Upper Volta - Telecommunications Project

FILE COPY R ESTRICTED Report No . TO -6 93 a This report was prepared for use within the Bank and its affiliafed organizations. They do not accept responsibility for its accuracy or completeness. The report moy not be published nor moy it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION UPPER VOLTA APPRAISAL OF THE TELECOMMUNICATIONS PROGRAM OF THE OFFICE OF POSTS AND TELECOMMUNICATIONS January 27, 1969 Public Utilities Projects Department  CURRENCY EQUIVALENTS US$1 = CFAFZ47 CFAF1, 000 US$4. 05 CFAF1, 000, 000 = US$4,050 LIST OF ABBREVIATIONS USED IN THE REPORT BEPTOM - Bureau d'Etudes des Postes et Telecommunications d'Outre-mer (Paris) CAPTEAO - Conference Africaine des P&T des Etats de l'Afrique Occidentale (8 countries) FAC - Fonds d'Aide et de Cooperation (Paris) FCR - Compagnie France Cable et Radio (Paris) FCS - French Cooperation Services administering the FAC and Technical Assistance under the Ministry of Foreign Affaris, Paris OPT - Office of Posts and Telecommunications in Upper Volta P&T - Posts and Telecommunications SOFRECOM- Societe Francaise d'Etudes et d'Equipement des Tele- communications (Paris) UAMPT - Union Africaine et Malgache des P&T (14 French- speaking African Countries) UNDP - United Nations Development Programme USAID - United States Agency for International Development  UPPER VOL TA APPRAISAL OF THE TJECOQM24UNICATIONS PROGRAM CF TIHE OFFICE OF POSTS AND TELECOMvUNICATIONS Table of Contents Page No. SUMMARY i-ii I. RITRODUCTION i II. POSTS AND TELECOMMUNICATIONS IN UPPER VOLTA 1 History and Organization 1 The New Office of Posts and Telecommunications 2 Management, Staffing and Training 3 Foreign Assistance h III. FINANCIAL POSITION 5 Accounting and Audit 5 Financial Development Since 1959 6 Tariffs and Revenue 7 Present Financial Position 7 Past Earnings 8 IV. EXISTING FACILITIES AND INVESTMENT PROGRAM 9 V. THE PROJECT 10 Costs and Financing il Procurement and Disbursement 12 Coordination with French Aid 13 Justifications of the Project and Economic Aspects 13 VI. FUTURE FINANCES 14 Financing Plan 14 Future Operating Results 15 Future Financial Position 16 OPT - Postal and Consolidated Operations 17 VII. RECOMMENDATIONS 17 This report is based on the findings of an appraisal mission to Upper Volta which was made in June 1968 and was composed of Messrs. M. V. Scoffier and J. G. Davis of the Bank.  List of Annexes 1. Proposed Organization Chart of the OPT. 2. Basic Tariff Structure. 3. Existing Telecommunication Facilities h. Construction Program (1969-1971) and Estimated Costs. 5. Costs Benefit Analysis. 6. Notes and Assumptions on Financial Statements. 7. Notional Balance Sheets 1965-1973 (Telecommunications Division). 3. Statement of Income 1965-1973 (Telecomnunications Division). 9. Statement of Sources and Application of Funds (Teleconmunications Division). 10. Notional Balance Sheets 1965-1973 (Postal Division>. Il. Statement of Incorne 1965-1973 (Postal Division). 12. Statement of Sources and Application of Funds (Postal Division). 13. Consolidated Notional Balance Sheets 1965-1973 (OPT). 1h. Consolidated Statement of Income 1965-1973 (OPT). 15. Consolidated Statenment of Sources and Application of Punds (OPT). 16. OPT - Postal Operations. 17. OPT - Cash Resources. MAP - IBRD 2359 - Existing and Proposed Telephone Exchanges and Long-distance Links.  TJPPER VOLTA APPRAISAL 0F THE TELECOMMUNICATIONS PROGR M OF THE OFFICE OF POSTS AND TELECOMMUNICATIONS SUMMARY i. Ihe Government of Upper Volta has asked the International Development Association for a credit to finance part of its program to be undertaken during 1969 to 1971 for the rehabilitation and expansion of public telecommunication facilities. Total costs of the program are estimated at US$1.5 million equivalent. The project consists of part of the program amounting to US$1.2 million equivalent of which US$0.8 million representing the foreign exchange costs would be financed by the proposed credit, the remainder of the project being financed from internal resources. ii. The Borrower would be the Government of Upper Volta. The works would be carried out by the Office of Posts and Telecommunications (OPT) under a oroject agreement with IDA. The Government would relend the proceeds of the credit to the OPT at 6L% for 20 years including h years of grace under a subsidiary loan agreement satisfactory to IDA. iii. The OPT is a newly created organization which, as from January 1, 1969, took over the functions of the present Posts and Telecommunications (P&T) Department of the Ministry of Information, Posts and Telecommuni- cations which exercised the postal and telecommuwnication monopoly. Organized as a government-owned and controlled agency to establish, main- tain and operate the postal and telecommunication services, the OPT has corporate and financial autonomy and will be commercially run. iv. The proposed program concentrates on the reconditioning and expansion of existing local networks and subscribers' installations in Ouagadougou and in Bobo-Dioulasso, and also includes some interur>.n connections. Following the recent modernization of switching facilities in these two main cities and construction off main overlhead routes to the Mali and Niger borders, the project will improve cquality of service and productivity of the present plant. It is also aimed at providing better telephone service where most of the administrative antd economic activities are concentrated, and at increasing traffic capa&l lity of existing long-distance spur routes between developing agricultural prov- inces and trade centers. v. The program is technically sound and economically justified. The estimated costs are reasonable and the arrangements for execution are satisfactory. All imported equipment to be financed under the pro- posed IDA Credit would be procured through international competitive bidding, except for US$112,000 equivalent covering engineerirng services and parts of various contracts for the construction of the networks which due to the nature of the works and the small amounts involved would be awarded after limited tendering on a regional basis. vi. The existing facilities were originally installed and opeiaied by the French Colonial Administration but, sinec 1960. develoumen:rjt was carried out by the former P&T Administration with mil assistance froin  - ii - the French Cooperation Services (FCS) under the French Ministry of Foreign Affairs. Essential services are headed by Erench personnel. Expansion plans and equipment specifications are prepared by outside consultants. Qualified local staff will not be immediately available and the OPT will continue with foreign assistance, principally from the FCS, at both advisory and executive levels for the implementation of the program and for the operation of the facilities. These arrange- ments are acceptable; adequate coordination between the IDA, the OPT and the FCS will be established in this respect during the supervision of the project. vii. In order to assure OPT's financial autonomy, a complete fi- nancial and accounting set-up will have to be established with outside assistance; at present there exist neither adequate records nor the commercial background for OPT's operations. Basic financial parameters and statements have been prepared for the past and the future, and the financial analysis in this report represents the firet such attempt for P&T services in UDper Volta. Within the OPT the emphasis on com- mercial operation and the major financial commitments will apply to the telecommunication services which will therefore maintain separate accounts from the postal side. The Government has settled its arrears and has comrmitted itself to pay promptly and fully for the use of tele- communication services in the future. On this basis, OPT will be financially viable. It is estimated that the capital requirements of OPT's telecommunication program 1969-1971 will be met, 54% frcm the proposed IDA Credit, 10% from the FAC and USAID, and the balance from internally generated funds which is an acceptable financing plan. It is expected that the overall financial situation of the OPT including the postal services will improve during the program period. viii. The objectives of the proposed IDA Credit go beyond the specific purpose of financing a highly needed rehabilitation project within a minimum expansion program. Dhe credit vould enable IDA ta support directly the endeavours of the UPPER Volta Government to estab- lish the OPT on a commercial basis and to lend its assistance, together with other aid organizations, to assure the future technical and fi- nancial viability of the telecomiunication sector in the country. ix. The project is suitable for an IDA Credit of US$o.8 million equivalent for construction to be completed between January 1969 and December 1971.  UPPER VOLTA APPRAISAL OF THE TELECOMMUNxICATIONS PROGRAM OF THE OFFICE 0F POSTS AND TELECOMMflUNICATIONS I. INTRODUCTION 1.01 The Government of Upper Volta has arepared an improvement and expansion program for its telecommunications services during the three- year period (1969-1971) following the establishment of an autonomous Office of Posts and Teleccmmunications (OPT), which took over exist- ing postal and telecommunication services from Government Administration on January 1, 1969. The main objectives are to rehabilitate existing facilities which, owing to the scarcity of funds from the Government in past years, have suffered from lack of maintenance and to carry out the improvement and expansion required to increase productivity and service quality of the networks. The total cost of the progran is estimated at US$1.5 million> and the project is a part of the program amounting to USil1.2 million of which the proposed IDA Credit would finance US$O.8 million rerresenting the foreign exchange costs. Internally generated funds would finance riost of the balance of funds required, with minor contri- butions from the Friench Government and USAID. The proposed credit would be the first lending operation from the Bank/IDA Group in Upper Volta. 1.02 The 3orrower would be the Government of Unper Volta. The works would be executed by the OPT which operates the postal and tele- communication monopoly under the charge of the Ministry of Information, Posts and Telecommunications. The Government would relend the proceeds of the credit to the OPT at 6,% interest for 20 years including a grace period of 4 years. 1.03 The first direct contact with the Upper Volta Government re- garding the financing of the telecommunications sector was made in September 1967 by a Reconnaissance 1i,ssion consisting of Messrs. C. Finne and H.C. Hittmair. After clarification of some issues an Aopraisal Mission composed of I4essrs. M.V. Scoffier and J.G. Davis visited Upper Volta in June 1968 and this reDort is based on their findings. Aspects concerning the past and proposed aid from the French Government were discussed in Ouagadougou and Paris with representatives of the French Cooperation Services. II. POSTS AND TELECOMMUNICATIONS IN UPPER VOLTA History and Organization 2.01 Posts and Telecommunications services for the w-jhole of the former French West Africa Federation date back to the formation of Posts, Tele- graph and Telephone Departments operating as Government services under French rule whichwere set up early in the present century under the authority of the High Commissioner for West Africa and the Governors in each separate territory. After the formation of various states within the Federation, the P&T services of the seven countries, Senegal, Dahomey,  - 2 - Ivory Coast, Mali, Mauritania, Niger and Upper Volta were operated by the West African P&T Office with headquarters in Dakar. When this Office was dissolved in late 1959, the P&T services in Upper Volta were left without the benefit of the central administration and with- out the required qualified staff to set up the necessary central services in the country. The existing services were incorporated into the general services of the Governnent. The financial responsibility and control for the P&T were transferred to the Ministry of Finance. Minimum required French staff was maintained to operate the services. Necessary additional senior staff and advisers were provided by the French Cooperation Services to run and organize the Department. 2.02 During eight years, from 1960 until 1968, the P&T services were organized on the simple pattern of a Government department. The Minister in charge delegated to the P&T Director the technical and ad- ministrative responsibilities for daily operation of the services which were and are still organized in three divisions: Telecommunications covering telephone, telegraph, telex and radio; the Postal and Financial Services including the Postal Checking Accounts and Savings Bank; and General Administration. Telecommunications were run by French nationals and were organized in a series of technical and operating sections. This is expected to be continued for some time to come. Since the services lacked financial autonomy, there was no financial or accounting department in the proper sense. The P&T accounts formed part of the national budget and were supervised by the Financial Controller re- sponsible to the Minister of Finance. 2.03 Under the previous organization, operations, staffing and development of the P&T Department have largely suffered from Government budgetary problems. In spite of annual surpluses from telecommuni- cation operations during the past years, lack of budgetary allocations resulted in frequent delays in the settlement of current operating and maintenance expenses. Employees who had left or transferred from the P&T services could not be replaced. Development budgetary allocations were quite insufficient. Installations and quality of service there- fore suffered greatly from the lack of maintenance and qualified staff. For the moment a breakdown is prevented by the technical assistance provided by French personnel maintained at various levels of the organi- zation, but personnel are performing duties which are beyond their qualifications and experience. Development and renewal of the in- stallations are mainly provided by the French Fonds d'Aide et de Cooperation (FAC) and by other bilateral contributions such as USAID for specific projects. The New Office of Posts and Telecommunications 2.04 In 1964, the Upper Volta Government and the French Cooperation Services (FCS) administering the FAC and technical assistance under the Ministry of Foreign Affairs agreed that a study be made for the re- organization of the P&T services in Upper Volta. Towards the end of 1966 a French P&T senior adviser reported on the present status of the Department and made detailed proposals for its reorganization into an office with administrative and financial autonomy along the lines "l  - 3 - of similar offices in other French-speaking countries in West and Central Africa. The law creating the new OPT which is effective from January 1, 1969, and the Decree concerning its organization, management, and the controlling powers of the Government were passed by the Cabinet in June 1968. These arrangements follow closely the French adviserts recommendations. They also incorporate suggestions made by the mission and are satisfactory. 2.05 Additional statutory regulations concerning the financial ad- ministration of the Office, and its relationship with the Ainistry of Finance, have also been passed. These are satisfactory, as well as the regulations setting out the accounting organization in the Office. 2.06 The basic principle of the reorganization was to create a Government-owned entity responsible for Postal and Telecommunication services, with sufficient autonomy to be commercially operated on a self-supporting basis without undue recourse to the Government budget. The organization to be set up in the newly created OPT is formally satisfactory. From the scarce information available on past operations, and making reasonable assumptions which were discussed with local senior staff, past and forecast operating statements and balance sheets for P&T operations were prepared considering each service separately and in consolidation. These statements are reviewed in Chapters III and VI and show the financial viability of the OPT under the new organization. Management, Staffing and Training 2.07 OPT's new organization chart, which is being implemented, is shown in Annex 1. The Minister in charge of posts and telecommuni- cations is Chairman of OPT's Board of Directors. The Board comprises 13 members nominated by the Government to represent the related Ministries, the National Assembly, the Economic Council, the Chamber of Commerce and OPT's staff. The Office is to be headed by the P&T Director who is assisted by the Chief Financial Officer, a Deputy Director and Division Chiefs. There will be in fact little change from the lines of powers and internal organization of the present Department, with the exception that OPT's new Chief Financial Officer (Agent Comptable) is vested with all financial and accounting functions and resDonsibilities of the Office. This officer forms part of OPT's senior executive staff and has direct access to the Board. He is subject to inspection by the M4inistry of Finance and to audit by the Audit Branch of the Supreme Court (Chambre des Comptes de la Cour Supreme). 2.08 The present P&T Director is a Voltaic citizen who graduated from the French Ecole Superieure des PTT in the senior Postal Branch. He has been with the Department for about 10 years and is well quali- fied and capable of managing the services. Almost all other senior executive and chief technical staff at various key levels are French. A permanent adviser assists the Minister on budgetary, administrative and operational matters. Technical advisory and purchasing agent services are obtained through the FCS which since 1960 has also been financing most of the development of the Department on a grant basis.  - 4 - 2.09 At the end of 1967, P&T's total staff was composed of h14 permanent and 132 temporary employees. Of the permanent staff, 26h worked for the postal services and 150 for telecommunications. The Department operates 64 public offices within the country of which 18 are for postal service only. No substantial change occured in 1968. Most of the employees have received only a minimum of training and their productivity is therefore low. Supervisory staff is scarce and qualifications generally poor resulting in inadequate services in cer- tain sectors. Sufficient foreign assistance should therefore be retained at various levels and it has been agreed, during negotiations, that OPT will take all measures required to institute and maintain adequate telecommunications personnel recruitment. 2.10 From time-to-time the P&T Department organizes locally, vocational training courses for its employees. Due to lack of funds and instructors, this program only limps along, and should be reactivated and intensified. Professional and supervisory technical staff are trained abroad, mostly under French fellowships and scholarships to specialized schools, and the FCS is favorably considering cont