RDMU - Swaziland

The European Union’s Programme for SwazilandService Contract No 2007 / 147-446Restructuring and DiversificationManagement Unit (RDMU)to coordinate the implementation ofthe National Adaptation Strategy tothe EU Sugar Reform, SwazilandFifth Progress Report – December 2010for the period 01 February 2010 – 31 July 2010

Your contact personswith GFA Consulting Group GmbH areDr. Susanne PecherAnke SchnoorRestructuring and Diversification Management Unit (RDMU)to coordinate the implementation of the National AdaptationStrategy to the EU Sugar Reform, SwazilandFifth Progress Report - December 2010for the period 01 February 2010 – 31 July 2010AddressGFA Consulting Group GmbHEulenkrugstraße 82D-22359 HamburgGermanyPhone +49 (40) 6 03 06 – 111Fax +49 (40) 6 03 06 - 119Email anka.greiner@gfa-group.de

DISCLAIMERThe contents of this report are the sole responsibility of the RDMUand can in no way be taken to reflect the view of the European Union.

KDDPLUSIPM&EMEPDMIPMoPW&TNAONASNDSNGONMNPVODAOGDO&MPCMPDDPESPIFPMUPRPRSAPPRSPPSRDMUREASWARMFRSARSSCSASABISACUSCSCGASECSHIPKomati Downstream Development ProjectLower Usuthu Smallholder Irrigation ProjectMonitoring and EvaluationMinistry of Economic Planning and DevelopmentMulti Indicative ProgrammeMinistry of Public Works and TransportNational Authorising officerNational Adaptation StrategyNational Development StrategyNon Government OrganisationNew MethodologiesNet Present ValueOfficial Development AidOutgrower DepartmentOperation and MaintenanceProject Cycle ManagementProject Development DocumentProject Electricity SystemProject Identification FicheProject Management UnitPublic RelationsPoverty Reduction Strategy and Action PlanPoverty Reduction Strategy PaperPermanent SecretaryRestructuring and Diversification Management UnitRenewable Energy Association of SwazilandRatoon Management FundRepublic of South AfricaRoyal Swaziland Sugar CorporationSouthern AfricanSouth African Institute of IrrigationSouthern African Customs UnionSteering CommitteeSwaziland Cane Grower AssociationSwaziland Electricity CompanySmallholder Irrigation Projectv

SNLSOSPSSSASSFSSGSTESWADESWAPSWOTTAPToRUNFCCCVOCWGZARSwazi Nation LandStrategic ObjectiveSpecial Preferential SugarSwaziland Sugar AssociationSwaziland Sugar FacilitySmall-Scale GrowerShort-Term ExpertSwaziland Water and Agriculture Development EnterpriseSector Wide ApproachesStrengths, Weaknesses, Opportunities, ThreatsTechnical Administrative ProvisionTerms of ReferenceUnited Nations Framework Convention on Climate ChangeVehicle Operation CostsWorking GroupSouth African Randvi

1 E X E C U T I V E S U M M A R YThis report captures the activities and progress accomplished between the 01 February 2010and 31 July 2010. The review of progress in this report will be illustrated in line with theresults to be accomplished and as outlined in the logical framework of the RDMU.Under “Result 1: EU Accompanying Measures for Swaziland are committed andimplemented”, the main activities of the RDMU in the reporting period centred aroundassisting the EU in developing the necessary appraisal documents for the Annual ActionProgramme 2010 (PIF and AF 2010). The amount which is available for the AAP 2010 totals€ 12.4 million. The AAP 2010 focuses on the upgrading of the Mananga – Sihoye Road overa distance of about 14 km. The RDMU undertook a financial and economic analysis for theproposed Mananga – Sihoye Road as a supporting document for the AAP 2010.In parallel to the last discussions on the Multi Indicative Programme (MIP) 2011-2013, theRDMU started on the elaboration of the PIF 2011. Focal intervention areas of the PIF 2011will be the finalisation of the transport infrastructures in the North and South and theSwaziland Sugar Facility (SSF), which is meant to support actions for out growers, and socialservices through grant contracts awarded following a Call for Proposals.Part of the preparation for the AAP 2011 was also to revisit the proposed RatoonManagement Fund (RMF) concept and to adjust it more to a bulk input procurement systemin which all growers (small-medium and large) are interested to participate.With regard to the implementation of the various AAPs, it should be noted that the RDMUorganised a preliminary design workshop in March 2010 whereby the two consultants (NODand Aurecon) presented the first findings on the design of the infrastructures in the North(Mananga – Sihoye Road and Manzana – Dvokolwako Road) and South (Siphofaneni – St.Phillips Road and Bridge). The workshop was followed by a tour to the project areas. NODsubmitted final design reports for the two road projects in May and July 2010 and Aurecon inJuly 2010 for the roads in the south.As far as AAP 2007 is concerned, the RDMU organised the evaluation committee meetingfor the (irrigation works) EU Round 3 tender. Moreover, the RDMU assisted the EU in theverification of the interim payment certificates of the (irrigation works) EU Round 1 Tendercontractors, Irricon and SII.With respect to the AAP 2009, the RDMU developed and finalised the grant contractproposal for the Swaziland Cane Grower Association (SCGA), a manual on procedures andapplication documents. Several stakeholder meetings were organised to discuss and agreethe eligibility criteria for the growers who want their irrigation equipment rehabilitated or whoare interested in diversifying.Parallel to that, the RDMU developed documentation for the proposed bulk water irrigationschemes and organised three evaluation committees. Following the approval of the threeschemes (Malkerns Canal, Poortzicht Irrigation Scheme and Siphon 4 at Mhlume), theRDMU started developing tender documents for the final design and supervision (servicetender).The RDMU assisted the EU in the process of drawing up the final document of the MIP 2011-2013. At the time of writing this progress report, the final allocation has not beencommunicated to the stakeholders in Swaziland.Under this result we envisage finalising the PIF and AF 2011 in the next reporting period,finalising the tender documents for the transport infrastructures to be funded from AAP 2008and AAP 2010 and launching the works tenders, continuing with the verification of paymentcertificates of contractors and consultants, launching the EU Round 3 irrigation works tender,finalising the SCGA grant contract and negotiating and agreeing an RDMU extension.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 1

Under “Result 2: Implementation and financing of other NAS activities facilitated”, the RDMUcontinued to work on the Project Development Document (PDD) for the Ubombo fuel switchand energy efficiency project. One particular aspect in this regard was that the RDMUfacilitated the process to change the baseline methodology applied by the UNFCC which willresult in a larger amount of CER to be sold (providing more benefits through carbon credits).The RDMU continued to develop more PR material such as an RDMU newsletter, a radiospot and press coverage around the signing of the AAP 2009 Financing Agreement.Under this result we plan for the next reporting period to finalise the PDD in accordance withthe revised baseline methodology and develop further PR material.Under “Result 3: Stakeholder liaison established and in operation”, the RDMU is continuingits coordination and liaising role with the stakeholders on a frequent basis. Numerous NCand NAS SC were organised in which important issues (MIP 2011-2013 and AAP 2009 andAAP 2010) were thoroughly discussed.Capacity building activities were organised for the stakeholders on EU procedures andregulations (5-day seminar) and for irrigation technicians from SWADE, MoA and RDMU a 4-week training on irrigation designs. Two formal training sessions were organised forstakeholders including the MEPD, the NAS WG and the NAS SC. The RDMU hasimplemented a communication strategy with the organisation of press conferences, thedevelopment of brochures and flyers, the regular update of the RDMU webpage andrepresentation at the Swazi Expo 2009. Moreover, PR material including cricket hats,umbrellas and shirts with the RDMU logo have been developed and disseminated. Severalworkshops with international participation were organised and a study tour of smallholdergrower representatives was undertaken to Malawi to visit fair trade compliant smallholderirrigation schemes.Under this result we will conduct the Zambia Study Tour focusing on fair-trade andsmallholder cane grower irrigation and discuss the content of the AAP 2011 with thestakeholders in various NAS WGs.Under Result 4: A monitoring and evaluation system for the NAS established”, the RDMUrevised the NAS logframe and developed a Monitoring and Evaluation framework for theNAS. The content, including the indicators for this M&E framework will be discussed with thestakeholders during the next reporting period.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 2

2 R E S U L T 1 : E U A C C O M P A N Y I N GM E A S U R E S F O R S W A Z I L A N D A R EC O M M I T T E D A N D I M P L E M E N T E D2 . 1 P r o g r e s s a c h i e v e d d u r i n g t h e r e p o r t i n gp e r i o d2 . 1 . 1 R 1A 1 I d e n t i f y p r o j e c t s f o r t h e f o u r s p e c i f i co b j e c t i v e s S O 1 – S O 4 o f t h e M I P 2 0 0 7 - 2 0 1 0 a n da s s i s t w i t h p r e p a r a t i o n o f t h e P I F a n d A F2.1.1.1 AAP 2009: Support to smallholder cane growers (SO1), diversification(SO4) and NAS coordinationThe Financing agreement for the AAP 2009 was signed by the EU in December 2009. Thesignature by the MEPD was completed at a signing ceremony with strong press coverage inApril 2010.2.1.1.2 AAP 2010: Road Transport Infrastructure (SO3)In order to confirm the priorities for the roads being proposed for NAS funding, the RDMUconducted a traffic count study with a view to undertaking a financial and economic analysisfor each of the roads. This was done with the support of short-term experts. However, as thefunding within the new MIP 2011-2013 is very limited, no additional roads will be financed bythe EU. Nevertheless, the results of the traffic count study were used to elaborate the PIFand AF 2010 (Mananga – Sihoye Road) and to estimate the incremental financial andeconomic benefit this infrastructure project will generate. The incremental benefits have beenestimated as positive, especially due a relatively large traffic volume accounted for by theordinary general traffic using the route.Subsequent to this analysis, the AF and supporting documentation was finalised andsubmitted for approval to EU headquarters. It is expected that the corresponding FinancingAgreement will be signed at the end of 2010 for an amount of € 12.4 million. In this context ithas to be noted that Swaziland has benefited from an additional € 2.4 million coming fromuncommitted allocations for the Fiji Islands.With the exclusion of the social services component in the AAP 2010, the proposed study onthe Mananga College Business Plan has been postponed pending the identification offeasible actions for the AAP 2011.2.1.1.3 AAP 2011: Road Transport Infrastructure (SO3)/Support to Outgrowers(SO1), Social Services (SO2) and Institutional SupportIn parallel to the last discussions on the MIP 2011-2013, the RDMU started on theelaboration of the PIF 2011. The focal point will be the Swaziland Sugar Facility (SSF) tosupport actions for out growers and social services through grant contracts awardedfollowing a Call for Proposals. It is proposed to allocate the funds of the whole MIP 2011-2013 under the AAP 2011. It is expected that the PIF 2011 will be ready at the end ofSeptember 2010 and the AF by mid December 2010.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 3

Input Procurement and Ratoon Management FinanceIn March 2009, the sugar industry through the RDMU finalized an assignment to establishthe feasibility of the ratoon management finance for the cane growers. This was followed byan assessment of the operationalization of the proposed structure which was undertaken inDecember/January 2010. The key finding from the exercise was that the facility wouldimprove the timely access of the ratoon management finance to the growers and alsofacilitate effective linkages between the growers and the other supporting institutions [e.g. theMiller Outgrower Departments and the Development Finance Institutions (DFIs)]. Theobjective is to enhance the grower support, pre-empt grower problems and address themeven before they occur.Changes were proposed to the RMF assignment with a clearer focus on a centralised bulkinput and ratoon procurement system. The main reason for this change of assignment wasthe fact that the medium and larger growers were not interested, or were even reluctant tocontribute to the paired (equity) capital for the RMF, as the main beneficiaries of the RMFwould be the smallholder growers. The reluctance is attributed to the fact that medium andlarger growers already have longstanding relationships with commercial banks and haveaccess to finance under more favourable conditions than the RMF could offer. There is nowa common consent among the stakeholders that a bulk ratoon procurement system is easierto implement and would also at least benefit small and medium growers.An assignment will be undertaken to review and customize the existing RMF concept to beamenable to the grant modality and give prominence to the central input procurement facilityto reduce the input costs for the growers. It is anticipated that this assignment will clearlyindicate the location of the facility, co-financing modalities and the implementationprocedures. The following are the specific areas that will be analyzed;Examine the key elements that will be required and the contribution of the key industryplayers towards the formation of the facility in conformity with the grant modality.Analyze and establish the key conditions that can facilitate the setting-up, operationand the sustainability of the facility. This will include assessing and recommending thepositioning (hosting) of the facility, screening & appraisal procedures, operatingsystems and resource mobilization strategies.Evaluate the financial viability and sustainability of the proposed structures andoperating procedures.Finally, develop a logical plan of action comprising the strategic areas, key activities,indicators and budget that will facilitate the implementation of the proposed facility.The outcome of this exercise will facilitate the preparation of the grant proposal applicationand the mobilization of additional resources to support the operation of this facility.2 . 1 . 2 R 1 A 2 : A s s i s t E U a n d M E P D i n : d e v e l o p m e n t o ft e n d e r d o c u m e n t s , s u p e r v i s i o n , m o n i t o r i n g a n dg u i d a n c e o f c o n t r a c t o r s2.1.2.1 AAP 2006: Final Design of Transport Infrastructure in the North (SO3)Nicholas O‟Dwyer (NOD) submitted preliminary designs for the Mananga - Sihoye Road inthe northern part of Swaziland in February 2010. The RDMU reviewed the report andcoordinated the comments of various stakeholders. On 03 March 2010, the RDMU organiseda preliminary design workshop in which the two final design consultants (AURECON/Southand NOD/North) were given the opportunity to present their findings. On 04 March 2010, theRDMU organised a field trip with the two contractors and various stakeholders to the twoRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 4

project sites facilitating discussion of outstanding issues and allowing the assimilation ofmore in-depth information from the design consultants. NOD submitted the draft final designreport in May 2010 and draft tender documents for the Mananga-Sihoye Road in July 2010.The two reports were reviewed and commented on by the RDMU.Initial Environmental Evaluation (IEE)The final design document included a detailed Initial Environmental Evaluation (IEE). An IEEis sufficient since the SEA categorised the project as category 2 which means that only anIEE and a Comprehensive Mitigation Plan (CMP) are required. According to the project thereare no major environmental obstacles. Particular attention needs to be given to potential soilerosion due to excavation activities and storm water drainage. The environmental reporthowever lacks an assessment of risks from increased road traffic accidents and casualties.One has to bear in mind that the current road is a basic dirt road where few accidents occur.With the construction of an upgraded route, it can be expected that the number of accidentswill increase.Design and cost of the projectThe proposed project is a single carriageway with a 7.0 m wide pavement and a shoulder oneach site of 1 m, with 0.5 m on each shoulder to breakpoint. The cost of the project isestimated at E 80.514 million which corresponds to € 8.041 million at an exchange rate of€ 1.00 = E 10.Cost benefit analysisFor the AF 2010, the RDMU undertook a cost-benefit analysis (CBA) based on informationderived from a traffic count study undertaken by the RDMU in early 2010, recent figures onhectarage and yields by the sugar industry and latest figures on vehicle operating costs(VOC). The VOC were obtained from a survey of various road infrastructure projects inSouthern Africa in 2009 and adjusted to the conditions in Swaziland with a particularemphasis on sugar cane traffic.The underlying assumptions for the CBA were: i) an incremental annual increase of the trafficamounting to 2 % as a response to the better road conditions, ii) periodic maintenance takesplace every 5 years for gravel roads (regravelling) whereas resealing takes place every 10years, iii) only direct tangible benefits and effects which can be given a monetary value havebeen considered in the CBA. As such, capital cost, cost for supervision, savings in vehicleoperating costs and annual and periodic maintenance have been considered respectively ascost benefits. Other economic effects such as multiplier effects arising from potentialincreasing economic activities from the community have not been considered due to absenceof reliable figures. The financial analysis results in a Net Present Value (NPV) of € 1.275million and a Financial Internal Rate of Return (FIRR) of 6.0 % (compared to a discount rateof 5 %). The sensitivity analysis indicates that the model used is sensitive to changes in thevehicle operating costs which are largely determined by the International Roughness Index(IRI).With regard to Switching Value Analysis, the model illustrates that the investment cost canincrease up to 16 % to accomplish a FIRR of 5.0% to obtain a NPV higher than Zero. On theother hand, benefits (VOC) can decrease by 14 % to accomplish a FIRR of 5.0% respectivelyto obtain a NPV higher than Zero. With particular respect to reducing transportation cost ofsugar cane farmer associations, the improved Mananga - Sihoye Road is expected to reducevehicle operating cost by about € 43 (discounted) per ha per annum, based on a harvest of103 tons cane per ha. This is above the 15% target for smallholder transport cost reductionsfor the third specific objective of the Multi-Annual Indicative Programme (2007-2010). Fordetails see Annex 7.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 5

2.1.2.2 AAP 2007: Support to smallholder cane growers (SO1)As the estimated value of the EU Tender (irrigation works) Round 2 for new entrant growerswas over € 5.0 million (865 ha) an international tender procedure was required. Publicationwas on 15 th March 2010, the tender period for submission was 90 days. Twenty fivecompanies obtained the tender dossier of which four were based in Europe and theremainder being locally/regionally based. The RDMU participated in the evaluation of thetenders. The expected date for award of the contract is August / September 2010. Theearliest that contractors can be expected on site is October 2010. Works completion timesare estimated as 4.5 months for Takhamiti, 5 months for KDDP and 6 months for LUSIP.The RDMU organised an evaluation committee meeting for the EU Round 3 (irrigationworks). As in the previous rounds, the RDMU reviewed all business plans and cash flowsand commented on them, The Smallholder Irrigation Project (SHIP) Team corrected thebusiness plans and cash flows accordingly. The RDMU assisted SHIP in the development ofthe corresponding tender documents for the development of 297 ha in LUSIP and KDDP.The tender was launched locally at the end of July 2010 with a deadline of 28 th September2010.In parallel, the RDMU assisted SHIP in the verification of the interim payment certificates ofIRRICON and SII, the two contractors for the EU Round 1 contract. The inclusion of theRDMU in the certificate check had been requested by the EU to accelerate the processing ofthe payments to the contractors. Within the reporting period, the RDMU checked threecertificates by IRRICON and two by SII. For details see the next chapter.2.1.2.3 AAP 2008: Transport Infrastructure in the South (SO3)The RDMU assisted the contractor (Aurecon) in developing their design reports, tenderdocuments and gave guidance for the preparation of invoices for the improvement of theexisting road and bridges network in the South. Aurecon participated at the preliminarydesign workshop and field trip on the 3 March 2010. The RDMU reviewed several reportsprepared by Aurecon and commented on them. The RDMU assisted Aurecon in the wholeprocess of developing the contract addendum to split the tender documents and to includethe final design of Mhlatuzane Bridge.With respect to the preliminary design report, the following was agreed:Design StandardsRoute plan (vertical and horizontal alignment)Vertical Alignment – Siphofaneni Bridge: an elevation sufficient for a one hundred year flood,and with the potential to accommodate a grade separation (road over rail) on the north bankin the future.The Junction at the St Phillips- Maphobeni link road:The design speed would require a new alignment at the junction to improve line of sight,which would entail constructing a new crossing over the LUSIP main canal at a cost ofapproximately E 7,000,000. However, government policy is to calm traffic to 60 km/h atjunctions. The existing alignment will be retained, with traffic calming measures.The Road Cross section/Width of formationA 3.5 m lane width with a 1m shoulder30 mm asphalt layerRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 6

Siphofaneni BridgeThree options for the construction were considered:1. Pre-stressed beams2. Incrementally launched3. Reinforced concrete inverted T beamsThe consultants assessed each option against four criteria: Cost; maintenance, timing andaesthetics.The second option was recommended, and agreed:The maintenance costs are lowerThe higher estimated cost is offset by the substantial reduction in risk of any costincreases during works consequent on delays due to claims for delays or additionalworks due to unseasonal floodingThe existing bridge:The existing bridge will have no impact on the new structure, and could be left in place.Access will anyway be difficult owing to the abutments for the new structure, and the newhigh level walkways will be more convenient for pedestrians. The cost of demolition will notbe included in the EU project.Road furnitureFences and bus stops should be included. The social study should indicate the location ofbus stops.Quarry licencesLicences are required for Borrow Pits and a quarry. If the contractor has to request a quarrylicence it will take time and delay the commencement of the works. Potential quarry sitesnearer the works than Kwaluzeni were investigated, with the possibility that the MPW&T orthe RDMU could apply for a mining licence. This option was discarded as licences are nontransferable.Contract phasingThe budget for works is € 14.890m, or ZAR 157,089,500 (March Info euro rate of € 1 = ZAR10.55.The total cost of the works, including the Mhlathuzane Bridge, is currently estimated atZAR 300,000,000. The project will have to be split into two phases, with Phase 2 financedfrom the 2011 allocation.The consultant presented two options for the phasing: a) the Siphofaneni Bridge and theroad to Mhlathuzane Bridge; and b) the balance of the road (≈ 26 km) to St Phillips and thelink to the MR 8 via Maphobeni Bridge.The Ministry of Public Works and Transport (MoPW&T) prefers to construct the bridge first.The road will provide greater benefits to the sugar industry. The NAS SC of July 2010recommended starting with the road for the following reasons:Timing: The contract for the bridge must be awarded in time to commence the worksprior to the dry season (i.e., by April 2011). It would be difficult to achieve this startinga tender in 2010. The commencement of the road is not affected by the seasons.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 7

Supervision Costs: Starting with the road and then doing the bridge will reduce thetotal construction time by at least three months, bringing forward the benefits andreducing the cost of works supervision.Combining Bridge structures in the same contract: it is preferable to combineSiphofaneni and Mhlatuzane Bridges in the same works contract, given the potentialsynergies during construction.Table 1: Phasing of Option 1 and cost in E – Roads in 2008 and Bridge in 2011Item AAP 2008 AAP 2011Road construction/upgrade 124,035,003Road construction/upgrade 42,548,496Siphofaneni Bridge construction 0 91,827,532Mhlathuzane river crossing 0 25,000,000Bridge over canal 7,500,000 0Sub Total 131,535,003 159,376,028Contract price adjustment 5% 6,576,750 7,968,801Contingencies 10% 13,153,500 15,937,603Sub Total 151,265,253 183,282,432Additional Establishment 13,153,500Additional contract price adjustment 6,576,750Total 151,265,253 203,012,682Table 2: Phasing of Option 2 and cost in E – Bridge in 2008 and Roads in 2011Item Contract A Contract BRoad construction/upgrade 42,548,496 124,035,003Siphofaneni Bridge construction 91,827,532 0Mhlathuzane river crossing 0 25,000,000Bridge over canal 0 7,500,000Sub Total 134,376,028 156,535,003Contract price adjustment 5% 7,968,801 6,576,750Contingencies 10% 15,937,603 13,153,500Sub Total 158,282,432 176,265,253Additional Establishment 13,153,500Additional contract price adjustment 6,576,750Total 158,282,432 195,995,503RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 8

Environmental and Social AssessmentGiven the bulky environmental and social assessment report, the RDMU made significantcomments. The overall feeling of the RDMU was that the report put more emphasis on asocial assessment rather than having a balanced assessment without neglectingenvironmental and land-related issues. Moreover, in our view, there are two overridingconcerns about this project – its justification and the selection of the proposed bridge‟salignment. The RDMU recommended that these two issues need to be more stronglyelaborated in the final report.Mhlatuzane BridgeThe design of a new bridge was not included in the original ToR. Four options werediscussed:Option 1:Option 2Option 3Option 4Widening of the existing bridge to accommodate pedestrians – 60km/hWidening of the existing single lane bridge to a double lane bridge at the samelevel for 60 km/h or 100 km/hNew high level bridgesLeaving the road as it is for 1 km either side of the bridge (to reduce traffichazard).Option 1 and 2 requires a substantial cut on the approaches, which are costly and provide noother benefit. Option 4 would result in an unfinished product (the government cannot financethe bridge). Option 3 was recommended to the NAS SC and approved. The estimated cost isE 24 millionContract AddendumThe service contract requires a rider:to include the design of the Mhlatuzane bridgeto allow for the preparation and administration of two tendersThe EU has agreed in principle, and authorised a negotiated procedure.2.1.2.4 AAP 2009: Support to smallholder cane growers (SO1), diversification(SO4) and NAS coordinationSupport to cane growers new and existingThough the FA for the AAP 2009 was signed in April 2010, several NAS WG and NAS SCwere organised to discuss and agree on the final allocation of the AAP 2009 funds. Therewas a particular bias among the various members of the sugar industry in the allocation fornew entrants versus existing growers. A result of the NAS WG on the 26 th July 2010 was thatnew entrants will be given priority compared to the rehabilitation of the bulk irrigationinfrastructures (Poortzicht and Siphon 4) and the rehabilitation of the Malkerns Canalprovided that the cost does not escalate after the final design. For details, see next chapter.During the reporting period, other important issues were discussed and progressed:Existing Growers/DiversificationAssisted by a short-term expert (STE), the RDMU developed the grant contract proposal forthe SCGA, a manual on procedures and application documents for those who wish to getsupport from the SCGA grant. In parallel, a local short term expert conducted a survey ondiversification. Preliminary results are available; however, the RDMU needs to verify the database established for this survey before making the results of the survey public.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 9

Seed caneThe project intends to finance seed cane for small and medium scale growers. Thestakeholders agreed the contribution is limited to the cane, delivered to the farm gate. Thisrepresents approximately 40% of the replanting costs. The grower would finance thebalance. This approach builds on the industry seed cane scheme by subsidising only thecane.The Technical Administrative Provision (TAP) recognized that the characteristics ofsecondary seed cane supply lend themselves to a negotiated procedure, followed by a directaward of contract:a) It takes 10-11 months to produce seed cane. Only the Miller-cum planters have SSAcertified secondary cane available immediately in sufficient quantities to be able tosupply the growers within any reasonable performance period (normally 90 days in asupply tender).b) Seed cane cannot be imported from the RSA for phyto-sanitary reasonsc) Transport costs for seed cane are high and very sensitive to distance. Therefore it canonly be supplied at an economically viable price by someone centrally located withinthe Mill group area. Given the geographical structure of the industry in Swaziland, thisis the Miller-cum-Planters, unless the tender were divided into a multitude of lotscorresponding to production centres, which is not possible for the reasons stated in a)above.d) Price cannot be the sole award criterion (lowest compliant tender), as all suppliers arebound by the same price formula. The price of seed cane is set by the produceraccording to an industry formula, regulated by the SSA, and therefore every tendererwill offer the same farm gate price.On this basis, the RDMU assisted the MEPD prepare a request for a derogation to allow adirect award of contract in January. This would also reduce the transaction costs for theproject and the MEPD/EU.To finalise the supply tender the industry must provide the following information:EligibilityTenderer to bid for a given quantity (not a price per ton). The tender requires theactual quantities of seed caneAssurance that the growers will take it up. In an EC supply tender it is only possible tovary the contracted quantities by 25% either way.The distance and quantity for each grower: the quoted price must include the transportcosts to the point of delivery, rather than a ton per km rate, to establish the cheapestoffer.The industry is keen for medium growers to benefit from the project. The TAP does notestablish their eligibility. The Contracting Authority must request the EU to agree to this priorto the preparation of a tender. Medium scale growers are eligible under MIP 2: one argumentcould be consistency.TimingCane is replanted in autumn and spring.Holding the priceWe want to tender for one growing season (i.e., autumn and spring replant). The tendererwould have to be willing to offer a price valid over this extended period, as variations are notRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 10

possible. The EU is reluctant to use the local currency because it introduces uncertainty intothe final amount of the contractual commitment. Therefore the exchange rate is also a risk forthe supplier. Otherwise we just go for either autumn or spring supplyBulk irrigationThe RDMU received three applications from the SCGA for financing bulk water. The RDMUdrew up supporting documentation (among other financial and economic analysis forPoortzicht and Siphon 4) for the three proposed bulk irrigation schemes including detailedfinancial and economic analyses which are earmarked for being funded by AAP 2009. Inaccordance with the conditions of the financing agreement, a selection committee wasconvened and evaluation criteria agreed. Subsequent to the go ahead by the evaluationcommittee and endorsement by the NAS SC, the RDMU started drawing up the tenderdocuments for a design and supervision service tender. It can be expected that the tender forthe final design and supervision (service contract) will be launched (forecast) in November2010.The following schemes were recommended to the Contract Authority:Table 3:Costs and benefits of proposed bulk irrigation schemesCostEstimated BenefitsMalkerns E 26.65 million NPV: 20M FIRR:26% Cane Area:1,600ha Pineapple: 850 ha Other: 500 haPoortzichtSiphon 4E 14.84 millionE 8 millionSource: calculations by RDMU2.1.2.5 Fair-trade SugarNPV: 6,417,154 FIRR:10.5%Cane Area: 432ha Domestic Supply: 329household Cattle drinking: 130 cattleElectricity cost: decrease by 30%NPV: 2,610,399 FIRR:8.1%Cane Area: 12400 ha Citrus: 1000 haCattle drinking: 130 cattleThe sugar industry took the decision to participate in the fair-trade sugar initiative to improvethe profit margins for the growers. This was based on the findings to assess the feasibility ofthe fair-trade sugar which indicated that the local Small-Scale Growers (SSGs) have thepotential to benefit from the facility. The SSA was assigned to explore ways through whichthe industry can benefit from the fair-trade which included assessing the demand for the fairtradesugar, the certification process, grower eligibility, institutional structures and theutilization of the fair-trade premium. A Task Team comprising the SSA, SCGA, growerrepresentatives, millers, SWADE, the RDMU, and the Business Place was formed to assist inthis process.A bilateral meeting was held in June 2010 with the Cape Town-based FLO-Cert Office todiscuss the framework that the sugar industry has proposed for participation in fair-trade.There was advice that the industry should start with the Farmer Associations as a pilotphase. The structure of the umbrella bodies for the participating growers should be at thePlanters‟ Group level drawing from the individual Farmer Associations. The sugar industryRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 11

had proposed that this be done at the Harvest Group level. Priority should be given to theformation of the umbrella bodies as part of the process towards the certification. A pre-auditassessment will be done through FLO-Cert to determine the suitability of the structure ofthese umbrella bodies, the compliance status of the participating Farmer Associations andthat of the key associated value chain institutions such as the Mills. The outcome of this willprovide the necessary information on the state of readiness within the industry and furthersuggest strategies to expedite the certification process.2 . 1 . 3 R 1 A 3 : A s s i s t E U a n d M E P D i n t h e d e v e l o p m e n to f t h e M I P 2 0 1 1 – 20132.1.3.1 AllocationThe allocation was due to be announced in March 2010, but at the time of writing it has stillnot been communicated officially to Swaziland. The Industry and the MEPD preferred to takean optimistic view of the allocation (€ 75m), whereas the EU cautioned it could beconsiderably less (in the range € 40-60m).If the allocation is lower than indicated in the original decision, it will be due to Swaziland‟slow commitment rate. Industry stakeholders have voiced concerns that this amounts todouble jeopardy, as €11.1m was already cut from the MIP 2007-2010 for the very samereason. Further, the slow rate of implementation reflects more on the nature of EUprocedures than a lack of need or interest within the industry. There is also a perception thatbecause the industry is reporting healthy profits, and the associated costs of managingadditional funds, EU decision makers are less supportive of Swaziland‟s case for a fullallocation. In its updated strategy, the Sugar Industry tried to correct the perception that thefuture was secure, pointing to many uncertainties about continued access to the EU marketand rising operational costs.2.1.3.2 MIP 2011-2013 preparationIn the last reporting period (September 2009) the RDMU contracted two consultants to assistin the preparation of the draft MIP 2011-13 document. AIDCO only provided guidelines forthe MIP in March 2010. The RDMU re-formatted the draft MIP document, adding informationwhere necessary.Following a series of working group meetings to agree on the range of eligible actions, theRDMU presented the main elements of the draft MIP to the NAS SC in June.The range of eligible actions is focused on four areas: improvements in productivity andefficiency of small and medium scale sugarcane growers; improvements to transportinfrastructure, institutional support and provision of social services.In recognition of the administrative burden on an under staffed EU Delegation in Swaziland;the time it has taken to translate global commitments into action on the ground; and thedesire for more ownership of the actions, the MIP 2011 – 2013 places far more emphasis onthe appropriate implementing modalities. For 2011-13 the actions for improving theproductivity and efficiency of small and medium scale sugarcane growers and actions tolower the cost of social services will be implemented through grant contracts.Additional resources will be allocated to the infrastructure projects already designed underthe MIP 2007 –2010. The weakening of the Euro has had an impact on the budget neededfor this area. Provision is made for technical assistance to the MEPD and sugar industryinstitutions.The implementation modalities for MIP 2 should be sufficiently flexible to allow for continuitywith the 2009 Financing Agreement. Specifically, if some of the bulk irrigation projects areRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 12

deferred until 2011, they should be implemented under the same conditions as 2009 (100%financing).While welcoming (with considerable enthusiasm) the move towards grant contracts, theindustry would like to discuss and understand in greater detail the conditions before agreeingto focus exclusively on this modality, e.g., how to account for the 20% beneficiarycontribution contributed by new entrant growers using bank loans.2.1.3.3 Annual allocationsThe MIP 2011-2013 is fully front loaded, as all funds will be committed in 2012. Thus it willrequire only one further programming document and financing agreement for 2011, the roadinfrastructure tender dossiers to be financed under the AAP 2011 are already ready to belaunched. Only one call for proposal under the SSF will be required, because splitting grantapplications over two years offers no advantages and could complicate the evaluationprocess by not allowing for a comprehensive assessment of industry proposals.2 . 2 P r o b l e m s e n c o u n t e r e d a n d p o s s i b l e s o l u t i o n s2 . 2 . 1 2006 A A P A M S P2.2.1.1 AAP 2006 RDMU extension - Integration into the MEPDThe current contract with the RDMU terminates on 13 th December 2010. The Mid-TermReview recommended a 2-year extension of the RDMU. There is a budgetary provision of€ 950,000 to extend the GFA contract to manage the RDMU. The 2009 Financing Agreementstates that the RDMU should be merged with the MEPD.The EU‟s current position is that the semi-autonomous RDMU is inconsistent with its broaderpolicy commitments, most notably the Paris Declaration. It had „accepted the autonomousbody with reticence as an emergency response‟, and only as a temporary structure, as it wasnot in line with aid policy. Therefore after the expiry of the current contract it proposes tobring a reduced structure under the same roof as the NAO support team being planned,becoming the sugar pillar side-by-side with the EDF.After two years the stakeholders have had an opportunity to assess the success of theinstitutional framework put in place to serve and promote the interests of the NAS. Thecurrent location of the RDMU as a semi autonomous body sitting somewhere between thesugar industry, the donor and the MEPD is no longer justified. In addition, from 2009 theMEPD will assume the role of Contracting Authority, adding to its workload and indicating aneed to adapt the institutional support accordingly.The RDMU carried out a review of its current functions, and sought to estimate the humanresource implications during the programming and implementation of the AMSP until 2018,when the majority of individual commitments will be closed.With regard to its role supporting the NAS, the RDMU believes that to all intents andpurposes the NAS is understood by stakeholders to be a vehicle for EU financing. Theinstitutional framework should reflect this reality:a) The NAS was supposed to generate large amounts of additional funding. This wasunrealistic: Swaziland is a middle income country with very few donors operating, andthe needs of the sugar industry or sugar belt would anyway rank very low on their listof priorities.b) The sugar industry is successfully implementing its own adaptation strategy (e.g., millexpansion, product diversification), but it sees little need to involve external agenciesRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 13

in its decision-making (not least because it does not want to compromise itscommercial secrets). Moreover, it has its own well established structures to deal withindustry wide issues.c) The same logic applies to other stakeholders. Unless institutions have a realistic hopeof funding, there is very little incentive to participate in a parallel NAS coordinationmechanism. Thus the active stakeholders are now just the MEPD, SWADE and theMinistry of Agriculture. Trade, etc are not evident. The NAS is not a natural coalition ofthe willing: the glue that holds it together is the prospect of EU funding.d) An external Unit is not an ideal vehicle for taking the lead in designing andimplementing initiatives on behalf of the sugar industry (i.e., almost any measureaiming to increase productivity, output or add value): it must be owned and driven bythe stakeholders themselves. The RDMU also shares the SSA‟s view that the industryhas the relevant expertise. Also, in the event that the interests of the two Millers and/orthe growers are not always one and the same, it is best resolved within industrystructures. At best the RDMU can assist the management of EU funds.e) Third, the institutional framework must be structured to improve efficiency. The EUfunding has taken far longer to mobilise than the stakeholders understood. This hasled to a loss of momentum and fatigue. EU procedures also impose high transactioncosts on the stakeholders. There are two ways of addressing this: providing additionalcapacity to manage EU procedures, or using instruments (like grants) that use apartner‟s own systems and procedures. The second route is preferable, and more costeffective: wherever possible, implementation needs to be devolved to local partners,rather than technical Units. This will also help overcome the low rates of commitmentand disbursement.f) The commitment of resources through grant contracts managed by the Sugar Industrywill transfer ownership of the actions and the management of theprocesses/implementation to the stakeholders. This will obviate the need for theRDMU to continue to play a significant role in implementation, as it has had to do inthe early phases (i.e., infield irrigation, irrigation infrastructure, RMF and fair-trade).The grants could include resources for project identification and formulation.g) The sugar industry already has in place coordination structures for intra-industryinitiatives. These should drive the programming and implementation of actions directlysupporting the sugar industry. Any local institution taking over NAS functions orimplementing EC financed projects will require additional capacity.In summary, the institutional structure must be adapted to the actual circumstances.Pragmatism would indicate a less ambitious strategy, with the RDMU becoming an entitywithin the MEPD that assists the stakeholders programming, design and implementing theEU‟s contribution to the NAS. Implementation will then be led by existing institutions,including fund raising.The way forwardIn line with this, the RDMU proposes a restructuring of the institutional framework and the EUsupport. The approach should seek to:a) Support the MEPD with its NAS/Contracting Authority functionsb) Give implementing partners greater responsibility for project design andimplementationc) Strengthen other key stakeholders, in particular to assist implementation [SSA, SCGA,SWADE, Outgrower Departments (OGDs)]RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 14

Several discussions have taken place between EU, MEPD and RDMU to review the budget,the positions for the extension phase and the terms of reference. There is a generalagreement among the three organizations that the extension will be granted, however detailsneed to be agreed in the next reporting period.2.2.1.2 AAP 2006 Transport Infrastructures North (SO3)Financing of the Tender evaluationThe NOD contract expires at the end of December 2010 and since the correspondingFinancing Agreement also expires at the end of December 2010, the contract with NOD canonly be extended though a request to extend the implementation period of the FinancingAgreement which has been made. However, it is not certain whether the extension will beapproved.Several delays occurred in the final design for the transport infrastructures north. Therefore,the tender for the works contract cannot be launched in time. This means that the tenderevaluation which is part of the NOD contract, with a budget position of approximately€ 25,000, cannot be undertaken under the current NOD contract since the evaluation willneed to be made at the earliest in the second half of 2011.In order to allow NOD to perform the tender evaluation and to keep the whole process fromthe final design, the tender evaluation and the supervision in one hand, it is proposed that theextended RDMU contract will include a budget for a short term Civil Engineer to facilitate thetender evaluation.2 . 2 . 2 A A P 2 0 0 7 : S u p p o r t t o s m a l l h o l d e r c a n eg r o w e r s ( S O 1 )2.2.2.1 Interim payment certificatesAs mentioned earlier, problems occurred during the process of submission and approval ofthe interim payment certificates of the two contractors (SII and IRRICON). Whereas the firstinterim payment certificate submitted by IRRICON was processed relatively smooth andwithout major delays, the following certificates were rejected by the EU as the contractingauthority. In the absence of a template for works interim payment certificates (EU-fundedworks contracts), the contractors prepared certificates in accordance with common practice.However, from the second certificate onwards the EU requested certificates to be preparedin accordance with a template developed for inputs by EU, SHIP and the contractors. Thenext certificates were prepared according to this template, however several mistakes andinconsistencies became apparent such as rounding errors or inclusion of administrativeorders which were recommended by the supervisor but not approved by the contractingauthority, and omission of minor cost items. As a result the certificates were suspended for along time. For details see the SHIP progress Report No .2. These delayed payments createdsignificant financial bottlenecks for the two contractors. Relationships between EU and SHIPwere under strain and the EU requested the RDMU to assist in the review and checking ofthe payment certificates. This ad hoc measure generated an additional work load for theRDMU and each payment certificate had to undergo a thorough and detailed review processjointly undertaken by SHIP, the contractors and the RDMU. It has to be noted that in theabsence of the technical background and essential supporting documentation, it took sometime for the RDMU to adjust and to facilitate the submission of certificates to the contractingauthority which complied with their strict requirements.It has to be noted that several issues contributed to the late payments:No clearly defined role for the supervisorRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 15

The perception of the EU Delegation in Swaziland on how to interpret and apply therole of the contracting authority and also of the supervisor;Insufficient experience within the SHIP team to deal with EU-funded works contractsNeither the EU in Swaziland nor the EU Delegation in Lesotho (Finance andContracts) has had experience with EU-funded works contracts.However, after several weeks of joint working experience to draw up payment certificates,SHIP, the RDMU and the EU in Swaziland are working well together and the latest paymentcertificates should be processed and paid significantly faster.With regard to lessons learned for the works contracts in the infrastructure programme, it hasto be ensured that all parties concerned agree on:the template of the payment certificates andthe deadlines in the checking system for the various parties involved.2.2.2.2 Construction of infield roads not started for EU Round 1 FAsSWADE promised that infield roads and fencing for the EU Round 1 FAs will be funded andimplemented by SWADE. However by the end of the reporting period there is no signindicating that work on infield roads has started. SHIP and RDMU need to monitor this in thenext reporting period.2.2.2.3 Land conflicts remain unsolvedAlthough now heard by the High Court the judgment is still pending in the case of theSibotela and Nyonikalakahle land disputes. Land areas of 10 ha and 14 ha respectively werewithdrawn from this development contract. The RDMU prepared a discussion paper on landconflicts and its implications. For details see Annex 8.2 . 2 . 3 A A P 2 0 0 8 : T r a n s p o r t I n f r a s t r u c t u r e ( S O 3 )With regard to the current Aurecon contract, the following issues needed particular attention:2.2.3.1 PaymentsThe consultant had approval to sub-contract the survey and geotechnical study. Theseservices were included under „fees‟, not incidental expenditure. The consultant had includedoverheads, margins, and backstopping in its quoted rates. After consultation with theContracting Authority it was agreed that in this instance the consultant could submit acertificate confirming the services were provided as supporting documentation. The RDMUrecommends that in future such items should be financed from the incidental budget, andpaid on the basis of the actual costs.2.2.3.2 15% variationThe consultants considered submitting a request for a budget revision within the 15%allowed by Article 22.2 of the General Conditions without a rider. The consultant‟s legalservices and the RDMU concur that the wording of the article leaves it unclear as to whetherthe 15% refers to transfer between „fees‟ and „incidental expenditure‟, or also applies to eachbudget line within the „fees‟. Assuming that the intent is operational flexibility, without bringinginto question the contract award or the basic purpose, there seems little reason why transferswithin fees should be restricted (unlike transfers from incidentals, which has the effect ofRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 16

increasing the total fees). The RDMU recommends that EuropeAid should be advised of theambiguity of this clause.2 . 2 . 4 A A P 2 0 0 9 : S u p p o r t t o s m a l l h o l d e r c a n e g r o w e r s( S O 1 ) , d i v e r s i f i c a t i o n ( S O 4 ) a n d N A Sc o o r d i n a t i o n .2.2.4.1 Existing Grower Concerns versus new entrantsLessons learned during the implementation of the 2007 AAP and stakeholder discussionsconcerning the indicative allocations for 2011-13 and the priorities for 2009 have provoked arenewed debate about the prioritisation of resources between new entrants and existinggrowers in NAS WGs and Industry fora.The existing growers continue to complain they have seen no tangible benefits from theNAS, although they have borne the brunt of the EU reforms, whilst NAS resources are beingused to benefit new entrants. The existing growers are also concerned that the new entrantmay not be the most economically beneficial use of NAS financing for the industry as awhole, and should the new entrants fail, they will in fact be an added burden on the industry.2.2.4.2 2009 FA New entrantsNAS planning did not quantify the target hectarage for new entrant cane development. In anyevent, development costs have more than doubled since 2007, making redundant all theoriginal cost estimates on which planning was based.1,700 ha of new cane will be planted using AAP 2007 funds, half the 3,600 ha foreseen inthe AAP 2007. This is a major concern for Illovo (major shareholder of the Ubombo Mill),which took a decision to expand its milling capacity on the basis of 5,000 ha of additionalcane produced in LUSIP. It requires 1,900 ha sugar cane harvested by 2011, but only 1,700ha will be planted (of which 450 ha was financed by the GoS) by 2011.Meeting the approximate 2,800 ha shortfall has significant implications for the NAS and theAMSP. Based on current unit costs, € 18,000,000 is needed to achieve the LUSIP target.With SACU revenues falling dramatically, the MEPD has cautioned that in future governmentfinancing will be limited. The result is that LUSIP is now dependent on NAS financing toachieve its targets.But the MIP 2011-2013 allocation for all activities apart from road infrastructure and technicalassistance is only € 22 million. Assuming – very optimistically – that the government couldfund a further 1,000 ha, 53% of the AMSP MIP 20911-2013 funds will be required to meetthe target. This would come at the expense of actions to benefit the northern mill and theexisting growers. Any such allocation can be expected to generate controversy.2.2.4.3 Unintended consequencesThis situation is an unintended consequence of the NAS decision to finance 70% of theinfield development investment costs. It may have mitigated the risks to new entrants, but itis likely to have wider implications for the development of LUSIP:By default, the 70% grant established by the NAS has set a precedent: it will be difficult topersuade smallholders to enter under different conditions. 1 Moreover, with the rise in1 The 70%:30% grant finance should be even applied for other schemes such as the proposed LavumisaIrrigation Development Project.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 17

development costs, the business plans are not viable without the 70%, and anything less willnot attract DFI co-financing for the growers 30% finance contribution.Therefore, for LUSIP to develop around 10,000 ha, it will require grant funding of€55,000,000. Moreover, the profitability of other crops has not been established, and banksare unwilling to finance anything but sugar.2.2.4.4 The viability of sugar caneThe sucrose price has come under pressure due to competition from Brazil. Swaziland didnot benefit from the spike in the world price because it had concluded mid-tem deliverycontracts with the European Union which could not be changed while the Euro depreciatedagainst the local currency.The price of electricity – which constitutes approximately 20% of total operational costs – willincrease by 75 % within the next three years as Swaziland Electricity Company (SEC) tariffsrise in response to ESKOM‟s higher charges.Even large scale growers (e.g., Nisela and Canterbury) are concerned about their viabilitybeyond 2014, unless they can secure additional benefits (e.g., co-generation) or reducetransport costs (by constructing a mill nearer to the production centre).The RDMU has started to undertake an accurate financial and economic analysis of severalFAs which will be funded by the AAP 2007. As compared to the previous readymadebusiness plans and cash flows, the RDMU will tailor the model according to the exactspecifications such as:Distance to the mill which not only has an effect on haulage cost but also planting /crop establishment cost (transport of seed cane)Replanting according to industry standardsO&M & replacement cost following industry standards and recommendationsRealistic electricity cost based on the specification of the pumps and head to bepumpedPotential sales of cane trashOption to sell fair-trade sugar.The RDMU envisages performing this financial analysis not only for new entrants but also forexisting growers with longer distances to the mill (growers from Malkerns, Sidvokodvo or BigBend).2.2.4.5 AAP 2010 Transport Infrastructures (SO3)Insufficient road reserveA section of the proposed Mananga – Sihoye Road leads through several sugar cane fields.The official road reserve for gazetted roads amounts to 28 meters (14 meters each side fromthe middle of the road). Therefore, several ha of cane would need to be abandoned to makeway for the road reserve. However, since the road (D 35) has not been gazetted and to avoidhigh compensation cost, the MoPW&T has applied its own discretion and informed the EU intheir letter dated from 21sth July 2010 that the road reserve for the entire section of theproposed road effected will be reduced from 28 meters to 20 meters. In view of that, it isexpected that no valuable sugar cane land will be lost and no compensation will need to bepaid.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 18

2 . 3 R e c o m m e n d a t i o n s & a c t i v i t i e s f o r t h e c o m i n gr e p o r t i n g p e r i o d a n d i s s u e s r e q u i r i n g u r g e n ta t t e n t i o n2 . 3 . 1 A A P 2 0 0 6 : A M S P - R D M UNegotiating a contract extension and budget between EU, MEPD and GFA ConsultingGroup (RDMU).Signing of a contract addendum between the Contracting Authority and GFA ConsultingGroup (RDMU) before the 13 th December 2010.2 . 3 . 2 A A P 2 0 0 6 : A M S P F i n a l D e s i g n I n f r a s t r u c t u r e sN o r t h ( S O 3 )Finalisation of the final design report and works tender document2 . 3 . 3 A A P 2 0 0 7 : S u p p o r t t o s m a l l h o l d e r c a n e g r o w e r s( S O 1 )Evaluation and award of EU Tender Round 3 before the end of December 2010RDMU will undertake a financial analysis on smallholder sugar cane shareholdercompaniesMore emphasis on monitoring of the AAP 2007 interventions.2 . 3 . 4 A A P 2 0 0 8 : R o a d T r a n s p o r t I n f r a s t r u c t u r e ( S O 3 )Signing of a contract addendum for AureconFinalization of the final design report and works tender documentLaunch of a works tender for infrastructures south in November / December 20102 . 3 . 5 A A P 2 0 0 9 : S u p p o r t t o s m a l l h o l d e r c a n e g r o w e r s( S O 1 ) , d i v e r s i f i c a t i o n ( S O 4 ) a n d N A Sc o o r d i n a t i o nRevision of the SCGA Grant Contract proposalSigning of the SCGA Grant Contract in November or December 2010Finalisation of the diversification studyCommencement of the technical assessment for 43 individual growers on SNL(proposed by the SCGA and endorsed by the NAS WG)Launch of a service tender (procurement notice) for the Final Design and Supervision forthe bulk irrigation infrastructure before the end of December 20102 . 3 . 6 A A P 2 0 1 0 : R o a d T r a n s p o r t I n f r a s t r u c t u r e ( S O 3 )Launch of a works tender for infrastructures north in January 2011 after the FinancingAgreement for AAP 2010 has been signedRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 19

2 . 3 . 7 A A P 2 0 1 1 : R o a d T r a n s p o r t I n f r a s t r u c t u r e( S O 3 ) / S u p p o r t t o O u t g r o w e r s ( S O 1 ) , S o c i a lS e r v i c e s ( S O 2 ) a n d I n s t i t u t i o n a l S u p p o r tSupport to the EU in developing the Action Fiche (AF) and all supporting documentationThe RDMU will perform a financial and economic analysis on the proposed project forthe Dvokolawako – Manzana Road, and the complete road and bridge projects in theSouth, as supporting documentation for the AF.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 20

3 R E S U L T 2 : I M P L E M E N T A T I O N A N DF I N A N C I N G O F O T H E R N A S A C T I V I T I E SF A C I L I T A T E D3 . 1 P r o g r e s s a c h i e v e d d u r i n g the r e p o r t i n gp e r i o d3 . 1 . 1 R 2 A 1 A s s i s t a n c e t o M E P D i n e f f o r t s t o s e c u r ed o n o r s n o t a b l y p r o v i d i n g n e c e s s a r y i n f o r m a t i o nt o p o t e n t i a l d o n o r sCurrently, the only project (apart from the sugar industry‟s own activities) which is close tobeing ready and that can be marketed to other donors (CER buyers) is the carbon project atUbombo Sugar mill. The RDMU has been heavily involved in the development ofcorresponding documentation and has assisted Ubombo in the request for changing themethodology used to assess the baseline scenario. The major reason for changing themethodology for the baseline scenario is that under the current methodology, Ubombo wouldnot benefit much from the carbon credits by following fuel switch and energy efficiencymeasures. However the current methodology has been questioned by potential projectdevelopers from several other countries and therefore, Ubombo have made a casesupported by the RDMU to get the methodology changed and approved.A short background is presented below.3.1.1.1 Methodology Application for the CDMIn the CDM, activities are classified into different project types. In the area of small-scaleactivities this is reflected in the definition of “renewable energy”, “energy efficiency”, and“other projects”. A similar classification is also implied in the area of large-scale projects.Activities spanning more than one class of activity and requiring the application of more thanone methodology are frequent. Thus, any CDM-project developer would say the applicationof more than one methodology is business-as-usual.In the case of the Ubombo project, the application of more than one methodology has beenassessed by the RDMU. However, the result of this assessment was still that a combinationof several methodologies would not adequately reflect the initial situation of the plannedUbombo activity. This is due to the simultaneous implementation of different measuresattributable to different CDM-activity categories.The RDMU came to the conclusion that a “Request for Revision” to an approved CDMmethodologyis necessary. The formulation of this “Request for Revision” is a timeconsumingprocess especially in the context of the applied ACM006 methodology. ACM0006is among the most complex CDM-methodologies. The formulation of a Request for Revisiongoes beyond the business-as-usual work of CDM-project development.3.1.1.2 Methodology Revision Process of the CDMThe revision process of the CDM is designed to deliver a decision on whether to approve orreject a submitted “Requests for Revision” of large-scale methodologies like ACM0006 withina six-week term.Due to the complexity of ACM0006 and a relatively high number of Requests for Revision,the CDM EB decided to subject ACM0006 to a general revision. This process was initiatedafter the submission of the Request for Revision by the RDMU and is still ongoing.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 21

A recently published first draft of the generally revised ACM0006 revealed that the formulae,monitoring parameters and other content are completely different from the current ACM0006.This creates the undesirable situation that the applicability criteria, the emission reductioncalculation, the formulation of the monitoring plan, and the assumptions made have to becompletely revised. This means that around 50% of the contents of the current large-scalePDD for Ubombo will have to be reviewed or updated. The table below illustrates theactivities and some challenges we are currently facing.Table 4:TaskCDM-related activities undertaken and challenges to overcomeCommentRequest for Revision „Methodology“ (AM_REV_169)SubmissionAM_REV_169Delay of decision onapproval/ rejectionGrid Emission FactorIn September of 2009 the request for revision was submitted to theCDM EB.The workload for the conception of the request is far higher than theapplication of approved CDM-methodologies, both in terms of quality(i.e. qualification of assigned personnel) and quantity (i.e. number ofworking hours).After repeated postponement of a decision on AM_REV_169 riskmitigation activities were assessed by GFA ENVEST:- Application for other standards than the CDM like GS VER or VCS- Application of alternative (package of) methodologies: AM0018,AM0036, AM0044, AM0061, AM0062, AMS-I.C, AMS-III.B andAMS-II.D- Observation of the progress on New Methodologies (NM): NM0325for the sugar industryIt turned out that none of the above alternatives would deliver asatisfactory result. Either the methodology is not applicable or the basicrequirements of alternative standards cannot be fulfilled.Data UpdateAmplification of theProject Electricity SystemNew Version of ACM0006Due to the delay of project validation resulting from the delay in theapproval of AM_REV_169 the original values collected for the gridemission factor were updated in June 2010.Usually the Project Electricity System (PES) and the ConnectedElectricity System (CES) of a CDM activity are located in the samecountry. Sometimes, the CES is located in another host country, asituation in which imports to the PES have to be assigned an EF of0 tCO 2 e/MWh.Among the more than 2,300 CDM projects registered so far, only twohave applied a different approach and expanded the PES acrosscountry borders. This approach can thus easily be qualified asextraordinary.The RDMU has reconsidered the case of the grid EF and comes to theconclusion that USL should apply for an expansion of the PES to theRepublic of South Africa. In turn it is necessary to get the approval ofthe DNA for South Africa. The RDMU has already initiated this process.This can easily be referred to as additional and unforeseen work load.Comment PeriodThe MethPanel of the CDM had expressed the intention to publish thedraft of the revised ACM0006 for a public comment phase on theUNFCCC-homepage. The RDMU commented on the draft to positivelyinfluence the applicability to the planned Ubombo activity.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 22

The table below illustrates an overview of what has been accomplished by the RDMU andwhat needs to be undertaken to finalise the process of CDM validation.Table 5:Progress and way forward in the mentoring and CDM Validation processCompleted by 31 July 2010Task1: Grid Emission Factor- PDD contains the most recent grid EF-proceedings (i.e. PESspanning Swaziland and RSA)- The idea has been presented to the RSA DNA; they aregenerally ready to issue us a LoA- The actual calculation gives an EF of 987 tCO 2 e/GWh.Task 2: ACM0006- Submit comments in response to the Public Call for Inputs tothe draft ACM6- Analyze the data needs of the draft ACM6.Task 3: Monitoring- Define the monitoring parameters of the approved, butoutdated, ACM6, version 9.Task 4: Validation- Received quotations from the DOEs; UBOMBO has not yetmade its choice; some quotations have lost validitymeanwhile- Prepare a list of documents likely to be requested by theDOE during the validation process.Outstanding Activity- Request LoA with final PDDand validation report from theDNA RSA and Swazi- Respond to grid-EF questionsfrom DNAs.- Include the draft ACM6, whenapproved by the EB, into thePDD (text and formulae)- Calculate the CERs.- Define/incorporate newmonitoring parameters- Conceive monitoringorganogramme (plan) withUBOMBO.- Critical aspects likesimultaneous implementationof demand-side EnergyEfficiency (EE) with capacityexpansion not resolved, butwill certainly entail aclarification request from theDOE.3 . 1 . 2 R 2A 2 F a c i l i t a t e d o n o r m e e t i n g s t o f o c u s d o n o rs u p p o r t a n d t o a v o i d d u p l i c a t i o n o f e f f o r t sIn the absence of bankable projects, no donor conference has been organized. With regardto the economic diversification study proposed by the AfDB, there is no progress. There are,however indications that a study team will arrive during the next reporting period.3 . 1 . 3 R 2A 3 D e v e l o p a v i s i b i l i t y a n d c o m m u n i c a t i o ns t r a t e g y a n d d i s s e m i n a t e b r o c h u r e s a n d l e a f l e t sThe RDMU printed the first NAS Newsletter in May 2010 and disseminated it among thevarious stakeholders. Moreover, the RDMU website is continuously updated with news oflatest events and documents for downloads.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 23

3 . 1 . 4 R 2A 4 O r g a n i s e p r e s s c o n f e r e n c e s , r a d i o a n dT V s p o t s o n t h e N A S a n d t h e M I P3.1.4.1 Radio spotThe RDMU prepared a radio spot and the RDMU Agriculturalist was given one hour tointroduce the NAS to the Swazi population in Siswati and to answer questions frominterested stakeholders. The radio spot was broadcast on 18 th June from 07:00-08:00 a.m.3.1.4.2 AAP 2009 Annual Action Programme: Financing Agreement SigningCeremony on 13 th April 2010The Government of Swaziland and the European Union have signed the FinancingAgreement for the 2009 Annual Action Programme (AAP) for the Accompanying Measuresfor Sugar Protocol Countries. The total value of this programme is €16,500,000 which isequivalent to 173,250,000 Emalangeni. The ceremony was witnessed by close to 30 peoplerepresenting the different stakeholders from the sugar industry and was later followed up bya stakeholder consultation workshop on the development of the SCGA Grant System.3.1.4.3 Problems encountered and possible solutionsNo problems related to this result were encountered in the reporting period.3 . 2 R e c o m m e n d a t i o n s & a c t i v i t i e s f o r t h e c o m i n gr e p o r t i n g p e r i o d a n d i s s u e s r e q u i r i n g u r g e n ta t t e n t i o n3 . 2 . 1 C D M v a l i d a t i o n p r o c e s sFrom first hand information (not confirmed yet), we were told that the methodology has beenchanged. After having received an official confirmation, the RDMU will finalise the ProjectDevelopment Document and continue the mentoring during the validation process.3 . 2 . 2 D o n o r l i a i s o nIFAD will organize a monitoring mission of their supported projects (LUSIP and a RuralFinance Programme). On this occasion, the RDMU supported by the NAS stakeholders willpursue a harmonized approach with regard to the governance business farm model forsmallholder share holders, land-related issues, etc. for both, the EU and the GoS supportedschemes.Should other donors be in the country, the RDMU will continue to assist MEPD in liaising withthem and discuss possible funding arrangements for NAS measures.3 . 2 . 3 V i s i b i l i t yThere was a high demand for some of the PR material produced by the RDMU. We willpurchase more items prior to termination of the RDMU contract. Parallel to that, the websitewill be continuously updated.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 24

3 . 2 . 4 P u b l i c r e l a t i o n e v e n t sThe AAP 2010 might be signed by the EU in December 2010. We envisage organizing apublic signing ceremony with MEPD in January 2011. Similarly we intend organizing asigning ceremony for the SCGA grant contract.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 25

4 R E S U L T 3 : S T A K E H O L D E R L I A I S O NM E C H A N I S M S A R E E S T A B L I S H E D A N D I NO P E R A T I O N .4 . 1 P r o g r e s s a c h i e v e d d u r i n g t h i s r e p o r t i n gp e r i o d4 . 1 . 1 R 3A 1 O r g a n i s e w e e k l y p l a n n i n g m e e t i n g s w i t hM E P DThe RDMU has met MEPD almost weekly at Monday meetings throughout the reportingperiod. Moreover, many ad hoc meetings have been organised to discuss important issues.4 . 1 . 2 R 3A 2 O r g a n i s e t h e N A S S C a n d N A S W GDuring the reporting period, 3 NAS SC meetings and 17 NAS WG meetings were held.4 . 1 . 3 R 3 A 3 O r g a n i s e s i t e v i s i t s w i t h t h e m a j o rs t a k e h o l d e r s / N A S W GFor the preliminary design report at the beginning of March 2010, the RDMU invited thevarious stakeholders on a tour with the design engineers to the two project areas.In April, the acting head of the EU Delegation in Lesotho, Mr Andrew Headey, came toSwaziland and visited the LUSIP area including some of the GoS and EU supportedsmallholder cane grower shareholding companies.4 . 1 . 4 R 3 A 4 S u p p o r t a n d p e r f o r m c a p a c i t y b u i l d i n g o fs t a k e h o l d e r s e n a b l i n g t h e m t o e f f i c i e n t l yc o n t r i b u t e t o t h e p r o g r a m m eIn March 2010, the RDMU organised a one week training course on EU works contracts, EUservice contracts, EU grant contracts and on the PCM. The training was conducted by MDF,a company which also undertakes training on EU procedures for EU Delegations and NAOs.The training was well attended by our NAS stakeholders and throughout 18 participants werepresent. The stakeholders saw the training as a big success since EU procedures with its(long-term) implications were very well illustrated (i.e. periods between the various steps inthe tender process). Moreover, since grant contracts were also covered, our stakeholdershave received a clear picture of the challenges they might face in the SCGA grant contractand how to overcome them.In April and in June, the RDMU funded the training of 5 technicians from SWADE, MoA andRDMU on irrigation design and implementation organised by the South African Institute ofirrigation (SABI). This hands-on training was very useful for the SWADE irrigation techniciansto improve their design capacity. It was also very important for the RDMU to be representedby the agriculturalist to get a more in-depth knowledge on design and implementation-relatedissues. This will significantly contribute to a better understanding of the bill of quantities andthe progress reported in the process of verification of the payment certificates. Theprogramme and the certificates are presented in Annex 4.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 26

4 . 2 P r o b l e m s e n c o u n t e r e d a n d p o s s i b l e s o l u t i o n sNo problems related to this result were encountered in the reporting period.4 . 3 R e c o m m e n d a t i o n s & a c t i v i t i e s f o r t h e c o m i n gr e p o r t i n g p e r i o d a n d i s s u e s r e q u i r i n g u r g e n ta t t e n t i o n4 . 3 . 1 T r a i n i n g & c a p a c i t y b u i l d i n gThe MDF training related to Grant contracts was appropriate to get an overview, howeverwith regard to implementation of a grant contract; we need to organize another trainingactivity to focus on the important details. The RDMU Finance Manager has an in depthknowledge and experience of grant contracts. We propose that he will conduct the trainingexercise before the 13 th December 2010.4 . 3 . 2 Z a m b i a S t u d y T o u rThe Zambia Study Tour is scheduled for 29 th August to 03 rd September 2010. We will have15 participants from all the major stakeholder organizations.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 27

5 R E S U L T 4 : A M O N I T O R I N G A N DE V A L U A T I O N S Y S T E M F O R T H E N A SE S T A B L I S H E D5 . 1 P r o g r e s s a c h i e v e d d u r i n g t h e r e p o r t i n gp e r i o d5 . 1 . 1 R 4A 1 D e s i g n a M & E s y s t e m f o r t h e N A SIn April and May 2010, a short-term expert assisted the RDMU in the development of theNAS logical framework matrix and the corresponding monitoring and evaluation framework.The M&E framework suggests a wide range of indicators which can be measured in thecourse of the next few years allowing the stakeholders to measure progress and evaluate theimplications the NAS will have on the overall performance of the sugar sector in Swaziland.The RDMU will be in charge of coordinating and implementing the M&E framework which willdepend heavily on the various stakeholders‟ contributions with regard to accessinginformation on the indicators.5 . 1 . 2 R 4A 2 A s s i s t i n i m p l e m e n t i n g a n M & E s y s t e mf o r t h e N A SAnnex 10 illustrates the first attempt in implementing the M&E framework.5 . 2 P r o b l e m s e n c o u n t e r e d a n d p o s s i b l e s o l u t i o n sM&E framework: some of the indicators appear to be very sensitive. It can be expected thatseveral indicators, which appear to be confidential in the sugar industry‟s opinion, will remainblank and cannot be monitored. The RDMU suggests organizing a stakeholder sensitizationworkshop to agree what information can be made public and what not.During the assignment for developing the NAS logframe, it was agreed between the EU andthe RDMU to adjust the RDMU logframe so that it fits better with the NAS logframe. Therevised RDMU logframe (see Annex 1) is more comprehensive and better reflects activitieswithin the specific objectivities.With regard to monitoring, the RDMU team has spent significant time elaborating EUappraisal documents, checking payment certificates, invoices and timesheets, writing,reading, reviewing and correcting reports and liaising with stakeholders. Thus “on the groundmonitoring” with frequent field visits has not been feasible. In the next reporting period theRDMU team will organise more field visits to address this shortcoming.5 . 3 R e c o m m e n d a t i o n s & a c t i v i t i e s f o r t h e c o m i n gr e p o r t i n g p e r i o d a n d i s s u e s r e q u i r i n g u r g e n ta t t e n t i o nThe RDMU will organize a stakeholder consultation & sensitization workshop with regard tothe M&E framework and more field visits for “on-the-ground monitoring”.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 28

6 B U D G E T A L L O C A T I O N S F O R M I P 2 0 0 7 –2 0 1 0 A N D D I S B U R S E M E N TAnnex 6 provides an overview of the financial status of the programme.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 29

7 P R O G R E S S R E P O R T A N D F U T U R E W O R K P R O G R A M M E B Y R E S U L T( F R O M 0 1 F E B R U A R Y T O 3 1 J U L Y 2 0 1 0 )Result 1: EU Accompanying Measures for Swaziland are committed and implementedActivity Planned during period Achieved during period Planned for next 6 monthsR 1 A 1: EU Identify projects for the four specific objectives SO1 – SO4 of the MIP 2007 -2010 and assists with preparation of the PIF, AF, AAP, FA, and TAPAAP 2009: Support tosmallholder cane growers(SO1), diversification (SO4)and NAS coordination.Signing of FA by all parties in firstquarter of 2010.Signing ceremony of the FA 2009 with press and mediacoverage on 13 th April 2010.Nothing foreseen under this activity.AAP 2010: Road TransportInfrastructureFinalisation of the AF, FA and TAP.Commencement of the ManangaCollege Business Plan Study.RDMU carried out traffic count study on roads set out as apriority for NAS funding.RDMU undertook financial and economic analysis of proposedMananga – Sihoye Road which is part of AAP 2010.Nothing foreseen under this activity.RDMU, in close cooperation with EU, developed the AF, TAPand FA.Social services dropped from AAP 2010.Mananga study postponed.AAP 2011 Nothing foreseen. Not applicable RDMU will develop the PIF for the AAP 2011in September.Mananga Study will commence August 2010.Results will contribute to the AAP 2011RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 30

Activity Planned during period Achieved during period Planned for next 6 monthsR 1 A 2: Assist EU and MEPD in: development of tender documents, launching and evaluating tenders, preparing contracts, supervision, monitoring and guidance ofcontractors according to the AAPs and specific objectivesAAP 2006: Final DesignInfrastructures NorthGuidance, supervision andmonitoring of the contractor NOD inestablishing preliminary design, finaldesign and tender documents.Preliminary designs submitted by NOD in February 2010.RDMU organised preliminary design workshop and field tripfor NAS stakeholders. NOD submitted draft final designreport in May 2010 and draft tender documents for Mananga-Sihoye Road in July 2010.Finalisation of tender documents and launchof works tender at the end of 2010.RDMU will undertake an Ecofin analysis ofthe proposed Dvokolwako infrastructure.AAP 2007: Support tosmallholder cane growersSupport SHIP in establishment,finalisation and review of businessplans. Support in launching the EUTender 2 irrigation works.RDMU organised the evaluation committee meeting for EURound 3 Tender. Support in the development of businessplans for EU Round 4 Tender.RDMU heavily involved in the checking and correction ofinterim payment certificates for the two contractors for the EURound 1 tender.RDMU assisted in the evaluation of the EU Round 2 Tender.RDMU assisted SHIP in the development of tenderdocuments for EU Round 3 irrigation works. Tender launchedat the end of July 2010RDMU will organise the evaluation committeefor the EU Round 4.Continuous check and verification ofcontractor invoices for EU Round 1 and alsoEU Round 2.Assistance in launching EU Round 3 tenderirrigation works and evaluation to ensure thatthe contract will be signed before the end ofDecember 2010.RDMU will undertake a very thoroughfinancial analysis of the current smallholdermodel to assess viability and sustainability.AAP 2008: TransportInfrastructureAssistance to contractor (Aurecon)in developing their design reports,tender documents and invoicesRDMU organised the preliminary design workshop and fieldtrip.RDMU reviewed several reports submitted by Aurecon andcommented on them.Continuous support in developing the tenderdocuments, contract addendum andinvoicing.Verification of the next Aurecon invoice.RDMU assisted Aurecon in the whole process of developingthe contract addendum for splitting the tender documentsand to include the final design of the Mhlatuzane Bridge.Launch of a tender (forecast andprocurement notice) for the works tenderinfrastructures south in Nov / Dec 2010.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 31

Activity Planned during period Achieved during period Planned for next 6 monthsAAP 2009 Support tosmallholder cane growers,agricultural diversification andNAS coordinationDevelopment and finalisation of thegrant contract proposal supportedby STE.Conducting diversification survey toidentify needs for diversification.Development of documentation forbulk irrigation infrastructures andorganisation of evaluationcommittees.Assisted by a STE, the RDMU developed the grant contractproposal for the SCGA, a manual on procedures andapplication documents for those who wish to get supportfrom the SCGA grant.Diversification survey finished but data analysis and reportnot yet finalised.RDMU drew up supporting documentation for the threeproposed bulk irrigation schemes including detailed financialand economic analysis which are earmarked for beingfunded by AAP 2009.The RDMU started drawing up a tender document for aservice tender for the final design and supervision of the bulkwater irrigation schemes.Organisation of various NAS WG and NAS SC to agree onthe final allocation of the AAP 2009 funds. There was a biasamong the various members of the sugar industry in theallocations between new entrants and existing growers.The RMF assignment was changed with a clearer focus on acentralised bulk input and ratoon procurement system.EU indicated that some minor changes on thegrant proposal need to be made. RDMU willassist to revise if the need arises.RDMU will finalise the diversification dataanalysis and finalise the report in August2010.SCGA requested continuation of the technicalassessment on the 43 individual smallholdercane growers on SNL. RDMU has sent arequest and the indicative start for thisexercise is first week of August 2010.Continue coaching of Ubombo in theapproval and validation process. Approval ofPDD by the UN is expected in December2010.Launch of a tender (procurement notice) forthe final design and supervision servicecontract for bulk irrigation infrastructure inOct/Nov 2010.AAP 2010 TransportInfrastructureNothing foreseen under this activity Nothing foreseen under this activity Launch of works tender in January 2011.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 32

Activity Planned during period Achieved during period Planned for next 6 monthsR 1A 3: ASSIST EU AND MEPD IN THE DEVELOPMENT OF THE MIP 2011 – 2013Finalisation of the MIP 2011-2013,endorsement by the NAS SC.RDMU assisted the EU in drawing up the document. Currentversion has been finalised by the EU, however, thestakeholders were not given the opportunity to review thedocument and to endorse it. Also, the EU has not informedthe stakeholders of the final allocation.An NAS SC is planned for early Augustwhere stakeholders will discuss the currentversion of the MIP 2011-2013RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 33

Result 2: Implementation and financing of other NAS activities facilitatedActivity Planned during period Achieved during period Planned for next 6 monthsR 2 A 1 Assistance to MEPD in efforts to secure donors notably providing necessary information to potential donors (drawing up strategy on donor liaison,development of bankable projects, conducting field trips)Assistance to Ubombo in benefitting fromcarbon creditsFinalisation of the PDD and assistancein the change of the baselinemethodologyThe PDD was finalised in line with the oldbaseline methodology. However, in order toassist Ubombo to benefit from carboncredits, energy efficiency measures andfuel switch, the RDMU requested the UN tochange its methodology for the baselinescenarioOnce the methodology has been amended,then the RDMU will finalise the revised PDDRDMU will assist MEPD in developing thedonor strategy provided the various projectpackages such as the RMF and carbondocuments are finalised and agreed uponR 2 A 2Assist in facilitating donor meetings to focus donors’ support and to avoid duplication of effortsDonors will be approached dependingon the availability of bankable projectproposalsAny donor mission in Swaziland will beapproached and briefed.In the absence of bankable projects, nodonor conference has been organised.No progress on the economic diversificationstudy in Swaziland to be funded by AfDB.Donors will be approached depending on theavailability of bankable project proposals.Any donor mission in Swaziland will beapproached and briefed.R 2 A 3 Develop visibility and communication strategy & and disseminate brochures and leaflets to inform all stakeholders and donors about the NAS and MIPVisibilityDeveloping brochures if deemednecessaryRDMU developed the first RDMUnewsletter and disseminated it amongstakeholders. The RDMU websitecontinuously updatedUpdating of the website and production ofadditional PR material such as RDMU writingpads.R 2 A 4 Organise press conferences, radio and TV spots on the NAS and the MIPRadio spot Broadcasting of Radio spot on the NAS The RDMU Agriculturalist was presenter ofa radio spot giving a brief on the NASMedia coverage Signing ceremony of the FA 2009organised with press coverageNothing foreseen in the next reporting periodIf possible, signing ceremony of FA 2010 withpress coverage in December 2010RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 34

Result 3: Stakeholder liaison mechanisms are established and in operationActivity Planned during period Achieved during period Planned for next 6 monthsR 3 A 1 Organise weekly planning meetings with MEPDWeekly meetings organisedThe RDMU has met MEPD at the weeklyMonday meetings throughout the reportingperiod. Moreover, many ad hoc meetingshave been organised to discuss importantissuesContinuation of weekly meetingsR 3 A 2: Organize NAS SC and NAS WGR 3 A 3 site visits with the major stakeholders / NAS WGNAS SC on a bi-monthly basisNAS WG on the occasion of specialeventsNothing planned3 NAS SC meetings held17 NAS WG meetings heldWith the preliminary design report at thebeginning of March 2010, the RDMU invitedthe various stakeholders on a tour, with thedesign engineers, to the two project areas.To be continued as planned and needs ariseSite visits, usually ad hoc, organised whenneed arises.R 3 A 4 Conduct field Support and perform capacity building of stakeholders enabling them to efficiently contribute to the programmeFormal capacity building Training on EU procedures In march 2010, the RDMU organised a oneweek training course on EU workscontracts, EU service contracts, EU grantcontracts and on PCM.In April and in June, the RDMU funded thetraining of 5 technicians from SWADE, MoAand RDMU on irrigation design andimplementation organised by the SouthAfrican Institute of irrigation (SABI)Study tour to Zambia on fair-trade plannedRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 35

Result 4: A monitoring and evaluation system for the NAS establishedActivity Planned during period Achieved during period Planned for next 6 monthsR 4 A 1 Design a M&E system for the NASDevelopment of the NAS M&EframeworkR 4 A 2 Assist in implementing a M&E system for the NASNothing foreseen in this reportingperiodIn April the RDMU supported by a shorttermexpert developed a revised NASlogframe and elaborated an M&Eframework.Not applicableNothing foreseen in this reporting periodPerforming monitoring according to the M&EframeworkRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 36

8 C U R R E N T S T A T U S O F T H E R D M UP R O J E C T O N T H E B A S I S O F P E R S O ND A Y S U S E D8 . 1 O v e r v i e w o f i n p u t s o f e x p e r t s s i n c e p r o j e c ts t a r tEU- RDMU-SWAZILAND last update 31/07/2010WORK DAYS INVOICEDCommencement date - 14 January 2008MonthTLBatzlenLong-term expertsFinancemanagerCookeLocalEconomistORIGINAL CONTRACTCivilEngineerLocalAgriculturalistRenewableEnergyAgriculturalistShort-term ExpertsIrrigationBusinessDevelopmentEnvironmentAdditionalInternationalSTEAdditionalLocal STETotal days that canbe Invoiced 648 648 683 683 200 200 193 229 177 46 660 1,200 5,5672008 0January 08 5 12 17February 08 23 23March 08 22 13 6 41April 08 22 26 18 23 6 26 121May 08 19 26 23 22 17 9 14 5 135June 08 21 23 21 23 5 25 20 8 146July 08 25 23 23 24 2 41 43 24 205August 08 21 21 21 21 6 35 7 6 25 163September 08 16 10 19 19 2 82 33 24 10 17 232October 08 18 23 22 23 5 27 37 23 10 24 212November 08 10 20 20 20 20 5 11 8 6 6 126December 08 15 15 16 18 9 17 11 2 1032009 0January 09 20 20 21 20 4 42 36 163February 09 22 21 23 24 56 19 165March 09 26 22 16 23 5 11 26 22 151April 09 20 18 21 22 4 13 7 40 16 161May 09 25 23 24 26 2 3 6 36 20 165June 09 25 20 24 25 5 34 66 199July 09 26 25 26 26 11 29 9 4 19 61 236August 09 4 22 23 25 3 10 18 6 6 106 223September 09 22 12 23 23 3 7 5 32 121 248October 09 23 20 23 23 27 18 17 102 253November 09 19 22 22 23 18 4 12 7 90 217December 09 19 22 24 22 4 15 10 4 1202010 0January 10 17 18 20 20 6 81February 10 20 14 20 20 2 17 93March 10 23 22 23 18 3 16 13.5 27 146April 10 10 17 18 18 2 17 47 129May 10 15 17.5 20 17.5 1 9 39.5 16 136June 10 17.5 15 22 17.5 72July 10 21.5 21.5 22 18 7 10 100TOTAL USED 592.0 572.0 598.0 604.0 179 192 163 200 151 46 498 786 4581TOTAL00BALANCE 56 76.0 85 79.0 21 8 31 29 26 0 162 414 987It has to be noted that the RDMU applied for a budget reallocation allowing us to be moreflexible with the funding source of the various assignments and to convert expert days whichare not likely to be spent and part of the incidental budget into expert days for assignmentsthat the NAS stakeholders have requested. The upcoming assignments proposed by theNAS stakeholders were:A technical audit of existing individual smallholder cane growers‟ irrigation schemesRDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 37

Pre-audit on fair-trade for selected farmer associationsContinuation and revision of the RMF assignment with a view to an Input and RatoonFinance schemeSupport to the Nsoko growers in a feasibility study which is funded by the Nsokogrowers, SWADE and possibly by the RDMU.As indicated above, the RDMU has several STE budget positions which will most likelyremain unused as of termination of the contract. At the same time, there is a shortfall of thebudget position for the “irrigation engineer” and “additional international short-term experts”.In view of that the RDMU has requested to reallocate those budget positions which might notbe used into those areas where there is still a need.In parallel, to cater for the NAS stakeholders requests, the RDMU proposed to transfer 15 %of the incidental budget into short-term expert work days by applying Article 20.2 of theGeneral Conditions for Service Contracts which allows the Consultant to do so within theProject Manager‟s authority.The overall contract value with GFA remains unchanged. In their letter dated 30 th July 2010,the EU approved the reallocation. The revised budget is reflected in the financial overview ofthe RDMU contract overleaf.RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 38

8 . 2 O v e r v i e w o f t h e f i n a n c i a l s t a t u s o f t h e R D M U c o n t r a c t s i n c e p r o j e c t s t a r tBudget according to contractExpenditure in reporting period(01 February - 31 July 2010)Cumulative expenditures untilreporting periodBalance avaliableNumber ofwork daysFee rate (€per work day)Amount €Number ofwork daysAmount €Number ofwork daysAmount €Number ofwork daysAmount €FEES (including overheads):Long-term expertsKey Expert 1: Team Leader 648 1,425 923,400 107 152,475 485 691,125 56 79,800Key Expert 2: Finance Manager 648 1,225 793,800 107 131,075 465 569,625 76 93,100Expert 9 (Local): Agriculturalist 683 299 204,217 109 32,591 495 148,005 79 23,621Expert 10 (Local): Economist 683 327 223,341 125 40,875 473 154,671 85 27,795Short-term expertsExpert 3: Civil Engineer 200 1,105 221,000 15 16,575 164 181,220 21 23,205Expert 4: Renewable Energy Expert 200 841 168,200 16 13,456 176 148,016 8 6,728Expert 5: Agriculturalist 193 507 97,851 50 25,350 113 57,291 30 15,210Expert 6: Irrigation Expert 229 583 133,507 200 116,600 29 16,907Expert 7: Business Management Expert 177 733 129,741 151 110,683 26 19,058Expert 8: Environment Expert 46 684 31,464 46 31,464Additional International Experts 660 664 438,240 130 86,320 368 244,352 162 107,568Additional Local Experts 1,200 178 213,600 16 2,848 770 137,060 414 73,692Total fees (including overheads) 3,578,361 501,565 2,590,112 486,684PROVISION FOR INCIDENTAL EXPENDITURE: 196,397 24,000 95,000 77,397PROVISION FOR EXPENDITURE VERIFICATION: 15,000 1,500 6,000 7,500MAXIMUM CONTRACT VALUE 3,789,758 527,065 2,691,112 571,581RDMU Progress Report No. 5 (01 February – 31 July 2010) - Page 39

Annexes

Annex 1RDMU logical framework (revised)

Logical Framework for the Restructuring and Diversification Management UnitRestructuring and Diversification Management Unit to coordinate the implementation of the National Adaptation Strategy to the EU Sugar Reform, SWAZILANDINTERVENTION LOGICOverall Objective Objectively Verifiable Indicators (OVI) Source of verification AssumptionsTo contribute toSwaziland’s adaptation tothe EU Sugar MarketReformMill Groups remain profitable & engine of sugar canedevelopmentQuantities and value of sugar processed in Swazilandincreased by 5 % between 2006 and 2013Smallholder growers within an economically viabledistance from the mill remain in sugarcane, and areprofitableFarmers who are no economically viable andprofitable in sugar have diversified into alternativecrops, profitablySSA Reports and SugarMarket StatisticsSGCA ReportsBaseline Survey ofFarmer AssociationsGoS Reports andStatisticsPurpose OVI Source of verification AssumptionsMEPD supported in theimplementation andcoordination of the NAS30 out of 60 NAS strategic response measures havebeen converted into actionable projects andprogrammes by the end of 201020 NAS measures have started or have beenimplemented by the end of 2010€ 100 million worth of projects have been committedby 2010 out of € 360 million earmarked for the NASProject or Programmedocuments prepared byRDMU and GoS.Joint Annual ReviewDonor Progress Reports,MTR ReportsGlobal market for sugar stableLogframe for Restructuring and Diversification Management Unit – Page 1

Results OVI Source of verification AssumptionsAnnual Action Programmes (AAP 2008, 2009 andCRIS2010) of AMSP funds for Swaziland are approved and RDMU progress reportimplemented according to the various deadlinesJARAAP2007: TA contract awarded beginning of 2009;Contractsworks tenders for irrigation equipment launched in2009 and 2010, AAP 2007 funds fully contracted by RDMU reports.the end of 2010Project ReportsAAP 2008: Road and bridge design & supervisionContractor Reports andcontracts awarded in first half of 2009; Phase 1 Road Invoicesand Bridge construction contracts awarded by the endof 2010AAP 2009: Some component(s) of AAP 2009 (SCGAGrant Contract) signed before end of 2010MIP 2011-2013 developed and approved before endof 2010Result 1: EU AccompanyingMeasures for Swaziland arecommitted and implementedResult 2: Implementationand financing of other NASactivities facilitatedResult 3: Stakeholder liaisonmechanisms are establishedand in operation.Result 4: A monitoring andevaluation system for theNAS establishedAt least two other donors contribute up to € 20m tothe NAS by 2010Necessary documentation established by the end of2009 and carbon credits valued at € 5m are sold onthe market by the end of 2011At least 5 NAS SCs organised per year70 % of major stakeholders participate in NAS WGand workshops every year until 2010At least 8 brochures developed and 4 radio/ TV spotsbroadcasted by the end of 2010At least 2 study tours organised and 4 formal trainingsorganisedSystem agreed with stakeholders and results used asbasis for decisions by NAS SC and WGsContracts,Project ReportsMinutes of MeetingsProceedings, DonorReportsMinutes of NAS SC andNAS WGParticipation listsRadio/ TV programmesMinutes of NAS SC andNAS WGStakeholder ReportingMatrixLogframe for Restructuring and Diversification Management Unit – Page 2EU and MEPD officialsavailable for process follow upImplementing partners andcontractors fulfil theircontractual obligationsEU makes more funds availablefor 2011-2013Current credit crunch does notreduce the availability of donorfundsIndustry continues to haveaccess to finance on the capitalmarketMajor stakeholders aremotivated and committed in theidentification, formulation andimplementing of the NASMajor stakeholders participateactively in the development andupdate of the M&E system

Activities to achieve the ResultsResult 1: EU Accompanying Measures for Swaziland are committed and implementedR 1A 1 Identify projects for the four specific objectives SO1 – SO4 of the MIP 2007 -2010 and assist with preparation of thePIF, AF, AAP, FA, TAP,R 1A 2 Assist EU and MEPD in: development of tender documents, launch and evaluation of tenders, preparing contracts,supervision, monitoring and guidance of contractors according to the AAPs and specific objectivesR 1A 3 Assist EU and MEPD in the development of the MIP 2011 - 2013Result 2: Implementation and financing of other NAS activities facilitatedR 2A 1 Assistance to MEPD in efforts to secure donors notably providing necessary information to potential donors(drawing up strategy on donor liaison, development of bankable projects, conducting field trips)R 2A 2 Facilitate donor meetings to focus donor’s support and to avoid duplication of effortsR 2A 3 Develop visibility and communication strategy & and disseminate brochures and leaflets to inform all stakeholdersand donors about the NAS and MIPR 2A 4 Organise press conferences, radio and TV spots on the NAS and the MIPResult 3: Stakeholder liaison mechanisms are established and in operationR 3A 1 Organise weekly planning meetings with MEPDR 3A 2 Organise NAS SC and NAS WGR 3A 3 Organise site visits with the major stakeholders / NAS WGR 3A 4 Support and perform capacity building of stakeholders enabling them to efficiently contribute to the programmeAssumptionsStakeholders, MEPD and EU dulyperform their tasks andresponsibilities without delaysInternational donor agenciescommitted towards assistingSwaziland in implementing theNASGoS and local stakeholdersmobilize funds to bridge the gapbetween the NAS budget and theEU and other donors’ fundingcontributionsAll stakeholders participate activelyin the development andimplementation of these eventsResult 4: A monitoring and evaluation system for the NAS establishedR 4A 1 Design a M&E system for the NASR 4A 2 Assist in implementing a M&E system for the NASAll stakeholders contribute activelyin the development,implementation and monitoring ofthe activitiesLogframe for Restructuring and Diversification Management Unit – Page 3

Activities and means to accomplish the resultsRelated to Result 1Related to Result 2Related to Result 3Related to Result 4MEANSLong-term Technical AssistanceShort-term consultanciesStudiesTechnical AssistancePublic Relation MaterialWorkshops and field trips TechnicalAssistanceRadio / TV spotsTechnical AssistanceWorkshops and field tripsTechnical AssistanceCOST in Euro€ 3,789,758Logframe for Restructuring and Diversification Management Unit – Page 4

Annex 2RDMU logical framework with resultsaccomplished until 31 January 2010

Logical Framework for the Restructuring and Diversification Management Unit with results accomplished up to 31 July 2010Restructuring and Diversification Management Unit to coordinate the implementation of the National Adaptation Strategy to the EU Sugar Reform, SWAZILANDOverall Objective OVI planned OVI achieved Source of verificationTo contribute toSwaziland’sadaptation to theEU Sugar MarketReformMill Groups remain profitable &engine of sugar cane developmentQuantities and value of sugarprocessed in Swaziland increasedby 5 % between 2006 and 2013Smallholder growers within aneconomically viable distance fromthe mill remain in sugarcane, andare profitableFarmers who are not economicallyviable and profitable in sugar havediversified into alternative crops,profitablyQuantities and value of sugarprocessed in Swaziland reduced by2.9% between2006 and2008/ 2009Quantity of sugar processed between2006/07 (638,037 tons) and 2009/10(595,143 tons) reduced by 7 %Average yields of sugar cane perhectare by smallholder decreased from79.5 tons in 2007 to 78.5 tons in 2008No intervention yetSSA Reports and Sugar Market StatisticsSGCA ReportsBaseline Survey of Farmer AssociationsGoS Reports and StatisticsLogframe for Restructuring and Diversification Management Unit – Page 1

Restructuring and Diversification Management Unit to coordinate the implementation of the National Adaptation Strategy to the EU Sugar Reform, SWAZILANDOverall Objective OVI planned OVI achieved Source of verificationMEPDsupported in theimplementationand coordinationof the NAS30 out of 60 NAS strategicresponse measures have beenconverted into actionable projectsand programmes by the end of201012 out of 50 NAS strategic responsemeasures have been converted intoactionable projects and programmes bythe 31 January 2010 (Note: there areseveral duplications among the 60measures. In fact, there are 50measures)1. TA to Smallholder Irrigation Development2. Irrigation equipment installation3. SCGA Grant Contract: Irrigation rehabilitationand diversification4. SEC approved tariff reduction for smallgrowers5. Energy efficiency project at Ubombo6. Design of CHP plants in the sugar belt7. AAP 2008 and infrastructures in the South8. Development of the Ratoon ManagementFund9. Development of an exit strategy forprogramme of diversification10. Sugar mills provide transport subsidies forlong distance growers11. Rebate for indebted cane growers from KDDP12. EU funded FAO initiative “AgriculturalDevelopment Programme”Logframe for Restructuring and Diversification Management Unit – Page 2

Restructuring and Diversification Management Unit to coordinate the implementation of the National Adaptation Strategy to the EU Sugar Reform, SWAZILANDOverall Objective OVI planned OVI achieved Source of verificationMEPDsupported in theimplementationand coordinationof the NAS20 NAS measures have eitherstarted or have been implementedby the end of 20109 NAS measures have either started orhave been implemented by 31 July20101. TA to Smallholder Irrigation Development(started in May 2009)2. Supply and install irrigation equipment on 633 haco-funded by EU and 482 ha co-funded by GoS3. SEC approved tariff reduction for small growers4. AAP 2008 and infrastructures in the South andin the North. Final Design were started in July /September 20095. Sugar mills provide transport subsidies to longdistance growers6. Rebate for indebted cane growers from KDDPapproved in July 2009 and partly granted till July2010 with an indicative amount of E 38 million7. Factory expansion and energy efficiency projectat Ubombo with € 60 million spent to date8. Modernisation, increase of bagging capacity andethanol production at RSSC € 35 million9. EC funded FAO initiative “ AgriculturalDevelopment Programme” started in mid 2009Logframe for Restructuring and Diversification Management Unit – Page 3

Restructuring and Diversification Management Unit to coordinate the implementation of the National Adaptation Strategy to the EU Sugar Reform, SWAZILANDOverall Objective OVI planned OVI achieved Source of verificationMEPDsupported in theimplementationand coordinationof the NAS€ 100 million worth of projectshave been committed by 2010 outof € 360 million earmarked for theNASApproximately € 155 million worth ofprojects have been committed by the31 July 2010 out of the € 360 millionearmarked for the NAS1. Smallholder Irrigation Development Programme(AAP 2007) amounting to €14.895 million2. Support to Transport Infrastructure (AAP 2008)amounting to €18 million3. Rebate for indebted cane growers from KDDP(approximately €10 million)4. 482 ha irrigation installation at LUSIP KDDPfunded by GoS (€2.5 million)EC funded FAO initiative “ AgriculturalDevelopment Programme” (€14.661 million)5. RSSC and Ubombo investment programme withapproximately € 95 million spent to date andapproximately € 280 committedLogframe for Restructuring and Diversification Management Unit – Page 4

Restructuring and Diversification Management Unit to coordinate the implementation of the National Adaptation Strategy to the EU Sugar Reform, SWAZILANDOverall Objective Objectively Verifiable Indicators (OVI) planned OVI achieved Source of verificationResult 1: EUAccompanyingMeasures forSwaziland arecommitted andimplementedAnnual Action Programmes (AAP 2008, 2009 and2010) of AMSP funds for Swaziland are approvedand implemented according to the variousdeadlinesAAP2007: TA contract awarded beginning of 2009;works tenders for irrigation equipment launched in2009 and 2010, AAP 2007 funds fully contractedby the end of 2010€ 18 m committed for AAP 2008 RoadTransport Infrastructure by Dec 2008;€ 16.5 m committed for AAP 2009 by end ofDec 2009; € 12.4 m committed for AAP 2010by end of Dec 2010SHIP contract signed May 2009, EU Round 1irrigation contracts signed in October andDecember 2009Works tenders for irrigation equipmentlaunched in 2009 and contracts for 633 ha(EU funded) signed and tender for 865 ha EURound 2 launched in March 2010 and EUTender 3 for 300 ha launched in July 2010.Works tenders for irrigation equipmentlaunched in 2009 and contract for 482 ha(GoS) awarded to S&BAAP and FA 2008 signedin Dec 2008AAP 2009 and FA signedend of 2009AAP 2010 indicativelyapproved but not signedContract with GRMInternational (SHIP)Contracts with Irricon andSIITenders launchedContact with S&BAAP 2008: Road and bridge design & supervisioncontracts awarded in first half of 2009; Phase 1Road and Bridge construction contracts awardedby the end of 2010AAP 2009: Some component(s) of AAP 2009(SCGA Grant Contract) signed before end of 2010MIP 2011-2013 developed and approved beforeend of 2010Road and bridge design & supervisioncontracts awarded (July / Sept 2009)No contract on construction awarded yet.Commencement of construction in mid 2011.SCGA grant contract not likely to be signed byend of 2010MIP 2010-2013 not likely to be signed beforemid Dec 2010Contract with Aureconand Nicolas O’DwyerLogframe for Restructuring and Diversification Management Unit – Page 5

Restructuring and Diversification Management Unit to coordinate the implementation of the National Adaptation Strategy to the EU Sugar Reform, SWAZILANDOverall Objective Objectively Verifiable Indicators (OVI) planned OVI achieved Source of verificationResult 2:Implementationand financing ofother NASactivitiesfacilitatedResult 3:Stakeholderliaisonmechanisms areestablished andin operation.Result 4: Amonitoring andevaluationsystem for theNAS establishedAt least two other donors contribute up to € 20m tothe NAS by 2010Necessary documentation established by the endof 2009 and carbon credits valued at € 5m are soldon the market by the end of 2011At least 5 NAS SC organised per year70 % of major stakeholders participate in NAS WGand workshops every year until 2010At least 8 brochures developed and 4 radio/ TVspots broadcast by the end of 2010At least 2 study tours organised and 4 formaltrainings organisedSystem agreed with stakeholders and results usedas a basis for decisions by NAS SC and WG’sOne donor contributes up to € 13m to theNAS by the 31 January 2010PIN developed and approved in May 2009.PDD under preparation as of the 31 January2010. No carbon credits soldSince GFA mobilisation 19 NAS SC meetingshave been organised100 % of the major stakeholders haveparticipated in NAS WG meetings andworkshops as from the 31 July 2010As of the 31 July 2010 1 newsletter, 3brochures and 4 flyers have been developed,the website is in operation, and 1 radio spothas been broadcast2 study tours have been organised (Malawiand Akwandze Finance), 2 formal trainingsessions organisedM&E framework developed and in operationGoS Irrigation tender andGoS rebatePIN / PDDMinutesMinutesRDMU progress reportsand RDMU websiteRDMU progress reportsand RDMU websiteRDMU progress reportLogframe for Restructuring and Diversification Management Unit – Page 6

Annex 3Monitoring list of short-term experts approved until31/07/2010

3_Monitoring_STEBalance of work days as committed and approvedPosition work days available work days requested work days leftCivil Engineer 200 184 16Irrigation Engineer 229 229 0Renewable Energy Expert(s) 200 200 0Agriculturalist 193 193 0Business Management 177 177 0Environment 46 46 0Additional International Short-term Experts 660 615 45Additional local Short-term Experts 1200 1100 100Total work days all 2,905 2,744 161Total work months all 132 125 7Total work days international 1,705 1,644 61Total work months international 77.5 75 3Overview

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignmentCivil EngineerName of EXPERTKind of assignmentIndicative Start ofAssignmentINDICATIVEIndicative End ofAssignmentDays requestedEffective Start ofAssignmentEFFECTIVEEffective End ofAssignmentShaun Finley PIF preparation, designs 2008/04/15 2008/07/01 40 2008/11/06 22/10/2008 40Robert Geddes AAP Elaboration 20/05/2008 2008/05/30 10 25/5/2008 2008/04/06 10Shaun Finley Assessment Malkerns Canal 01/10/2008 15/11/2008 27 2008/02/10 16/12/2008 27Shaun Finley Roads, Transport, Malkerns Canal 15/03/2009 23/06/2009 50 2008/04/03 40Shaun Finley Small dam evaluation & screening 20/06/2009 20/07/2009 9 2009/01/07 28/9/2009 9Shaun Finley Poortzicht Technical Assessment 15/09/2009 30/11/2009 48 2009/01/10 2010/02/07 48Effective daysworkedTotal Amount 184 174Amount according to budget 200 200Still available 16 26Civil Engineer

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignmentIrrigation EngineerName of EXPERTKind of assignmentIndicative Start ofAssignmentIndicative End ofAssignmentDays requestedRobert G. Bloemers Review of designs, tender docs 2008/03/25 2008/05/05 35Robert G. Bloemers (2. assign) Review of designs, tender docs 25/05/2008 04/07/2008 35Robert G. Bloemers ( extension) Review of designs, tender docs 03/07/2008 13/08/2008 35Johannes de Beer Technical Audit Assocations 2008/07/10 2009/12/15 90Robert Bloemers extension Review of designs, tender docs 20/08/2008 15/09/2008 5Tiekie de Beer Technical Audit Individual Growers 2010/08/01 2010/12/13 29Total Amount 229Amount according to budget 229Still available 0Irrigation Engineer

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignment Renewable Energy Expert(s) Energy Concept, Carbon, CDM and CMSName of EXPERTKind of assignmentIndicative Start ofAssignmentINDICATIVEIndicative End ofAssignmentDays requestedEffective Start ofAssignmentEFFECTIVEEffective End ofAssignmentEffective daysworkdPhase 1:Joachim Schnurr Renewable Energy 01/08/2008 30/09/2008 27 2008/07/09 14/10/2008 27Christine Clashausen Bioenergy / CDM 01/08/2008 30/09/2008 32 2008/07/09 14/10/2008 32Richard Koech Agronomist / Sugar Expert 01/08/2008 30/09/2008 20 2008/09/08 2008/01/10 20Christian Schweitzer Engineer Sugar and Ethanol 01/08/2008 30/09/2008 20 2008/03/09 24/9/2008 20Lutz Schützenmeister Process and Electrical Engineer 01/08/2008 30/09/2008 10Phase 2:Joachim Schnurr Outgrower concept /DNA Expert 2009/04/01 2009/05/06 29 15/4/2009Daniel Plank Bioenergy / CDM / PDD 2009/04/01 2009/05/26 41 2009/12/07Gerald Kapp CDM / DNA 2009/04/01 2009/05/06 21 2009/10/07Total Amount 200 99Amount according to budget 200 200Still available 0 101Renewable Energy

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignmentAgriculturalistName of EXPERTKind of assignmentIndicative Start ofAssignmentINDICATIVEIndicative End ofAssignmentDays requestedEffective Start ofAssignmentEFFECTIVEEffective End ofAssignmentChristopher Forte Longitudinal Survey Malkerns 2008/08/15 2008/10/09 40 15/9/2008 2008/07/11 40Dr Ernst Grenzebach Exit Strategy Cost Divesification 27/08/2008 06/10/2008 35 2008/07/09 18/10/2008 35Rob Sawyer Small Dams Evaluation & Screening 20/06/2009 20/07/2009 6 28/7/2009 19/8/2009 6Mike OGG Small Dams Evaluation & Screening 20/06/2009 31/07/2009 20 2009/01/07 23/11/2009 20Eben Verster Soil Survey Takhamiti Farmer Assoc. 2009/07/27 2009/08/17 12 2009/03/08 18/8/2009 12M. Duerr / M. Ntuli Support to SCGA 2010/03/01 2010/04/10 50 2010/03/22 2010/06/30 50M. Duerr / M. Ntuli Support to SCGA, additional days 2010/03/22 30 2010/06/08 2010/07/10 30Effective daysworkdTotal Amount 193 193Amount according to budget 193 193Still available 0 0Agriculture

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignmentBusiness ManagementName of EXPERTKind of assignmentIndicative Start ofAssignmentINDICATIVEIndicative End ofAssignmentDays requestedEffective Start ofAssignmentEFFECTIVEEffective End ofAssignmentFolkhard Wohlgemuth Financial Assessment Associations 2008/07/07 2008/08/15 30 2008/06/07 2008/10/08 30Simone Iltgen Financial Assessment Associations 07/07/2008 01/08/2008 20 2008/06/07 30/7/2008 20Dr Richard Bates Ratoon Management Fund 13/10/2008 17/11/2008 25 2008/05/11 24/12/2008 25Paul Goodison Review of the Sugar Industry Strategy 22/03/2009 21/04/2009 18 19/3/2009 2009/09/04 18Dr Richard Bates Ratoon Management Fund: Phase 2 01/05/2009 29/08/2009 58 18/5/2009 2010/12/31 58Dr Richard Bates Centralised input & procurement system 01/09/2010 10/12/2010 26Effective daysworkdTotal Amount 177 151Amount according to budget 177 177Still available 0 26Business Management

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignmentEnvironmentName of EXPERTKind of assignmentIndicative Start ofAssignmentINDICATIVEIndicative End ofAssignmentDays requestedEffective Start ofAssignmentEFFECTIVEEffective End ofAssignmentEffective daysworkdRod de Vletter EIA Scoping 2008/05/20 2008/07/14 20 24/5/2008 2008/04/08 20Ara Monadjem EIA Scoping 2008/05/20 2008/07/14 20 24/5/2008 2008/07/08 20Rod de Vletter EIA Scoping 2009/03/10 2009/03/15 3 26/3/2009 31/3/2009 3Ara Monadjem EIA Scoping 2009/03/10 2009/03/15 3 25/3/2009 30/3/2009 3Total Amount 46 46Amount according to budget 46 46Still available 0 0Environment

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignmentAdditional International Short-term ExpertsName of EXPERTKind of assignmentIndicative Start ofAssignmentINDICATIVEIndicative End ofAssignmentDays requestedEffective Start ofAssignmentEFFECTIVEEffective End ofAssignmentEffective daysworkedSteve Atkins RDMU hand over 2008/02/14 2008/02/28 12 2008/02/14 2008/02/29 12Alan Price Ecofin on transport 2008/05/21 2008/06/10 cancelledGeorge Blundell O'Reilly Viability Organic Sugar Production 2008/07/31 2008/09/04 30 2008/09/01 2009/02/28 30Johannes de Beer Technical Assessment 20 Fas 05/01/2009 05/05/2009 80 2008/12/15 2009/04/30 80Daniel Lambart FairTrade Certification 05/01/2009 09/02/2009 30 2009/02/09 2009/03/04 30Steve Atkins Socio-economic study Malkerns 05/01/2009 14/02/2009 30 2009/01/07 2009/02/18 30Robert Bloemers Review designs & tender documents 14/04/2009 13/07/2009 70 2009/04/13 2009/07/02 70Peter Zhou Asessment Grid Factor 20/04/2009 10/05/2009 12 2009/04/26 2009/05/08 12Martin Burian Asessment Grid Factor 20/04/2009 10/05/2009 13 2009/04/19 2009/05/06 13Tiekie de Beer Technical Audit 34 Fas 01/05/2009 29/08/2009 45 2009/06/02 2009/12/18 45Robert Bloemers Small Dams Evaluation & Screening 20/06/2009 20/07/2009 9 2009/07/03 2009/07/12 9Paul Goodison MIP 2011-13 Preparation 17/09/2009 05/10/2009 17 2009/09/20 2009/10/10 17Rene Timmer MIP 2011-13 Preparation 13/09/2009 05/10/2009 20 2009/09/13 2009/10/08 20Juan Palerm Strategic Environmental Assessment 20/01/2010 30/04/2010 60 2010/02/18 31/5/2010 60Rex Brown Strategic Environmental Assessment 20/01/2010 16/03/2010 35 2010/02/23 25/5/2010 35Penny Geerdts Strategic Environmental Assessment 20/01/2010 16/03/2010 35 2010/02/23 24/5/2010 35Anthea Dickie Review of logframe and M&E 10/02/2010 01/04/2010 35 2010/02/28 19/4/2010 35Peter Hughes Mananga College Business Plan 01/02/2010 25/02/2010 17Robert Bloemers AAP 2009 Tender Dossier additional days 2010/03/12 30/04/2010 40 2010/11/03 29/4/2010 40Roger Bailey AAP 2009 Primary Seed Cane 15/06/2010 05/07/2010 10 2010/08/09 2010/08/20 10Daniel Blank/ Joachim Schnurr Carbon Follow up PDD 01/09/2010 01/10/2010 15Total Amount 615 583Amount according to budget 660 660Still available 45 77Additional int short-term exp

3_Monitoring_STEMonitoring of Expert Days and Budget for RDMUProject:Restructuring and Diversification Management Unit, SwazilandCost Center: 3011360End of contract 13/12/10Current date 2010/07/31Position of assignmentAdditional local Short-term ExpertsName of EXPERTKind of assignmentIndicative Start ofAssignmentIndicative Start of AssignmentIndicative End ofAssignmentDays requestedEffective Start ofAssignmentEFFECTIVEEffective End ofAssignmentEffective daysworkedPhumelele Thwala Gender audit 2008/05/27 2008/06/09 13 26/5/2008 16/6/2008 13Thulile Tsela Financial Assessment Assocations 2008/07/01 2008/08/30 50 2008/04/07 2008/01/09 50Lwazi Mhlongo Exit Strategy: cost of diversification 2008/08/27 2008/10/01 25 2008/10/09 2008/10/10 25J. Constantine / S. Mamba Communication & Visibility Strategy 2008/10/06 2008/11/25 28 13/9/2008 2008/12/12 28G. Nkambule/ N.F. Nxumalo Baseline survey 74 Fas 2009/01/10 2009/02/19 80 2009/05/01 17/4/2009 80Gift Nkambule / K. Khumalo Communication / Brochures 2009/04/15 2009/08/13 27 21/4/2009 30/4/2009 24G. Nkambule/ N.F. Nxumalo Basline Survey 61 individual growers 2009/04/25 2009/05/30 60 2009/04/05 21/7/2009 57Bongani Bhembe/ Fisiwe Mavuso Technical Audit 34 Fas 2009/05/01 2009/09/28 260 2009/01/06 30/11/2009 260Jabulile C. Dlamini Small Dams Evaluation & Screening 20/6/2009 20/07/2009 6 2009/08/09 22/9/2009 6Marius Kolesky FD Takhamiti: Team Leader 30/6/2009 15/09/2009 40 2009/01/07 16/11/2009 40J. van Rensburg FD Takhamiti: Irrigation Engineer 30/6/2009 15/09/2009 40 2009/06/07 29/10/2009 40Riaan Slabbert FD Takhamiti: Irrigation Technician 30/6/2009 15/09/2009 40 2009/01/07 16/11/2009 40Eksteen Lindeque FD Takhamiti: Agricultural Engineer 30/6/2009 15/09/2009 40 2009/10/07 30/10/2009 40Claudia de Beer FD Takhamiti: Draughtswoman 30/6/2009 15/09/2009 40 2009/02/07 27/10/2009 40Khetsiwe KhumaloDNA support: Approval proceduresand Sustainable Development2009/01/09 2009/10/11 51 14/9/2009 30/11/2009 51IndicatorsKwanele Simelane Traffic Counts and Roads Survey 2009/01/12 2009/02/16 40 2010/01/20 2010/03/16 40Ntsika Nxumalo Traffic Counts and Roads Survey 2009/01/12 2009/02/16 40 2010/01/20 2010/03/16 40Jacob de Vries Traffic Counts and Roads Survey 2009/01/12 2009/02/16 40 2010/01/20 2010/03/26 40Bongani Bhembe/ Fisiwe Mavuso Technical Audit Individual Growers 2010/08/01 2010/12/13 180 2010/08/02 2010/12/12 180Total Amount 1100 1094Amount according to budget 1200 1200Still available 100 106Additional local short-term exp

Annex 4Certificates of the Final Design Training

Annex 5Sugar Industry Adaptation Interventions 2005-2010

SWAZILAND SUGAR ASSOCIATIONSUGAR INDUSTRY ADAPTATION INTERVENTIONS FOR 2005-2010DESCRIPTION ACTIVITIES COSTS(E’M)IMPLEMENTATIONSTATUS Fuel switch and improving steam efficiencies (boiler33,5 CompletedA. EnhancingIndustry improvements)Increasing milling capacities including expanding refining1 727,6 The Ubombo expansionCompetitivene capacity and co-generationprogramme has spentsso Sugar Mill and Co-generation Project to increase millingabout E600 million todate.The rest will becapacities.o Expansion of distillery to strengthen ethanol production.o Expansion of refinery capacityspent in subsequento Investment in Sugar Packing Plant.years.Simunye Expansion wascompleted.Expanding bagging facilitieso Purchase of a new 1 ton bagging machine.o Upgrade of S bend for 1 ton refined sugar bagging plant.o Simunye sugar packing station upgrade.Improving Maputo Port facilities (improving warehousingfacilities and other upgrades)Process improvements improving field management, canehaulage, transport scheduling e.t.c.o Procurement of CanePro software for improving fieldmanagement.o Purchasing of a transport scheduling system.o Refinery sludge management.5,5 Completed78,0 Completed56,2 Process improvements arecontinuous. Procurementof equipment has beendone. Current costsindicate operationalexpenses.

B. Trade PolicyDimensionAnd ActivePursuit OfPremiumMarketsC. PromotingSmallholderSugar CaneImproving warehousing facilities.o Upgrading Mhlume Warehouse to ISO 22000 standardso Re-roofing Mhlume Warehouseo Upgrading Ubombo Warehouseo Dust and Bird proofing bulk warehouse at SimunyeImprovements to water and irrigation infrastructure (andsystems) to improve efficiencies.o Ubombo center pivot conversion on 4016 hectares for yieldand water duty improvements.o Big Bend pump station upgrade.Productivity improvement initiativeso RSSC’s Vusumnotfo productivity improvement initiative.Improving and upgrading road networks around the estates.o Re-gravelling 20km of the Ngomane/Simunye RoadOther interventions:o Improvements to weighbridges.o Improvements of refinery filters to meet EU specifications.o Silo upgrades.Systems and infrastructure upgrades to cater for increased VHPproduction.o VHP sugar Dryer.o Installation of a VHP Dust extraction system.o 50 VHP upgrade and Crane-In Zone.o 80 TPH VHP screening.In collaboration with the Government of Swaziland negotiatedcontinued preferences on volume sales to the EU (particularlySPS allocation) and sought increased access for Swazi sugarinto the EU, and other preferential markets.Contribution towards the adjustment of the Dollar BasedReference Price for determining the SACU sugar import tariff.Long distance assistanceo Sugar Mills are supporting long distance growers with atransport subsidy of between E0,70 – 0,90 per km for anaverage of 40km.28,6 Completed120,0 Completed2,0 Started in 2009. Mediumterm plan to improveproductivity.2,05 Completed12,2 Completed13,2 CompletedContinuousContinuous10,07 Report considers fundsexpended until 2009/10 andthe budget for 2010/11.

Growing Provision and improvement of outgrower extension serviceso Providing farm management services to some outgrowers.o Providing technical advice to outgrowers.o Providing mentoring services to outgrower farmsupervisors. Assisting growers with replanting and input supply and16,application (including seedcane development and supply).6o Re-planting and Input supply and application for Vuvulanegrowers.o 200 hectare seedcane development for LUSIP.TOTAL 2 108,9*4,0 Report considers fundsexpended until 2009/10 andthe budget for 2010/11.Report considers fundsexpended until 2009/10 andthe budget for 2010/11.

Annex 6Finanical Staus of the MIP 2007 -2010 Programme

6_Annex_6_MIP_1_Disbursement_statusSWAZILAND - SUGAR BUDGET LINE CONSUMPTIONS till 31 July 2010AAP DECISION NUMBER ALLOCATION EuroCONTRACTEDEuroCONTRACTED %PAIDEuroPAID%RACEuroRALEuro2006 18497 4,703,000 4,665,962 99% 3,385,415 73% 37,038 1,317,5852007 19052 14,895,000 6,220,879 42% 1,594,655 26% 8,674,121 13,300,3452008 19848 18,000,000 570,804 3% 513,723 90% 17,429,196 17,486,2772009 20576 16,500,000 0 0% 0 0% 16,500,000 16,500,0002010 22044* 12,057,000 0 0% 0 0% 12,057,000 12,057,00031 Jul 2010

6_Annex_6_MIP_1_Disbursement_statusContract Number Title / CONTRACTING PARTY natureContractSignaturedateEnd date ofactivitiesAmount (EUR) Paid (EUR) Balance (EUR)UnderpreparationSUCRE/2007/133-117SUCRE/2007/133-128SUCRE/2007/133-131Consultancy to serve as an interim structure forthe Restructuring and Diversification ManagementUnitCARDNO AGRISYSTEMS LIMITEDIdentification Mission for an InfrastructureImprovement Programme in the Sugar SectorPARSONS BRINCKERHOFF LTDConsultancy for provision and management ofsocial services in the sugar beltAGRICONSULTING EUROPE SASERSERSER2007/03/272007/05/162007/05/142008/01/242007/09/252007/09/18189,680.00138,532.00158,960.00189,680.00138,532.00158,960.00---0.000.000.00SUCRE/2007/147-446Restructuring and Diversification Management Unitto Coordiante the implementation of the NatioanlAdaptation Strategy to the EU Sugar SectorReform in SwazilandSER 2008/01/03 2010/12/143,789,758.00 2,735,772.74 1,053,985.26 0.00SUCRE/2009/206-474GFA CONSULTING GROUP GMBHMID TERM EVALUATION of theRESTRUCTURING AND DIVERSIFICATIONMANAGEMENT UNIT (RDMU) TO COORDINATETHE IMPLEMENTATION OF THE NATIONALADAPTATION STRATEGY TO THE EU SUGARREFORM, SWAZILANDITALTREND SPASER 2009/05/29 2009/11/2165,372.0065,372.00-0.00SUCRE/2009/216-425Detailed Design and supervision for the Upgradingof Secondary Roads in Hhohho District, Swaziland.Phase 1, II & III – Preliminary, and detailedtechnical design study, and assistance withtendering evaluation for worksSER 2009/08/27 2010/12/17NICHOLAS O'DWYER AND COMPANY LTD323,660.00 97,098.00 226,562.000.00TOTAL 31/07/2010 4,665,962.00 3,385,414.74 1,280,547.26 -TOTAL FA 2006 4,703,000.00RAC 37,038.0000RAL 1,317,585.2600AAP 2006

6_Annex_6_MIP_1_Disbursement_statusContractNumberDCI-SUCRE/2009/203-062DCI-SUCRE/2009/216-232DCI-SUCRE/2009/219-838Title / CONTRACTING PARTYTechnical Assistance: Support toSmallholder Sugar Cane Growers – Phase1GRM INTERNATIONAL BVSupply and Installation of IrrigationEquipment Round 1 Lot 2 Southern Area(Usuthu – LUSIP)IRRICON (EIENDOMS) BEPERKTSupply and Installation of IrrigationEquipment Round 1 Lot 1 Northern Area(Komati – KDDP)SWAZILAND INTERNATIONALIRRIGATION(PROPRIETARY) LIMITEDNatureContractSignaturedateEnd date ofactivitiesAmount (EUR) Paid (EUR) Balance (EUR)SER 15/04/2009 15/04/2012 3,057,012.0000 - 3,057,012.0000WKS 16/09/2009 15/03/2010 1,976,185.6900 1,036,932.3300 939,253.3600WKS 05/12/2009 05/06/2010 1,187,681.7000 557,722.6400 629,959.0600Underpreparation0.000.000.00TOTAL 31/07/2010 6,220,879.39 1,594,654.97 4,626,224.42 -TOTAL FA 2007 14,895,000.00RAC 8,674,120.61RAL 13,300,345.03AAP 2007

6_Annex_6_MIP_1_Disbursement_statusContract Number Title / CONTRACTING PARTY natureContractSignaturedateEnd date ofactivitiesAmount (EUR) Paid (EUR) Balance (EUR)UnderpreparationDetailed design and supervision for theconstruction of Siphofaneni Bridge and theDCI-upgrading of the Siphofaneni/ St PhillipsSUCRE/2009/208- road, Siphofaneni region, Swaziland741(Component 1 Design to Tender)AURECON SOUTH AFRICA(PROPRIETARY)LIMITEDSER 2009/07/01 2011/01/01 570803 513722.7 57080.30.00TOTAL 31/07/2010 570,803.00 513,722.70 57,080.30 -TOTAL FA 2006 18,000,000.00RAC 17,429,197.00RAL 17,486,277.30AAP 2008

Annex 7Financial and Economic Analysis Mananga –Sihoye Road

1 S U M M A R Y O F F I N A N C I A L A N A L Y S I S O FM A N A N G A – S I H O Y E R O A D1 . 1 I n t r o d u c t i o nA financial analysis has been undertaken on the proposed road project. An economicanalysis is not required since the current level of wages, major inputs in construction,components which are part of the vehicle operating cost reflect real economic (shadow)prices and, hence real opportunity cost.1 . 2 S o u r c e s o f i n f o r m a t i o nThe assumptions made in this cost benefit analysis have been derived from the followingsources: RDMU conducted a traffic count study for various roads which have beenconsidered for future NAS financing. As such, the Mananga – Sihoye Road wasincluded in the traffic count; The sugar industry provided details on hectarage, yields and number of canegrowers benefitting from the proposed Mananga – Sihoye Road: Detailed figures on vehicle operating cost were derived from a recent survey(undertaken in 2009) of various roads infrastructure projects in Southern Africa andadjusted to the conditions in Swaziland with particular view to sugar cane trucks.1 . 3 A s s u m p t i o n sIn performing the financial analysis the following assumptions were made: One cane truck can load on average 30 tons of cane; Capital cost occur in 2 years. 60% in year 1 and 40% in year 2. International Roughness Index (IRI) 1 amounts to 2 on the newly constructed roadsand 16 on the current road which is extremely prone to (gully) erosion; The annual growth rate of the ordinary traffic amounts to 4 %, heavy traffic 2 % andof sugar cane trucks 1 %; Average yield of sugar cane per ha amounts to 103 tons; Periodic maintenance (regravelling) takes place every 5 years whereas resealingtakes place every 10 years; Economic (financial) lifespan of the road is 40 years; Given the long-term implications of the financial crisis and limited investmentopportunities in Swaziland, the opportunity cost of capital (discount factor) arecalculated at 5 %; Only direct tangible and effects which can be monetary valued have beenconsidered in the financial analysis. As such capital cost, cost for supervision,savings in vehicle operating costs and annual and periodic maintenance have beenconsidered as cost respectively benefits. Other economic effects such as multiplier1 The International Roughness Index (IRI) is the roughness index most commonly obtained from measuredlongitudinal road profiles. It is calculated using a quarter-car vehicle math model, whose response isaccumulated to yield a roughness index with units of slope (in/mi, m/km, etc.).Since its introduction in 1986,IRI has become the road roughness index most commonly used worldwide for evaluating and managing roadsystems.Summary on CBA of Mananga - Sihoye Road - Page 1

effects arising from potential increasing economic activities from the communityhave not been considered due to absence of reliable figures.1 . 4 R e s u l t s o f t h e f i n a n c i a l a n a l y s i sThe table below illustrates the results of the financial analysis and parameters selectedTable 1:Parameters, assumptions & results of the financial analysisParametersBase ScenarioFactor to cater for 24 hours traffic 30.0%Annual Growth rate of ordinary traffic 4%Annual Growth rate of heavy traffic 2%Annual Growth rate of cane trucks 1.0%ha Extra additional development of ha in mid future after 10 years 0Yield in tons of cane / ha 103International Road Roughness Index Gravel Roads 16International Road Roughness Index Paved Roads 2Adjustment Factor to cater for IRI of cane trucks on gravel roads 1.5Annual maintenance gravel roads per km (grading) in Euro 500Periodic maintenance of gravel roads per km (regravelling every 5 years) in Euro 25,000Annual maintenance asphalt roads per km 1,000Periodic maintenance of asphalt roads per km (resealing every 10 years) 50,000Change of capital cost (increase or decrease) factor in % (1= no increase) 1.00Global change of Vehicle Operating Cost (VOC) factor (1= no increase) in % 1.00Opportunity Cost of Capital (base 5 %) 5.0%NPV 2,259,108FIRR 6.7%1 . 5 R e s u l t s o f t h e s e n s i t i v i t y a n a l y s i s a n ds w i t c h i n g v a l u e sThe following table depicts changes of the Net Present Value (NPV) and the FinancialInternal Rate of Return (FIRR) on changes of various parameters.Summary on CBA of Mananga - Sihoye Road - Page 2

Table 2:Parameters, assumptions & results of the financial analysisChange of parameter NPV FIRR5 % annual growth rate of ordinary traffic 3,503,624 7.4 %2 % annual growth rate cane trucks 2,715,828 7.0 %Development of additional 500 ha of cane asplanned2,836,112 7.1 %10 % increase of sugar cane yields 2,543,503 6.9 %Change of IRI from 16 to 15 (gravel roads) 1,579,805 6.2 %Change of IRI from 2 to 1 (paved roads) 2,775,019 7.1 %Change of adjustment factor to cater for IRIof cane trucks on very poor gravel roads from1.5 to 2Periodic maintenance cost of gravel roadsper km increase 20%Annual maintenance cost of gravel roadsincrease by 100%Annual maintenance cost of asphalt roadsincrease by 50%Increase of periodic maintenance cost ofasphalt roads by 50%4,089,776 8 %2,476,483 6.9 %2,379,222 6.8 %2,152,010 6.6 %1,831,345 6.4 %Capital cost increase by 10% 1,493,031 6.0 %Capital cost decrease by 10% 3,025,185 7.5 %Global increase of Vehicle Operating Cost(VOC) by 20%Global decrease of Vehicle Operating Cost(VOC) by 20%4,294,106 8.1 %224,110 5.2 %From the table above it can be seen that the model is sensitive to changes of theInternational Roughness Index and the change of vehicle operating costs.With regard to Switching Value Analysis, the model illustrates that investment cost canincrease up to 29 % to accomplish a FIRR of 5.0% respectively to obtain a NPV higher thanZero.On the other hand, benefits (VOC) can decrease by 22 % to accomplish a FIRR of 5.0%respectively to obtain a NPV higher than Zero.Summary on CBA of Mananga - Sihoye Road - Page 3

Annex 8RDMU Discussion Paper on Land

Annex 8: Discussion NoteLand tenure, governance and the smallholder model1 Land conflictsLand conflicts are perceived to be a serious problem affecting smallholder irrigationschemes. Broadly, there are three main causes: Chieftancy disputes; the reluctance of somefamilies to contribute their land willingly to a scheme; and the opposition of non-schemehouseholds who lose access to communal land. It is the second and third causes that havethe greatest impact for the NAS.It is widely held that the only solution is to reform the land tenure system. This is very unlikelyto happen, as it underpins the social and political system in Swaziland. Projects must workwithin the existing cultural and legal framework.However, a case can be made for stating that one of the main causes of social conflictswithin smallholder schemes is not the inherent unsuitability of the land tenure system per se,but the unintended consequences of a set of policy requirements imposed on projects as acondition for financing.2 Background: the smallholder modelThe current model for smallholder development is based on large production units managedby farmer associations, in which SNL land is pooled and irrigated using overhead or subsurface systems.This model benefits from economies of scale at the operational level and is cheaper thandeveloping individual farms. Flood irrigation (more suited to individual smallholder plots) wasrejected because it is water inefficient and would limit the total area for development. It isalso unsuited to the soils found in many schemes, particularly LUSIP.The model restricts the farmers’ room for manoeuvre: beyond determining the actualmembership, they have little alternative but to become shareholders in relatively largecompanies operating as a collective.3 Poverty Reduction and the Land issueThe projects that finance smallholder irrigation and developed this model have as theirprimary objective poverty reduction. 1 This objective can only be achieved in the first instanceif the smallholder farming enterprise is profitable. What is required above all else is anownership and management model suited to this purpose.However, poverty reduction has its own set of objectives and principles, which findexpression in the range of conditions attached to smallholder financing in Swaziland’sirrigation schemes, all of which relate to land and all of which share the laudable aim ofensuring an equitable outcome: a) all households must benefit equally from land holdingswithin the scheme; b) disadvantaged and landless families must be included; and c) themaximum land holding per household attracting grant support for infield development iscapped. 2 The result is that a household that contributes 10 ha derives the exactly samebenefit as a member who contributes none at all.This model is justified with reference to the customary laws governing the use and allocationof Swazi Nation Land (eg, land is not owned, but usufruct rights allocated to a household on1 There is one notable exception: the EC support under the Accompanying Measures, whose specific objectiveis to improve the competitiveness of the sugar industry.2Currently 3.5 ha.Annex 8 Discussion note on land - Page 1

the basis of their need). The cap on the land holding per household is also understandable:public funds being used to improve land should benefit as many people as possible.4 The actual situation and the consequencesIn practice, the rules put in place to try and ensure equity and relieve poverty might be havingunintended consequences that, paradoxically, undermine the very enterprises they aim tosupport:- The main problem is that land is in short supply: soils suited to irrigation are limited; thereare obligations to include households who cannot contribute land; and there arecompeting uses for available land, mainly for pasture and new households. Moreover,households with usufruct rights regard themselves as the de facto owners of their land. 3- To accommodate the irrigation projects, land must be redistributed within the community,a process that creates both winners and losers. The losers are a) those who contribute adisproportionately large share of the irrigable land; and b) non-scheme householdswhose grazing area is reduced. Naturally, the losers don’t believe this is equitable.Moreover, they are able to compare the income stream forgone from their formerlandholdings with their dividends from the scheme. Given that the schemes haveperformed poorly, they are keenly aware that they are losers.- Including members who are not required to invest either land, labour or capital 4 reducesthe barriers to entry to zero. This undermines the basic principle of any business: that theinterests of owners are only aligned when they invest their own money and share risk.The outcome is a two-tier ownership structure in which some shareholders have very littleincentive to make the project work. Moreover, the conditions increase the size of themembership for a given farm size, making FA governance even more complex andunworkable. Land redistribution risks challenging the status quo in the community, settingin motion social conflicts that could undermine the enterprise.- By default, the cap on the land area per household attracting the grant towards theinvestment costs has become the upper limit of land area per household (3.5 ha). Thus,while the members are in theory free to develop a larger area per household usingborrowed funds, the business proposition is far less attractive on these terms. The capalso creates an incentive to play the system by inflating the membership with bogusmembers to capture additional grant funding, rather than increase the average landholding per member transparently using borrowed funds. 5Therefore the model has the immediate effect of reducing incentives to join a scheme, whichmeans less land for development; reduced scale effects; and more complex irrigationdesigns that must work around excluded land. Over the medium term it creates the fertileconditions for a cycle of social conflict around land, which is further aggravated when incomeexpectations are not met.3 The large houses constructed on SNL are testimony to this.4 The members don’t have any equity in the business, apart from land, and the funds are borrowed by the FA,for which individual members bear no direct responsibility.5 Although in fact it might make good business sense: developing limited additional land with 100% loans hasthe effect of diluting the grant support, but the financial analysis on the 3.5 ha indicates that the schemeswould still be viable, and in the long term the returns to members would be higher.Annex 8 Discussion note on land - Page 2

5 SolutionTraditional causes of land conflicts cannot be eliminated without reforming the land tenuresystem. However, in the short-term the problems can be mitigated by easing the restrictionson land ownership in a scheme and allowing households who contribute more land to benefitfrom a larger shareholding. Households which cannot contribute land can still be members,but their shareholding would be smaller.This simple solution largely resolves a major source of land conflict, and creates incentivesfor willing and wider participation by the holders of usufruct rights. A household is far morelikely to want to join a scheme if the group is smaller, more homogenous socially and entirelyself-selecting (ie, the selection is not based on compliance with project conditionalities).There is evidence that this is already happening in KDDP and LUSIP, where farmers areplaying the system by using family members as fronts, or reverting to distributing dividends inproportion to their former land holding. It is extremely difficult to detect this, and so enforcingthe conditions is in practice very challengingThe approach is very easy to implement. The land area can be converted pro-rata into ashareholding, and shares allocated accordingly. This is analogous to any business, wherebyinvestors are awarded shares in proportion to their capital investment.It would still be possible to put in place upper limits to land ownership, but these shouldreflect the range of actual land holdings and be guided by norms for the sector, not simpleaverages. For instance, in the sugar sector a grower with less than 50 ha is considered asmallholder, whereas each household has barely 3 ha in a scheme.To adopt this, donors and implementing agencies will have to revisit their objectives.Pursuing equity and creating viable farm enterprises simultaneously and with equal weightwill not work. The primary focus must be on putting in place the conditions to create a robustsmallholder sector. Only then should welfare and equity issues be addressed, and even thenany intervention should be carefully structured so as not encumber an embryonic businesswith excessive costs or an unwieldy governance structure. Achieving a balance betweenequity and business logic will translate into more prosperous enterprises with real potential toreduce poverty.Donors and implementing agencies might also take a wider view of the stream of benefitsflowing from the project, and the opportunities these create for the poor. It isn’t necessary toown the business to benefit from it. Beyond rents and dividends, there is a demand for labouron the farms; and other services, works and supplies. This might be a more appropriatesource of income than rent derived from a passive shareholding in a scheme.The approach must also find a way of ensuring the ownership and commitment of memberswho do not contribute land, labour or capital. In a conventional business, the value of theland would be considered part of the investment capital, and the owners would be grantedshares accordingly or paid for it. Ideally the project would apply this approach, probablyfinanced from future dividends, thereby compensating the former landowners and getting afinancial buy in from all members. However, this is unlikely to be acceptable in a contextwhere land cannot be sold or valued. Nevertheless, the principle could be applied in someform or other. What is important is that rational human expectations based on self-interestshould be allowed to dictate the ownership and governance structure.Lastly, the impact of the reduced grazing area must be addressed. This might present thegreatest challenge.Annex 8 Discussion note on land - Page 3

Annex 9NAS Logframe

A N N E X 9U P D A T E D N A S L O G I C A L F R A M E W O R KNarrative Summary Objectively Verifiable Indicators* Means of Verification AssumptionsOverall ObjectiveSwaziland's (Export-led)Econo-mic Growth isGDP per capita in PPP $Central Bank Annual Reports; MEPD Political stability. HIV/AIDS epidemic controlled andimpact declinesmaintained or improved, GDP per capita in US$Central Bank Annual Reports; MEPDcreating employment and National employment rate in the formal sector Central Bank Annual Reports; MEPDreducing poverty% of Swazis living below poverty line Central Bank Annual Reports; MEPDPurposeA more competitive sugarindustry continues to play itsSugar Industry contribution to GDP in US$ (%) Swazi National Accounts; CentralBank Annual ReportsGovernment assisted in implementing its responsestrategy and the wider poverty action programmesstrategic multifaceted role, Sugar Industry contribution to formal sector Swazi National Accounts; Central Good economic performance of other sectorsfacilitating sustainabledevelopment in the Sugar Beltemployment (% and total)Hectares of Cane in the SSG sector (proxy forBank Annual ReportsSSA/Millersemployment)Changes over time in cost of social services deliveryper ton of sugar produced, disaggregated by sector.SSA/MillersGoS and Sugar Industry are committed to ensure thatexisting facilities are properly managed and maintainedChanges over time in enrolment and pass rate of Ministry of Education'matriculation' level students in Sugar Belt,compared with national figures in private and publicschoolsRange of services offered by MillersIndustry recordsAnnual sucrose price per tonneIndustry recordsYields: Tonnes cane/ha; % sucroseIndustry recordsTotal hectarage in caneIndustry records% energy produced by industry (megawatt hours) MillersResults1. NAS coordinated and Value in Euros and timing of funding committed NAS Steering Committee reports; Implementing institutions have sufficient capacityimplementedRDMU reportsValue in Euros and timing of projects implemented NAS Steering Committee reports;RDMU reportsLocal contractors complete projects on time and onbudget2. Productivity and efficiency Kms of paved v gravel roads in the Sugar Belt MEPD Hauliers transfer cost savings to farmersof sugar industry supported Time taken from Cut to Crush Industry records Other energy costs are not excessively scaling upTransportation costs per ton km from field to mill Industry records Hauliers transfer cost savings to farmersEducational trusts established become financially Industry recordssustainable with precise agreed targetsAnnex 9 - NAS Logframe - Page 1NAS interventions are integrated into viable strategicprogrammes to enhance competitiveness of theinvolved schools

Narrative Summary Objectively Verifiable Indicators* Means of Verification AssumptionsContribution of Industry to trusts Industry records The sugar industry continues to support the EducationTrusts% sugar cane under drip/ centre pivot/ sprinkler/furrowIndustry recordsUse of efficient irrigation systems to save energy costsand water useAverage SSG yields in ton cane per ha Industry records There is sufficient water for irrigation and SSGsreceptive to the demands of good irrigationmanagement.SSG indebtedness Industry records; DFIs records DFIs and commercial banks continue to providedevelopment and working capital.SSG profit and loss accountsIndustry records: SHIP/RDMUSurveysDevelopment and input costs do not increase in realterms.Area of land developed through co-financing ofsmallholder schemesRDMU; SWADE; Industry records The viability of the new cane development area isenhanced or maintainedTotal and % membership of SSGs in harvestinggroupsIndustry records; RDMU Surveys Farmer Association governance structures can quantifythe benefits of being in the Harvesting Groups3. Value added to industry Refining capacity for higher value sugars Industry records No major escalation in costs of major inputsproducts supportedBagging capacity for higher value sugarsIndustry records% of total sugar sales certified Fair Trade Industry records Demand for Fair Trade products continues% contribution of diversified revenue streams to totalrevenueIndustry recordsMarkets can absorb diversified products and servicesat a competitive price4. Diversification supported Area in hectares returned from cane to other crops Industry records Economic returns to alternative crops are competitiveand sustainable5. Market access, marketingand revenue enhancementsupportedSales by type of products, volume and value to EU,SACU, US, COMESA and World MarketsIndustry recordsActivitiesNAS coordinated andimplementedStrengthen sugar sector institutions identified in the NAS to ensure sustainable delivery of supportSupport to programme coordination and preparation of action plans and financing proposals, the establishment of efficientaid delivery modalities (including possibly cost-sharing arrangements) and systems for ensuring financial accountability.Annex 9 - NAS Logframe - Page 2Exchange rate movements (£,$, Rand and Euro) do notunduly undermine competitivenessRand appreciation does not unduly increasecompetitiveness of sugar imports into SACUWorld prices provide a cushion against the fallingprices in preferential marketsOpportunities arise to increase supply to otherpreferential marketsSugar industry players amenable to support andcommit requisite complimentary resources to sustaininterventionsDonor agencies agree-able to cost-sharing modalitiesand the sugar industry players have the capacity(technical and financial)

Narrative Summary Objectively Verifiable Indicators* Means of Verification AssumptionsSupport to capacity building of institutions involved in assisting out-growers to reduce production costs, improve productivity Stakeholders can take over services for the longer termand enhance their financial viability, possibly through a Sugar Industry Trust FundProductivity and efficiency of sugar industry supportedGeneral Industry Support - Transport and Water Infrastructure ImprovedTransport and Water Infrastructure ImprovedSupport to removal of field to mill road infrastructure bottlenecks, through improving infield and field to mill road infrastructurein cane growing areas, with project selection based on a thorough cost/benefit assessmentHaulers transfer vehicle operating cost savings to thegrowersImprovement of canal infrastructure, dams, reservoirs and water management and rehabilitate selected capital investments Savings are passed on to growersEnergy cost reduction and revenue generation through cogeneration supportedSupport to improvement inGrowers also benefit from co generation revenuesenergy efficiencyRestructure social service provision and assist retrenched workersMaintain and enhance the provision of social services and public utilities in the sugar beltCounterparts can continue to provide servicesPopulation willing to pay for servicesProvision of TA to support implementation of activities to maintain and enhance the provision of social services and publicutilities in the sugar belt.Support construction and rehabilitation of educational facilities (including supply of equipment).Support interventions to maintain required standards of health care, where increased challenges are being faced (TB andother AIDS related illness)Support the development of centralised solid waste management facility to requisite environmental standardsSupport to upgrading of water systems to SWSC standards and township developmentSSG specific supportAssist SSGs to improve input productivity and yields, reduce production costs and increase revenuesReduce production costs, improve productivity and enhance the viability of out growersSupport to supply, installation, repair of irrigation equipmentSupport to other costs reducing measuresSupport for land development through co-financing of smallholder schemesSupport to improvement of harvesting organisation and transport systems.Support to human capacity development in the sugar sectorReduce SSG debt and make loans repayableAnnex 9 - NAS Logframe - Page 3SWSC willing to take-over water supply and wastewater management facilities from the sugar estateareasSSGs governance is improvedNo other external shocks to business modelOut-growers willing to adopt and implement bestpractices that will make the farms to be run in acommercial mannerGrowers maintain irrigation equipmentBanks can provide 30% fundingSmallholders can make transition to commercialfarmingGrowers are willing to cooperateThe sugar sector is able to attract and retain highlyskilled staff to improve industry productivity andefficiencyImproved management of the schemes translate toincreased profit margin to improve loan repayment

Narrative Summary Objectively Verifiable Indicators* Means of Verification AssumptionsDFIs are willing to reschedule the non-performing loansProvide management support to SSGsSSGs willing to receive the supportSupport to improvement of input supply and managementSSGs willing to accept giving up control ofprocurementSupport to improvement of agronomic and management practices of cane growers, including through training and renewal ofthe ratoonsupport is appropriate for context and SSGs willing toadopt new practicesValue added to industry products supportedExpand refining capacity to produce increased VHP and refined sugar productionInvest in bagging facilities to allow marketing of DC VHP and refined sugarsObtain certification of high health and hygiene standardsSupport to forms of quality certification and identification of market opportunities for the development of value-addedproductionDevelop new and enhanced revenue streams based on sugar production (alcohol, ethanol, cogeneration of electricity)=downstream productsIncreased market demand for VHP and refined sugaravailableSEC purchases electricityDiversification supportedAgriculture DiversificationSupport growers who wish to diversify out of sugarcane production5. Market access, marketing and revenue enhancement supportedRespond to evolving EU market opportunitiesRespond to SACU marketRespond to the US marketRespond to the COMESA marketRespond to the world sugar market* Targets to be agreed bystakeholdersKey Inputs and Main Budget Headings still to be agreed between StakeholdersViable alternative crops and institutional support (e.g.markets, finance, extension, etc.) existThe regional and world markets remain open toSwazilandPreconditionsMajor stakeholders are motivated and committed inidentification, formulation and implementing of NASClear memorandums of understanding setting outrespective roles of different sugar sector institutionsEC and other donors secured and disburse finance ofthe NAS measuresAnnex 9 - NAS Logframe - Page 4

Annex 10NAS M&E Framework

NAS Monitoring and Evaluation FrameworkPerformance Questions Overall Objective Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)To what extent has the Swaziland's (Export-led) Economicstrategy contributed to Growth is maintained or improved, GDP per capita in US$ 3,046.84 (in million US $)the longer term goals.employment and reducingcreatingWhy or why not? WhatpovertyNational employment rate in theunanticipated positive orformal sector53.90%negative consequences% of Swazis living below E128/mdid the strategy have?poverty lineWhy did they arise?69%What changes haveoccured in social servicesprovided by the industry?Source: Central Bank Annual Reports; MEPD,Swaziland labour force survey 2007/08, Swaziland income & expenditure survey 2000/01Performance Questions Purpose Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)What changes have A more competitive sugar industry Sugar Industry contribution to GDPoccured in thecontinues to play its strategic USD315.91 (in million US $)contribution of theSugar Industry contribution to GDP %industry to the Swazi18%economy?How has the industrycontribution toemployment changed?Sugar Industry ProfitabiltyProfiability as a % of operating costs: Tabankulu20.3%Simunye 11.2%Ubombo 11.8%Source: Swazi National Accounts, Central Bank Annual Reports, Industry financial reports, RDMU reports:SCGA Grant application March 2010,p8Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Sugar Industry contribution to formal10%sector employment (%)Sugar Industry contribution to formalsector employment (absolute 22 277number)Source: SSA report; Swaziland labour force survey 2007/08Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Ha cane in SSG sector (proxy foremployment)8 900 hectaresSource: SSA report,RDMU reports:SCGA grant application, March 2010.Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Ha cane in estates35,00 haSource: SSA/MillersIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Range of services provided by theIndustryCane testing, extension,Technicalservices(Irrigation advice and design),Market all sugar as well as molasses,Responsible for the distribution of sugarproceeds using an agreed formular.Source: Millers,RDMU reports:Final report by Allan Joseph Chintedza,p30Performance Questions Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)How has thecompetitiveness of theprice received in relation to worldmarket price (WM, SSA)3,720 E/MT sugar (66% of world marketprice)industry changed?Source: SSA Latest informal reportIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Annual sucrose price/ton (receivedby grower)2,043 E/ton of sucrose)Source: Industry records,SSA price forecast 2009/10Page 110_NAS_ME_Framework_July_2010

NAS Monitoring and Evaluation FrameworkPerformance Questions Overall Objective Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Industry Yields: Tonnes Cane/ha; %sucrose98 tons/hectaresucrose: 14.59%Source: Industry records,SSA Annual report 2008/9Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Industry total hectarage in cane 50 375 haSource: Industry records,SSA Annual report 2008/9Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)% energy produced by industry(megawatt hours) 20%Source: MillersIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)% of area cane burnt 97%Source: Industry records,SSA Annual report 2008/9Performance Questions Result 1: Indicator Milestone 1 (2011) Milestone 2 (2012) Target (2013)To what extent has NAS coordinated and implemented Value in Euros and timing of funding AAP 2007 & AAP 2009: Support tocoordination beencommittedsmallholder growers: €30 mio AAPimproved and2008 and AAP 2010: Support toimplementation of MIP2accelerated?transport infrastructure €30 mio.Non EU funding €95 mioHave the plannedactivities been completedon time and withinbudget?Value in Euros of projects started /implementedSmallholder support: €10 mio (EUand GoS)TransportInfrastructure : € 500,000NAS Coordination: €4.7 mioMiller investment € 95 mioWhat institutionalsupport has been given?Source: RDMU Reports (Development of logical framework for NAS, July 2010,p20), RDMU pamphlet, NAS, SSA reports,Performance Questions Result 2: Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Productivity and efficiency of sugar Industry initiatives in support of Subsidize transport cost & bulk inputindustry supportedsmallholder growersprocurement coordination.Source:SCGA grant application M arch 2010 reportHow have logisticsmanagement of canedeliveries changed?2. 1.1 Improve Transport (roadtransport infrastructure andtransport system logistics) andwater infrastructureIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)kms of paved v gravel roads in theSugar BeltPaved: 264 kmGravel: 205kmSource: MEPD; Industry reports,MoPW Siteki branch (Roads exclude those maintained by the industry)Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Time taken from burn to crush Best practice: 36 hours AverageBHTCD: 55.92 hoursSource: Industry reports, Simunyegrower response/BHTCDIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Transportation costs rangefall by between 10 and 40%1.45 E/km/ton(SZL/km/ton) from field to millSource: Industry reports,RDMU reports:Financial analysis for small growers, CBA Model by RDMUPage 210_NAS_ME_Framework_July_2010

NAS Monitoring and Evaluation FrameworkPerformance Questions Overall Objective Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)How has effiency ofwater utilisationimproved as a result ofprogrammeinterventions?Area in ha of flood irrigation, Centrepivot, Drip, Floopy and Sprinklers.Flood: 13, 526 haCentre Pivot:7,203 haDrip : 10,454 haFloopy : 476 haSprinklers: 16,342 haSource: SSA reports, SCGA reports, miller reportsIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)How have costs for waterElectricity costs Kwh for smallholders28.63 Ecent/ Kwhusage changed?in E centsSource: Industry reports,SEC tariffs 2008/09How has access to andquality of educationfacilities in the sugar beltbeen enhanced? (ER2.1)How well has thetransition of utilityprovision to public sectormanagement gone?To what extent haveagronomic andmanagement practices ofcane growers beenimproved through(among others) trainingTo what extent has inputsupply and managementbeen improved?2.1.2 Reduce energy costs (andsupplement revenues) throughcogeneration2.1.3 Restructure social serviceprovision and assist retrenchedworkersIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Megawatts(MW) produced and RSSC (use of energy)utilised by the estate (RSSC)Ethanol plant:2 MW Irrigation:2MWMlhumevillage: 1 MWSource: Industry reports, RSSC profileIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Educational trusts are financiallyMananga: 74.8% enrolment,sustainable and achieve 90% ofSisekelo:83.3% enrolmentstudent enrolmentSource: Industry reports,RDMU reports:Final report by Allan Joseph Chintedza,p26 & Mananga Business Plan AAP 2010.Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Contribution of industry to trusts 1 million E/ per annumSource: Industry reports, RDMU report: EU Funding Mananga Capex development,p1.2.2 SSG Specific Support Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)2.2.1 Assist SSGs to improveproductivity and yields, reduceproduction costs and increase90.7 tons/hectareAverage SSG Yieldsrevenues (= productivity andefficiency?)2.2.3 Provide management supportto SSGsIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Ratio of extension officers to SSGs1 Extension Officer for 2,000 haSource: Industry reportsIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)% of SSGs bulk purchasing Not yetSource: Industry reportsPerformance Questions Result 3 Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Value added to industry productssupported3.1 Expand refining capacity toproduce increase VHP and refinedsugar productionSource: Industry reportsTotal sales by product type expressedas a percentageRaw: 18%VHP/Brown: 44%Refined/White:38%Source: Industry reports,SSA report 2008/09Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Metric tons increase in bagged sugarstorage capacity33, 000 metric tonsSource: Industry reports,SSA report 2008/09Page 310_NAS_ME_Framework_July_2010

NAS Monitoring and Evaluation FrameworkPerformance Questions Overall Objective Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)3.2 Invest in bagging facilities to Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)allow marketing of DC VHP andrefined sugarsMonetary benefits from sugarpackaging diversification RSSC: 5 mio E (2006)3.3 Obtain certification of highhealth and hygiene standards3.4 Develop new and enhancedrevenue streams based on sugarproduction (alcohol, ethanol,cogeneration of electricity)=downstream productsSource: Industry reports,RDMU reportsIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Proportion of total sucrose salescertified fair tradeNot yetSource: Industry reportsIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)% contribution of each stream tototal revenueRSSCEthanol: 4.8%Packaging of sugar:0.4%Source: Industry reportsPerformance Questions Result 4. Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Diversification supported Hectarage returned to other crops 1, 229 ha4.1 Support growers who wish todiversify out of sugarcaneproductionSource: SCGA/RDMU reportsPerformance Questions Result 5. Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Market access, marketing and Total sugar sales in tons Tons: 626 739revenue enhancement supported Source:Industry reports 2007/85.1 Respond to evolving EU marketopportunities5.2 Respond to SACU market5.3 Respond to the US market5.4 Respond to the RegionalMarket5.5 Respond to the world sugarmarketIndicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Metric tons sold and price offered Metric tons(mt): 188 220Emalangeni/mt: 2,930 E/MTSource: Industry reports 2007/8Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Metric tons sold and price offered Metric tons(mt): 307 232Emalangeni/mt: 4,300 E/MTSource:Industry reports 2007/8Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Metric tons sold and price offered Metric tons(mt): 15 935Emalangeni/mt: 5,570 E/MTSource:Industry reports 2007/8Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Metric tons sold and price offered Metric tons(mt): 25,000Emalangeni/mt: 3,490 E/MTSource:Industry reports 2007/8Indicator Baseline (2010) Milestone 1 (2011) Milestone 2 (2012) Target (2013)Metric tons sold and price offered Nothing exported in 2010Source:Industry reports 2007/8Notes for Framework:1. Complete the indicator baseline, milestones and targets in consultation with stakeholders2. For each indicator, or group of related indicators, 'Source' should indicate agreed data gathering methods, frequency and responsibilities.3. For all or specific areas of the framework indicate agreed data management responsibilities.4. Agree with stakeholders and specify how the information will be used, including: Analysis, reporting, feedback, critical learning events, responsibilities.Page 410_NAS_ME_Framework_July_2010