INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE

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1 I. Basic Information Date prepared/updated: 03/08/2007 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE Report No.: AC Basic Project Data Country: Lesotho Project ID: P Project Name: Private Sector Competitiveness and Economic Diversification Task Team Leader: Agata E. Pawlowska Estimated Appraisal Date: January 18, Estimated Board Date: March 21, Managing Unit: AFTPS Lending Instrument: Specific Investment Loan Sector: General industry and trade sector (80%);Vocational training (10%);Micro- and SME finance (10%) Theme: Small and medium enterprise support (P);Other financial and private sector development (S) IBRD Amount (US$m.): 0.00 IDA Amount (US$m.): 8.10 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: BORROWER/RECIPIENT Environmental Category: B - Partial Assessment Simplified Processing Simple [] Repeater [] Is this project processed under OP 8.50 (Emergency Recovery) [ ] No [] 2. Project Objectives The key objective of the project is to facilitate increased private sector investment by improving the business environment and diversifying sources of growth. This goal will be achieved by reducing the costs of doing business; strengthening the linkages and integration of the Lesotho economy with the regional economy, especially with South Africa; strengthening support for technical and business management skills thereby improving productivity at the firm level; and improving access to finance for MSMEs. These measures will also support the poverty reduction strategy dialogue and implementation of agreed upon policy measures. 3. Project Description The PSC Project consists of three components: Component One - Improving the Business Environment - will support implementation of policy measures intended to improve the business environment and reduce the cost of doing business.

2 Component Two - Supporting Economic Diversification - will build the capacity of the private sector by: (i) strengthening the linkages with the regional economy, especially South Africa; (ii) strengthening institutional support for employable skills and business management; and (iii) improving productivity at the firm level. Component Three - Project Implementation Support - will support implementation costs of the PSC Project. 4. Project Location and salient physical characteristics relevant to the safeguard analysis Kingdom of Lesotho. The PSC Project will support the establishment of two pilot farms in two locations as described below in Section II, part A. 5. Environmental and Social Safeguards Specialists Mr Amadou Konare (AFTS1) 6. Safeguard Policies Triggered No Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts: The PSC Project will support the establishment of two pilot farms. In the first pilot, Alpha Estates, a South African farm, will partner with selected Basotho farmers to grow vegetables (e.g., carrots, butternut, potatoes, Brussels sprout, and others). A vegetable farm in the Berea district on a 10 hectare site situated about 30 kilometers north east of Maseru. The second pilot will focus on the production of apples and cherries, where Denmar Estates, another South African firm, likewise will partner with selected Basotho farmers to grow crops for the local, South African, and the European Union (EU) markets. A horticulture farm in the Leribe district, on approximately 15 hectares divided between two unequal separate land parcels in Qoqolosing and Mahobong villages. Tillage practices for each of the farms will vary significantly. It is important to assess the soil types, topography, method of planting, and other factors to develop soil conserving, cost-effective tillage practices. Soil preparation and soil testing before

3 planting are important elements of productivity. To ensure long-term productivity of apples and cherries it will be important to prepare the soils through tillage and adding organic matter well in advance of planting. Prior to planting, through soil testing, nutrient levels and ph levels should be noted for adequacy and appropriate actions taken to apply needed agrochemicals and nutrients. In addition, care must also be exercised to minimize erosion due to trees or vegetable plantation. For irrigation, the Berea farm will draw water from the Caledon River, flowing along its northwestern borders, and use a center pivot system, currently installed on the farm. A pumping station already exists at the farm. At the Leribe site, the water will come primarily from boreholes and the existing irrigation system. Sound irrigation systems and practices are essential for good crop production at each of the sites. The type (and quantities) of insecticides to be used at each of the demonstration farms could not be ascertained during the period of the EA study. However, insecticides that are likely to be used would be similar to those in use in the bordering Republic of South Africa. These include: pyrethroids, chlor pyriphos, Delta methryn, prothiophos, cabaryl, permethrin and teflubenzuron, methamidophos, metolachlor, carbendazim and carbosulfan. While their insecticidal properties are well documented, it is useful to know that among these, the last four have shown high leaching potential in alluvial soils common in the project area. Among the plant diseases, common ones include: mildews, black spot, and corn leaf blight. If organic farming for apples and cherries is to be practiced, pesticides may not be involved especially during the early years. An important issue involving pesticide use however is the lack of facilities and weak regulatory framework including for pesticide procurement, storage, use and other management aspects. The EIA prepared in the context of the project includes detailed provisions on environmental impacts and their mitigation measures, including those concerning pesticides use, handling and storage. The EMP also discusses implementation and monitoring arrangements of those measures. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Based on the EIA findings, it appears that, under proper project management, potential environmental impacts from the project are likely to be insignificant. Nonetheless, there is a need for a coherent Lesotho government policy that ensures that the requirements of the World Bank, and also objectives of Agenda 21 (UNEP), such as integrated pest management, and the relevant conventions are developed. At the farmer level, education and awareness, including through training are essential. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. Each of the South African firms has extensive experience related to the activity, and also brings EU network for potential food export. The demonstration results will help scale up the activity, helping improve rural livelihoods. Over the long term, the project s objective is to add more value to horticultural products grown in Lesotho, particularly vegetables, and fruit crops such as apples and cherries. Production will be linked to markets in South

4 Africa, and the EU through (i) improving quality, volume and delivery capability of Basotho farmers; (ii) transitioning away from smallholder farming into group or block farming methods; and (iii) production of organic products to help tap into high premium (overseas) niche markets. 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. There is a need to develop and/or update specific legislations on pesticide importation, use, and safe handling and management. Since such issues include health and safety, food and environmental protection, agricultural production, and economic affairs are relevant and important, an inter-disciplinary and a multi-agency approach with effective inter- and intra-agency coordination will be needed. Furthermore, proposed export of fruits and vegetables to EU requires meeting "EUREPGAP Fruit and Vegetables standards; successful implementation of the above interventions will help meet such requirements. During the project preparation activities, drafting of appropriate legislation will be initiated. Furthermore, capacity building activities (such as education, training and awareness rising programs) will be developed and implemented under the project on better management of pesticide stocks. Given the very high illiteracy levels of Lesotho farmers, development of innovative training programs would be required. It may include use of audio-visual tools and hands-on demonstrations. In addition, a more "holistic" approach to training may also be needed where entire community, as part of the training programs, is involved. Training techniques have proved more useful where they have focused on identified local needs and use of local dialects during training. Finally, the monitoring and evaluation (M&E) plan developed for the project will assure mitigation adverse impacts, if any. M&E in data collection and analyses will not only consider non-point runoff (pollution) from vegetable- and orchard-applied fertilizers?both organic and inorganic, and pesticides, but also how soil type, slope, watersheds, and groundwater relate to surface runoff, drainage, and persistence in and leaching through the soil profile. The M&E parameters presented in Table below assume that: (i) tillage practices, as applicable, for each of the two farms were used (ii) judicious use of fertilizers and pesticides following requirements such as those on the (pesticide container) label, in accordance with the Lesotho or South African guidelines, as applicable, (iii) participating (field) personnel have some level of training, and (iv) access to field instrumentation and laboratory services, as needed, will be provided by the project?s two South African partners. An environmental review will be conducted mid term of the project to see what (significant) environmental problems, if any, have arisen and what corrective action can be implemented. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. EIA has been prepared in broad consultations with other stakeholders, including the Government (MTICM, MOAFS, MTEC, etc.), Local DEO officers, farmers who will participate in the scheme and South African partners from DENMAR and ALPHA. The

5 findings and recommendations of the draft EIA report were discussed with the relevant stakeholders with objective to benefit from their inputs and to incorporate their comments and suggestions into the final report. The EIA report has been disclosed in-country and at Bank prior to appraisal. B. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Date of receipt by the Bank 11/13/2006 Date of "in-country" disclosure 12/20/2006 Date of submission to InfoShop 01/18/2007 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP Environment Assessment Does the project require a stand-alone EA (including EMP) report? If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the credit/loan? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank s Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the

6 borrower and the same been adequately reflected in the project legal documents? D. Approvals Signed and submitted by: Name Date Task Team Leader: Ms Agata E. Pawlowska 03/05/2007 Environmental Specialist: Mr Amadou Konare 03/02/2007 Social Development Specialist Additional Environmental and/or Social Development Specialist(s): Approved by: Regional Safeguards Coordinator: Mr Warren Waters 03/08/2007 Comments: Sector Manager: Mr Demba Ba 03/08/2007 Comments: