Lesotho - Fourth Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4883-LSO STAFF APPRAISAL REPORT KITNGDDM OF LESOTHO FOURTH HI, HWAY PR., J.ICT April 24, 1984 Eastern Africa Projects Tranportation II Division This document has a iestricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALEN1S Currency Unit Maloti (M) 1/ US $ 0.83 M 1.00 US $ 1.00 M I.2r WEIGHlS AND MEASURES 1 meter (m) - 3.28 feet (ft) 1 kilometer (km) 0 U.62 miles (ml) 1 square kilometer (sq kn) 0.386 square miles (sq mi) ACRONYMS AND ABBREVIA1LONS AfDF African Development Fund CIDA Canadian International Development Agency CPDO Central Planning and Development Office EEC Europetan Economic Community ICB International Competitive BLdding KfW Kreditanstalt fur Wieders!fbau LCB Local Competitive Bidding LCU Labor-Intensive Constructinn Unit LNBS Lesotho National Bus Service LII Lerotholi lechnical Institute MD Maintenance Division (MOW) MOA Ministry of Agriculture MUIC Min-istry of Iransport and Communications MOW - Ministry of Works MRD Ministry of Rural Development ODM Overseas Development Ministry, United Kingdom PPF Project Preparation Facility PVPS Plant and Vehicle Pool Services (MOW)- RB Roads Branch (MOW) RSA Republic of South Africa RIB Road iransportation Board (MOIC) I1S - echnician Iraining School UNDP United Nations Development Programme USAID UniCed States Agency for International Development vpd vehicles per day KINGDOM OF LESOIHO FISCAL YEAR April 1 - March 31 1/ Maloti are at par and circulate side by side with the Rand, the HSA's currency.  FOR OFFICIAL USE ONLY SIAFF APPRAISAL REPORT FOURTH HIGHWAY PROJECI KINGDOM OF LESOIHO IABLE OF CONTENlS Page Nos. I. THE TRANSPORT SEClOR A. Geographic and Economic Setting ... 1 B. The I ransport System . ................ . . . 1 C. Iransport Policy, Planning and Coordination ......... 3 D. Previous Bank Group Projects inthe... Ira nspert Sector ...4..... . , .,.,,.,,., ...... , . , . * 4 II. THE HIGHWAY SUB-SECIOR A l The Network . . .. , , *.. ..., 6 B. Road Use 6 C. Admin.istration *. . ........ .. ... .., 8 D . St affing and Training 9 E . Planning ...... 10 F. Financing 11 . . Engineering 12 H . Co nst ructi on 12 1 . Mainten ance.. ..... . , 13 III. THE PROJECT A. Project Objectives ...16 B. Project Description 6.. 16 C. Cost Estimates .. . 19 D . Financing . . .Zi E. Implernentation and Procurernent 21 F . Disbursernents ...24 G. Accounting, Auditing and Reporting Requirements 24 H. Environmental Impact ...25 IV. ECONOMIC EVALUAIION A. General. .26 B . Ecoriomi c Evaluation .26 C. Risks .28 V. AGREEMEN1S AND RECONMENDAIIONS .......................... 29 The appraisal was undertak<en jointly by IDA and AflDF in September/0ctober 1983. The IDA appraisal team consisted of J. de Weille, Senior Economist, H. van Helden, Engineer/Consultant, A. Krishnan, Financial Analyst, and J. Segerstrom, lecnnical Educator. This docurnaett haq a restricted distribution and may be used by recipients only in the performance of their official duatics. Its contents may not otherwise be disclosed without World Bank authorization.  Page Nos. ANNEXES 1. Review of Domestic Construction Industry:. Terms of Reference . .. .... ... .. . 31 2. Work Program for Brigades, 1984/85-1936/87 . 34 3. Estimated Project Costs 7........ 7 4. lechnical Assistance: lerms of Reference . 42 5. Training Component ... ..46 6. Composition and Cost Estimates of Brigades..48 7. Project Implementation Schedule .....51 8. Estimated Schedule of Disbursements ......... ............. 52 9. Progress Reporting System . . .53 10. Actual Traffic on Roads to be Rehabilitated, 1973- 83....... 57 11. Economic Analysis of Rehabilitation Component:. A. Masianokeng-Maseru - KM 6 Leribe Road . .58 B. Maseru (KM 6) - Leribe Road ......................... 59 C. Masianokeng-Mafeteng Road Including Two Bridges 60 12. Economic Analysis of Road Improvement Component . A. Vehicle Operating CcsLs and Savings Earth and. Gravel Roads ...................................... 61 B. Economic Justification of Road Improvements ......... 62 13. Related Documents and Data Available in Project File ...... 63 CHARTS 1. Organizational Chart, MOIC 64 2. Organizational Chart, MOW 65 MAP Lesotho - Fourth Highway Project (IBRD - 17433R)  KINGDOM OF LESOIHO FOURTH HIGHWAY PROJECI CRFrI1 AND PROJEC1 SUMMARY Borrower: Kingdom of Lesotho Amount: Development credit of SDR 14.3 million (US$15.2 million equivalent) Terms: Standard Project Descriptionr: lhe proposed project aims to improve existing roads and strengthen institutions in the transport sector. It would include: rehabilitation of two paved road sections and construction of two bridges; regravelling of 360 km of gravel roads, upgrading of 42 km of earth roads to gravel standard, and improvement of drainage of 123 km of gravel roads; traffic counters and weighbridges; and technical assistance and training. Road rehabilitation and improvement would lower transport costs, protect past investments and increase accessibility of rural areas. Technical asistance and training would improve the operational capability of the Roads Branch and the Plant and Vehicle Pool Services. In addition, assistance for the labor-intensive construction unit wou'.d enhence the Government's efforts to increase domestic employment opportunities. The project risks relate to the scarcity of qualified local technical and managerial staff and the drain of qualified local staff to South Africa. The project, therefore, includes a high level of staff training and a substantial technical assistance component.  - il - Estimated Cost: Local Foreign Total ------- US$ Million - Rehabilitatiori of Paved Roads 2.9 11.6 14.5 Improvement of Gravel and Earth Roads 2.9 2.7 5.5 Iraffic Counters and Weighbridqes - .2 .2 lechnical Assistance .3 1.5 1.8 ira ining .2 1.2 1.4 lotal Base Cost 6.3 7.1 2T3.5 Physical Contingencies .3 1.1 1.3 Price Coneingencies 1.2 2.5 3.7 Extra Contingencies .3 1.1 1.4 IOTAL 8.1 21.8 29.9 (of which taxes) (1.7) (1.7) Financing Plan: Local Foreiqn Total - US$ Million ------- IDA 1.8 13.4 15.2 African Development Fund .3 8.3 8.6 Government of Lesotho 6.1 - 6.; IOTAL 8.2 21.7 29,9 Estimated Disbursement of IDA Credit: IDA FY 85 86 87 88 U! Million- Annual 5.0 4.0 3.5 2.7 Cumulative 5.0 9.0 12.5 15.2 Rate of Return: 16.4 to 24.2 percent on paved road rehabiliation and bridges. 15.8 percent on road regravelling and 16.2 percent on upgrading from earth to gravel standard (minimum estimate for first year of program). Appraisal Report: Report No. 4883-LES, dated April 13, 1984. Map: No. IBRD 17433.  STAFF APPRAISAL REPORT FOURTH HIGHWAY PROJECI KINGDOM OF LESOTHO l. IHE IRANSPORI SECIOR A. Geographic and Economic Setting 1.01 Lesotho's economy is vulnerable to factors beyond its control. It is a small country, land-locked within an industrialized country, the Republic of South Africa (RSA), on which it relies for external communications (see Map). lotal population (1983) is 1.4 million growing at 2.3% per year. lotal land area is no more tthan 30,350 sq km, about the size of Belgium, and only 13 percent of this is suitable for crop farming. Soil erosion is excessive, further reducing the amount of arab e land available. Known mineral resources are few and limited. Only diamonds have been mined in any large quantity, but the supply is being depleted and the major mine has closed. 1.02 Lesotho was designated as one oF the least developed countries of the world by thc United Nations in 1976. For 1982, per capita GNP >was estimated at US$530. The lack of development of the country is evidenced by the fact that about 90 percent of the population still live in the rural areas and depend on subsistence agriculture and/or workers' remittances from abroad for livelihood. 1.03 The country is highly dependent on the RSA for employment, income, trade and monetary arrangements. About 50 oercent of the male labor force earn their income by working in the mines in the RSA. lheir remittances constitute over 40 percent of Lesotho's GNP. Over 70 percent of the Government's income comes from the payments of the Customs Union, an associa- tion formed in 1910 by Botswana, Lesotho and Swaziland with the RSA, the dominant parLner. Over 95 percent oF Lesotho's imports come from the RSA and its exports either end up there or go to the rest of the world via RSA's ports. In addition, Lesotho is a member of the Rand Monetary Area; while this guarantees payments of Lesotho's foreign financial commitments, it severely limits its use of monetary policy instruments. B. Ihe Transport System 1.04 Lesotho depends almost exclusively on road and air transport for internal travel. lhe country has no navigable rivers and no railway except for a short (2 km) rail spur, operated by South African Railways, connecting Lesotho (Maseru) to the South African system. Domestic air transport, connecting 12 airports, is quite well developed. The density and standard of the road network reflects the population distribution. Most of the network, including most paved roads, are located in the western part of the country where the majority of the population lives. A small part of the network,  -2- mainly consisting of lower class roads and trails negotiable only by four-wheel drive vehicles, is located in the eastern mountain region which is only very thinly pupulited. At present, the pressing need of the trarisport sector is to rehabilitate the iflain paveL roads, built some 15 years ago, and to properly maintain and uinprovei the remainder of the road. network. In recent years, some 25%0o of the Government's capital budget has been devoted to invest- ment in the transport sector, mainly in roads. For external travel, Lesotho depends entirely on RSA's well developed road and ra.;l network and on Jan Smuts International Airport at 3ohannesburg for internattonal flight connections. Because of Lesotho's high proporti,n of migrant workers and low level of marketed domestic production, domsnd ror passenger transport is relatively high. Roads and Road lransport 1.05 Ihis sub-sector is discussed in Chapter LI Air Transport 1.06 Lesotho has 31 airfields and airstrips, of which 12 are used for domestic scheduled air transport. Only two are paved, while the rest have gravel or grass surfaces, of which six are presently being improved to gravel standards. Only Maseru Airport, the cour,'.ry's international airport, is equipped with navigational aids, communications equipment, and terminal facilities. Ihere are no facilities for night flights in the interior. For some remote mountain areas, air transport provides the only access, other than by foot or animal. Flights need sometimes to be suspended because of adverse wheather conditions. 1.07 Facilities at Maseru Airport are inadequate for the larger planes needed for longer distance international flights and can only accommodate aircraft up to the Hawker Siddeley 748. Consequently, international traffic to and from Lesotho must transit through the RSA. lo decrease this reliance on RSA facilities, Government, in 1983, started construction of an inter- national airport 20 km south of Maseru, near Mazenoid. Ihis project, expected to cost about US$50 million, is financed by a number of bilateral and multilateral aid agencies. Construction is expected to be completed by mid 1985. The construction of this airport was essentially a political decision and not justified from an economic or financial point of view. 1.08 In 1982, the number of domestic passengers averaged 76 per day, and international passengers 58 per day. The latter number is easily accommodated by the 40-seat Fairchild 227 of Lesotho Airways which presently maintains, with two flights daily, connections with international airlines starting or terminating in Johannesburg in the RSA. (Ihe Project File contains statistics on the number of passengers, volume of freight and aircraft movements at Maseru Airport; Item 1.) 1.09 Lesotho Airways`' domestic schedule is maintained by three 18-seat lwir Otters. Lesotho Airways also carries out sone charterflights.  -3 1.10 South African Airways operations into Lesotho were discontinued in February 1983 and so were Lesotho Airways' direct flights to Botswana. Except for a privately owned Cessna Charter Comipany, the Government-owned Lesotho Airways provides all air transport services tc and within the country. In 1982, nearly 30,000 passerigers and 300 tons of freight were carried; these figures will increase rnow that the partnership with SAA has been terminated. Because of low occupancy and low utilization of the fleet, Lesotho Airways operates at a considerable deficit. A four-men KLM team, financed by the EEC, at present provides technical assistance to Lesotho Airways. C. Iransport Policy, Planning and Coordination 1.11 Ihe main policy objectives in the transport sector have been to (i) provide a basic road network serving the main population and production centers, (ii) reduce dependence on South Africa, and (iii) create the institutional capability to plan and maintain a transport systu,n consistent with resource constraints. 1.12 As regards the first objective, Lesotho has been successful during the sixties and early seventies in providing a paved road network in the north-south lowland corridor near the western border linking the country's main political and economic centers. Since the mid-seventies, the Government has been extending the road network to, and in, the country's eastern mountain areas to develop their full socio-economic potential as well as ensure their political and administrative integration. In developing the rc i network, the Government, with the assistance from IDA and in line with the Government's basic economic policy of increased employment generation, has introduced the use of Jabor intensive work rneLhods. These endeavors have been and are being achieved with technical and financial inputs from multilateral and bilateral aid agencies. Ihe current Five-Year Development Plan is consistent with the Government's development objectives and provides a sound basis for development of the country's road infrastructure (Para 2.17). 1.13 As to the second objective, the new international airport now under construction, although uneconomic, intends to avoid the use of airport facilities in South Africa. As to the third objective, the Government has mixed experiences. For example, while it has appointed a Mosotho as Chief Engineer of the Roads Branch and some more experienced local engineers are moving up in the hierarchy, the Roads Branch is still faced with a lack of local engineers and technicians as they leave Lesotho for better paying employment opportunities in the RSA. As a result, the Roads Branch still requires a considerable number of expatriate staff. 1.14 The Association has supported the Government's policy in the highway sub-sector, since 1966, through three projects (Paras 1.17-1.20). The proposed Highways IV project will continue to support the Government's policy and includes rehabilitation of the main paved roads, improvement of gravel and earth roads and continued support of institution building. A subsequent project is likely to continue to support road improvement and institution building efforts, assist the development of the domestic construction industry, and may include reconstruction of the Oxbow-Mokhotlong Road (Para 1.19).  - 4 - 1.15 The Central Planning and Development Office (CPDO) of the Ministry of Planning is responsible for overall policy and planning in Lesotho and for ensuring irit-er-sectoral. coordination. CPDO's staff includes a Director of Planning and 1B planning officers, all with training in economics or statistics; two staff members are expatriates. Coordination among the transport modes is not a major issue, given the lack of internal rail and water transport and the complementary functions of air and road transport. 1.16 The Ministry of Iransport and Communications (MOTC) through its Road Iransport Roard, is responsible for issuing operating permits for taxis, buses and trucks. MOlC's policy in this area is rather liberal. Also, through its Civil Aviation Department, MOIC is responsible for airports and their operatip;is and oversees the activities of Lesotho Airways. In addition to these main activities, MOIC is responsible for coordination with the South African Railways, issuance of drivers and vehicle licenses, control of vehicle weight, and collection of certain transport statistics. As further discussed in Chapter III, riuW is responsible for the road network and its maintenance. D. Previous Bank Group Projects in the Transport Sector 1.17 There have been three Bank Group transportation projects in Lesotho, all three for roads. The First Highway Project (Credit 82-BL, US$4.1 million, 1966), executed between 1967-69, included the construction of 107 km of the main north-south road from Leribe to the Masianokenig Turnoff, and a 27 km gravel road between Leribe and Pitseng. Ihe project did not include training. The work was corrmpleted satisfactorily and for less than the estimated cost. 1.18 Ihe Second Highway Project (Credit 619-LSO, US$5.5 million, 1976) provided for construction to all-weather gravel standard of a 147 km section of the main west-east road linking St. Michaels with Thaba Tseka in the eastern mountain area. The project also assisted in establishing the LCU on a pilot basis to prepare Lesotho to provide economic employment for any sudden return of Basotho from the RSA; projects suitable for labor-intensive work methods were identified, and on-the-job training was provided for local staff who would form the nucleus of an administrative set up if expansion should become necessary. A recently prepared PCR concluded that the project had only been partly successful: construction of the project road encountered delay while the agricultural development in the area traversed by the road remained well below expectations, resultinq in a lower economic return than expected. Ihe LCU as a pilot project, on the other hand, turned out to be successful in establishing an alternative work method more suitable for low traffic roads. Ihis project did not include a training component. 1.19 The Third Highway Project (Credit 884-LSO, US$9.0 million, 1979) provided for (a) paving of the 24 km St. Michaels-Molimo Nthuse section of the above St. Michaels-lhaba Iseka roao; (b) improvement of gravel and earth roads through establishment of one equipmerit arid two labor-intensive regravelling brigades; (c) construction and equipping of regional offices of the Roads Branch (RB) in the Ministry of Works (MOW); (d) construction and equipping of the Plant and Vehicle Pool Services (PVPS) regionial workshops; (e) technical assistance and fellowships for RB and PVPS; and (f) feasibility study and (if  - 5 - justifiud) detailed engineering for the Oxbow-Mokhotlong road (120 kin) in the eastern part of the country. Ihe pavirig of the St. Michaels-Molino Nthuse road section was aatisfactorily completed in 1983, and road maintenance wau reorgan.ized and strengthened with the assistance of technical assistance staff. Ihe improvement of existing roads is progressinig roasonably well anld the regravelling backlog has been substantially reduced. lhe two labor based brigades, employing about 200 workers each, are facing serious staffing problems (technical. and managerial) resulting in lower output (in terms of quantity and quality) and higher costs than originally anticipated. The detailed engineering of the Oxbow-Mokhotlong road was satisfactorily completed in late 1982. After a delayed start, the ihird Highway Project is now expected to be completed by early 1985 and, on the whole, can be considered successful. 1.20 Ihe technical assistance services provided under Highways III helped strengthen RB's road maintenance capability and considerable progress has been made under the project: a new maintenance organization was set up, a staff training program developed a cost accounting system designed, and a road inventory and inspection systen introduced. Similarly, technical assistance provided to PVPS helped improve the poor condition this organizatiorl wes in and introduced order in the administration, workshops and yards. Moreover, a start was made with the training of staff. lechnical assistance provided under Highways III to RB and PVPS accounted for some 7%0 of total project costs. 1.21 In the proposed Fourth Highway Project, an attempt is made to reflect the lessons learned under the previous projects. For example, particular attention is paid to technical assistance to PVPS, training and fellowships to strengthen the staff of the RB and implementation of traffic count and axle load limit enforcement programs.  - 6 - II. THE HIGHWAY SUO3SECTOR A. Ihe Network 2.01 The road network, totalling about 5,000 km, is divided into three categories according to their function: a) primary trunk roads (1,154 km) linking the major towns, regional centers and border posts; b) secondary district roads (856 km) within and between districts; and c) tertiary sub-district roads (376 km).; the remaining 2,613 I<m are mostly tracks serving as feeders to trunk snd secondary district roads and are as yet not classified. 2,386 km of these roads are officially classified. As shown in the following table, 412 km are bitumen paved, 1,644 km are gravel roads, and the rest are dry-weather earth roads and tracks. Whereas in the late sixties the paved road network covered less than 150 km at present it is over 400 km. By and large, the lay-out and density of the road network is adequate; its condition is discussed in Paras 2.28 and 2.29. Road Network, 1983 (in kn) Road Iype Maintained_b Primary Secondary Tertiary Total Bitumen MOW 381 17 14 412 Gravel MOW 752 775 117 1,644 Earth 1/ MOW 21 64 245 330 lotal Flassi- ___ ___ fied Network 1,154 856 376 2,386 Not Classified Ministry of Network Rural Devel., Traders & Missions 2,613 Total Road Network 4,999 1/ Not maintained regularly. Source: Ministry of Works B. Road Use 2.02 Until 1977 vehicle registration statistics were collected by the Ministry of Finance but MOIC now collects this information. In 1982, the last year for which data are available, the vehicle fleet was estimated at about 21,000 units or one vehicle per 70 inhabitants. Of the total vehicle fleet nearly 70% consists of light vehicles (passenger cars, pick ups, land rovers, and minibuses); some 10%o of heavy vehicles (trucks and buses) and the  - 7 - remainder consists of tractor-traiLers, and motorcycles. Between 1971 and 1982, the vehicle fleet grew at an average annual rate of 12% with the fastest growth occurring in the number oF light vehicles. (lhe Project File contains more detailed information on vehicle registration; Item 2). Ihe Iransport industry 2.03 Information on the total number of trucks operating in Lesotho is not available since no record is kept of the many South African-owned trucks handling freight between railheads in South Africa and points in Lesotho. In 1980, there were about 1,400 trucks and 340 buses registered in Lesotho. About half the number of trucks is for hire. The number of transport companies and the size of their fleets were not recorded. The majority of the bus fleet is privately owned; the Lesotho National Bus Service (LNBS), a parastatal under MOTC and Pstablished in 1973, owns and operates at present 24 buses arid offers a limiteJ inter-city service on most passable routes in the country. In response to the closure of the southern border with Transkei in 1977, the Government established in 1979 a national trucking company, Lesotho Freight Services Corporation (LFSC). Ihis company with a fleet of 3B trucks at present, confines its activities to Lesotho's southern regions, but Government hopes that this could form the nucleus for an expanded trucking company operating in the future on a country-wide basis. Traffic and Transport Regulations 2.04 Commercial transporters of goods or passengers must obtain a motor carrier certificate which MOTC's Road Transport Board (RTB) issues annually to licensed drivers on payment of a small fee. Passenger transport vehicles are required to be tested for road-worthiness every six months, and passenger fares for buses are determined by RIB, taking into account the conditions of transport routes. Ihe fares are not strictly enforced, and there is evidence of some passenger-fare undercutting as well as some overcharging; however, fare under- cutting is generally more prevalent than overcharging since competition in passenger transport is quite intense. Freight vehicles are required to be tested at yearly intervals; freight tariffs are not regulated, and competition is very keen. The single axle load limit is 8.2 tons, the same as in Souith Africa. This limit is not enforced at present and a 1980 survey found that overloading is a problem. 2.05 Nevertheless, under the Third Highway Project some progress was made in this area: one staff member each from the Police and MOTC were trained in 1982 in the mechanics of checking axle loads; in 1983, legislation on axle load control and enforcement was rewritten and adopted; and MOTC, in 1983, acquired two portable weighbridges. The proposed project includes procurement of some additional portable and two permanent weighbridges while the rehabilitation of the main paved roads includes access to the two permanent weighbridges to be installed north and south just outside Maseru. MOTC has prepared an Axle Load Limit Enforcement Work Program (see Project File for details; Item 3) implementation of which will start in 1984. 2.06 MOTC's Department of Transport administers the regulations. It has recently been reorganized; Chart 1 gives the present organization. The Department's ability to enforce vehicle regulations is limited by a lack of  - 8 - trained and experienced staff. Though many of its staff are well educated, they lack experience with the types of activities to be carried out. Furthermore, driver arid vehicle examiners are in short supply. MOIC is working toward improving this situation by providing on-the-job training to the Department's staff. Fuel Consumption and Prices 2 07 Annual growth of Fuel consumption over the period 1976-1981 ranges from 12% for gasoline to 15