The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) Integrated Safeguards Data Sheet Restructuring Stage Restructuring Stage | Date ISDS Prepared/Updated: 6-Feb-2021| Report No: ISDSR27585 Regional Vice President: Hafez M. H. Ghanem Country Director: Mara K. Warwick Regional Director: Mark R. Lundell Practice Manager/Manager: Holger A. Kray Task Team Leader(s): Francisco Javier Obreque Arqueros, Efrem Zephnath Chilima, Meeta Sehgal The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) . I. BASIC INFORMATION 1. BASIC PROJECT DATA Project ID Project Name P158434 Malawi Agricultural Commercialization Project Task Team Leader(s) Country Francisco Javier Obreque Arqueros, Efrem Zephnath Malawi Chilima, Meeta Sehgal Approval Date Environmental Category 23-May-2017 Partial Assessment (B) Managing Unit SAEA3 PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 95.00 Total Financing 95.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 95.00 IDA Credit 95.00 2. PROJECT INFORMATION The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) PROG_INF O Current Program Development Objective The Project Development Objective is to increase commercialization of agriculture value chain products selected under the project. Proposed New PDO To increase commercialization of agriculture value chain products selected under the project and to provide immediate and effective response to an eligible crisis or emergency . 3. PROJECT DESCRIPTION The Agricultural Commercialization Project (AGCOM) is a flagship intervention of the Government of Malawi to promote the commercialization agenda in the agriculture and food sector. It comprises the following four components; (a) Building Productive Alliances; (b) Support Investments Enabling Services; (c) Project Coordination and Management; and (d) Contingent Emergency Response Component (CERC). Component 1: Building Productive Alliances (US$50 million) The objective of this component is to support the integration of small-scale, emerging farmers into value chains by improving their capacity to finance and execute productivity-enhancing investments and respond to the requirements of the end markets and buyers. To do so, it will implement the high impact ‘Productive Alliances’ (PAs) model. Project support to PAs will be complemented by ‘last mile’ infrastructure investments in targeted areas. Component 1 will finance the following: (a) organization of and capacity building in Producer Organizations (POs) and PAs (US$8.3 million); (b) matching grant investments in POs (US$25 million); (c) partial credit guarantee fund (PCG, approximately US$3 million); and (d) last mile public good infrastructure to facilitate the selected POs and PAs (US$13 million). It will address the following constraints: (a) inefficiencies along value chains due to inadequate integration of actors, information asymmetries, and coordination failures among stakeholders; (b) unreliable access to quality raw material; (c) poor rural access roads to connect producers to markets; and (d) limited access to finance in agricultural value chains. Addressing these through PAs has the proven potential to increase incomes, productivity and commercial viability, prospects for employment generation, and integration of youth and women. Sub-component 1.1 Horizontal Alliances (US$8.3 million) The objective of this sub-component is to organize smallholder producers into formal organizations and to strengthen the governance capacities of these newly formed POs for the purpose of them being able to effectively enter PAs with off takers. Special attention will be given to emerging women and youth POs to participate in PAs. This will be done by carrying out an effective communication and dissemination campaign and strengthening the capacity of these new farmer organizations to coordinate their business activities and manage funds. The communication and dissemination campaign will support PO formation but will also promote PA opportunities to market-ready POs. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) Communication and dissemination: This subcomponent will finance the implementation of a communication and dissemination campaign to inform potential stakeholders about the scope and rules of the Project through local workshops and mass-media outlets. It will ensure that small producers, potential buyers, and providers of goods and services become aware of the opportunities presented by the Project. Several campaigns will be held, accompanying the calls for proposals. The campaign will help clarify the rules of the game and assist in ensuring that potential beneficiaries apply with realistic expectations. Dissemination will take place through local workshops and mass media outlets, including radio spots, and will be delivered in both English and the principal local languages in each Project region to ensure that information reaches both local groups and women. Further effort will be placed on reaching women and youth by disseminating information at weekly markets and ensuring that radio spots are broadcast at times when women and youth are more likely to be listening. Capacity Building Support: Following the communication campaign, interested groups of farmers that meet the criteria will be selected to participate in a PO formation process. Similarly, for interested farmers that are already part of informal farmer groups and meet the criteria, the Project will support the formalization process. For organizing the farmers into new POs, training and capacity building will be provided based on a needs assessment through a structured approach. As the POs will be new, a demand-driven exercise will be conducted in order to find gaps in the assets and skills, which will be assessed and considered under the Project. The specific needs of women and youth for effective participation in economic activities and the organizational structure will also be assessed. The capacity building and training financed by this subcomponent will include basic accounting and financial management; corporate governance; business plan management; leadership training for the management committee; and procurement. This assistance should help to develop the capacities of producers and their organizations to manage their businesses and improve marketing skills in a manner that will allow them to effectively enter into PAs. Special training and assistance will also be provided to design, negotiate, manage and execute their productive alliance business plans to improve their probability of accessing the Matching Grants (MGs) in subcomponent 1.2. Culturally-appropriate techniques for institutional strengthening of local POs will be utilized. Key outputs of the subcomponent will be the formation of formal producer organizations that effectively enter PAs. Subcomponent 1.2 Productive Alliances (US$28.3 million) The objective of the subcomponent is to implement PAS in Malawi by financing the business proposals of the PAs that are successfully selected through the calls for proposals outlined in Component 1.1. A PA is based on a commercial agreement between a Project-supported PO and a commercial off-taker. Through the combination of grant financing and provision of technical support, the Project will facilitate the evolution of productive partnerships between aggregated farmers and off-takers. Better integration of relationships between producers and off-takers will be mutually beneficial. POs will receive TA to improve production and management of their organizations, grant funding to invest in technical and infrastructure enhancements, and support to access commercial loan finance. Off-takers will benefit from improved and consistent volumes and quality of supplies received. The PAs will assist in improving economic benefits derived from crop yields, rural accessibility and post-harvest gains, processing facilities, better organized value chains, and access to new markets. In addition, the Project will establish a PCG Fund in order to reduce risk exposure of the financial institutions in financing POs. These improvements will directly help farmers to secure their incomes and manage the production risks from climate change and climate variability, especially concerning droughts and flooding as demonstrated in the climate risk screening carried out by the team. Better organized value chains and access to new markets are beneficial to climate change adaption through all stages of the value chain, as they build farmers’ assets and institutional linkages, and increase efficiency, and deliver higher profitability to farmers and small businesses in the value chain. These efficiency gains also generate mitigation co-benefits. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) The Project will finance the costs related to the subprojects of the PAs. The TAs are fully financed by the Project, while inputs and other working capital will need to be financed by the POs and financial institutions facilitated through the PCG fund. MGs will be available to cover up to 70 percent of the total investment costs. The rest will be self-financed through cash or/and in kind and the difference through financial institutions, if any. The involvement of the financial institutions should start at the beginning of the formulation of the PA so that they can gain deeper knowledge on the POs and appraise sub-projects. The Project will place a strong preference on the sub-projects with external financing; however, it is not a prerequisite for the PAs. The business plans will be evaluated and selected by an independent group and based on their technical and financial feasibility, in line with the terms and conditions further detailed in the Project Implementation Manual (PIM). The business plans will include identification of key risks associated with each value chain, including weather and climate related risks, and measures to mitigate these risks. The Project will also look for opportunities to support new income generating value chains utilizing agriculture products and practices better adapted to climate risks, such as more drought-resistant varieties and wider adoption of climate-smart farming systems. The Government’s financial incentives to POs are capped at US$2,500 per producer household, based on the typical costs a subproject will incur and the current income per capita in Malawi. Any partnership is expected to include at least 20 emerging farmer households, and at least 80 percent of these need to fulfill the requirements of an emerging farmer (market orientation and with capacity to produce beyond subsistence), poor farmer definition of the Project, which will be based on hectares under cultivation (or amount of livestock), total assets, and annual income, where available. The POs will be allowed to include one or a few medium-scale farmers as leaders/organizers where appropriate, in line with best practice in Latin America. The PIM will specify more details of the incentive mechanism. The financial incentive will be used for investment expenditures, operational costs, TA, and certifications. The objective is to have over 200 PA partnerships in operation by Year 5, reaching approximately 40,000 farmer households. Special attention will be given to youth and women-based POs. A PCG will be established in order to reduce the risk exposure of financial institutions in financing POs, with an allocation of US$3 million. The sub-projects of the PAs will require productive inputs (e.g. seeds and fertilizers) for agricultural production, which may require external finance if the POs’ own funds are not sufficient. Although financial institutions are already providing seasonal loans, their current coverage is rather limited in terms of geographic locations and commodities and therefore, may not fit in with the Project target beneficiaries. A competitively selected third party entity will manage the PCG on behalf of the Project Implementation Unit (PIU). The PCG will provide guarantees to selected financial institutions for their loans to the project beneficiaries. The PCG fees will be priced to cover the operational costs so that they will remain sustainable even after the Project. In this scenario, the PCG will compensate the risks involved in reaching new borrowers and commodities. The guarantee will be offered on a first-come, first-served basis and cover up to 70 percent of the risk pari-passu for loans to smallholder borrowers, including project supported POs. The guarantee will cover all administration costs and risks involved. The Project will provide tailored technical assistance (TA) support to the financial institutions in order to ensure high utilization of the PCG. The support will cover value chain financing in general and, more specifically, various technical areas including risk analysis, product development and delivery, and coordination with other value chain actors. The sub-component will have a special window focusing on youth POs and PAs. Within this window, the Project will also support M-hub and similar business incubator institutions to innovate and develop successful youth business entrepreneurship. Special attention will be given to training, skills development and mentorship in business entrepreneurship, facilitation of negotiations with the industry, and the targeting of agribusiness and horticulture value chains. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) Sub-component 1.3 Last Mile Infrastructure for Productive Alliances (US$13.4 million) This subcomponent aims to provide an infrastructure envelope that will invest in ‘last mile’ public good infrastructure to enable the creation of more PAs (separate from the direct investments in PAs through MGs). This investment envelop will focus on infrastructure whose cost will be prohibitively high for PAs, whose benefits will exceed those to the PAs and reach broader surrounding rural communities, and finally, those that push otherwise unfeasible PAs over the sustainability and profitability line—as such this subcomponent is aimed as an enabler to the PAs but will be managed separately. The infrastructure investments will also help POs to manage the risks, especially drought-related risks, and hence reduce the vulnerability of participating farmers. In addition, these infrastructure investments will be built to ensure sustainability in the face of potential future climate hazards (e.g. extreme precipitation and droughts as expressed in the climate risk screening tool) to make sure farmers do not lose access to economic activities. The activities of this sub-component will be to (i) develop/rehabilitate small scale irrigation infrastructure benefiting POs in PAs to accelerate the pace of diversification, intensification and commercialization of agricultural production; (ii) construct/rehabilitate feeder roads to access to the productions areas; (iii) improve the access to electricity in Project areas; and (iv) provide access to clean water for value addition where required. Irrigation: This sub-component will include ‘last mile’ irrigation infrastructure to allow for small-scale access to water as an enabler for highly productive PAs and POs. Interventions will include small-scale rehabilitation of existing but non- functional irrigation systems, spot improvement works for small irrigation pumps or provision of new small-scale systems and drainage structures using labor-intensive methods to benefit the PAs. Schemes will be selected in accordance with selection criteria, including (i) business orientation of investment and activities associated; (ii) readiness for investment, (ii) stakeholder interest and commitment, (iii) proximity to market and/ or potential to enter into a PA (iv) technical, environmental and social sustainability, and (v) economic rate of return. This will include capacity strengthening for farmers to incorporate climate risks. Feeder Roads: This sub-component will include ‘last mile’ rural road infrastructure to enable farmers to get their products to their clients. Interventions will include small-scale rehabilitation and spot improvement works for short links including drainage structures using labor-intensive methods to benefit the poor. This activity will be implemented by the PIU in close liaison with the Ministry of Transport and Public Works and the Ministry of Local Government and Rural Development through District Councils. The selection criteria will be developed in the PIM. The beneficiary PO will have primary maintenance responsibility and its members will establish maintenance clubs together with rest of the community members and will be trained by the Project. Electricity Access: Investments will be capped at US$200,000 (although the average investment is expected to be in the US$10,000 to US$20,000 range) per subproject and will fall under the pre-defined list of investments options disclosed a priori by the Project’s safeguards. The selection will be based on their alignment with existing PAs and their economic rate of return. The details of the selection criteria, procurement arrangements, and monitoring and evaluation will be included in the PIM. For POs that are constrained by lack of electricity, the Project will finance drop down transformers and extension low voltage line for a distance not exceeding 2 km and not exceeding US$20,000, and will be done on condition that all other alternatives have been exhausted. The Project shall also look at other off grid solutions that can serve the purpose. Water Access: This sub-component will support POs and PAs that are constrained by access to a good source of clean water. The investment will focus on connecting processing facilities to portable water (clean water) sources. In the event that connecting to portable water sources is not possible, then the support will be towards provision of a borehole and all The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) other connecting accessories, such as submersible pumps, solar panels, tanks etc. The Project will carry out an environmental and social impact assessment and develop an Environmental and Social Management Plan (ESMP) for the site. This activity will be implemented by the PIU for selected beneficiaries in close liaison with the Department of Water Development and the Department of Environmental Affairs. The Project will assess the feasibility of the last mile infrastructure interventions. This assessment would include an evidence-based justification for public investment (e.g. market failure) and describe the sustainability of the interventions. In addition, care will be taken so that the proposals will include a detailed plan for how facilities and equipment will be operated, managed and maintained. In order to ensure sustainability of the last mile infrastructure, the Project will consider the following: (i) engage beneficiaries in the determination of the infrastructure and form community maintenance clubs; (ii) monitor quality of the interventions through the PIU and required TA; and (iii) work with Government and key stakeholders to put in place the maintenance strategy for the last mile infrastructure. The Project will enter into active agreements with PO and Government in order to ensure that the infrastructure is of good quality, meets the intended objectives and is well maintained in a sustainable manner. Component 2: Support Investment Enabling Services: (US$16 million) The objective of this component is to support business enabling services by addressing some of the systemic gaps and challenges that constrain investment and trade in the agribusiness sector. Unless addressed, these constraints may impede the formation of POs and prevent PAs from operating optimally. These include access to agricultural finance; access to land for commercial agriculture, policy dialogue on agribusiness; and removing some of the barriers to trade for agriculture business such as on standards and certification. The component will address processes that support efficient access to finances, land and regulatory and operational business enabling services. Sub-Component 2.1: Access to Agricultural Financing (US$3.3 million). The access to agricultural finance is one of the critical bottlenecks to agriculture commercialization in Malawi. This Project will address this challenge by strengthening the warehouse receipt financing system. Warehouse receipt financing has been growing but is still limited in terms of amount of loans and number of participating financial institutions. The limited capacity of banks on agricultural commodities and warehouse receipts is one of the biggest obstacles. The participating banks are exposed to various risks related to handling and storage of the crops. This risk exposure is translated into higher interest rates limiting farmers from utilizing warehouse receipt financing. A mitigation mechanism such as insurance or/and indemnity fund is required to assume the risks related to possible mismanagement of stored crops in certified warehouses. Limited capacity of smallholder farmers also prevents active participation in the system, and the benefits of storing crops in warehouses are not fully materialized. Risk mitigation measures will be introduced in order to upgrade the credibility of the warehouse receipt system in Malawi. International experience indicates that insurance and/or indemnity funds are useful tools to protect the value of the stored crops from various risks including the deterioration of quality and loss of crops. The Project will provide TA to analyze the existing structure in the country, gather international experiences and recommend suitable risk mitigation mechanisms that would strengthen the Malawi warehouse receipt system. Key considerations include an appropriate incentive structure to enhance the trust of the various players; developing a common mechanism to cover commodity exchanges in the country; and sustainability beyond the Project. The Project will facilitate the consensus-building among the stakeholders and continue to support the implementation, which includes TA and contribution to the indemnity fund as a seed capital. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) The Project will provide TA and capacity building to POs, organized farmer organizations and PAs to participate in the warehouse receipt system. It will also provide grant contribution for building and rehabilitation of rural warehouses through Public-Private Partnership arrangements with POs. This will be implemented with some collaboration with the commodity Exchanges (ACE and AHCX), and agri-business companies in Malawi. The location of the rural warehouses will be selected by the agribusiness companies to ensure their strong commitment and a commercially-directed investment framework. TA will be provided to the POs and small and medium-size enterprises (SMEs). Project funds will be leveraged by contributions from other donor agencies and private sector players to achieve a larger impact. Progress of the Public- Private Partnership formulation will be closely monitored and supported to reduce coordination failures among key stakeholders. Sub-component 2.2: Access to Land for Commercial Agriculture: (US$6.3 million) Access to land is one of the main factors of production. Due to tenure insecurity in Malawi, investing in land is a risk. Taking advantage of the current policy framework the country has put in place, this Project seeks to pilot some of the land laws (Customary Land 2016, Registered Land 2017, and Acquisition Land 2017 etc.) and other international land principles to increase agricultural investment for improved agricultural production and industry. Moreover, knowing that the Project advocates for MGs, farmers need to have secured tenure as their contribution to accessing financial support. This sub- component is therefore very important to setting the pace for production and investment activities. The objective of the sub-component is to support the policy and regulatory environment aimed at increasing access to land and tenure security for commercially oriented smallholder and commercial farmers, and other actors in the agriculture value chains. Under the subcomponent, this Project will: Strengthen the capacity of stakeholders (Ministry of Lands, Ministry of Trade(MT), Malawi Investment and Trade Center (MITC), Ministry of Agriculture and Private Sector Institutions) as regards to the implementation of the new land bills within the context of PA. Within this capacity building support, the Voluntary Guidelines on the Responsible Governance of Tenure and the Principles for Responsible Investment in Agriculture and Food Systems will be duly integrated. A TA will be hired. In line with the new land bills, the Project will support the registration of land processes and equipment to the selected POs (based on need) in order to ensure land tenure security. The Project will work closely with the Ministry of Lands to register the land pieces and provide title deeds to respective POs. The Project will cover the costs related to all processes to ensure that this happens. Land rights for women and youth will be particularly protected and strengthened. Support MITC in its mandate to avail land for commercial investments in the agriculture sector, in line with the new land bills. MITC will be connected to the Land Information System. Ministry of Lands is conducting a performance study on estates and the results will identify land for possible reallocations. The Project will strengthen multi sectoral linkages and operationalization of the Land Information and Management System by provision of TA and equipment to MITC and the Ministry of Lands. Sub-component 2.3: Support for business enabling services (US$6.4 million) The project will support the improvement of regulatory environment for agriculture businesses in order to improve agriculture related commerce. The sub-component will focus on support for dialogue between the public and private sectors on key challenges faced by agriculture businesses. Activities in this subcomponent will be enhanced through complementary World Bank Group TA, typically using IFC administered trust funds that will provide hands-on consultation on policy reform and regulatory drafting, targeted institutional capacity building, and analytical work supporting agreed development objectives. Activities are also complemented by World Bank lending programs. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) The Project will strengthen Public-Private and inter-ministerial dialogue (PPD) on key policy issues around agribusiness. Key challenges to effective PPD work are ineffective representation of the small, micro and informal enterprises and inadequate capacity to research, analyze and frame issues in a way that enables presentation of compelling cases for reform. This Project will support an economy-wide PPD forum and create an agribusiness specific taskforce that will address issues of commercialization, prioritize key challenges and identify international good practices that can be adopted to the Malawi context. The Project shall also support the Trade and Industry Sector Wide Approach (TIP-SWAp) and ASWAp technical working groups (TWGs), in order to improve dialogue on agriculture commercialization challenges and policy reform and implementation. The TWGs will promote sector inter-ministerial coordination on key business issues. This Project will provide funds to the MT, and Agriculture, Irrigation and Water Development (MoAIWD) to facilitate activities of the PPD and TP-SWAP/ASWAP Secretariats to enable this dialogue will translate into reforms in agriculture production and agriculture business. The Project shall support improvements in services (operations and regulations) to agribusiness related to standards and certification provided by Malawi Bureau of Standards (MBS). It will address inefficiencies in product certification that affect agriculture businesses and those that make the agriculture products less competitive on the domestic and The World Bank international markets, such as: a) lack of capacity by the bureau to execute its responsibilities in a timely manner; b) overlaps between MBS technical regulations and some of the country’s laws, and duplications of inspection responsibilities with MoAIWD, especially those related to food safety; and c) unnecessary or high inspection fees. The Project will support a) the introduction of risk assessment, improved market surveillance, and incentives for more compliance responsibilities to agribusiness, b) improved efficiencies to testing and certification, c) strengthening, coordinating and improving the implementation of technical regulations in the Malawi Bureau of Standards (MBS) and other relevant ministries or agencies, and d) introduction of automation to the certification processes. The subcomponent will provide finance directly to MBS to undertake these activities. The Project will also provide financing for the Bureau to facilitate POs, organized farmers and PAs to obtain certification standards such as a) sanitary and phytosanitary standards (SPS) certification; b) global gap; c) rain forest; d) halaal certification; e) fair trade certification; and f) Hazard Analysis and Critical Control Point (HACCP) certification. It will also provide finance to at least three Malawian manufacturing firms with horizontal links to POs or organized farmers to obtain certifications. This work will be complemented by World Bank Group advisory services. It will be analyzed whether standards and certifications pose different constraints for men and women, and restrictive standards and practices will be addressed. The Project will build on activities by the Southern Africa Trade and Transport Facilitation Program (P145566), which supports investment in hardware and software of modern trade systems in Malawi, and build on IFC Advisory Project on Trade Facilitation. It will address some of the key prevailing limitations, such as low capacity in the MT, and cumbersome trade procedures that discourage agriculture businesses and trade. The sub-component will also focus on supporting the simplification and modernization of international trade practices affecting agriculture products; the removal of challenges on cross border trade for agriculture products, and capacity building. These activities will be implemented by the MoITT. The Project will provide TA support to MITC to review regulatory and technical issues underpinning the attractiveness of the country’s investment for domestic and foreign investors, especially in agribusiness. It will finance an investor survey and demand assessment. It will support a review of legal regulatory and institutional framework for the operation of EPZ in Malawi. The Project shall provide capacity building to MITC and MT on Agri-spatial solutions. The Project will utilize the guidelines for identification and design of agri-spatial solutions by the joint Agriculture/Trade and Competitiveness Global Practice product offering on agri-spatial solutions, to support Government to identify agri-based spatial solutions including undertaking market demand assessment, and commercial site feasibility. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) Component 3: Contingent Emergency Response Component (CERC, US$20 million) The CERC is included under the Project in accordance with OP/BP 10.00, paragraphs 12 and 13, for situations of urgent need of assistance. This will allow for rapid reallocation of project proceeds in the event of future natural or man-made disaster or crisis that has caused or is likely to imminently cause a major adverse economic and/or social impact during the life of the Project. The CERC had no allocation in the original budget and was only activated on August 8, 2019 in the aftermath of the cyclone Idai. US$20 million were deducted from other components to finance the emergency response. The approved activities were the following: (i) procurement of 21,000 tons of maize for restocking the Strategic Grain Reserves (humanitarian assistance); (ii) rehabilitation of damaged 20 irrigation schemes; and (iii) rehabilitation of 15 damaged feeder roads and bridges associated with the irrigation schemes. All activities have been completed in December 2020. Component 4: Project Coordination and Management (US$9.0 million) This component will finance activities of the PIU. The PIU will oversee the implementation of project activities, ensure sound fiduciary management in the Project (both procurement and financial management), carry out monitoring and evaluation, ensure social and environmental safeguards compliance, and engage in communication and reporting. A main responsibility of the PIU will be to comply with the World Bank’s fiduciary reporting requirements. This includes submitting a project implementation progress report on a semi-annual basis. In addition, the PIU would be responsible for implementing the calls for proposals and administering the grants component under Component 1.1 and 1.2. Additional support will be provided under this component to support relevant research and analysis that can inform implementation of the Project, as well as provide an opportunity for learning and informing future operations. An example would be a specific focus on researching SMEs support through SME diagnostic tools. Given the multi-sectoral nature of the Project, a PIU will be established to coordinate and manage the Project. The PIU is justified based on the complexity of the Project, which involves multiple stakeholders and government Ministries. Staff of the PIU will be recruited competitively to manage the Project on behalf of the government. Detailed activities and staffing of the PIU are provided below. The Project’s decision-making bodies at all levels will include both men and women. Cross-cutting issues: The Project will support the mainstreaming of cross-cutting issues (gender, nutrition, and CSA & resilience) throughout the above components as follows: a) Gender: The Project will contribute to closing gender gaps in productivity and women’s access to agriculture inputs and services. It will also seek innovative ways to reduce women’s work burden, e.g. through labor -saving technologies and childcare arrangements. The activities targeting women will be demand led and based on analysis of women’s and men’s constraints and opportunities under each component. The Project will ensure that both men and women are enabled and encouraged to participate in and benefit from project activities. The result framework will include indicators to monitor outcomes of the gender actions. The results of gender actions will be monitored and corrective actions taken, if needed. b) Nutrition: The Project will support nutrition interventions in line with the Malawi National Nutrition Plan, through the diversification of crop and livestock production including under irrigation, the identification, validation and dissemination of nutrition dense crop and livestock technologies, increased attention to storage and processing of foods, and awareness of nutritional issues at the household level. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) c) CSA and resilience: The Project will support the adoption of climate-smart and environmentally friendly practices in the agro-food sector with the main purpose of minimizing the impacts of weather-related risks and of strengthening the resilience of the investments. Through the support provided to POs , the focus will be on sustainable intensification to increase the yields and productivity, and on improving the resilience of the farmers and farming practices. Adoption of practices such as conservation agriculture, agroforestry and sustainable intensification will also bring mitigation co- benefits through reduced green-house gas emissions and improved soil carbon sequestration. The Project will systematically ensure that all activities and investments financed include climate-smart and good environmental management practices, and that the technical support and financial incentives provided by the Project facilitate the wide adoption of such practices. Climate-smart practices for the purpose of minimizing production risks and enhancing resilience of the proposed business plans will also be part of the selection criteria under the Competitive Grants Program. . 4. PROJECT LOCATION AND SALIENT PHYSICAL CHARACTERISTICS RELEVANT TO THE SAFEGUARD ANALYSIS (IF KNOWN) The Project is implemented nationwide and seeks to improve the commercialization of agricultural value chain products. The core of the Project is the PA approach, that is, connecting organized farmers to off- takers through commercial partnerships. The Project provides MGs to alliance subprojects in value chains, according to calls for proposals. At the time of the Restructuring, 25 PA subprojects are under implementation in commodities such as coffee, dairy, tea, groundnut and soybean, across 15 districts. The social and environmental safeguards tools (Environmental and Social Management Framework, Integrated Pest Management Plan, Resettlement Policy Framework) guide the implementation of safeguards under the Project. Component 3 (CERC) was activated on August 8, 2019. The CERC activities have been implemented in 15 districts: Dedza, Ntcheu, Mangochi, Machinga, Balaka, Neno, Mwanza, Chikwawa, Mulanje, Thyolo, Zomba, Phalombe, Chiradzulu, Blantyre, and Nsanje. All activities have been completed in December 2020. The CERC included infrastructure works for the rehabilitation of irrigation schemes, feeder roads and bridges. An ESMF-CERC addendum was developed in July 2019 and cleared by the Bank in August 2019. The Project prepared an Environmental and Social Management Plan (ESMP) per district for all works in the area. Each ESMP was cleared by the Bank. The ESMPs covered environmental degradation, health and safety, labor influx, HIV/AIDS, Gender Based Violence, and Sexual Exploitation and Abuse, and included appropriate mitigation measures. 5. ENVIRONMENTAL AND SOCIAL SAFEGUARDS SPECIALISTS ON THE TEAM Violette Mwikali Wambua, Social Specialist Nicholas Stephen Zmijewski, Environmental Specialist SAFEGUARD_TABLE 6. SAFEGUARD POLICIES TRIGGERED Safeguard Policies Triggered Explanation The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) The safeguards policy on Environmental Assessment is triggered. The Project is likely to involve some infrastructure works to build or upgrade small markets, small processing or post harvest units, last mile rural road and rehabilitate very small irrigation scheme in selected areas across Malawi under component 1.3 and 2.1. The TA will focus on promoting a business-enabling environment for agribusinesses and investment and facilitating national and regional trade. Environmental Assessment (OP) (BP 4.01) Yes An ESMF has been prepared as a prerequisite for appraisal providing adequate guidance for use during implementation. An ESMF-CERC addendum was developed in July 2019 and cleared by the Bank in August 2019. The ESMF will guide the preparation of ESMPs for any safeguard-related concern that is identified in the specific investments. Performance Standards for Private Sector No Activities OP/BP 4.03 The Bank policy on Natural habitats is not triggered as the proposed activities will have a small footprint Natural Habitats (OP) (BP 4.04) No and will not have significant ecological impacts on any natural habitats. The policy on forests is not triggered as the proposed activities of POs will happen on currently cultivated lands and no new infrastructure is likely Forests (OP) (BP 4.36) No to be constructed that will have a high footprint, and possible forest cover or vegetation losses will be negligible. The policy on Pest Management is triggered as the Project is likely to involve investment activities that will require the procurement of farming inputs such as fertilizers, pesticides and fungicides to support Pest Management (OP 4.09) Yes the new market oriented production systems and adherence to good Integrated Pest Management Plan. The Client has developed a PMP and ESMF detailing measures to be followed. The policy on Physical Culture Resources (PCR) is not triggered as the Project activities will leave a Physical Cultural Resources (OP) (BP 4.11) No small footprint and the unearthing of PCR is highly unlikely. The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) The policy is not triggered as the geographical areas Indigenous Peoples (OP) (BP 4.10) No covered in Malawi are not likely to have indigenous people as defined by the Bank policy. The Project includes investments in small scale infrastructure and common use infrastructure. While the exact sites are not known at this time, such investment activities may require land acquisition or require temporary relocation of Involuntary Resettlement (OP) (BP 4.12) Yes traders currently occupying the sites while new infrastructure of rehabilitation is taking place are built. An RPF has been prepared to address any involuntary resettlement on the Project. Site- specific abbreviated RAPs will be prepared during implementation for applicable beneficially areas. The policy is not triggered as it will not involve the Safety of Dams (OP) (BP 4.37) No construction or maintenance of dams whether large or small as defined by the Bank policy. The policy is not triggered because the Project will Projects on International Waterways (OP) No not finance activates or subprojects lying within (BP 7.50) riparian areas of international waterways. The policy is not triggered as it will not finance any Projects in Disputed Areas (OP) (BP 7.60) No activities in disputed areas or territories. KEY_POLICY_TABLE II. KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT A. SUMMARY OF KEY SAFEGUARD ISSUES 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential large scale, significant and/or irreversible impacts. The Project is not likely to have any large scale, significant and/or irreversible impact. Potential environmental impacts may result from last mile infrastructure investments, or small scale rehabilitated irrigation schemes, and associated structures. The sub-project portfolio is diverse in terms of mode of implementation, intervention type, and location. Under the approved CERC, 20 irrigation schemes, 15 feeder roads, and 12 bridges damaged by the Cyclone Idai have been rehabilitated. The CERC activities have been assessed and mitigation measures for the potential impacts have been detailed in an ESMF-CERC addendum, developed in July 2019 and cleared by the Bank in August 2019. The Project prepared an ESMP per district, including all intended works in the specific area. A comprehensive Resettlement Policy Framework (RPF) was prepared and approved by the Bank, although the risk of resettlement across the project activities is low. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area. At appraisal, the specific sites for subprojects and infrastructure investments were unknown, but no indirect and/or long-term impacts of the planned activities were foreseen. At the time of the restructuring, the portfolio of investments have no evidence of any possible indirect or long-term impacts (25 subprojects under implementation, The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) all CERC activities completed). The ESMF provides a general framework for environmental and social issues, where specific plans can be developed accordingly. Specific guidelines were included in the Matching Grant Manual, which is part of the PIM and unpacks the preparation and approval of alliance subprojects. At the time the CERC was activated, the anticipated impacts of the proposed activities included cutting down of trees, environmental degradation, deforestation, borrow pits, land acquisition, resettlement, health and safety, labor influx, HIV/AIDS, GBV and SEA. In line with the ESMF-CERC addendum, the Project prepared specific ESMPs, one per district, covering all CERC-funded activities. Each ESMP was reviewed and cleared by the Bank, and implemented. 3. Describe any potential alternatives (if relevant) considered to help avoid or minimize adverse impacts. During preparation, multiple alternatives were assessed. The PA approach, linked to last-mile infrastructure, have proved to have low risk in terms of social and environmental risks. In the case of the CERC, the impact assessment conducted after the cyclone Idai guided the development of the pipeline. The portfolio only included investments with low impacts and adequate mitigation strategies. 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. The borrower has hired an Environmental Safeguards Specialist and Social Safeguards Specialist within the Project Implementation Unit (PIU) to provide expertise and oversee the implementation of the ESMF, RPF, and ESMPs. For the CERC activities, the PIU hired supervising consultants, including safeguard specialists. Each Contractor developed a Contractor ESMP, based on the content of the approved ESMPs. All workers were required to sign a code of conduct. Although adequate supervision capacity was in place, even during the Covid-19 pandemic, two accidents were reported during the implementation. The CERC provides important lessons for the design and construction of last-mile infrastructure works. For instance, the safeguards documents will include an adequate framework for labor influx occur on project sites with clear monitoring parameters. Also, contractor guidelines on Covid-19 have been prepared and are to be strictly adhered to. 5. Identify the key stakeholders and describe the mechanism for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The key stakeholders include POs/cooperatives and off-takers directly supported through competitive sub grant financing (MGs). These stakeholders, including the district council, will be consulted to develop appropriate mitigation measures for environmental and social risks that were identified from environmental and social screening. Appropriate safeguard instruments like ESMF, ESMPs, RPF have been developed, disclosed, and made available in all the district councils. The site-specific stakeholder engagement will ensure that there are no unforeseen adverse impacts and ensure that communities are fully appraised of project conditions. The Project has in place a Grievance Redress Mechanism (GRM), which is operational in all the project sites, and will continue to support stakeholder engagement at all levels. DISCLOSURE_TABLE B. DISCLOSURE REQUIREMENTS ENV_TABLE Environmental Assessment/Audit/Management Plan/Other The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) Date of receipt by the Bank Date of submission for disclosure 27-Feb-2017 16-Mar-2017 For Category ‘A’ projects, date of distributing the Executive Summary of the EA to the Executive Directors “In country� Disclosure Country Date of Disclosure Malawi 16-Mar-2017 Comments RESETTLE_TABLE Resettlement Action Plan/Framework Policy Process Date of receipt by the Bank Date of submission for disclosure 27-Feb-2017 16-Mar-2017 “In country� Disclosure Country Date of Disclosure Malawi 16-Mar-2017 Comments PEST_TABLE Pest Management Plan Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank Date of submission for disclosure 27-Feb-2017 16-Mar-2017 “In country� Disclosure Country Date of Disclosure Malawi 16-Mar-2017 The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) Comments COMPLIANCE_TABLE C. COMPLIANCE MONITORING INDICATORS AT THE CORPORATE LEVEL EA_TABLE OP/BP/GP 4.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes If yes, then did the Regional Environment Unit or Practice Manager (PM) review No and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the credit/loan? NA PM_TABLE OP 4.09 - Pest Management Does the EA adequately address the pest management issues? NA Is a separate PMP required? NA If yes, has the PMP been reviewed and approved by a safeguards specialist or PM? Are PMP requirements included in project design? If yes, does the project NA team include a Pest Management Specialist? IR_TABLE OP/BP 4.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process framework Yes (as appropriate) been prepared? If yes, then did the Regional unit responsible for safeguards or Practice Manager No review the plan? PDI_TABLE The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank for No disclosure? 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 No and local NGOs? ALL_TABLE The World Bank RESTRUCTURING ISDS Malawi Agricultural Commercialization Project (P158434) All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been Yes prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project Yes cost? Does the Monitoring and Evaluation system of the project include the monitoring Yes of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower Yes and the same been adequately reflected in the project legal documents? III. APPROVALS Francisco Javier Obreque Arqueros Task Team Leader(s) Efrem Zephnath Chilima Meeta Sehgal Approved By Practice Manager/Manager Holger A. Kray 06-Feb-2021 .