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AFRICAN DEVELOPMENT FUND REF. N° : TAN/PTTR/2001/01 LANGUAGE : ENGLISH ORIGINAL : ENGLISH

APPRAISAL REPORT

ROADS REHABILITATION/ UPGRADING PROJECT

UNITED REPUBLIC OF TANZANIA

This document contains corrigenda and/or addenda (see Annexes).

COUNTRY DEPARTMENT OCDE EAST REGION MAY 2001

TANZANIA : PROPOSAL FOR AN ADF LOAN OF UA 38.65 MILLION

TO FINANCE THE ROAD REHABILITATION PROJECT ADDENDUM*

Please find below an addendum to the above-mentioned Appraisal Report.

It was agreed that:

The procurement of civil works for the rehabilitation works comprising 8 lots of regional roads will be through ICB with domestic preference margin of 10 per cent in accordance with the Bank Group’s “Rules of Procedures for Procurement of Goods and Works” (Page 21, paragraph 5.4.2).

TABLE OF CONTENTS Page PROJECT INFORMATION SHEET, CURRENCY AND MEASURES, LIST OF TABLES, LIST OF ANNEXES, LIST OF ABBREVIATIONS, BASIC DATA SHEET, PROJECT LOGICAL FRAMEWORK, EXECUTIVE SUMMARY i - ix 1. ORIGIN AND HISTORY OF THE PROJECT 1 2. THE TRANSPORT SECTOR 1 2.1 The Transport System 1 2.2 Transport Policy, Planning and Co-ordination 4 2.3 Intervention of Other Donors in the Sector 5 3. THE ROAD SUB-SECTOR 5

3.1 The Road Network, Vehicle Fleet and Traffic 5 3.2 The Road Transport Industry 6

3.3 Road Administration and Training 7 3.4 Road Planning and Financing 8 3.5 Road Engineering and Construction 9 3.6 Road Maintenance 10 4. THE PROJECT 10 4.1 Project Concept and Rationale 10 4.2 Project Area and Project Beneficiaries 11 4.3 Strategic Context 12 4.4 Project Objective 13 4.5 Project Description 13 4.6 Environmental Impact 14 4.7 Social Impact 16 4.8 Project Costs 16 4.9 Sources of Finance and Expenditure Schedule 17 5. PROJECT IMPLEMENTATION 19 5.1 Executing Agency 19 5.2 Institutional Arrangements 19 5.3 Supervision and Implementation Schedules 19 5.4 Procurement Arrangements 21 5.5 Disbursement Arrangements 22 5.6 Monitoring and Evaluation 22 5.7 Financial Reporting and Auditing 23 5.8 Aid Co-ordination 23

6. PROJECT SUSTAINABILITY AND RISKS 24 6.1 Recurrent Costs 24 6.2 Project Sustainability 24 6.3 Critical Risks and Mitigation Measures 24 7. PROJECT BENEFITS 25 7.1 Economic Analysis 25

7.2 Social Impact Analysis 26 7.3 Sensitivity Analysis and Risks 26

8. CONCLUSIONS AND RECOMMENDATIONS 27 8.1 Conclusions 27 8.2 Recommendations and Conditions for Loan Approval 28 _____________________________________________________________________________ This appraisal report was prepared by Messrs. E. K Yamoah (Chief Transport Engineer, Ext. 4546) A. Kies (Principal Transport Economist Ext. 4317) E. Shannon (Principal Environmentalist Ext. 5558), A. Yahie (Principal Socio-Economist Ext. 4288) following their mission to Tanzania in March, 2001. Any inquiries relating to this report may be referred to either the authors or to Mr. G. MBESHERUBUSA, Division Manager, OCDE.4, Ext. 4131. _____________________________________________________________________________

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AFRICAN DEVELOPMENT FUND 01 B.P. 1387 - ABIDJAN

Tel: 20 20-44-44 Fax: (225) 20 20-49-86

Telex: 23717, 22202, 22203

PROJECT INFORMATION SHEET The information given hereunder is intended to provide some guidance to prospective suppliers, contractors and consultants and to all persons interested in the procurement of goods and services for project approved by the Board of Directors of the Bank Group. More detailed information and guidance should be obtained from the Executing Agency of the Borrower. 1. COUNTRY : Tanzania 2. PROJECT TITLE : Roads Rehabilitation/Upgrading Project 3. LOCATION : Kagera, Dodoma, Singida and Tabora Regions, Tanzania, 4. BORROWER : United Republic of Tanzania. 5. EXECUTING AGENCY : Tanzania National Roads Agency

(TANROADS) 3rd Floor, Maktaba Building, Bibi Titi Mohammed Road, P.O. Box 11364, Dar Es Salaam Tel: (255) 22 215 2576/2150932 Fax: (255) 22 215 0022 E-mail:tanroadshq@cats-nets.com

6. DESCRIPTION : The project consists of:

a) Rehabilitation of about 923 km of regional roads in four regions of Kagera, Dodoma, Singida and Tabora to gravel standards and upgrading to bituminous standard of about 154 km of gravel road between Kagoma and Lusahunga.

b) Consultancy services for the supervision of above

construction works.

c) Project audit services.

ii 7. TOTAL COST : UA 42.94 million i) Foreign Exchange : UA 29.90 million ii) Local Cost : UA 13.04 million 8. BANK GROUP LOAN ADF : UA 38.65 million 9. OTHER SOURCE OF FINANCE GOT : UA 4.29 million 10. DATE OF APPROVAL : June, 2001 11. ESTIMATED STARTING DATE OF PROJECT AND DURATION : August 2002-December 2005 (41 months) 12. PROCUREMENT OF GOODS AND WORKS : International Competitive Bidding (ICB) for construction

works, among contractors from member countries of ADB and ADF State participants in accordance with the Bank's "Rules of Procedure for Procurement of Goods and Works".

13. CONSULTANCY SERVICES

REQUIRED AND STAGE OF SELECTION : Consultancy services will be required for the supervision of

construction works. Procurement will be in accordance with the Bank's "Rules of Procedure for Use of Consultants". The procurement will be through competition on the basis of shortlist of firms.

: Project audit services will be procured through competition

on the basis of a shortlist of auditing firms. 1 SDR = UA 1 1 UA = US$ 1.29248 1 UA = TZS 1046.58 (March, 2001)

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CURRENCY AND MEASURES

Currency Equivalents

(March, 2001 Exchange Rates)

Currency Unit = Tanzania shilling (TZS) 1 UA = TZS 1046.58 1 UA = US$ 1.29248 1 US$ = TZS 809.74 WEIGHTS AND MEASURES 1 metric tonne (t) = 2,205 lbs 1 kilogramme (kg) = 2.205 lbs 1 metre (m) = 3.281 ft 1 foot (ft) = 0.305 m 1 kilometre (km) = 0.621 mile 1 square kilometre (km2) = 0.386 square mile 1 hectare (ha) = 0.01 km2 = 2.471 acres FISCAL YEAR July 1 - June 30

LIST OF TABLES Table 3.1 : Road Sub-Sector Investment and Recurrent Expenditure Table 3.2 : Summary of Road Fund Disbursements Table 4.1 : Summary of Project Cost by Component Table 4.2 : Summary of Project Cost by Category of Expenditure Table 4.3 : Sources of Finance Table 4.4 : Expenditure Schedule by Component Table 4.5 : Expenditure Schedule by Sources of Finance Table 5.1 : Summary of Implementation Schedule Table 5.2 : Summary of Procurement Arrangements

LIST OF ANNEXES Annex. Titles No of Pages 1. Map of Country and Project Area 1 2. Organizational Charts 1 3. List of Regional Roads 1 4. Project Implementation Schedule 1 5. Provisional List of Goods and Services 1 6. Summary Economic Analysis 3 7. Environmental Screening Memorandum 1 8. Summary of Existing Portfolio as at 31/12/2000 1 9. List of Annexes in Project Implementation Document 1

iv LIST OF ABBREVIATIONS AADT = Average Annual Daily Traffic ADB = African Development Bank ADF = African Development Fund ATC = Air Tanzania Corporation CBR = California Bearing Ratio CRB = Contracts Registration Board CTLA = Central Transport Licensing Authority CSP = Country Strategy Paper CODAP = Coordination Office for Donor Assisted Projects DANIDA = Danish International Development Agency DCA = Directorate of Civil Aviation DRC = Democratic Republic of Congo EAC = East African Community EU = European Union EIA = Environmental Impact Assessment EIRR = Economic Internal Rate of Return ESA = Equivalent Standard Axles FE = Foreign Exchange GDP = Gross Domestic Product GOT = Government of Tanzania HDM = Highway Design and Maintenance Standard Model HIPC = Heavily Indebted Poor Countries ICB = International Competitive Bidding IDA = International Development Association (World Bank) IRP = Integrated Roads Project kph = Kilometres Per Hour MCT = Ministry of Communication and Transport MOF = Ministry of Finance MORALG = Ministry of Regional Administration and Local Government MOW = Ministry of Works MTEF = Medium Term Expenditure Framework NEMC = National Environmental Management Council NORAD = Norwegian Agency for Development NTP = National Transport Policy NPC = National Planning Commission NPV = Net Present Value OPEC = Organization of Petroleum Exporting Countries PMO = Prime Minister's Office PID = Project Implementation Document PRSP = Poverty Reduction Strategy Paper RE = Regional Engineer REO = Regional Engineer's Office RETCO = Regional Transport Company

v SDC = Swiss Development Cooperation TCAA = Tanzania Civil Aviation Authority THA = Tanzania Harbours Authority TANLAB = Tanzania Roads Agency Laboratory TANROADS = Tanzania Roads Agency TAZARA = Tanzania-Zambia Railway Authority TRC = Tanzania Railways Corporation TRL = Transport Research Laboratory TZS = Tanzania Shillings UDA = Shirika La Usafiri Dar Es Salaam Bus Company UA = Bank Unit of Account URRP = Urgent Road Rehabilitation Programme VOC = Vehicle Operating Costs Vpd = Vehicles Per Day

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TANZANIA ROADS REHABILITATION/UPGRADING PROJECT

PROJECT MATRIX

DESIGN TEAM: E.K. YAMOAH/A. KIES DATE (REVISED) March, 2001

Narrative Summary (NS)

Verifiable Indicators (VI)

Means of Verification

Assumptions

Goal: 1. The sector goal is to improve the

road network in order to support economic growth and poverty alleviation.

1.1. Rehabilitation, of about

4,500 km of regional roads and the Central and Lake Corridors under the URRP by 2006.

1.1 Annual regional and

trunk road construction statistics from TANROADS.

1.2 Traffic Statistics.

(Goal to super goal) 1.1.Other productive sectors implement the right policies to stimulate economic and social development.

Project Objective: 2. To reduce transport costs by minimizing vehicle operating and maintenance costs in Kagera, Dodoma, Singida and Tabora Regions.

2.1 Average vehicle operating cost on the proposed roads reduced by about 30% by year 2006. 2.2 Roughness less than 3,000 mm/km for trunk road and less than 7,000mm/km for regional roads throughout the service life of the proposed roads.

1.1 Calculate VOC using data

on the project roads and change in road mainte-nance costs.

1.2 Measure roughness

Project objective to Goal 1.1.Adequate Government commitment for the success-ful implementation of the Road sector component of the PRSP.

Outputs 3.1 Rehabilitation to gravel standard of regional roads in four regions. 3.2 2-lane bituminous standard road with 6.5m wide carriageway and two 1.5m shoulders from Kagoma to Lusahunga constructed.

3.1 923 km of regional roads

rehabilitated by year 2004. 3.2 154 km of bituminous

road completed between Kagoma and Lusahunga by Year 2006.

1.1 Quarterly Progress Reports

(QPRs) 1.2 Supervision Reports(SRs) 1.3 Project Completion

Report (PCR) 1.4 Audit Reports

(Outputs to Project Objective) 1.1.Road Agency will maintain the road after its completion. 1.2 URRP implemented as scheduled.

Activities 4. Construction works 4.1 Prequalification of contractors for the trunk road and the Issue and receipt of tenders, Evaluation, negotiation and award of contracts. 4.2 a) Rehabilitation of regional roads: Lot 1 – 101 km Lot 2 - 87 km Lot 3 – 103 km Lot 4 – 126 km Lot 5 – 151 km Lot 6 –116 km Lot 7 – 156 km Lot 8 - 83 km

b) Upgrading of Kagoma- Lusahunga Road (154km)

5.2. Consultancy Services: 5.1 Approval of Short list, and RFP 5.2 Issue and receipt of RFP 5.3 Evaluation and approval of

proposals. 5.4 Award of consultancy services 2.1 Commencement of services.

Input/Resources 4. Input Million UA 4.1 Civil Works 34.34 4.2 Supervision

Works and Audit 2.12

4.3 Contingencies Physical 3.65 Price 2.94 Total 42.94 5.0 Resources

ADF 38.65 GOT 4.29 Total 42.94

1. Appraisal Report estimates. 2. Supervision Reports 3. Quarterly Progress Reports 4. PCR 5. Audit Reports 6. Disbursement Records.

(Activity to Output) 1.1 All procurement actions

are on schedule 1.2 Payments for invoices are

not delayed 1.3 Timely release of local

counterpart funds 1.4 Effective supervision by

the Bank and Executing Agency.

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EXECUTIVE SUMMARY

1. Project Background 1.1 Within the framework of the Poverty Reduction Strategy Paper (PRSP), the Ministry of Works (MOW) prepared a 6 year Urgent Roads Rehabilitation Programme (URRP) in year 2000 which was presented to and adopted by donors. The overall estimated cost of the programme is about US$ 590 million of which donors are expected to contribute approximately US$ 535 million and the Government of Tanzania (GOT), the balance. 1.2 It is in this context that the GOT approached the Bank to consider financing a Roads Programme which consists of (i) a trunk road from Kagoma to Lusahunga (154 Km) on the Lake Corridor and (ii) 923 km of regional roads in Kagera, Dodoma, Singida and Tabora Regions. The proposed trunk road is a continuation of previous ADF contribution on the same corridor, both in Tanzania and Uganda whereas the regional roads were selected on the basis of the highest priority roads within the four poorest regions in the country. The study for the Kagoma-Lusahunga Road was part of the previous study for the Mutukula-Muhutwe-Lusahunga Road and was completed in 1992 under Bank finance. The study was updated in 2001 whereas the regional roads were studied in 2000 and 2001. 2. Purpose of the loan

The ADF loan of UA 38.65 million, amounting to 90 % of the total project cost, will be used to finance 100% of the foreign exchange (UA 29.90 million) and 67.10% of the local cost (UA 8.75 million). 3. Sector Goal and Project Objective The sector goal is to improve the road network and thus to support poverty alleviation. The project objective is to reduce transport costs by minimising vehicle operating costs and maintenance costs in Kagera, Dodoma, Singida and Tabora Regions in Tanzania. 4. Brief Description of the Project’s Outputs In order to achieve these objectives, the project will focus attention on:

i. Rehabilitation to gravel standard of 22 regional roads (923 km) in four regions. ii. Upgrading of Kagoma-Lusahunga trunk road (154 km) from gravel to bitumen

standard. 5. Project Cost The total project cost is estimated at UA 42.94 million out of which UA 29.90 million (69.64%) will be in foreign currency and UA 13.04 million (30.36%) will be in local currency.

ix 6. Sources of Finance The Project will be financed by the ADF and the GOT. ADF Funds amounting to UA 38.65 million representing 90% of the total cost will be utilised to finance civil works and consultancy services. The GOT’s contribution of UA 4.29 million, representing 10 % of the total project costs, will be utilised to cover 32.90% of local costs. 7. Project Implementation The duration of implementation of physical works is 41 months from August, 2002 to December, 2005. The Implementing Agency will be Tanzania Roads Agency (TANROADS). 8. Conclusions and Recommendations 8.1 The project is in line with the Government’s stated policy on roads infrastructure development and aims at supporting the Government goal of poverty reduction. Lastly, the project is consistent with the Bank Group Country Strategy Paper for 1999/2001 period. It is technically feasible and economically viable. In addition, the project is environmentally sustainable, and socially desirable. Furthermore, the project would support poverty alleviation and promote regional integration in Tanzania and the landlocked neighbouring countries and regions. 8.2 It is recommended that a loan not exceeding UA 38.65 million from ADF resources be granted to the Government of Tanzania for the purpose of implementing the project as described in this report, subject to conditions specified in the loan agreement.

1. ORIGIN AND HISTORY OF THE PROJECT INTRODUCTION 1.1 The Government of Tanzania (GOT), has embarked on the restoration of the network through a 10-year Integrated Roads Programme (IRP), which was initiated in 1990. Despite the achievement, the overall condition of the Tanzania Road network continues to be unsatisfactory with 65 percent of the road network still in poor condition. This is due to the maintenance backlog and the devastating effect of the “El-Nino” weather phenomenon that left more than a third of the country flooded in 1999. As such, substantial investments are required to improve the network to maintainable condition and to sustain it through regular maintenance. In view of the above, and within the framework of the Poverty Reduction Strategy Paper (PRSP), the Ministry of Works (MOW) prepared a 6-year Urgent Roads Rehabilitation Programme (URRP) in year 2000 which was presented to and adopted by donors. The overall estimated cost of the programme is about US$ 590 million of which donors are expected to contribute US$ 535 million and GOT, the balance. 1.2 Within this framework, the GOT approached the African Development Bank Group to support the programme by financing (i) a trunk road from Kagoma to Lusahunga (154 km) in Kagera Region and (ii) 923 km of regional roads in Kagera, Dodoma, Singida and Tabora Regions. In addition to the Bank, nine other donors are participating in the URRP programme. More details of the URRP are given in section 2.3.2 of the report. 1.3 The Bank contribution to the URRP is a continuation of previous Bank interventions both in Tanzania and Uganda in the sub-sector, particularly along the Lake and Central corridors. These two corridors are among the most prioritized of the nine major Tanzanian corridors and promote regional integration by linking the neighbouring landlocked countries to the Ocean ports. The regional roads identified within the PRSP, were selected on the basis of the highest priority roads within the poorest regions in the country. 1.4 The study for the Kagoma-Lusahunga Road was completed in 1992 under Bank finance and updated in 2001 whereas the regional roads were studied in 2000 and 2001. This appraisal report is based on these studies, discussions held with concerned ministries and agencies of GOT, as well as data and information collected by the Bank appraisal mission to Tanzania in March, 2001.

2. TRANSPORT SECTOR

2.1 The Transport System

General

2.1.1 In Tanzania, the transport sector is estimated to account for 3% of GDP with the road transport sub-sector contributing 2.5%. It also accounts for between 15% to 21% of the country’s foreign exchange earnings. The importance of the transport sector is not limited to its direct contribution to the GDP but it also enables other sectors (agriculture, mining and tourism) to generate added value. Tanzania, also, serves as an important transit corridor for the landlocked countries of Rwanda and Burundi and to a lesser extent Uganda, Zambia and the Democratic Republic of Congo (DRC). 2.1.2 The transport system consists of: (i) a road network of about 115,000 km; (ii) two railway systems – the Tanzania Zambia Railway (TAZARA) which links Dar Es Salaam with

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Zambia and Tanzania Railways Corporation (TRC), which serves the central and northern regions and provides transit access to DRC, Rwanda, Burundi and Uganda; (iii) one dominant and three subsidiary ports; Dar Es Salaam, Zanzibar, Tanga and Mtwara; and (iv) a civil aviation sub-sector consisting of several small airlines, three international airports and more than 60 smaller domestic airports and air strips. The physical capacity of Tanzania’s transport system, whether ports, railways or the road system, is adequate to handle not only present but significantly higher traffic volumes. However, its condition represents a constraint. This generally poor condition, particularly for roads, is mainly due to inadequate maintenance. A brief discussion on the individual modes and their role in the country’s economy follows.

Road Transport

2.1.3 Tanzania has a relatively limited classified network of about 85,000 km of which 5% is paved. The density of this network of 96.5m/km2 (5.0m/km² for paved roads) is quite low, much lower than in the other East African Community (EAC) member states, Kenya and Uganda, where it is respectively 261.9 m/km² (15.2 m/km² for paved roads) and 330.8m/km² (14.5m/km² for paved roads).

2.1.4 As a consequence of the backlog of maintenance and rehabilitation and the devastating effect of the “El Nino” weather pattern, the overall condition of the Tanzania road network is unsatisfactory with 65% in poor condition. Unless an urgent and massive intervention is undertaken, there is a serious danger of losing the benefits of recent investments in the road network. To address this need, the Ministry of Works (MOW) has prepared the URRP.

Railways

2.1.5 Tanzania operates two railway systems within its territory. These are managed by the Tanzania Railways Corporation (TRC) and the Tanzania Zambia Railway Authority (TAZARA). The railways systems play an important role in the country’s overall transport system. They form, with the ports, transport corridors for the country’s trade flows and they also carry transit traffic for the landlocked regional countries.

Tanzania Railway Corporation (TRC)

2.1.6 The TRC network consists of 2,580 km of single lane track of which 2,251 km are part of the main line network and 329 km in branch lines. From its establishment in 1977, TRC suffered from declining traffic level. Tonnage-km freight volumes has declined from 1.7 million in 1977 to 1.1 million in 2000, and passenger-km fell from 800 million to 413 million. The principal causes of this low level of performance were poor availability and utilization of assets, inadequate maintenance, overstaffing and road competition.

2.1.7 As part of the new Government’s policy towards transport, the TRC is being considered for privatization by concessionning the operations of rail assets while the Government retains ownership of assets. It is expected that the preferred concessionaire will be identified, latest, by second quarter of year 2002.

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Tanzania Zambia Railway Authority (TAZARA)

2.1.8 The TAZARA, jointly owned by the two Governments of Tanzania and Zambia, is predominantly a freight railway across Tanzania to Zambia, Malawi and DRC. It links Dar Es Salaam with Kapiri-Moshi in Zambia through 1,860 km of single track of which 975 km are in Tanzania.

2.1.9 Total freight traffic decreased from about 1.0 million tons in 1990 to 0.6 million tons today, well below its design capacity of 5.0 million tons per year. This reduction is mainly due to lower freight traffic volumes generated by the landlocked countries Zambia and DRC. Domestic freight traffic represents only 20% of the total traffic while transit traffic accounts for between 50% to 60% almost exclusively from Zambia. Passenger traffic has been more stable at around 1.2 million passengers a year throughout the ten year period.

2.1.10 The recent institutional development of TAZARA to achieve an efficient commercially viable railway has not been successful and both Governments have commissioned a study to look into a possible joint-venture with a parastatal railway company from the Peoples Republic of China.

Maritime Transport

2.1.11 The principal ocean ports are Dar Es Salaam, Tanga and Mtwara. In addition, there are port facilities at lake Victoria, Tanganyika and Mwanza for lake services. Dar Es Salaam throughput is the second largest in the eastern coast of Africa after the port of Mombasa. The port of Dar Es Salaam with the two railway systems and the different road corridors serves the mainland and the regional economies of Zambia, Malawi, DRC, Burundi, Rwanda and Uganda.

2.1.12 Dar Es Salaam port handles 90% of the total country ocean freight with an average of 4 million-ton per year. Fluctuations from year to year do take place. Transit traffic which constitutes 80% of the total output declined from 35.3% of the total port throughput in 1995 to 29.4% in 2000. This decline in transit traffic may be partly attributable to economic slowdown of the neighbouring countries, but also to the increasing port competition in the region. For Dar Es Salaam to retain competitiveness against other regional ports, it is essential to improve railway systems, road corridors and reduce the “time clearance”.

2.1.13 The principal ports are managed by the Tanzania Harbours Authority (THA), a public corporation wholly owned by the Government of Tanzania. Following the recommendation of a commercialization study undertaken in 1996, the Government started to privatize THA. The Strategy, approved in 1997 for THA, was for Government to retain ownership of the major port assets through THA and to concession the port operations. In May 2000, the Government approved the contract for leasing the THA container terminal in Dar Es Salaam for a period of ten years. For the remaining activities carried out by THA, the Government is launching a study to re-examine the privatisation options and to confirm or otherwise its original reform strategy for THA excluding the container terminal.

Air Transport

2.1.14 Tanzania is served by about 63 airports and landing strips of which three (Dar Es Salaam, Kilimanjaro and Zanzibar) are used for scheduled international flights. The industry was liberalized in 1992 as part of the on-going economic reforms, thereby opening up for private participation in the market hitherto a monopoly of Air Tanzania Corporation (ATC). Alongside ATC, 30 private airlines are providing scheduled and charter services throughout the country. Furthermore, the Government has restructured the Department of Civil Aviation and created the Tanzania Civil Aviation Authority (TCAA) to regulate services and the operation of aerodromes. At

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a latter stage, it is expected that TCAA will come under the umbrella of a multi-modal regulatory body now in the formative stage. In 1999, Kilimanjaro airport was privatized and a concession let for its operation and maintenance. For the remaining airports and the ATC, a study on options for privatisation is being initiated.

2.2 Transport Policy, Planning and Co-ordination

2.2.1 Since 1997, the Government has made a special effort to formulate its policy objectives and strategies. Several major policy documents were published during year 2000 of which the most important are Vision 2025, the Tanzania Assistance Strategy and the Poverty Reduction Strategy Paper. In the same context, the Ministry of Communication and Transport (MCT), initiated in 1998, the preparation of a National Transport Policy (NTP). As summarized in these documents, the Government policy objectives in the Transport sector are to:

• Develop a well integrated national transport network which will serve all sectors of the national economy and segments of the population with maximum cost-effectiveness;

• Improve the quality and safety of transport services in the country;

• Minimize environmental degradation as a result of transport related development and operational activities; and

• Maximize transport sector earning capacity particularly in transit/international transport trade.

2.2.2 To achieve the above objectives, the Government is liberalizing the transport sector with the private sector being increasingly involved in the various transport undertakings including infrastructure development and service provision. This is reflected by the on-going private concessionning process of the ATC, TRC (with TAZARA considering to take similar action), parts of THA and the establishment of TANROADS, a commercially operated, but publicly owned road agency. Simultaneously, the Government has dissolved most of the publicly owned operated passenger and freight transport corporations with road transport activities presently fully in the hands of private operators. The Government’s intention is to limit its role to policy making, strategic planning, regulatory and performance monitoring in the sector. These roles are sound and the legislation and regulation required to establish the new institutions are being worked out. In this regard, the Government is currently studying the establishment of a joint regulatory body for the transport sector. This single regulatory body will incorporate all the existing agencies such as TCAA and THA, and would help the Government to exercise its inter-modal co-ordination and performance monitoring roles. In addition to this, a study is on-going to improve inter-modal integration and complementarity between all transport modes.

2.2.3 As far as the development of road infrastructure is concerned, NTP objective is both to “Facilitate road transport corridor development and ensure that they are furnished with all weather bitumen roads” and “to develop and expand the infrastructure and ensure easy accessibility”. This would ensure that the nine road corridors with their link sections are accessible and contribute to the growth of economic activities.

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2.3 Intervention of Otrher Donors in the Sector

2.3.1 Donors have, over the last decade, supported the Government’s Economic Recovery Programme with a comprehensive transport sector programme for each of the key sub-sectors; through the Port Modernisation Project, Railway Restructuring Project and the IRP. The port and the Railway projects, which consisted of rehabilitation works and institutional support prepared the way for the privatization process of these sub-sectors (see paras. 2.1.7 and 2.1.13).

2.3.2 Under the road sub-sector, the donors supported different programmes of which IRP was the last and amounted to US$ 1.6 billion. Eighteen donors including ADF supported this 10-year programme (1990-2000). The programme is being followed by the current 6-year URRP to the tune of US$ 590 million. The costs include US$ 359 million for trunk roads and US$ 214 million for regional roads. Others are US$ 2.5 million for ferries, US$ 9.2 million for Axle Load Control and US$ 5.3 million for overheads.

2.3.3 The URPP has been divided into two phases: Phase 1 covers projects to be carried out in the first three years (2001-2003), consisting mainly of on-going projects and accumulated rehabilitation works on most of the paved roads and some high priority unpaved trunk and regional roads; and phase 2 will cover the following three years (2004-2006), consisting mainly of upgrading, regravelling and urgent periodic maintenance works. The expected donor contribution is US$ 535 million. In addition to the Bank, nine other donors are supporting the programme as shown in the Table below. The total commitment so far is US$ 336.85 million, leaving a gap of US$ 198.15 million which will be partly filled with further World Bank contribution of US$ 140 million.

Donor Contribution to URRP (in US$ million)

DONOR AMOUNT DANIDA NORAD E.U. ITALY JICA KUWAIT FUND/OPEC SAUDI FUND WORLD BANK ADB REMAINING TO BE FINANCED

15.35 11.16 108.31 2.24 25.41 26.30 16.80 51.60 79.68 198.15

TOTAL 535.00

3. THE ROAD SUB-SECTOR

3.1 Road Network, Vehicle Fleet and Traffic

3.1.1 The classified road network is estimated at 85,000 km and can be distributed into five classes as shown in the following table:

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Length in km

Paved Unpaved Total Trunk Roads 3,830 6,470 10,300 Regional Roads 100 24,600 24,700 District Roads 30 19,970 20,000 Feeder Roads 0 27,550 27,550 Urban Roads 470 1,980 2,450 Total 4,430 80,570 85,000 Source: MOW (Highway Act)

3.1.2 Trunk roads include nine major traffic corridors and constitute the primary road system of which 40% is paved. Regional roads link the trunk roads with economic centers, and district and feeder roads provide the inter-village tertiary road network.

3.1.3 There is limited available data on the size and characteristics of the vehicle population in the country. The best estimates suggest a total fleet size of about 130,000 growing at the rate of 6% per year for the last five years. On the road network, daily traffic is generally light, with only two major roads (Tanzam highway and Central corridor) currently handling over 1,000 vehicles per day (vpd); most paved roads carry between 200 and 500 vpd.

3.1.4 Tanzania is among the countries with very high rates of accidents despite its small size of vehicle fleet. In 2000, about 150 persons per 10,000 vehicles were killed in Tanzania as a result of road accidents. This rate is about 20-30 times the average of developed countries and double that of some Southern African countries. The costs in economy and social terms are enormous. The GOT, with the aim to tackle the road safety problem, established a Road Safety Unit in 1992. The Unit is currently implementing a road safety program comprising; accident recording and analysis system, vehicle licensing and inspection, axle load control, traffic engineering and driver training.

3.2 The Road Transport Industry

3.2.1 The MCT regulates the whole land transport sector, including entry into the business of passenger and freight transportation directly through the Central Transport Licensing Authority (CTLA). However, due to the inadequacies in human resources, technology and funding, CTLA currently does little more than issuing permits to operate vehicles. As part of the on-going reforms, the regulatory role of the CTLA will be transferred to the sector wide, Tanzania transport Regulatory Authority (see para. 2.2.2).

3.2.2 The commercial vehicles are estimated at 36,000, out of which freight vehicles number 23,000, mainly, in the 0-5 ton capacity range. About 93% are one vehicle owner/operator and known to have a low level of technical and managerial expertise and a limited financial capacity to adapt to changes in market conditions and economic downturn. This is an important issue and attention needs to be focussed in encouraging private operators to form strong partnership/organization in provision of freight and passenger services.

3.2.3 The freight market is totally dominated by the private sector after the divestiture of nine out of the ten state-owned Regional Transport Companies (RETCOS) in year 2000. Road passenger transport services are also provided by the private sector with the exception of about 10% of Dar Es Salaam’s market which is served by Shirika La Usafari Dar Es Salaam Bus company (UDA). Like the RETCO’s, UDA is lined up for divestiture by selling 75% of the shares to investiture where as 25% will be held by the Dar Es Salaam City Council.

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3.2.4 There is adequate supporting evidence suggesting that the national road freight demand is lower than supply. Firstly, the private sector reports declining freight rates in real terms and consequently reduced profitability, which suggests a tightening market situation. Secondly, imports of new trucks have slowed down in recent years. However, it must be noted that a domestic freight demand is highly seasonal, and therefore shortages occur during the peak harvest seasons.

3.3 Road Administration and Training

3.3.1 The responsibility for administration of the classified road network is shared by the Ministry of Works (MOW) and Ministry of Regional Administration and Local Government (MORALG). The MOW is responsible for trunk and regional roads. The role of the MOW includes policy formulation, strategic planning and regulation in the road sub-sector. It is also responsible for monitoring the performance of the following agencies: Tanzania National Road Agency (TANROADS), Building Agency, Government Stores Agency and Electrical and Mechanical Agency. 3.3.2 The TANROADS was established on 1st July, 2000 as a semi-autonomous road agency with the responsibility for the maintenance and development of the classified trunk and regional road networks. The establishment Act of the TANROADS is included in the Project Implementation Document (PID), whereas the organisational structure is given in Annex 2. 3.3.3 The Directorate of TANROADS consists of a Chief Executive with its functions divided among four departments of Maintenance, Development, Technical and Finance and Administration. TANROADS is to be staffed in July 2001, with a total of 652 staff of which 162 are engineers. Most of the required qualified staff are in place. The recruitment process is on-going and is expected to be completed according to the initial business plan. The staff is spread over the head office in Dar es Salaam and 20 regions across the country. 3.3.4 TANROADS has the requisite organization to manage its function to maintain and develop the classified trunk and regional road network in the country. Procedure for procurement, accounting and supervision are well established. This has enabled TANROADS to already take over on-going development projects from the World Bank, the E.U. and the ADF and performing road maintenance activities country wide on all the classified trunk and regional roads. 3.3.5 With regards to training, a total of US$ 105 million was expended under the IRP on capacity building effort through staff training and Technical Assistance. Sixty-three staff of the MOW were trained to the level of Master of Science while 379 more staff received short-term skill training provided by local and international training institutions within the country, namely the University of Dar es Salaam, Morogoro Ujenzi Training Institute, Mbeya (Kiwira) Appropriate Technology Training Institutue and the Eastern and Southern African Management Institute. Also in the National Construction Council, a total of 15 staff received advanced training.

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3.3.6 TANROADS has initiated a local contractor support programme through training financed by the Swiss Development Corporation, relaxation of tender conditions for demonstration sites and have planned trial contracts of about TZS 750 million in the next ten years. 3.4 Road Planning and Financing 3.4.1 MOW through the Policy and Planning Division is responsible for road planning, construction, rehabilitation and maintenance of the classified road network. Its proposals are subject to review and approval by the Ministry of Finance (MOF) and National Planning Commission (NPC) which have responsibility for inter-sectorial co-ordination and planning. 3.4.2 The road sub-sector is funded respectively from the national budget, donor community and road user charges. As shown in table 3.1, road expenditures for MOW have increased, in nominal terms, from TZS 21.14 billion in FY97/98 to TZS 47.19 billion in FY99/00. There have been substantial variations between budgeted financial resources and actual expenditures both from the Government and the donor community. Over the period, the budgeted commitment by the donor community was about twice as large as the commitment of the Government. This high level of commitment was in anticipation of the second phase of the IRP that was expected to start in 1997. However, due to the delay in finalization of the institutional reform in the management of the road sector, out of the total commitment of TZS 124.54 billion for the period (1997/2000), only TZS 41.82 billion was released. The Government on its part, provided TZS 77.41 billion out of which TZS 72.88 billion was from the road fund (94%) and the rest (TZS 4.53 billion) from general government budget. This latter represents an average of 4% of the total Government expenditures. This is a relatively modest amount considering the size of the country and the development of the road network. However, it is expected that in future, the Government contribution will increase due to savings in elimination of subsidies and investments in the other transport modes as a result of the privatization process.

Table 3.1 Road Sub Sector Investment and Recurrent Expenditure (TZS million)

Sources

FY/97/98 FY/98/99 FY/99/00 Total Budget Actual Actual

% Budget

Budget

Actual Actual %

Budget

Budget Actual Actual %

Budget

Budget Actual Actual %

Budget Devel. Budget

3,945

2,195

56%

-

-

-

4,000

2,333

58%

7,945

4,528

57%

Donor 41,635 4,448 11% 51,148 19,115 37% 31,735 18,263 58% 124,541 41,826 34% Road Fund 20,000 14,500 73% 32,250 31,777 99% 32,640 26,600 81% 84,890 72,877 86%

Total 65,580 21,143 32% 83,398 50,892 61% 68,398 47,196 69% 217,376 119,231 55%

Source: MOW 3.4.3 The funding of road maintenance activities is through a Road Fund created in 1995 by an Act of Parliament. The Act which established the Road Fund was amended in 1998 to clarify the allocation of resources between development and maintenance of the network and between trunk roads and rural roads. The main resource of the Road Fund is a levy, presently TZS 80, on each litre of fuel. Additional fees collected are: transit fees, vehicle over-loading fines, heavy vehicle license fees and any other service approved by the Parliament from time to time.

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3.4.4 The Road Fund is administered by a Board, composed of nine persons. The Board includes representatives of the Ministries responsible for roads (works, finance and local government) as well as the private sector. The funds are collected by MOF and MCT according to their respective competencies and deposited into the Fund. Ninety percent of the funds are ring-fenced exclusively for road maintenance of which seventy percent is for trunk and regional roads and thirty percent is for district and urban roads. Ten percent is to be used for the road development. 3.4.5 Since the amendment of the Act (1998), the performance of the Road Fund has improved. Funds that have been collected have been disbursed to MOW and Prime Minister’s Office/MORALG as shown in the table below. Moreover, during the FY 1998/99 the treasury disbursed more funds compared to what was in the Road fund account to support the restoration of network that was destroyed by “El Nino” rains. However, despite the significant effort in the collection and release of funds to the MOW and MORALG, there is still a gap to meet the maintenance requirement which is estimated over the period 2000-2004 at about TZS 90 billion per year. This gap is due to the backlog maintenance and to the “El Nino” effect.

Table 3.2

Summary of Road Fund Disbursements (TZS billion)

Year Total Collections MOW MORALG 1996/97 33.93 16.00 3.45 1997/98 36.70 14.50 26.00 1998/99 38.39 31.77 13.60 1999/00 38.00 26.60 11.40

Source: Road Fund 3.4.6 The collection process is undertaken with too many entities involved and long transit time for the funds. According to a recent study, it takes about 60 days for up-country fuel levy collections to be deposited in the road fund collection account. It also takes three weeks for the funds deposited in the Bank of Tanzania Road Toll Collection Account to reach the Road Fund Board’s account. Therefore, the time taken by the whole process is quite long, and time for the release of funds is quite unpredictable which results in serious cash flow problems during the implementation of the road maintenance contracts. 3.4.7 The Government recognizes that sustainability of the road network requires more finance than current revenue levels and timely release of the fund. The Government is therefore contemplating different actions to be taken, among which are: (i) launching of a study, financed by the Swiss Development Corporation and the Road Fund, to review road user charges, current collections and use of funds, in order to recommend more efficient procedures and to widen the sources of revenue for the fund, (ii) request for donor contribution to the maintenance program, and (iii) minimizing damage on the roads by already introducing and enforcing appropriate axle-load and vehicle regulations.

3.5 Road Engineering and Construction 3.5.1 The MOW maintains a small design and construction section, which among other duties establishes principles and procedure for route locations and Right of Way demarcations in addition to the review of technical standards and specifications for road works. The TANROADS is in charge of detailed engineering design of minor roads and bridges and checks feasibility study reports and design and tender documents prepared by consultants or by in-house teams. Foreign consultants undertake most of the studies and designs for large and complex projects. Local consultancy firms have been encouraged to undertake consultancy assignments in the sector, in

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association with foreign consultants, as a result of the high investments in the road infrastructure over the last decade. 3.5.2 The Central Materials Laboratory, now known as TANLAB, provides testing of soils and other civil engineering construction materials for Government, consultants and contractors. Regional Material Laboratories under the regional managers' offices undertake soil, pavement and other tests in support of the regions’ maintenance and development works. 3.5.3 Foreign contractors play a significant role in the execution of a majority of the road construction works. Despite the effort made under IRP to promote the local contracting industry, yet the industry is still weak with only about 50 contractors, which are mainly involved in basic routine and periodic maintenance works. This is a major concern to the nascent private contracting industry in Tanzania and the GOT intends to continue to develop the industry to keep pace with the work volumes. Within this framework, TANROADS has initiated a local contractor support programme of trial contracts of about TZS 750 million over the next two years (see para. 3.3.6).

3.6 Road Maintenance 3.6.1 TANROADS is tasked with the maintenance of the classified Trunk and Regional Roads network under agreement with the MOW. In order to achieve this, TANROADS has divided the country into 4 zones comprising 4 to 6 regions per zone, with each region under the control of a Regional Manager. Each zone is headed by a zonal director who reports directly to the Chief Executive in the Head Office. 3.6.2 The Regional Managers are responsible for routine maintenance carried out by force account while local contractors are utilised to undertake periodic maintenance and minor rehabilitation works. As far as equipment is concerned, TANROADS is developing a self-financing Equipment Hire Unit in four regions in order to provide service to their field offices and to contractors undertaking maintenance works. 3.6.3 During the first half of the current fiscal year, TANROADS has maintained about 2,500 km of the trunk roads and 2,300 km of the regional roads which represent 45 per cent and 11 per cent of the classified trunk and regional roads respectively. Given that the TANROADS has been recently established (July 2000), this achievement is considered satisfactory. 4. THE PROJECT 4.1 Project Concept and Rationale 4.1.1 The rationale for ADF involvement in the proposed project is a logical continuation of its past interventions along these two corridors. In the past 10 years, the Bank, along with three other donors namely, E.U., World Bank and OPEC Fund have mobilised a total of US$ 310 million for rehabilitation of the Central and Lake Corridors. These two corridors are among the most prioritized of the nine major Tanzanian Corridors based on their socio-economic significance in terms of population, social welfare, agriculture, mining, tourism and international trade with landlocked countries. They connect major urban centres, ports and border points with inland regions and vast rural areas, and function as a vital lifeline for a large number of people. They also serve as transit corridor to neighbouring land-locked countries. Therefore the project will contribute to the regional integration between Tanzania and its neighbouring countries. 4.1.2 In the discussions with the stakeholders carried out during the social impact assessment, the project beneficiaries expressed a strong desire to improve the road infrastructure

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that will provide them with better access to markets, health and education facilities and to other basic services. These anticipated impacts are consistent with the objective of strengthening economic infrastructure, which has been identified in the Country Strategy Paper (CSP), as a key element in the poverty reduction strategy. 4.1.3 Various technical options for the upgrading and rehabilitation of the trunk and regional roads were examined during the feasibility studies in order to select viable economic routes with minimum of adverse impact on natural environmental sites and human settlements. The resulting options were to upgrade the trunk road from gravel surface to a 6.5 meter wide bituminous surfaced road with two 1.5 meter wide shoulders, and to rehabilitate the regional roads to gravel standard as the most economically justifiable propositions. These specifications are in conformity with the Tanzania Road Standards. 4.1.4 The Bank Group has extended loans to help finance 8 road projects in the sub-sector. Five projects have been completed and implementation of the remaining projects is on-going. Project completion reports (PCRs) were completed for four road projects. The main findings of these reports and the lessons learnt are that most of the transport sector projects/studies have been characterized by (i) long start-up delays ranging from 1 to 3 years due to the long time taken in fulfilling the conditions precedent for loan effectiveness, and (ii) long implementation delays caused by ineffective and weak institutional structures, procurement problems and lack of local counterpart funding. Other donor assistance has suffered from similar problems. Besides theses lessons, the recent Implementation Completion Report of the IRP prepared by the World Bank identified the following lessons: (i) the need to update technical documentation before actual commencement of works and (ii) the need to maintain donor interest through the whole period of a major initiative. The proposed project incorporates these lessons learnt by the Bank and other donors involved in the sector by (i) the implementation of the project by the TANROADS, which is already executing projects to the satisfaction of donors such as E.U., World Bank and ADF. It is expected that TANROADS will review the technical documentation before commencement of the works; (ii) the GOT commitment at a high level to increase and release timely, its contribution to the road sectors; furthermore the project is already included in the Medium-Term Expenditure Framework of Government; (iii) the establishment of a dedicated unit for donor co-ordination under TANROADS and (iv) the close monitoring of the implementation schedule by the Bank through intensified supervisions.

4.2 Project Area and Project Beneficiaries A) Project Area 4.2.1 The project area lies along the Central Corridor and the Lake Corridor and covers four regions, namely the Kagera, Dodoma, Singida and Tabora regions which is about 178,625 square kilometres of Tanzania Mainland. The four regions have a combined population of 5.7 million (18% of the country’s total population) out of which 95% are rural. Seventy one percent (71%) of the population (10 years and above) are economically active and over 91% of them are engaged in agriculture while the remaining 9% are engaged in other occupational categories most of which are in the service sector. The main crops grown include maize, millet, cassava, wheat, cotton, groundnuts and tobacco while livestock keeping is an economic activity second to agriculture. The regions are among the poorest in the country. 4.2.2 In terms of per capita income, the regions rank very low with Kagera and Dodoma being the most deprived regions with per capita income as low as TZS 39,604 (US$72) for Dodoma as compared to national average of US$161. As far as infant mortality and school enrolement are concerned, the four regions are also among the most deprived regions with a rate as high as 130 per 1,000 and 220 per 1,000 for infant mortalities and under five mortality respectively.

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4.2.3 Women are traditionally most active in the day to day upkeep of rural life. Studies carried out in the target regions show that women account for 76% of time spent on transport and 85% of load carried while men account for 21% of the time and 11% of the load carried. As a result, it is found common that women move about 50kg per day over a distance of 4km, spend 75% of total transport time walking long distances to and from farms and other production units, and largely contribute to the tonne-km of the households on head or back loading. However, the amount produced is small due to time wasted, as walking constitutes the major transport means. The situation becomes more difficult for pregnant women and lactating mothers and small children who also have to walk long distances to access basic services. This is partly due to inadequate and poor transport service caused by poor rural transport infrastructure.

B) Project Beneficiaries. 4.2.4 Different stakeholders and the country as a whole will benefit from the project roads. Transport operators and passengers mainly constituting of the rural poor, those located far from markets and women would also directly benefit. Other beneficiary groups include those suffering from poor access to credit to allow diversification, commercialization, and/or marketing of goods in wider markets. 4.2.5 On a broader scale, the roads being on the Central and Lake Corridors, will promote regional integration between Tanzania and the landlocked neighbouring countries and regions, such as Uganda, Burundi, Rwanda and the DRC. This will reduce the transport costs on their imports and exports resulting in greater competitiveness for their markets and would therefore support poverty alleviation in these countries. 4.3 Strategic Context The objective of the URRP is to improve the road network, thus to support poverty alleviation (i) removing major constraints to transport services on the country’s road network; (ii) improving accessibility to socio-economically important rural areas, and (iii) contributing to promoting economic activity. The proposed project would support the URRP by rehabilitating 22 regional road priority links and upgrading of a section of a trunk road. In the project area, the poor condition of the network constitutes a major constraint to the poverty reduction strategy. This condition does not enable the movement of agricultural products; it limits access to markets and raises the costs of access to markets. It is expected that the project will reduce transportation costs of agricultural products. Improved road services would raise the producer price of export crops and reduce farm-level costs of fertilizer and other inputs. It will also improve links between villages and markets. The project is therefore in line with the sector goal as outlined in the URRP and is consistent with the Bank Group Country Assistance Strategy and the Government defined PRSP.

4.4 Project Objective The sectorial objective is to improve the road network in order to support economic growth and poverty alleviation. The objective of the project is to reduce transport costs by minimizing the road maintenance and vehicle operating costs in four regions: Kagera, Dodoma, Singida and Tabora.

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4.5 Project Description 4.5.1 The project consists of the following components:

i) Rehabilitation of twenty-two (22) Regional Roads (923 km) in Kagera, Dodoma, Singida and Tabora Regions. The list of the roads is given in Annex 3.

ii) Construction works for the upgrading of gravel surfaced road to bitumen

standard with 6.5 m wide carriageway with 1.5m wide shoulders on each side for a total length of 154 km between Kagoma and Lusahunga.

iii) Consultancy Services for:

- Supervision of Construction works of (i) and (ii) above. - Project Audit Service

Detailed Description of Activities and Components

A. Civil Works

(i) Rehabilitation Works 4.5.2 The roads to be rehabilitated are all gravel and earth roads which have to be improved to bring them to acceptable design standards for regional roads classification. They lack adequate drainage structures and the surface severely degenerated without gravel. The existing alignment of the roads will generally be followed in most cases. The design of the roads consists of 200 mm thick and 5.5 m wide gravel layer with 0.7m. wide shoulder on either side. Materials for base construction and gravel surface layer are available from within each project area. The road structure is designed for a service life of ten years after which a periodic maintenance activity involving regravelling must be undertaken every five years. (ii) Upgrading Works 4.5.3 The alignment of the proposed road nearly follows the existing one without any major changes except at certain places where minor modifications were done to achieve economy. The proposed road has been designed in accordance with Tanzanian geometrical design standards for trunk roads. A carriageway width of 6.5 m with 1.5 m shoulders has been adopted with a design speed of 100 kph in the flat terrain and 65 kph in the hilly areas. Improvements to horizontal and vertical alignments have been made to meet the desirable geometric criteria to meet traffic safety requirements. 4.5.4 The road foundations will be protected by side drains which will be paved where the gradient exceeds 5%. As there are no major bridge structures along the road, almost all the drainage structures will be in the form of multiple corrugated metal pipe culverts and these together with side drains will be constructed along the whole stretch of the road. 4.5.5 The design of the pavement was based on sub-grade evaluation of CBR tests taken along the alignment after soil sampling and compaction tests . A CBR value between 5 to 7 percent has been used in the pavement design which has been carried out in accordance with TRRL road note No.31 and is based on the estimated traffic, using a design life of 20 years. The road pavement

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shall be of Double Bitumen Surface Treatment Standard placed on 150-200 mm thick coment/lime stabilized base over a cement/lime modified sub-base of varying thickness. 4.5.6 Large outcrops of dolerite rock have been identified at four major parts along the road at Km 42.8, 86.1, 96.5 and 106.5 on the Muleba to Lusahunga Road with hauls ranging from 1.5km to 34 km. These have been found to be suitable for crushed stone base material, surfacing and for concrete works. The most common gravel occurring along the project road are laterite and ferricrete, which is much more like laterite but often has many cavities. These can be used as selected fill and sub-base materials. Road signs and road line markings are provided in compliance with Tanzanian standards. Guard rails, marker posts and kilometer posts shall be provided as required. B. Consultancy Services 4.5.7 Consultancy services for the supervision of the road construction works will be carried out by two reputable firms of consultants on behalf of TANROADS. The selected firm will supervise the construction, monitor quality control testing performed by the contractors, track progress and costs, prepare progress reports and maintain close liaison with TANROADS, the ministries responsible for the project and the Bank during project implementation. 4.5.8 Audit services for the project will be undertaken by a consultant who will, as part of his services, submit the audit reports every year of the project implementation and at the completion of the project.

4.6 Environmental Impact 4.6.1 In accordance with the Bank’s Environmental Guidelines, the project has been classified as category II. A review of the Environmental Impact Assessment (EIA) reports on the proposed roads indicate that the project roads follow the existing alignments with minor improvements to the horizontal and vertical alignments. The studies further indicate that the resulting environmental impacts due to the rehabilitation/upgrading of the roads will be minimal and only of a temporary nature and can therefore be controlled to acceptable levels by the implementation of the requisite mitigation measures and good construction practices. 4.6.2 The Government of Tanzania completed its Environmental Policy and Legal Frameworks in 1996. The Policy and Legal Frameworks are intended to ensure the improvement and management of the country’s environmental resources, such as, the forests, wildlife, soils, water bodies, minerals, etc. The Environmental department within the office of the Vice President ensures the implementation of environmental policies and co-ordination of environ-mental activities. There exists also, the National Environmental Management Council (NEMC) whose task it is to institutionalize EIA in the various sectors of government by assisting the sectors in the preparation of EIA Guidelines and Checklists. 4.6.3 Positive and negative environmental impacts are expected to be associated with the project. The proposed mitigation measures to alleviate the adverse effects have been recommended. Also, the related costs for the implementation of these measures have been included within the project cost. Negative Environmental Impacts 4.6.4 The potential negative impacts will include the following: non-reclaimed burrow pits; demolition of seven adobe brick houses; modification of the natural drainage patterns; landslides; erosion; and stream and lake sedimentation. Others will include interference with the

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movement of wildlife, livestock and local residents; air and soil pollution from asphalt plants and dust; noise pollution from construction equipment and blasting; and the presence of a non-resident labour that may induce the spread of HIV/Aids. Mitigation Measures 4.6.5 The requisite mitigation measures recommended to alleviate the potential negative impacts include the reclamation of non-reclaimed borrow pits; compensation to families for the loss of seven adobe brick houses which fall within the road alignment; and the improvement of the drainage systems by the provision of infiltration ditches for silt and pollutants. Other mitigation measures will consist of the stabilisation of slopes by re-vegetating so as to reduce erosion, landslides, erosion and stream and lake sedimentation; installation of speed breakers, speed control signs, radar detectors, and placement of traffic police within the Game Reserve. One example of where these types of mitigation measures are successful are within the Mikumi Game Reserve of Tanzania, where the Morogoro-Mbeya trunk road passes through one of the largest Game Parks of Tanzania. The installation of a radar system, speed bumpers and traffic police has reduced car accidents and human fatality rate by more than eighty percent. Environmental Monitoring and Management Plan 4.6.6 An Environmental Management and Monitoring Plan as well Compensation Plan will be prepared by the GOT. TANROADS has the capacity and the expertise to prepare this plan which will be submitted to the Bank prior to first disbursement of the loan. This has been included as a loan condition. Mitigation Cost 4.6.7 The cost for the seven houses to be demolished is calculated at 2,000,000 TZS (UA 1,910). The cost has been negotiated and accepted by the owners who have expressed willingness to vacate their property. This cost will be borne by the GOT and will be reflected in the Compensation Plan. The other mitigation costs estimated at UA 0.3 million are included in the engineering cost of the project.

4.7 Social Impact 4.7.1 Poor roads and the resultant inadequate transport limit the facilitating role of the transport sector in both production and consumption of social and economic services. In particular, the Tanzania PRSP underlines that transport improvement is critical for rural development and poverty reduction. The link and impact of improvements in roads lie in the fact that it leads to improved accessibility to social services such as health and economic opportunities by reducing transport costs. It also ensures increased agricultural productivity; opens up room for participation in non-agricultural activities through time saving effect, particularly, for women; eases accessibility to markets and social services; and links the rural sector to the rest of the economy. Since women constitute 51% of the population in the project target area and account for 76% of time spent on transport and 85% of load carried, the improvement of the roads in the project area is expected to reduce this physical and emotional burden while increasing their productivity and overall wellbeing. 4.7.2 During the construction and maintenance of the project roads, it is expected that the local population, both men and women - will benefit from the employment opportunities to be generated. It has been estimated, that a total of more than 1,500 skilled and unskilled laborers will be employed during the construction while at least 200 permanent employment opportunities will be created during the maintenance of the roads. The income generated from the employment will improve the livelihood of the local population.

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4.7.3 It is not anticipated that the project will generate significant negative social impacts. However, the introduction of the road may expose the communities, particularly women, to limited social problems. It is anticipated that the higher disposable income of the laborers would lead to life styles that could spread sexually transmitted diseases and unwanted pregnancies. Furthermore after the construction of the roads, traffic accidents are likely to increase due to high speed. 4.7.4 To mitigate these negative impacts, sensitization and awareness raising workshops on sexually transmitted diseases will be organized for the workers. In addition to raising the awareness of local communities, the contractors will be expected to distribute to their workers, protection material. With respect to enhancing road safety, the project will install traffic signs and speed-break signs in critical junctions of the road. 4.8 Project Costs 4.8.1 The project cost is estimated at UA 42.94 million net of taxes, made up of UA 29.90 million (69.64%) in foreign exchange cost and UA 13.04 million (30.36%) in local costs. A provision of 10% has been made to cover physical contingency as well as an average price escalation of 3% per annum on foreign exchange and 5% per annum on local currency. An amount of UA 2.06 million representing 6% of base cost, was provided for supervision consultancy services. A lump sum amount of UA 0.06 million has been included for the consultancy services for audit. 4.8.2 A summary of the project cost estimates is presented in Table 4.1 below while the project cost by category of expenditure is presented in Table 4.2.

Table 4.1 Summary of Project Cost by Component

Component TZS billion UA million

F.E. L.C. Total F.E. L.C. Total A. B.

Civil Works: - Rehabilitation - Upgrading Consultancy Services: -Supervision -Audit

10.12 14.68 1.94 0.07

6.75 4.39 0.22 -

16.87 19.07 2.16 0.07

9.67 14.03 1.85 0.06

6.45 4.19 0.21 -

16.12 18.22 2.06 0.06

Total Base Cost Physical contingency (10%) Price Contingency

26.81 2.68 1.80

11.36 1.13 1.15

38.17 3.81 2.95

25.61 2.56 1.73

10.85 1.09 1.10

36.46 3.65 2.83

Total 31.29 13.64 44.93 29.90 13.04 42.94 % 69.64 30.36 100.00 69.64 30.36 100.00

Table 4.2 Summary of Project Cost by Category of Expenditure

Category of Expenditure

TZS billion UA million F.E. L.C. Total F.E. L.C. Total

A. B.

Civil Works: Consultancy Services:

24.80 2.01

11.14 0.22

35.94 2.23

23.70 1.91

10.64 0.21

34.34 2.12

Total Base Cost Physical Contingency (10%) Price Contingency

26.81 2.68 1.80

11.36 1.13 1.15

38.17 3.81 2.95

25.61 2.56 1.73

10.85 1.09 1.10

36.46 3.65 2.83

Total 31.29 13.64 44.93 29.90 13.04 42.94

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4.9 Sources of Finance and Expenditure Schedule 4.9.1 The project will be financed jointly by ADF and GOT. ADF will finance 100% of the foreign exchange costs and 67.10% of the local costs amounting to UA 8.75 million. The GOT will finance 32.90% of the local costs amounting to UA 4.29 million. Overall, ADF will finance 90% of the total project cost with GOT meeting the remaining 10% plus taxes and duties. The source of finance is shown in Table 4.3 below.

Table 4.3 Sources of Finance (In Million UA)

Source F.E. L.C. Total % of Total ADF GOT

29.90

-

8.75 4.29

38.65 4.29

90.0 10.0

Total 29.90 13.04 42.94 100 4.9.2 The financing of part of local costs by ADF is justified by the GOT's strong efforts towards the mobilization of internal and external resources to support its long term development strategy. As part of this effort, the GOT has introduced important measures to broaden its tax revenue base and also to improve tax collection. These measures include the establishment of the Tanzania Revenue Authority which has helped reverse the decline in revenue performance. However, in spite of these efforts, the Government is not yet able to generate enough resources to finance the whole of the local costs of externally financed projects. 4.9.3 Tanzania's external finance requirements are large and the country relies mostly on grants and concessionary loans to meet these requirements. Additional resources will be provided under the enhanced HIPC Initiative which will be targeted towards poverty reduction activity such as improvement of transport service. Through the World Bank and the Bank Group Structural Adjustment loans and other budget support programmes, GOT receives resources which are used to finance the foreign exchange costs of goods and services that the economy needs to expand and for the implementation of development projects. 4.9.4 The Government of Tanzania has adopted the Medium-Term Expenditure Framework as an instrument for allocating budgetary resources to priority sectors. The shift towards a medium-term framework for expenditure planning has improved the prioritization of expenditures across and within sectors. These priority sectors which are covered by the current MTEF include roads. 4.9.5 In view of the above, the proposed ADF share of 67.40% of local currency financing for the project is justified. The Bank local cost contribution will finance important components of the project that can be procured locally, such as, skilled and unskilled labour, construction of road camps, development of quarry sites and the production of aggregates for the successful implementation of the project. 4.9.6 The expenditure schedule by component of the project is derived from the implementation programme and is in proportion to the works and services programmed for each year of the project implementation. The yearly expenditure plans by component and by sources of finance are shown in Tables 4.4 and 4.5 respectively.

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Table 4.4 Expenditure Schedule by Component (in UA million)

Component

2002 2003 2004 2005 Total

A. Civil Works-Rehabilitation B. Civil Works-Upgrading C. Consultancy Services

-Supervision-Rehabilitation -Supervision-Upgrading -Audit

5.69 4.29 0.34 0.26 0.02

11.39 5.36 0.68 0.32 0.03

1.90 5.36 0.12 0.33 0.02

- 6.44 0.38 0.01

18.98 21.45 1.14 1.29 0.08

Total 10.60 17.78 7.73 6.83 42.94

Table 4.5 Expenditure Schedule by Sources of Finance (In Millions UA)

Source 2002 2003 2004 2005 Total ADF GOT

9.54 1.06

16.00 1.78

6.96 0.77

6.15 0.68

38.65 4.29

Total 10.60 17.78 7.73 6.83 42.94 5. PROJECT IMPLEMENTATION

5.1 Executing Agency The Executing Agency for the project will be TANROADS under the directorate of development. TANROADS is well established and successfully implementing road projects financed by the World Bank and E.U. TANROADS has the requisite organisation to manage its functions. It is well staffed and equipped to execute the project (paras. 3.3.2-3.3.4). 5.2 Institutional Arrangements The implementation of the project will fall directly under the control of the development director who reports to the Chief executive. A civil engineer, whose qualifications and experience are acceptable to the Fund, will be designated from TANROADS as project co-ordinator to monitor the proposed project during implementation. This has been included as a condition precedent to first disbursement of the loan. This co-ordinator will work in conjunction with NEMC and the Safety Unit of TANROADS to monitor the implementation of the environmental mitigation measures. 5.3 Supervision and Implementation Schedules 5.3.1 The rehabilitation of regional roads will be executed in eight lots while the upgrading of the trunk road will be undertaken as one package. The works will be supervised by two reputable firms of civil engineering consultants on behalf of the Executing Agency; one for the rehabilitation works and another for the upgrading works. 5.3.2 The duration of the construction works for each lot of the regional roads will be 18 months commencing in August 2003 and ending in February 2004. The construction work for the trunk road will be completed over a period of 36 months commencing in January 2003 and ending in December 2005. Each road project will be followed by a one year maintenance period. A

19

summary of tentative implementation schedule for the project is given in Table 5.1 below and more details are given in Annex 4.

Table 5.1 Summary of Implementation Schedule

Activity Agency Responsible Date A. Civil Works A.1 Rehabilitation

- GPN issue - SPN issue - Issue of Tenders - Receipt of Tenders - Approval of Tenders - Award of Contract - Commencement of Works - Completion of Works

A.2 Upgrading

- GNP issue - SPN issue - Prequalification submission - Approval of prequalification - Issue of Tenders - Receipt of Tenders - Approval of Tenders - Award of Contract - Commencement of works - Completion of works

TANROADS/ADF TANROADS/ADF TANROADS TANROADS TANROADS/ADF TANROADS TANROADS TANROADS TANROADS/ADF TANROADS/ADF TANROADS TANROADS/ADF TANROADS TANROADS TANROADS/ADF TANROADS TANROADS TANROADS

Aug. 2001 Sep. 2001 Oct. 2001 Jan. 2002 Apr. 2002 May 2002 Aug. 2002 Feb. 2004 Aug. 2001 Sep. 2001 Nov. 2001 Feb. 2002 Mar. 2002 Jun. 2002 Sep. 2002 Oct. 2002 Jan. 2003 Dec. 2005

B. Supervision B.1 Rehabilitation

- GNP issue - SPN issue - Approval of Shortlist - Issue of RFP - Recept of RFP - Approval of RFP - Award of Contract - Commencement of Supervision - Completion of Supervision

TANROADS/ADF TANROADS/ADF TANROADS/ADF TANROADS/ TANROADS TANROADS TANROADS TANROADS TANROADS

Aug. 2001 Sep. 2001 Nov. 2001 Nov. 2001 Jan. 2002 Apr. 2002 May 2002 Jul. 2002 Mar. 2004

B.2 Upgrading - GNP issue - SPN issue - Approval of Shortlist - Issue of RFP - Recept of RFP - Approval of RFP - Award of Contract - Commencement of Supervision - Completion of Supervision Works

TANROADS/ADF TANROADS/ADF TANROADS/ADF TANROADS/ TANROADS TANROADS TANROADS TANROADS TANROADS

Aug. 2001 Sep. 2001 Nov. 2001 Nov. 2001 Jan. 2002 Apr. 2002 May 2002 Dec. 2002 Jan.2006

5.3.3 Consultancy supervision services will commence in July 2002 for the regional road lots and in December 2002 for the trunk road project and terminate in March 2004 for the regional roads, and in January 2006 for the trunk road. The consultants will be responsible for the day to day supervision of the works, quality control and certification of the works done.

20

5.3.4 The Bank will intensify its field supervisions over the project implementation period. Details are given in the PID. 5.4 Procurement Arrangements 5.4.1 The procurement arrangements are summarised in Table 5.2 below. All procurement for construction works and acquisition of consultancy services financed by the Bank will be in accordance with the “Bank’s Rules and Procedures for Procurement of Goods and Works” and “Rules of Procedures for the Use of Consultants” using the relevant Standard Bidding Documents (SBD).

Table 5.2 Summary of Procurement Arrangements (UA million)

Project Category ICB NCB Others Shortlist Total 1. Civil Works: 1.1 Rehabilitation 1.2 Upgrading 2. Consultancy Services: 2.1 Supervision

- Rehabilitation - Upgrading

2.2 Audit

18.98 (17.08) 21.45 (19.31)

1.14 (1.02) 1.29 (1.16) 0.08 (0.08)

18.98 (17.08) 21.45 (19.31) 1.14 (1.02)

1.29 (1.16 0.08 (0.08

TOTAL 40.43 (36.39) 2.51 (2.26) 42.94 (38.65) Notes: Figures in parenthesis are the respective amounts financed by ADF. Civil Works 5.4.2 The Civil Works contracts for the regional roads rehabilitation works costing UA 18.98 million has been packaged into eight lots, taking into consideration the geographical spread of the road sections. The works will be procured under International Competitive Bidding (ICB), and bidding documents for procurement works will be prepared for each lot to facilitate contractors to bid separately for one lot or a combination of a maximum of three lots. The trunk road upgrading works costing UA 21.45 million will form one package and will be procured on the basis of ICB with pre-qualification. Consultancy Services 5.4.3 Procurement of consultancy services as detailed in the table above, will be undertaken in accordance with the "Bank's Rules of Procedure for the Use of Consultants". Consultancy Services for Supervision 5.4.4 Given that the works are not of complex nature, procurement of supervision consultancy services for (i) rehabilitation works in four regions (UA 1.14 million); and (ii) upgrading of Kagoma-Lusahanga trunk road (UA 1.29 million), will be undertaken on the basis of shortlist of qualified consultants, in accordance with Bank’s guidelines. The selection of consulting firm(s) for the supervision of works, will be based on technical quality with price as a factor, in accordance with the Bank Group “Rules of Procedure for the Use of Consultants.” The Executing Agency shall complete both technical and financial evaluations and obtain the Bank’s “No Objection” in one step.

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Audit Services 5.4.5 Audit services will be procured in accordance with the Bank’s “Rules of Procedure for the Use of Consultants”. The selection procedure combining technical quality with price consideration shall be used. As the amount is less than UA 350,000, the Borrower may limit the publication of the announcement to national or regional newspapers. However, any eligible consultant, being regional or not, may express his/her desire to be short-listed. National Procedures, Regulations and Executing Agency 5.4.6 Tanzania’s National procurement laws and regulations have been reviewed and determined to be acceptable. The executing agency (TANROADS) will be responsible for the procurement of works and acquisition of consultancy services. General Procurement Notice and Review Procedures 5.4.7 The text of a General Procurement Notice (GPN) has been agreed with TANROADS and it will be issued for publication in “Development Business”, upon approval by the Board of Directors of the loan proposal. 5.4.8 The following documents are subject to review and approval by the Bank before promulgation: (i) Specific Procurement Notice; (ii) Pre-qualification invitation documents; (iii) Tender documents/Requests for Proposals; (iv) Tender Evaluation Reports or reports on Evaluation of Consultant’s proposals including recommendations for contract award; and (v) Draft Contracts if these have been amended from the drafts included in the tender invitation documents.

5.5 Disbursement Arrangements

The loan will be disbursed against two categories of expenditure, viz. Civil works and Consulting Services, using the direct payment method against standard documentation as specified in the Bank's Disbursement Handbook.

5.6 Monitoring and Evaluation 5.6.1 TANROADS shall regularly provide the Bank with Quarterly Progress Reports (QPR's), in line with the Bank's format covering all aspects of the project not later than one month after the end of each quarter. The reports will include progress achieved against implementation and disbursement schedules, key performance indicators, work programmes and cost estimates for the next quarter. The progress report will provide an updated information on project implementation, highlighting key issues and problem areas, and recommending action plans for resolving identified bottlenecks. 5.6.2 The implementation of the EIA mitigation measures will be supervised by the supervision consultants and also be monitored by the Environmental Unit of the TANROADS with NEMC. The consultant will prepare a quarterly brief on the implementation of the identified mitigative measures and forward to the Bank and TANROADS. The consultant is required to prepare and submit to the Executing Agency and the Bank, a final report at the completion of the Project. Thereafter, TANROADS will prepare and submit to the Bank, the Borrower's Project Completion Report (PCR), not later than six months after project completion. The consultants' final reports and the Borrower's PCR, will provide the background documents for the preparation of the Bank's PCR required to facilitate post evaluation of the project.

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5.7 Financial Reporting and Auditing 5.7.1 The Finance and Administration Division of TANROADS will be responsible for financial management and reporting procedures for the project and for other donor assisted projects. The Division has been fully established with its full complement of staff in accordance with the organizational structure. TANROADS has already prepared an Accounting Manual which is in use. This will ensure that accounting and auditing functions are carried out in a sound and desirable manner. 5.7.2 Project Audit will be carried out once every year and a final audit will be prepared at the completion of the project. The audit report shall be submitted to the Bank not later than three months after the completion of the project audit. 5.7.3 Provision has been made as part of project cost for annual audit of the project during implementation and a final audit at the end of the project in line with the Bank's Guidelines for Project Audit. The auditing services will be undertaken by a qualified, experienced and independent audit consulting firm procured in accordance with the Bank guidelines.

5.8 Aid Co-ordination 5.8.1 The project is part of the URRP, which will be financed by various donors. Nine donors as well as the Bank have already committed themselves to funding part of the programme. The programme was a result of extensive consultation and collaboration between the GOT and the donor agencies organized through the co-ordination of Donor Assisted Projects (CODAP) which operates directly under the Permanent Secretary of MOW. This unit has the function of (i) co-ordinating the planning and implementation of the URRP and the inputs and requirements of the programme; (ii) undertaking annual reviews with proposals for any required programme adjustments; and (iv) organizing donor meetings. As part of the institutional reform the role of the CODAP is being transferred to a dedicated unit within TANROADS. 5.8.2 Besides this official framework, there is a regular and ad hoc donor co-ordinating meeting by the various resident donors in Dar es Salaam. The Bank attends some of these meetings and has been kept informed of the deliberations of these meetings. In the future, efforts will be made to synchronize Bank missions with meetings.

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6. PROJECT SUSTAINABILITY AND RISKS

6.1 Recurrent costs 6.1.1 Through the construction and guarantee period, the construction firms will be responsible for the road maintenance. One year after commissioning, the maintenance expenditure of the project will be taken on by TANROADS and will be charged to the road maintenance budget. The maintenance activities comply with the current maintenance policy mostly comprising: (i) routine maintenance of the road side, ancillary works including patching for the trunk road, and grading and spot regravelling for the regional roads; and ii) periodic maintenance comprising of resurfacing of the surface dressing every 7 years for the trunk road and regravelling after every 5 years for gravel roads. 6.1.2 Maintenance expenditures that would be required to maintain the project to good quality standard during their service life are estimated by the HDM Model in economic costs, to be TZS 0.03 billion per year and TZS 0.8 billion every 7 years for the trunk road; and TZS 2.0 billion per year and TZS 28.8 billion every 5 years for the regional roads. All maintenance expenditures are expected to be met from the established Road Fund (see para. 3.4.3). 6.2 Project Sustainability The sustainability of the project will depend on maintenance financing. Road maintenance is financed through a road fund which was established in 1995 by an Act and amended in 1998. Since the amendment, the road fund is working to the satisfacation of stakeholders. However, due to the maintenance backlog and the “El Nino” weather effect, the road fund has not been adequate to cover the maintenance requirements. The Government is concerned and is commissioning a study to widen the source of further revenue (see para. 3.4.7).

6.3 Critical Risks and Mitigation Measures The principal risks to the achievement of the project developmental objectives include (i) prolonged delays in procurement; (ii) available and timely release of local counterpart funds, (iii) delays in project implementation and (iv) low traffic volumes as a result of economic slowdown. To guard against these risks, experience gained from past projects have been incorporated in the project design by (i) implementing the project through TANROADS which is effectively and efficiently handling procurement activities for World Bank and E.U. projects; (ii) the commitment from Government to increase its road sector contribution as this sector has been recognised as priority in the PRSP; furthermore, since the project has been recognized as a priority, there is already some allocation in the MTEF., (iii) appointing competent consultants and by undertaking intensive Bank supervision missions, and (iv) Government implementation over the last years of the right policies to stimulate economic and social development.

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7. PROJECT BENEFITS

7.1 Economic Analysis 7.1.1 Base year (2003) traffic levels are estimated on available MOW time series, as adjusted to reflect location of counting stations, on manual classified and origin-destination surveys carried out under the studies. The traffic projections reflect growth prospects for GDP which is in line with Government macroeconomic and demographic projections. These projections, supported by the donors, assume that the real GDP will gradually increase from 4.5% in 2000 to 6 percent a year in the late 2010’s. Traffic projections also attempt to reflect the foreseeable impact on market structure and vehicle usage of the on-going regulation and liberalization policy. Based on these assumptions, a recently completed study estimated the average growth rate at 6.5 percent over the analysis period (2003-2025). In order to monitor the assumptions made with regards to the traffic proejctions, the Government will continue to collect on regular basis, traffic count on the project road and at other important locations on the road network. This requirement has been included as a condition of the proposed loan. 7.1.2 The proposed roads, being located along two of the nine major Corridors of Tanzania, will provide incentives for increased economic activities leading to increased agricultural production and increased transit freight. Given the great potential of the areas, improvement of these roads will generate demand for road transport which has been assumed to be about 30% of normal traffic. This is a conservative estimate as traffic growth on rehabilitated roads in Tanzania has more than doubled the estimates in most of the recent feasibility studies. No diverted traffic was considered as there is no modal competition. Base year (2003) traffic level for each road are given in Annex 6. Future foreasts covering normal and generated traffic for each road are given in the PID. 7.1.3 The unit construction and maintenance costs were based on engineering design estimates prepared by the consultant and the MOW for the trunk road and regional roads respectively, and were reviewed during the appraisal mission. Construction costs considered in the analysis include 10% allowance for physical contingencies and 6% allowance for supervision. The vehicle operating costs (VOC) are estimated based on cost inputs generated by the Tanzanian fleet. The analysis was conducted in economic terms using a discount rate of 12% for the opportunity cost of capital. Economic costs were estimated from financial costs, through the use of a standard conversion for no-traded goods (estimated at 0.86); and a shadow wage rate (estimated at 0.82, 0.55 and 1.06 for skilled, unskilled and expatriate labour, respectively). Prices were assumed at their 2001 level. 7.1.4 The World Bank’s developed economic model HDM III was used to analyze the costs and benefits for each road. The model calculates the stream of benefits in the form of savings between the rehabilitation/upgrading solution and the “without project” alternative for VOC costs and road maintenance costs. These are then compared with the capital costs of rehabilitation/upgrading to produce the NPV and the EIRR. 7.1.5 The analysis assumed that construction of Kagoma-Lusahunga road would start at the beginning of year 2003 and would last for 3 years with the road being fully opened in 2006. For the regional roads, construction would commence in 2002 and would open in year 2004. 7.1.6 The detailed results of the HDM III for each road are available in the PID and are summarized in Annex 6. From this Annex, it can be seen that all the proposed roads are economically feasible giving a combined EIRR for the project of 18.68% (weighted by investment).

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7.2 Social Impact Analysis

7.2.1 The investments identified for ADF financing form part of a program that would restore the essential role and function of roads. The project roads are expected to improve access to markets and the quality of transport services available to the rural population by linking under-served rural areas with the country’s national and regional networks. The project will also yield substantial benefits, mainly in terms of savings on vehicle operating costs that would result from improved road conditions. It should be noted, that the population of project target area which is estimated at 5.7 million, are primarily engaged in the agricultural sector which employs 75% of the population. Therefore, since the roads selected for rehabilitation are located in zones of good agricultural production and serve as two major transit corridors (central and lake circuit), most of these savings will be passed on to the producers and consumers and will enhance rural incomes. 7.2.2 The proposed road improvement in the project target area is expected to benefit the poor in rural areas who mostly constitute women in many ways. Villages will be opened up to the rest of the world and access to markets, transport costs will be reduced, and if the market is competitive by improved trader’s access to villages, then the price of their produce will increase. Improved roads in the target area would also enable the poor rural population to access basic social services such as safe water, education and health facilities, as well as agricultural extension services and inputs. Recent studies in the project target area, found that villages with better physical infrastructure have fertilizer costs 14% lower, wages 12% higher, and crop production 32% higher than villages with poor infrastructure. This, combined with lower transport cost reflected in time saved and higher opportunity cost of time would translate to reduced cost of produce, which would enhance competitiveness. Therefore, in the long run, it is expected that the real value added of agriculture is estimated to increase in the target area at an average annual rate of about 5% compared to the 3.6% during 1990-98. As a result, this would reduce the proportion of the rural poor below the poverty line from 57% to 49.5%. 7.2.3 Presently, the very poor condition of much of the roads in the project target area must undoubtedly act as a deterrent to travel. This applies not only to travelers themselves, who must endure slow and uncomfortable conditions on the project road, but also to owners of vehicles and potential entrepreneurs who could be attracted to the two regions. The latter has a great potential of generating additional employment and income opportunities, particularly as the traffic levels increase and could result in the release of suppressed demand for more economic and social services.

7.3 Sensitivity Analysis and Risks 7.3.1 The two main variables, which would affect the economic benefits of the project, are (a) failure of the economy to continue its recovery, hence for traffic not to increase as estimated; and (b) rehabilitation and upgrading costs to exceed estimates as a result of prolonged delays in project procurement and implementation, timely release of local counterpart funds or unforeseen additional works. To test the effect of these variables, sensitivity analyses were carried out on the base case values, assuming either a lower growth rate for the traffic or a higher construction cost. To this extent, construction costs were increased by 20% and the traffic growth rate decreased by 2 points (30%). A summary of these analyses, given in Annex 6, show that the conclusions drawn from the base cases are still sustainable with either the lower volumes of traffic or the higher construction costs leading to slightly lower values for the corresponding NPV’s and EIRR’s. The results, also, suggest that, even under the extreme scenario the average EIRR for the total roads (weighted by investment) would be still estimated at about 15.70%. Further, the risks of higher costs is less because although the project construction costs are based on current contracts, there are indications that the unit cost of construction is declining as the economy is further liberalised and

26

competition increases in the sector. With regard to the traffic, recent experience has shown traffic increase of twice or more than original feasibility estimates suggesting that there is considerable surplus demand. 7.3.2 In order to assist project monitoring during implementation, switching values analysis for the project roads was also carried out. The corresponding multipliers for construction costs and basic traffic to yield an EIRR of 12% are indicated in Annex 6. The results are in line with the finding presented in section 7.1 above and show that there is considerable headroom for the economic feasibility of the proposed investments except for the Bwanga-Uyovu, the Hogoro Junction-Dosidosi and the Sepuka-Ndago roads. In the case of these sections, the analysis leads to the conclusion that it would not be economically feasible if the costs are 30% above their base value or if the traffic in the opening year is between 80-90% of the projected value. Costs and benefits associated with these three roads will be subject to close monitoring during project implementation. 8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions 8.1.1 The roads project in four regions, that comprise the rehabilitation of regional roads in Kagera, Dodoma, Singida and Tabora regions and the upgrading of the Kagoma-Lusahunga road, is in line with the Government’s stated policy on roads infrastructure development. The project aims at supporting the Governmental goal of poverty reduction. Lastly, the project is consistent with the Bank Country Strategy Paper for 1999/2001 period. 8.1.2 The project is technically feasible and economically viable. The EIRR of the Kagoma-Lusahunga trunk road upgrading project of 16.5% and an EIRR range of between 16% and 31% for the regional roads is based only on quantifiable economic benefits in terms of vehicle operating cost savings and maintenance savings. The combined weighted EIRR of 18.68% is higher than the opportunity cost of capital of 12% for Tanzania. On the basis of economic justification, therefore, the project is economically viable. 8.1.3 In addition, the project is environmentally sustainable and socially desirable as it will generate employment of skilled and unskilled labour in the project area during construction and permanent employment opportunities during the maintenance of the roads, thereby improving the livelihood of the local population through the income generated from the employment. 8.1.4 Furthermore, the project would support poverty alleviation, promote agricultural production and lead to market integration and economic growth through improved accessibility to market and production centres and to social facilities. 8.1.5 Finally, the roads lie along the Central and Lake Corridors. These corridors are listed by the East African Co-operation as among the road priority network. The project is therefore considered of strategic importance in the promotion of international trade, movement of persons and co-operation in the Great Lakes region. The Kagoma-Lusahunga road will complement past Bank and other donor interventions to upgrade the Lake Corridor, which provides Rwanda, Burundi and Uganda with alternative access to the Indian Ocean. The project will also promote regional integration between Tanzania and the landlocked neighbouring countries and regions. This will reduce the transport costs on their imports and exports resulting in greater competitiveness for their markets.

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8.2 Recommendations and Conditions for Loan Approval

It is recommended that a loan not exceeding UA 38.65 million be given to the Government of Tanzania for the rehabilitation of twenty-two roads (923 km) in four regions in Tanzania that lie along the Central and Lake Corridors, and the Kagoma-Lusahunga Road (154 km) in the Lake Corridor, subject to the loan conditions below: A. Conditions Precedent to the Entry into Force of the Loan Agreement

The obligations of the Fund to make the first disbursement of the loan shall be conditional upon entry into force of the loan agreement as provided in Section 5.01 of the General Conditions Applicable to Loan Agreements and Guarantee Agreements of the Fund and fulfillment by the borrower of the following conditions.

B. Conditions Precedent to First Disbursement

The borrower shall:

i) Submit to the Fund the Environmental Management and Monitoring Plan as well as a Compensation Plan (para. 4.6.6);

ii) Designate a civil engineer from TANROADS, whose qualifications

and experience are acceptable to the Fund to co-ordinate and monitor the project during implementation (para 5.2.1).

C. Other conditions:

The Borrower shall:

i) Continue to collect on a regular basis, traffic counts on the project

road and at other important locations on the road network (para. 7.1.1).

TANZANIA Annex 1 ROADS REHABILITATION/UPGRADING PROJECT

LOCATION MAP

BUKOBA

Muhutwe

Kagoma

MUSOMA

MWANZA

ANNEX 3

TANZANIA ROADS REHABILITATION/UPGRADING PROJECT

Proposed Regional Roads REGION ROAD SECTION LENGTH (KM) KAGERA Lot 1 Lot 2

Nyakahura-Murusangamba Rulenge-Murusagamba Bwanga-Uyovu

20 35 46

Sub-Total 101 Bukoba-Kabango Bay Katoma-Kanyigo

47 40

Sub-Total 87 TOTAL 188 DODOMA Lot 3 Lot 4

Kolo-Dalai Kondoa-Bicha-Dalai

72 31

Sub-Total 103 Hogoro Jct-Dosidosi Chenene-Itiso-Izava Mbande-Kongwa

55 55 16

Sub-Total 126 TOTAL 229SINGIDA Lot 5 Lot 6

Singida-Sepuka Sepuka-Ndago Ndago-Kizaga Kititimo-Kinyamshindo Misigiri-Kiombol

36 30 18 46 21

Sub-Total 151 Igugumo-Nduguti Ilongero-Ngamu Ilongero-Gumanga

40 28 48

Sub-Total 116 TOTAL 267 TABORA Lot 7 Lot 8

Urambo-Kaliua Kaliua-Chagu-Malagarasi

36 120

Sub-Total 156 Tabora-Ulyankulu Ziba-Choma

55 28

Sub-Total 83 TOTAL 239 OVERALL TOTAL 923

ANNEX 5

TANZANIA ROADS REHABILITATION/UPGRADING PROJECT

Provisional List of Goods and Services

Categories TZ Billion UA Million Co-Financing

F.E. L.C. Total F.E. L.C. Total ADF. GOT

1. 1.1 1.2 2. 2.1 2.2

Civil Works Rehabilitation Upgrading Consultancy Services Supervision:

- Rehabilitation - Upgrading

Audit

10.12 14.68

0.91 1.03

0.07

6.75 4.39

0.10 0.12

-

16.87 19.07

1.01 1.15

0.07

9.67 14.03

0.87 0.98

0.06

6.45 4.19

0.10 0.11

-

16.12 18.22

0.97 1.09

0.06

14.00 16.84

0.94 1.05

0.06

2.12 1.38

0.03 0.04

-

Total Base Cost Physical Contingency (10%) Price Contingency

26.81 2.68 1.80

11.36 1.13 1.15

38.17 3.81 2.95

25.61 2.56 1.72

10.85 1.09 1.10

36.46 3.65 2.83

32.89 3.29 2.47

3.57 0.36 0.36

T O T A L

31.29

13.64

44.93

29.90

13.04

42.94

38.65

4.29

Source: ADB Mission, March/April 2001

2

ANNEX 6 Page 1 of 3

TANZANIA ROADS REHABILITATION/UPGRADING PROJECT

ECONOMIC ANALYSIS SUMMARY 1. Methodology

The economic model used for the analysis was HDM.III. The model Calculates benefits in the form of savings in vehicle operating costs, road maintenance costs, travel time costs and allows inclusion of exogenous benefits stream such as savings in accident costs. But these with the time savings have not been considered for the present study. Discounted benefits are then compared to discounted costs to obtain the Net Present Value (NPV) and the Economic Internal Rate of Return (EIRR).

The analysis was conducted in economic terms, using a discount rate of 12% for the opportunity cost of capital. Financial costs are converted to economic costs, through the use of a standard conversion factor for non-traded goods (estimated at 0.86); and a shadow wage rate (estimated at 0.82, 0.55 and 1.06 for skilled, unskilled and expatriate labour, respectively). Prices were assumed at their April 2001.

Construction was assumed to start in 2002, and to last for 3 years and 2 years for the trunk roads and regional roads respectively. The analysis periods end in 2025 and 2015 for the trunk roads the regional roads respectively, and the investment is assigned 10% residual value.

2. Evaluation results:

The results of the HDM III analysis are available, in the PID and are summarised below.

ANNEX 6. Page 2 of 3

Table 1: Summary of Economic Evaluation

Roads

ADT 2003

Economic cost (Billion TZS)

NPV (at 12%) (in Billion TZS)

EIRR (in%)

Kagoma-Lusahunga Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Kolo-Dalai Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Kondoa-Bicha-Dalai Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Hogoro Jct-Dosidosi Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Chenene-Itiso-Izava Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Mbande-Kongwa Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Nyakahura-Murusagamba Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Rulenge-Murusagamba Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Bwanga-Uyovu Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Bukoba-Kabango Bay Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Katoma-Kanyigo Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Singida-Sepuka Base case (i) Cost increased by 20% (iii) Traffic growth Rate decreased by 2 points (30%) Sepuka-Ndago Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Ndago-Kizaga Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Igugumo-Ndugali Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%)

140

140

90

98

93

132

85

106

184

73

73

89

78

21.56

1.34

0.58

1

0.79

0.3

0.38

0.65

0.86

0.88

0.88

0.60

0.50

0.30

0.66

10.40

1.10

0.40

0.30

0.60

0.10

0.30

0.50

0.20

0.70

0.9

0.21

0.95

0.19

0.23

16.50 14.60 13.90

26.70 21.40 23.90

24.90

21 22.10

17.30 13.40 13.70

25.10 19.50 21.70

18.70

15 15.20

25.10 19.70 22.40

25.10 21.80 22.40

17

14.70 13.60

26.30 21.20 23.20

31

24.80 28.70

20.40

16 16.30

16

12.10 12.10

23.20 16.60 18.80

18.50 15.50 14.90

2 ANNEX 6

Page 3 of 3

Roads

ADT 2003

Economic cost (Billion TZS)

NPV (at 12%) (in Billion TZS)

EIRR (in%)

Kititimo-Kinyamshindo Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Ilongero-Ngamu Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Ilongeroa-Gumanga Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Misigiri-Kiomboi Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Urambo-Kaliua Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Tabora-Ulyankulu Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Ziba-Choma Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%) Kaliua-Chagu-Malagarasi Base case (i) Cost increased by 20% (ii) Traffic growth Rate decreased by 2 points (30%)

120

110

91

133

96

92

126

74

0.76

0.46

0.79

0.35

0.59

0.91

0.46

2

.67

0.27

0..25

0.2

0.2

0.03

0.37

0.54

26.4 20.7 23.4

21.9 17.9 18.7

14.7 16.3

18.9 15.4 15.3

18.1 15.0 14.8

18.3 13.9 14.6

24.8 20.3 21.8

17.3 13.3 13.4

Table 2 - Multipliers to Yield an EIRR of 12%

Road

Construction

Cost Base

Traffic Kagoma-Lusahunga Kolo-Dalai Kondoa-Dalai Hogoro Jct-Dosidosi Chenene-Isto-Ezava Mbande-Kongwa Nyakahura-Murusagamba Rulenge-Murusagamba Bwanga-Uyovu Bukoba-Kabango Bay Katoma-Kanyigo Singida-Sepuka Sepuka-Ndago Ndago-Kizaga Iguugumo-Nduguli Kititimo-Kinyamshindo Ilongero-Ngamu Ilongero-Gumanga Misigiri-Kiomboi Urambo-Kaliua Tabora-Ulyankulu Ziba-Choma Kaliua-Chagu-Malagarasi

1.6 1.8 1.6 1.3 1.7 1.4 1.7 1.7 1.3 1.8 2.1 1.4 1.2 1.6 1.3 1.7 1.5 1.5 1.5 1.4 1.3 1.3 1.7

0.6 0.6 0.5 0.8 0.8 0.8 0.7 0.6 0.8 0.6 0.5 0.4 0.7 0.7 0.5 0.5 0.3 0.4 0.5 0.5 0.5 0.5 0.3

3 ANNEX 7

TANZANIA ROADS REHABILITATION/UPGRADING PROJECT

ENVIRONMENTAL SCREENING MEMORANDUM A. ENVIRONMENTAL CATEGORY II

JUSTIFICATION FOR ENVIRONMENTAL CATEGORIZATION The project has been classified as category II, indicating that the project has minor negative aspects for which the requisite mitigation measures have been recommended and included into its design. Two EIA studies were part of the feasibility study and mitigation measures earmarked have been integrated into the design and budgeting of the project. B. BRIEF DESCRIPTION OF THE PROJECT

The project is comprised of twenty-two regional roads and one trunk road. Five regional roads with a total of 229km are within the region of Dodoma, five are in the Kagera region with a total of 188 km, eight are in Singida region with a total of 267 km and four in Tabora region with a total of 239 km. The Lusahunga-Kagoma, 154 km in length, is a trunk road, which is to be upgraded to bitumen standard. All of the existing twenty-two regional roads will be rehabilitated to gravel standard.

The overall aim of this project is to reduce poverty in the rural areas through the reduction in traveling time and operation costs for passengers, goods and vehicles; accessibility to market, health and education facilities; improved connectivity to the main roads, districts and regions. C. POTENTIAL ENVIRONMENTAL IMPACTS

• Loss of vegetative cover; • Modification of natural drainage patterns; • Land slides, erosion, stream and lake sedimentation; • Interference with movements of wildlife, livestock, and local residents; • Air and soil pollution from asphalt plants and dust; • Noise pollution from construction equipment and blasting; • Improper disposal of trash and garbage; • Presence of non-resident labor force; and

* Loss of property. D. MITIGATION MEASURES RECOMMENDED

• Reclamation of degraded areas; • Re-habilitate burrow pits; • Improve drainage systems and provide infiltration ditches for silt and pollutants; • Re-stabilize slopes by vegetating; • Compensate affected families for properties lost; • Carry out periodic wetting of surface to reduce dust; • Provide ear muffs at quarry and construction sites; • Control the spread of HIV/Aids and other STDs; • Dispose of garbage and trash by burning, burial or composting;

* Install speed bumbers, speed reduction signs, safety signs, and where necessary, overhead and under passes E. PUBLIC CONSULTATION

Before and during the implementation of the project, the government and the consultant will periodically discuss The project objectives with the stakeholders, with the view to ensuring their fullest participation in the project. F. RE-SETTLEMENT REQUIRED

Considering the size of the affected people, re-settlement will not be necessary. However, families affected as a result of the demolition of their houses found in the right of way will be compensated. The total amount calculated for the seven houses to be demolished is TZS 2,000,000 (UA 1,910.00).

2

ANNEX 9

TANZANIA

ROADS REHABILITAITON/UPGRADING PROJECT

PROJECT IMPLEMENTATION DOCUMENT (PID)

1. Tanzania at a glance

2. Project maps

3. Feasibility and Technical Studies for the Trunk Road

4. Strip Map of Regional Roads

5. Bank Supervision Plan

6. Traffic Demand and Road User Prices

7. Detailed Economic Analysis

8. Geometric Design Standards for Roads (3pp)

9. Environmental and Social Impacts Assessment Reports for Regional Roads

TANZANIA : PROPOSAL FOR AN ADF LOAN OF UA 38.65 MILLION

TO FINANCE THE ROAD REHABILITATION PROJECT ADDENDUM*

Please find below an addendum to the above-mentioned Appraisal Report.

It was agreed that:

The procurement of civil works for the rehabilitation works comprising 8 lots of regional roads will be through ICB with domestic preference margin of 10 per cent in accordance with the Bank Group’s “Rules of Procedures for Procurement of Goods and Works” (Page 21, paragraph 5.4.2).