Zambia - Second Highway Project

RESTRICTED Report No. TO-676a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE SECOND HIGHWAY PROJECT ZAMBIA r" --. I-Uc 1 September 10, 1968 Projects Department  CURRENCY EQUIVALENTS Currency Unit: Kwacha US.$L - K 0.71b Kl - US$1.O40 K1,000,000 = US$1,h00,000 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES British METRIC - BRITISH/US EQUIVALENTS 1 mile = 1.6 kilometers 1 foot = 30.5 centimeters 1 acre = 0.41 hectares 1 imperial gallon = 1.20 US gallons = &.54 liters 1 ton = 1.12 US sh ton = 1.02 metric ton  ZAMBIA APPRAISAL OF THE SECOND HIGHWAY PROJECT Table of Contents Page SUItThARY i 1. INTRODUCTION 1 2. BACKGROUND 2 A. Economic Setting 2 B. Transport System 3 C. The Zambia-Tanzania Transport Problem 4 3. THE HIGWRAY SYSTEM 9 A. The Highway System 9 B. Highway Traffic and Vehicle Fleet 9 C. Highway Transport Industry 10 D. Highway Administration 10 E. Design Standards, Engineering and Construction 11 F. Highway Maintenance 11 G. Highway Expenditures and Investment Planning 12 THE PROJECT A. Description 13 B. Design Standards 13 C. Cost Estimates 14 D. Execution 15 E. Financing 15 5. ECONO0MIC E7ALUATION 17 A. Introduction 17 B. Economic Justification 17 C. Problems of Analysis 17 D. Probable Traffic Levels 19 E. Probable Unit Savings in Vehicle Operating and Road Maintenance Costs 21 F. Probability Analysis of Economic Rate of Return 22 G. Engineering of the Luangwa River-Nyimba Section of the Great East Road 23 6. CONCLUSIONS AND RECOMMENDATIONS 25 This report was prepared by Messrs. E. Jaycox and L. Pouliquen, economists, and F. Soges, engineer.   Table of Contents -2- ANMEX 1. Probability Analysis of the Economic Rate of Return 2. Hypotheses of Probability Analysis of Economic Rate of Return, Mpika-Tunduma Road 3. Diagram: Probability Profile of Economic Rate of Return TABLES 1. Highway Budgets 2. Design Standards 3. Cost Estimates 4. Estimated Vehicle Operating Costs (1967-1968) 5. Estimated Vehicle Unit Operating Costs on Project Road Sections MAPS Map 1 - East & Central African Transport links - IBRD-1253R8 Map 2 - Zambia Highway System - IBRD-1710R3 ABBREVIATIONS - ACRONYMIS UDI - Unilateral declaration of independence by Southern Rhodesia BCK - Bas-Conga-Katanga railways CARS - Central African Road Services Ltd. ZTRS - Zambia-Tanzania Road Services Ltd. USAID - US Agency for International Development Lonrho - London and Rhodesia Mining Company RD - Roads Department   ZAMBIA APPRAISAL OF THE SBCOND HIGHWAY PROJECT SUMMARY i. The proposed project consists of the reconstruction of the Mpika- Tunduma section (235 miles) of the Great North Road and of the detailed engineering of the Luangwa river-Nyimba section (63 miles) of the Great East Road. The Great North Road forms a part of the Tanzam Highway linking the Zambian Copperbelt with the sea at Dar es Salaam in Tanzania. Construction is already being executed under two contracts awarded in 1967 through inter- national competitive bidding, and was 35 percent complete as of July 1968. ii. This would be the second loan for highways in Zambia. In 1966, a loan of US$17.5 million equivalent was made to help finance the reconstruc- tion and/or engineering of other sections of the Great North Road and of parts of the Great East Road. Execution is proceeding satisfactorily, and was 60 percent complete as of June 1968. iii. Retroactive financing of part of the Second Highway Project is recommended. The possibility of Bank financing of the road sections was considered during negotiations of the first highway loan in 1966. At that time the political and transport situation in Central Africa was so uncer- tain that a Bank appraisal was impractical. However, execution of the project could not be delayed because of the transport crisis facing Zambia, and the Government proceeded with it late in 1966, on the understanding that the project would subsequently be appraised on its merits and that if proved to be justified retroactive financing would be recommended to the Executive Directors. In January 1968, the Zanbian Government submitted an application and the project was appraised in 14arch/April. iv. The total cost of the project is estimated at US$17.5 million equivalent. The UK has provided a grant of US$2.2 million equivalent toward the project, which covered total expenditures up to about March 1, 1968. The proposed Bank loan of US$10.7 million would cover the estimated foreign exchange costs of the part of the project not defrayed from the U.K. grant. Retroactive financing would amount to about US$3 million by October 1968. v. Execution of the project is the responsibility of the Roads Depart- ment. Construction is being supervised by consultants satisfactory to the Bank. The project is expected to be completed by the end of 1969. vi. The project forms part of a larger international program to improve the entire Tanzam Highway to suitable standards, with a view to developing transport capacity to the sea for landlocked Zambia. Because of the uncer- tainty with respect to various developments which could affect traffic de- velopment on the project road, a probability analysis of the economic rate of return was conducted. The results of this analysis indicate that the project can be expected to earn a rate of return of 15 percent, which is satisfactory.  - ii - vii. During negotiations, satisfactory assurances were obtained from the Government that (1) the progran for the technical education and training of Zambian nationals will be increased with a view to ensuring an appropriate supply of Zambians qualifying for professional and other positions within the Roads Department, and (,2) the pavement on th.e project rcard will he strengtlened by overlay,s when an(' it' necessarz.. viii. The project is suitable for a Bank loam of UJ$,10.7 million to) the Government of Zambia. iAn appropriate loan term would be 20 years including a two-year period of grace.  ZAMBIA APPRAISAL OF THE SECOND HIGHWAY PROJECT 1. INTRODUCTION 1.01 The Government of the Republic of Zambia asked the Bank in January 1968 to help finance the reconstruction of the Serenje-Tunduma section(382 miles) of the Great North Road and of the Rufunsa-Nyimba section (113 miles) of the Great East Road. The possibility of Bank financing of the road sec- tions was considered during negotiations for the first highway loan (469-ZA) in 1966. At that time, the political and transport situation in Central Africa was so uncertain that a Bank appraisal of the above road sections was impractical. However, due to the transport crisis facing Zambia, the Government undertook execution of the project on the understanding that the project would subsequently be appraised on its merits and that if proved justified, retroactive financing would be recommended to the Executive Directors. 1.02 A Bank appraisal mission visited Zambia in March/April 1968 and found the reconstruction of the 235 mile Mpika-Tundumna (Tanzanian border) section of the Great North Road ready for appraisal and suitable for Bank financing. The reconstruction works on the Serenje-Mpika section (147 riles) of the Great North Road, and the Rufunsa-Luangwa section (48 miles) of the Great East Road were let to contracts on a negotiated basis and are therefore not eligible for Bank financing. The detailed engineering of the Luangwa-Nyimba section (63 miles) of the Great East Road is not ready, and a preliminary economic analysis indicates that its reconstruction would yield only a marginal return. However, as the analysis is sensitive to costs, proceeding with the detailed engineering is considered Justified at this time in order to establish accurate cost estimates. Therefore, the detailed engineering of the Luangwa-Nyinba section is included in the proposed project. 1.03 This appraisal was carried out in conjunction with the appraisal for possible Bank/IDA lending of improvements to further sections of the Great North Road in Tanzania which links Zambia to the Tanzanian port of Dar es Salaam on the Indian Ocean. The Tanzanian part of the project will be submitted for consideration by the Executive Directors shortly. The appraisal is based on the findings of a Bank appraisal mission consisting of Messrs. E.V.K. Jaycox and L. Pouliquen, economists, and F. Soges, engineer, which visited Zambia in March 1968. Mrs. J. Comer, programmer-analyst, contributed substantially to the appraisal. 1.04 This would be the second loan by the Bank for road projects in Zambia. The first loan (469-ZA) was made in 1966 and covered the recon- struction of one section of the Great North Road and of two sections of the Great East Road. Performance under the first loan is satisfactory, and the project is expected to be completed on schedule and within the original cost estimates. Previously, the Bank made two loans for railways (NR-74 and RN-197) in Northern and Southern Rhodesia and two loans for power (RN- 145 and RNS-392) to the Central African Power Corporation jointly owned by Zambia and Rhodesia. Zambia has assumed responsibility for its share of these loans.  - 2 - 2. BACKGROUND A. Economic Setting 2.01 Zambia is a landlocked country in Central Africa. With an area of about 291,000 square miles, it is comparable in size to France and West Germ.any combined. Zambia's; population is about 3.8 million, and is growing at an estimated rate of 2.8 percent per annun. Ninety-eight percent of the population is of African origin. The Gross Domestic Product in 1966 is estimated at K 761 million (US$1,070 million equivalent); annual per capita income is about US$260 equivalent. 2.02 The economy is highly dependent upon foreign trade. Over 50 per- cent of total production by value is exported, and about 45 percent of total domestic consumption and investment is imported. To maintain economic activity at current levels, about 3.5 million tons of cargo worth over .IS,1l billion must move in and out of the country each year. 2.03 Zambia's market economy has two main sectors. The primary sector is the copper mining and refining industry which dominates the economy. It is the third largest in the world, ranking in value of output after the copper industries of the U.S. and U.S.S.R. Copper and other mining produc- tion accounts for nearly 50 percent of GDP and over 90 percent of export proceeds. The second main productive sector consists of European tobacco and maize farning. By far the greatest majority of the African population is engaged in subsistence agriculture. 2.04 Economic activity in Zambia is concentrated in the ';Copperbelt and along the 'Line of Rail';. The Copperbelt is a relatively small area located in the north central part of the country adjoining the border with Katanga Province of the Congo. The Line of Rail area is a narrow, north- south strip along the railway where the larger towns of the country are located and the bulk of the economic and administrative activity takes place. Ineither the copper industry nor European farming has had much direct effect upon the development of the rest of Zambia. Less than one-third of the people live within the zone of influence of the Line of Rail/Copperbelt complex. 2.05 During the country's federation with Rhodesia and Nyasaland (1953- 1963), the economy grew in real terms at the annual rate of about 3.6 per- cent. In the period 1960-1963, GDP virtually stagnated, due mainly to a fall in copper prices and to political uncertainties arising out of the move- ment toward dissolution of the Federation (December 31, 1963) and achieve- ment of national independence (October 24, 1964). However, in the period 1964-1966 the economy registered an average annual increase in real GDP of 7 percent, despite a 15 percent fall in copper output in 1966 due to trans- port and fuel supply problems arising from the political situation in Central Africa.  -3- B. Transport System Internal Transport 2.06 The 665 mile Zambia Railway system contributes little to the internal exchange among the various regions. Extension of the rail system to meet inter-regional transport requirements is not practical. However, the 20,800 mile road network, which branches from the primary road along the rail line, is basically appropriate for meeting these needs. River and canal transport and air transport, while irmortant in certain areas or for limited purposes, are not suited to the major task of integrating the economy. As far as transport is concerned, the process of economic development and diversification will be helped most by investment in improving the existing primary and secondary road network and in improving and constructing agri- cultural feeder roads. Access to the Sea 2.07 As a landloc&ed country Olepending heavily on exports and imports, Z7anbia must concern itself with ensuiring a. reliable access to the sea as well as witlh building an adeouate irternal network to facilitate economic development. Zamnbia's primaryr link to the sea has historically been via the Rhodesin Railways fror. the Copperbelt through Southern Rhodesia to the Mozambiaue norts of Beira and Lourerco M4arques, both about 1,500 rail miles from the Copperbelt (see Miar 1). In the past virtually all of Zambia's imports and exports moved over this line. U(ntil late 1967, the Rhodesia Failways was jointly owned by the Governmcnts of Zambia and Southern Rhodesia and was operated by a statutory corporation as a common service to the two countries. As a result of the unilateral declaration of independence (UDI) by Southern Rhodesia. in 1965, the Zanbian Railways and Rhodesia Railway have been formed into separate operating entities. Discussions as to the division of assets and liabilities have not yet been completed. Existing rail rou:tes which could provide alternatives to the Rhodesia Railway are (see Sap 1): (1) the Bas-Congo-Katanga. (BCK)-Benguela Railways through Katanga Province and Angola to the Atlantic port of Lobito; (2) the Katanga- ,latadi rail/water route via Port Francqui; and (3) the Katanga-Lake Tanganyika- East African Railways line to Dar-es-Salasm. In addition to the alternative rail links, Zambia is connected through its primary road network to the neighboring highway/rail systems in Tanzania and Malawi, which provide outlets to the sea. 2.08 Historically, the movement of Zambia's copper production (currently about 700,000 tons per year) has been governed by several international agree- ments 1/, which have had the effect of ensuring that at least 80 percent of Zambia's copper output would move via the Rhodesia Railways and port of l/ The Tripartite Agreement between Rhodesia Railways, Chemin de Fer du Bas Congo au Katanga, and Caminho de Ferro de Benguela (1956); the Beira Convention between the U.K. (on behalf of Zambia, Malawi, Rhodesia and the U.K.) and Portugal (1950); the Agreement between Southern Rhodesia and Northern Rhodesia relating to Rhodesia Railways (1963).  Beira. A 1960 agreement between the Federal Government and the Copperbelt mines limited export via Lobito to 36,000 tons per annum. As a result of these arrangements, the alternative rail routes have not developed sufficient capacity to handle more than a small amount of Zambian traffic. 2.9 The orientation of Zambia's trade, economy, and transport faci- lities toward Southern Rhodesia is an outcome of African history and Zambia's federal past. Since independence it has become the established long-range policy of the Government of Zambia to reduce the country's dependence upon Southern Rhodesia for access to the sea and for the supply of a wide variety of manufactured and raw material reouisites. Zambia wishes to develop new and closer trade relations with neighboring nations to the north and east, and to change the inherited and somewhat arbitrary pattern of international traffic. C. The Zambia-Tanzania Transport Problerm The Transport Crisis 2.10 UDT a,gravated the already troubled atmosphere of Central Africa, and transformed Zambia's lonF-ranrue aim to diversify its trading and trans- port pattern into an i:mediate problem. Following UDT, a series of UN Security Council resolutions 1/, pl<sced progressively strict economic sanc- tions on Rhodesia beginning with an international embargo on the movement of petroleum and other products t.o or through Rhodesia, and imposing most recently (May 1968) a complete embargo on trade and services. These sanctions necessitated the emergency transport of liquid fuels to Zambia and the backhaul of some conper exports over the most irnmediately available alternative link to the sea, the 1,200 'dile road from the rail line at Kapiri Mposhi to Dar es Selaar, which is now carmonly k:nown as the Tanzarx highway. During 1966 nearly 1,000 privately-owned. truc's in Zambia and Tanzania were put into service for this purrose iunder contract to the Central African Road Services (CARS), acting as agent of the Zamlbian Governnment. In mid-1966, the Zambia- Tanzania Poad services Ltd. (ZTRS) was formed and began operating 30 ton capacity truck-trailer umits to carry petroleum and general cargo imports and conner exports: by,r mid-1968 the 7CRS fleet had reached 442 units. In early 1967 a number of large foreirn firms, operating a total of about 300 large tanker-trailers, entered the oil lift service over the Tanzam highway. Oil lift operations over the Great ]ast Road via the Malawi and Mozambique rail systems from Beira were also instituted on a smaller scale. 2.11 In addition to the emergency transport over the Tanzam highway, a rmilitary-type airlift of oil products and copper was instituted early in 1966 by the US, U.K. and Canadian Air Forces via the Congo and East Africa. This has since been discontinued and replaced by the operations of Zambia 1/ Resolutions 216 (1965) of November 1965; 217 (1965) of 20 November 1965; 221 (1966) of 9 April 1966; 232 (1966) of 16 December 1966; and 253 (1968) of 29 May :1968.  - 5 - Air Cargoes Ltd., a newly formed company operating four large cargo planes, which carry copper to Dar es Salaam and return with fuels. 2.12 Attempts have also been made to increase ZaTnbian traffic on the alternative rail routes to Lobito, to Matadi, and via Lake Tanganyika and the East African Railways to Dar es Salaam. The only significant results so far have been achieved on the BCK/Benguela line via the Congo and Angola to Lobito, for which additional rolling stock and personnel have been pro- vided by Zambia to handle Zambian traffic on the BCK portion through the Congo (see para. 2.15). 2.13 The Tanzam highway has been the principal route for the traffic diverted from Rhodesia, due primarily to the greater flexibility inherent to trucking operations as compared to the rail routes. The most important constraint on traffic movement has been the condition of the road, although the combined problems encountered in the areas of traffic control, trucking organization, goods storage, port capacities, commercial arrangements and border formalities have also had a considerable imnact on the volume of traffic. The emergency operation of about 120 heavv trucks per day over the Tanzam highway, in addition to normal traffic, required extraordinary main- tenance expenditures of about USQ3.O million eauivalent in 7ambia and about US$2.0 mnillion equivalent in Tanzanxia during 1966/67, but even so the road has often been closed at one or more noints for several days at a time due to broken structures or mired or wrecked vehicles. Over 100 drivers have been killed on this road since early 1(66. The damage to vehicles in the course of a journey renuires extensive vehicle maintenance (averaging 5 days for ZTIS after each one-way trip). Under these conditions the 7TRS averares only 1.1 round trips rer vehicle unit per month. Wahile the condition of the road un(oubtedly affects the capacity of the existinri trucking fleet, the traffic on the existinr' roaC cou]d be pushed up by continued expansion of the fleet until caracity constraints on ]ess flexible parts of the system, i.e., the ports and storag-( facilities, becore operative. 2.14 Since mid-1966 drastic f'uiel rationing has been imposed periodically in Zambia, often for many months at a time. Refined copper production in 1966 was down 15 percent due to fiuel shortages that interrupted smelting operations. Costly stockpiles of copper concentrates had to be held as inventory. Fuel (coal and heavy fuel oil) costs for the copper industry averaged K 6.0 (US$8.110 equivalent) per ton in 1965 prior to UDI; in 1967 the average cost had risen to K 18.0 (US$25.20) per ton including a surcharge placed by Rhodesia on coal exports to Zambia. Copper transport costs to the sea averaged K 32.0 (US$44.80) per ton in 1965; the 1967 average by all routes and modes was K 52.0 (US$72.80). In October 1967 the Rhodesia Railways increased the charges on Zambian copper by 50 percent and at the same time on other Zambian traffic by an average of over 25 percent. No systematic accounting of the economic costs to Zambia of the present situation has been made; however, the recent increases in rates for Zambian cargoes via the Rhodesia Railway, demonstrate the degree to which the Zambian economy is dependent upon a single access route, and the lack of competitive pressure from alternative routes which could help to ensure low cost external transport for Zambia.  - 6 - 2.15 While the diversion of transport of oil, copper and general imports has so far proved to be very expensive, it has failed to reduce appreciably Zambia's dependence upon Rhodesia for access to the sea. In 1967, the average division of the monthly tonnage of import/export traffic between the various routes was approximately as follows: Average Monthly Import/Export Tonnap_es Imports Via Via Via Via Rhodesia Dar es Salaam Lobito Mtalawi Total Coal & Oil products Coal. & Oil products general &f general general & general 145,000 20,000 14,000 5,000 184,000 Fxnorts Copper & Copper P. Coprer & general Copper general general Total 6o,ooo 17,500 11,5o0 4,500 93,500 * * TOTAL: 205 000 37,500 25,500 9,500 * Including 90,000 tons of co01 fror Wankie, Dhodesia, wVhich is to be replaced by local supply in 1969. Long-Range Solutions 2.16 Some 50 or more possible combinations of land transnort solutions have been considered at various times to meet Zanbia's import/export traffic needs. Among these are three means of reaching Dar es Salaan--bv pipeline (para. 2.17), by road (para. 2.18) and by rail (para. 2.19). Another possi- bility is the Great East Road from Lusaka to MfIalawi, and then via either an existing rail route to Beira in Mozambique or a new rail line that is under construction to connect the Malawi railways with the Nova Freixo-Nacala line in Mozambique. This alternative, in addition to involving additional railway investments, would involve transshipment in Malawi and would also pass through two countries outside Zambia. 2.17 The most advanced of current projects to develop permanent alter- native transport capacity to the sea is an oil pipeline from Dar es Salaam to the Copperbelt. The pipeline is estimated to cost about US$48 million equivalent and will be capable of handling the entire refined fuel require- ments of Zambia - about 200,000 tons in 1967. The Zambian and Tanzanian Governments have formed a joint company to own and operate the pipeline. Construction began in 1967, and the pipeline is scheduled to be in full  - 7 - operation by October 1968. At this time, the oil traffic, which accounts for about half the total present traffic on the Tanzamn highway, will be diverted to the pipeline, except for the relatively small amounts of oil types unsuited to pipeline transmission. 2.18 Reconstruction to two-lane bituminous paved standard of the full length of the gravel/earth sections of the Tanzam highway from Kapiri Mposhi at the Line of Rail in Zambia to Morogoro in Tanzania (965 miles) is now in advanced stage of planning, and partly under execution. The Zarnbian sections are all under construction; the first 122 mile section from Kapiri 1Mposhi to Serenje is part of the project under Bank Loan 469-ZA, and the 235 mile Mpika-Tunduma section is the subject of this appraisal report. In Tanzania, reconstruction of the 150 mile section from the border at Tundurna to Iyayi is being financed with the assistance of USAID; the remaining 311 miles from Iyayi to Morogoro are being considered for Bank/IDA financing. The plans call for completion of the Zambian sections by the end of 1969 and for the Tanzanian sections by the end of 1971. The improved and realigned Copper- belt - Dar es Salaam road link will be about 1,170 miles in length, including the section along the Line of Rail north of Kapiri Mposhi. 2.19 In addition to the pipeline and improved road connection, the Zambian and Tanzanian Governments have announced their intention to construct a 980 mile rail link from Kapiri Mposhi on the Zambian Railway systemn to the Kidatu railhead of the East African railway system in Tanzania, which would provide a 1,300 mile route from the Copperbelt to the Indian Ocean, at a cost of roughly US$400 million equivalent including line construction, rolling stock, and additional deep water berths at Dar es 'Salaam. The idea of a rail link predates the emergency by many years and has been the subject of a number of engineering and economic investigations. The latest inves- tigation took place in 1966 with financial assistance from the U.K. and Canada. The Bank has reviewed the consultants' report in conjunction with the UNJDP and the African Development Bank. This review concluded that three technical and one economic supplementary investigations were necessary to complete the feasibility analysis of the project. The major technical investigation has been undertaken with INDP financing. The Governments of Tanzania and Zambia, however, have so far not indicated their intention to proceed with the economic enquiries. The detailed engineering of the link is now undervay with the assistance of Mainland China, which has also given some assurances with respect to the financing of eventual construction. The timing of construction is uncertain. Detailed engineering is to be completed by the end of 1969. A five-year construction period is probably a minimum feasible schedule. Presumably, the commitment to invest this magnitude of capital will remain subject to further decisions based on final cost estimates and the foreseeable demand for the facility. Traffic Prospects on the Tanzam Highway 2.20 The future volume and duration of through export/import traffic on the Tanzam highway is uncertain. Once the pipeline is in operation, and oil traffic over the road ceases, the intention is to increase the transport of copper exports and general goods imports. However, while the trucking capacity could be converted with relative ease from oil to copper and general cargo, the same is not true of the capacity at the port of Dar es Salaam,  - 8 - where new deep water berths are required for any additional Zambian general goods traffic beyond the approximately 190,000 tons of copper exports and 70,000 tons of general cargo imports handled in 1967. Three berths are now under construction and a further two are planned to be in operation by 1971 to handle increased Zambian traffic in addition to the normal growth of Tanzanian traffic. The possibilities of containerization of cargoes at Dar es Salaam in general and of Zambian import cargoes particularly are also being investigated, and could affect significantly the capacity of the entire Tanzam highway transport system. If and when the Tanzam railway is built, it is very likely that most, if not all, Zambian import/export traffic using the road connection would be diverted to the rail which, regardless of its economic characteristics, would have to haul the bulk of available traffic to be financially viable. Under these uncertain circum- stances, the forecasts of traffic over the project road have been made taking into account the probabilities of future traffic levels and trends as they are affected by the main foreseeable constraints on the physical system and the timing of major investments (See Section 5, Economic Evaluation, and Annex for details).  - 9 - 3. THE HIGHWAY SECTOR A. The Highway System 3.01 The road network comprises over 20,000 miles of various types of roads (see Map 2): Length, in miles Bituminous Gravel Earth Paved Roads Roads Roads Total Primary roads 905 2,474 519 3,898 Secondary roads 82 1,492 11,807 13,381 Tertiary roads - 25 3,532 3.557 Total 987 3,991 15,858 20,836 3.02 The geographical distribution of the primary roads is generally adequate to meet current transport requirements. The primary road along the rail line is constructed to modern bituminous paved standards; the re- construction to similar standards of two other primary roads from the rail line to Malawi (Great East Road) and to Tanzania (Great North Road) is in process, partly financed by proposed and previous Bank projects. The re- maining primary roads are gravel surfaced or earth roads, sone sections of which are becoming inadequate for growing traffic volunes. Many of the secondary and tertiary roads are poorly maintained, if at all. B. Highway Traffic and Vehicle Fleet 3.03 Highway transport is relatively undeveloped. It is concentrated mainly along the Line of Rail, utilizing the country's only long-distance bitumen-surfaced highway. Light Vehicle traffic in particular is concen- trated in this area. Traffic on the trunk roads to the outlying areas is generally heaviest near the rail line, and falls off rapidly according to distance from this rail zone. Since late 1965, this general traffic pattern has been altered significantly on the Great North Road and to a lesser ex- tent on the Great East Road by the imposition of heavy through traffic of imports and exports, as described in the preceding section. 3.04 The motor vehicle fleet expanded rapidly in the 1950's until the general economic downturn of the early 1960's. Since 1960, the average growth rate of the light vehicle fleet (cars, pickups, etc.) is estimated at 7 percent per annum, while for trucks and tractor-trailers, the expansion has been on the order of 8 percent with the emergency shift to road trans- port over the past three years. Statistical information on vehicle age is limited, but on the basis of registration data the fleet appears to be relatively modern with over 60 percent of all vehicles less than 5 years old.  - 10 - 3.05 On the basis of a 50-point traffic count system instituted under the supervision of the U.K. Road Research Laboratory in 1961, and of the past growth of fuel consumption, the current normal traffic growth is esti- mated at about 7 percent per annum. In arriving at this normal growth rate, the current import-export road operations through Tanzania and Malawi, and the rationing of fuel supplies in 7ambia, have both been discounted by extrapolating pre-1966 traffic trends. C. Highway Transport Industry 3.06 Most of the commercial vehicles engaged in public road transport are run by owner-operators. However, the industry is dominated by three re-7 latively large companies: CARS, a subsidiary of the United Transport Group (U.K.); Smith and Youngson Ltd., owned by the London and Rhodesia Mining Company (Lonrho); and the recently formed ZTRS owned by the Zambia and Tanzania Governments (35 percent each) and Italian vehicle supply and finan- cial interests (30 percent). Recently the trucking industry has become increasingly competitive, especially for internal transport for which the licensing policy has been significantly liberalized. D. Highway Administratior- 3.07 The Roads Department (RD), under the Mfinistry of Works and Housing, is responsible for the administration of the highway system. It has central services in Lusaka for engineering, construction and maintenance, and eight provincial divisions throughout the country. The RD has direct control over the primary road system and about half of the secondary roads: the Rural Local Authorities are responsible for the rest. 3.08 Professional posts and middle-level technical positions are held to a large extent by expatriate civil servants inder a program of the U.K. Ministry of Overseas Development. The RD lost manv experienced officers during 1966 and 1967 and, although the total number of staff has been kept about constant through recruitment, the newly recruited personnel is often inexperienced in the conditions of road administration in Zambia. Moreover, some vacancies have not been satisfactorily filled. The shortage is still within acceptable limits at the professional level, but is serious at middle level technical positions where recruitment is virtually impossible at the salaries being offered. The present staff is competent but is overburdened by the increasing demands of road development and maintenance which make it difficult to maintain satisfactory standards of performance. 3.09 Africanization of public services is an established policy, but the availability of nationals qualifying for technical positions is extremely low. The Government is aware that this is a constraint on Africanization. So far it has taken a pragmatic approach in employing expatriate technicians to meet the present personnel requirements of the RD. However, the prepar- ation for Africanization as a long-term solution requires that the profes- sional education and training of nationals for positions in the RD be promptly and substantially strengthened. Opportunities for the engineering education of talented Zambians exist at foreign universities through numerous scholar- ships, and are being created at the University of Zambia in its recently established School of Engineering. The Zambian Government has requested  - 11 - that the Bank consider providing financial assistance for the development of this institution. However, only a few Zambians are currently taking advantage of the existing opportunities for engineering studies. The Government gave assurances under Loan 469-ZA that it will continue its efforts to retain RD personnel and to recruit replacements for the departing personnel from national sources and from foreign sources to the extent that qualified Zambians are not available. During negotiations for the proposed loan, the Government gave an additional assurance that it will maintain the professional standard and strength of the RD at appropriate levels, and will take appropriate steps, both through the promotion of technical education and training, and through career incentives, to encourage the development of national technical talent so as to enable Zambians to assume an increasing share in the operations of the ED. The Government agreed to exchange views with the Bank from time to time concerning the progress in achieving this goal. E. Design Standards, Engineering and Construction 3.10 Design standards follow basic American and British patterns, with appropriate adaptations to local conditions that make it practical to build and improve the roads in stages according to traffic growth. The standards are considered appropriate; however, in the engineering of recent works, they have not always been applied with adequate care for economies, -which has led to overdesigning of some of the works. 3.11 In previous years, the RD was heavily engaged in road engineering and construction. At present, however, the Department is using extensively the services of engineering consultants and contractors for all major con- struction projects to cope with the sharp increase in road works since 1965. The locally established road contractors are mostly foreign owned: all major road works now underway are being carried out by international firms. Bid- ding procedures are sound and have proved adequate to attract contractors on an international basis. Physical conditions are favorable for road construction and maintenance in most parts of Zambia. F. Highway Maintenance 3.12 The condition of the roads maintained by the RD is still generally satisfactory, but that of the roads maintained by the Bural Local Authorities is poor. The maintenance operations of the RD are highly mechanized and are carried out by units located throughout the country. In recent years, contractors also have often been employed in road maintenance for major regraveling or bituminous resurfacing works. The RD's maintenance practices are sound; however, increasing demands on personnel and equipment in recent years have resulted in some deterioration of previous standards. 3.13 Under Loan 469-ZA, the Government stated its intention to improve the maintenance of the roads under the responsibility of the Rural Local Authorities. The Government is now planning to set up mechanized Provincial Construction Units with a view to strengthening the capacity of the Authori- ties to maintain roads and to carry out some construction works. Technical assistance is being sought for this purpose from the United Nations. The Bank considers these preliminary steps by the Government as satisfactory with regard to its statement of intent.  - 12 - G. Highway Expenditures and Investment Planning 3.14 Highway expenditures rose from about K 5.0 million in 1960/61 to the annual rate of nearly K 20.0 million in late 1967 (see Table 1). The increase has not been gradual; a large increase in the maintenance budget occurred between 1961/62 and 1962/63; the budget for new construction has been substantially increased since the first development plan of independent Zambia got underway in January 1965. In 1966/67 new construction accounted for over two-thirds of total highway expenditures. This marks a new period of intensive road development; the rate of increase in public capital expen- diture has also been high in other infrastructure sectors. 3.15 In recent years the total recurrent and capital highway budget has been equivalent to about 6 percent of total public expenditure; investment in new construction has represented roughly 10 percent. of public capital formation. Under the current National Development Plan, road construction is supposed to take up 11 percent of government investment; however, the relative ease with which road works could be started and the current transport crisis have pushed the share of road construction to over 17 percent. In 1968, expenditure on road construction is likely to make the highway sector the largest single recipient of government capital funds, and only a slightly smaller investor than the whole mining sector. Total road investments over the 4