Senegal - Second Railway Project

RESTRICTED Report No. PTR-112a This report is for official use only by the Bank Group and specificaly authorized organizations or persons, It may not be published, quoted or cited without Bank Group authorization. The Ban]c Group does not accept responsbility for the accuracy or completeness of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A SECOND RAILWAY PROJECT SENEGAL May 31, 1972 Transportation Projects Department  Currency Equivalents Currency Unit = CFAFi CFAF 256 = US$1 CFAF 1 US$0.0039 CFAF 1,000,000 US$3,900 Fiscal Year July 1 - June 30 Weights and Measures Metric System Metric US Units 1 ton 1.102 short tons 1 km = 0.621 mile 1 ton-km 0.684 short ton-mile 1 pass-km 0.621 pass-mile 1 meter 3.281 feet 1 kg 2.205 pounds Abbreviations and Acronyms ACC - Agence Centrale de Comptabilite (5CcE - Caisse Centrale de Cooperation Economique CTLNA - Conmite des Transports du Materiel et des Produits A:ricoles FA'^ - Fonds d'Aide et de Cooperation OCA - Office de Conmercialisation Agricole 3i,FERaI - Office Central des Chemins de Fer d'Outre-AUler NCDAD - Office National de Cooperation et d'Assistance au Developpeament S0FREISAI - Societe Francaise d 'Etudes et de Atalisations Ferrov ires  SENEGAL APPRAISAL OF A SECOND RAILWAY PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ..... .................. i 1. INTRODUCTION ....... ........................... 1 2. BACKGROUND ........ ............................ 2 A. Economic Trends ...... .................... 2 B. The Transport Sector ..... ................ 3 C. Transport Policy and Coordination ........ 4 D. Coordination of Groundnut Traffic ........ 5 3. THE RAILWAYS ........ .......................... 6 A. Organization ...... ................... 6 B. Accounting ....... .. .. -. 7 C. Management and Administration ............ 8 D. Manpower, Productivity, and Wages ........ 8 E. Railway Property ...... ................. 9 F. Operations ....... ................... 9 G. Traffic .................................. 10 H. Branch Lines ....... ...................... 12 4. THE PROJECT ........ ........................... 12 A. The Third Four-Year Plan (1969/70-1972/73) 12 B. The Project and the Loan/Credit .... ...... 12 C. Financing of the Project ..... ............ 15 D. Execution of the Project, Procurement and Disbursement ..... .................. 15 E. Action Supplementary to the Project ...... 16 5. ECONOMIC EVALUATION ............ .. ............. 16 A. Track Renewal ............................ 16 B. Workshop Modernization ..... .............. 17 This Appraisal Report has been prepared by Messrs. J. Brechot (engineer), D. Havlicek and T. Nkodo (economists) and C.T. Vu (financial analyst).  TABLE OF CONTENTS (Cont'd) Page No. 6. FINANICIAL EVALUATION ...... .................... 17 A. General .................. ................ 17 B. Past Earnings ...... ...................... 18 C. Present Financial Position ............... 19 D. Rates, Fares, and Costs .................. 20 E. Future Earnings ............ .............. 21 F. Financing Plan ............ .. ............. 22 G. Future Financial Position ................ 24 7. AGREEMENTS REACHED AND RECOMMENDATION ......... 24 Tables 1. Selected Operating Statistics, 1966/67 to 1970/71 2. Passenger and Freight Traffic 1961 to 1970/71 and Traffic Forecast 1971/72 to 1976/77 3. The Project 4. Items to be Financed under Proposed Loan/Credit 5. Estimated Schedule of Disbursements 6. Operating Statistics and Financial Data Base Appendix (Underlying Assumptions) 7. Summary Income Statements as of June 30 8. Reconstructed and Projected Balance Sheets as of June 30 9. Freight and Passenger Traffic Cost and Revenue 1969/70 10. Investment in Fixed Assets and Provision for Depreciation 11. Sources and Application of Funds ANNEXES 1. Consulting Services for Transport Coordination and Planning - Tentative Terms of Reference 2. Senegal Railways Organization Chart 3. Consulting Services for Study on Improvement of Operation - Tentative Terms of Reference 4. Consulting Services for Organization and Management of Thies Workshops - Tentative Terms of Reference 5. Summary of Principal Commitments in Connection with Credit 96-SE and of Action Taken 6. Brief Description of Railway Property 7. Freight and Passenger Traffic Forecasts 8. Plan of Action for the Regie 9. Tariff Regulations, Training of Staff, Reorganization of the Commercial Department, Improvement of Accounting and Revaluation of Fixed Assets - Tentative Terms of Reference MAP Senegal Railway System - IBRD 3666  SENEGAL APPRAISAL OF A SECOND RAILWAY PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project for the rehabilitation and modern- ization of the Regie des Chemins de Fer du Senegal (Regie). The objectives are to enable the Regie to retain its vital role in the transport sector and to reestablish its financial viability. The proposed loan/credit of US$9.6 million equivalent (loan US$6.4 million and credit US$3.2 million) would be the second lending operation to Senegal for railway purposes. ii. Despite increased use of road transport, especially for agricul- tural produce, the railway still carries about two-thirds of the country's freight traffic and remains the most important means of land surface trans- port. Eighty percent of freight traffic is either block train, bulk or cap- tive traffic for which the railway will continue to provide the most economic transportation. The railway system extends up to Bamako and provides Mali with a low cost access to foreign markets. Under these circumstances, the railway is expected to retain its key position in the region's transport system. However, due to growing highway competition, high labor cost, and inadequate operating efficiency, the financial situation of the Regie is critical. iii. The results of the first railway project under Credit 96-SE have been rather disappointing. The Regie's performance in physical terms im- proved more slowly than anticipated but the physical targets have now been reached about three years behind schedule. However, due to a sharp decrease in groundnut traffic and an unexpected overall economic stagnation in Senegal and Mali, the financial targets could not be achieved. The Regie continued operating at a loss and its rate of return on net fixed assets remained nega- tive, compared with a forecast of 4% for 1969/70, according to the 1966 ap- praisal. Other commitments in the Credit Agreement were fulfilled only par- tially, or not at all, particularly transport coordination, reduction in num- ber of staff, and control of wages and salaries. The situation should improve greatly with the implementation of the proposed investments and the supplemen- tary action plan. iv. The Regie has an unsatisfactory liquid position resulting essen- tially from large Treasury overdraft upon which it had to rely in recent years in order to meet its cash requirements. Since it is unlikely that the Regie will be able to reimburse the Treasury overdraft within a reasonable period, the Bank recommended, and the Government agreed, that a debt clearing and rescheduling operation should take place. Confirmation that all the Regie's short-term debt to the Government as of December 31, 1971 be rescheduled into medium-term debt effective July 1, 1972, followed by a reconversion,to be effective July 1, 1973, of half of all the Regie's debt to the Government as of December 31, 1971 into equity, and the remaining half into long-term debt is a condition of loan credit effectiveness.  - ii - v. Pending completion of the Fourth Four-Year Plan (1973/74-1976/77), to be prepared in 1972 as stated in the agreed Plan of Action, the Regie and the Bank Group have prepared a project consisting of track renewal work, rehabilitation of the Thies workshop, modernization of rolling stock and technical assistance; it is to be completed within three years. This project, which will be incorporated in the future Four-Year Plan, is designed to carry on the physical rehabilitation of the Regie's equipment and to improve its management, operations and finances. The total cost of the project is about US$12.3 million equivalent, including contingencies. The proposed loan/ credit of US$9.6 million equivalent would cover the cost of the foreign ex- change component of all items except six diesel locomotives already financed by French suppliers' credit and the Fonds d'Aide et de Cooperation (FAC), and 74% of the local currency costs of equipment and works. vi. In order to secure the maximum benefits from the modernization and rehabilitation program, the Regie will need to retain technical assis- tance and intensify staff training. vii. Government initiation of comprehensive transport and investment planning forms an important part of the proposed project; up to now, lack of qualified personnel has prevented satisfactory progress in this area. viii. The economic rate of return of the two major items in the project, track renewal and workshop rehabilitation and modernization, is estimated, respectively, at 17% and 18%. The financial benefits derived therefrom will also be substantial. These, and the anticipated traffic level, are expected to enable the Regie to eliminate operating deficits by 1974/75. By 1975/76, the rate of return on net fixed assets in use is estimated to reach 2%, a rate considered reasonable under the circumstances. The operating ratio will be reduced to about 90%. ix. The project is suitable for a Bank Group operation of US$9.6 mil- lion, consisting of a Bank loan of US$6.4 million and an IDA credit of US$3.2 million. The proposed loan would be made to the Regie for a term of 25 years, including five years of grace. The proposed credit would be made to the Government of Senegal and relent to the Regie on the terms and condi- tions of the proposed Bank loan.  SENEGAL APPRAISAL OF A SECOND RAILWAY PROJECT 1. INTRODUCTION 1.01 The Government of Senegal and the Regie des Chemins de Fer du Senegal (Regie) have asked the Bank Group to help finance a project designed to carry on the physical rehabilitation of the Regie's equipment and to im- prove its management, operations and finances, pending the completion of the Fourth Four-Year Plan (1973/74-1976/77). The project, expected to be com- pleted within three years, consists of track renewal work, rolling stock and motive power, workshop rehabilitation, technical services and training of Regie staff. Total cost of the project is estimated at CFAF 3,169.5 million (US$12.31 million equivalent). Toward this, a Bank loan of US$6.4 million and an IDA credit of US$3.2 million are proposed to cover the major part of the Regie's foreign exchange and 74% of its local cost requirements. As an important part of the project, a Plan of Action has been agreed upon with the Government and the Regie; the most important features of the Plan are mentioned in this report and are summarized in an annex for easy reference. 1.02 This would be the second Bank Group lending operation to the Regie since Senegal became independent; the first amounted to US$9 million equiva- lent, of which three-fourths has been spent and the remainder will be fully disbursed in June 1972. Prior to independence, a Bank loan was made (Loan 100-FR, 1954) for US$7.5 million equivalent to the Office Central des Chemins de Fer d'Outre-Mer (OFFEROM) for dieselization. 1.03 Senegal Railways was created as a State-owned autonomous entity in August 1960 out of that part of the former Dakar-Niger Railways situated in the Republic of Senegal. Dakar-Niger Railways, serving what has now become Senegal and Mali, was run by a single management with headquarters at Thies, Senegal. Senegal Railways, while continuing to maintain its head- quarters and workshops at Thies, inherited a share of the properties and net assets of the former Dakar-Niger Railways, representing 62% of the total. The remaining 38% became the Mali Railway, operating under independent con- trol and management. From September 1960 until July 1963, all railway traf- fic was discontinued between Senegal and Mali. In 1966, the Association granted a credit of US$9.1 million (95-MLI) for the development of the Mali Railway and is now considering the appraisal of a second project to finance part of its 1973-1976 railway program. 1.04 International traffic is regulated by an Agreement between the Senegal and Mali Governments and by a Convention between the Senegal and Mali Railways. The Convention provides for the handling of traffic and oper- ations across the border, exchange of rolling stock, and common tariffs. The Convention generally provides an adequate and practical basis for the regulation of international traffic. International traffic is also facili- tated by a Customs Agreement between the two countries, providing for tax- free passage of Mali goods in Senegal. Cooperation between the two railways is satisfactory, but the Regie has high receivables from the Mali Railway, mainlv for frelght car rentals and maintenance services. The Association  - 2 - has received confirmation that the Senegal Covernment has agreed to the pro- posal made by the Mali Covernment to settle this debt in full through install- ment payments up to mid-1974. 1.05 The Regie's performance has improved more slowly than anticipated under Credit 96-SE. The physical targets have almost been reached, some three years behind schedule, but progress toward achieving the financial targets has lagged. The Regie was unable to contain the increase of ex- penses to the expected rate, and growth of revenues from national and inter- national traffic did not materialize as projected, due to a virtual economic stagnation in both Senegal and Mali, and a sharp decrease in Senegal's grotend nut production. Economic missions to Senegal and Mali reported, however, that both economies are on an expansionary course again and are expected to sustain it. 1/ 1.06 The project fits well into the development strategy of the trans- port sector advocated by the Government and the Bank Group, of modernization and rationalization of existing facilities, feeder road construction and improvement of transport and investment planning in the transport sector to provide the economy with an adequate transport network. 1.07 This report is based on (a) findings of an appraisal mission to Senegal in September 1971, consisting of Messrs. J. Brechot (engineer), D. liavlicek and T. Nkodo (economists), and C.T. Vu (financial analyst); and (b) data provided by three consultants' reports 2/. 2. BACKGROUND A. Economic Trends 2.01 In 1969, Senegal's per capita domestic product was estimated at US$194, which is relatively high for West Africa 3/. However, since 1969, Senegal has had a slow rate of economic development, hardly exceeding popu- lation growth. GDP in constant prices increased by 2.6% per annum between 1961 and 1965, and only by 1.5% between 1966 and 1970. This economic stag- nation, which also adversely affected the growth of the transport industry, can be explained by many factors, the most important of which are: (a) the dislocation of French West Africa in the early 1960's with the advent of independence for the former colonies; Dakar, and Senegal in general, had a central position in 1/ Report No. AW-15a, 1970 (Senegal) and Report No. AW-30a, 1971 (Mali). 2/ Etude d'Entretien Routier - Societe Louis Berger (USA), (1971); Prix de Revient et Politique Tarifaire - SOFRERAIL (France), (1971); and Etude de Reorganization des Transports de l'ONCAD - ITALCONSULT (Italy), (1971). 3/ GDP per capita in Senegal is third in West Africa after that of the Ivory Coast (US$280 in 1968) and Liberia (US$263 in 1969).  - 3 - the administrative and economic organization of the colonial territory, which was adversely affected by independence; (b) the loss of preferential prices for groundnuts in the French market in 1967-1968, the adverse weather in recent years and a restrictive Government policy with respect to the compensa- tion of groundnut producers, which resulted in a decline of production; and (c) the acute rural exodus and the growing unemployment in the towns. 2.02 The Government has now taken energetic measures to diversify agri- cultural production and to restore confidence to farmers by raising producer prices and paying various production and planting bonuses. The last economic mission to Senegal (Report No. AW-1Sa) forecast an annual growth rate of 5.5% p.a. for GDP in constant prices. This increase in the growth rate is explained by the expected recovery in groundnut production, to be brought about by an increase in the Government purchase price and the reorganization of the ground- nut marketing system, as well as the favorable trends in the production of other agricultural products and Government's policy of improving rural infra- structure (see also para. 2.03). These measures are also expected to increase demand for transport. B. The Transport Sector (i) Development Strategy 2.03 Transport accounted for 6% of GDP in 1968. During the first and second development plans, 1961-1964 and 1965-1968, transport ranked high in public investments, representing, respectively, 26% and 28% of total expend- itures, with the major emphasis on roads and bridges. However, because of the small size of investments in feeder road construction and improvement, the expansion of the road network had little effect on agricultural produc- tion. Government recognized this weakness in its development policy and shifted its emphasis in the third development plan (1969-1972) to improving the quality of rural transport infrastructure through increased construction of feeder roads. 2.04 Investment in railways during the first and second development plans amounted to CFAF 3.9 billion, representing 21% of total public investments in transport infrastructure. This amount was used essentially for track renewal and rehabilitation, the purchase of rolling stock and additional equipment to meet higher levels of traffic, and the improvement of safety and operational efficiency. 2.05 Government strategy in the transport sector is aimed at moderniza- tion and rationalization of existing facilities, construction of feeder roads, and improvement of transport and investment planning. Bank lending in the sector since independence (1960) has been US$9.0 million in 1966 (Credit 96-SE) for a railway rehabilitation and modernization program, US$4.0 million in 1967  -4- for Dakar Port (Loan 493-SE) and US$2.1 million for feeder road construction and technical assistance (Credit 198-SE). Another highway project for the im- provement of road maintenance is now under preparation. Possible Bank Group participation in the improvement of Dakar airport is being appraised. (ii) The Transport System 2.06 The railway is the most important freight carrier in Senegal, ac- counting for an estimated 65% of total freight traffic in 1970. The bulk of this traffic is concentrated in phosphates, groundnuts and transit traffic for Mali. Passenger traffic has declined substantially with the expansion of the road network and the vehicle fleet. A full discussion of railway traffic is presented in paragraphs 3.13 to 3.18. 2.07 Senegal's railway provides the landlocked Malian economy with its main route to the sea. It is estimated that 36% of Mali's exports and 63% of its imports pass through Dakar. These percentages are expected to in- crease over the next five years as a result of transport coordination measures adopted by the Malian Government. The international traffic rep- resented 43% of the Regie's traffic and more than 52% of the Regie's traffic revenues in 1969/70. 2.08 Senegal's road network totals over 9,000 km, of which 2,000 km are paved. This network is concentrated in the coastal regions and the groundnut areas, and the main roads partly parallel the railway lines. The vehicle fleet increases on the average by 5.5% p.a. In 1968, there were about 53,000 vehicles in Senegal 1/, an increase of 32% over 1963. 2.09 River transport and coastal shipping are presently insignificant in the country's transport system. Until now, Senegal has made little us of the Gambia river in Gambia, although the navigable upstream branches of this excellent waterway reach deep into Senegal's interior region. Senegal's foreign trade is mainly concentrated in the Dakar port; the three main second- ary ports are Ziguinchor on the Casamance river, Kaolack on the Saloum river and St. Louis on the Senegal river. 2.10 Dakar has one of the main international airports in West Africa. Domestic air passenger and freight traffic is insignificant. A dozen out- lying towns are served by the national airline, Air-Senegal. C. Transport Policy and Coordination 2.11 Under Credit 96-SE (1966), Government agreed to move toward less re- strictive transport policy and overall transport coordination. The long-term objectives covered, inter alia, (a) the establishment of a non-discriminatory transport policy and other Governmental policies affecting the transport sec- tor; (b) the adoption of measures to ensure the adequacy of road user charges; (c) the implementation of a cost-related and competitive pricing policy for 1/ Excluding diplomatic administrative and military vehicles.  - 5 - the Regie; and (d) the use of economic criteria for public investment or dis- investment in transport facilities. However, transport planning, policy mak- ing and coordination are dispersed among the Ministry of Planning, the Minis- try of Finance and the Ministry of Public Works, Urbanism and Transport, and the transport sector is still hampered by a highly restrictive regulatory system. Additionally, transport coordination and planning of public trans- port investment on the basis of economic criteria suffers from a lack of adequate data, particularly for road transport, and from a shortage of quali- fied planning staff. 2.12 Present regulations of road traffic do not appear to be in line with Government's stated transport policy objectives (para. 2.11). Entry into goods transport is restricted by a stringent licensing policy. Road user charges are estimated to be significantly higher than the costs of providing and maintaining the roads. Since 80% of the Regie's traffic is either block train bulk or captive traffic (paras. 3.13 to 3.18), there is little danger of an uneconomic distribution of traffic between road and rail, but high road user costs may have hampered the growth of generated road traffic. 2.13 An attempt by Government in 1967 to solve the problem of rational allocation of traffic through a committee 1/ representing the transport modes, their main customers and Government was not successful because the committee had no authority to deal with the difficult issues of distorted transport prices and restrictive licensing of road transport. During negotiations, agreement was reached with Government that, by a date not later than December 31, 1972, the Direction des Transports in the Ministry of Public Works, Urban- ism and Transport will be responsible for formulation and implementation of transport policy planning and coordination in close cooperation with the other Ministries concerned. To assist in implementation of the policy objectives outlined in paragraph 2.11, technical assistance is needed for (a) training of planning staff; (b) improvement of data collection; (c) investment plan- ning; (d) reviewing the effects of the regulatory system and other relevant policies; and (e) studying the rationality of road user charges. During negotiations, assurance has been received from Government that technical as- sistance of two experts experienced in transport economics will be secured for a period of about two years for the areas indicated above under terms of reference to be agreed upon by the Bank Group. Tentative terms of reference are included as Annex 1. Agreement has also been reached that the experts will report to the Direction des Transports. D. Coordination of Groundnut Traffic 2.14 In 1965/66, it was agreed with the Association that Government, through its agricultural agency, OCA (Office de Commercialisation Agricole), would annually allocate 400,000 tons of groundnuts to the Regie. This was resorted to because it was clear that anomalies in the market meant that pricing did not result in distribution of groundnut traffic in accordance 1/ Comite Directeur des Transports du Material et des Produits Agricoles, created by Decree No. 67-1119 of October 13, 1967.  - 6 - with economic costs. Experience of the last five years showed that the agreement failed because: (a) due to climatic and market conditions, ground- nut production declined sharply since the peak harvest in 1965; (b) measures to spread shipment of groundnuts evenly over a longer period did not have the desired results because of inadequate storage facilities and organiza- tional difficulties; and (c) the OCA (now ONCAD) 1/ failed to enforce road/ rail groundnut allocation. Furthermore, rigid enforcement of the agreement would not have brought about better cost-based transport coordination be- cause the reduction of groundnut production changed the optimal economic distribution of groundnut traffic in favor of road transport. Government became increasingly concerned about this unsatisfactory situation and, in 1970, appointed consultants, ITALCONSULT, 2/ to determine, within the framework of the overall reorganization of ONCAD under a Bank Group agri- cultural project (Loan 548-SE/Credit 140-SE, 1969), the optimum distribution of groundnut traffic between road and rail. However, due to a lack of ade- quate cost data on road transport, the consultants initially used road and rail tariffs as a criterion for the distribution of groundnut traffic. 2.15 For the reasons outlined above, allocation of traffic through the price mechanism does not sufficiently ensure economic efficiency. Therefore, at the request of the Association, Government confirmed during negotiations that distribution of groundnut traffic between road and rail would be determined annually in advance by ONCAD and the Regie, taking into account the recommendations of the Comite Directeur des Transports du Materiel et des Produits Agricoles, based on the forecast production of groundnuts and on respective transport costs and service characteristics. 3/ The new method of allocation of groundnut traffic hasboome effective with the 1971/72 groundnut harvest. In addition, the Regie plans to compete more effectively with road transport through a scheme of more flexible tariffs and improvements in the quality of service. Government's and the Regie's measures are considered adequate to ensure distribution of groundnut traffic between road and rail on a cost and market-oriented basis. 3. THE RAILWAYS A. Organization 3.01 The Regie is owned by the Government and regulated by a Presidential Decree of October 1967. It is under the authority of the Minister of Public Works, Urbanistn and Transport and is administered by a Board consisting of 18 members, including the Chairman nominated by the Minister of Transport. Eleven 1/ Office National de Cooperation et d'Assistance au Developpement. 2/ ITALCONSULT, Rapport d'Activite, July/September 1971. 3/ Consultants' reports recently made available cost information on road and rail traffic: SOFRERAIL, Prix de Revient et Politique Tarifaire, October 1971. Louis Berger, Etude d'Entretien Routier, Dakar, September 1971.  - 7 - members of the Board are Government representatives, the remainder representing the Chambers of Commerce and Industry (3), the Trucking Industry (1), the National Assembly (1), and railway personnel (2). The Director of Financial Control and the Comptroller of Financial Operations, attached to the Presidency, attend the Board meetings in a consultative capacity. 3.02 Except for the operating and capital budgets which, in addition to review and endorsement by the Board, require specific approval of the Minis- ters of Transport and Finances, the Board has overall authority for railway administration. Its powers are delegated to the Chairman, subject to his re- porting at least bi-annually to the Board at statutory meetings. The Chair- man must also submit to the Board the investment programs, personnel policies and borrowing operations. The Board may delegate part of its authority to a Permanent Committee consisting of eight members. 3.03 The Manager, who is the chief executive officer of the Regie, is appointed or dismissed by Presidential decree; he is responsible to the Board, whose meetings he attends. The Manager agrees that he should be assisted by a Deputy in the future; selection and training of a suitable individual was discussed during negotiations. Annex 2 shows the present organization chart of the Regie. The organization, similar to that of many other railways, is satisfactory. B. Accounting 3.04 The Regie's accounting is maintained by the Central Accounting Agency (ACC) 1/ under the control of the Ministries of Finance and Transport. The chief accountant of the Regie, appointed or dismissed by a joint deci- sion of the Ministers of Finance and Transport, acts as liaison officer with the ACC. This organization, which serves some 18 public agencies, provides a tight Government control over the finances of the Regie but does not hinder the railway management, except for some delays due to its heavy workload. 3.05 The accounting staff of the Regie is competent and capable of pro- viding the management with all necessary financial information. However, the accounts, as they are now being presented according to a "commercial" account- ing method, do not give a detailed breakdown of income and expenses by sources and by types of railway operations. It has been agreed during negotiations that the Regie will accompany its existing accounts with a detailed breakdown of revenue by sources and costs by major categories. To this end, the base of a cost accounting system is needed and the Regie has agreed to include such a provision in the terms of reference for the costing study consultant (Annex 9). 3.06 Financial reporting is often late. Following repeated request by the Association, an independent auditing firm, the same one accepted by the Bank for the audit of the port of Dakar's accounts, was appointed in April 1971 to examine the Regie's accounts from 1966/67 onward. Part of the work has been completed and the submission of audit certificates up to and including 1970/71 is a condition of effectiveness of the loan/credit. The Bank's auditing requirements have been discussed during negotiations and 1/ Agence Central de Comptabilite.  - 8 - agreement has been reached on the scope, form, and timing of future audit reports,to be submitted no later than six months after the end of each fiscal year. C. Management and Administration 3.07 Many managerial officials lack practical railway experience; how- ever, they generally display keen interest in their work and should, through continued effort, reach the required level of efficiency. There are some inadequacies at the supervisory and foreman levels due to insufficient train- ing and, sometimes, premature replacement of French technical assistants by Senegalese lacking railway experience. 3.08 Technical assistance and training of staff are necessary to im- prove operation of the railways. At the management level, the Regie needs to be strengthened in the operating field and in the organization and ad- ministration of the Thies workshops. Provision has been made in the proposed loan/credit for the financing of the services of one expatriate operating ad- viser attached to the General Manager for one year, and one expatriate work- shop expert for a two-year period (para. 4.09). Terms of Reference (Annexes 3 and 4) were discussed and agreed upon with the Regie during negotiations. At the lower staff level, agreement was also reached during negotiations on the following measures: (a) intensification of the training program in order to provide adequate supervisory and technical skills, and (b) establishment of a long-term program for the gradual replacement of French technical assistants by Senegalese counterparts. 3.09 A railway planning unit, established in 1970 to formulate and coordinate the Regie's medium and long-term planning in such areas as traffic forecasting, marketing, investment planning, costing, and pricing, is perform- ing satisfactorily. However, some outside assistance will still be needed for the establishment of a new, cost related competitive pricing system (para. 4.09 and Annex 9). D. Manpower, Productivity, and Wages 3.10 Total personnel (excluding temporary track workers) as of June 30, 1971 was as follows: Technical Assistants 44 Permanent 1,907 Auxiliary 1,481 Total 3,432  -9- This is 18% less than in 1965. Productivity, at 171,000 traffic units 1/ per employee, is satisfactory in relation to African conditions and traffic den- sity, and shows an increase of 26% since 1965. However, considering tiie type of operation (mainly bulk train traffic), the Regie should be able to re- duce the staff further and increase productivity to about 233,000 traffic units by 1975/76 (Annex 8). On the other hand, the Regie suffers from high personnel costs inherited from pre-independence days. The remuneration of permanent staff is notably higher than that of other Senegalese employees in similar categories and this results in a high level of direct personnel expenditures, 2/ some 71% of the total working expenses. These matters were the subject of a covenant in the Credit 96-SE Project Agreement; how- ever, neither objective (staff reduction and limitation of increases in wages and salaries) was reached (Annex 5). In view of the Regie's deficits, a particular effort should be made to improve the situation. During negotia- tions, the Regie agreed to reduce its staff by attrition and limitation of recruitment according to a five-year program, in accordance with which direct personnel expenditures should not exceed 64% of total working expenditure by 1975 (Plan of Action, Annex 8). E. Railway Property 3.11 A brief description of railway track, structures, equipment and other property is presented in Annex 6. Property as a whole has been lack- ing proper maintenance except for telecommunications network and signalling, which are in good condition. However, track is being improved and the pro- posed rehabilitation of the motive power and rolling stock workshops at Thies will ensure adequate maintenance. F. Operations 3.12 Table 1 gives a summary of operating statistics from 1966/67 to 1970/71; performance is below attainable standards and the Regie should seek improvement. Reference is made to the proposed Plan of Action (Annex 8) which sets detailed time-phased objectives for improvement of operations. To assist the General Manager, provision has been made in the proposed loan/credit for the financing of the services of a high-level operating expert for one year (para. 3.08). Passenger-km have decreased while passen- ger train-km lhave increased; seat utilization coefficient was 68% in second class and 24% in first class. The situation is somewhat better in the case of railcar service using recently acquired stock. Average freight car-km per car in service per day is only 70 km, which is low. Average freight car turn-around is satisfactory for phosphate traffic, which is bulk short dis- tance traffic, but unsatisfactory for national and international Mali traffic, respectively 5-1l2 and 2-1/2 trips per month. Availability of diesel engines was about 70%, a substantial improvement over past years but still too low. 1/ Ton-km plus pass-km. 2/ Defined as total personnel expenditure minus pensions, cost of training, transport of personnel, medical services and other fringe benefits.  - 10 - Availability of railcars was also 70% with a daily average run of about 495 kr,. The proposed rehabilitation of the workshops should improve the utilization of rolling stock. Delays, accidents and on-line breakdowns o- failures are high due to the poor condition of the sections of track still to be renewed and of some over-age rolling stock, poor discipline and in- sufficient training of station staff and engine drivers. The Regie is aware of the situation and has begun a professional training program. (. Traffic (i) Freight Traffic 3.13 Freight traffic on the Senegal Railways can be divided into four groups: 1970/71 Thousands Millions of tons % of ton-km X 1. Phosphates 1,234 69.2 134 40.6 2. Groundnuts 117 6.6 22 6.7 3. "Other" National 204 11.4 33 10.0 4. International 228 12.8 141 42.7 Total 1_783 100.0 330 100.0 Details of freight traffic statistics for the years 1963/64-1970/71 and fore- casts for the years 1971/72-1976/77 are discussed in Annex 7 and Table 2. Over the last eight years, freight traffic increased at an annual growth rate of 5.0%. The same growth rate was found for traffic in ton-km, which increased from 256 to 330 million. For the period 1971/72-1976/77, freight traffic is expected to increase by 4.3% annually to 2.3 million tons, and by 5.2% annually in terms of ton-km to 445 million ton-km. 1976/77 Thousands Millions of tons % of ton-km _ 1. Phosphates 1,572 67.6 172 38.7 2. Groundnuts 250 10.7 50 11.2 3. "Other" National 214 9.2 40 9.0 4. International 291 12.5 183 41.1 Total 2,327 100.0 445 100.0  - 11 - 3.14 Phosphate traffic consists of aluminumi phospha*tle from doipozldu near Thies (Lam Lam) amounting to about 120,000 tons (11 miiillion ton-kin) p.a. and the larger calcium phosphate deposits of Taiba which amount to about one million tons (110 million ton-km) p.a. Traffic of aluminum phosphates is expected to remain stationary, whereas Taiba traffic is fore- cast to increase by 4.9% p.a. because of a strong increase in demand for calcium phosphates. Phosphate traffic accounted for about 20% of the Regie's revenues in 1970/71. Contract rates for Taiba phosphate traffic were in- creased by 8% in April 1972. 3.15 Groundnut traffic reached a peak of 282,000 tons (47 million ton-kiii) in 1965/66 and declined to 117,000 tons (22 million ton-km) in 1970/71 due to a reduction in groundnut production (para. 2.01) and other reasons outlined in paragraph 2.14. Groundnut traffic is expected to in- crease again to about 250,000 tons (50 million ton-km) by 1975/76. This increase can be attributed to (a) increased production of groundnuts brought about by a more market-oriented Government agricultural policy (para. 2.02), (b) a more flexible competitive pricing and marketing policy of the Regie, and (c) a more economic distribution of groundnut traffic between road and rail (para. 2.14). The Regie's revenues from groundnut traffic amounted to 16% of total freight traffic receipts in 1970/71, and are expected in the future to regain their previous share of about 20% of total traffic receipts. 3.16 Other national traffic consists of all other commodities carried by the Regie, including "less-than-carload" traffic. In 1970/71, a total of 200,000 tons (33 million ton-km) was carried, amounting to about 11% of total freight revenue. Forecasts of this traffic, based on the expected growtli of GDP, show an increase of about 3.5% p.a. 3.17 International traffic through the ports of Dakar and Kaolack to Mali has gained increasing importance for the Regie, in terms of both traffic volume and revenue. In 1970/71, the Regie's traffic to and from Mali amounted to 43% of total ton-km and 51% of total freight traffic revenue (CFAF 1.6 billion), up from 37% and 45% respectively in 1963/64. International traffic is vital for both the Senegal and the Mali Regies, representing more than 80% of the Mali Regie's total traffic and 70% of its total receipts. Forecasts of Mali traffic are based on the Mali Regie's traffic projection supplemented by a sectoral analysis of Mali's main traf- fic generating sources and the country's prospective import needs. Inter- national traffic is expected to increase by 5% p.a. in terms of tons and 5.3% p.a. in terms of ton-km. (ii) Passenger Traffic 3.18 Between 1963/64 and 1969/70, national passenger traffic remained al- most constant, averaging just over 3.5 million passengers and 270 million pass- km per year. Analysis indicates a high price and income elasticity of demand in passenger traffic and, consequently, a high vulnerability of the Regie's passenger traffic to low priced bus competition (Annex 7). In 1970, passenger traffic declined by 21% (passengers) and 9% (pass-km) respectively, largely because of a fare increase of some 10% and the drop in domestic production,  - 12 - particularly in the agricultural sector. Passenger traffic is expected to recover slightly in 1971/72 due to a repeal of the fare increase mentioned above, improved quality of service (para. 6.08) and an expected recovery of agricultural production. The forecast takes into account an increase in the average journey length (Table 2). 11. Branch Lines 3.19 The Regie's system comprises about 370 km (35% of the system) of low traffic density lines. 1/ Traffic density ranges between 7,000 tons and 131,000 passengers p.a. (1969/70) on the Louga-Linguere line to 90,000 tons and 769,000 passengers p.a. on the Tivaouane-Louga section. While a tenta- tive analysis of marginal costs of these lines suggests that they are not uneconomic, it seems that they make an inadequate contribution to overhead. During negotiations, assurance has been given that the railways' planning unit will conduct detailed studies on the lines' economic and financial viability until mid-1973, and, subsequently, Government and the Regie will agree with the Bank upon the appropriate course of action. Agreement with Governmnent has also been reached during negotiations that in cases where Government should insist on keeping unprofitable lines in operation for social, political or other reasons, the Regie will be reimbursed for the financial savings that would have been possible by closing the lines (Plan of Action, Annex 8). 4. THE PROJECT A. The Third Four-Year Plan (1969/70-1972/73) 4.01 A railway Plan covering the four-year period 1969/70-1972/73 has been prepared by the Regie and agreed upon by the Government. However, be- cause of the unavailability of funds, only a small part of the proposed investment was made in 1969/70 and 1970/71. Some investment in rolling stock and motive power was made possible in 1971/72 under FAC grants and CCE loans; some other investments in track renewal works were financed with the savings under the previous Credit 96-SE. Remaining proposed investment, amounting to CFAF 3,U19 million (about 62% of the total amount of the Plan), and concerning mainly track renewal, rolling stock and motive power and work- shop rehabilitation, was shifted into 1972/73. The Plan, as it now stands, appears obsolete and of no practical use as a basis for a new project. B. The Project and the Loan/Credit 4.02 The proposed Plan of Action (para. 4.16) provides that a detailed Fourth Four-Year Plan 1973/74-1976/77 will be prepared in 1972. Pending completion of this Plan, a project (Table 3) consisting of the same items that were shifted into 1972/73 of the Third Plan (para. 4.01) plus techni- cal services and training, has been prepared by the Regie and the Bank 1/ Tivaouane-St. Louis (170 km); Louga-Linguere (128 km); Diourbel-Touba (47 km); Guinguineo-Kaolack (21 km).  - 13 - Group; this project, which is expected to be completed within three years, will be incorporated in the future Four-Year Plan and forms the basis for the proposed loan/credit. 4.03 The total cost of the project is estimated at about CFAF 3,169 million (US$12.31 million equivalent) with a foreign exchange component of CFAF 1,742 million (US$6.8 million equivalent). In view of the Regie's tight financial situation, agreement was reached with the Regie that, ex- cept for small, miscellaneous equipment estimated at about CFAF 170 million (para. 6.15), investments should be limited to the project during the years 1972/73-1974/75, unless the Bank Group agrees otherwise. A breakdown of the project and of the expenditure suitable for finance under the proposed loan/credit is given below: US$ Million % Total Proposed CFAF Million US$ Million Expend- Loan/Credit Local Foreign Total Local Foreign Total iture Total /1 1. Track renewal 1,106.5 948.3 2,054.8 4.29 3.68 7.97 64.7 6.84 (175 km) 2. Workshops re- habilitation and equipment 231.0 191.0 422.0 0.89 0.74 1.63 13.2 1.40 3. MIotive power (6 diesel locomotives) - 337.0 337.0 - 1.32 1.32 10.7 - 4. Modernization of rolling stock (350 bogies) 20.0 36.0 56.0 0.07 0.14 0.21 1.7 0.19 5. Teclinical services and training abroad - 135.7 135.7 - 0.53 0.53 4.3 0.53 Total 1,357.5 1,648.0 3,005.5 5.25 6.41 11.66 94.6 8.96 Price contin- gencies 69.9 94.1 164.0 0.28 0.37 0.65 5.4 0.64 Grand Total 1,427.4 1,742.1 3,169.5 5.53 6.78 12.31 100.0 9.60 /1 Foreign exchange plus 74% of local cost such as ballast, aggregate, electric welding, transport and labor.  - 14 - 4.04 The proposed loan/credit of US$9.6 million will meet about 77% of the t:otal cost of the project. It will finance 83% of the foreign exchange (the six diesel locomotives will be financed jointly by French suppliers' credit and the Fonds d'Aide et de Cooperation (FAC)) and 74% of the local cost (Table 4). 4.05 The six diesel locomotives, similar in type and power to locomotives in service, are intended to replace over-age diesel locomotives and will be equipped with devices for running in "multiple unit". These locomotives of medium power (1200 hp) will give more operating flexibility than fewer high power engines. 4.06 Track renewal over 175 km of the main line is part of the ongoing project of rehabilitation of the track from Dakar to the Mali border. About 243 km have already been renewed or are being renewed under the previous cre- dit. After completion of the proposed additional 175 km, 226 km will remain to be renewed up to the Mali border. Track renewal with 36 kg/m rail, long welded rails and concrete sleepers will ensure greater safety and improve efficiency. Track renewal represents some 71% of the proposed loan/credit. 4.07 The Thies rolling stock and motive power workshops are inefficient and need modernization. The layout is inadequate, requiring construction of some new buildings, removal of others, installation of proper handling equip- ment and replacement of over-age machine tools. The proposed new layout has been carefully designed and is satisfactory. Workshop rehabilitation repre- sents 14%, of the proposed loan/credit. 4.08 Modernization of rolling stock (freight cars) consists of replac- inv plain bearing axle-boxes with roller bearing axle-boxes; 652 bogies are to be modernized and the provision in the proposed loan/credit will permit modernizing about 50% of the total stock. The use of roller bearings will reduce: (a) maintenance costs and the number of staff employed in the work; (b) occurrence of hot boxes with subsequent train delays and derailments; and (c) tractive effort, thus saving fuel. 4.09 Provision for technical services and training is intended to fi- nance the services of (a) an expert in train operation, for one year, to in- vestigate the shortcomings of train operations and recommend improvement (Annex 3); (b) an expert in workshop management, for two years, to assist in the physical rehabilitation of the Thies workshop and to organize the proper functioning of the workshop and the training of staff (Annex 4); and (c) training abroad of Regie senior staff. Furthermore, provision has been made for an expert from SOFRERAIL for about seven months to supplement its report on costing with a study covering tariff regulations and training of staff together with a reorganization of the Commercial Department. Terms of Reference for this costing expert were discussed and agreed upon during nego- tiations (Annex 9). 4.10 The cost estimates for track renewal, the main item in the project, are based on prices quoted recently for the renewal of the additional 39 km under Credit 96-SE. Cost estimates for the workshop rehabilitation, the sec- ond mails item in the project, are based on proposals received recently by the  - 15 - Regie from local enterprises. A price contingency allowance of about 5% has been added to local costs. A price contingency of about 8% has been added to meet possible increase in the cost of imported materials (mainly steel), ex- cept for the four diesel locomotives already ordered. C. Financing of the Project 4.11 The following table summarizes the financing plan of the project: CFAF Million US$ Million % Financed From: Railway resources 374 1.40 11.3 Suppliers' credit and FAC 337 1.31 10.6 Proposed loan/credit 2,458 9.60 78.1 Total 3,169 12.31 100 D. Lxecution of the Project, Procurement and Disbursement 4.12 The Regie is competent to carry out the project. Track renewal will be performed by Regie forces which are now well trained and do good work; in addition, workshop modernization will be supervised by the expert to be en- gaged under the proposed loan/credit. 4.13 Preferential trade arrangements exist between Senegal and members of the European Economic Community. They are, however, irrelevant for pro- curement procedures under the project because the Government has exonerated the Regie from taxes and duties levied on import of goods financed under Credit 96-SE and confirmation was given during negotiations that the Govern- ment will continue this policy. 4.14 All imported items (rails, fastenings, rolling stock, steel struc- tures, etc.) will be acquired through international competitive bidding. Regarding cement, mostly needed for the manufacturing of ties by the Regie, international competitive bidding will also apply, and a preference of 15% will be given to local suppliers. Regarding ballast, sand, and aggregate, it is reasonable to assume that they will be procured locally (through com- petitive bidding), as it is most unlikely that foreign suppliers will show interest; electric welding of long rail is performed in the Regie workshop with its own equipment. 4.15 Disbursements will be made on the CIF landed cost of imported equip- ment and materials as well as on the foreign cost of technical services and training, and on 74% of the cost of locally acquired goods and services. The estimated quarterly and annual rates of disbursement of the proposed loan/ credit are given in Table 5. The disbursements will extend through FY 1974/ 75. It is proposed that if there are any savings in 3ank Group financed items of the project, they be used to finance the foreign exchange costs and, possi- bly, part of the local cost (74%) of continuing items in the plan, subject to review and agreement with the Bank Group.  - 16 - L. Action Supplementary to the Project 4. J6 In order to achieve the full potential benefits of the Investment Program and to allow the Regie to reach financial viability by 1975/76, a sup- plementary Plan of Action has been proposed by the Bank Group. This Plan out- lines measures which the Regie should adopt to improve operations, reduce staff, introduce a cost related competitive pricing policy and simplified tariffs, study certain branch lines which appear to be unprofitable, and prepare, in 1972, the Regie's Fourth Four-Year Investment Plan 1973/74-1976/77. Thc majority of the lines of action included in this Plan are discussed in thc relevant sections of this report and the whole Plan is reproduced as Annex 8. During negotiations, agreement on this document was reached with Government and the Regie. 5. ECONOMIC EVALUATION A. Track Renewal 5.01 Some 400 km of track remain to be renewed on the main line from Dakar to Kidira (644 km) on the Mali border. This line serves Mali as the main link to the Atlantic and is a valuable foreign exchange earner for Senegal. The track has passed its useful life, and severe speed restrictioas have been imposed for safety reasons. Accidents, however, still are frequent. The envisaged track renewal, designed to strengthen the backbone of the Senegal railway system, was started during the Second Four-Year Plan and partly fi- nanced by Credit 96-SE. If the track renewal program were not carried out, the line could be kept in operation only for another eight years, at increv3-- ing maintenance and accident cost, reduced line capacity and a substantial loss of traffic and income to the Senegal economy 11. The economic analysis given below includes the acquisition of six diesel locomotives to replace over-age locomnotives now running on this line and the completion of track renewal of the line up to the Mali border, which is planned to be achieved in about five to six years. 5.02 In the economic evaluation, three possible alternatives were con- sidered against immediate renewal of the track: (a) complete deterioration of the line (estimated at eight years); (b) continuation of traffic on the old line and renewal after its complete deterioration; and (c) improving the road to Kidira. 5.03 The economic benefits of the track renewal with respect to alterna- tive (a) can be derived from savings in track and rolling stock maintenance, reduced accidents, improved rolling stock utilization, and reduced fuel con- sumption for that traffic still on the line for the remainder of its useful 1/ A comparison of transport economic costs with the Bamako-Abidjan route, Mali's alternative outlet to the Atlantic, shows the Dakar-Bamako route to be more economic for most of Mali's traffic.  - 17 - lifetime. For the traffic which is lost to the economy during the period of increasing deterioration and thereafter, the benefit is measured by the net value added per unit-km. The economic rate of return would be about 22%. 5.04 In the case of alternative (b), the project would yield the same type of benefits as alternative (a) for the first eight years until the line is completely renewed. Thereafter, no substantial additional benefits are assumed. The internal economic rate of return would be about 17%. 5.05 Alternative (c) takes into account the possibility of partly up- grading the existing road up to Tambacounda and constructing a new road up to the Senegalese border 1/. Even if only marginal operating and maintenance costs are considered and road construction cost is excluded from the economic evaluation, the track renewal of the whole line would yield an internal eco- nomic rate of return of 25%. 5.06 Analysis suggests that the timing of the investments is also satis- factory, with a first year benefit of about 12%. Therefore, it can be con- cluded that the investment in track renewal is economically well justified. B. Wokshop Modernization 5.07 The present inadequate layout of the workshops and their obsolete machinery cause delays in servicing and repair of rolling stock of about double the time considered normal technical standard. This adversely affects the utilization and, thus, the earning power of the rolling stock. The pro- posed workshop investment, at a total cost of CFAF 453 million (including technical assistance), would finance high priority items of the workshop modernization such as improved layout of buildings, new handling equipment and machine tools. 5.08 The economic benefit of the workshop modernization program would come from the reduction in unit maintenance cost of about CFAF 70-80 million a year. The possible reduction in unit maintenance cost would yield an in- ternal rate of return of about 18-24%. The rate of return is understated because it does not account for the possible increase in utilization of roll- ing stock which, for lack of adequate data, could not be quantified. 6. FINANCIAL EVALUATION A. General 6.01 The Regie has been operating in financial difficulties since its creation in 1960. The main reasons have been low revenues due to a low traffic volume, coupled with inefficient operations resulting in high operating costs. In 1966 a general rehabilitation and modernization program was started, large- ly financed by Credit 96-SE. It aimed at improving the Regie's operations and 1/ This understates the work to be done because it does not take into ac- count the necessary construction of a road from Kidira to Bamako (490 km).  - 18 - restoring its financial viability. The implementation of the program was delayed, but the physical objectives have now been achieved, about three years behind schedule. However, the financial targets could not be reached, primar- ily because of an unforeseen sluggishness of economic development, and in 1969/70 the Regie's losses amounted to about CFAF 280 million, as compared to the CFAF 340 million loss in 1965/66 when the rehabilitation first began. As a result, the Regie's rate of return on net fixed assets in use remained nega- tive, compared with a forecast of 4% for 1969/70 according to the 1966 appraisal. B. Past Earnings 6.02 General statistics on the Regie's operations from 1965/66 to 1969'1,"7 with provisional data for 1970/71, are given in Table 6. The Regie's finan- cial performance during the last five years, compared with projections made in the appraisal report for the first railway project, is given in Table 7 and summarized as follows: 1965/66- 1966/67- 1967/68- 1968/69- 1969/70- 66/67 67/68 68/69 69/70 70/71 (CFAF Million) Revenue Actual 2,422 2,633 2,416 2,541 2,450 Projected 2,614 3,026 3,286 3,589 3,686 Expenditure Actual 2,451 2,514 2,442 2,389 2,417 Projected 2,452 2,501 2,548 2,599 2,653 Working Ratio Actual 101 96 101 94 99 Projected 101 83 78 72 72 Depreciation Actual 284 336 265 395 258 Projected 400 485 521 545 551 Operating Ratio Actual 113 108 112 110 109 Projected 118 97 93 88 87 Interest Charges Actual 24 2 29 44 54 Projected 4 37 87 172 144 Net Surplus (Deficits) Actual (337) (219) (320) (287) (279) Projected (242) 3 130 273 338 6.03 Operating revenue during the period remained at about the same level of CFAF 2.5 billion (US$10 million equivalent) a year, whereas projections made in 1966 assumed that operating revenue would increase by about 50% over the  - 19 - period. The sharp decrease in groundnut traffic (para. 2.14) and the unexpect- ed overall economic stagnation in Senegal and Mali account for a large part of the discrepancies between projections and realizations; however, experience suggests that the projections made in 1966 were generally optimistic. Although the Regie was somewhat successful in containing operating expenditures, it con- tinued to operate at a loss during the whole period. C. Present Financial Position 6.04 Comparative balance sheets for the Regie are given in Table 8. They show that, as of June 30, 1970, the Regie had total assets of CFAF 13.8 billion (US$54 million), of which net fixed assets amounted to CFAF 11.9 billion; the current ratio was 0.6 and the debt/equity ratio 22/78. The Regie has an unsatisfactory liquid position resulting essentially from large Treasury overdraft on which it has had to rely over the years to cover its deficits and meet its cash requirements. Since it is unlikely that the Regie would be able to reimburse the Treasury overdraft within a reasonable period along with all other debts outstanding to the Government, it was agreed during negotiations that the Regie's debt to the Government be subject to the following clearing operation: (a) effective as of July 1, 1972, rescheduling of all Treasury overdraft and any other short-term debts of the Regie to the Government outstanding as of December 31, 1971 into Trea- sury advances maturing in one year; (b) after ratification by the Parliament and effective as of July 1, 1973: (i) conversion of about CFAF 1.95 billion, or half of all the Regie's debt to the Government, except proceeds from Credit 96-SE, outstanding as of December 31, 1971 into equity; and (ii) rescheduling of the remaining half of all the Regie's outstanding debt to the Government as of the above-mentioned date into long-term debt, free of interest charges and repayable over fifty years with a ten-year grace period. Projections of the Regie's future financial position reflect the above opera- tion, which will improve the Regie's liquid position and provide it with additional borrowing capacity when continuation and completion of the current rehabilitation program will require more external financing. Copy to the Bank of a letter of confirmation by the Government to the Regie on the above operation is a condition of loan/credit effectiveness. 6.05 The debt of the Mali Railway, mainly for freight car rentals and maintenance services, has remained high over the years because the Mali Railway itself has not been paid by the Mali Government and other Government agencies for services rendered. The Association has received confirmation that the Senegal Government has agreed to the proposal made by the Mali Government to settle this debt in full through installment payments up to mid-1974.  - 20 - D. Rates, Fares, and Costs 6.06 A recent traffic costing study 1/ revealed that the Regie's freight rates cover the marginal cost of transporting specific traffics under con- sideration and contributed CFAF 971 million to overhead in 1969/70 (Table 9). However, there is room for a simplification of the tariff structure, which would lead to increased revenue from freight traffic. In setting freight rates, the Regie applied the traditional concept of covering the fully distributed costs of traffic which, in the case of Senegal, tends to expose to wasteful competition some traffic for which the railway is best suited. This policy, in conjunction with other factors, may have contributed to the decline in the important groundnut traffic, which accounts for about 10% of the Regie's total traffic (in terms of ton-km) and 20% of its revenues. During negotiations, assurance has been given by Government and the Regie that a more flexible and competitive pricing policy will be adopted and im- plemented by the Railways. Furthermore, the SOFRERAIL report on costing will be supplemented by a study covering adequate tariff regulations, train- ing of staff and reorganization of the Commercial Department of the Regie (para. 4.09). 6.07 More than 80% of the Regie's freight traffic, producing about 90% of total freight revenue, is carried at negotiated rates. Average revenue per net ton-km has remained fairly constant, ranging from CFAF 5.1 to 5.2 (USJ1.85-1.89) per ton-km. Considering the Regie's deficits (para. 6.02), some selective rate adjustments, e.g., in the tariff for Taiba phosphates, are required. During negotiations, assurance has been given by Government and the Regie that, by the second quarter of FY 1972/73, the overall aver- age revenue per ton-km will be increased to CFAF 5.5 through selective rate adjustments and a modification of the tariff structure, following the recom-- mendations of consultants, SOFRERAIL (Annex 8). This level is considered the maximum possible in the given competitive environment. 6.08 Passenger fares are low and make an insufficient contribution to overhead, although average revenue per passenger increased by about 15% in the period 1963/64-1970/71. In 1969/70, passenger revenues contributed only CFAF 18 million to overhead (Table 9). Further increases, however, are pre- cluded by (a) severe bus competition in the heavily populated areas of the Dakar-Thies-St. Louis region and (b) the high price elasticity of demand of the Regie's clientele and its dependence on groundnut marketing prospects. Therefore, the Regie must find means for further cost reductions. To this end, diesel locomotive trains will increasingly be replaced by railcars, with an expected reduction in marginal cost per pass-km for national passenger traffic of 50% at no additional investment cost. The economies can be achieved entirely through improved maintenance of the existing railcars, made possible by the intended workshop modernization, and better train scheduling. In addition, the Regie's operating performance is expected to be improved by the services of an expatriate operating expert proposed in the project (para. 3.08). 1/ Prix de Revient et Politique Tarifaire - SOFRERAIL (France), 1971.  - 21 - E. Future Earnings 6.09 Forecasts of the Regie's revenues and expenditures up to 1975/76 are shown in Table 7. The underlying assumptions are given in Table 6 and the attached appendix. Provisional data available for 1970/71 show a slight decline in revenue reflecting the persisting economic stagnation in Senegal. This trend, however, is expected to reverse from 1971/72 onward based on the following expectations, which are considered reasonable: (a) increased traffic, induced by a more vigorous growth of the economy (para. 2.02); (b) a rise in international traffic to and from Mali; and (c) a selective tariff increase in the second quarter of 1972/73 (para. 6.07). 6.10 In the projections of the income and expenditures related to the Regie's operations, no consideration has been given to the eventual closure or subsidization of uneconomic branch lines. On the other hand, assumption was made that the Regie will improve its current billing procedures. All aspects considered, growth in operating revenue from 1970/71 to 1975/76 will average about 7% per year, which is satisfactory. On the expenses side, personnel costs are expected to be reduced through a containment policy (para. 3.10) agreed upon during negotiations. Other operating costs, based on past data, including fuel, lubricants and materials, have been allowed to increase in proportion to traffic volume, with an additional increase of 5% per annum to cover inflation. This rate of inflation is assumed to affect the prices of imported fuels and materials up to 1973/74. There- after, it is assumed that increased efficiency in operations and mainte- nance resulting from the execution of the project will partly compensate for inflation and reduce its effect to 2-1/2% per annum. The same assump- tion, which is considered realistic, has been made concerning miscellaneous charges. With working costs thus growing at a lower rate than increases in revenue, the working ratio should decline from 96% in 1970/71 to 71% in 1975/ 76. The operating ratio should also improve from 110% to 91% in spite of higher depreciation allowances from 1971/72 onward as recommended by SOFRERAIL. Table 10 gives the details of projections of depreciation provisions used in this report based on a more realistic, new revaluation of assets and depre- ciation scheme made by SOFRERAIL. The revaluation of assets and the computa- tion of depreciation at the rates recommended by the consultants SOFRERAIL in their report entitled "Prix de Revient et Politique Tarifaire", October 1971, has been agreed upon during negotiations. As a result, revenues and expenses are expected to evolve approximately as follows:  - 22 - Operating Net Expenses Operating Net In- Operating Excluding Deprecia- Revenue Interest come or Revenue Depreciation tion or (Deficit) Charges (Deficit) (CFAF Million) 1970/71 2,423 2,368 287 (233) 124 (356) 1971/72 2,683 2,396 526 (239) 142 (381) 1972/73 2,858 2,405 552 ( 99) 178 (277) 1973/74 3,053 2,435 629 ( 11) 235 (246) 1974/75 3,241 2,437 642 162 302 (140) 1975/76 3,322 2,375 659 288 308 ( 20) 6.11 The above table shows a gradual improvement of the Regie's finan- cial performance. An operating deficit of CFAF 233 million in 1970/71 should turn into an operating revenue of CFAF 288 million in 1975/76. These figures are computed without considering the possible closure of branch lines which would result in additional savings. Also, despite the assumed rate of inflation of 5% per year, the projections do not envisage tariff increases after 1972/73. As a result, the Regie should have room for further tariff adjustment in later years. With long-term debt rising to cope with capital investment requirements, interest charges will also increase sharply and the Regie is expected to continue to operate with a deficit, after interest charges through 1975/76; the gap is, however, narrowing from CFAF 356 million in 1970/71 to CFAF 66 million in 1975/76. The corresponding rate of return on average net fixed assets in use will be 1.8%. During negotiations, it has been agreed that the Regie will, as part of its Plan of Action, achieve operat- ing ratios of no more than 100% in 1973/74, 95% in 1974/75, 91% in 1975/76, and thereafter a rate of return of at least 2%. Such targets are considered realistic; however, the Regie should aim at higher rates of return in subst.- quent years. F. Financing Plan 6.12 A detailed cash flow forecast up to and including 1975/76 is shown in Table 11. Funds required by the Regie and the sources of such funds dur- ing the tlhree-year disbursement period of the project (July 1, 1972 to June 30, 1975) may be summarized as follows: 1/ 1/ With the exclusion of CFAF 76 million (US$0.3 million equivalent) for the financing of consultants' work on transport coordination and planning (para 2.13).  - 23 - CFAF US$ Percent Million Million Funds Required 1. Proposed Project 3,093 12.1 84 2. Other capital expenditures 167 0.7 5 3. Increase in working capital 422 1.6 11 Total requirements 3,682 14.4 100 Sources of Funds 1. Regie's resources: Cash generated internally 1,875 7.3 51 less: debt service 913 3.5 25 Net internal cash generation during period 962 3.8 26 2. FAC grant 150 0.6 4 3. Borrowings: Proposed Bank loan and IDA credit 2,380 9.3 65 CCCE loan 190 0.7 5 Sub-total borrowings 2,570 10.0 70 Total sources 3,682 14.4 100 6.13 The above summary shows that the Regie would be able to finance about one-fourth of its investment requirements with its own resources. This rather low contribution is acceptable in view of the difficulties en- countered by the Regie in increasing its internal cash generation. Indeed, the achievement of this low contribution is dependent upon the realization of the forecast increases in revenues (due in particular to the projected tariff increases) and cost savings discussed in paragraphs 6.09 and 6.10. It is also based on the assumption that the clearing and rescheduling of all the Regie's debts to the Government, as of December 31, 1971, with the exception of the proceeds from Credit 96-SE (para 6.04), will have taken place, and that satisfactory arrangements will be made for the repayment by the Mali Regie and its transit agents SOCOPAO of their current debts to the Senegal Regie (para. 6.05). 6.14 Because of the expected low level of its cash generation in the next three years, the Regie will have to rely heavily on borrowings, repre- senting two-thirds of total sources of funds. The projections assume that the proposed Bank loan of US$6.4 million to the Regie will be repaid in 25 years, including five years of grace, and will bear interest at 7-1/4% p.a.,  - 24 - and that the proposed credit of US$3.2 million to the Government will be re- lent to the Regie on the same terms and conditions as the Bank loan. Firm arrangements have already been made for the CCCE loan which, together with the grant from FAC, is financing the six diesel locomotives included in the project. 6.15 In addition to the proposed project, the Regie is expected to incur capital expenditure of about CFAF 170 million (US$0.7 million equivalent) dur- ing the project period, mainly for the purchase of miscellaneous equipment. 6.16 The financing plan is satisfactory. However, in the event of a shortfall in the Regie's internal cash generation or of a project cost over run, the Government has agreed to provide such funds as may be needed to complete the project. G. Future Financial Position 6.17 Forecast balance sheets of the Regie up to 1975/76 are shown in Table 8. The Regie's liquidity position would be satisfactory. However, in the event of a shortfall in the Regie's revenues or of an increase in its expenses, the Government should provide the Regie with adequate funds to enable it to meet its working expenses, service its debt and maintain an adequate working capital. This was agreed in principle by the Government and has been confirmed during negotiations. 6.18 The Regie's debt/equity ratio is expected to increase gradually from 18/82 on June 30, 1970 to 35/65 on June 30, 1976. During the next four years, the Regie's debt service coverage would be amlple (varying from 1.8 to 2.0), mainly because repayments of debt incurred for the proposed project are not scheduled to start during that period. Maximum future debt service requirements will reach the level of CFAF 600 million by 1977/78, while net cash revenue is expected to surpass the same level by as early as 1973/74. During negotiations, it has been agreed that no further debts other than those assumed for the project would be incurred by the Regie without the prior approval of the Bank, unless its net cash revenue is at least 1.5 times its maximum future debt service requirements. 7. AGREEMENTS REACHED AND RECOMMENDATION 7.01 During negotiations, agreement was reached with the Government of thie Republic of Senegal and the Regie on the following principal items: (a) technical assistance to Government in the field of transport planning and coordination (para. 2.13); (b) financial targets for fiscal years 1973/74, 1974/75, 1975/76 and thereafter (para. 6.11); (c) debt limitation arrangements (para. 6.18);  - 25 - (d) adjustment of personnel expenditure (Plan of Action, Annex 8, para. 2); and (e) revision of tariffs leading to an overall increase in average revenue per ton-km of CFAF 5.5 by the second quarter of fiscal year 1972/73 (Plan of Action, Annex 8, para. 3). 7.02 The following items shall be conditions of effectiveness of the proposed loan/credit: (a) submission of audit certificates for the accounts from the fiscal years 1968/69, 1969/70 and 1970/71 (para. 3.06); and (b) confirmation of the clearing and rescheduling by the Government of all the Regie's debts with the Government, as of December 31, 1971 (para 6.04). 7.03 The project provides a suitable basis for a Bank loan of US$6.4 million and an IDA credit of US$3.2 million equivalent. The proposed loan would be made to the Regie for a term of 25 years, including five years of grace. The proposed credit would be made to the Government of Senegal and relent to the Regie on the terms and conditions of the proposed Bank loan. A Guarantee Agreement will be concluded between the Republic of Senegal and the Bank. May 31, 1972   TABLE 1 SENEGAL RAILWAYS Selected Operating Statistics 1966/67 1967/68 1968/69 1969/70 1970/71 I. TRAFFIC Passenger-km (million) 295 277 291 280 258 Net ton-km (million) 335 239 332 337 328 I/ Traffic anits (pass-km + ton-km) 630 566 623 617 586 (million) Traffic units per 000 employees 157 159 175 171 171 II. OPERATIONS Train-km (000):2i Passengers 2,150 2,177 2,190 2,273 2,331 Phosphates - - 164 216 245 Others (freight and service) 992 859 873 820 825 Total 3,142 3,036 3,227 3,309 3,401 Loconotive-km (000): Passengers 1,148 1,128 1,412 1,218 754 Phosphates - - 166 180 216 Others (freight and service) - - 818 748 942 Total 1,148 1,128 2,396 2,146 1,912 Railcar-hn (000) 1,088 1,070 957 1,175 1,509 Number of wagons loaded: Phosphates 25,913 20,716 23,787 23,943 26,854 Others (freight and service) 22,967 24,129 25,903 24,958 20,875 Total 48,880 44,845 49,690 48,901 47,729 Average load of freight car: Phosphates 47 46 45 47 46 Other (freight) 23 23 22 18 18 Service - - - 6 5 Engine-day in fleet 11,160 11,280 11,358 11,520 11,691 Engine-day in service 6,433 6,561 6,758 7,399 8,310 Engine-km per engine in service per day 253 264 274 284 286 Railcar-day in fleet 3,630 3,820 4,480 4,680 4,728 Railcar-day in service 2,802 2,884 3,120 3,204 3,264 Railcar-kla per railcar in service per day 404 412 432 488 494 Average freight car-km per car in service per day 75 72 71 68 70 Seat-km available (million): Railcars 1st class - - - 57 69 2nd class 83 107 163 183 214 Coaches lst class 30 35 24 45 36 2nd class 331 312 201 164 139 Seat-km in service (million): Railcars 1st class - - - 14 21 2nd class 54 79 127 120 144 'Coaches 1st class 19.5 24.3 22.7 11.3 8.4 2nd class 215.4 224.1 207.5 107.7 94.3 Seat occupancy ratio' (%): 1st class 24.7 16 28.9 26.5 23.7 2nd class 68.5 74.7 78.2 65.5 67.8 Ton-km available (million) 821 697 692 697 697 Ton-km utilized (million) 382 325 328 333 340 Turnaround time - Revenue earning Phonpe atri (Taiba (70 km) 0.3 0.3 0.3 0.3 (Lam-La. (70 km) o.6 o.6 0.6 o.6 0.6 National traffic 4.7 4.7 4.7 4.7 4.7 Mali traffic 10.3 10.3 10i. 1. 3 10.3 Number of breakdowns: Locomotives 179 221 327 373 210 Railcars 30 37 60 41 39 Number of accidents: Affecting rolling stock 138 228 215 278 263 Casualties 73 92 71 165 59 / Including service traffic (15.7 ton-km) j Including service railcar train March 1972   TABLE 2 Page 1 SENEGAL RAILWAYS Passenger and Freight Traffic (1969-1970f71) 1961 1962/63 1963/64 196h/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 a) in unWits Passengers (thousands) 2,664 3,929 3,642 3,205 3,518 3,825 3,574 3,656 3.503 2,793 National 2,664 3,929 3,625 3,186 3,k81 3,769 3,531 3,612 3,460 2,745 International - - 17 19 37 56 43 44 43 48 Freight (000 tons) 1,005 893 1,389 1,394 1,685 1,785 1,536 1,667 1,637 1,783 Phosphates 569 452 814 841 1,043 1,202 944 1,044 1,127 1,234 Thies 119 109 105 123 130 134 131 122 125 150 Taiba 450 343 709 718 913 1,068 814 922 1,002 1,084 Groundnuts 254 248 254 222 282 223 259 203 131 117 Other National 182 195 171 144 138 158 147 179 155 204 International - - 150 187 182 202 186 241 224 228 b) in imi t/lkm Passenger (mrillion pass-hlo) 196 295 303 292 290 295 277 291 280 257 National 196 295 290 277 271 267 257 270 259 235 Average Length of Joumey (km) 74 75 80 87 78 71 73 75 75 86 International - - 13 15 19 28 20 21 21 22 Average Length of Joumey (ken) - - 765 789 513 500 465 477 488 458 Freight (million tk) 137 135 256 277 304 336 290 331 323 310 Phosphates 59 47 82 91 113 131 102 114 123 134 Thies 10 9 9 11 11 12 11 11 11 14 Taiba 49 38 73 80 102 119 91 103 112 120 Groundnuts 37 41 41 39 47 43 42 35 30 22 Other National 241 47 38 28 28 32 28 32 30 35 International - - 95 119 116 130 118 150 140 141 Source: Regie March 1972  TABLE 2 Page 2 SENEaAL RAILWAYS Traffic Forecast (197172-1976/77) 1970/71- 197)172 1972/73 1973/74 1974/75 1975/76 1976/77 1. Passengers (1000) National 2,745 2,917 2,952 2,968 2,980 3,017 3,035 International 48 47 48 49 50 51 52 Total 2,793 2,964 3,000 3,017 3,030 3,068 3,087 2. Freight ( OOO tons) Phosphate s Thies 150 125 125 125 125 125 125 Taiba 1,081 1,102 1,169 1,236 1,304 1,371 1,447 Groundnuts 117 223 223 236 236 250 250 Other National 204 184 190 196 202 208 214 International 228 213 226 258 290 288 291 Total 1,783 1,847 1,933 2,051 2,157 2,242 2,327 * * * * * * 1. Passengers ( million pass-hm) National 235 248 251 254 255 256 258 Average Length of Journey (an) 86 85 85 85 85 85 85 International 22 22 22 23 24 24 24 Average Length of Journey (kom) 458 468 458 469 480 470 469 Total 257 270 273 277 279 280 282 2. Freight (million ton-la) Phosphates Thies 14 11 11 11 11 11 11 Taiba 120 122 130 137 145 152 161 Groundnuts 22 41 41 43 45 50 50 Cther National 33 34 35 36 37 39 40 International 141 133 141 162 182 181 183 Total 330 341 358 389 420 433 445 1/ Actual Source Senegal Regie; Mali Regie; Association March 1972  SENEGAL RAILWAYS The Project (CFAF Million) - - - 1972/73 - - - 1973/74 - - - 1974/75 - - - Grand Total Items Number Local Foreign Total Local Poreign Total Local Foreign Total Local Forein Total A. Track Track renewal 175 km 85.7 73.5 159.2 806.9 691.6 1,2498.5 213.9 183.2 397.1 1,106.5 948.3 2,054.8 B. Workshops Rehabilitation and equipment of workshops 115.5 95.5 211 115.5 95.5 211 231 191 422 C. Motive Power and Rolling Stock 1. Diesel locomotives 337 337 337 337 2. Modernization of rollinig stock (350 bogies) 20 36 56 20 36 56 D. Technical Assistance man-months 1. Implomentation of new tariff 10 13 13 13 13 2. Workshop adviser 24 15.6 15.6 15.6 15.6 31.2 31.2 3. Operating adviser 12 15.6 15.6 15.6 15.6 4. Training abroad 12 15.6 15.6 15.6 15.6 5. Coordination of transport 48 30.1 30.1 30.1 30.1 60.3 60.3 Total 221.2 631.9 853.1 922.4 832.8 1,755.2 213.9 183.2 397.1 1,357.5 1,648.0 3,005.5 Price contingencies 266- 9. 6 price contingencies 1/ ~~~12.1 16.4 28.5 46.1 63.0 109.1 11.7 14-7 2.4 6994.14 GRAND TOTAL 233.3 648.3 881.6 968.5 895.8 1J864.3 225.6 197.9 423.5 1,427.4 1,742.1 3,169.5 1/ A price contingency of about 5% has been added to local cost for works; a price contingency of about 8% has been added to meet possible increases in the cost of imported materials (mainly steel), except for the four diesel locomotives already ordered through bilateral arrangements. May 1972  TAELE 4 SENEGAL RAILWAYS Items to be financed under Proposed Loan/Crecdit Amount Category US$ equivalent I. Track renewal of about 175 km of the main-line (from km 243 to km 418) (a) Foreign Exchange Cost 3,6o0,000 (b) 74% of local cost 3,160,000 6,840,000 II. Thies Workshop rehacilitation and equipment (a) Foreign Exchange Cost 750,000 (b) 74% of local cost 650,000 1,400,000 III. Modernization of freight cars (1,400 roller bearings) (a) Foreign Exchange Cost 140,000 (b) 74% of local cost 50,ooo 190,000 IV. Technical Services and Training (a) Foreign Exchange Cost 530,000 V. Unallocated 640,o0o Total 9.600 000 May 1972  TAMLE 5 SENEGAL RAILWAYS Estimated Schedule of Disbursements (uS$ 000) IBRD/IDA Fiscal Year Cumulative Disbursement and Quarter at end of Quarter 1972/73 December 31, 1972 110 March 31, 1973 160 June 30, 1973 1,770 1973/74 September 30, 1973 4,040 December 31, 1973 5,660 March 31, 1974 6,500 June 30, 1974 7,880 1974/75 September 30, 1974 8,430 December 31, 1974 8,970 March 31, 1975 9,600 Underlying assumptions: 1. Effective Date: October 31, 1972 2. Bidding for procurement: September 1972 for rails and fittings December 1972 for workshop equipment 3. Delivery: June 1973 through December 1973 for rails and fittings June 1973 through December 1973 for workshop equipment 4. Local cost (74%): June 1973 through March 1975 May 1972  SENEGAL RAILWAYS Operating Statistics and Financial Data Base (A) Work Done 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 Weight Traffic - Revenue earning: Tons (thousand) 1,645.0 1,785.o 1,537.0 1,776.0 1,637.0 1,783.0 1,847.0 1,933.0 2,051.0 2,157.0 2,242.0 Ton/Km (millions) 304.0 336.0 290.0 331.0 323.0 330.0 341.0 358.o 389.0 420.0 433.0 Average length of haul 185.0 188.o 189.0 199.0 197.0 185.0 185.0 185.0 190.0 195.0 193.0 Passenger Traffic Number (thousand) 3,518.0 3,825.0 3,574.0 3,656.o 3,503.0 2,793.0 2,967.0 3,000.0 3,017.0 3,030.0 3,068.0 Passenger/las (million) 290.0 295.0 277.0 291.0 280.0 25'7.0 270.0 273.0 277.0 279.0 280.0 Average length of journey 82.0 77.0 78.0 80.0 80.0 92.0 91.0 91.0 92.0 92.0 91.0 Train - Km, revenue earning (000) Passenger & Railcar 2,169.9 2,153.3 2,181.1 2,187.9 2,276.4 1,976.9 2,000.0 1,992.7 1,978.6 1,924.1 1 866.7 Freight 890.2 968.3 838.2 1,060.9 1,015.1 1,031.3 1,065.6 1,118.8 1,215.6 1,312.5 1,353.1 Total ' 3,060.1 3,121.6 3,019.3 3,258.8 3,290.5 3,008.2 3,o65.6 3,111.5 3,195.2 3,236.6 3,219.8 (B) labor Statistics Number of employees 4,193 5,028 3,570 3,558 3,617 3,432 3,389 3,321 3,276 3,218 3,o60 Personnel Expenditure (millions CFAF) V 2,006.6 2,061.3 1,776.2 1,894.2 1,845.4 1,812.0 2/ 1,803.0 1,780.0 1,769.0 1,750.0 1,677.0 Cost per employee (000 GFAF) 478.6 511.6 497.4 532.2 510.2 528.o- 532.0 536.0 540.0 544.0 548.0 Traffic units per employee 141,664.6 156,653.4 158,823.3 174.817.3 166,712.7 171,037.2 180,289.0 190,003.0 203,296.7 217,215.7 233.006.5 (C) Indices 1965 = 100 Consumer Price Index 100.0 100.8 101.0 100.8 100.9 100.1 100.9 102.7 103.5 104.4 105.2 Coot per mployee: At current prices: 100.0 116.9 103.9 111.1 106.6 117.1 118.0 118.9 119.8 120.8 121.8 At oonstent prices 170.0 106.0 102.8 110.2 175.6 115.0 115.8 115.8 115.8 115.8 115.8 Productivity per man employed 100.0 110.6 112.1 123.4 117.7 120.7 127.3 134.1 143.5 153.3 164.5 (D) Staff Costs expressed as % of: Operating Revenue 92.8 78.3 73.5 75.5 75.3 75.8 68.2 62.2 57.9 54.0 50.5 Operating Expenditure 73.4 72.3 65.6 68.o 68.9 68.2 61.7 60.1 58.9 57.7 56.0 Working Expenditure 81.9 82.0 72.7 79.3 76.5 76.5 75.3 74.0 72.6 71.8 70.6 (E) Freight Traffic Average Net Train load, revenue earning freight 341.5 357.4 346.o 312.0 318.5 320.0 320.0 330.0 335.0 350.0 350.0 Average revenue per t/hm (CFAF) a) At current Prices 5.1 5.1 5.5 5.2 5.1 4.9 5.2 5.5 5.5 5.5 5.5 b) At constant Pricso (1965 = 100) 5.1 5.1 5.4 5.1 5.1 4.8 5.1 5.4 5.3 5.3 5.2 Average revenue per train-km 1,741.7 1,771.7 1,903.0 1,622.4 1,624.4 1,568.0 1,664.0 1,815.0 1,842.5 1,870.0 1,925.0 (F) P=gngerTraffic PP-1 Z Ps er Train/km of total train/km 71.1 69.o 72.2 67.4 69.2 65.7 65.2 64.o 61.2 59.4 58.o % Passenger Train Revenue of total freigh5t & Passenger Revenue 31.5 29.9 29.8 29.7 30.( 28.7 2y.7 2'7.9 26.5 25.2 24.8 Average Rumber of Passenger per train 132 137 127 133 123 133 135 137 150 145 150 Average Revenue per Passenger/Ion 2.5 2.5 2.4 2.4 2.6 2.6 2.8 2.8 2.8 2.8 2.8 Average Revenue per train/Im 327.0 351.5 311.4 321.3 315.3 335.9 374.o 381.4 390.7 404.3 420.0 (G) Fuel, lubricant J, other materials Fuel, lubricant a materials 399.3 532.5 381.8 438.0 417.5 547.0 473.0 508.0 525.0 533.0 Miscellaneous general charges 53.5 133.3 113.4 132.5 3/ 139.0 145.5 152.0 158.5 162. 165.O Total Non-Personnel Charges I 442.2 452.8 665.8 455.2 571.4 556.3 592.5 625.0 666.5 687 o 698. Variable Cost per Train/Iom (CFAF) N... 128.5 176.5 117.0 133.0 3/ 139.5 146.3 152.5 159.0 162.5 166.C (H) Fixed Assets Net Value (CFAF Mil) 9,631.5 10,263.3 11,392.0 11,762.7 11,950.0 12,251.4 14,359.5 15,575.1 16,115.1 17,019.1 17,901.1 (I) Turnover - Operating Revenue 25.1 25.7 21.2 21.6 20.5 19.8 18.4 18.4 19.0 20.3 20.4 Expressed as % of Ret fixed assets (J) Return on Investment. Net Operating N.a. N.a. N.a. N.a. N.a. N... N.a. N.a. 0.0 1.0 1.8 Revenue expressed as % of average net fixed assets in use. Note: 1/ Including pension and benefits. 2/ Regie's budgeted figure used as base for projection. 3/ 1969/1970 figures used as base for projections with an increase of 5% for each of the following years, as-loing cost increases an imported materials, up to 1973/1974 and 2.5% thereafter allowing same compensatory effect from higher efficiency achieved. Pebruary 1972  APP&NDix to TABLE 6 Underlying Assumptions (A) Work done The basic assumptions underlying freight traffic forecasts are explained in Annex 7. The number of train/km is obtained by dividing traffic in ton/km (pass/km) by the average net load per train (average number of passengers per train) (B) Labor Statistics These statistics were computed under two major assumptions: if there will be no replacement hirings for retiring staff and If real wages will remain constant throughout the period 1971/72 to 1975/76, as agreed with the Regie and the Minister of Transport. Traffic units per man employed is obtained by dividing total traffic (ton/km + pass/km) by the number of employees during the year. (C) Indices The consumer price index is expected to increase by a rate equal to the average rate of increase for the last ten years, i.e. 0.8% per annum. Productivity per man employed is obtained by dividing traffic units per man employed by that of the base year, i.e. 1965. (D) Staff Costs These indices are obtained by dividing total staff costs (number of employees x cost per employee) by the corresponding operating revenue, operating expenditure and working expenditure obtained from the income account table. (E) Freight Traffic We assume an increase in the average net trainload, resulting essentially from the application of a new policy designed to encourage full carload shipping. Average revenue per train/km is equal to average net trainload x average revenue per ton/km. (F) Passenger Traffic Average revenue per train/km is equal to average number of passenger per train x average revenue per pass/km.  APPENDIX toTABLE 6 -2- (G) Fuel, lubricants and Other Materials These are the Regie's variable costs. Forecasts were made by multiplying the average cost per train/km by the forecast figure of train/km. (H) Fixed Assets are here computed as the average of net fixed assets at the beginning and at the end of each fiscal year. (I) Turnover This ratio is obtained by dividing operating revenue by net fixed assets (see above). (J) Return on Inyestment This figure is obtained by dividing net operating revenue by net fixed assets.  SENEGAL RAILWAYS Summary Income Statements (CFAF Million) Year Ended or Ending June 30, 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 OPERATING REVENUE Actual 1/ Provisional Projected Passengers International 74.1 92.0 74.1 76.1 83.1 87.0 87.0 91.5 94.5 94.5 98.5 & Luggages Local 642.5 642.5 604.0 627.6 631.4 5750o 661.0 668.5 678.5 683.5 685.5 Sub-total 716.6 y34,5 678.1 703.7 711.5 662.0 7,8.0 760.0 773.0 778.0 781.0 Freight: International (Inel. LCL & Mail) 743.2 818.7 762.9 920.1 866.2 850.0 825.o 875.0 1,005.0 1,129.0 1,124.0 Local: Phosphate 275.0 310o6 268,6 276.1 334.5 383.0 443.0 Groundnuts 286,0 314.9 347.7 269,0 269.2 188,0 350.0 1,094.0 1,134.5 1,181.0 1,257.5 Other carloads 176.6 203.5 1502 179.2 137.7 171.0 1147.0 LCL & Mail 78.2 78.5 68.8 60o7 60.4 54.0 46.o SSub-total 1,559.0 1,726,2 1,598,2 1,705.1 1,668.0 1,646,0 1,811.0 1,969.0 2,139.5 2,310.0 2,381.5 Miscellaneous 1146.5 172.0 139.9 132.1 67.3 115.0 124.0 129.0 141.0 153.0 157.0 Total Operating Revenue! -2,T2 2.1 ;2,632,7 2,T416,2 2,540.9 2,4749.8 2,423.0 2,683.0 2,838.0 3,203.5 3,2141.0 3,322.5 OPERATING EXPENSES Personnel Costs3/ 2,oo6.6 2,061.3 1,776.2 1,894.2 1,845.4 i,812.07/ 1,803.0 1,780.0 1,769.0 1,750.0 1,677.0 Material and otherL/ 444.2 453,0 665.6 494.8 571.4 556.5 592.5 625.0 666.5 687.0 698.o Total working costs 2,450.8 2,514,3 2,441.8 2,389.0 2,Ul6.8 2,368.5 2,395.5k 2,405.0 2,435.5 2,437.0 2,375.0 Depreciation and provision for renewal 284.3 335.5 265.0 395.1 257.9 287.0 526.0 552.0 629.0 642.0 659.0 Total Operating Expenses 2,73501 2,849.8 2,706.8 2,784.1 2,674,7 2,655.5 2,921.5 2,957.0 3,064.5 3,079.0 3,034.0 Net Operating Revenue (313.0) (217.1) (290.6) (243.2) (224.9) (232.5) (238,5) (99.0) (11.o) 162.0 288.5 Interest Charges 24.2 1.8 28.6 43.7 53.7 123.7 142.1 178.7 235.0 302.2 308.7 Net Revenue (Loss) (337.2) (218.9) (319.2) (286.9) (278.6) (356.2) (380,6) (277.7) (246.o) (140.2) (20.2) Exceptional Profits (Loss) - 16,5 (21,9) (26,0) 41.5 - - - _ _ _ Net Total Profi . (Loss) (337.2) (202.4) (341l1) (312.9) (237.1) (356,2) (380.6) (277.7) (2;-6.0) (140.2) (20.2) Ratio Analysis Working Ratios 101 96 101 94 99 96 89 84 80 75 71 Operating Ratios 1l3 108 112 110 109 110 109 103 100 95 91 Times interest earned - _ - - - - - - - 0.5 0.9 Debt Service Coverage - o.5 - 1.5 0.3 0.3 1.2 1.9 2.1 2.1 2.1 Notes V Ref: Annual Reports and Financial Statements of Regie. Total Operating Revenue = Regie's Produits d'Exploitation (Acot. #70) - Recettes Accessotres du Trafic - Cessions de Fabrication pour Tiers; (cf. Details on "Produits" in Balance Sheet Book). 3/ Personnel Costs = Regie's Frais de Personnel (Acot. #61) + Transport & Deplacements (Acct. #64) + Frais Divers de Gestion (Acot. #66) - 60% travaux faits par Regie (Acot. #78); because these "Travaux faits par Regie" do not correspond to a revenue or costs from operation, but rather an increaoe dono to fixed assets, as capital spending. See Annual Report of 1967/68 as base of computation. 4/ Material and Other = Regie's Stock debut - Stock Final (Acot. #30) + Achats (Acct. #60) + Tmpot & Taxes (Acct. #62) + Travaux & Fournitures (Acot. #63) - 40% Travaux faits par Regie (Aect. #78) see notes above. i/ Amortization + Provision for Renewal = Regie's Dotations aux Amortissements & Provisions (Acot, #68) also refer to "Immobilisation"in Dalance Sheet Book for explanations. 6/ Depreciation on a new Sofrerail sugiested base. 7/ Regie's budgeted figure, reflecting an increase in salary, and in administrative costs attributed to personnel (See note 3). May. 1972  SU1IA1 RAILWAYA Reccn-trcted/ i& Prjected Balance Sheet (CFAP MRllion. ) Actual r,,. Po-a - - Forecast _ - As of Jue 30, 1966 7.967 1968 1969 1970 1971 1972 1972 1973 19A4 1975 1976 After After After Asse.ts short-term Partial Revaluation Debt Debt reocheduliog Conversion ASSETS into Equ1 ty Current Assets Cash 56.9 255.8 356.3 351.2 234.1 98.6 278.1 278.1 358.8 589.1 772.3 973.6 Receivables OGAS 255.2 317.9 268.3 144.6 i68.1 170.0 175.0 175.0 190.0 210.0 230.0 260.0 Taiba 73.5 120.2 93.5 44.0 50.0 55.o 55.0 6o.o '75.0 95.0 110.0 State groundnut 26.5 30.9 72.1 131.5 145.o 15. 0 145.o 14. 145.0 145.0 145.0 145.0 Mali 251.4 166.1 201.0 265.2 240.0 240.0 210.0 210.0 150.0 100.0 102.0 100.0 SOCOPAO - 203.6 138.5 ilo.6 110.0 110.0 100.0 100,0 90.0 70.0 50.0 45.o Other & Invest,ent 233.5 217.9 165.2 315.6 296.2 290 0 317.0 317.0 340,0 360.0 390.0 410.0 Sub-total 8235 1,265.7 1,320.6 1,501.2 1,237.4 1,103,6 1,280.1 1,280.1 1,333.8 1,549.1 1,782.3 2,043.6 Inveentories 10. 7 _745.9 622.0 688.8 629.6 662.o 715.0 715.0 735,0 785,0 795.0 815.o Total Current Assets 1,574.1 2,011.6 1.942.6 2,090.0 1,866.9 1,765.6 1,995.1 1,995.1 2, 068.8 2,335,1 2,577.3 2,858.6 Fixed Assets Gross vclae 10,739.7 10,55a.5 11,303. '2,825.1 13,650.4 14,199.4 14,937.5 16,923.5 17,711.4 19,285.4 19,983.3 21,083.1 Less Accuomloted Depreciation (1,125.8) Th.365.0) (1,586.3) (1,8.P31) (2 o061.0) (2A34850) (2,874.o) (2,874.0) (3p426.0) (Y4,055-) (4,697.0) (5,356.) Net Fixed Assets in Use 9,613.9 10,179.4 10,117.2 11,022.0 311,851.5 12,663.5 1,059.5 14,285. 1,20. 15,286.3 15,727.1 Work in Progress - 6175 _ 83.9 1,27L4.3 740.7 361.1 400.0 600.0 600.0 700.0 1 000 0 800.0 600.o Total Net Fixed Assets 9,31 10,263.3 11,392.0 7 7(Z 1,9iU5 12,2515 12,663. 13,65945 15,985.5 16,230. 16,086-3 16,327.1 Total Assets 11,205.5 12,274.9 13,334.6 13,852.7 13,807.5 14 01o70o t68 16,655.6 17,055.2 18,565 18,663.6 19.185,7 LIABILITIES Current Liabilities Receipt held for Treasury - 1.4 406,6 255.9 36,9 50.0 50.0 50.0 50.0 50.0 50.0 50.0 Short-term Treasury Advances/Overd-af' 175.8 1,355.5 1,271.8 3/ 1,779,2 3/ 2,257.1 3/ 2,452.1 2,674.1 2,675.0 . - - Customs 50301 168.1 168.1 i68.i- 168.1 - 168.1 168.1 168.1 _ - - Payables on Works and Equipment - 2.1 1,018.0 632.0 129.7 405.0 550.0 530.0 OO, 700.0 650,0 60o.0 Others 595.1 427.9y/ 677.5 536.6 2/ 457.65/ 480.0 520.0 520.0 540.0 570.0 580.0 590.0 Total Current Liohilities 1,175,0 1,955.0 3,552.0 3,371.8 3,049.5 3,555.2 3,962.2 3,962.2 1,1900 1,320.0 1,210.0 Long-term Debts IDA Credit 96-sE - 258.2 331.8 1,082.5 1,658.4 1,803.0 2,113.5 2,113.5 2,073.0 2,030.5 1,986.0 1,937.5 Proposed Bank Loan/Credit - - - - - - - - 453.0 2,017.0 2,380.0 2,380.0 C,C.C.E. & Alsthom 51-3 282.0 2/ 253.8 2/ 197.4 5,' 141i0 2/ 56.4 306.0 316,0 360.8 345.6 330.4 315.2 Treasury Advances and Others 969.0 732,8 586,0 3/ 586.o I/ 586.o 7/ 586.0 3/ 586,O 3/ 586 t7/ 3,129.2 1,834.1 1,810.1 2,486.1 Total Long_term Debt 1,020.3 1,273.0 1,171.6 1,865.8 2,385.4 2,445.T 3,005,5 3,005 5 6,315.o 6,227.2 6,5o6.5 7,118.8 Equity Held by State Capital contributed 8,999.1 8,999.1 8,999.1 8,999.1 8,999.1 8,999,1 8,999.1 8,999,1 8,999,1 8,999.1 8,999.1 8,099.1 Reserves for Renewal & Revaluation 391.8 529.0 529.0 529.0 529.0 529,0 529.0 2,515.1 2,515.1 2,515.1 2,515.1 2,515.1 Provision for losses 209.3 229.3 143.5 326.5 32'i. 321.1 321.1 321.1 321.1 321.1 321.1 321.1 Contributions for Investments 629.9 711,9 711.9 835.9 835.9 835,9 890.9 _8yo. 1,040.9 1,01,0.9 1,040.9 1,0o0.9 Sub-total 12,230.1 10,469.3 10,383.5 10,690,5 10,685.1 10,685.1 10,740.1 12,726.2 12,876,2 12,876.2 12,876.2 14 876.2 Reserves or less (accumulated deficits) (1,218.9) (1,421.4) (1.762.5) (2,075.4) (2,312.5) (2,660.7) '3,049.3) (3,059.3) (3,327.0) (1,85839) (1,999.1) (2,019.3) Total equity 9,011,2 9,047.9 8,621.0 8,615.1 8,372.6 0,016.4 7,690-8 7,676.9 9,59.2 11,017.3 10,877.1 10,856.9 Total liabilities ]1,205.5 12,274.9 13,334.6 13,852.7 13,807.4 1)l,017.0 14,658.5 16,645.6 17,055.2 18,564.5 18,663.6 19,185.7 Ratio Analysis Current Ratios 1.34 1.03 0.55 o.62 0.61 0.50 0.50 0.50 1.74 1.77 2.01 2.36 Debt Equity 10/90 12/88 12/88 18/82 22/78 23/77 28/72 24/76 40/60 36/64 37/63 40/60 Return on average not fixed assets n.a. n.o. n.a. n.a. n.a. n.a. n.a, n.e. n.a. n.a. 1.0% 2.0% in use (%) I/ Reconstructlon of the Balance Sheevr ir destined to show a more realistic and actually larger current liabilities position, due to heavy reliance on Treasury advances, instead of showing an overdraft cash position as appeared on Regie's bocks, 2/ Reconstructed from the Regis's da-a co reflect repayments of CCCE loan, as described in notes in b4ance sheet books, In this rearranged presentation, maturing installments are paid with reference to the debts repayment schedule and based on notes in balance sheet books, with direct reduction of long-term debts and not with a shift from long-terom debt to short-term debts as part of current liabilities. 3/ Reconstructed to reflect the rescheniul_ng of the payment of CFAF 586 million Treasury advances. May 1972  SE:EPGAL IAIIWAYS Freight and Passenger Traffic Cost and Revenue 1969/70 Marginal Contribution Percentage Unit Marginal Revenue Cost Revenue to Coverage of Km Cost per per unit- Overhead Marginal Cost (million) unit-km km Freight (COAF million) Phosphates Taiba 101 288 184 227 112 .93 2.57 lam- Lam 13 48 35 369 11 1.22 4.36 Groundnuts 142 326 184 230 39 3.59 8.36 Petroleum Products 50 174 124 348 27 1.87 6.44 Other traffic 1 Full Carload 346 789 443 228 131 2.64 6.02 Less than Carload 68 69 1 1 4 17.39 18.27 Passengers Railcars 297 391 94 132 159 1.87 2.46 Other national trains 317 241 - 76 - 24 100 3.17 2.41 International trains 83 83 - 21 3.95 3.95 Total passenger traffic 697 715 18 3 280 2.149 2.55 NTote: All figures rounded. 1/ Including Mali traffic. Source: SOFR&RAIL, Prix de Revient et Politique Tarifaire, 1971. March 1972  SENEGAL RAILWAYS Investment in Fixed Assets and Provision for Depreciation (CFAF Million) Year ended or ending June 30, 1970 1971 1972 1973 1974 1975 1976 I. Ch-nges ;xn Fixed Assets Gross fixed assets at year start 13,565.8 14,001.5 11,599.4 17,523.5 18,41114 20,285.4 20,783,3 Acquisition of new fixed assets in year 435.7 597.9 938.0 887.9 ll,874.c 497.9 899.8 Increase in assets due to revaluation - - 1,986.1 - - - Gross fixed assets at year end 14,001.5 14,59914 17,523.5 18,411.4 20,285,14 20,783.3 21,683.1 Cumulative depreciation year start 1,803.1 2,061.0 2,348.o 2,874.o 3,426.o 4,o55.o 4,697.0 Provision for depreciation in year 259.9 287,0 526.o 552.0 629.0 642.0 659.o Cumulative depreciation year end 2,063.0 2,348.o 2,8714.O 3,426.o 4,o55.o 4,697.0 5,356.0 II. Computation of Depreciation on Sofrerail Basis Estimation for 1971/72 onwards, on the basis of revaluation by Sofrerail of existing fixed assets to their replacement value: Readjusted Replacement Depreciable Life-time Annual Depre- value value (years) ciation on Existing Assets Track: Tivaouane-Dakar 600o.0 570.0 30 22.8 Dakar-Thies-Guinguineo Tivaouane-St. Louis 3,100.0 2,945.0 45-50 73.6 Guinguineo-Kaolack Diourbel-Touba Guinguineo-Kidira 3,000,0 2,850.0 50 57.0 Louga-Linguere 900.0 855.o 60 14.3 Sub - total 1 .7 Locomotives 1,889.0 1,795.0 25 72.0 Ra:lcars (Soule & Dietrich) 1,040.0 988.0 20 4914 Trailers 388.0 368.6 20 18.4 Tractors 477.0 425.0 Avge, 30 21.3 passenger cars 993.0 943.4 Avge. 35 31.4 Freight cars 3,43505 3,264.9 Avge, 35 82.3 Miscellaneous 763,0 724.9 Avge. 20 60.8 Revalued Existing Fixed Assets 16,585,5 - - 7503.3 5503.3 703.3 Annual Depreciation on New Assets 22.7 48.7 125.7 138.7 155-7 Total New Annual Depreciation 526.o 552.0 629,0 642.0 659.0 H May 1972  SENEGAL RAILWAYS Sources and Application of Funds (CFAF Million) Year ended June 30, 1970 1971 1972 1973 1974 1975 1976 .7ctua Provisional Forecast Sources of Funds Net Operating Revenue (224.9) (232.5) (238.5) (99.0) (11.0) 162.0 288.5 Depreciation & Provision for Renewal 257-9 287.0 526.0 552.0 629.0 642.0 659.0 Sub-total 33.0 54.5 287.5 453.0 618.0 804.0 947.5 Sales of Assets 41.5 - - - - - Decrease in Working Capital excluding cash - 471.6 357.0 77.0 95.0 - - Grants: FAC - - 150.0 - - - French Government _ _ 55.0 - _ _ _ Long-term Borrowing: IDA Credit 96-SE 576.0 213.6 348.0 - _ _ _ CCCE Loan/ French fioit. - - 230.0 70.0 12C.0 - Alsthom Supplier Credit - - 760o - - - - Proposed Ba k Loan/) - -- 453.0 1,564.0 363.0 - IDA Credit Other Sources - - - - 700.0 Sub-total 576.0 2130 6554.0 523.O 1,6B4. 0 700.0 Total Sources 650.5 739.7 1,353.5 1,203.0 2,397,0 1,167.0 1,647.5 Application of funds Capital Expenditures Proposed Project - - 843.2 1,825.9 423.5 - Additional Track Renewal - -- - - - 800.0 Other 441.1 597.9 93800 44.7 48.1 74.4 99.8 Sub-total -VT4= 777T 93800 887.9 1,874.0 497.9 899.8 Debt Service: Interest 53.7 123.7 142.1 178.7 235.0 302.2 308.7 Principal Amortization 56.4 153.6 93.9 55.7 57.7 83.7 87.7 Sub-total 110 1 277.3 236.0 234.4 292.7 305 93 Increase in Working Capital excluding cash 21614 - - - 100l 0 150.0 Total Applications 767.6 875,2 1,174.0 1,122.3 2,166.7 983.8 1,446.2 Cash Surplus (or Deficit) for Year (117.1) (135.5) 179.5 80.7 230.3 183,2 201.3 Cash Balance Beginning of Year 351.2 234.1 98.6 278.1 358.8 589.1 77203 Cash Balance End of Year 234.1 98,6 278.1 358.8 589.1 772,3 973.6 May 1972   ANNEX 1 Page 1 SENEGAL RAILWAYS Consulting Services for Transport Coordination and Planning Tentative Terms of Reference I. Objective The purpose of the services, which will be conducted by two ex- perts in transport and which will last for about two years, is to assist Government in the initiation, organization and implementation of transport coordination and planning and the training of staff. II. Scope The services shall cover all modes of surface transport. The Consul- tants shall perform all organizational studies, financial investigations, eco- nomic analvsis and related work described herein. In the conduct of this work, the Consultants shall cooperate closely with Government officials, who will be assigned by Government as counterpart personnel to the Consultants for the duration of the consulting services. The training of these counterparts is an important part of the Consultants' assignment. More specifically, the Consultants will perform the following work program: (a) Review of Government policies regarding transportation, especially for effective transport coordination and plan- ning, and recommendation of revisions in laws, rules and other regulatory devices, such as licensing and pricing regulations, when advantageous; (b) Analysis of the adequacy of the institutional, organiza- tional and administrative setup for transport coordina- tion and planning, determination of the extent of its authority and identification of manpower needs; (c) Review, in cooperation with the Direction Nationale du Plan et de la Statistique, of the adequacy of the data collection system for transport and economic data re- quired for comprehensive transport planning and recom- mendations concerning development of a data collection system as needed to ensure the desired compatibility of data among the modes; design, pre-test and promulgation of reporting procedures and plans for tabulation, sum- marization and dissemination; (d) Recommendations for the establishment of road user charges which reflect the cost to the Government of constructing, maintaining and operating highways;  ANNEX 1 Page 2 (e) Evaluation, in cooperation with the transport expert in the Ministry of Planning, of criteria currently applied by Government for transport investment planning; (f) Day-to-day support in the detailed formulation of the transport coordination measures and the establishment of operational methods for their implementation; and (g) Determination of the need for training abroad of the country's nationals in the field of transport coordi- nation and planning. III. Data and Facilities to be Provided by Government The Government is responsible for providing the Consultants with all available reports and data which they require to carry out their assign- ment effectively. The Government is to provide liaison in connection with work that requires the cooperation of other Government or private agencies and to ensure access to all information required for the completion of the consulting services. Government is to assign qualified counterparts to work with the Consultants. The counterparts are to be assigned on a full-time basis for the purpose of liaison, training, participation in the Consultants' studies, and review of the findings and recommendations of the Consultants. The Government is to provide the following facilities and staff to help the Consultants perform their services: (a) Office space, furniture, equipment and supplies in the offices; (b) Local travel expenses for the Consultants inside Senegal for official travel; and (c) Secretarial services as required. IV. Reporting Requirements The Consultants shall report to the Direction des Transports in the Ministry of Public Works, Urbanism and Transport, and shall prepare the following reports in French and English: (a) Quarterly Progress Reports giving a statement of all work performed and a summary of interim findings; (b) A draft Final Report presenting the Consultants' final recommendations and experience of the functioning of transport coordination and planning in Senegal, within 18 months of the starting date; and  ANNEX 1 Page 3 (c) A Final Report, incorporating Government's and the Association's comments, within three months upon receipt of the comments. This report shall also update and sup- plement the information given in the Draft Final Report previously submitted. May 1972   SENEGAL RAILWAYS ORGANIZATION CHART IBRD-6249(R)   ANNEX 3 Page 1 SENEGAL RAILWAYS Consulting Services for Study on Improvement of Operation Tentative Terms of Reference I. Objectives and Scope The purpose of the services to be rendered by the Consultant is listed below: A. Short-Term Studies (i) General review and study of all aspects of present train operations including (but not limited to): freight and passenger timetables, utilization of rolling stock and motive power, shunting operation, adequacy of signalling and telecommunication systems, safety problems, handling and switching in stations, control post and training of staff; and (ii) Plan and recommendations to correct urgent deficiencies. B. Long-Term Studies (i) Determination of main traffic flows at present and projections; (ii) Analysis of flow to determine capability of yards, stations and lines to handle projected traffic; (iii) Determination of major and minor yard systems; and (iv) Preparation of train schedules to meet future demands. II. Reports The Consultant shall prepare the following reports in French and English: (i) Monthly progress report giving a statement of all work performed and a summary of interim findings; and (ii) A final report upon completion of the one-year assignment.  ANNEX 3 Page 2 III. Relationship between the Regie and the Consultant, Data and Facilities to be provided by the Regie The Consultant, to be appointed for one year, will report directly to the General M4anager. The recommendations of the Consultant will be put into effect upon receipt of the General Manager's approval. The Pegie will provide the Consultant with all necessary available data. The Pegie will assign one counterpart to work with the Consultant either full. time or from time to time as shall be required. February 1972  ANNEX 4 Page 1 SENEGAL RAILWAYS Consulting Services for Organization and Management of Thies Workshops Tentative Terms of Reference I. Objectives The purpose of the services, which will be conducted over a period of two years, is to give assistance in the reorganization and management of the Thies workshops with a view toward improving rolling stock maintenance and repairs (diesel locomotives, railcars, passenger and freight cars) in order to promote a better utilization of existing equipment. II. Scope of the Study The proposed assistance will include a campaign of systematic research and analysis of the causes of the high rates of immobilization in the Regie's rolling stock. On the basis of this research and analysis, studies will be made to find adequate solutions to the problem, and instructions will be drawn up for the rational repair of rolling stock in order to place equipment in good running order, number and quality at the disposal of the Operating Department. The rational organization of the workshops will be based mainly on the principle of preventive maintenance and will include the following points: (a) Advance programming of the work to be performed; (b) Definition of elementary jobs to be performed, and methods and supervision needed for their correct execution; (c) Supervision of the efficient use of manpower; (d) Determination of equipment required for proper execution of maintenance work; (e) Determination of the workload of the workshop and methods to be implemented to follow the scheduled maintenance cycles in order to adhere to the drawn up program; (f) Recommendations regarding the workshop organization; (g) Recommendations regarding the organization of the workshop on the management level; and (h) Recommendations regarding personnel training.  ANNEX 4 Page 2 TI. Reports The Consultant will prepare the following reports in French and English: (a) Monthly progress report giving a statement of all work nerformed and a summary of interim findings; and (b) A Final Report unon completion of the two-vear assignment. TIT. Relationship between the Pegie and the Consultant, Data and Facilities to be provided by the Regie The Consultant will report directly to the General Manager. The recommendations of the Consultant will be put into effect as soon as they receive the General Manager's approval. The Regie will provide the Consultant with all necessary available data. The Regie will assign one or two counter- part(s) to work with the Consultant either full time or from time to time as required. Fehruary 1972  ANNEXS SENEGAL RAILWAYS Summary of Principal Commitments in Connection with Credit 96-SE and of Action Taken Commitments Action Taken Development Credit Agreement 7.01 The Closing Date shall be June 30, 1970 or such Postponed until December 31, 1972. other date as may from time to time be agreed between the Borrower and the Association. Project Agreement 2.11(b) The Regie shall not make any substantial modifica- This is being done. tion in its Investment Plan, or until such Investment Plan shall have been carried out, make any substantial expendi- tures for capital goods or works other than those provided for in such Investment Plan, without prior consultation with the Association. Side Letters: Revenue and Related Matters 2.(a) We consider that rates of return of 45. per annum These financial forecasts were too optimistic and could not and of 5% per annum would be reasonable objectives to be be achieved. The rate of return on fixed assets was -2.0% attained by the Regie by 1od8/is9 and 1970/71, respectively, for 1969/70 and it is estimated to be -2.3% for 1970/71, and that thereafter, the rate should further improve to and 2% in 1975/76. reach a level of not less than 6% per annum. 3. Taking into account the present situation with There are no separate data available on the Regiets workshop respect to the staff employed at the Regie's workshops at staff; instead these are included in "Material et Traction". Thies and the need to improve the profitability of the Re- Between 1966 and 1970, there was a reduction of 241 gie, the staff of the Regie's workshop at Thies will be re- employee-in this Department, far mere than agreed upon. duced by about 35 employees during each fiscal year 1966/67 to 1975/76 while at the same time maintaining or improving the productivity of such workshops. Transport Coordination The goal of the Government in this respect is to There still does not exist any clear system of transport ensure that each mode of transport develops in the most coordination. economic manner, and that the pattern of demand for trans- port services and the division of function between road and rail reflect least total economic cost solution to particular distribution problems under conditdons of fair competition between the modes. Operations 3. To improve the Regie's operating results,it has been agreed, among other things, to take the following measures: (a) Passenger fares will be increased progressively by Passenger tariffs were raised by 10% on March 1, 1970. Be- not less than 15% of their present level before cause of the resulting decline in passengers (20%), pass-km June 30, 1968. (10%) and in receipts (30%), the Regie canceled this increase on May 1, 1970. New tariff adjustments are not recommended at this stage. (b) The rates applicable to the transport of groundnuts, The present rate applicable to groundnut traffic - CFAF except in the case of international traffic, will be 8.57/ton-km - covers more than fully distributed costs. increased gradually with a view to cover the cost of Introduction of a system of incentive rates is envisaged. such transport by no later than June 30, 1969. (c) The Republic of Senegal shall take measures to en- Because of low levels of production and increasing competi- sure that not less than 400,000 tons of groundnuts tion from the road, this quota has never been achieved and will continue to be allocated to the Regie for trans- it is practically unfeasible. port during each fiscal year. (d) Tariff rate with Taiba Phosphatewill be re-negotiated. Government and the Regie have initiated discussions with Taiba Phosphate for the fixing of a new rate; this will in- volve an amendment to the Convention of June 28, 1963 traffic. (e) In view of the difference presently existing between This objective has not yet been reaoead. the wages and salaries paid to permanent employees of the Regie and those paid to permanent employees of the Senegalese Government, the Regie shall, except for normal promotions and seniority increases, endeavor to prevent increases in the wages and salaries paid to its employees until the wages and salaries paid to Government employees reach the same level. Personnel and Matters Related to Project Agreement 5. It is the Regie's intention to reduce its staff by This commitment was not achieved. Between 1966 and 1970, the attrition and to limit recruitment to about 25% of retirements, Regie reduced its labor force by 576 only instead of 744 whidh during each fiscal year 1966/67 to 1970/71. is equal to 75% of the retirements which took place during that period. March 1972   ANNEX 6 Page 1 SENEGAL RAILWAYS Brief Description of Railway Property 1. Track and Signalling The Senegal Rallway system (1,032 kIn), a part of the former Dakar- Niger Railways, was constructed between 1885 and 1924. It is laid in meter gauge and is mainly single track, with the exception of the 70-lma section from Dakar to Thies, which is double track. The Railway traverses flat country with no important rivers. Track is in poor condition for the most part except for the approximate 260 km being renewed with Association's financing (Credit 96-SE). With a view to reducing maintenance cost, the Regie has adopted the modern technique of long welded rails and concrete sleepers. Light rails (20-26 kg/m) are gradually replaced by heavier rails, where justifled by the level of traffic. Signalling and train control equip- ment is of simple design, meeting the operating requirements adequately. Modernization of signalling on some sections, such as automatic block system, was included originally in the Four-Year Plan, but deferred later as not justified. 2. Office Buildings and Stations The administrative headquarters of the Railway are at Thies, as are workshops, training school, rail welding and sleeper plants, with ancillary residential and social facilities for headquarter's personnel. Office build- ings and some stations are in rather poor condition due to lack of proper maintenance. 3. Motive Power and Rolling Stock Details of locomotives and rolling stock as of September 1971 are shown on pages 3 and 4 of this annex. The main components, in summary, are as follows: 31 mnln llne diesel locomotives 23 diesel shunting locomotives 13 diesel railcars 113 passenger cars, trailers and vans 727 freight cars The Regie has ordered four RB 1200 hp diesel locomotives, a type which meets the requirements well, and three diesel shunting locomotives to replace over- age units. Five new air-conditioned railcars were delivered in 1970. Avail- ability of existing diesel locomotives and railcars, at 70.2 and 70.3 respec- tively, is unsatisfactory due to low efficiency of the workshops, frequency of accidents and carelessness of drivers. Rehabilitation of the workshops, improved organization of the workshops and training of drivers should help remedy the situation.  A nTEX 6 Page 2 .ost of the 113 passenger cars, with the exception of the trailers, are over 20 years old and their condition is rather poor. No replacement is envisaged, since the policy of the Regie is to develop railcar and trailer services which, it is believed, are likely to attract, and retain, passenger traffic. Out of a total of 727 bogie freight cars (revenue traffic), 200 are over 40 years old with average load capacity of 25 tons. New freight cars being ordered are of modern design with high average load capacity of 30-35 tons and/oi 40 m3 of usable surface. At the same time, the Regie has started a program of modernization of some 326 bogie freight cars by replacing exist- ing bearing axle-boxes with roller bearing axle-boxes. This will reduce main- tenance cost and frequency of axle-box heating, and will allow for higher speeds. The proposed loan/credit would finance about 50% of the program. 4. Workshops There is a central main workshop at Thies whose principal function comprises the periodic maintenance of diesel locomotives, coaches and freight cars, and the repair of damage to rolling stock and motive power folJowing accidents. This workshop occupies a sufficient area, especially since the Regie stopped the repair and maintenance of Mali traction, which is now being performed in Bamako. However, the general layout at Thies is inadequate, and there is a lack of transfer equipment, such as traveling cranes and car trans- fer tables. The proposed loan/credit would finance (a) the reconstruction or extension of various shops, (b) the acquisition and installation of suitable handling enuippment, and (c) the replacement of a few over-age machine tools.  ANNEX 6 Page 3 Fleet of Motive Power and Rolling Stock as of September 1971 (Excluding Service Rolling Stock) 1. Main line diesel locomotives Year put Type of Position Nmber HP in serviae Tranumission In service BB 100 4 610 1949-51 Electric BB 500 9 740 1955-56 Electric BB 600 4 570 1957 Electric BB 1100 10 1050 1959-65 Electric CC 2400 4 2180 1967 Electric Ordered BB 1200 4 1200 - Electric 2. Railcars In service Z 130 8 550 1958-62 Electric Z 120 5 550 1970 Electric 3. Shunting locomotives In service AA 10 16 150 1956 Hydraulic AA 50 3 420 i969 Electric AA 1 1 100 1963 Electric BB 60 3 300 1953 Electric Ordered AA 50 3 420 - Electric 4. Bogie passenger-coach fleet Year put 8osition Tzpe Number Seat in 8ervice In service Sleeping car 3 16 1952 Mixed sleeping car 1 62/8 1954 lt and 2nd class heavy weight (express trains) 20 30/88 1947-54 lot and 2nd class light weight (omnibus trains) 7 32 1941 31 52 1941 6 44 1929-59 Vans (omnibus trains) 17 20/30t 1938-56 Trailers (rail- car sets) 28 50/76 1954-69  ANNEX 6 Page 4 5. Bogie freight cars Year put Eosition Tye Number Capacity in service In service Flat 45 20/30 t 1905-66 Ordered Flat 40 30 t _ In service Gondola 151 20/30 t 1926-60 Ordered Gondola 25 35 t _ In service Covered 490 20/35 t 1924-69 Ordered Covered 125 35 t _ In service Tank cars 18 20/25 m3 1924-51 Ordered Tank cars 10 30