INTERNATIONAL DEVELOPMENT ASSOCIATION

Transcription

1 This report was prepared for use within the Association. It may not be published nor may it be quoted as representing the Association's views. The Association accepts no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATIONS PROPOSED OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A DEVELOPMENT CREDIT TO SWAZILAND FOR A ROAD PROJECT R E S T R I C T E D R e-p o r t N o. P(IDA) 20 March 6, 1962

2 REPORT AiND RECO{I"1ENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A FROPOSED DEVELOPFIENT CREDIT TO SWAZILAND FOR A ROAD PROJECT 1. I submit herewith the following report and recommendations on a proposed development credit to Swaziland for an amount in various currencies equivalent to $2.8 million, to help finance a road project. PART I - PITRODUCTION 2. Swaziland is one of three United Kingdom dependencies in southern Africa known as the High Commission Territories. The administration of the t;hree territories is the responsibility of the U.K. High Commissioner who is also the U.K. Ambassador to the South African Repuiblic. The territories are, in practice, administered in much the same way ELs other U.K. dependencies :3. In 1959 an Economic Survey Mission, headed by Professor Chandler Morse, visited all three territories and made recommendations concerning their economic problems and develofment plans. Following these recommendations the United Kingdom Government last year requested financial assistance for a number of projects in the territories. The -ost important of these projects L4ere for roads and an IDA mission subsequently visited the territories to study the need for improved roads and the territories' plans for meeting it. The mission found that the present project in Swaziland was ready and had a high economic priority. Negotiations on the proposed credit were held in ijashington in August. 4. This credit 1rould be the first operation by either IDA or the Bank in the High Commission Territories. It would also be the first IDA credit to a dependent territory. PART II - DESCRIPTION OF T-Es PROPOSED DEVELOPIElrT CREIDIT Borrower: Amouint: Pupose.: Term and Amortization: Service Charee: Swaziland The ecuivalent in various currencies of 02.8 million. To help finance the construction of an allweather two lane highway across Swaziland from the South African to the Mozambique border. 50 years with no amortization for the first 10 years. Repay.aent to be in SO installments, 1/2 of 1% of the principal amount to be repaid semi-annually begirning 14ay 1, 1972 and ending November 1, 1981 and l-l/25% semi-annually thereafter to November 1, 2011, 3/4 of 1l, per annum on the Frincipal amount of the credit disbursed and outstanding. Payment Dates: May 1 and November 1.

3 The Economy of Swaziland PART III - APPRAISAL OF THE CREDIT 5. A report on the economy of Swaziland is attached (No. 1). 6. Swaziland is the smallest of the three High Cornmission Territories. It has an area of 6,700 square miles and is situated on the eastern borders of the Republic of South Africa where the high veldt of southern Africa begins to descend to the coastal plains of Mozambique. It has a population of about 250,000 including some 7,00 Europeans. Mtos-t of the Africans belorg to the Swazi nation and are traditionally pastoralists. Political development in Swaziland is still in its very early stages. A new constitution which will transfer some responsibility from the colonial administrators to the local population is now being discussed. 7. Although no estimates of national income have been made, average income per head is certainly low. Swaziland does, however, have important economic resources and progress is being made in developing them. An asbestos mine, established after the war, now provides nearly half the country's exports and makes an important contribution to governrnent revenue. During the last decade several irrigation schemes have been carried out, of which the most important is one in the north-west financed by the Colonial Development Corporation. Two sugar factories have recently been completed and together produce 80,000 tons of sugar a year. A large pulp mill ihich will produce 100,000 tons of sulphate pulp a year is now under construction. A British group is undertaling the exploitation of an iron ore deposit in western Swaziland and the construction of a railway to link this deposit with the existing railway running to the port of Laurenco Mkarques in Mozambique. E>. This growing economic development has had to be accompanied by improved public services vwhich have placed a heavy burden on the government's limited financial means. The United Kingdom provides a grant-in-aid to supplement the ordinary budget revenue and it also provides grants and loans for development. The present development program covering the period 1L cal:ls for a total expenditure of R 8.4 million (U.S. jll.75 million equivalent) of which some 40%O has been allocated to roads, 20% to health and education and the remaining 20% to agriculture, telecommunications, housing and water supplies. The emphasis on roads reflects the need to provide better links between the most important economic centers. 9. At the present time, Swaziland is part of the monetary and customs area of the Republic of South Africa and the currency in use in Swaziland is the South African rand. It does not therefore have a balance of payments problem as such. Its financial position is supported by substantial subventions for its current budget and development program from the United Kingdom: without them Swaziland would not only be unable to grow but would not be able to support its present administrative services. This dependence is not likely to disappear for some years. The United Kingdom has therefore provided certain assurances concerning future financial support and the availability of foreign currencies to service the credit (No. 2). In these circumstances I consider it appropriate that additional external assistance be provided to Swaziland to accelerate its economic developmenlt and that this assistance be forthcoming on IDA terms.

4 -3- The eprojct 10. Attached is a report (No. TO-312) on the project (No. 3). 11. The proposed project consists of a two-lane all-weather highway across Swaziland. It would be 112 miles long and would run from Oshoek on the border of the Republic of South Africa, through Mbabane, the capital of the territory to Namaacha on the Mozambique border. It also includes nine miles of connecting roads and a bridge over the Blaci Umbuluzi river. It is expected to be completed by March The cost of the project is estimated to be the equivalent of U.S. &4.2 million. To meet this, `2.8 million (somewhat less than the expenditure expected to be incurred outside Swaziland) would come from the IDA credit and the remainder would be provided by the Government; of Swaziland. 13. The progress of Swazilandts economy over the past five years has emphasized the need for further investment in transportation. Reliable road connections between the most important centers are still lacking. The proposed highway will provide a means of all-wleather transportation across the territory, linking the internal road system with the roads of South Africa and Iozanbiquey joining the principal towms to production centers and opening up new country, particularly -n the eastern part of the territory. It is a high priority project which will contribute significantly to Swaziland's economic growth. Once the project is completed the Swaziland Government plans to move ahead with the first stage of a feeder road program which should accelerate the development of several agricultural regions. 14. The Public Works Department, which will be responsible for the execution and maintenance of the project, is competently staffed. It would be assisted by engineering consultants in the design and supervision of the project. The bulk of the construction work would be carried out under contracts awarded on the basis of international competitive bidding; work has already been started on some sections. The Department is well experienced in the use of consultants and contractors and the execution of the project is not expected to create any unusual problems. 15e PART IV - LEGAL INSTRUMENTS AND AUTHORITY Attached is a draft Development Credit Agreement between Swaziland and the Association (No. 4). Development Credit Regulations No. 1, dated June 1, 1961, would be applicable to this Agreement, with appropriate modifications to take account of the fact that the Borrower is a dependent territory of a member. In other respects the draft Agreement conforms generally to the pattern of Association Credits to members for road projects. The Credit would be disbursed on the basis of a percentage of expenditures incurred from August 1, 1961 for goods included in an agreed list of goods (Sections 2.03 and 3.01). 16. The recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association is attached (No. 5).

5 - 4 - PART V - CO1iPLIANCE WTITH ARTICLES OF AGREE IENT 17. I anm satisfied that the proposed development credit will comply with the Articles of Agreement of the Association. PART VI - RECOM1'ENDATIONS 18. I recommend that the Association make available a development credit to Swaziland in an amount in various currencies equivalent to w2.s million for a total term of 50 years, with service charge of 3/4 of 15 per annum, and on such other terms as are specified in the attached draft Development Credit Agreement, and that the Executive Directors adopt a Resolution to that effect in the form attached (No. 6). W. A. B. Iliff Vice President for Eugene R. Black President Washington, D. C. March 6, 1962