Document ofTh UWorld B]2ank

]F(0R CI)bDCHAL USIE GNLY

Report No. P-1987-SW

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

KINGDOM OF SWAZILAND

FOR A

SECOND EDUCATION PROJECT

June 21, 1977

This docnment hnas 0 resgrDded distirlbftlon md mny be 1w' by recipients only In the perfTornnerce oftheir ofIcID duties. fis contemns smay not othervise be discRosed Wlthont Wridd kBi nithorzlationi.

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CURRENCY EQUIVALENTS

Currency Units emalangeni (E) or rand (R) 1/ (E=R)

US$1.00 E 0.87

E 1.00 US$1.15

ABBREVIATIONS

AfDB - African Development BankEDF - European Development FundMOW - Ministry of Works, Power and CommunicationsODM - United Kingdom Ministry of Overseas

DevelopmentSCOT - Swaziland College of TechnologySIDA - Swedish International Development AuthorityUnesco - United Nations Educational, Scientific

and Cultural OrganizationUSAID - United States Agency for International

DevelopmentWPTTC - William Pitcher Teacher Training College

FISCAL YEAR

April 1 to March 31

1/ The lilangeni (pl emalangeni) was introduced as the local currencyin September 1974; the South African rand is also legal tender inSwaziland.

FOR OFFICIAL USE ONLY

SWAZILAND

SECOND EDUCATION PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Kingdom of Swaziland

Amount and Terms: US$4.0 million equivalent, with a term of 20 years,including 4 1/2 years of grace, and with interest at8.2 percent per annum.

ProjectDescription: The project will consist of:

(a) Buildings, furniture and equipment for thefollowing institutions:

- the extension of 13 existing juniorsecondary schools;

- four new junior secondary schools;and

- a ''model agricultural center" containinglivestock and crop facilities and alaboratory workshop to support agriculturalteacher training at the Faculty of Agricultureat the University of Botswana and Swaziland.

(b) Professional services and technical assistancefor the Program Unit including preparation offuture projects.

This dcument hs a restricted distribution and may be used by recipients onlyis the perfonanceef their eficisl duties. hs contents may not ehewiw be kclseed witht W.m Dank autholntion.

Estimated Cost:

US$ (million) % of

Item Local Foreign Total Total

1. Civil works, furniture 2.20 2.49 4.69 96and equipment

2. Project administration(incl. equipment) andpre-investment studies 0.15 0.10 0.25 4

Sub-total 2.35 2.59 4.94 100

Contingencies:

a. Unforeseenevents 0.20 0.23 0.43

b. Estimated priceincreases 0.49 0.54 1.03

Sub-total 0.69 0.77 1.46

Total Project Cost 3.04 3.36 1/ 6.40

Total Project Cost(net of taxes and duties) 3.04 2.96 6.00

Financial Plan: Bank: US$4.0 million (67%)Government: US$2.0 million (33%)

EstimatedDisbursements:

US$ Million; Bank Fiscal Year

FY 78 79 80

Annual 0.2 2.7 1.1

Cumulative 0.2 2.9 4.0

Consultants: The preparation of future projects is expected

to require detailed architectural and engineeringdesign works. Consultants will probably be re-quired to assist the Program Unit in this workand in any necessary pre-investment studies.

Appraisal Report: Report No. 1417-SWMay 17, 1977

1/ Taxes and duties of US$0.40 million are treated as foreign expenditures

because it is estimated the Swaziland Government will receive this amount

in rand from the Southern Africa Customs Union for goods imported under

this project.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSED LOAN TO THE KINGDOM OF SWAZILANDFOR A SECOND EDUCATION PROJECT

1. I submit the following report and recommendation on a proposed loanto the Kingdom of Swaziland for the equivalent of US$4.0 million to helpfinance an education project. The loan would have a term of 20 years, includ-ing 4 1/2 years grace, with interest at 8.2 percent per annum.

PART I - THE ECONOMY 11

2. The most recent economic report entitled "Economic Memorandum onSwaziland" (No. 852a-SW) was distributed to the Executive Directors on Novem-ber 24, 1975. A special mission visited the country in September 1976 as partof a study on regional migration in southern Africa. An updating economicmission is scheduled to visit Swaziland in August 1977. Country data areshown in Annex I.

3. Swaziland is one of the smallest countries on the African continent.Located in southern Africa, it is surrounded by the Republics of South Africaand Mozambique. In 1976, its population was estimated at 525,000 (of whichapproximately 29,000 live abroad, mainly as migrant workers in South Africa)with a growth rate of about 3.2 percent per annum. Relative to its size andpopulation, the country is well endowed with natural resources and has goodpotential for development. It has some mineral deposits (of which iron oreis nearing depletion) and its soil and climate are favorable to a diversifiedagricultural production.

4. The economy is highly dualistic with about 40 percent of the landowned by foreigners. The modern sector, which is largely foreign owned,consists of mining (asbestos, iron ore, coal), large-scale plantations offorestry, sugar, citrus and pineapples, and associated industries such aspulp, sawmilling, sugar and fruit processing. The traditional sector, on theother hand, is based largely on cattle raising and subsistence agriculture(maize, groundnuts, sorghum) which directly supports about one-half of thepopulation.

5. This economic dualism is to some extent a reflection of the Govern-ment structure. The King rules the modern Government through an appointedCabinet of Mtinisters who manage the country's normal economic activities andprovide the bulk of services to the people. However, in traditional mattersand over all activities concerning Swazi-Nation land (this term refers toalmost 60 percent of the territory of Swaziland which is held communally for

1/ The entire text of this section is reprinted from the President's Reportfor the DFC project (Report # P-1990-SW) which was circulated to the

'Executive Directors on April 11, 1977.

the Swazi people by the King), the King relies on the advice of the SwaziNational Council (SNC), a group of senior Swazi chiefs and leaders. When themodern Government becomes involved in developing the Swazi Nation land'sagricultural and mineral resources, considerable deliberations by both theCabinet and SNC are required. Consequently, economic change has been slowon Swazi Nation land in contrast to the modern agricultural sector's rapiddevelopment.

6. The Swazi economy has a good growth record. During the 1950s and1960s, the modern sector developed rapidly; real GDP grew at about 12 percenta year. Apart from tourism, no major new industries have been establishedsince independence in 1968; however, expansion of existing enterprises and theGovernment sector, together with a growing number of smaller enterprises, sus-tained real growth in GDP at about 7 percent a year between 1968 and 1975.Because of favorable terms of trade, particularly in the last few years, realincome grew even faster (9 percent a year). At current prices, GNP per capitawas estimated at about $470 in 1975. GDP is projected to grow at about 6 per-cent a year up to 1980, based mainly on expanding agricultural exports (sugar,citrus, woodpulp, beef) whose markets are expected to remain generally favor-able over the next several years.

7. The country's sustained economic growth has been due mainly toprivate investment. Since 1968, gross private investment has averagedabout 19 percent of GDP and Government capital expenditures about 7 per-cent. As Swazi entrepreneurship was, and still is, quite limited, almostall modern activities have been carried out by foreign companies, underforeign managements, and with foreign capital. This development pattern hasactually sharpened the dualism in the Swazi society and economy which theGovernment inherited at independence. The modern sector now contributesabout 80 percent of GDP and wage employment and 90 percent of direct taxes.The main sector, agriculture and forestry, accounts for close to 35 percentof GDP and 40 percent of total wage employment, while manufacturing con-tributes 15 percent and 12 percent, respectively. The traditional ruralsector, which accounts for about 14 percent of GDP, has remained virtuallystagnant over the years. Because wage employment in the modern sectorgrew at over 10 percent a year during the 1960s, the labor force in tradi-tional agriculture declined from 72 percent in 1960 to about 50 percent in1974.

8. Swaziland's Second National Development Plan (NDP) 1973-77 empha-sizes four main objectives: (1) to create conditions for sustained privatesector growth; (2) to promote rural development and modernize traditionalagriculture; (3) to improve the relevance and usefulness of education; and(4) to provide better housing and health conditions for low-income familiesin urban and rural areas. Planned allocations to the main sectors are:infrastructure 29 percent; agriculture and forestry 19 percent; communityservices 19 percent; education and health 14 percent. The Government real-izes that most of the momentum in the economy will be generated by the modernsector; nevertheless it is committed to assisting the majority of the popu-lation who remain in the traditional sector, and who have not sufficientlyshared the benefits of Swaziland's growth. The main strategy for traditionalsector development is through integrated rural development areas (RDAs).

Shortages of technical and management personnel have limited the implementationof this program, but in the northern area, where substantial inputs have been

concentrated, increases in yields of a number of crops as well as farmers'incomes have been encouraging. The Third NDP (1978-82), currently under pre-

paration, is expected to emphasize agricultural, educational and industrialdevelopment.

9. Since 1971, owing to the sharp increase in mining wages in the

Republic of South Africa (RSA), the number of Swazis recruited for mining

employment doubled. At the same time, there is a shortage of labor fordomestic modern agriculture (in particular, the sugar plantations) and of

skilled Swazis for the modern non-agricultural sector. The Government's

long-term education policy, described in detail in Part III of this report,

aims to alleviate this problem, through restructuring the educational system

and emphasizing vocational and technical rather than academic training.

Programs, assisted by the Bank (para. 15), already are underway to expand

technical institutions and accelerate curriculum reform, particularly to

better serve rural development.

10. Together with Botswana, Lesotho and South Africa, Swaziland belongs

to the Southern Africa Customs Union. Under this arrangement, Swaziland draws

customs and excise revenue from a common revenue pool according to the value

of its total imports and production of taxable goods. Swaziland also belongs,along with Lesotho and South Africa, to the Rand Monetary Area. In September 1974,

Swaziland issued its own national currency, the emalangeni (E) with the same

par value as the rand; both currencies are legal tender in Swaziland. A Mone-

tary Authority manages the country's new monetary system. In order to remain

in the Rand Monetary Area and be able to continue drawing on its foreign ex-

change reserves, Swaziland has agreed to maintain 100 percent of the value of

the emalangeni in circulation in a rand account with the South African Reserve

Bank. This requirement, as well as the free convertibility of the two curren-

cies, limits somewhat the scope for credit management by the Monetary Auth-

ority.

11. Government finances have improved significantly since 1969 when the

revision of the Customs Union Agreement substantially increased revenues andeliminated the Government's chronic budget deficits. At the same time, the

Government strengthened the tax administration and introduced new taxes (in

particular, the hotel tax and sugar levy). As a result, recurrent revenue in-

creased from E 8.5 million in 1967/68 to E 42 million in 1974/75. Correspond-

ingly, recurrent expenditures grew from E 13 million to E 24.8 million. A re-

cent revision of the revenue distribution formula of the Customs Union Agree-ment should help maintain the Government's favorable financial position over

the next several years, even though revenues under the sugar levy are expected

to decline.

12. Swaziland's membership in the Rand Monetary Area has meant ready

access to the Area's exchange reserves; in turn this has made consideration

of Swaziland's foreign exchange and balance of payments matters not of much

practical significance since the Area has benefited from sizeable foreign ex-

change surpluses. In view of the current difficult economic situation facing

the Republic of South Africa, the major partner in the Rand Monetary Area,

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it is important to examine Swaziland's external trade situation in the even-tuality that Swaziland withdrew from the Rand Monetary Area. As regardsmerchandise trade, exports have increased from US$39 million in 1968 to aboutUS$174 million in 1975, largely as a result of increased production and favor-able prices on world markets of sugar and forestry products which accountfor 60 percent of total export value. At the same time, imports have in-creased less rapidly, from US$51 million to US$124 million, with the resultthat Swaziland has for many years enjoyed a favorable balance of merchandisetrade. As the country sells about 70 percent of its exports to Europe, NorthAmerica and Japan, and imports about 90 percent of its requirements from SouthAfrica, it has been a substantial net earner of foreign exchange for the RandMonetary Area. Swaziland should be able to maintain a favorable tradebalance in the event it withdrew from the Rand Monetary Area.

13. Until 1975, the United Kingdom was the major source of foreignfinancial assistance, providing funds to cover Swaziland's budget deficits aswell as grants and long-term interest-free loans for development. During thelast few years, however, Swaziland has diversified its sources of foreignassistance. In addition to ODM, several bilateral agencies, including USAIDand SIDA, as well as multilateral lenders, such as IDA, IBRD, AfDB and EDF,contribute to financing the Government's capital budget. Because of theslow buildup of absorptive capacity, the utilization of foreign assistancefollowing independence has been sluggish. A substantial technical assistanceprogram is now in place, and recent experience suggests that the country'sabsorptive capacity is improving, as local staff benefit from training andexperience.

14. On December 31, 1975, Swaziland's external public debt (outstandingand disbursed) was US$46.3 million; service obligations on this debt amountedto US$1.8 million. Swaziland's future external public debt (including undis-bursed) is expected to increase to some US$250 million by 1985 and annualdebt service obligations will be about US$15 million, or less than 10 percentof estimated exports in 1985. Since the Government is able to draw on theforeign exchange earnings of the Rand Monetary Area, the debt service ratioexpressed as a percentage of exports is mainly an indicator of Swaziland'sexternal debt carrying capacity if the country were to withdraw from theRand Monetary Area. A more useful indicator of the Government's current debtservice capacity is the ratio of debt service payments to Government revenue-.In 1975, servicing of existing public debt represented 3 percent of currentGovernment revenue; by 1985, we estimate this would increase to 6 percentand should not create an unmanageable burden on the country's finances.

PART II - BANK GROUP OPERATIONS IN SWAZILAND

15. Eight Bank Group operations have been approved in Swaziland, ofwhich three were before independence. An IDA credit of US$2.8 million,approved in 1962, helped finance the construction of the first highwayproject. Two loans, one for US$4.2 million in 1963 and the other for US$2.75million in 1967, were made to assist the Swaziland Electricity Board in the

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development of the power sector. All three projects have been completedsatisfactorily. No loans or credits were made between 1968 and 1974; anirrigation project was appraised during that period but was found uneconomic.Following intensified preparation work, three projects were approved by theBoard in FY75: a US$5.0 million credit for an education project designed tostrengthen vocational, technical, commercial and rural education programs;a US$3.5 million loan to extend the water supply and sewerage facilities inthe Mbabane and Manzini areas; and a US$7.0 million loan for the secondhighway project which will improve to bitumen standard two major road sections.Implementation of all three projects is proceeding satisfactorily. In March1977, the Board approved a US$4.0 million loan for a rural development projectwhich will expand the provision of agricultural services to 125,000 Swazisliving in rural areas. In April 1977, the Board approved a US$5.0 millionline of credit to the National Industrial Development Corporation of Swazilandto help promote medium and small-scale enterprises. Both loans have beensigned and are expected to be made effective in July/August 1977. Annex IIcontains a summary statement of Bank loans and IDA credits to Swaziland.

16. Future Bank Group operations in Swaziland will continue to supportthe Government's efforts to expand the role of the Swazis in the modernsector, to improve the country's infrastructure and to raise the productivityand level of incomes of those Swazis dependent on traditional agriculture. Arailways project, currently being prepared for presentation to the ExecutiveDirectors in FY78, would assist the Swaziland Railways through the provisionof technical assistance, maintenance facilities and equipment, scholarshipsand consultant studies. Feasibility studies have been completed for a thirdhighway project scheduled for presentation in FY79. The project would help toimprove about 100 km of Swaziland's national highway network and would providetechnical assistance for improving the Ministry of Work's road maintenancecapability. A second rural development project, planned for presentation inFY80, would extend to new areas of Swazi Nation land the improvements ininfrastructure, extensiun and marketing currently being provided in the firstrural development project.

17. Debt to the Bank as a percentage of total debt (outstanding anddisbursed) is projected to increase from 17 percent in 1975 to about 24 per-cent in 1985. The Bank's share in total public debt service would increasefrom 26 percent at present to about 34 percent in 1985. Increases in theBank's share of debt and debt service reflect the expectation that Swazilandwould continue to receive a significant amount of its external financialassistance on grant or near-grant terms. Swaziland's exports and publicrevenue prospects remain favorable and the country continues to be credit-worthy for Bank lending. During the Fourth IDA Replenishment, Swaziland hasbeen a blend country, but due to the favorable growth in Swaziland's economyin recent years and prospects for a continuation of this trend, we do not atthis time anticipate additional IDA lending in Swaziland. In Swaziland'sThird NDP (1978-82), proposed development expenditures will likely exceedUS$200 million. The Government intends to make a significant financial con-tribution to this development program. and its favorable financial prospectswill enable it to do so. But the Government also desires to build up reason-able budgetary reserves during this period to insulate its ongoing programsfrom sudden reductions in Government revenue due to external factors suchas a downturn in agricultural prices or difficulties arising in the Southern

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Africa Customs Union or Rand Monetary Area. Consequently, to complementits own resources, the Government will seek new commitments of external aidfor its programs in the Third NDP including financing for some project localcosts. This strategy appears sound, and external assistance agencies shouldbe prepared to finance a significant amount of total costs including somelocal costs of projects having a relatively low foreign exchange content.

PART III - EDUCATION IN SWAZILAND

Characteristics of the Sector

18. The availability of educational opportunities in Swaziland hasimproved significantly during the last decade. This is most evident informal education where primary school enrollments (Grades 1-7) now cover about73 percent of the age group and attainment of universal primary educationis expected by 1985. Junior secondary school enrollments (Grades 8-10) currentlytotal about 38 percent of the age group and this is expected to increase to54 percent in 1985.1/ Senior secondary school enrollments (Grades 11-12) andenrollments in the University of Botswana and Swaziland are available to asmall percentage of the age group; this reflects both the poor quality of theentrants who apply to these institutions, and Government's policy of limitingthese enrollments to reflect manpower requirements. In the area of technicianand vocational training, the Government has supported the establishment of theSwaziland College of Technology (SCOT) to provide a number of craft and skilltraining programs for Junior secondary and senior secondary graduates. SCOTalso operates training programs in typing, shorthand, bookkeeping and in relatedcommercial fields. Finally, Swaziland has a number of institutions providingspecialized educational services. These include teacher training colleges,farmer training centers, handicraft and cooperative training centers, aninstitute for training civil service staff and training programs for nurses.

19. The rapid expansion in the education sector over the last decadehas led to the employment of poorly trained teachers in primary schools and aheavy reliance on expatriates in secondary and tertiary education. In 1975,73 percent of primary teachers were not qualified and 50 percent of secondaryteachers were expatriates. The Government, with the assistance of severaldonors, has taken steps to remedy this problem. In the first educationproject (Cr. 518, December 9, 1974), the Bank is providing assistance, interalia, to expand enrollment in the William Pitcher Teacher Training College(WPTTC). The College receives considerable staff support from ODM and providesthe majority of trained primary school teachers and a significant number ofsecondary school teachers. A new primary teachers' college, with assistancefrom Denmark, is scheduled to graduate its first teachers by the early 1980s.The Government expects that by 1983, some 74 percent of the primary teachersand 100 percent of secondary teachers will be qualified Swazis.

20. The expansion in enrollment has taken place at the expense of qual-ity, particularly with regard to the curriculum in formal education whereliteracy subjects and humanities have been stressed more than the sciences

1/ Enrollment figures exclude under- and over-age students.

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and practical subjects. Of the 3,000 candidates for grade 12 school cer-

tificatesin 1973-75, only 86 qualified in science subjects, often with low

grades. The result of the maldistribution in the qualifications of the

secondary school graduates has been a scarcity of Swazi engineers and tech-

nicians which will take some time to remedy. The Government has begun

modernizing its formal education curriculum with the assistance of a USAID-

financed curriculum planning team, and with assistance provided by the Bank's

first education project which included funds for a curriculum development and

education materials production center. The new curriculum with its increased

emphasis on sciences and practical subjects would provide educational training

which is better suited to Swaziland's increasingly complicated economy.

21. As part of its overall analysis of the future requirements of the

sector, the Government intends to review the role of SCOT to ensure that the

quality of the output and the relevancy of the courses offered meets the man-

power requirements. The Government has recently appointed a governing body

for SCOT with the Permanent Secretary of the Ministry of Education as the

chairman. The governors, in order to form a base for adequate programming

of developments in technical education and vocational training, intend to

carry out, with external assistance, a full assessment of SCOT to determine

the optimum course of future investment in technical and vocational education.

An area of importance to this project is SCOT's program for training teachers

of practical subjects. This program needs to be improved quickly to provide

the practical subject teachers for existing schools and the schools to be

funded through this project. The Government has reviewed with the Bank a plan

to improve training of practical teachers at SCOT and has agreed to begin

implementing this plan by December 31, 1977 (Section 3.03, Loan Agreement).

Management and Financing of the Education Sector

22. The Ministry of Education is responsible for all institutions within

the formal system except SCOT which comes under the Ministry of Labor. The

shortage of skilled manpower in the teaching profession is also reflected

in staff shortages in the Ministry of Education where considerable reliance

is being placed on expatriate staff for key functions. The planning section

has external assistance from UNESCO and USAID, but is headed by a competent

Swazi and is efficient. Other- sections dealing with inspection of schools

and scientific and technical subject-development require reinforcement which

will take some years to achieve. In the meantime, some continued reliance on

expatriates is inevitable.

23. Recurrent expenditures on education currently account for about

23 percent of the total recurrent budget and are forecast to increase by

nearly 8 percent per annum until 1986. The recurrent budget, however, may

grow at a faster pace during the same period. Consequently, recurrent expen-

ditures on education as a percentage of the total recurrent budget may be

somewhat lower in 1986 than the current level. This level of expenditures is

satisfactory and is similar to expenditures on education in other countries.

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School fees paid by parents (E 20 per annum for primary school, and E 60 perannum for secondary school) and contributions from other lenders and religiousmovements also help to finance education.

Government's Strategy for Education and Bank Group Assistance

24. At independence, the Government inherited a loosely defined educa-tional system which comprised mostly missionary-controlled primary andsecondary schools providing instruction in literary subjects and humanities.These schools were haphazardly located with the greatest concentration inurban areas; often they were too small to be run economically. There waslittle vocational instruction and no manpower information to guide theMinistry of Education in the educational areas they should emphasize. TheGovernment began to correct the most obvious deficiencies in the system:control over the missionary schools was established by agreeing to pay allteachers salaries; new educational facilities were built, primarily in ruralareas; a multiplicity of programs to provide rural education was developed;and an institution for craft and vocational education was opened to traintechnicians and skilled craftsmen for the economy. By 1973, when the BankGroup first became involved in Swaziland's educational system, the problemsassociated with the rapid growth in the sector were just emerging. Two of thebiggest problems were the loss of quality in the teaching force which resultedwhen the growth in the education system exceeded the ability of the teachercolleges to provide quality teachers (para. 19), and the growing influenceof the traditional curriculum with its emphasis on literary subjects andhumanities when the country required manpower with technical and skill train-ing. A third problem was the proliferation of educational programs in ruralareas and the need to fundamentally address the appropriate type of programsin these areas and how they should be implemented. The Bank's first educationproject, which became effective in January 1975, was designed to assist theGovernment with all three problem areas. The project provided for improvedteacher training at William Pitcher Teacher Training College (WPTTC), forimprovements in SCOT's vocational and technical training capability, for a newcurriculum development center at WPTTC and for a new program of rural educa-tion to be centered around rural education centers (RECs); i.e., juniorsecondary schools with additional classrooms and workshops to provide practi-cally oriented agricultural training and rural skills training to both primaryschool leavers and adults. Implementation of the project has proceededsatisfactorily with civil works at SCOT and WPTTC well underway. Nevertheless,while earlier than forecast at appraisal the first REC will not be operationaluntil 1978, because of the time required to prepare the curriculum and trainspecialized teachers.

25. At the time of the first project, the Bank Group and Governmentagreed that a fresh assessment should be made of the country's educationalprograms to determine the direction of education in the Third NDP (1978-82)period. The Government commissioned two studies and their reports (theReport of the National Education Commission and the Report on Current Trendsin Education), which became available in 1976, provide the basis for theGovernment's educational strategy in the Third NDP. Based on these reports,the Government has adopted a two pronged approach for the future. First,

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efforts at expanding vocational training and education after junior secondaryschool level will be delayed until after an assessment has been made of SCOT(para. 21) and a comprehensive manpower survey is undertaken to determine,inter alia, the specific needs of the economy for all levels of skilled, tech-nical and professional manpower. The results of the manpower survey whichbegan in 1976, should be available by the end of 1977. Furthermore, new pro-grams for providing rural education will be delayed until an evaluation hasbeen made on the effectiveness of the RECs to be built in the first project.Second, while awaiting the outcome of the manpower survey, the assessment ofSCOT and the evaluation of the RECs, the Government will proceed with a planto expand the basic education cycle from grades 1-7 (primary schools) togrades 1-10 (primary and junior secondary schools) and introduce in theseschools the new curriculum which features increased emphasis on science andpractical subjects. The Government concluded that this consolidated andrestructured basic education cycle with its increased science and practicalsubjects orientation is required now to form the proper base for furthereducational needs. The Government's strategy is sound and it is proposed thatthe expansion of the basic education cycle be supported through this project.

PART IV - THE PROJECT

26. The proposed project was identified in early 1976 during the courseof a Bank mission to review developments in Swaziland's education sector.Following preparation and the Government's request to consider the project,a Bank mission appraised the project in October-November 1976. Negotiationswere held in Washington from February 22 to 25, 1977. The Swaziland delegationwas led by Mr. E. V. Sikhondze, Under-Secretary, Ministry of Finance and Eco-nomic Planning. An appraisal report entitled "Appraisal of a Second EducationProject in the Kingdom of Swaziland" No. 1417-SW dated May 17, 1977 is beingcirculated separately.

Objectives and Description of the Project

27. The principal objectives of the proposed project are (i) to supportGovernment policy to expand its basic educational cycle from seven to tenyears; (ii) to improve existing junior secondary schools, i.e. the last threeyears of basic education, by the addition of facilities for science and prac-tical subjects; (iii) to support Government policy of broadening educationalopportunities by building new Junior secondary schools in rural areas pre-sently without such schools, and (iv) to enable the Government to preparefuture educational projects.

28. To meet these objectives the proposed project would provide thefollowing:

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(i) Buildings, furniture and equipment to support theteaching of science and practical subjects in 13 juniorsecondary schools whose present capacity of 2,900 stu-dents would be increased to 3,960.

(ii) Buildings, furniture and equipment for four new juniorsecondary schools. Each school would have a capacityof 240 students.

(iii) Simple livestock buildings and equipment to support theagricultural teacher training program at the Universityof Botswana and Swaziland.

(iv) Operational costs of project administration and pre-investment studies for future projects.

Project Items

29. Junior Secondary Schools. The project would provide for the expan-sion of 13 junior secondary schools and the construction of four new juniorsecondary schools, all in rural areas. The improvements to the 13 junior secondaryschools consist of science laboratories and practical subjects workshops.Included among the practical subject workshops would be "model agriculturalcenters" containing livestock facilities, crop facilities and a laboratoryworkshop. Curricula and syllabi have already been developed with assistancefrom the USAID curriculum development project (para. 20). Following theevaluation of the rural education centers (para. 25), the Government maypropose to develop some of the junior secondary schools in this project intorural education centers.

30. It is expected that 35-40 percent of future junior secondary schoolleavers, unable to continue on in senior secondary schools, would look foremployment in agriculture, small-scale industry or services. Therefore, theemphasis on science and practical subjects is essential to provide them withthe attitudes and background on which to build on-the-job training and ex-perience. Science and practical subjects would account for about 40 percentof the weekly timetable.

31. Agricultural teacher training facilities. The Faculty of Agricul-ture of the University of Botswana and Swaziland, located at Manzini, isgenerally well equipped for its agricultural teacher training program. TheFaculty does need, however, a "model agricultural center" similar to the typewhich is being included in junior secondary schools.

32. Program administration, operating expenses and pre-investmentstudies. The Program Unit formed for the first education project has operatedsatisfactorily and the Unit, working in cooperation with the Ministry ofWorks, would be responsible for implementing the proposed second project. TheUnit's operating expenses, currently financed through the first project, would

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be increased with the additional responsibility for implementing the secondproject. These additional expenses would be for furniture, equipment, print-ing and additional staff; they would be financed as a part of theproject. Following completion of the ongoing manpower survey in late-1977and clarification of the country's need for middle- and higher-level manpower,the Government wishes to prepare a third project for possible Bank financing.This project is likely to incorporate training programs for agricultural,commercial and technical manpower. Since the design of the physical facilitieswould be somewhat complex, existing standard drawings and equipment listscould be used only to a limited extent and project preparation may requireconsultants to prepare detailed architectural and engineering designs.To enable necessary pre-investment studies and design work for a futureproject, US$100,000 has been set aside in project funds.

Project Cost and Financing

33. The total project cost is estimated at US$6.0 million, excludingtaxes and duties amounting to US$0.4 million. About US$3.0 million or 50percent of project costs, would be for expenditures on goods and servicesoutside Swaziland. The proposed Bank loan of US$4.0 million would coverforeign expenditures plus US$1.0 million of local costs. In discussingproject local cost financing earlier in this report (para. 17), it was sug-gested that external assistance agencies should support the Government's soundeconomic policies by financing not only foreign costs of projects, but alsosome local costs were the foreign costs are relatively low. In this project,the relatively low I/ foreign exchange costs (50 percent) are due to the rurallocation of the proposed schools and their small size which makes it unlikelythat foreign contractors would bid on civil works. The project also encour-ages local small-scale enterprises to manufacture school furniture and equip-ment, a practice which has begun with the first project and should expandwith the proposed project. In view of these factors it is proposed that theBank contribute about 67 percent of total net project costs, which includessome local expenditures. The Government would finance the balance of projectcosts. A detailed breakdown of the costs and proposed financing plan aregiven in the Loan and Project Summary.

Project Implementation

34. The Program Unit established for the first project would also beresponsible for implementation of the proposed second project. The Unit in-cludes a Program Director, a local counterpart for the Program Director, anAccountant and a Procurement Specialist. The Government has agreed to con-sult with the Bank on any new appointments to the position of Program Director

1/ In the four projects in Swaziland approved by the Board in FY75 andFY77 (excluding the DFC project), foreign exchange costs have averagedabout 65 percent of net project costs.

- 12 -

(Section 3.02(b), Loan Agreement). The Ministry of Works would provide theProgram Unit with architectural and engineering assistance for all the con-struction in the proposed project. Standardized designs and master equipmentlists have already been developed for most of the project schools.

35. Procurement. Civil works contracts costing less than US$250,000each (total estimated at US$2.15 million), furniture and equipment contractscosting less than US$50,000 each (total estimated at US$150,000), and locallyprocured transportation services for moving furniture and equipment (totalestimated at US$50,000) would be awarded on the basis of competitive bidding,advertised locally and in accordance with local procedures satisfactory tothe Bank. All other contracts for civil works, furniture and instructionalequipment would be awarded on the basis of international competitive biddingin accordance with the Bank Group's Guidelines for Procurement. Based onexperience under the first project and on the expected size of the contracts,it is anticipated that civil works contracts will be won by local firms.Local manufacturers of furniture and equipment would be allowed a preferentialmargin of 15 percent of the CIF price of competing imports or the totalapplicable customs duties and import taxes, whichever is lower. Standardizedsketch designs, draft tender documents, and master lists of furniture andequipment have been reviewed by Bank staff. Proposed grouping for tenderwould be reviewed by the Bank staff. Items would be grouped, to the extentpracticable, to encourage competitive bidding and to permit bulk procurement.Review of tender evaluation documents by the Bank prior to award would berequired only for contracts of US$250,000 and above for civil works and ofUS$50,000 and above for equipment and furniture.

Disbursement

36. Disbursement would be on the basis of: (a) 100 percent of foreignexpenditures for directly imported equipment and furniture or 80 percent ofthe cost of locally manufactured equipment and furniture; (b) 60 percent oftotal expenditures for civil works, locally procured equipment and furniture;and (c) 80 percent of total expenditures for program administration and futureproject preparation. Disbursements for program administration includingpreparation of future projects and local transport services would be madeagainst certificates of expenditure, documentation of which would not besubmitted for review but would be retained by the Borrower and would beavailable for inspection by the Bank during project supervision. All otherdisbursements would be fully documented. Procurement is expected to becompleted by April 1979, and the project by October 31, 1979.

Benefits and Justification

37. The main project benefit would be the expansion of Swaziland'sbasic education cycle from seven to ten years and the improvement in thecycle through the introduction of science and practical studies. Thetiming is appropriate since this expanded cycle is part of the proposed ThirdPlan educational strategy which the Government seeks to implement as quicklyas possible. Another important project benefit would be the rural location

- 13 -

of the new and expanded junior secondary schools. Thus, this project wouldassist the Government to redress the imbalance in educational opportunitiesbetween rural and urban areas as well as support the Government's overallprogram of rural development.

38. This project would complement the Bank's first education projectwhich is providing assistance for teacher training, vocational and techni-cal training and for an innovative program of rural education. While theseprograms are being evaluated and new manpower data are being analyzed, theGovernment seeks to establish a solid basic education program which wouldprovide the initial output for rural or vocational programs. Future Bank-assisted education projects are expected to address the needs for techniciansand high level manpower.

39. The 17 junior secondary schools in the proposed project, when builtand fully operational by about 1983, would produce an output of some 1,400graduates per annum with a well-balanced humanities-science background. Thegraduates would be suitable not only for formal education but also for on-the-job training and associated part time training at the Swaziland Collegeof Technology and other institutions. It would be these graduates, aftersome years of industrial and commercial experience reinforced with appropri-ate courses, who would replace the expatriates in Government and the privatesector and become the skilled manpower upon which Swaziland's economic devel-opment depends.

Risks

40. In view of the Program Unit's satisfactory performance under thefirst education project and its good coordination with other ministries,prospects for physical implementation of the proposed project appear excel-lent. Fulfillment of the project's educational objectives, however, willbe more difficult. In many Bank Group-assisted educational projects, intro-duction of science and practical subjects into secondary schools has notmet with immediate success, usually because of a lack of appropriate trainedteachers. In this project there are reasonable prospects that teachers willbe produced in adequate numbers to meet school expansion needs except perhapsfor the practical subject teachers, and to meet this need the Governmentintends to implement a plan for training practical subject teachers at SCOT byDecember 31, 1977. A possibility exists that the demand for individuals withcommercial and technical skills might cause teachers in these areas to leaveeducation for higher paying employment in the private sector. To counter thisproblem, the Government has agreed to review from time to time the conditionsof employment of teachers trained in commercial and technical skills to ensurethat secondary schools are adequately staffed (Section 4.03(b), Loan Agreement).

Altogether, the above risks are acceptable and should not impede the projectfrom achieving its objectives.

- 14 -

PART V - LEGAL INSTRUMENTS AND AUTHORITY

41. The draft Loan Agreement between the Kingdom of Swaziland and theBank, the Report of the Committee provided for in Article III, Section 4 (iii)of the Articles of Agreement, and the text of the draft Resolution approvingthe proposed loan, are being distributed to the Executive Directors separately.

42. Features of the Loan Agreement of special interest are referred toin Section III of Annex III of this report.

43. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank.

PART VI - RECOMMENDATION

44. I recommend that the Executive Directors approve the proposed loan.

Robert S. McNamaraPresident

Attachments

June 21, 1977

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ANNE IPage 5 of 4 pages

Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970, and for PaInt Recent EstImate between1975 and 1975.

Differen-s between UR rate of natural increase and IBRD population growth rate due to different consus bases.

Selection of Gabos so the objectivo coutry is based on its isldlarity In population nice. and economIc strutur, although Gabon in at a higherlevel of d-evelpment, Both countriso hav -eeU-diversified econoies, are endowed with natural resono-en and have advaned, active private

SWAZIIANDI 1_960 A Rstio of population onder 15 and 65 and over to total labor force; A1 1962.

1970 A1966, Ab Rntlo of population under 15 and 65 and over to total labor force.

MOST RECENT ETIMAiTE: La African population only; Ab Ratio of population under 15 and 65 and over to total labor force;ft Including assistant nurses; fd 1972.

BCTSWANA 1970 L. 1964-70.

MAURITIUS 1970 A. fai to emigration population, growth rate is lower than rate of natural increase; fb Ratio of population under 15 and

65 and over to total labor force; ft Sugar land only.

GABON 1970 /a Rstio of populetion unfer 15 and 65 and ove to labor force age 15-49 year, ft Entlanted actIve population definedso 15-49 years of age; ft Income recipienta; ft Including mldwlves and ansistant nornro; ft Govermnenthospital estsblishnets onl,y; If 1964-66.

07, June 8, 1977

DEFINI5TIONS OP SOCIAL. SOfICATORS

Land Area (Rho,, 1 Paniatios sac -urame peros - Popalatian dieided by susber so practiciogTotal -Tonal sarfane area comprising ma.d area sand Ised waners. male sad Rfsal graduate aas, -risad' or neratified nurse., andaorta. M- st re...cn .t ali-ce of agri-ltora1 area used tmspscrarly or Pena- anailisry paraaaa stab training or- prLne

nannty far crops, pas cares, arktn i hitches gardens ar e Iia fslil,. PsP.1ation sacr hoesitel bad - Pspalatian diwided hy nosier oR haspinl bad.availobie is poblia sad private g.. serl aod apacisitad hsapictl and

CNP pac narita (S$R) - tNP Par capita nlti-tane an nareoc market prices, rehsbilitatitaa caters, -soldne s-rasg henn and as-bltabhsaeat faraeIclnale d by earn -ov-ris - tehod as Wseld Bash Atlsa (1973-75 basis), nutadis1 and praetlee oas..1960; 1970 and 1975 dana. Per saPita saPP1Y of eara -ftarstren)- Caspated from esargy

aqueaIcat at set fsad soPpliss -vllabla is naantry Par aepita per day;roeslatin and vital sa ttiatic, a-alabla sapplies cspries desnanic produasias, kaPorns les escorts, cadPonoIatisa (mid-yea million) As of July firet, if sat -alabla, avarags chagas is stank,..st .op,li. las enlua asisil Read, sasda, q-aaitiaaueedof tw and-year as tlastna; 1 h0, 1970 sad 1971 date. in Road proonee. og asd lenses in distir~ihuio; qur --n wr estimated

hy FAO base.d as physiaigioa1 sends for -sse nctiviny asd haa1th osasid-Pspolation deneino - ear square ha - Mid-year population par aquer kilseeter racig eavirom ula tperatura, body seighta, ego and sea distrihbtians of

(10hiars f tonl ara.ppuaiss asd llsia 15% fsr wat e oabldlv...siatia dan y t-nan assre ha of aarie Isad - Capunad as above far Prsnasnl feaan(rascdy rti ae tpraptagrinalt-rl lead only. oat supply of food per day; ant sapply of Road is defisad as above; rqulc-

seats tar all no,"trias aa.tahlibed by 50D E-ot R esseeth IereocasVital stanianics provido foe a s.is- aloas of 60 gras oftoa Protei. par day, andCrude birth eel tsar th-sand_ aer!Sa - Annua lIve births par thoussd of 20 gras of ..i-a and pulsa protnin, of which 10 gres shold ha ..i-ialmid-year population; ceo-y_ar eritLsmtic sorgas ending in 1960 sand 1970, prtois; thase tanadards see lowr then chose oR 75 gras of total proteinand fivo-yae --nsge endin,g ia 1971 for ens erase..at aetnste sand 23 gras of asSes

1protein as an -esrage Roe the world, prapseed by PAO

Cndo dasoh rate oar thau.and. av-SEe - Assual dastha per thouaad of mtd-yasr is tba Third World road Sarvy.popalanion; tan-year aritlearnic averages nding is 1960 end 1970 asd flea- Par ,anin, sea.teRsapnlv frc animal and palsa - Pretain sopply of fnedyear -verega ending is 1971 for mast reasont astiaata. darivad fern 1 ao aaend polss. in grass par day.

1. fnt aartality cans C/thai; - As-u.I darhs of infests u-dar on yar of ago loath race C/thea) ae.s 1-4 - Annual deonha par nhousend is age grep 1-4Par ths-a linbrh.years, n ahildras in thia ega group; saggeatadase inditoaer of

ita soatso st birth (yea) - Averaga suaer of years of lita reeting at se-atritobsrth; sa_ally RI va-yaar --srgae amding in 1960, 1970 sod 1972 fsr dovalop-ing co_nira. Edonation

cross reorodctios rate-vraanonker atlicsesdaghtars a oe ill baar AdJusted.asrolinent canto -ociasre cahl - E-r1llat of oll agoa as Pa-is hsr norma reproduct ive partod It she rcreanna pres...t oge-spatifi sanRage so Primar soh1-aga populattion; ialadan hitldra aged 6-11 yearferilit'y rto; as saly fiv-yea sveragea ending to 1960, 1970 and 1971 hat adjutad tar difforent lengths oR peiary adunation, tar -ontrisa sinhfor davoloplng nannreias. -nt-rol adoction, asro11ant nay osseod 100% stince eespupils era hal,

Pponlation groA rsa t tonal -Compound annua grawth rtaise oR id-year orabov thaoffintaIshool ego.population far19106-60,1960-70 sad 1970-75. Adjusted enrallnsast rantio-saaondscy sohol - Computed aoboes, ce-ondary

oaltestan raIn Mt -urbee - Computed like growth nate of tota dantion raqutre tlas Roa yersrof approved pr Imar Inlnanlo;population; difra9aisioeo rsaae a fec aprb ty of p ied.s garal, vocationa.lfor tyaahe trating issironti.m for puptisdots among nautries. at 12 to 17 yaarn of ann; oares,pondsa c,, narse ror gnaralIy easluded.

Orbas nanulanion ft oftotal) - Ratio of urban no tonal popultton; different Yaars of scabooling nrot-ded (fiest ad _son lsolsl - Ita .1Y.sre ofdefinttias of urban areas nay affect comparabiliny at data asag nucehs sboling; an secosdary le-nl tosit,osl imatr,tin sey ha partislly or

taplataly smolded.ga tronra (Percentn Childon (0-14 years), -kintg-sgr (15-64 yasra) Vacatoa1 enarolboa ft at sanndarl-) Ronatioml inatitotti- iacluds

Asdn ritred (65 years a ad oe)apaenaa ofmdya pesltontnhol,industrial or thrs prngraa hiah oparte imdepesdently or aAge depenod...y ratRio - Ratio of popalat on under 15 and 65 end ovr to thosa daparem,ant at secondary inatinotioma.of ags1 thr-gh h4. Sdale Itearno.- rot .%t)- 1itneratoadolts (able to read sad -its) as per-

o-cagsat d daeaen,y ra tie - toic of population undar 13 and 65 and over to Iatg Poa daln popletito aged 15 yeara ad ovr.the labor torte is apga group of115-hi y55c..

Penile I .plnis-a_ctors (oso_aive. nha) - C-omltice snhar at ancapnors Hoesminof birnh-nonteo1 devicse wader aoa pin.. of national fatly planntng pro.gra Pereapsa cor (urban) - A-arages,nbsr of person par corn I a-pied

aio atio. eovatioml dw-l1tsga in orban areas; dweIlitga e-olde non-pa-sm...ntfatly elaning - Csraf of martied wmn -Pr"ateges of married ,aaa of seotorest and ona.apied perta.child-basring age (15-4 years) h.a use blrthp-aaro1 de-cas to all macrod Ocoapiad dllisga sithont stood manor Cl) - Ocoapiad --vettona dwellings

sastoens . age grap. in uebaa ad cral areas without insaide or otaide piped saner fasilinissasparoetage ot all onopiad dwellings.

EPzlsymeat "'cstoscteait f I o l dwlllias) - Con-sati-I dwIlitaga withTotal labor terse (thosasad) - Econoicslly active parsons, isoading cond ee-tracity is livingqu-t!rnsr eePeoent of tsia1 dwellings In orbee and

forcas and amaplayad bat sanlading bhcoawi-n, atdesta, eta. ; definition-ualscsLis varios onteia. arc son nmpareble.. -Rura dwcltsn aaaacttd to elantrinity 1) Caponed as above for coraabortooeisarica1ture fCX - Agela1teuraI labor tacos (ia f.-aeig, tareatry, dasalinga only.hastIng ad tihing) as parnontage at total bsr ftorte.

'nslydC f labor terse) - Osaplayd are asmlly defined as prsone who Csmaptioare abla ad willing to take a job, ont ofajob on a givas day, r-asiasd an Radio rc..teers (pc th- real - A11 tyfesn at raneivera for radio broadcastsat a Job, and cashking work f or a spanitid misbive pariod sot an..eeding one to general pablic par thoveond at popnlstio; ...a1ados oliaensed re..alevraweek;-ny at ha caparable hatwea Rantries doe no different defnnitions in nonstrlos and In yeses h.. registrati-onfa radio sets wa is ffatfn;at u_pIoyd and sa e. at data, a.g., -playsst offiae nt.tatts, .aP.e dens for recnet pear may son be anpacoble stacs moan -ontrtos bk1isbed

asess,npolcory aneplaysst imua .Itn_m ing.

Passaner 0cta huno P-Passeger oars ncsPriso motor sa- Ssattsg1soriedinbr.ibstion - Parnontags at pri-ete incas (both in sashb and kind) leas Stbaa aighlt pess slades abslsee, ba-ses asd mIlitaryressdbtinhast It, rinbost 20%, pooreat 20%, ad poorsn At o0 f honas- vhiales..

holds. Eletirta (ks/a/y ea ass) - annul t oPtio o f tad-tria, a.cotia1,psblin end private ea-tr"is ty in ki'lowtt hare par a.pit., gonaral1y

DOtstibatin of lend -- rhip -psrn...tagca of 1ond ease by saclthiest 10% bead n r tanbo dana, vithoot a feasatr I-s.. in grids bun site--and p-erst 10% sf land frr.le o imports sad amprta at elentrlnity.

NasasrIat (km/yr sac taP) - Per apto sansl casmaspton to, kilogras,Realah and Nutrition senteatad tras doatia pradasnios plu seat asporna of assprint.

Poesalttn sc eysnia -Ppulation divided by sibkr of prancticingpksoim qaitted Rca a rdiaal enksl at university leve

ANNEX IPage 3 of 4 pages

ECONOMIC INDICATORS

GROSS NATIONAL PRODUCT IN 197/175 AmNNAL. RATE OF GROWTH (%M constant prices)

US$ Mln. j.. 1971/72-73/74 1974/75_/

GNP at Market Prices 240.9 100.0 7.0 6.0

Gross Domestic Investment 62.2 25.8

Gross National Saving 76.2 31.6

Current Account Balance 14.0 5.8 9.5

Exports of Goods, NFS 192.1 79.7 8.5

Imports of Goods, NFS 161.3 67.0

OUTPUT, LABOR FORCE ANDPRODUCTImITY IN 1974/75

Value Added Labor Force3/ V. A. Per Worker

US$ Hln. %_ NMl _f U $ ^

Agriculture 72.0 31.7 .157 78 458 41

Industry 60.4 26.6 .015 8 4,026 357

Services 94.6 41.7 .029 14 3,262 288Unallocated ..

Total/Average 227.0 TR.o .20 IO. 1,10

GOVERNMENT FINANCEGeneral Government Central Government( Nln.) %Of GDP (Emal.Hln.) % of GDP

197 197 lTw-7 19775 1974/73 5

Current Receipts 41.9 22.5 28.5

Current Expenditure 24.8 133 16.9

Current Surplus 17.1 9.2 11.6

Capital Expenditures 9.5 5.1 6.5

External Assistance (net) 10.4 5.6 7.1

MONEY, CREDIT and PRICES 1970 1971 1972 1973 1974 1975

(Million Emal. outstanding end period)

Money and Quasi Money .. .. 39.5 43.6 56.3 82.3

Bank credit to Public Sector -1.2 -1.5 -2.0 2.8 -5.3 -13.7

Bank Credit to Private Sector 17.1 18.2 17.4 22.6 29.3 42.9

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP .. ., 34.6 31.1 30.2

General Price Index (1963 - 100) 4/ 109.1 111.3 113.9 127.1 151.6 170.3Annual percentage changes ins

General Price Index 2.2 2.0 2.3 11.6 19.3 12.3

Bank credit to Public Sector .. -25.0 -33.3 140.0 -189.3

Bank credit to Private Sector .. 6.4 -4.4 29.9 29.6

NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period

covered.

1/ Estimated on basis of national accounts data for period July to June. Not strictly comparable with balance

of payments figures which relate to cAleadAr year.-

2/ Provisional.

7 laorforceis definedras persos emoyed in the mnodern seetor plus those whose main occupation wasin the traditional aector; excludes 25,000 absentees mainly in South Africa (29,000 in 1976).

/ No general Price Index is availahle; index relates-to-the-ma-, ±-cties oftMbabane and Manzini only.

not availablenot applicable

February 1977

ANNEX IPage 4 of 4 pages

TRADB PAIMENTS AND CAPITAL FLWS

BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1973-75)

1973 1974 19752/ US $ Mln %

(MillionsUS $)

Exports of Goods 109.3 178.3 173.6 Sugar 63.5 42.0Imports of Goods 83.3 112.5 123.8 Wood Products 28.1 18.6Trade Balance 26 0 g -z--8 49.8Fruits (mainLy citrus) 10.3 6.8

Non-factor Services (net) -5.0 -2.6 -2.7 Iron Ore 15.3 10.1Interest Payments (net) .. * * Asbestos 10.5 7.0Workers' Remittances .. .. .. Meat & Meat Products 3.5 2.3

Other Factor Payments (net) -30.4 -36.0 -53.4Net Transfers 5.5 11.6 12.1 All other commodities 20.0 13.2Balance on Current Account - 3.9 38.8 5.8 Total 151.2 100.0

Direct Foreign Investment .. *- *- EXTERNAL DEBT. DECEMBER 31, 1976Net MLT Borrowing

Disbursements *- *- *- US $ MlnAmortizationSubtotal .. .. .. Public Debt, incl. guaranteed 46.0

Capital Grants . * Non-Guaranteed Private Debt

Govt. Capital (net) 14.6 15.3 10.9 Total outstanding & DisbursedOther items n.e.i -12.9 -26.8 18.3Increase in Reserves (+) -2.2 27.3 35.0 DEBT SERVICE RATIO for 1976 3

Gross Reserves (end year) ..

Net Reserves (end year) .. .. .. Public Debt. incl. guaranteed 2.8Non-Guaranteed Private Debt

Fuel and Related Materials Total outstanding & Disbursed

Imports 83.3 112.5 123.8of which: Petroleum 8.4 15.7 17.6

Exports 109.3 178.3 173.6of which: Petroleum .. .. .. IBRD/IDA LENDING, (April 1977) (Million US$)

RATE OF EXCHANGE IBRD IDA

1971 1972 1973 1974 1975 1976 'Outstanding & Disbursed 17.3 3.1

US$1.00 = E 0.71 0.76 0.69 0.68 0.73 0.87 Undisbursed 6.3 4.5E1.00 = US$ 1.40 1.29 1.44 1.47 1.37 1.15 Outstanding incl. Undisbursed 23.6 7.6

1/ IMF staff estimates.2/ Provisional.3/ Ratio of Debt Service to Government Current Revenue.

. not available

not applicable

May 1977

ANNEX IIPage 1 of 3 pages

STATUS OF BANK GROUP OPERATIONS IN SWAZILAND

A. STATEMENT OF BANK LOANS AND IDA CREDITS

(as at April 30, 1977)

Amount (less cancellations)US$ million)

No. Year Borrower Purpose Bank IDA Undisbursed

Two loans and one credit 7.0 2.8 -fully disbursed

1058-SW 1975 Kingdom of Water Supply and 3.5 2.6Swaziland Sewerage Facilities

518-SW 1975 Kingdom of Education 5.0 4.5Swaziland

1108-SW 1975 Kingdom of Highways II 7.0 3.7Swaziland

1375-SW 1977 Kingdom of Rural Development 1' 4.0Swaziland

1409-SW 1977 Kingdom of NIDCS 1/ 5.0Swaziland

Total 26.5 7.8 10.8of which has been repaid 2.9 0.2

Total now outstanding 23.6 7.6

Amount sold 2.2of which has been repaid 1.1 1.1

Total now held by Bank & IDA 2/ 22.5 7.6

of which is undisbursed 6.3 4.5 10.8

1/ Not yet effective.2/ Prior to exchange adjustments.

ANNEX IIPage 2 of 3 pages

B. PROJECTS IN EXECUTION 1/

Loan No. 1058-SW Water Supply and Sewerage: US$3.5 Million Loan ofDecember 9, 1974; Effective Date: March 12, 1975;Closing Date: June 30, 1979

After some initial delays the project is progressing reasonablywell except on one contract (construction of sewers in Mbabane) of whichthe liquidation of the contractor led to retendering of part of the works.Completion of the project is now expected by July 1978 instead of October1977. Latest project cost estimates indicate that there will possiblybe an unused balance of the Bank Loan of US$0.9 million (mostly due to thedevaluation of the South African rand in September 1975). Discussionsare in progress on identifying possible additional works which could beconsidered for financing with the unused funds.

Credit No. 518-SW Education: US$5 Million Credit of December 9, 1974;Effective Date: March 11, 1975; Closing Date:December 31, 1980

The project is continuing to make good progress. The ProgramImplementation Unit is operating satisfactorily; architectural design, con-struction and procurement are proceeding well. If implementation continuesat the present rate, the project could be completed ahead of schedule. Costsare within the original estimate.

Loan No. 1108-SW Second Highway: US$7 Million Loan of May 5. 1975;Effective Date: October 13, 1975; Closing Date:December 31, 1980

Construction of the Tashaneni-Mlaula and Helehele-Phuzumoya roadsis progressing well, and is expected to be finished by the contract comple-tion date. At Government's request, the loan agreement was amended (R76-232,September 15, 1976) to permit utilization of US$1.8 million of an estimatedUS$2 million surplus in the loan account. The surplus resulted partly fromthe 1975 rand devaluation and partly from savings in physical contingencies. Theamendment will enable the Helehele-Phuzumoya road to be extended 25 km to BigBend.

Loan No. 1375-SW Rural Development: US$4 Million Loan of April 6, 1977,Effective Date: (expected in July 1977); Closing Date:November 30, 1982

Loan effectiveness is expected in July 1977.

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution, and in particular, to reportany problems which are being encountered and the action being takento remedy them. They should be read in this sense, and with the un-derstanding that they do not purport to present a balanced evaluationof strengths and weaknesses in project execution.

Page 3 of 3 pages

Loan No. 1409-SW National Industrial Development Corporation of Swazi-land: US$5 Million Loan of May 12. 1977; EffectiveDate: (expected in August 1977); Closing Date:December 31. 1981

Loan effectiveness is expected in August 1977.

ANNEX III

SWAZILAND

SECOND EDUCATION PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

I. Timetable of Key Events

(a) Time taken to prepare project: six months

(b) Preparation by: Government of Swaziland assisted by the Bank

(c) Initial discussion with Bank: January 1976

(d) First Bank mission: January 1976

(e) Appraisal mission departure: October 7, 1976

(f) Negotiations: February 22-25, 1977

(g) Planned date of effectiveness: September 1977

II. Special Bank Implementation Actions

None

III. Special Conditions

(a) The Borrower shall implement, starting not later than December 31,1977, a plan for improved training of practical studies teachersat the Swaziland College of Technology (para. 21);

(b) The Borrower shall consult with the Bank on future appointments tothe position of Program Director of the Program Unit (para. 34); and

(c) The Borrower shall, from time to time, review the conditions ofemployment of teachers in commercial and technical subjects toensure that secondary schools are adequately staffed (para. 40).

IBRD 12579Re'i° FEBRUARY 1977

0 10 20 3

SWAZILAND MILES

- Main roads-tar SECOND EDUCATION PROJECT ? KILOMETERS

Main roads-gravel-____ Minor roads

Railways To To Hectorspruit _ JUNIOR SECONDARY SCHOOLS* Important airfield Neispruil To Kaopmuiden [ * AGRICULTURAL TEACHER TRAINING

Aerial ropeway 9H5 / Fgr,o.R, FACILITYRivers FarCILIaTYIrrs Ia1;on schemes Ngor..n t, See list of schools in report onnexes.

L1~ IProm ana gum forests J ~' o'

REGIONS To ~ \KomoatipoortHighveId- overage height iiiiIe ''8

above sea level 1,200 mff, .Iave ock .i.},. .o rgate T TOMiddleveld-average height lŽ\ - Lomahasha Louren;o

6' above sea level 600m. AB S PIPgs Pak I' Marques

26 LowveId-overage height Tshan----.r' above sea level 200m 016 /

=3jLubombo-overage height / oHHrmabove sea level 550m. / Korncj,

® National capital nr \,International boundaries

\~~~~~~~~ ~~~ . 4 Mp7akaStn

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