Type of Review: Annual Review

Support to the National Fund for Climate and Environment (FONERWA) - Rwanda

(Aries project number: 203582)

Project start date: 24 April 2013

Date review undertaken: 27 March 2014

Instructions to help complete this template:

Before commencing the annual review you should have to hand:
·  the Business Case or earlier project documentation.
·  the Logframe
·  the detailed guidance (How to Note)- Reviewing and Scoring Projects
·  the most recent annual review (where appropriate) and other related monitoring reports
·  key data from ARIES, including the risk rating
·  the separate project scoring calculation sheet (pending access to ARIES)
You should assess and rate the individual outputs using the following rating scale and description. ARIES and the separate project scoring calculation sheet will calculate the overall output score taking account of the weightings and individual outputs scores:
Description / Scale
Outputs substantially exceeded expectation / A++
Outputs moderately exceeded expectation / A+
Outputs met expectation / A
Outputs moderately did not meet expectation / B
Outputs substantially did not meet expectation / C

Introduction and Context

What support is the UK providing?

The UK is contributing up to £22.5m to Rwanda’s national Fund for Climate Change and the Environment (known by the French acronym, FONERWA) over the period July 2013 to March 2015. The Fund will support a wide range of climate adaptation and low carbon development outputs in Rwanda. Proposals are selected on the basis of agreed criteria with a strong emphasis on value for money.
The UK contribution goes directly to FONERWA which is managed by a team of experts recruited by DFID under a separate project, under the oversight of the Rwanda Ministry for Natural Resources (MINIRENA)
.
What are the expected results?
The intended impact of the programme is that Rwanda’s economic growth is environmentally sustainable, low carbon and climate resilient. The expected outcome is that sustainable and equitable finance supports national programmes and private sector initiatives to address climate and environment priorities.
The outputs will flow through two channels: primarily, the delivery of high quality climate and environment projects and programmes; but also through improved institutional capacity for mainstreaming climate change into existing and future programmes. This latter channel will help ensure the impact of UK support is sustained over time.
The programme is expected to result in at least 20 low carbon, climate resilient projects implemented successfully and delivering, by 2015[1]:
·  15,000 people made more resilient to climate change impacts
·  Improved access to clean energy for 2,000 more people
·  1,200 hectares more land protected against soil erosion
·  At least £8m finance mobilised from the private sector for climate and environment purposes

What is the context in which UK support is provided?

Rwanda is highly vulnerable to climate change as it is strongly reliant on rain-fed agriculture both for rural livelihoods and its significant exports of tea and coffee. Climate change is expected to lead to higher temperatures, changes in seasonal patterns, and the potential for increased flooding and droughts, increasing the risk of landslides, crop losses and damage to infrastructure.[2]
Rwanda also imports all of its oil-based products so an increase in oil price has the potential to negatively impact Gross Domestic Product (GDP) and economic growth.[3] Rwanda is fortunate in that it has large, untapped clean energy resources, in the form of geothermal, hydro and solar, which have the potential to meet Rwanda’s electricity needs and replace oil-fuelled power plants. This could offer domestic energy security and support socio-economic development whilst avoiding increasing the greenhouse gas (GHG) emissions that contribute to global climate change.
The Government of Rwanda is determined to set the economy on a low carbon and climate resilient path to development. The National Strategy for Climate Change and Low Carbon Development, developed with UK support, was approved by the Rwandan Cabinet in 2011. The challenge Rwanda now faces is in implementation of the Strategy.
The initial implementation phase needs to focus on creating and building institutions that will enable Rwanda to access international and bilateral climate finance, mainstream climate resilience and low carbon development into national development plans and achieve its vision of becoming a low carbon and climate resilient middle income economy by 2050. A key recommendation from the strategy was the creation and operation of a National Fund for Climate and the Environment.
The rationale for the Fund stems from a growing recognition amongst both donors and recipients that a coordinated, streamlined approach to climate financing is needed to respond to developing countries’ adaptation and low carbon needs, and that such coordination would best be achieved through a ‘devolution’ of management to developing country governments.[4] The purpose of the Fund is therefore to facilitate and coordinate access to domestic, bilateral, multilateral and international climate funding streams and align them with national development programmes and private sector initiatives that contribute to low carbon development and climate resilient growth in Rwanda. The Fund, enabled in law[5], is an integral part of the Rwandan government’s financial institutional architecture.
A wide range of institutions (government ministries, district authorities, private companies and charities) are eligible for funding, provided their proposals satisfy the objectives for the Fund and meet agreed value for money criteria. A wide range of activities could be supported, including initiatives to promote sustainable land use practices, increase forest cover, improve management of water resources, or support sustainable small-scale renewable energy installations in rural areas. Other proposals are expected to relate to the extra costs of making existing programmes more ‘climate smart’ e.g. providing better flood protection around school sites.
DFID Rwanda support will help the Government of Rwanda finance projects and programmes that enable Rwanda to adapt to climate change and pursue its low carbon growth objectives. It will also help strengthen the government’s institutional capacity and support mainstreaming of climate change across the government programme as well as leveraging private finance through providing additional incentives for new and innovative ‘green’ private sector initiatives.
The Fund will be administered by the Government of Rwanda, with additional technical assistance provided by a dedicated Fund Management Team (FMT), financed through an existing DFID programme until September 2014. At project-level, implementation will be led by the institution requesting funding. A minimum of 20% of Fund resources are expected to go to private sector-led projects, with the majority of projects being implemented by government ministries and districts.

Section A: Detailed Output Scoring

Output 1: Conservation and management of natural resources strengthened and sustained as a result of fund support

Output 1: C: output substantially did not meet expectation
Indicator 1.1: Area (ha) of land secured against erosion
The milestone target of 150ha secured against erosion by December 2013 was not met. Actual performance against this indicator was zero.
Indicator 1.2: Area (ha) of forest and agro-forest coverage (disaggregated by afforestation/restored forest/agroforestry)
The milestone target of 400ha additional forest or agro-forest coverage by December 2013 was not met. Actual performance against this indicator was zero.
Indicator 1.3: Area (ha) of watersheds rehabilitated
The milestone target of 20ha of watersheds rehabilitated by December 2013 was not met. Actual performance against this indicator was zero.
Progress against expected results: When the logframe was agreed with the Government of Rwanda in November 2012, it was expected that the Fund would be up and running by early 2013, that the first projects would be approved by April 2013 and be starting implementation by June 2013. Therefore some modest targets were included in the logframe for 2013. In hindsight, this timeframe was overly optimistic. DFID support to the Fund was approved by ministers in April 2013, later than originally expected. It then took some time to finalise the arrangements with the Government of Rwanda: the MoU with the Government of Rwanda allowing transfer of resources to the Fund was not signed until July 2013. The first projects were not approved by the Fund Management Committee (FMC) until December 2013 and did not sign their grant agreements until January 2014. Even delaying the first milestone to December 2013 (from June 2013) did not allow sufficient time for initial results to be delivered.
We have scored each indicator as ‘C’ (substantially did not meet expectation), since there is no progress to report.
However, it is the opinion of the Annual Review team that lack of progress against these initial logframe targets does not adequately capture programme performance. Rather, that a combination of delays in capitalising the fund, combined with an overambitious logframe, mean that performance appears worse that it is in reality. In fact, the Fund has made significant progress in formalising governance arrangements, providing technical assistance to prospective bidders to the Fund, running two calls for proposals, screening the responses and approving five projects for support so far. Other funds have taken much longer to operationalise. For example, in Bangladesh their national climate fund was capitalised in 2010 but projects took two to three years from initial concept to final approval by the World Bank (who manage the fund) and the Government of Bangladesh so only around $25m (out of total donor pledges of $180m) has so far been disbursed. In Ethiopia, the Business Case for DFID support to the national climate fund was approved in September 2012 but setting up the fund and signing the MoU with government took over a year. The first contribution to the fund was made in December 2013 and the government of Ethiopia is currently assessing the initial pipeline of projects. However no projects have been funded as yet. This information wasn’t available to inform project design.
Now that projects are starting to be approved under FONERWA, the likelihood of meeting future targets is improved. However, there is a significant risk that future targets will still be missed, even whilst the Fund may be performing very well. This is because the ‘challenge fund’ nature of FONERWA makes it difficult to predict results in advance because it is not possible to know what projects will come to the Fund, and of these, which will be approved. For example, if no forestry projects are approved by the Fund, then it will be impossible to meet targets under output indicator 1.2. However, this is not necessarily a failure of the Fund. It may just signal that there is little demand for finance for forestry projects, that there are other projects are of greater importance for Rwanda and/or that forestry projects that came to the fund were of poor quality and were therefore rejected (an indication that the fund is prioritising value for money). As such, a conventional logframe approach may not fairly capture the performance of the fund.
A DFID-supported infrastructure technical assistance facility in Nigeria has adopted a flexible logframe approach due to difficulties in predicting in advance which activities will be conducted under the demand-led facility. An independent Technical Review Panel (TRP) meets every six months and scores performance on each output and outcome indicator. They also make recommendations for changes to the logframe which are then considered by DFID on a six monthly basis. It may be worth considering a similar arrangement for FONERWA. Such a new approach would need to be balanced against the additional time and resources that a flexible logframe would require. In any case, it is recommended that a review of the logframe is conducted in six months’ time (October 2014). By this point at least three, and possibly, four calls for proposals will be complete. This should give a better idea of the types of projects coming to the fund, and the nature and the scale of benefits expected.
Recommendation 1  Conduct a review of the logframe in October 2014 and consider making changes to indicators and targets on the basis of experience gained from the first three or four calls for proposals. As part of this review, consider the case for adopting a flexible logframe to account for the fact that results are difficult to predict in advance.
Impact Weighting (%): 25%
Revised since last Annual Review? No
Risk: Medium
Revised since last Annual Review? No

Output 2: Renewable energy and other environmentally sustainable, low carbon and climate resilient technologies adopted, developed and/or improved for use in Rwanda as a result of the fund

Output 2: B: output moderately did not meet expectation
Indicator 2.1: Number of monitoring and management information systems (MIS) with sufficient climate change data to inform policy decisions
The December 2013 milestone target for this indicator was one monitoring and MIS system established. Actual performance under this indicator was zero.
Indicator 2.2: (a) MW produced through clean energy projects; and (b) number of people (disaggregated by gender and income) with improved access to clean energy
The Dec 2013 milestone target for (a) was zero. The target for (b) was 150 people. Actual performance under this indicator was zero.
Indicator 2.3: Tonnes of CO2e avoided
The December 2013 milestone target for this indicator was zero. Actual performance under this indicator was also zero.
Indicator 2.4: Number of Rwandan (a) citizens and (b) women and girls who have built resilience to climate change impacts
The December 2013 milestone target for this indicator was zero. Actual performance under this indicator was also zero.
Progress against expected results: Indicators 2.2a, 2.3 and 2.4 were not expecting any progress by December 2013 and therefore met expectation (scored A). The remaining indicators (2.1 and 2.2b) included modest targets against which no progress was made (scored C). Weighting each indicator equally suggests an overall score of ‘B’. The same comments and recommendations made under output 1 also apply to output 2.
Impact Weighting (%): 25%
Revised since last Annual Review? No
Risk: Medium
Revised since last Annual Review? No

Output 3: Environment and climate change issues mainstreamed into policies, programmes, plans and activities for public and non-public agencies

Output 3: B: output moderately did not meet expectation
Indicator 3.1: Total number of Project Profile Documents (PPDs) received from ministries relating to incorporating climate and environment considerations into existing or planned programmes