FILE COPY. Public Disclosure Authorized. Report No. 626a-SW Appraisal of a Second Highway Project Swaziland. Public Disclosure Authorized

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Report No. 626a-SW Appraisal of a Second Highway Project Swaziland April 7, 1975 Regional Projects Department Eastern Africa Regional Office Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association FILE COPY This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.

2 CURRENCY EQUIVALENTS (AS OF DECEMBER 23, 1974) Except where otherwise stated all figures are quoted in US Dollars (US$). Currency Unit = Emalangeni (E) = Rand (R) US$1.5D = E 1 = R 1 US$1 E = R US$l,OOO = E 667 = R 667 US$1,000,000 E 667,000 = R 667,000 The Emalangeni was introduced in September 1974 as the local currency of Swaziland. WEIGHTS AND MEASURES 1 meter (m) 1 kilometer (km) 3.28 feet (ft) 0.62 miles (mi) 1 hectare (ha) 1 liter (1) = 2.b7 acres (ac) 0.22 Imperial gallon (IMg) 0.26 US gallons (gal) 1 kilogram (kg) 2.2 pounds (lbs) 1 metric ton (m ton) = 2,204 pounds (lbs) 1 sq km (km 2 ) square miles GLOSSARY OF ABBREVIATIONS ADT Average Daily Traffic CIDA Canadian International Development Agency COMTEC Compagnia Technica Di Progrettazione MWPC Ministry of Works, Power and Communications ODM Ministry of Overseas Development SITI Swaziland Industrial Training Institute UBLS University of Botswana, Lesotho and Swaziland UNDP United Nations Development Programme GOVERNMENT OF SWAZILAND FISCAL YEAR April 1 - March 31

3 SWAZILAND APPRAISAL OF A SECOND HIGHWAY PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS... i-ii 1. INTRODUCTION THE TRANSPORT SECTOR... 1 A. Economic Setting. 1 B. The Transport System. 2 C. Transport Policy and Coordination.3 3. HIGHWAYS.. 4 A. The Network.. 4 B. Characteristics and Growth of Road Traffic 4 C. Administration... 5 D. Planning and Financing.. 6 E. Engineering.. 6 F. Construction.. 7 G. Haintenance.. 7 H. Training THE PROJECT. 8 A. Objectives.. 8 B. Description.. 8 C. Execution D. Cost Estimates..10 E. Financing and Disbursements ECONOMIC EVALUATION AGREEMENTS REACHED AND RECOMMENDATION. 13 This report was prepared by Messrs. K.G. Clare (economist), W.H. Cooke (Consultant engineer), and with assistance from H. Peters (engineer).

4 TABLE OF CONTENTS (Continued) TABLES 1. Highway Network 2. Vehicles Licensed by Type of Vehicle, Highway Projects Under Preparation 4. Annual Highway Expenditures 5. Highway Design Standards 6. Estimated Schedule of Disbursements 7. Projected Average Daily Traffic on Project Roads 8. Vehicle Operating Costs by Type of Road 9. Economic Costs and Benefits CA*TS 1. Ministry of Works, Power and Communication Organization (IBRD 9368) 2. Roads Branch Organization (IBRD 9367) MALP Swaziland - Transportation Network (IBRD 11274R)

5 SWAZILAND APPRAISAL OF A SECOND HIGHWAY PROJECT SUMMARY AND CONCLUSIONS i. Landlocked Swaziland is well linked by road to its neighboring territories; within the country, all areas are accessible by a relatively dense road network. Most of the country's road system, however, consists of gravel and earth roads which, in many cases, are impassable during the rainy season, causing interruptions in the flow of traffic. Moreover, the poor quality of much of the road system results in relatively high transport costs. Road improvements, along with adequate maintenance, are essential to enhancing the reliability of road transport and to lowering transport costs. ii. The Bank Group became involved in the transport sector of Swaziland in 1962 when Credit 60-SW (US$2.8 million) was made to help finance construction of the Oshoek-Lomahasha road (181 km) which extends from the western border through the main economic core of the country to the Mozambique border. This project was satisfactorily completed. There has been no financing by the Bank Group of other projects in the transport sector of Swaziland. iii. This project is concerned with two roads; The first, Tshaneni- Mlaula Road (about 39 km), an important link in the national transport system, connects a major agricultural area and sugar milling center with Mlaula Station on the Swaziland Railway. The second road, between Helehele and Phuzumoya (about 43 km), connects the IDA-financed main east-west road through the country with Phuzumoya Station on the Swaziland Railway. The latter road is part of the principal route linking two areas undergoing relatively rapid agricultural development. However, the poor condition of both roads results in high transport costs which are an impediment to economic growth. The purpose of the proposed project is to reduce transport costs by improving the two roads to a two-lane paved standard. The necessary feasibility and engineering studies were financed by the United Nations Development Programme and the Government of Swaziland, with the Bank as executing agency. iv. The project comprises improvement of the Tshaneni-Mlaula and Helehele-Phyzumoya roads. The total cost of the project is estimated at US$9.92 million (which includes US$500,000 taxes and duties), with a foreign expenditure component of US$7.53 million. The Bank loan of US$7.00 million will cover 93% of the foreign costs, or about 74% of project costs net of taxes and duties. v. The Roads Branch of the Ministry of Works, Power and Communications will be responsible for executing the project; consultants will provide assistance in construction supervision. Award of construction contracts will be based on international competitive bidding in accordance with Bank guidelines. Two years will be required for construction.

6 - ii - vi. Improvement of the two roads will result in significant savings in vehicle operating costs and road maintenance costs. The project is well justified; it will yield an economic return to Swaziland of 13% on the Tshaneni-Mlaula Road and 17% on the Helehele-Phyzumoya Road. vii. Satisfactory assurances were obtained from the Government on the matters mentioned in paragraph 6.01 and the project is suitable for a Bank loan of US$7.00 million to the Government of Swaziland. An appropriate loan term would be 23 years with a grace period of three years.

7 SWAZILAND APPRAISAL OF A SECOND HIGHWAY PROJECT I. INTRODUCTION 1.01 In , the University of Natal, partly financed through South African technical assistance, prepared a road development plan and carried out feasibility studies of a number of roads including the Tshaneni-Mlaula and the Helehele-Phyzumoya roads which are the subject of this project. The studies indicated that improvement of these roads had high priority and was economically justified. Subsequently, the Italian consultants, COMTEC, financed by the United Nations Development Programme and the Government of Swaziland, with the Bank as executing agency, completed detailed engineering of both roads in mid The Government has asked the Bank to help finance construction of the roads This report is based on the above-mentioned studies and on the findings of an appraisal mission to Swaziland in August-September 1974, comprising Messrs. K.G. Clare (economist) and W.H. Cooke (consultant). The report was prepared with the assistance of Mr. H. Peters (engineer). 2. THE TRANSPORT SECTOR A. Economic Setting 2.01 Swaziland is a small (17,364 sq km) landlocked country in southern Africa bounded by the Republic of South Africa and Mozambique. Four identifiable topographic regions are, from west to east, the mountainous highveld (average height 1,300 meters), the undulating middleveld, the more gently undulating lowveld, and the Lubombo plateau on the eastern border. Annual rainfall is relatively heavy (1,270 mm per year average) and the temperature moderate in the higher elevations as compared with the lower-lying areas The population, increasing at an annual rate of 3.0%, totals about 500,000 of whom only a small percentage live in urban areas. The average population density is 28 per sq km and differences in density throughout the country are not pronounced. The most economically active part of the country is the west central area with Mbabane, Manzini, and Bhunya as principal centers. The area includes a pulp mill, some small industrial establishments, most of the country's commercial firms, and considerable irrigated agriculture. Three other important areas are located in the vicinity of Piggs Peak, Tshaneni, and Big Bend: Lumbering and agriculture are the chief activities in the Piggs Peak area, while sugar and other cash crops are principal products of the Tshaneni and Big Bend areas.

8 The country is well-endowed with natural resources. It has a variety of mineral deposits and soil and climate are favorable for diversified agriculture. GDP, at constant market prices, increased over the period by an average of 7% per year. At current prices, per capita GNP in 1974 was estimated at US$450. The principal exports are sugar, citrus fruits, wood pulp, iron ore, and asbestos. Swaziland forms part of a customs union with South Africa, Botswana, and Lesotho; under this union customs dues on imports into the union are apportioned between the four countries. There are no customs duties on movement of goods within the union. B. The Transport System 2.04 The transport system comprises about 2,600 km of road, 220 km of railway, an international airport and several airstrips. Transport facilities are available to a high percentage of the people of Swaziland although many of these facilities are not reliable all-weather connections to market and administrative centers. For internal and import trade, road transport predominates, while for export trade the traffic is carried largely by a railway which connects Swaziland with the port of Lorenco Marques via a rail line through neighboring Mozambique. Highways 2.05 Only 190 km (7%) of the approximately 2,600 km of roads are paved; the rest are gravel and earth roads. Road density, about 150 km per 1,000 sq km or 5 km per 1,000 inhabitants, is about average compared to other countries in a similar stage of development. The poor quality of most of the network results, however, in high transport costs, adversely affecting the market price of goods. Road transport accounted for some 110 million tonkilometers in 1974 or only about 15% of total freight traffic in the country. The reason for this low percentage of traffic moving by road is that iron ore, which forms the bulk of the country's freight traffic, moves by rail. All surface transport between Swaziland and the Republic of South Africa is handled by South African motor carriers. Details concerning highways and their administration are given in Chapter 3. Railways 2.06 The Swaziland Railway extends (220 km) from an iron ore mine at Ka Dake, in the extreme west of the country, to the eastern border with Mozambique where it joins a line stretching 74 km from the border to the port of Lorenco Marques; it does not connect with the South African System. Built in to carry iron ore for export to Japan, the funds for constructing the line have been repaid by the freight revenues received from transport of iron ore. The railway is operated by the Mozambique Railway under a contract which is profitable to Swaziland and includes providing locomotives and rolling stock. While iron ore is the principal traffic, some other freight

9 - 3 - is also carried, but no passengers. In 1973, the railway carried about 3 million tons or about 85% of the country's total freight, three-fourths of which was iron ore while sugar, wood pulp, and petroleum products accounted for most of the rest. The movement of iron ore is expected to end sometime between 1975 and 1978 because of depletion of good grade ore. As a consequence, some portions of the line may be closed. Although the economic viability of the remainder is uncertain and is presently under study by the Government, it is the Government's intention not only to see that it continues in operation but also to enable Swaziland Railway to take over operation of the system from Mozambique Railway. Air Transport 2.07 Swaziland has no national airline; international air service is provided at Matsapa airport near Manzini by a foreign carrier. A total of about 13,000 passengers and a small amount of freight were handled in At present, consultants are assisting the Government in determining whether the present airport should be improved or a new airport constructed. C. Transport Policy and Coordination 2.08 Swaziland's present transport policy has two broad aims: (1) to aid development, particularly in rural areas, by improving transport services within Swaziland and expanding the highway network in areas of high economic potential; and (2) to reduce transport costs within the country and between Swaziland and neighboring countries. With these aims in mind, the Government has established a development program encompassing significant investments in road improvement, lesser investments in airport facilities, and minor investments in railways. Planned expenditures in the transport sector for the period are E 5.2 million or about 12% of total public expenditures projected for the period Coordination of transport planning is the responsibility of the Economic Planning Office in the Ministry of Finance and Economic Planning which reviews proposals and determines priorities. The proposals are put forward by various ministries, most importantly by the Ministry of Works, Power and Communications (MWPC). Since MWPC encompasses agencies concerned with road, rail, and air transport, the Ministry is broadly structured in order to permit analysis of the inter-relationships between transport projects of each mode. Lack of transport economists in the MWPC, however, means that the Economic Planning Office, using general economists, must undertake the economic analysis of proposed projects. It was to assist that office in this function that the Government invited the University of Natal in to conduct an overall transport study, and that report has been the principal basis for the Government's subsequent transport planning.

10 Government control over transport is provided through the MWPC. Railway transportation falls under the jurisdiction of the MWPC and is provided by the Swaziland Railway which is operated by Mozambique Railways under an agreement between the two railway organizations. In the road transport field, the MWPC is responsible for regulating private carriers for whom entry into the road transport industry is relatively unrestricted; applicants are required to demonstrate only financial capability and a nominal demand for transport services. Permits have not been difficult to obtain. As a result, there are numerous small private operators providing freight and bus services. Provision of regular air carrier services or changes in existing services are subject to prior approval by the fwpc Transport rates for freight services of motor carriers are free of Government regulation; fares for bus passengers, however, are subject to a reasonable maximum (fare per passenger-kilometer) established by the Road Transportation Board of the MWPC. 3. THE HIGHWAY SECTOR A. The Network 3.01 The highway network is defined in the Roads and Outspan Act of Under this Act, "proclaimed" roads, which are the responsibility of the NWPC, are divided into two classes--main and District roads. There are at the present time 1,456 km of Main roads and 1,150 km of District roads, a total of 2,606 kin proclaimed roads, of which 190 km are paved (Table 1). In addition, there are several thousand kilometers of unclassified earth tracks for which no organization bears responsibility. B. Characteristics and Growth of Road Traffic 3.02 The composition and growth of the vehicle fleet is shown in Table 2. In 1972, there were an estimated 4,800 automobiles, 3,200 goods vehicles and 300 buses, with the vehicle fleet as a whole having grown at an annual average of 3.2% since Most goods vehicles are small trucks and vans of less than 3-ton capacity. The carrier with the largest number of trucks is South African Railways, but it accounts for only 4% of the total truck fleet; most truck and bus operators have only one vehicle Road users contribute to Government revenue through taxes and duties on vehicles, fuel, lubricants, and spare parts and through licenses and registration fees. No specific data are available on total revenues collected from road users. All customs and sales duties on goods imported into the common customs area (Swaziland, Botswana, Lesotho, South Africa) are paid into

11 - 5 - a common revenue pool. Only the license fees, which are not paid into the common revenue pool, are set by the Swaziland Government; this source yielded E 223,000 in fiscal year The Roads Branch has conducted traffic counts on selected roads over a period of several years. While these counts have not been taken as frequently and carefully as desirable, the available data indicate that traffic has been growing at 7-8% annually. The Government has agreed to improve and expand its traffic count methods to provide an adequate basis for future road planning. C. Administration 3.05 The Roads Branch of the MWPC (Chart 2) has the executive responsibility for planning, constructing, and maintaining all proclaimed roads. Area offices, under a Clerk of Works (senior technical officer), are responsible for routine highway maintenance in the field. Planning, new construction, and periodic maintenance (resealing and regravelling) are handled from the Ministry headquarters located at Mbabane. Equipment is rented from the NWPC plant and vehicle organization which has a Central Workshop in Mbabane with a sub-unit at Manzini The professional staff of the Roads Branch, provided under British technical assistance, consists of four expatriate engineers: a Senior Road Engineer, head of the Branch, who is assisted by a road maintenance engineer; a planning engineer; and an engineer in charge of construction. All are based at Mbabane. An Assistant Engineer assists the Senior Roads Engineer in administration and coordination of the work of the office. Below professional level, all staff are Swazi nationals. With this minimal professional staff, the Branch has no road designing capacity; all engineering and construction supervision is carried out by consultants. This has proved a workable arrangement Road use is regulated by the fwpc under a Road Traffic Law which has recently been revised to bring it into line with South African law. The regulations impose, among other things, limits on size and weight of vehicles, axle and wheel loads, and power-to-weight ratios. Most commercial trucking is carried out by South African Railways and other bulk carriers operating in and out of South Africa where the regulations are strictly enforced, so there is no problem with breach of regulations. However, there may be a problem on the project roads caused by locally operating bulk sugarcane carriers, but assurances were obtained from the Government that it would take such steps as are reasonably required to ensure that the dimensions and axleloads of vehicles using the highway system are consistent with the structural and geometric design standards of the roads.

12 - 6- D. Planning and Financing 3.08 The Ministry of Finance and Economic Planning is responsible for national economic planning and has prepared the Second National Development Plan covering the five-year period Proposals for road transport development are based on recommendations of the transportation study carried out by the University of Natal (para 1.01). A list of project roads being engineered for construction is given in Table 3; most of the roads in this table, as well as the roads included in this project, were included in the construction program recommended by the University of Natal. In addition, to serve agriculture, some rural roads now under construction by force account are being financed by British Technical Assistance (ODM). Also, the African Development Bank is financing 92 km of engineering for the Manzini-Nhalangano- Mahamba road and Government is financing the engineering of the Motshane-Piggs Peak-Jeppes Reef Road (95 km). In another type of assistance, the Canadian Government (CIDA) is, as stated in para. 3.13, financing a study of road maintenance and may finance a technical assistance program with the object of increasing the maintenance capacity of the Roads Branch and improving highway maintenance Recurrent highway expenditures (Table 4) are financed out of the general budget. New construction is financed through grants and credits under bilateral aid programs. Expenditures under both the recurrent and the capital budget for highways have increased from US$552,000 to US$1,236,000 per annum during the five year period ending 1971/72. Although expenditures on maintenance have increased in recent years, the amounts have generally fallen short of budget allocations for maintenance because of problems with the availability of staff and equipment (para. 3.13). The CIDA-financed project would help eliminate these problems (para. 3.08), and improved management as a result of CIDA technical assistance should lead to better availability of equipment. Assurances were obtained from the Government that sufficient funds will be allocated to insure proper maintenance of the highway network. E. Engineering 3.10 The Roads Branch does not have the capacity to engineer road projects other than those few executed by force account. The preparation and execution of nearly all new works is therefore carried out by consultants. Design standards (Table 5) are influenced by, and similar to those in South Africa. They appear to be on the high side but, since they are used as maximum standards, few problems arise. F. Construction 3.11 No major road works have been carried out in Swaziland during the past ten years and there is no domestic contracting industry capable of

13 - 7 - executing the project (para. 4.05). The small size of the country and the limited construction work planned provides only a small potential for developing a domestic highway construction industry. The Roads Branch has a small construction unit for building low standard feeder roads serving rural development projects and has satisfactorily constructed 57 km of such roads during the past two years. For major road works, the Roads Branch employs consultants fo supervise contractors selected after suitable prequalification and tendering procedures. Contracts are normally let on a unit-price basis. G. Maintenance 3.12 For routine maintenance, the country is divided into three areas and 17 districts. Each area is supervised by a Roads Branch clerk of works who is assisted by an inspector of works, a construction foreman and five or six overseers. Depending on the size of the area, work is largely mechanized, relying on motor graders for reshaping and removal of corrugations. However, due to the low availability of equipment, no regular schedule of grading is possible and some roads are in very bad condition. For periodic maintenance, there are a bitumen unit, three gravelling units and two bridge construction and repair units under head office control. These units are undermanned and are often idle due to breakdown of important items of equipment. Regravelling is seriously in arrears and at the present rate of progress it will take some 21 years to regravel roads which should be done every 5-7 years. The CIDAfinanced project would aim at resolving these difficulties The Government has a poor record for maintenance of its plant and vehicles. In an attempt to improve this situation, the British Government (ODM) financed a study of the whole system of purchase, repair and administration of equipment and vehicles. The study recommended that a Central Transport Organization (CTO) be established which would maintain all Government equipment. The organization has failed to achieve its objective due to the failure of the GoverLnent to appoint suitably qualified and experienced management and technical staff. At present, the availability of plant and vehicles is less than 50%, making it impossible for the Roads Branch to function properly. Only one out of three gravelling units is manned, and the bitumen unit is not functioning at all. There is no shortage of equipment. To remedy this situation, the CIDA mission, under its technical assistance program (para. 3.08), is reviewing the operations of CTO and its relationship with the Roads Branch. The Government agreed to ensure that by the Closing Date for the project the management of its Central Transport Organization, or any other entity performing essentially the same functions, operates along lines agreed with the Bank in order to ensure the most economic and effective utilization of its road maintenance equipment.

14 -8- H. Training 3.14 The Government has a program for selecting, educating, and training administrative and technical staff for the public service. Within the Government, a Staff Training Institute is playing a major part in localization by providing training for civil servants in administration. The Swaziland Industrial Training Institute (SITI) has been expanded and courses are now offered in most technical skills. The University of Botswana, Lesotho and Swaziland (UBLS) has been enlarged and, since 1971, has been taking students for degree courses, including engineering; also, increasing numbers of students are sent to courses overseas when no equivalent degree courses are available locally. At the present time, there are 8 civil engineers in training (3 at UBLS and 5 in the USA); the xwec estimates its ultimate requirements will be 14. Also at the SITI, there are 36 students taking a three-year course for mechanical technicians and 7 are training to be draughtsmen. In addition, CIDA may provide technical assistance for training highway maintenance personnel, including equipment operators and mechanics; the CIDA assistance may also include provision of replacement road maintenance equipment. These programs are adequate to meet the present and immediate future needs of the Roads Branch. 4. THE PROJECT A. Objectives 4.01 The objectives of the project are to: (a) improve the road between Tshaneni and Mlaula (about 39 km) to a two-lane bitumen paved standard; and (b) improve the Helehele-Siphofaneni-Phuzumoya road (about 43 km) to two-lane bitumen paved standard. B. Description 4.02 The first road passes through flat lowlands of irrigated sugar and citrus fruit plantations. During the development of this area, a new spine road was planned, although only half of it was built. The project provides for the construction of the rest of that road and improvement of the existing alignment which was engineered to gravel standard under the First Higlhway Project (Credit 60-SW). The present road has a rough gravel surface and is expensive to maintain under existing traffic conditions of about 250 ADT (average daily traffic). Under the project, the road will be improved to two-lane bituminous paved standard. The new alignment will also shorten the present route by about 6 km.

15 4.03 The second road is located in the middleveld, which consists of a more hilly and undulating terrain. It branches off the transterritorial highway, paved under Credit 60-SW, at Helehele and runs in a southeasterly direction fo 43 km. There is little gravel on the road and its condition is poor, particularly in the rainy season when pot holes develop and make it very rough. Although the existing route will be followed for most of the way, there will be a few significant diversions to improve the geometry of the road, effecting a route reduction of about 4 km The proposed design standards for these roads, based on the recommendations of the Natal University Transportation Study (Table 5), are in accordance with those recently adopted by the Government and are satisfactory. Briefly, these provide for a 7.30 m wide pavement on the Tshaneni-Mlaula road which carries heavy sugarcane traffic in bulky vehicles and 6.70 m wide for the Helehele-Phuzumoya road which does not carry this type of traffic. The inter-territorial highway financed under the First Highway Project (Credit 60-SW) is also 6.70 m wide. The pavement structure will be composed of a natural gravel sub-base, base course and shoulders, with a triple bituminous surface treatment. The nature of the terrain does not impose any restrictions on geometric design standards. On the Tshaneni-Mlaula road, one small bridge of 20 m span will be constructed to full formation width. Design standards are set out Table 5. C. Execution 4.05 The Roads Branch will be responsible for the execution of the project but wishes to retain consultants to supervise construction. The Government confirmed that suitably qualified consultants will be engaged for supervision of the construction under terms and conditions satisfactory to the Bank. Construction will be under one unit price contract, awarded after international competitive bidding in accordance with Bank/IDA guidelines, including prequalification of contractors which will be undertaken before bids are invited. Construction is expected to take about 24 months. There is no domestic road contracting industry in Swaziland and the Government has no intention of developing one because of the small size of the country.

16 D. Cost Estimates 4.06 Total project costs are estimated at US$9.92 million with a foreign expenditure component of US$7.53 million or 76%. Detailed costs are as follows: I. Construction Foreign Emalangeni US$ Expendi- (million) (million) ture Local Foreign Total Local Foreign Total Component Tshaneni-Mlaula Road % Helehele-Phuzumoya Road % II. Supervision of Construction % Base Cost Estimate III. Contingencies Physical (10%) Expected price increases (25%) Total Expected Cost of Project /1 76% /1 Taxes and duties represent about 5% of the total project costs The costs of construction were estimated by the consultants in June 1974 on the basis of final design quantities; the estimates have been updated to reflect costs expected in March As no major road construction contract has been carried out in Swaziland for the past ten years, unit prices have been arrived at after a detailed survey of prices in the adjoining South African provinces of Transvaal and Natal where an extensive road construction program is under way. The costs of supervision have been estimated by the Association. A 10% physical contingency has been provided for construction and supervision to allow for possible quantity variations and time extensions. A price contingency of about 25% has been provided to cover expected price increases during the project period and has been derived by applying the following price escalation rates to the cost estimates for civil works: 16% in 1975, 14% in 1976, 12% in 1977, and 10% in 1978; for consultant services, 10% per annum.

17 E. Financing and Disbursements 4.08 The Bank loan of US$7.00 million will cover 93% of the foreign expenditure element of the project; the Government will finance the remaining foreign expenditure element and the local costs of US$2.39 million Disbursement of loan funds will be on the following basis: (a) 70% of the total costs of construction contracts, and (b) 100% of foreign costs of consultants' services. A schedule of estimated disbursements is given in Table 6. Any funds remaining in the loan account upon completion of the project will be cancelled. 5. ECONOMIC EVALUATION 5.01 The two roads included in this project, which are major links in the national road system, are high on the Government's list of road development priorities. Their improvement will contribute to Swaziland's principal transport aims of reducing transport costs and aiding development (para. 2.08). In the northeast, the Tshaneni-Mlaula road not only services the internal needs of an important area of commercial agriculture but also connects that production center with the railway. The Helehele-Phuzumoya road links two of the more rapidly developing regions in the country, the Mbabane/Manzini/ Bhunya area with the important agricultural district centered at Big Bend. It also connects the main east-west road with Phuzumoya Station on the Swaziland Railway The area served by the Tshaneni-Mlaula road (covering approximately 350 sq km) produces about 950,000 tons of sugarcane annually, or over half of Swaziland's total cane production. The cane is hauled by truck to a mill in Mhlume for processing after which the sucrose and molassas are transported by truck to the railway station at Mlaula. Estimated production at the Mhlume mill during the season is 100,000 tons of sucrose and 30,000 tons of molasses; a 25% expansion of mill production is planned within the next few years. The Mhlume mill is wholly-owned by the Commonwealth Development Corporation, a British institution. While most of the cane is grown on large estates, a small but increasing number of smallholders also supply cane to the mill. In addition to sugarcane, this area also produces a substantial part of Swaziland's citrus fruit plus some cotton, maize, and potatoes Recognizing that the Mhlume Sugar Company, the principal grower and only miller of sugarcane in the northeast, would benefit substantially from the lower transport costs which would result from constructing the

18 Tshaneni-Mlaula road, consideration was given to the possibility that the company be required to make a specific contribution to financing the construction. Since 1973, however, the sugar industry has been subject to a special levy on sugar exports. This levy is so structured that a reduction in sugar production costs, including transport costs, results in half this saving being captured under the levy. Accordingly, while the Company will share in the benefits from the road, the Government has decided it would rely on the sugar levy to recover such benefits rather than require that the Company be subject to an additional tax aimed at financing the road improvement. In addition, the Government will collect income tax on profits. As indicated below (para. 5.07), the road improvement is economically viable even if the recovered benefits to the Mhlume sugar company are excluded The principal benefit from the Helehele-Phuzumoya road improvement would be lower transport costs for inter-regional traffic, i.e., traffic between the main economic core of the country and the rich agricultural area in the southeast. This traffic includes several thousand tons per year of cotton produced by both foreign-owned farms and a large number of Swazi smallholders and transported to the ginnery at Manzini; other important elements of westbound traffic are citrus fruits, maize, and vegetables, while eastbound traffic is a diversity of non-agricultural goods. Immediately south of Phuzumoya is the Mapobeni area where about 4,000 hectares are to be developed as an important center of irrigated agriculture with citrus fruits, sugarcane, and vegetables as the projected main crops. This development would have a notable impact on traffic over the Helehele-Phuzumoya road In 1973, traffic on the Helehele-Phuzumoya road was about 240 ADT and on the Tshaneni-Mlaula road 248 ADT. Both roads when improved will divert relatively small amounts of traffic from other routes. Specifically, some traffic will probably be diverted to the Tshaneni-Mlaula road from the road running southeastward from Bordergate along the country's northern border; traffic is also expected to be diverted to the Helehele-Phuzumoya road from the Helehele-Mpaka-Big Bend road. On the basis of past traffic growth, averaging 7-8% annually in recent years, and ongoing development schemes in the two areas served by these roads, the consultants have estimated that traffic will continue to grow by about 7% per annum (Table 7) The basis for the economic analysis is an assessment of the benefits for expected traffic and costs with and without the proposed improvements over a 20-year period, the estimated economic life of the project. For the purpose of the analysis, the investment cost has been taken as the cost, net of taxes, of improving the two roads, including the cost of supervision and taking physical contingencies into account. The principal quantifiable benefits will be savings in vehicle operating costs (Table 8) and savings in road maintenance costs. There will, of course, be other benefits which cannot be quantified such as improved access to social and administrative facilities.

19 The streams of costs and benefits summarized in Table 9 indicate that the proposed investments are economically sound. They will yield a 13% economic return to Swaziland on the Tshaneni-Mlaula road; this return is based on benefits which exclude both those to foreign owners and Government revenue from the sugar levy. If sugar levy revenue is included in the benefits, the economic return is 20%, and if the total benefits to foreign owners as well are included, the return is 28%. On the Helehele-Phuzumoya road, the economic return to Swaziland is 17%. Including benefits to foreign owners, the economic return on this road is 25%. Both roads have first year returns to Swaziland above 10% when using a 10% discount rate Sensitivity tests applied to the economic analysis assumed increases in construction costs, reductions in rate of traffic growth, and increases in vehicle operating costs. If the construction costs on both roads increased by 25% the economic return would be reduced from 13% to 10% and from 17% to 15%, respectively. If traffic is assumed to grow at only 5% throughout the economic life of the project, the economic return would remain satisfactory at about 10% and 13%, respectively, for the two roads. In case of a decrease of 10% in savings in vehicle operating costs, the return would be reduced by about 2%. In each case the economic return remains satisfactory. The major risk in the project is considered to be increases in construction costs. 6. AGREEMENTS REACHED AND RECOMMENDATION 6.01 The following points were agreed with the Swaziland Government: (a) data on traffic flows and vehicles will be collected as necessary for sound transport planning (para. 3.04); (b) the Government will take such steps as shall be reasonably required to ensure that the dimensions and axleloads of vehicles using the highway system are consistent with the structural and geometric standards of the roads (para. 3.07); (c) sufficient funds will be allocated annually for highway maintenance to assure proper maintenance of the road system (para. 3.09); (d) the Government will ensure that by the Closing Date the management of the Central Transport Organization, or any other entity performing essentially the same functions, operates along lines agreed with the Bank in order to ensure the most economic and effective utilization of its road maintenance equipment and vehicles (para. 3.13);

20 (e) suitably qualified consultants will be engaged for supervision of construction under terms and conditions satisfactory to the Bank (para. 4.05); (f) procurement under the project will be in accordance with Bank guidelines (para. 4.05); and, (g) the Government will finance all project costs not covered by the proposed Bank loan (para. 4.08) Satisfactory assurances were obtained from the Government on the matters mentioned above and the project is suitable for a Bank loan of US$7.00 million equivalent to the Government of Swaziland. An appropriate loan term would be 23 years with a grace period of 3 years. April 7, 1975

21 TABLE 1 SWAZILAND SEBOND Hiamy PRotTz HighwayYNetwork (Kilometers) Main District Of Whic h Year Roads Roads Total Paved , , , , , , ,4521/ 977 2, ,A5 2 1,030 2, / I.,456 1,063 2, NT 1974' 1,456 1,1456 1,120 1}150 2,576 2, j' By Legal Notice No. 30 of 1970 a reclassification of roadb was adopted as of that year; this accounts for the 1970 decrease in M?in Road length. 2/ Mission Estimates, August Source: Central Statistical Office Annual Statistical Bulletin April 1975

22 TABLE 2 SWAZILAND SECOND HIGHWAY PROJECT Vehicles Licensed by Type of Vehicle, Light Other Motor Goods Goods Cars Vehicles-' Vehicle Buses Total ,922 2, , ,273 2, , ,111 2, , L4,251 2, ,59L ,9414 2, , ,561 2,101 1, , ,796 1,960 1, ,317 Under 4,000 lbs unladen weight. 2/ Licensed vehicles excluded from this total are tractors, motor cycles, caravans, trailers, earth movers and graders. Source: Swaziland, Central Statistical Office, Annual Statistical Bulletin, 1971, 1972 April 1975

23 TABLE; 3 SWAZIIAMD SECOND HIGHWAY PROJECT Highway Projects Under Preparation Road Project Status MR 1 Engineering by consultants of 95 km of road,motshane-piggs Peak-Jeppets Reef (border post),to paved standard with one major bridge (Government finance). In progress. MR3/7 Mpaka-Lomahasha border post with branch to Siteki. Paving 66 km of road engineered to Contract documents gravel standard under Credit 60-SW complete. MR 9 Manzini-Nhlangano-Mahamba border post. Engineering by consultants of 92 km of road to paved standard with one major In progress. bridge (ADB financed) MR25/16 Phuzumoya-Big Bend Engineering by consultants to paved Contract documents standard of 25 km of road (UNDP financed) complete. Source: Roads Branch (MUFC) April 1975

24 TABLE L SWAZILAND SECOND HIGHWAY PROJECT Annual Highway Expenditures 1/ _, EXPENDITURES (E 'OOO) MAINTENANCE BUD- FISCAL ADMIN- CONSTRUC- MAINTE- EQUIVAULENT GET ALLOCATION YEAR ISTRATION TION NANCE TOTAL US$ 'OOO (E 'OOO) 1968/69 n.a L1 1969/70 n.a h /71 n.a 107 h / b ,236 66L 1972/ n.a n.a na.a l /7L 92 n.a n. a n.a n.a b/75 n.a n.a - n.a n.a 836 * While maintenance expenditures for these years are not available,the Roads Branch indicated the amounts were significantly below allocations. 1/ Fiscal year April 1 to March 31 Sources: Government of Swaziland, Ministry of Finance April 1975

25 TABLE 5 SWAZILAND SECOND HIGHWAY PROJECT Highway Design Standards Tshaneni- Helehele-Phuzumoya Road Mlaula Road Helehele-Siphofaneni Siphofaneni-Phusumoya Design speed 100 km/h 80 km/h 100 km/h Minimum horizontal radius 450 m 200 m 450 m Maximum gradient 5% 7% 5% Width of carriageway 7.30 m 6.70 m 7.30 m Width of shoulders 2.40 m 1.80 m 2.4o m Pavement design wheel load kg kg kg Structures: loading BS 153 Part 3A BS 153 Part 3A BS 153 Part 3A (HA loading) (HA lading) (HA loading) Width 8.50 m 7.90 m 8.50 m Source: MWPC, Roads Branch April 1975

26 TABLE 6 SWAZILAND SECOND HIGHWAY PROJECT Estimated Schedule of Disbursements IBRD/IDA Cumulative Fiscal Year Disbursements at and Quarter end of Quarter US0 ' /76 September 30, December 31, March 31, ,300 June 30, , /77 September 30, ,000 December 31, ,200 March 31, ,200 June 30, , /78 September 30, ,600 December 31, ,000 Source: Mission Estimates December 197I April 1975

27 TABLE 7 SWAZILAND SECOND HIGHWAY PROJECT Projected Average Daily Traffic on Project Roads Tshaneni-Mlaula Road Helehele-Phuzumoya Road Normal Diverted Total Normal Diverted Total _ h Li Note: Forecast traffic based on 7% p.a. growth rate. Source: Government of Swaziland, Roads Branch and Mission estimates, August April 1975

28 TABLE 8 SWAZILAND SECOND HIGHWAY PROJECT Vehicle-Operating Costs by T e of Road (Emalangeni per km).l/ Vehicle Type Road Condition Gravel Bitumen Light Vehicles Heavy Vehicles / Net of taxes Source: Consultants and Mission estimates, August 1974 April 1975

29 SWAZILhND SECOND HIGHWAY PROJECT Economic Costs and Benefits (Emalangeni '000) Tshaneni-Mlaula Road Helehele-Phuzumoya Road Savings in Savings in Savings in Savings in Capital Vehicle Operating Maintena ce Total Net Capital Vehicle Opera,ting Maintenance Total Net Year Costs / Costs?iX Costs3/ Benefitski Costs 1/ Costs i/ Costs!I Benefits k ,280-2, ,730-2, L L48 9 L L L W , , , , , ,162 Economic return 13% Economic return 17% / Economic cost derived by (a) combining estimated financial costs of improvement, supervision and physical contingency and (b) reducing this sum by 5% for taxes and duties. 2/ Calculated on the basis of (a) normal and diverted ADT, (b) vehicle operating costs per km and (c) lengths of existing and new roads. Benefits to foreigners are excluded. / Calculated on the basis of (a) lengths of existing and new roads and (b) average maintenance costs of E 732 per km for existing road and E 578 per km for paved road. Total net benefits reflecting savings in vehicle operating costs, savings in maintenance costs and capital costs. Source: University of Natal, COMTEC, Mission estimates. April 1975

30

31 SWAZI LAND SECOND HIGHWAY PROJECT MINISTRY OF WORKS, POWER & COMMUNICATIONS ORGANIZATION I MINISTER I ASSISTANT PERMDEPUTY ENGINEERING SECRETARY SECRETARY SECRETARY ADVISOR ROADS BUILDINGS WATER I ACCOUNTS, ADMINISTRATIVIE CETRANSOR BRANCH BRANCH RESOURCES I BRANCH SERVICES OTRANSPORTIO BRANCH OGNZTO SENIOR PRINCIPAL SENIOR SENIOR ASSISTANT GENERAL ROADS BUILDINGS WATER ACCOUNTANT SECRETARY MANAGER ENGINEER OFFICER ENGINEER ACOUTA E CIVIL WATER& f POSTS & 1 SWAZILAND SWAZILAND ROAD AVIATION SEWERAGE TELECOMUNI- RAILWAYS ELECTRICITY TRANSPORTATION DEPARTMENT BOARD CATIONS DEPT. BOARD BOARD BOARD rmanager DIRECTOR DIRECTOR DIRECTOR I GENERAL GENERAL ] jj ] DIRECTOR l l DIRECTOR [ _DIRECTOR SECRETARY SURVEY DEPARTMENT SURVEYOR GENERAL World Bank-9368

32 SWAZILAND SECOND HIGHWAY PROJECT ROADS BRANCH ORGANIZATION SENIOR ROADS ENGINEER ASSISTANT ENGINEER.. ENGINEER ENGINEER ENGINEER MAINTENANCE PLANNING CONSTRUCTION......, = ~~~~~~~~~~~~~~~~~~~o COW ~~~~~COW COW CONSTRUCTI ION MAN 'NI MBABANE NHLANGANO _ 6 DISTRICTS 6 DISTRICTS 5 DISTRICTS CONSTRUCTION BRIDGE } 1 - low 1 - IOW 1 -low UNIT UNIT 1 -CFM 1 -CFM 1 -CFM 1 - low 6 - OVERSEERS 6 - OVERSEERS 5 - OVERSEERS 1 - CFM 1 -CFM 1 - OVERSEER BITUMEN I OW (1) l IOW 2) GRAVEL l l UNIT i GRAVEL UNIT GRAVEL UNIT UNIT 3 SOI LS LABORATORY UN IT ~~~~~~~~~COW - CLERK OF WORKS IOW - INSPECTOR OF WORKS PIPE CFM - CONSTRUCTION FOREMAN FACTORY } UNIT B World Yank-9367

33 - - 2) ; j _~- I V 'rz -W u I I~ ~ ~ I Z Z is i, le R }, g U 8 & e F ffi S t0 i U[i I:<F 11 II<T+I>:R= j1 X -\z-ti;i.