scheme) suffered initiation delays until a
qualified program manager was engaged and her office staffed and a grant approval
committee established by 2009. The original plan to support one or two consolidated
private-public dialogue platforms through the Private Sector Foundation of Lesotho
(PSFL) and the Business Council of Lesotho (BCL) was terminated. This was because
the PSFL encountered serious institutional problems. However, the LEAP continued to
support viable sectoral organizations. It appears that the time might not have been ripe
for a consolidated umbrella business association. All in all, the LEAP program supported
17 business associations.
47. Last but not at the least, the Project was implemented in the first a few years amid
the aftermath of the 2007 – 2008 global financial crisis and the follow-up economic
recession in Lesotho’s main export market (the USA) as well as its main source of
revenues (South Africa). The economy was hit hard. Textile exports declined more than
20% in the first half of 2009 from the first half of 2008. Immigrant workers were
retrenched and their remittances to home reduced.15
The country’s economic growth
started to recover in 2010 thanks to the rapidly increasing FDI inflows, which also
benefited the project implementation in the later years.
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization
15 United Nations: Impact of Global Economic Crisis in Lesotho, August 2009
14
48. Project Development Objective: The PDO was composed of three parts:
(i) facilitating increased private sector investment; (ii) improving business environment;
and (iii) diversifying sources of growth. The PDO in general reflected what the Project
was intended to achieve, i.e. to improve the business environment in Lesotho and explore
the feasibility of two potential new sources of growth as main means to facilitate
increases in private sector investment. Improving the business environment was mainly to
be achieved by cutting red tape in the administrative processes for company registration
and licensing. Testing of potential new sources of growth was expected to be achieved
through a horticulture outgrower scheme and strengthening of the tourism industry. The
statement of the PDO could have been more realistic if the third dimension had been set
along the lines of exploring and/or testing the potential for economic diversification.
This is because the tree crop pilots and a start grading system for tourism facilities alone
could not turn horticulture or tourism into a main driver of economic development.
49. Outcome indicators: The first outcome target was a standard and direct
measurement of changes in one aspect of business environment (business process for
starting a company), which corresponded to one of the two groups of main interventions
of the Project (Component 1). The indicator was specific, measurable and attributable to
what the project was designed and intended to achieve (improving business environment
in order to facilitate increases in private sector investment). The second indicator,
however, measures job creation in the whole private sector which is typically affected by
factors beyond the reach of the Project, such as the business cycles. In addition, job
creations are the result of increased private investment, while the Project was targeted to
facilitate increases in project investment and not necessarily directly increase private
sector investment. The target was set to create 2,500 new jobs, but no detailed technical
analysis was provided in the project design on why and how the Project was expected to
create this many new jobs. No mechanism was provided for the collection and
verification of employment data for which the government capacity was quite weak.
50. No indicator was set up in the project design to measure the expected outcome
related to economic diversification. Based on the design of the second group of project
interventions including the original allocation of project resources, the ICR review finds
that the intended (inferred) outcome indicator for the second part of the PDO is
“Providing a demonstration effect for a new source of economic development”.
51. Intermediate indicators: The component-level indicators as designed were
specific and most were numeric. The metrics to measure changes in the company
registration and licensing processes were standard Doing Business indicators. Some
other indicators measured the successful completion of the main activities (e.g. adoption
of leasing regulations).
52. However, a number of the original intermediate indicators suffered attribution
problems, in particular for the main activities of Component 2. The problem was
addressed to a certain extent during project implementation. The original targets of
subcomponent 2A (on the overall garment industry’s task efficiency) were unrealistic and
15
would be difficult to be attributed to the main objective of the subcomponent, which was
to train potential workers through two skills development centers, so that they would
have the basic skills demanded by garment industrialists. The centers do not have the
capacity to train the whole industry’s work force.16
Even if the Project could have done
this, behavioral changes usually take time. The two new indicators added by the project
restructuring were more appropriate as they measured the placement rate of the trainees
and the centers’ management model. The project restructuring also modified the original
indicators for the matching grant program, from comparison with the non-supported
groups to that with the income levels of the beneficiaries before the LEAP support. The
revisions made the indicators more measurable, given the fact that no baseline and
follow-up surveys were built into the Project to assess the MGP impact against control
groups.
53. Data collection and project reporting: Project data collection relied on the
implementing agencies but data management capacity of those public sector institutions
was very weak. For instance the GOL does not publish consistent and reliable national or
sectoral statistics on employment and private sector investment regularly. This affected
data reliability. The PMU made extra efforts to collect data from different sources as the
implementing agencies did not report project status and progress regularly.
2.4 Safeguard and Fiduciary Compliance
54. Environmental impact management: The PSCED was a Category B operation
which required partial environmental impact assessment (EIA) mainly due to the
horticulture outgrower scheme under subcomponent 2B. The main potential
environmental risk identified in the EIA (financed by the PHRD project preparation
grant) at appraisal was the lack of regulatory framework, capacity and integrated systems
for proper management of the agrochemicals (e.g. pesticides and fertilizers) which would
be applied at the pilot farms. The EIA also found that potential environmental impacts
from the subcomponent were probably insignificant, if the following actions were
undertaken: (i) development and implementation of M&E systems to monitory and
evaluate environmental impacts on a regular basis; (ii) conduct training and awareness
programs at the farmer level; (iii) development and implementation of a Pesticide
Management Plan.
55. During project implementation, a leading sustainable agriculture consulting firm
in South Africa was engaged to provide training and mentoring to the participating
farmers. The participating farmers were trained on the adoption and maintenance of
Good Agricultural Practices, including, inter alia, environmental sustainability, food
safety and international certification of farms. The farmers kept a Blue Book to track the
production activities for EIA purposes. One of the pilot farms has been audited for a
certification to be issued by Global Gap towards the end of 2013. The Environmental
and Social Management Framework (ESMF) for the second PSCED project (PSCEDII)
16 In 2011 the industry employed 36,000 workers according to the Lesotho Textile Exporters Association:
Lesotho Textiles Gets a Lifeline, IRIN, Nov. 24, 2011.
16
was more specific and comprehensive.17
In addition to training and community
engagement, the ESMF contains an environmental and social screening form. The
detailed ESM framework sets out: (i) the concerns and the actions; (ii) the monitoring
arrangement and the measures; and (iii) the responsibilities of the PMU, the participating
farmers, the program manager, the Global GAP and the GOL. The overall safeguards
and environmental assessment policy were consistently rated satisfactory by the Bank
task team during the project implementation period.
56. Procurement: The procurement performance of the Project was rated as
satisfactory by the Bank task team most of the time. In the first part of project
implementation, there were delays, in particular in goods. Three Country Post
Procurement Reviews (PPR) were conducted in 2010, 2011 and 2013. The September
2011 PPR identified a number of capacity gaps which were addressed thereafter.18
With
the benefit of hindsight, procurement packaging could have been improved, in particular
with regard to the needs for the tree crop pilots. As mentioned in Section 2, the
acquisition of seedlings, hail-nets and irrigation equipment should have been better
coordinated. In addition, tree crop farming is characterized by seasonal changes, and the
Project’s procurement planning and packaging should have taken this into consideration.
57. Financial management: The Project’s financial management was rated from
moderately satisfactory to satisfactory by the Bank task team. Audit reports of the
project accounts provided on time and all the audit reports were unqualified. The less
than fully satisfactory performance in certain periods of project implementation related to
a lack of staff performing the financial management tasks which should have been
separated and calculation of tax treatments for example. Those problems were resolved
and the latest PRIMA (April 2013) found the project performance in financial
management satisfactory.
2.5 Post-completion Operation/Next Phase
58. The Bank has approved the Second Private Sector Competitiveness and Economic
Diversification Project to build on reforms initiated under this Project as well as reforms
in new areas to support government priorities that would lead to greater private sector
development. Specifically, the follow up project will: (i) extend the reform in business
registration to all types of firms and extend the regulatory reforms to the other aspects of
business environment; (ii) address the main financial regulatory infrastructure gaps which
affected bank lending to businesses (e.g. insolvency regime and lack of reliable credit and
collateral information); (iii) improve tourism statistics; (iv) scale up the results of the
horticulture pilots to a commercialization level; and (v) continue to finance the
management cost of the LEAP program with GOL financing of the matching grants (a
17 The PSCEDII will scale up the pilots at the farmers-level (total of over 4 ha) and the village-level (10 ha)
to a larger community with joint land of 35 ha. 18
After subcontracting the procurement function to the LNDC in the first two years, the PMU moved the
function back into the project management unit and gradually gained more experience in procurement
under Bank financed projects.
17
clear sign of government commitment). For details please refer to the PSCEDII’s Project
Appraisal Document.19
The investments goods financed by the Project have been handed
over to the beneficiary institutions (e.g. the automated company registration system to the
OBFC), or the implementing agencies of the second project.
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
59. The Relevance of the PSCED Project is assessed in terms of: (i) consistency with
the current country and Bank strategies, and (ii) adequacy of prioritization based on local
capacity. Based on the following considerations, the Relevance of the Project is
considered as Substantial.
60. Strategic consistency: The current GOL National Strategic Development Plan
(2012/13 – 2016/17) aims to create the pre-conditions for high, sustainable, and private
sector-led economic growth and faster job creation. The strategy identifies four potential
long-term economic development drivers: i.e. agriculture, manufacturing, tourism and
deeper investment climate reforms. The project objectives as designed and implemented
were highly consistent with the GOL’s strategy for the private sector led economic
development.
Table 1: GOL Strategy and PSCED Project
GOL Strategy PSCED Project
Investment Climate reforms Development and adoption of laws and
regulations to improve business
environment (as designed and
implemented)
Commercialization and diversification of
agricultural sector
Horticultural outgrower scheme (as
designed and implemented)
Vocational training in manufacturing sector Establishment and operating of 2 skills
development centers for garment industry
(as designed and implemented)
Tourism development Concessions of operation of tourism sites
and adoption of international practices in
accommodation reservation and star
grading (as designed and implemented)
61. The early 2012 project restructuring further enhanced this strategic consistency as
it reoriented the Project towards what was more achievable or would have more impact.
The examples in place were (i) the development and adoption of the leasing regulations
to provide businesses with a new financing instrument other than the traditional bank
loans (improving business environment); and (ii) the scaling up of the tree crop pilots
19 The World Bank, Project Appraisal Document, Report No: 81069-LS.
18
from three individual farmers to a village-level community (diversifying sources of
growth). The GOL’s commitment to the objectives and implementation of the PSCEDII
project is another testimony of the first project’s consistency with the current government
strategy.
62. The World Bank’s current Country Assistance Strategy (CAS, FY10 -14)
concentrates in three priority areas including Competitiveness and Diversification. The
CAS Progress Report (2012) further indicated that “The strategic pillars of the CAS -
supporting fiscal adjustment and increased public sector efficiency, human development
and improved service delivery, and enhanced competitiveness and diversification of the
economy - , creating jobs,
inclusive growth, and private sector development.” The Project aimed to achieve the
same goals in the same identified priority area. The project implementation maintained
this consistency. The ICR review finds the Relevance of the Project as high in terms of
consistency with the Government and the Bank strategies.
63. Project scope: The scope of the Project responded well to the GOL and Bank
strategies. However, it was somewhat too ambitious, given the low capacity of the
government for implementing several large reform programs at the same time. While
identified as a high risk at appraisal, the low capacity constraint was not adequately
factored into the project design and materialized during project implementation. The
project design was clear about why the proposed reforms were needed, but was short on
the whats and hows in particular regarding the legal and regulatory reforms. Nevertheless
the project implementation made significant progress in the legal and regulatory reforms,
such as the adoption of the new company law and the leasing regulations. The Project
restructuring re-oriented the scope of interventions towards what was likely to be
achieved. The Relevance of the Project is considered as substantial in terms of designed
and implemented project scope.
3.2 Achievement of Project Development Objectives
64. The Project Development Objective was to “facilitate increased private sector
investment in the Recipient’s economy by improving the business environment and
diversifying sources of growth”.
65. Improving business environment: The following table provides a snapshot of
the pathway from the main project interventions to the achievement of the component-
level results.
Table 2: Progress towards improving business environment
Project interventions Results
Drafting and enactment of new Company
Act, amendments to Trading Enterprises
Regulations, and drafting of Industrial
Licensing Bill
Installation of a web portal for company
Registration
Days required to register a company
reduced from 28 days to 7 days (a
reduction of 75% in time needed)
Days required for obtaining an industrial
license reduced from 35 days to 5 or fewer
days (a reduction of 86% in time needed)
19
Project interventions Results
Staff training of Registrar General’s
Office
Training and TA for OBFC
Days required for obtaining a trade license
reduced from 35-50 days to 15 days (a
reduction of </= 57% in time needed)
66. Achieving first outcome (Starting a business): Those results at the component
level cuts down the red tapes in starting up a business, which are widely considered as an
important factor affecting increased private sector investment. At the project level, the
designed outcome indicator to measure improvement of the business environment was
“days required to start a business” (</= 20 days). Before the Project, it took 73 days to
start up a business (old DBI methodology), and by the project closing date the number of
days required was reduced to 24 days (GOL report). While this was four days short of
the target, it represented a 68 percent reduction from the baseline. According to the 2013
Doing Business report (new methodology), the number of days required to start a
business in Lesotho has been on consecutive declines from 93 days in 2006 to 40 days in
2010 and 29 days in 2013. In 2013 the Sub-Saharan African average was 30 days for
starting up a business.
67. Other achievements: In the five years (2007 – 2011) before the new company law
came into effect in May 2012, 179 companies registered on average per annum. Between
the milestone of the new law and the project closure (roughly 12 months), the registration
list saw an increase of 472 companies which was almost three times higher than the
average annual increase in the number of companies registered before the project result
was achieved. This could be an indication that the new law (and the automated registry)
encourages firms to move into the formal sector. The time to obtain industrial licensing
was also reduced by 86 percent from 35 days to 5 or less days. In addition, the leasing
regulations developed and adopted support the implementation of a new financial
services law. The gap in the legal and regulatory framework was removed and a
businessman can now finance capital goods through leasing in Lesotho. This is another
step towards improved business environment given the importance of improved access to
finance to an enabling business environment. Those achievements have been recognized
by the development partners’ community. For instance, a recent IMF staff report found
that "Financial sector regulation has been strengthened and the business climate has been
gradually improving, with progress made in enhancing the legal framework (e.g., the
Financial Institutions Act, the Insurance Act, and the Industrial Licensing Bill)."20
The
outcome indicator for improving business environment is considered as achieved.
68. Diversifying sources of growth: Table 2 summarizes the contribution of the
Project to the achievement of the component-level results related to the diversification of
sources of growth.
20 IMF Sixth Review under the extended credit facility for Lesotho, IMF Country Report No. 13/294
(http://www.imf.org/external/pubs/ft/scr/2013/cr13294.pdf)
20
Table 3: Progress towards diversifying sources of growth
Project interventions Results
Establishment of a partnership
arrangement between a pre-selected
South African company and three
participating Basotho farmers
Provision of a variety of fruit tree
seedlings, equipment, inputs, technical
support, training and participating
farmers’ livelihood
Scale up to village level for
commercialization tests
Best performing varieties identified for
early-season yields (2-weeks earlier than
yields in South Africa)
First batch of apples (54 kg) exported to
South Africa in 2012
One participating farmer to be certified by
Global GAP by end-2013.
Farmers of the village-level pilot
consolidated their smallholding land into
one single plot and organized themselves
as a cooperative.
69. Achieving second outcome (Demonstration of new source of growth): Those
results provided two important demonstrative effects: technical feasibility of (i) tree-crop
farming as a new source of economic development; and (ii) consolidating smallholding
land and organizing farmers for the commercialization of tree crop farming. There had
been suggestions in the government strategies and by international experts that Lesotho
would need to move from smallholding farming (mainly of maize) to block farming of
cash crops in order to increase farmers’ incomes and reduce the economy’s reliance on
low-end garment manufacturing. However, the technical feasibility of those suggestions
was unknown before the Project. Because the tree crop pilots found the best performing
varieties suitable for farming in Lesotho and that they could be harvested two weeks
earlier than South African fruits, there is a good chance for Basotho farmers to earn a
price premium from the nearby South African markets. Despite the tiny quantity of
export, it proved that outward linkage could be established when Basotho farmers had
access to South African partner’s marketing networks. The village-level pilot initiated
after the 2012 restructuring succeeded in consolidating the community’s landholdings
into a single plot. The farmers organized themselves as a cooperative and registered a
company.
70. While it is too soon to see the results of this limited commercialization
experiment, the PSCEDII project will test the commercial viability of the tree crop
outgrower scheme by expanding the experiment and supporting the tree crop supply
chain development. Since the project design did not specify any outcome indicator for
diversifying source of growth, the ICR review uses the inferred indicator in assessing the
progress made, which is “providing a demonstration effect for a new source of economic
development”. Based on the above analysis, the ICR review considers that the inferred
outcome indicator for diversifying sources of growth was achieved.
71. Other achievements: In addition, a star grading system was adopted for hotels
and other accommodation in Lesotho under the Project. The system will inform tourists
and business travelers which accommodation can meet their needs for their budgets.
Four tourism sites including the UNESCO designated SNP were transferred to private
sector management under concession agreements. Those results are expected to attract
more tourists and other travelers to the country; and hence increasing the tourism industry
21
potential to become another new source of growth. The PSCEDII will continue to
support the growth of tourism to test the potential of the industry as a new source of
economic development in Lesotho.
72. Facilitating private sector investment: The achievement of the above two
outcome indicators is expected to facilitate increased private sector investment. Reduced
red tapes led to lowered cost for company registration and licensing, which shortened the
administrative process for starting up a business. Those are one but important aspect of a
country’s investment climate. The tree crop pilots would open up new investment
opportunities. If commercialization experiments are successful under the second project,
there would be high demand for agricultural inputs, irrigation and hail protection
equipment, and marketing services for example. Four tourism sites are now managed by
private sector tourism operators under concession agreements nailed down through the
project interventions. The private investors are expected to invest more in tourism sites
and services to ensure success.
73. The introduction of the PPP model in tourism and vocational training has set up a
good example of sustainable financing of the private sector driven economic
development. Given the small size of the Lesotho economy this was by no means a small
achievement: it could increase the leverage of limited public sector resources, bring
discipline and commercial practice to investment planning and management, and open up
more investment opportunities to the private sector. The ICR review finds that the
Project enhanced the environment for increased private sector investment.
74. In addition, the ICR review finds that economy-wide, private sector investment
might be increased significantly in Lesotho as measured by proxy metrics. The IMF
estimated that the gross capital formation of the private sector would increase from 16.6
percent of GDP in 2009/10 to 19.6 percent (projected) in 2013/14.21
Using the World
Bank FDI data as another proxy, the net inflows of FDI in Lesotho registered an average
annual growth of over 100 percent in 2006 – 2012.22
It may be too soon to quantify the
extent of the project impact in terms of increased private sector investment, and even if it
can be quantified, the impact of the Project on the nationwide changes must be quite
modest compared to the more important drivers of economic and sociological changes.
On the other hand it would also be quite difficult to disregard the likely impact of the
Project as it did contribute to the development of an enabling environment for increased
private sector investments.
75. Job creation: The project design set an outcome indicator measuring job creation,
which was 2,500 “new jobs created in private sector”. As discussed in Section 2.3, there
design weaknesses of the indicator. For the ICR review data is not available on the
specific number of job creations in the whole private sector which would also be
attributable to the project interventions. However, based on the verifiable statistics, the
two skills development centers created 1,156 new jobs in the textile and garment industry,
21 (http://www.imf.org/external/pubs/ft/scr/2013/cr13294.pdf)
22 Http://data.worldbank.org
22
as they trained a total of 1,562 potential workers and 74 percent of the trainees were
placed by the centers. The impressive placement rate demonstrated that the training
centers’ curriculum and hands-on training met employers’ requirements. A PPP model
ensured financial sustainability of the centers, and thanks to the improved viability, the
centers are expected to continue to train and place workers; hence contributing to the
creation of jobs in the key manufacturing industry.23 In addition, the PMU reported that
during the project implementation period, textile and garment firms which operated on
LNDC premises added 3,072 formal jobs. This statistic could include the trained and
placed workers from the two centers. The best-effort assessment of the ICR review is that
the Project made positive contributions to job creations in Lesotho and directly to the
new jobs added in the textile and garment industry.
76. Local enterprise development: The Project also contributed to the achievement
of the above discussed outcomes through the LEAP (matching grant program). The
program financed over 70 business development services provided to 193 firms and 17
business associations. The BDS for trade fairs and exhibitions accounted for almost 27
percent of the total number of services provided; followed by those for website design
and development (10%) and design and capacity building of financial management
systems (6%). The ICR review notices that tourism was the sector where most of the
beneficiaries operated, followed by manufacturing, trade and retail, and ICT. The BDS
supported by the LEAP were reported as having contributed to the increased sales of
beneficiary firms (56%) and the increased incomes of industrial association members
(15%), although the impact of the small grants must be different for different sizes of
enterprises.24
For a detailed report of project outputs please refer to Annex 2.
77. Achievement of PDO: Based on the above analysis, the achievement of the
Project Development Objective is considered as Substantial.
3.3 Efficiency
78. Original economic analysis: At appraisal, an econometric model was developed
to assess the Net Present Value of the Project. The model was based on assumptions that
the planned interventions would generate economy-wide or sector-specific effects, and
interpreted the project benefits as a direct contribution to GDP. There are significant
drawbacks in using an econometric model on GDP growth to conduct economic analysis
of this type of projects which mainly financed dispersed consulting services and training
activities (82% of total IDA funding disbursed was in this category), as there is no hard
evidence that small consulting services and training directly led to GDP growth. In
addition, it appears that the economic analysis at appraisal was very optimistic and
23 A management council for each center was established which is composed of industrialists and
representatives of 4 ministries. The operational costs were shared with the GOL expected to gradually
reduce its financing and ownership. 24
The enterprise size distribution of LEAP grants was as follows: large firms accounted for 29%, medium
firms, 13%, and micro and small firms, 13%. The rest went to industrial associations.
23
unrealistic.25
The main drawbacks are found in the assumptions and here are a few
examples:
One assumption on economy-wide effects – Reduced time for business startup,
registration and licensing would increase net number of new businesses: there has
not been clear evidence that streamlined processes will automatically lead to net
increase of businesses without other major reforms in investment climate.
One assumption on sector-specific effects – Pilots of horticulture outgrower
scheme would increase agricultural exports on a commercial scale: this
assumption missed a critical factor in fostering new agricultural produce, i.e. the
need to first test the technical feasibility before commercialization can be carried
out. According to the Business Plan for Pilot Farms, the tree crop pilots at the
individual farmer’s level would start to generate a small net income only in year
eight (2016/17).26
79. ICR assessment: The ICR review takes a more qualitative approach to assess the
project efficiency as follows:
Benefits – Component 1 achieved the targets in shortening the administrative
processes starting a company in Lesotho which improved the country’s ranking in the
Global Doing Business Index (up 65 positions in terms of starting a business) and
improved the regulatory framework for leasing, which made Lesotho one of the top
DB reformers for the 2013 DBI. Component 2 demonstrated the technical feasibility
of the horticulture outgrower scheme which has the potential to become a new source
of growth if commercialization is successful (refer to Section 3.2 for details of those
and other benefits achieved).
Utilization of financing resources – The original financing resources were fully
utilized to achieve the benefits. In fact, the GOL increased the counterpart funding by
20 percent and by the project closure, close to 98 percent of the total funding was
disbursed (see Annex 1 for details).
Costs – Compared with the benefits achieved, the costs of the two main components
appeared to be reasonable in particular where consulting services and goods were
acquired through competitive selection or biddings. The cost of PMU was high (24%
of total actual project cost including the counterpart funding – see Annex 1). In a
way, it might probably be the cost that has to be paid to ensure the success of an
ambitious project in a low capacity country. The performance of the PMU had been
consistently rated as satisfactory by the Bank task team.
Cancellation – Subcomponent 1B on immigration and passport reform was
terminated before the expected target was achieved but the financing resources
25 For example, Component 1 (composed of mainly technical assistance interventions for improving legal
and regulatory framework) was projected to have a NPV of US$6.5 million and an ERR of 52 percent.
Component 2 (technical assistance plus limited investments in operational systems and equipment) was
projected to yield a NPV of US$10.3 million and an ERR of 49.7 percent. 26
Tree Crops in Lesotho: The Business Plan for the Pilot Farmers, Global Development Solutions, March
2013.
24
originally allocated to the subcomponent was reallocated mainly to finance the scaled
up (village-level) tree crop pilot and fully utilized.
Damage to tree crops pilot sites – Because of the poor workmanship, the hail-nets
collapsed on several occasions, causing damages to the tree crop seedlings planted in
the first year.
80. Based on the above analysis, the efficiency of the Project is considered as
Substantial.
3.4 Justification of Overall Outcome Rating
Rating: Moderately Satisfactory
81. This rating is based on the assessment under Section 3.1 – 3.3, in particular given
the significant on-the-ground results achieved in improving an important aspect of
business environment and testing the technical feasibility of tree crops as a new source of
growth. In addition, a regulatory gap for improved access to finance was removed
through the adoption of leasing regulations. PPP models were introduced in operating
tourism sites and vocational training centers. Basotho firms experienced the benefits of
business development services. Those results are likely to further facilitate increases in
private sector investment. The main downward factors considered include the ambitious
scope of interventions for a low capacity country, and the challenges associated with
employment data to assess the direct project impact on job creations.
3.5 Overarching Themes, Other Outcomes and Impacts
(a) Poverty Impacts, Gender Aspects, and Social Development
82. The Project was not designed to have direct poverty, gender and social
development impacts. Nevertheless, female-owned businesses accounted for 62 percent
(micro and small size), 39 percent (medium size) and 19 percent (large size) of all the
enterprises supported by the LEAP (matching grant program).
(b) Institutional Change/Strengthening
83. The most noticeable developmental impact on institutional strengthening under
the Project included (i) establishment and strengthening of the One-stop Business
Facilitation Center; and (ii) establishment and acceptance of PPP models in the
management of two skills development centers for the garment industry and the operating
of four tourism sites in particular that of Sehlaba Thebe which is an UNESCO designated
world heritage.
(c) Other Unintended Outcomes and Impacts (positive or negative)
Not applicable
25
3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops
Not applicable
4. Assessment of Risk to Development Outcome
Rating: Moderate
84. In general, the risks are considered as low in the technical sustainability of project
results, the government commitment and the continuous reform for private sector
competitiveness and economic diversification. The second project (PSCEDII) is a clear
sign of continuous government commitment to and the Bank strategy on those reforms.
In a way, a large part of the risk to the project outcomes has been transferred to the new
project. For instance, the new project will support the development of a credit
information system and the legal and regulatory framework of insolvency, which could
help alleviate the credit risk associated with the LNDC’s partial guarantee program.
PSCEDII will also support an expanded rollout program of the tree crop outgrower
scheme and the development of the fruits value change, which is expected to mitigate the
commercial viability risk associated with the farmer-level pilots. On the other hand,
higher risks would materialize if the beneficiary agencies do not have the technical and
financial capacity for regular maintenance and upgrading of the IT systems acquired
under the Project. Similarly, there could be a question on whether the beneficiaries of the
LEAP program would be willing and able to continue using business development
services when in need on their own, although the second project will continue to finance
the LEAP program (GOL - matching grants and IDA – program management) and further
foster the practice of using business development services.
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance
(a) Bank Performance in Ensuring Quality at Entry
Rating: Moderately Satisfactory
85. The Bank’s early analytical works such as the country investment climate
assessment and those related to the preparation of the GOL’s poverty reduction strategy
informed the design of the Project. The Bank task team also adopted a participatory
approach in project design and thanks to that was able to reach a mutual understanding
with the GOL on why the proposed reforms would be needed during project preparation.
The project design was relatively lean and corresponded well to the GOL and Bank
strategies. On the other hand, it appears that the project design did not adequately factor
in the high risk of low implementation capacity, and the need for consensus on the whats
and hows of the reforms. The design of the results framework for project M&E suffered
from an inadequate consideration for attribution and local reality (e.g. the employment
target and the indicators on the average task efficiency of the garment industry).
26
(b) Quality of Supervision
Rating: Moderately Satisfactory
86. The Bank team conducted regular and diligent implementation support to the
government counterpart and the implementing agencies. This helped in timely
identification of the hurdles to project implementation. For instance, the design weakness
of the horticulture outgrowers scheme was identified and addressed early on. The Bank
team played a crucial role in bringing the main stakeholders together by facilitating the
dialogue between the government, the South African company and the participating
farmers, which led to a mutual understanding on the stakeholders’ respective roles and
deliverables. The Bank team’s solutions to the main institutional problems during project
implementation were practical and effective, such as the PPP approach to address the
financial viability difficulty of the two skills development centers. Supervision reports
and aide memoirs were well organized and frank about the main issues. They were
focused on the technical issues as well as project processing problems. The main
developments in project implementation were well documented.
87. The main shortcomings affecting an otherwise satisfactory rating were the serious
delay in carrying out the mid-term review (a 12 months delay) and that in project
restructuring (15 months after the MTR). The delays postponed the much needed
readjustments in re-focusing the resources on what were more achievable and would
better contribute to the fulfillment of the project objectives. Another shortcoming was
the omission to improve the realism and attribution of the results framework.
(c) Justification of Rating for Overall Bank Performance
Rating: Moderately Satisfactory
88. This rating takes into consideration the Bank team’s contribution to the project
design and effective implementation support, as well as the shortcomings in quality at
entry and quality of supervision although the downward factors are considered as
moderate when compared to the achievement of the project outcomes and results.
5.2 Borrower Performance
(a) Government Performance
Rating: Moderately Satisfactory
89. The Government’s poverty reduction strategy guided the design of the Project.
The general political, policy and economic environment did not present major obstacles
to project implementation and the achievement of the project results. The Ministry of
Trade, Industry, Cooperatives and Marketing maintained a strong ownership of the
Project throughout project preparation and implementation. The consultations with the
main stakeholders carried out during project preparation facilitated consensus building on
27
the project design. The Government took lead in sensitizing the main parties involved
(e.g. Attorney General’s Office and Parliament members) in the drafting and review of
the new company law and the related bills and regulations. While the consensus building
process took time, the new company law was successfully pushed through the country’s
legislative path and is now under implementation. The prompt adoption of the PPP
approach for the management of the two skills development centers improved the two
institutions’ financial viability. The government increased its original counterpart
funding by 20 percent to finance the cost of goods, including those needed for the tree-
crop pilots. This was critical for the reduced days in company registration, training of
garment workers by the two skills development centers, and the implementation of the
tree-crop pilots. The Project Review Committee headed by the Principal Secretary acted
as the de facto oversight body of the Project. The PRC could have been more effective in
overcoming implementation delays in particular under subcomponent C1B (immigration
and passport reform). (b) Implementing Agency or Agencies Performance
Rating: Moderately Satisfactory
90. For the purpose of the ICR review, the implementing agency performance is
assessed against the performance of their components/subcomponents. To that extent,
the performance of the MTICM (as the main implementing agency for subcomponents
1A and 2A) and the Ministry of Agriculture and Food Security (for the implementation of
C2B) was satisfactory. The PMU was effective in the day-to-day management of project
implementation activities and also participated in the implementation of several
subcomponents. The main downward factor to an otherwise satisfactory performance of
the implementing agencies as a whole was the failure to overcome the hurdles to the
immigration and passport reform under subcomponent C1B.
(c) Justification of Rating for Overall Borrower Performance
Rating: Moderately Satisfactory
91. This rating takes into consideration the satisfactory government performance and
the overall moderately satisfactory performance of the implementing agencies.
6. Lessons Learned
92. The experience of the Project lends a few important lessons in supporting reforms
and experiments in a low implementation capacity environment.
93. Intensive mentoring pays off: Tree crop growing was new to not only most of
Basotho farmers but also local agriculture administration officials. Some common
knowledge of experienced orchard farmers were not known to the participating farmers
28
and the local officials as they were more used to maize growing for a subsistence living.27
Under the Project intensive hands holding was provided by international agricultural
experts to the farmers and local agriculture officials that was critical to the success of the
fruit tree pilots.
94. Knowledge transfer on whats and hows is equally important: The analytical
reports which informed the project design and the project appraisal document clearly
spelled out the needs for reforms in the administrative processes for starting a business
and facilitating travel documents processing (why the reforms were needed in Lesotho).
However, the government counterpart and the implementing agencies also need inputs
and guidance on what should be changed to achieve the reform objectives and how to
achieve them. As the whats and hows were not very clear to them at the beginning, it
took a while to reach consensus on what should be amended in the company law for
example. Once the consensus was reached, the legislative process moved on.
95. Project M&E should start from data management capacity building: Over
the last decade international development aid providers and research circles have paid
more attention to the monitoring and evaluation of intervention results and impact. The
World Bank requires that all projects financed by the Bank should develop and use a
results framework for the purpose. The implementation of the results frameworks often
requires basic capacity in data collection, verification and analysis on the part of project
units. This capacity, however, is usually one of the weakest in a low implementation
capacity environment. A project aiming to achieve sector-wide targets should plan and
budget for the strengthening of data management capacity at the government agencies
and/or public sector institutions as they are usually the authorities for collecting and
publishing macroeconomic and sectoral data. A major difficulty reported by the PMU of
the Project was the weak data management capacity of the government agencies. It
appears that the provision of one or two M&E staff at the PMU was not adequate to
overcome the difficulty.
7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners
(a) Borrower/implementing agencies
96. The PMU on behalf of the main government counterpart (MTICM) provided an
ex-post review of the Project shortly after the project closure. Below is a brief summary
of that report. For a more detailed summary, please refer to Annex 7 of this ICR.
97. The GOL saw the development objective of the Project as “to facilitate increased
participation of the private sector in the economy by creating conditions for improving its
productivity and competitiveness”. While no assessment of the overall achievement of
the project objective was provided, the GOL report reviewed the outputs and outcomes
by subcomponent and in general found that the performance of the two main components
27 For instance, after the first planted seedlings were damaged the pilots reportedly learned a lesson that
irrigation and hail protection were important to fruit trees.
29
was satisfactory. The Project was found to have significantly contributed to capacity
strengthening of the relevant stakeholders, especially the Project Focal Point in all
implementing agencies.
Component 1 – Most activities were successfully implemented, and the outcome was
satisfactory. Challenges were significant in implementing Immigration and Passport
Services Reform sub-component due to the complexity of the sub-component design,
lack of capacity within the implementing Ministry and the absence of a policy
framework for immigration.
Component 2 – The overall performance of this component was satisfactory as
measured by the achievements of the set targets. Most activities under this
component were successfully implemented. Some modifications were made to make
the targets for the subcomponents on the garment industry skills development and the
Lesotho Enterprise Assistance Program more realistic.
98. Apart from the problems encountered under subcomponent C1B, the following
main weaknesses were identified:
The project design had weak linkages between output and outcome indicators and as
a result affected the efficiency of the Project in translating activities into results under
some sub-components.
Some operations of the Project were based on assumptions that were unrealistic while
some others depended on external conditions beyond the project control which were
not captured in the project assumptions.
99. The government counterpart regarded the Bank task team’s regular supervision
visits most useful, as the Bank staff more often than not was able to resolve issues that
could possibly hamper the progress of the project if left unresolved. The Bank team was
appraised for the contributions to the design and modification/restructuring of the Project
by suggesting changes in priorities and in encouraging acceleration of some reforms. The
relationship between the Government and the Bank was good thanks to regular
communications and Bank task team’s commitment.
100. The GOL report listed the following main lessons learnt:
Policy consensus on specific reform areas is critical during the identification and
preparation phases of the Project to avoid delays in implementation.
It is important to strengthen the parliamentary counsel and develop a predictable
procedure for policy and legislative reform.
Good communication and decision-making modalities coupled with the adoption of
strong management tools among stakeholders are necessary for optimal utilization of
resources and expedite implementation of the project activities.
101. The ICR review agrees in principle the government’s comments and findings.
(b) Cofinanciers
30
Not applicable
(c) Other partners and stakeholders
Not applicable
27
Annex 1. Project Costs and Financing
(a) Project Cost by Component (in USD Million equivalent)
Component Appraisal Amount (USD millions)
2012
Restructuring
Estimate
(USD
millions)
Actual/Latest
Estimate
(USD
Millions)
Percentage
of Appraisal
Percentage
of 2012
Restructuring
Credit US
Million
Grant
US$ million
Total
US$ million
Component One - Improving the Business
Environment 1.01 0.70 1.71 1.29 1.13 66.16 87.71
A: Company Registration and Licensing
Reform 0.00 0.38 0.38 0.48 0.39 102.39
81.06
B: Immigration and Passport Service Reform
1.01 0.00 1.01 0.42 0.35 35.12
84.45
C: Improving Access to Finance
0.00 0.32 0.32 0.40 0.39 121.14
96.91
Component Two - Supporting Economic
Diversification 1.76 2.31 4.07 4.11 3.84 94.40 93.48
A: Skills Development for Garment Center
0.00 0.89 0.89 0.70 0.40 45.31
57.61
B: Horticulture Outgrower Scheme
0.87 0.42 1.29 1.89 1.84 142.31
97.13
C: Tourism industry support
0.89 0.00 0.89 0.68 0.77 86.63
113.38
D: Lesotho Enterprise Assistance Program -
LEAP (incl. LEAP
management) 0.00 1.00 1.00 0.84 0.83 83.20
99.05
Component Three: Project
Implementation Support 0.80 0.54 1.34 2.69 2.91 217.11 108.15
A: Project Management Unit (incl. annual
audit costs and LNDC Contract
Management) 0.04 0.54 0.58 2.17 2.42 417.21
111.51
B. Management of LEAP 0.76 0.00 0.76 0.53 0.49 64.40
28
Component Appraisal Amount (USD millions)
2012
Restructuring
Estimate
(USD
millions)
Actual/Latest
Estimate
(USD
Millions)
Percentage
of Appraisal
Percentage
of 2012
Restructuring
Credit US
Million
Grant
US$ million
Total
US$ million
92.34
Total Baseline Cost 3.57 3.55 7.12 8.10 7.88 110.71 97.32
Physical Contingencies 0.19 0.41 0.60 0.00 0.00 0.00 0.00
Price Contingencies 0.14 0.24 0.38 0.00 0.00 0.00 0.00
Government Counterpart Funding n.a. n.a. 2.00 2.40 2.40 120.00 100.00
Total Project Costs 3.90 4.20 10.10 10.50 10.28 101.81 97.93
Sources: Project Appraisal Document (Feb. 26, 2007) and Project Paper for project restructuring (Dec. 1, 2011), and PMU
Note: The Actual/Latest estimates are data as of 07/11/2013 from the Project Financial Statement
29
(b) Financing
Source of Funds Type of
Cofinancing
Appraisal
Estimate
(USD
millions)
2012
Restructuring
Estimate
(USD
millions)
Actual/Latest
Estimate
(USD
millions)
Percentage
of Appraisal
Borrower
Government
contribution 2.00 2.40 2.40 120.00
International Development
Association (IDA) IDA credit 3.90 3.90 3.83 98.21
International Development
Association (IDA) IDA grant 4.20 4.20 4.27 101.67
Total 10.10 10.50 10.50 103.96
Source: Project Appraisal Document (Feb. 26, 2007),Project Paper for project restructuring (Dec. 1, 2011),and PMU
Note:
1. The Actual/Latest estimates were data as of 12/18/2013 from the World Bank's ClientConnect.
2. The diffence between total actual cost and total actual financing was probably due to for instance SDR-USD exchange rate changes.
3. As of Dec 18, 2013, the original IDA financing in terms of USD equivalent would be $8.31 million and over
$210,000 were cancelled.
29
Annex 2. Outputs by Component
Component Main Output Implementing Agency
Component One: Improving the Business Environment
Subcomponent A:
Company
Registration and
Licensing Reform
Trading Enterprises Regulations amended, approved
and published
Draft Industrial Licensing Bill completed and
submitted to Parliament for discussion
The Companies Regulations and Companies Act
implemented
A Business Licensing and Reporting Workshop
conducted
A study on transition of Company registration from
old regime to the new system recommended
establishment of an electronic data base for a
commercial registry
Companies Registry digitized and automated
2,323 companies have been registered since May
2012 when the new Law came into force
Training designed and conducted for Registrar
General’s Office
Document Management System developed
Strategic Plan for the One Stop Business
Facilitation Centre (OBFC) developed
OBFC Organizational Structure and Institutional
and Human Resource Review undertaken and report
submitted to MTICM for implementation
Company Registration website developed and
operational
Training and international learning opportunities for
key government officials involved in company
registration and legal reforms provided
Needs assessment study for the Commercial Court
completed
Ministry of Trade and
Industry, Cooperatives and
Marketing (MTICM)
Subcomponent B:
Immigration and
Passport Service
Reform
Capacity Building and Training for revamping the
issuance of visas, residency and work permits
delivered
Feasibility Study for a National ID Card System
(NICS) completed and accepted by GOL for
implementation
Feasibility Study on revamping the residency and
work permits issuance protocol completed and
recommendations of the study and action plan
endorsed by GOL
Drafting of specifications and bidding documents
for procurement of the Lesotho Immigration
Management System (LIMS) completed and
endorsed by GOL for implementation
Ministry of Home Affairs
and Public Safety
(MHAPS)/ Project
Management Unit (PMU)/
Ministry of Trade and
Industry, Cooperatives and
Marketing (MTICM)
Subcomponent C:
Improving Access
to Finance
Study Tour to Madagascar by Lesotho National
Development Corporation (LNDC) for exposure to
an operational Credit Guarantee Scheme
undertaken. Working Paper on establishment and
implementation of Partial Credit Scheme developed
MTICM/Lesotho National
Development Corporation
(LNDC), Central; Bank of
Lesotho and Ministry of
Finance
30
Component Main Output Implementing Agency
LNDC Partial Credit Guarantee scheme is
operational with a capitalization of M10 million
Study on the development of a Financial Leasing
Framework undertaken.
Financial Institutions Act (2010) passed which
provides for, among others, regulation of the leasing
industry
Leasing Industry Regulations signed by central bank
Governor and published
Leasing training/work plan developed and training
of various target groups took place
A seminar on leasing was held to broaden
sensitization of key stakeholders on Leasing
Study tour to expose Central Bank staff to a
successful leasing regime in Tanzania took place
National Investment Promotion Strategy has been
developed and is ready for implementation
Investor Tracking system has been developed for
LNDC
Component Two: Supporting Economic Diversification
Subcomponent A:
Skills
Development for
the Garment
Industry
Two skills centers were established and became
operational in Maputsoe and Maseru
Assorted industrial machines (incubation
equipment) have been acquired for the two Centers
Refurbishments of Buildings completed for the two
centers
1,562 workers have been trained by the two centers
and 1,162 placed in industry by project end
The two centers were each managed by the
Management Council which comprised of
industrialists and four Government Ministries
(Operation of the skills centers under the PPP
arrangement started in January 2013)
MTICM/PMU
Subcomponent B:
Horticulture
Outgrower
Scheme
Three pilot farms have been established in
Mahobong, Qoqolosing and Thuathe
A total of 10,761seedlings of different varieties
were planted over an area of approximately 10ha to
test the performance of different varieties of apples,
peaches, plums, cherries, apricots as well as
blueberries.
Irrigation system installed in 3 pilots farms and is
functional
Hail netting completed in 3 farms
Fencing completed in 3 farms
The pilot farmers have been trained on different
aspects of farm management and business
management
Pilot farmers have started to export part of their
produce to South Africa
An end of Season Stakeholder Workshop was
conducted to sensitize stakeholders about the project
A community based roll-out project has been
launched in Mahobong (in March 2013 by MOAFS)
MTICM/Denmar/Ministry
of Agriculture and Food
Security (MAFS)
31
Component Main Output Implementing Agency
to apply lessons learnt at a commercial scale and
also to demonstrate to the local community and to
potential investors the advantage that Lesotho has in
producing tree crops
14,000 seedlings of different varieties of fruit trees
have been successfully planted over an area of
10.1ha at the rollout site
The site belongs to different households who
consolidated their individual land holding into a
single commercial plot
The different households who consolidated their
landholding into a single commercial plot organized
themselves into an association whose constitution
has been registered with the Law office
The association members have established a farmers
company which is registered with Registrar of
Companies
Fencing, hail netting and irrigation system have
been installed at the roll out site
A study tour took place to expose members of the
association and relevant staff of the Ministry of
Agriculture to a successful Farmers’ formation in
Swaziland
Subcomponent C:
Tourism Industry
Support
An online booking system (WHL) for tourism
accommodation facilities and other tourism
activities in Lesotho was established
Training workshops conducted for tourism
establishment to capacitate them with skills relevant
to on-line booking
Lesotho Council for Tourism (LCT) was granted
support to strengthen the capacity of industry
operators
A joint marketing strategy was developed and
executed by LTDC in collaboration with Lesotho
Hotels and Hospitality Association (LHHA) and
Tour Operators Association of Lesotho (TOAL)
through the matching grant scheme, the Lesotho
Enterprise Assistance Program (LEAP)
The concessions manual which sets out policies and
procedures for issuance of concessions within the
tourism sector has been developed MTEC and
LTDC Strategic plan has been developed
MTEC staff trained on PPP contract management
Signing of the SNP concession agreement done
(May 31, 2013)
Four new concessions were concluded and signed
by the project end: Lejone, Tsehlanyane, Kome and
Sehlaba Thebe National Park
Educational and Familiarization tour in the country
by LTDC’s Tourist Information Officers completed
Implementation of tourism grading system has been
completed and 12 establishments have been graded
and assessors trained
Ministry of Tourism,
Environment and Culture
(MTEC)/Lesotho Tourism
Development
Corporation/PMU
32
Component Main Output Implementing Agency
A subsector review for the handicrafts sector
completed
Feasibility study for the Maseru Information
Center/crafts market completed in collaboration
with the MTEC
Stakeholder dissemination and engagement event to
establish a handicrafts working group took place
Review and updating of the Tourism Statistics
System and Development of a Tourism Satellite
Account completed
Subcomponent D
Lesotho
Enterprise
Assistance
Program (LEAP)
The matching grant scheme (Lesotho Enterprise
Assistance Program (LEAP)) has been established
All procedures, systems and documentation are in
place including LEAP Approvals Committee for
effective management of the scheme
LEAP has assisted 193 firms and 17 business
associations since the inception of the project, with
a total LEAP beneficiaries/clients: 193 firms Plus
17 associations = 210
Percentage distribution of LEAP funds:
1. Associations – 30%
2. Large Enterprises – 29%
3. Small and Micro Enterprises – 28%
4. Medium Enterprises – 13%
Top 4 highest ranking assisted sectors:
1. Tourism
2. Manufacturing
3. Trading/Retail
4. ICT
LEAP beneficiaries by Gender:
1. Small and Micro Enterprises
Percentage of Small and Micro male owned
Enterprises – 38%
Percentage of Small and Micro female owned
Enterprises – 62%
2. Medium Enterprises
Percentage of Medium male owned Enterprises –
61%
Percentage of Medium female owned Enterprises –
39%
3. Large Enterprises
Percentage of large male owned Enterprises – 81%
Percentage of Large female owned Enterprises –
19%
MTICM/PMU
33
Annex 3. Economic and Financial Analysis (including assumptions in the analysis)
See Section 3.3 above.
34
Annex 4. Bank Lending and Implementation Support/Supervision Processes
(a) Task Team members
Names Title Unit Responsibility/
Specialty
Lending
Ricardo Inzunza Consultant CICTI
Georgette B. Johnson Program Assistant AFTFW
Yasuo Konishi Consultant EASRE -
HIS
Shaun Mann Senior Investment Policy Officer CSAIC
Agata E. Pawlowska Lead Operations Officer ECCU8 Task Team Leader
Roy Pepper Consultant QLP -
HIS
Ganesh Rasagam Lead Private Sector Development
Specialist AFTFE
Dileep M. Wagle Consultant AFTFP
Supervision/ICR
Henri A. Aka Operations Officer SASHN
Slaheddine Ben-Halima Consultant MNAPC
Paramita Dasgupta Manager CSAIC
Wilfrid Bernard Drum Consultant AFTFW
Michael Olavi Engman Senior Economist AFTFE
Xiaofeng Hua Sr. Financial Sector Specialist AFTFE ICR team leader
Wedex Ilunga Sr. Procurement Specialist AFTPE
Djibrilla Adamou Issa Sr. Financial Specialist MNSF1
Sidonie Jocktane Executive Assistant AFMGA
Smita Kuriakose Economist AFTFE Task Team Leader
Hannah R. Messerli Sr. Private Sector Development
Specialist AFTFE
Tandile Gugu Msiwa Financial Management Specialist AFTME
Tanangachi Ngwira Operations Analyst AFTFE ICR team member
Jonathan Nyamukapa Sr. Financial Management
Specialist AFTME
Eavan O'Halloran Country Program Coordinator ECCU3
Magalie Pradel Program Assistant AFTFW
Ganesh Rasagam Lead Private Sector Development
Specialist AFTFE Task Team Leader
Joao Tinga Financial Management Analyst AFTME
Chitambala John Sikazwe Procurement Specialist AFTPE
Gert Johannes Alwyn Van
Der Linde
Lead Financial Management
Specialist AFTME
Michaela J. Weber Private Sector Development
Specialist AFTFE
35
Chunlin Zhang Lead Private Sector Development
Specialist AFTFE Task Team Leader
(b) Staff Time and Cost
Stage of Project Cycle
Staff Time and Cost (Bank Budget Only)
No. of staff weeks USD Thousands (including
travel and consultant costs)
Lending
FY05 18.04 125.97
FY06 33.75 180.71
FY07 42.84 256.31
Total: 314.23 562.99
Supervision/ICR
FY08 16.57 96.90
FY09 16.64 85.09
FY10 12.49 75.57
FY11 21.34 120.35
FY12 20.48 114.79
FY13 10.12 68.03
FY14 4.88 21.73
Total: 102.52 582.46
36
Annex 5. Beneficiary Survey Results (if any)
No end-of-project beneficiary survey was conducted.
37
Annex 6. Stakeholder Workshop Report and Results (if any)
No end-of-project stakeholder workshop was held.
38
Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR
The Project Management Unit at the Ministry of Trade, Industry, Cooperatives and
Marketing conducted an ex-post review of the PSCED project in July 2013. Below is a
summary of the report.
Overall Impact and Results
1. The key results were as follows:
The Component 1 outcome is rated satisfactory and the benefits are likely to be
sustainable.
As a result of company registration law, the overall performance of the country on the
ease of doing business index has improved.
The number of days to start a business as a result has been reduced from 40 to 24
according to Doing Business report that was released by the International Finance
Corporation and the World Bank in October, 2012.
The use of model articles of incorporation and the removal of the minimum capital
requirement have made positive impact on the creation of new enterprises in Lesotho;
especially the formalization of micro enterprises.
Capacity Building and investor tracking system was developed to build data base of
potential investors as well as existing ones including screening mechanism for
effective investment facilitation.
The overall project performance of Component 2 is rated satisfactory as measured by
the achievements made in relation to the set targets.
Establishment an operational PPP model for Garment centers and capacity building of
people and placement of trainees in the industry for jobs.
Expansion of production of best performing early variety tree crops on a commercial
scale and the pilot farms are to be used as training centers.
Increase in the number of tourists visiting Lesotho, and more than three tourism
concessions were signed. In addition, the design and implementation of
accommodation grading system is reflective of Lesotho’s offerings and which is
within the context of the established systems throughout the region.
Capacity building of private sector through financial and technical assistance.
2. The Assessments by subcomponent were as follows:
Subcomponent C1A – Most of the key performance indicator targets were considered
as met. As a result of the reform, the overall performance of the country on the ease
of doing business index has improved. The use of model articles of incorporation and
the removal of the minimum capital requirement made positive impact on the creation
of new enterprises in Lesotho, especially the formalization of micro enterprises.
Subcomponent C1B – The sub-component received the biggest financial allocation
(57% of total budget of Component 1), but was the worst performing sub-component
in terms of achieving the intended results. This was largely due to the complexity of
39
the sub-component design, limited institutional and human resources capacity within
the MOHAPSPA and the absence of a policy framework for immigration. The sub-
component was eventually dropped during the restructuring process of the project as a
consequence of unsatisfactory performance.
Subcomponent C1C – All key performance indicators targeted under this sub-
component were met or exceeded. An investor tracking system was developed to
build data base of potential investors as well as existing ones including screening
mechanism for effective investment facilitation.
Subcomponent C2A – The sub-component had progressed fairly well in terms of
establishing an operational PPP model for the training centers as well as placing
people trained by the centers for jobs.
Subcomponent C2B – Three pilot farms were established and performance of
different varieties of apples, peaches, plums, cherries, apricots and blueberries were
experimented. The lessons learnt from the pilots were used to expand production of
best performing early variety tree crops on a commercial scale. The three pilot farms
will be used as training and demonstration sites. The pilot farms are in the process of
being certified by the Global Gap, and once certified their produce will be sold
globally.
Subcomponent C2C – All key performance indicators targeted were met with the
number of tourists visiting Lesotho increased, and more than three tourism
concessions signed by end of the project. Another significant achievement was the
design and implementation of an accommodation grading system.
Subcomponent C2D – The targets were achieved, i.e. to increase the revenue of
LEAP assisted firms and the income of LEAP assisted association members.
Project Management
3. Project Review Committee (PRC): The PRC consisted of 8 members representing
the agencies responsible for the project implementation. After the Midterm Review, it
was decided that the PRC should be elevated to a Project Steering Committee (PSC) by
assuming the responsibilities of the PPSC in addition to its original function of technical
support. The committee met every month to review implementation progress and later on
changed its sittings to quarterly to monitor the implementation progress of the project and
help to resolve technical and implementation problems affecting project progress. The
meetings were convened by the Project Manager and chaired by the Principal Secretary
of MTICM.
4. Project Management Unit (PMU): The PMU was managed by a qualified project
manager and the provision of procurement, financial management and M&E services
were initially subcontracted to the Lesotho National Development Corporation (LNDC)
on a fee-based contract, however, the contract was terminated after the mid-term review
of the Project to allow the project to make direct recruitment of fiduciary staff.
40
Results Framework and Monitoring
5. Component 1: Although it is too early to predict the eventual impact of the PSC
Project through this component, most activities were successfully implemented. The
project outcome is therefore rated satisfactory and the benefits are likely to be sustainable.
Challenges that were encountered in implementing Immigration and Passport Services
Reform sub-component were significant due to the complexity of the sub-component
design, lack of capacity within the implementing Ministry and the absence of a policy
framework for immigration. Consequently, the sub-component was dropped during the
mid-term review of the project.
6. Component 2: The overall project performance on this component is rated
satisfactory as measured by the achievements made in relation to the set targets. Most
activities under this component were successfully implemented. Some modifications
were, however, made on intermediate income indicators of Skills development for
garment Industry and the Lesotho Enterprise Assistance Program (LEAP) to make new
targets more realistic.
World Bank Performance
7. The supervision missions which took place on a regular basis over the period
2007-2013, were regarded as most useful by the Ministry of Trade and Industry
Cooperatives and Marketing and the Project Management staff. Supervision mission
staff more often than not was able to resolve issues that could possibly hamper the
progress of the project if left unresolved. The mission also contributed to the design and
modification/restructuring of the project by suggesting changes in priorities and in
encouraging acceleration of some reforms. Throughout the project duration, the
relationship between the Bank and the Borrower were good as a result of regular
communication between the project office and the IDA. This was greatly assisted by the
commitment of the IDA Task Manager supervising the project.
Lessons Learned
8. Main lessons learnt include:
The Project design had weak linkages between output and outcome indicators and as
a result this affected the efficiency of the project in translating activities into results in
some sub-components;
Some operations of the project were based on assumptions that were unrealistic while
some depended on external conditions beyond the project control which were not
captured in the project assumptions;
Policy consensus on specific reform areas is critical during the identification and
preparation phases of the project to avoid delays in the implementation of the project;
It is important to strengthen the parliamentary counsel and develop a predictable
procedure for policy and legislative reform;
41
Private Sector Development (PSD) initiatives should be linked with public sector
reforms to ensure that the public service has requisite capacity and skills to support
the private sector ;
Institutionalize the reform agenda and integrate it into line function ministries’
strategic plans and action plans and incentives and professionalize the public sector
(“carrot and stick”);
Strengthen data management and M&E divisions/units within the public sector;
To avoid administrative bottlenecks, the Project Management Unit (PMU) should
directly recruit its own staff and should not sub-contract staff from other institutions;
Good communication and decision-making modalities coupled with the adoption of
strong management tools among stakeholders are necessary for optimal utilization of
resources and expedite implementation of the project activities; and
The PSCP has significantly contributed to the strengthening of the capacity of
relevant stakeholders, especially the Project Focal Point in all implementing agencies.
42
Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders
Not applicable
43
Annex 9. List of Supporting Documents
The following documents supported the ICR review:
The World Bank documents:
1. Project Concept Note for the Lesotho Private Sector Competitiveness and Economic
Diversification Project (PSCED, June 23, 2005)
2. Country Assistance Strategy for Lesotho (September 14, 2006)
3. Minutes of Quality Enhancement Review Meeting for PSCED (October 25, 2006)
4. Minutes of Decision Package Review Meeting for PSCED (January 10, 2007)
5. Project Appraisal Document for PSCED (February 26, 2007, Report No: 37756-LS)
6. Financing Agreement for PSCED (April 17, 2007)
7. Country Assistance Strategy for Lesotho (May 17, 2010)
8. Project Mid-Term Review Issues Paper and MTR mission aide memoir (October 19,
2010)
9. Environmental Evaluations of A Horticulture Demonstration Farm in Lesotho
(E1534)
10. Project Paper (December 1, 2011)
11. Project Paper (March 12, 2012)
12. Project Implementation Status and Results reports (No 1 – 12)
13. Bank team supervision mission aide memoires
14. Project Appraisal Document for PSCEDII (October 3, 2013, Report No: 81069-LS)
15. Environment and Social Management Framework for PSCEDII – Horticulture
(E4263)
Other:
1. PMU/MTICM end-of-project review report (July 2013)
2. PMU progress reports
3. PMU/Bank team presentation on horticulture subcomponent at end of season
Workship (March 11, 2012)
4. Golden Tulip presentation on Commercialization Fruits in Lesotho at CAADP
African Forum in Tunisia (November 2012)
5. Global Development Solutions, LLC: “Tree Crop Production in Lesotho: Business
Plan for the Pilot Farms” (March 2013)
44
MAP