AFRICAN DEVELOPMENT FUND

MOZ/PTTR/99/01LANGUAGE : ENGLISHORIGINAL : ENGLISH

REPUBLIC OF THE MOZAMBIQUE

VANDUZI-CHANGARA ROAD REHABILITATION PROJECT

APPRAISAL REPORT

COUNTRY DEPARTMENT OCDWSOUTH REGION OCTOBER 1999

THE AFRICAN DEVELOPMENT BANKO1 B.P, 1387 ABIDJANTel: 20 44 44; 20 48 48FAX: (225) 22-70-04

PROJECT INFORMATION SHEETDATE: OCTOBER 1999

The information given below is intended to provide some guidance to prospectivesuppliers contractors, consultants and all persons interested in the procurement of goods, worksand services for projects approved by the Board of Directors of the Bank Group. More detailsand guidance should be obtained from the Executing Agency of the Borrower.

1. COUNTRY - Mozambique

2. PROJECT TITLE - Vanduzi-Changara RoadRehabilitation Project

3. LOCATION - Manica and Tete Provinces

4. BORROWER - The Republic of Mozambique

5. EXECUTING AGENCY - National Road Administration (ANE)Avenida de Mozambique 1225, C.P.403, Maputo, Mozambique Tel: 258-1-476163/7 Fax: 258-1-475290

6. PROJECT DESCRIPTION - The project consists of:a) rehabilitation of the 270 km

bitumen road between Vanduziand Changara.

b) Consultancy services for thesupervision of the above civilworks;

c) Audit services.

d) Institutional support to ANE

7. TOTAL COST: - UA 20.79 millionForeign - UA 17.41 millionLocal - UA 3.38 million

8. ADF LOAN - UA 16.79 million

9. TAF GRANT - UA 0.80 million

10. OTHER SOURCE OF FINANCEGovernment of Mozambique - UA 2.10 millionGovernment of Japan - UA 1.10 million

11. DATE OF APPROVAL - December, 1999

12. ESTIMATED STARTING DATE OF PROJECT: August, 2000AND DURATION 30 months

13. PROCUREMENT:International Competitive Bidding (ICB) for the civil works among pre-qualifiedcontractors from member countries of the ADB Group in accordance with the Bank’sRules of Procedure for Procurement of Goods and Works.

CONSULTING SERVICES REQUIRED AND STAGE OF SELECTION:Consultancy Services will be required for the supervision of the civil works.Procurement will be in accordance with the Bank’s Rules of Procedure for Use ofConsultants. The procurement will be through the retention of the consultants thatundertook the feasibility studies and prepared the detailed designs.

Project audit services and technical assistance for institutional support componentwill be procured through limited competition on the basis of a short list.

EQUIVALENTS AND ABBREVIATIONSCURRENCY EQUIVALENTS(August 1999 Exchange Rates)

UA 1.0 = MT 16,902.5UA 1.0 = US$ 1.364

WEIGHTS AND MEASURES

1.00 metre (m) = 3.281 ft1.00 kilometre (km) = 0.621 mile1.00 square kilometre (km2) = 0.386 square mile1.00 hectare (ha) = 2.471 acres1.00 kilogramme (kg) = 2.205 lbs1.00 metric ton (t) = 2,205 lbs

FISCAL YEAR

January 1st - December 31st

ABBREVIATIONS

AADT - Average Annual Daily TrafficADF - African Development FundADM - Aeroportos de Mozambique (Mozambique

Airport Authority)ANE - Administracao National de Estradas (National

Road Administration)CFM - Caminhos de Ferro de Mozambique

(Mozambique Railways)DNEP - Direccao Nacional de Estradas e Pontes (National

Directorate of Roads and Bridges)DNMP - Direccao Nacional dos Marinha e Portos

(National Directorate of Maritime and Ports)DNTT - Direccao Nacional de Transportes Terrestres

(National Directorate of Surface Transport)EEC - European Economic CommunityECMEP - Empresa de Construcao e Manutenacao de

Estradas e Pontes (Provincial Road and BridgeConstruction and Maintenance Enterprise)

ERP - Economic Rehabilitation ProgrammeESRP - Economic and Social Rehabilitation ProgrammeFE - Fundo de Estradas (Road Fund)GOM - Government of MozambiqueICAO - International Civil Aviation OrganizationICB - International Competitive Bidding

IDA - International Development AssociationLAM - Linhas Aereas de Mozambique

(Mozambique Airlines)MICOA - Ministry for Coordination of

Environmental AffairsMOPH - Ministry of Public Works and HousingMTC - Ministry of Transport and

CommunicationsNRZ - National Railways of ZimbabwePSIP - Public Sector Investment ProgrammeROCS - Roads and Coastal Shipping ProjectRONAP - Rodoviara National Passageiras

(National Bus Company)RSA - Republic of South AfricaSADC - Southern Africa Development CommunitySATCC - Southern African Transport & Communication

CommissionUNDP - United Nations Development ProgrammeWB - World BankVPD - Vehicles per day

TABLE OF CONTENTS

PROJECT INFORMATION, CURRENCY AND MEASURES,LIST OF ABBREVIATIONS, PROJECT MATRIX, LIST OF TABLES,

LIST OF ANNEXES, SUMMARY

Page

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS (i)–(xi)

1. INTRODUCTION1.1 Origin and History of the Project 11.2 Bank Group Strategy 11.3 Performance of Similar Projects in Mozambique 2

2. THE TRANSPORT SECTOR2.1 The Transport System 22.2 Transport Policy, Planning and Coordination 42.3 Donor Coordination 5

3. THE ROAD SUB-SECTOR3.1 Road Network, Vehicle Fleet and Traffic 53.2 The Road Transport Industry 63.3 Road Administration and Training 73.4 Road Planning and Financing 83.5 Road Engineering and Construction 93.6 Road Maintenance 103.7 The Project Area 103.8 Existing Road Situation 12

4. THE PROJECT4.1 Project Objectives 124.2 Project Outputs 124.3 Project Descriptions 124.4 Project Assumptions and Risks 144.5 Project Costs 144.6 Sources of Financing 154.7 Environmental Impact 164.8 Impact on Women 174.9 Poverty Reduction 174.10 Regional Integration 18

5. PROJECT IMPLEMENTATION5.1 Executing Agency 195.2 Organisation and Management 195.3 Procurement of Goods, Works and Services 195.4 Tentative Implementation Plan and Expenditure Schedule 215.5 Monitoring and Evaluation 225.6 Recurrent Costs 235.7 Financial Reporting and Auditing 23

6. TECHNICAL AND ECONOMIC JUSTIFICATION6.1 Technical Justification 236.2 Project Benefits 236.3 Economic Justification 24

7. CONCLUSION AND RECOMMENDATION7.1 Conclusion 257.2 Recommendation 25

---------------------------------------------------------------------------------------------------------------------This Report has been prepared by Messrs. H. Nyame-Mensah, (Chief TransportEconomist); A. Rugamba (Principal Transport Engineer), W. Soliman (SeniorEnvironmentalist); and H. Mekonnen (Senior Poverty Reduction Specialist) following anappraisal mission to Mozambique in August/September 1999. Mr. S. Turay (PrincipalTransport Engineer) contributed to Chapters 4 and 5. Any matters relating to this reportmay be referred to Mr. G. Giorgis, (Manager, OCDS.4 Ext. 4121)--------------------------------------------------------------------------------------------------------------------

LIST OF TABLES

Table No

3.1 Road Maintenance Financing4.1 Summary of Project Cost Estimate4.2 Financing Plan by Source4.3 Financing Plan by Component5.1 Procurement Arrangements5.2 Expenditure Schedule by Category5.3 Expenditure Schedule by Source

LIST OF ANNEXES

Annex No

1. Project Location Map2. The Classified Road Network3. Organization Structure of ANE4. Road Design Standards5. Detailed Cost Estimate6. Environmental Impact Analysis7. Detailed Procurement Arrangements8. Implementation Schedule9. Economic Evaluation

PROJECT MATRIXMOZAMBIQUE:

VANDUZI - CHANGARA ROAD PROJECT

PROJECT TEAM: NYAME/RUGAMBA

Narrative Summary (NS) Verifiable Indicators(VI) Means of Verification Assumptions/Risks

Goal1.1 Improvement of

economic activitiesthrough rehabilitationand maintenance oftransport infrastructureto protect pastinvestments and tostimulate and recoverthe previous trafficlevels of the nationaland rural roadnetworks.

1.1 Increase in therehabilitatednational/rural roads inMozambique.

1.2 Overall growth in traffic

1.3 70% of roads inMozambique being in goodcondition and 19,030km tobe trafficable in year 2003.

1.1 Annual road constructionand pavement evaluationstatistics from ANE

1.2 Traffic statistics

1.3 Annual road conditionsurvey

(Goal to supergoal)

1.1 Government commitmentfor the successfulimplementation of RoadSector Reforms

Project Objective1.1 Reduction of

maintenance andvehicle operating costsand improvement ofroad transport servicesbetween Vanduzi andChangara

1.1 Vehicle operating costsreduced by 10%/2% in theyear 2003/2021 when theroad is fully opened to trafficin 2003.

1.2 Roughness of about 2000mm/km throughout the life ofroad up to year 2003.

1.3 AADT of 500 vehicles for theproject road by 2003.

1.1 Calculate VOC using HDMmodel

1.2 International Roughnessindex (IRD)

1.3 Traffic Counts

1.4 Annual budget of ANE

(Project Objective to Goal)1.1 Availability of resources for

maintenance.

1.2 Government commitmentfor the successfulimplementation of ROCSProject

Outputs:1. A completely

rehabilitated two lanebituminous road with6m wide carriagewayand 1m shouldersbetween Vanduzi andChangara (270)km.

1.1 Total length of 270 km ofbituminous road completedbetween Vanduzi andChangara by year 2003

1.1 Quarterly Progress Reports(QPRs)

1.2 Supervision Reports (SRs).1.3 Project Completion Report

(PCR).1.4 Audit Reports

(Outputs to Project Objective)

1.1 Proposed institutionalchanges are maintained.

Activities:

1. Road Rehabilitation

1.1 Pre-qualification ofcontractors

1.2 Issue and receipt oftenders evaluation,negotiation and awardof contract.

1.3 Rehabilitation of theVanduzi-Changararoad (270km).

2. Consultancy Services

2.1 Pre-contract Services2.2 Supervision2.3 Audit Services

1. Input UA (million)

1.1 Construction works 14.131.2 Supervision 1.481.3 Audit 0.071.4 T.A. 0.661.5 Training 0.071.6 Contingencies :

1.7 - Physical 1.641.8 - Price 2.74

Total 20.79

2. Resources UA (million)

ADF 16.79Japan 1.10TAF 0.80GOM 2.10

Total 20.79

1.1 Appraisal estimates

1.2 QPR

1.3 SR

1.4 PCR

1.5 Audited accounts

1.6 Disbursements records

(Activity to Output)

1.1 All procurement actions areon schedule and competentconsultant and contractorsprocured

1.2 Payments for invoices arenot delayed and there areno cost overruns.

1.3 GOM timely payment ofcounterpart local funds

1.4 Effective supervision by theBank, consultant andMoPWH/ANE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

1 BORROWER : The Republic of Mozambique

2. EXECUTING AGENCY : The National Road Administration (ANE)

3. FINANCING

ADF LOAN

a) Amount (ADF) : Not exceeding UA 16.79 million

b) Terms:

i) Currency : Units of Account (UA)

ii) Duration : Fifty (50) years including a 10-year grace period.

iii) Service Charge : 0.75% per annum on amounts disbursedand outstanding

iv) Commitment fee : 0.5% per year on undisbursed portionbalance beginning 120 days after signature of theloan agreement.

v) Repayment : 1% of the principal each year from theeleventh to the twentieth year inclusive and3% each year thereafter.

4. PURPOSE OF THE LOAN/GRANT

The ADF loan and the TAF grant will be used to provide 93.68% of the foreign exchangecost of the project amounting to UA 16.31 million. The Fund will also finance somelocal costs amounting to UA 1.28 million. The ADF loan and TAF grant represents84.60% of the total project costs.

5. THE PROJECT

a) Objective : The sector goal is to improve economic activities throughrehabilitation/maintenance of transport infrastructure so asto protect past investment and reform the transportindustry.

The objective of the project is to improve road transportservices in the project area as well as reduction of roadmaintenance and vehicle operating costs.

(ii)

b) Project Outputs: The output of the project will be a 270-km rehabilitatedbitumen standard road with a 6.0m wide carriageway and1.0 m bitumen surfaced shoulders.

6. PROJECT COST

The project cost (net of taxes) has been estimated from quantities and unit prices preparedby the design consultant and approved by ANE. The cost, which has been escalated toprices, is presented for various components below.

Summary of Project Cost Estimates

MT (million) UA (million)ComponentF.E. L.C. Total F.E. L.C. Total %

Civil Works 202830.0 36002.33 238832.33 12.00 2.13 14.13 68Supervision Consultancy 21297.15 3718.55 25015.70 1.26 0.22 1.48 7Project Audit Services 1183.18 - 1183.18 0.07 - 0.07 0.5Institutional Support 11155.65 1183.18 12338.83 0.66 0.07 0.73 3.5Total Base Cost 236465.98 40904.05 277370.03 13.99 2.42 16.41Physical Contingency 23663.50 4056.60 27720.10 1.40 0.24 1.64 7Price Contingency 34143.05 12169.80 46312.85 2.02 0.72 2.74 13Total (net of taxes) 294272.53 57130.45 351402.98 17.41 3.38 20.79Taxes 17578.60 3549.53 21128.13 1.04 0.21 1.25 100

7. SOURCES OF FINANCING

The project will be financed jointly by ADF, GoM and parallel with Japan. The Bankfinancing is expected to come from ADF and TAF grant. ADF will finance 93.37% of theforeign exchange costs and 39% of the local costs amounting to a total of UA 16.79million. The GOM will finance 61% of the local cost of the project amounting to UA2.01 million, net of taxes. The proposed financing plan of the ADF project is presentedbelow. A TAF amounting to UA 0.89 million will be used to finance institutional supportto ANE. TAF will finance 100% of the foreign costs amounting to UA 0.80 million andGoM will finance 100% of the local costs amounting to UA 0.09 million. The proposedfinancing plan of the project is presented below:

Financing Plan by Source for ADF (UA million)Source F.E L.C Total %ADF 15.51 1.28 16.79 84.37Japan 1.10 - 1.10 5.52GoM - 2.01 2.01 10.11Total 16.61 3.29 19.90 100

Financing Plan by Source for TAF (UA million)Source F.E L.C Total %

TAF 0.80 - 0.80 90GoM - 0.09 0.09 10Total 0.80 0.09 0.89 100

(iii)

Financing Plan by Component

Component ADF TAF Japan GOM Total %Civil Works 15.10 - 1.10 1.81 17.91 86.1Supervision Consultancy 1.70 - - 0.20 1.90 9.1Project Audit Services 0.09 - - - 0.09 0.5Institutional Support - 0.80 - 0.09 0.89 4.3Total Base Cost 16.79 0.80 1.10 2.10 20.79 100

8. PROCUREMENT OF GOODS AND SERVICES

All the procurement for the project will be in accordance with the new Bank procurementrules adopted by the Board of Directors on 15 July 1996. The Civil Works for theconstruction contract will be let out on basis of International Competitive Biddingincluding prequalification of contractors. The consultancy services for project supervisionwill be acquired by the retention of the consultants that undertook the feasibility anddetailed engineering designs in accordance with Bank rules for the use of consultants.Consultancy services for the institutional support component will be procured throughlimited competition among a shortlist of qualified consultants in accordance with theBank’s rules. Audit services will be procured in accordance with the Bank's Rules ofProcedure for the Use of Consultants. The value of the contract being less than UA350,000, the publication of the announcement will be limited to national and regionalnewspapers.

9. PROJECT IMPLEMENTATION

The construction period will be 30 months. Allowing for the time required for theprocurement of consulting services and construction contract, the construction works areexpected to start in August 2000 and its completion in January 2003 followed by the 12months defects liability period. The project implementation plan is presented below:

Loan Processing

Activity Action/Agency Target DateProject Appraisal ADF Aug/Sept 1999Loan Negotiations GOM/ADF November 1999Board Presentation ADF December 1999

(iv)

Schedule of Civil Works

Activity Action/Agency Target DateGeneral Procurement Notice Issued ANE/ADF November, 1999Specific Procurement Notice Issued(Pre-qualification of Contractors)

ANE December, 1999

Pre-qualification Report Approved ANE/ADF March, 1999Tenders Invited ANE March, 1999Tenders Received ANE May, 1999Evaluation and Approval ANE/ADF June, 2000Contract Awarded ANE July, 2000Commencement of Works ANE August, 2000Completion of Works ANE January, 2003End of Maintenance Period ANE January, 2004

Schedule of Consultancy Services (Supervision)

Activity Action/Agency Target DateContract Negotiations ANE December, 1999Draft Contract Approval ADF January, 2000Consultant appointed GOM February, 2000Consultancy Services Commenced ANE March, 2000Consultancy Services Completed ANE January, 2004

10. EXPENDITURE SCHEDULE

A forecast expenditure by category is presented in the table below:

Expenditure Schedule by Category (UA million)Category 1999 2000 2001 2002 2003 TotalCivil Works 0.55 3.59 4.82 5.37 3.58 17.91Supervision - 0.38 0.57 0.57 0.38 1.90Audit - - 0.03 0.03 0.03 0.09Institutional Support - 0.18 0.27 0.27 0.17 0.89Total 0.55 4.15 5.69 6.24 4.16 20.79

A forecast expenditure schedule by source of finance is presented in the table below:

Expenditure Schedule by Source (UA million)Source 1999 2000 2001 2002 2003 TotalADF - 3.57 4.82 5.37 3.58 16.79TAF - 0.16 0.24 0.24 0.16 0.80Japan 0.55 0.55 - - - 1.10GOM - 0.42 0.63 0.63 0.42 2.10Total 0.55 4.15 5.69 6.24 4.16 20.79

(v)

11. CONCLUSIONS AND RECOMMENDATIONS

Conclusions

11.1 The Government of Mozambique is aware of the importance of maintaining continuity ofthe rehabilitation, maintenance and capacity building efforts initiated under the ROCS 1 and 2Projects. The Vanduzi – Changara road project will support Government policy for restoringeconomic growth through improving road transport and protecting past road investments byrehabilitating priority roads. The project will also contribute to the creation of a self-sufficientRoad Authority capable of efficiently managing and maintaining a completely rehabilitated roadnetwork. The overall gains made during the implementation of ROCs 1 and 2 will beconsolidated.

11.2 As a whole, the project objective is consistent with the government’s poverty reductionaction plan, which focuses on economic growth, the development of the human capital of thepoor and the provision of social protection for vulnerable groups within the Mozambican society.The reduction in overall transport costs due to the rehabilitation of the road and theaccompanying increases in land and labour productivity will increase farm and non-farm incomefor farmers as well as traders in Tete and Manica provinces. In addition, the delivery of socialservices related to education, health, nutrition and food for work programs including communitybased development activities supported by a number of NGOs in the two provinces would befacilitated.

11.3 The project is technically feasible, economically viable, and environmentally sustainable.Using only the quantifiable economic benefits, the project yields an economic internal rate ofreturn of 29%.

Recommendations

11.4 It is recommended that an ADF loan not exceeding UA 16.79 million be given to theGovernment of Mozambique for the rehabilitation of the Vanduzi – Changara Road and a TAFGrant amounting to UA 0.80 million for institutional support. The loan shall be subject to theconditions specified in para 7.4 of the main appraisal report.

1. INTRODUCTION

1.1 Origin and History of the Project

1.1.1 Mozambique is located on the southeastern coast of Africa and covers an area of 799,380sq. km. It is bounded on the north by Tanzania; on the west by Malawi, Zambia, Zimbabwe,Swaziland and the Republic of South Africa (RSA); and the entire eastern boundary by theMozambican channel of the Indian Ocean. The map of Mozambique is given in Annex 1. Thepopulation of Mozambique is estimated at 18.6 million (1998) and it is growing at 2.5% perannum. Mozambique is one of the poorest countries in the world. For instance, in 1997, just overtwo-thirds of its population (i.e., 10.9 million people) lived in absolute poverty. As a whole,both the incidence and depth of poverty is higher in rural areas due to limited access to roads andother socio-economic services.

1.1.2 The Government of Mozambique (GoM) through the Roads and Coastal Shipping Project(ROCS) has since 1992 been carrying out works on the road network. The main works carriedout under the ROCS 1 and ROCS 2 projects have been the rehabilitation of national roads andemergency opening of roads as a result of the civil war; rehabilitation of feeder roads; periodicand routine maintenance of roads; reconstruction of neglected and damaged bridges. ROCS 1and 2 have been implemented successfully. Under the project so far, approximately 6,000 km ofroads have been opened and rehabilitated or are in the process of being opened, plusapproximately 18,000 km are undergoing routine maintenance.

1.1.3 The Vanduzi-Changara road was identified by the GoM as one of the roads withinternational heavy and intensive inter-urban traffic in 1992. In 1992 consultants completedfeasibility and a set of maintenance and rehabilitation options for the road; but detailed workcould not be completed due to the then prevailing security situation. In 1994, the Bank provideda grant for the consultancy services for the update of the feasibility study and detailedengineering for the rehabilitation of the road. These studies were completed in 1994. This studyhas been further updated in 1998 and 1999 by the consultants.

1.1.4 In 1998, the GoM formally requested the Bank to finance the rehabilitation works. Inresponse to this the Bank mounted a preparation mission in November 1998. This was followedby an appraisal mission in August/September 1999. The project is a component of ROCS andforms part of the Public Sector Investment Programme (PSIP) and the GoM accords it highpriority. This appraisal report is based on the feasibility studies and detailed engineering studiesconducted by consultants as well as other data and information collected by the Bank during thepreparation and appraisal missions.

1.2 Bank Group Strategy

1.2.1 This project is in conformity with the Bank Group’s country strategy as well as thetransport sector policy. The main objective of the Bank’s medium-term lending programme(1998-2001) in Mozambique will be poverty reduction. For achieving that objective, the BankGroup’s strategy of operations will involve: (i) human resources development; (ii) support of thefamily-farming sub-sector; (iii) rehabilitation of physical infrastructure; and (vi) supportinggovernment policies and programmes which are geared to accelerating sustainable economicgrowth. The proposed strategy will require the Bank’s intervention in the social, agricultural,

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public utilities, and transport sectors, and will involve project financing as well as policy-basedlending.

1.2.2 Within the transport sector the main objective of the Bank is to improve the marketingopportunities for the small-scale farmers, particularly for those who are in the traditional sector.The main strategy for achieving this is through the expansion of roads, which inter linkproduction centres with marketing outlets. Another recommended strategy is for the Bank, toinvest in the rehabilitation and expansion of the trunk roads, which will facilitate faster transitionof the traditional agricultural sub-sector into the commercial sub-sector. In this respect the Bankwill consider financing roads which fall into this category including the Vanduzi – Changararoad, which is a component of the donor supported ROCS 3 project. The Bank will also supportthe Government’s policy initiatives in the privatisation of railways, ports, and air transportation.

1.3 Performance of Similar Projects in Mozambique

1.3.1 To date, the Bank has approved five projects within the transport sector. Implementationof two of the road projects was suspended and their loan balances were subsequently cancelled,mainly because of the then insecurity situation. The Beira Corridor Transport System Project wasapproved in May 1988. The project has been successfully completed. The overall assessment ofthe project has been satisfactory. The Transport Programme approved in 1992 has beencompleted successfully. The Pemba-Montepuez rehabilitation project was approved in 1977.The implementation of the project has been slow. It is behind by about 12 months due mainly tothe slow procurement of consultancy and contractors as a result of volume of work andinstitutional weakness of the executing agency. The situation was compounded by the new ADBprocedure for selecting consultants through pre-qualification.

1.3.2 Apart from the two road projects, which were terminated due to the then securitysituation, road transport projects have been well executed in Mozambique, with the exception ofthe Pemba-Montepuez road project. The execution of this project has been characterized by longstart-up of about 15 months. The delay is caused by slow procurement actions on the part ofGoM; and institutional weakness of the executing agency. Measures, which have been taken bythe Bank to improve the situation, include regular supervision missions and undertaking ofprocurement seminars/workshops. The GOM on its part has restructured the implementationagency. The main lesson which has been learnt is that when consultants are in place prior to thecommencement of a project, increases the chance of implementing the project on time. This isdue mainly to the institutional weakness in Mozambique. These were the cases with the twosuccessful projects: Beira Corridor and the Transport Programme while the late selection of aconsultant for Pemba-Montepuez has resulted in delays.

2. THE TRANSPORT SECTOR

2.1 The Transport System

2.1.1 Roads: Roads are the main means of transport in Mozambique. Roads also provideaccess for other transport modes. It is estimated that the total length of the Mozambique nationalroad network is 28,957 km. Of this total, approximately 5,265 km are paved roads (mainlyprincipal), 6,878 km are engineered gravel collector/secondary roads and 16,814 km are earthroads or tertiary roads (Annex 2).

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2.1.2 The earth roads are low-volume secondary and tertiary roads most of which are in poorcondition and impassable. The poor state of the roads has hindered the transport of farm produceto population centres and points of exports. This has in turn affected agricultural production andrural life in Mozambique. A major international effort is on going to rehabilitate and maintainsome of the feeder roads through ROCS. The road sub-sector is described in detail in Chapter 3.

2.1.3 Maritime Transport: With a coastline from north to south of about 2,700 km,Mozambique has three principal seaports at Maputo, Beira and Nacala. Thirteen smaller ports,used mainly for internal coastal shipping, are located at Inhambane, Quelimane, Pemba,Vilanculos, Chinde, Macuss, Pebane, Moma, Angoche, Ilha de Mozambique, Piama, Ibo andMacimbade Praia. In 1998, the total cargo carried by all Mozambican ports was about 7.2million tons of general cargo and 80,457 twenty-foot equivalent units (TEUs) of containers. Thisrepresents an increase of 15% in container traffic and a 5% decrease in general cargo comparedto 1997. Transit traffic remained dominant accounting for 66% of total cargo handled in 1998.

2.1.4 Maputo, the largest port of Mozambique, and the nearby port of Matola - a bulk port,handled 3.0 million tons of freight in 1998. Beira, the second largest port, handled about 2.3million tons of freight, while Nacala in the same year handled 461,000 tons. Organizationally,the ports and railways have been divided into three main regions centred on Maputo (CFM-South), Beira (CFM-Central) and Nacala (CFM-North) - all being managed as cost centres andby a holding company. The National Directorate of Maritime and Ports (DNMP) has theresponsibility for national co-ordination.

2.1.5 Railways: Three railway lines connect the Maputo/Matola port complex withneighbouring countries. The 63.5-km Goba line connects Mozambique to Swaziland, the 88-kmRessano Garcia line connects Maputo to South Africa and the Limpopo line connects Maputo tosouthern Zimbabwe through the Chicualacuala border station. This system, together with theports of Maputo and Matola, constitutes the Caminhos de Ferro de Mozambique, CFM(S). Theport of Beira is connected with Zimbabwe by a 317-km single-track rail line from Beira to theborder town of Machipanda. Another single rail links Dondo, 28 km west of Beira on the Beira-Machipanda line, to Sena and Vila Nova on the Malawian border. The central CFM (C) system iscompleted with a 254-km single-track rail from Dona Ana on the Sena line to the coal mine atMoatze.

2.1.6 A 615-km long single-track railway line connects Nacala port in Mozambique withMalawi at the border station of Entre-Lagos. A small branch line of 41 km links Rio Manapostation with Lumbo and a second line, 262 km, runs from Cuamba to Lichinga, serving theagricultural belt of Niassa Province. This constitutes part of the CFM (N). The three mainrailways systems combined handled 4.1 million tons of freight in 1998, an increase of 7.1% from1997 due to an increase in limestone and coal.

2.1.7 Air Transport: There are 19 airports in Mozambique of which seven are principal. Theseven principal airports are Maputo, Beira, Nampula, Tete (Chingozi), Lichinga, Pemba andQuelimane. Maputo, Beira and Nampula serve international flights. National flights are handledexclusively by the national airline, Linhas Aereas de Mocambique (LAM). Other airlinestogether with LAM provide international services. Overall, in 1998 a total of 597,783passengers were carried and 5,436 tons of freight and 36,645 aircraft movements were madethrough Mozambique airports.

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2.1.8 Oil Pipeline: A 310-km oil pipeline links Beira with Zimbabwe. The pipeline carriesfinished products from the port to Zimbabwe and transports 80%-90% of Zimbabwe's liquid fuelneeds. The pipeline has a capacity of 1 million tons/year.

2.2 Transport Policy, Planning and Co-ordination

2.2.1 Policy: The Government's policy within the sector is (i) to rehabilitate and improve theoperational efficiency of the ports and railways and to encourage the participation of the privatesector; (ii) to stimulate and support the selective rehabilitation of the principal elements of theroad network; and (iii) to improve the efficiency in the road sub-sector through major reforms infinance, administration and management. Thus in the road sub- sector the GOM seeks to restoretraffic on the classified network, expand and rehabilitate high volume roads and ensuresustainability through effective maintenance. The rehabilitation of the Vanduzi – Changara meetsthese objectives. The GoM is stressing a co-ordinated development of a more efficient transportindustry capable of supporting the on-going economic/structural adjustment programmes. Thistransport strategy is based on a recent review of the sector by the GOM with the assistance of theWorld Bank under ROCS. The new policy will shift the focus of transport investments from theport-rail corridors to those that will assist in getting agricultural produce to markets and materialsto farmers and stress the private ownership of transport.

2.2.2 An example of GoM policy in privatisation and commercialisation was thetransformation of CFM into a public company in 1995. The company has been given managerialautonomy in setting tariffs and involvement of private sector in management and operation of itsactivities through leasing, joint ventures agreements etc. The CFM has encouraged privatesector participation in its activities and to date, there are over ten different lease and concessionagreements including six joint ventures.

2.2.3. Planning and Co-ordination: The Ministry of Transport and Communications (MTC)is the core ministry that plans and manages investment in the transport sector. In addition, thereare a number of other Government agencies that also influence the planning, performance andefficiency of the various modes under the general guidance and control of the MTC. The powersof supervision and control are exercised through the investment planning and finance directorateof the MTC and national transport directorates like those for road transport (National Directoratefor Surface Transport, DNTT); National Directorate for Maritime and Ports for ports andrailways, (DNMP).

2.2.4 Air transport and related infrastructure are controlled by the MTC through the Secretaryof State for Civil Aviation who also oversees civil aviation management. Both the NationalDirector of Civil Aviation and the Director General of LAM are directly answerable to theMinister, to whom policy and other investment issues are referred. The Aeroportos deMozambique (ADM) manages airport facilities and is controlled by the Secretary of State forCivil Aviation. Currently ADM is a public corporation.

2.2.5 For roads, the Ministry of Public Works and Housing (MOPWH) through its NationalRoad Administration (ANE) formerly the National Directorate for Roads and Bridges (DNEP)has responsibility for the planning, construction and maintenance of the highway system. At theapex of planning and co-ordination in the transport sector are the National Planning Commissionand the Ministry of Planning and Finance. Officials of MTC, the MOPWH and the StateSecretariat for Civil Aviation are co-opted members of the National Planning Commission.

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Planning and investment decisions are co-ordinated at this level with input from the Ministry ofFinance in terms of priority and resource allocation and mobilization.

2.2.6 Planning and co-ordination of transport investment and management are reasonablygood, taking into account the institutional set-up of Mozambique. There is, however, need formore trained personnel at various levels in the Government machinery. To augment theinstitutional capacity of ANE and MTC, donors provide substantial technical assistance andtraining. This assistance will, among other things, strengthen the planning and supervisorycapabilities of these agencies.

2.3 Donor Co-ordination

2.3.1 The Vanduzi-Changara Road Rehabilitation project is being implemented as part of theoverall ROCS project, which started with a donor meeting in Brussels in June 1991. The GoMorganised a donors conference under the auspices of EEC to mobilize resources to support theimplementation of ROCS project. The World Bank played a significant role in assisting theGoM in the preparation of the project. The ADB was represented at this meeting and the Bankhas since as part of its commitment financed studies and other projects under the ROCS project.

2.3.2 Following the success of ROCS 1 and ROCS 2, a new project ROCS-3 is being preparedfor implementation and includes road rehabilitation and maintenance. The finance of theVanduzi-Changara road is being undertaken as part of Bank’s continued support for the ROCSproject. In addition to the Bank, the following donors are participating: World Bank, BADEA,CFD, DANIDA, ODA EU, FINNIDA, Germany (KFW), NORAD, RSA, SDC, SIDA, Spain,UNDP, UNCDF and USAID. Donors are co-ordinated through a secretariat at ANE. Annualdonor briefings/meetings are held where progress and status reports are presented. In addition,ROCS Annual Review Reports are produced and circulated amongst donors. The Bank has beenmonitoring progress through field visits and routine reports submitted by other donors. Some ofthe major donors have been ADF (US$ 40 million); IDA (US$ 140 million); EDF (US$ 34million); Japan (US$ 23 million); Kuwait (US$ 28 million); with the GOM contributing aboutUS$ 111 million.

3. THE ROAD SUB-SECTOR

3.1 Road Network, Vehicle Fleet and Traffic

3.1.1 The national road network is estimated at approximately 28,957 km of paved, gravel andearth roads, according to current ANE inventory data. This includes 5,265 km of paved roads,6,878 km of constructed gravel roads and 16,814 km of earth roads. Annex 2 gives a breakdownof the length of the road network by province.

3.1.2 ANE is responsible for planning and supervision of construction rehabilitation and formaintenance of the network. ANE regularly evaluates the network in respect ofcondition, classification and traffic characteristics. It is estimated that only about 20% of thenetwork is currently in a good condition and more than a third is in a poor to non-motorablecondition due mainly to neglect, lack of maintenance and the previous security situation.

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Vehicle Fleet and Traffic

3.1.3 The vehicle fleet in Mozambique is varied, in terms of model, make and type. Oldermakes and models predominate but no single make has more than 20% of the market. Thismakes it difficult for manufacturers and their agents to provide adequate spare parts andmaintenance back-up services. Mozambique is making efforts to adopt the SATCC harmonisedvehicle standards.

3.1.4 The vehicle fleet in Mozambique was drastically reduced after independence in 1975 dueto re-exportation and destruction during the war. The decline continued until about 1985 whenthe registered fleet was estimated at 66,900. Since then, the vehicle fleet of Mozambique hasbeen estimated to be increasing at 5% and current estimates put it at about 110,000. A recentsurvey indicated that the fleet is dominated by light vehicles (44%) followed by trucks andtractors (36%) and the rest split between buses (6%) and tractors (14%).

3.2 Road Transport Industry

3.2.1 Rodoviara National De Passageiras (RONAP or National Bus Company) which is nowprivatised provides inter-city passenger services, but the services are limited. Passenger servicesin the urban areas are provided by the urban transport units (TPUs) and are concentrated inMaputo and Beira. However, the available public passenger transport facilities are not sufficientto cater for the demand. The GOM now allows passenger transport by vans and up to 7-tontrucks resulting in some private operators providing passenger service but at more competitivefares than the ones charged by the public sector.

3.2.2 Until recently, the GOM has maintained a uniform official tariff structure throughout thecountry, which in addition to the security situation has been a major obstacle to the efficiency ofthe road transport industry. The tariffs did not reflect long run marginal costs taking into accountcapital replacement costs, capital finance costs or the type of circumstances in which the serviceswere provided (paved, gravel or earth surface, secure or insecure). In order to improve the roadtransport services, the GOM has deregulated the tariffs. Freight tariffs are already deregulated.There will still be some control of the passenger tariffs but it is the intention of the Governmentthat they shall reflect actual costs for the transporters, including a reasonable profit margin, in thefuture.

3.2.3 The GOM has also started to prepare for a larger participation of the private sector inproviding transport services. The Government, through DNTT, is encouraging smaller privateoperators to form co-operatives and is seeking international assistance to develop more effectivesupport to the private operators. DNTT is responsible for vehicle registration and inspection andfor licensing of vehicles and drivers. In each of the ten provinces, there is an executive roadtraffic office. Vehicles are inspected when they are brought into the country for permanent use inMozambique.

3.2.4 DNTT shares responsibility with the National Police for control of overloading. Someweighbridges have recently been installed on the Beira-Machipanda Road and overloadedvehicles are only allowed to continue after unloading of the excess load and the payment ofpenalties. The increased length and the improved condition of roads call for more attention toroad safety issues. The GOM has started a programme to maintain road furniture and to install

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standardised road traffic signs throughout the country as a way of improving road safety. Plansare also underway to set up a national road safety council.

3.3 Road Administration and Training

3.3.1 In April 1999, the Government of Mozambique adopted legislation introducing far-reaching reforms in the road sector. The decree no. 14/99 sets out the main components of theinstitutional framework making up the road administration system “Sistema de Administracao deEstradas” (SAE). Decree no. 15/99 establishes the “Administracao National de Estradas” (ANE)or National Road Administration which effectively replaces the previous road department knownas DNEP. The ANE has responsibility for the management and maintenance of the road network.The Minister of Public Works and Housing in July 1999 approved nominations for thePresident/Chief Executive Officer (CEO) and ten other board members of the ANE, includingfour representatives of the private sector. The Board or Administration Council as it is knownhas three committees dealing with technical, financial and training matters.

3.3.2 Responsibility for road management and financing is separated between executive bodiesof the ANE. On the roads side, principal responsibility is vested in the Directorate for NationalRoads (DEN) which has responsibility for the maintenance and development of both the primaryand secondary roads and the Directorate for Regional Roads (DER) which coordinates activitiesof provincial and local authorities. At the Provincial level, the current Department of Roads andBridges (DEP) will become the Provincial Road Authorities under the ANE. At some time in thefuture, once district authorities are established and operational, the responsibility for theunclassified roads will devolve to them with the DEPs acting in an advisory role. On thefinancing side, responsibility has been given to the Road Fund (FE) in respect of revenuecollection and the Directorate of Administration (DA) in respect of expenditure by the DEN andDER. The management committee for the ANE is composed of the CEO and the Directors ofDEN, DER, FE, and DA. An organisation chart depicting the general structure of the new roadauthority is attached as Annex 3.

3.3.3 Since 1992, many actions have been taken to develop the institutional capacity of theroad agency. Support for the newly formed ANE will continue during the ROCS 3 Project,which is being co-ordinated by the World Bank. The new project will focus on strengtheningactions initiated under ROCS 1 and ROCS 2 to further develop ANE’s capacity to function withlittle or no Technical Assistance. As part of the Bank’s contribution to the institutional capacitybuilding component of ROCS 3, a TAF Grant will be used to finance four Technical Assistantsto the ANE over a two year period.

3.3.4 Mozambique generally suffers from an acute shortage of educated and experiencedhuman resources. In 1990 the road agency had only four qualified civil engineers. From 1990,the agency has expanded its human resource base to a current total of 33 graduates made up asfollows: 25 civil engineers, 5 mechanical engineers and 1 economist. There are 6 womenengineers out of the above graduates, 5 civil and 1 mechanical. In addition there are sponsoredundergraduate students at the local university from the 3rd to 5th year as follows: 61 civilengineering and 7 mechanical engineering. Under the newly formed ANE, comprehensiveHuman Resource Development and Management Policies are being established to encouragequality personnel to seek careers in the road sub-sector. As part of this process, conditions ofemployment and job performance criteria are presently being reviewed.

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3.3.5 ANE is preparing a programme for training, retraining and upgrading of its roadpersonnel at all levels. It is the intention of ANE to carry out the training within Mozambique tothe extent possible and also use regional and other training facilities where necessary. Thetraining is administered by ANE through its Training Division. Upgrading of senior staff andmanagers is conducted by technical assistance consultants through workshops and seminars.Training of supervisors, foremen and general technicians is conducted partly at the RoadTechnical Training Centre in Chimoio and partly in the field. Technical and vocational educationis being strengthened including the re-establishment of the three year Road and Bridgetechnicians Diploma course at the Maputo and Beira Industrial Institutes. In practical terms inaddition to the many courses being mounted, ANE now has a reasonably well staffed andfunctional Training Division together with an effective and credible Training Centre at Chimoio.The staff is being trained within a framework of an overall 5-year rolling plan whichincorporates training at Chimoio Training Centre, formal training at Maputo, informal training atMaputo in the form of workshops and seminars, external scholarships for degree courses, shortcourses and study tours, and technical assistance technology transfer. A provision has been madeunder the institutional support component of the project for postgraduate fellowships for ANEstaff in the fields of engineering and management.

3.4 Road Planning and Financing

Road Planning

3.4.1 ANE through its Planning Department, is responsible for road planning. However thesecurity situation in the country made the planning work very difficult. This is due to the fact thatit was almost impossible to conduct traffic counts and furthermore, there was very little traffic onthe roads. There was therefore very little data for planning purposes. Traffic counts are nowcarried out at the most important counting sites all over the country. There are six counting sitesin each province. ANE regularly evaluates the road network in respect of condition and trafficcharacteristics. In 1998 traffic counts were done five times during the year and this has providedthe necessary updated information for ANE's road data base for planning purposes.

Financing

3.4.2 Expenditure on roads is financed from the recurrent budget, the investment budget andthe Road Fund. These sources are enhanced by donor finances. Presently the emphasis forfinancing is on rehabilitation and maintenance as opposed to financing of new constructionprojects. Currently the financing of maintenance programmes has been done from the RoadFund, which was established by legislation in 1989. The main sources of revenue of the RoadFund are fuel charges, transit charges and bridge tolls, which account for 80%, 19% and 1%respectively of the total revenue. The revenue collected from the road users goes to the Ministryof Planning and Finance which transfers these funds in a timely manner (once every threemonths), to the Road Fund.

3.4.4 Under the new institutional arrangements, all road financing will be undertaken inrelation to a financial plan. In addition, a dedicated Road Fund (FE) has been put in place. TheFE is responsible for preparing the financial plan and incorporates the budgets of the DEN, DER,FE and DA. Income for the FE will continue to be fuel surcharges on the selling price of dieseland petrol and transit charges. The next ten-year maintenance and development plan will befunded by the donor community, loans, and the GoM through the Road Fund. The GoM has

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committed itself to ensuring the proper functioning of an autonomous Road Fund and to raisingthe full budgetary allocations for routine maintenance of the national network. To guarantee theavailability of these funds the Government will allocate additional revenue to the FE through theGovernment’s general budget.

3.4.5 Over the last four years, starting from 1995-1998 inclusive, the GOM has through theRoad Fund spent between US$ 19.58 – 28.72 million per year on road maintenance, with ayearly average expenditure of US$ 24.52 million (Table 3.1). In 1999, it is expected to be US$29.17 million. Shown below is the estimated maintenance costs for the years 2000-2005; theprojected income from the Road Fund; the additional levy and income expected to balance theshortfall vis-à-vis the projected deficit in the Road Fund:

Table 3.1

Road Maintenance Financing(In US$ million )

1995-1999 (Actual)Revenue/Year 1995 1996 1997 1998 1999*Revenue 19.58 23.70 26.11 28.72 29.17

* Estimated

2000-2005 (Projected)Item/Year 2000 2001 2002 2003 2004 2005

Est. Maintenance Cost (USD million) 36.96 58.79 68.77 68.61 72.98 69.70Projected RF Income (USD million) 28.60 29.80 31.10 32.40 33.80 35.30Deficit (USD million) 8.36 28.99 37.67 36.21 39.18 34.40Additional Levy (USD/litre) 0.03 0.09 0.11 0.10 0.11 0.09Additional Income (USD million) 8.37 30.00 37.68 36.22 39.20 34.42

3.4.6 To ensure the efficient use of these funds, the GoM and the donors supporting the roadsector in Mozambique have agreed that the Road Fund account will be separate from ANEaccounts and will be subject to an independent audit. Separate accounting will also be introducedin respect to donor funds. It will be a loan condition for the GoM to provide evidence that suchmeasures have been formally adopted.

3.5 Road Engineering and Construction

3.5.1 The GoM has decided to adhere to the Design Standards established by the SouthernAfrican Transport and Communications Commission (SATCC) for road and bridge design in theSADC region. The capacity for in-house design is limited due to shortage of staff. The capablestaff is occupied by the supervision and review of designs, which are mostly carried out byconsultants (both local and international). A total of about eight Mozambican consultingengineers provide design services to ANE. There is a National Laboratory (LEM) in Maputo thatcarries out soils and materials testing. The laboratories in the provinces have only a limitedcapacity of carrying out tests.

3.5.2 There is currently a significant amount of construction work going on and particularly inthe area of road rehabilitation, which is mainly being carried out by foreign contractors. The

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local construction industry still requires further development to make use of the opportunities. Afew local contractors, however, have teamed up with the foreign firms as sub-contractors or injoint ventures.

3.6 Road Maintenance

3.6.1 The re-opening of roads and the rehabilitation of trunk and feeder roads over the last tenyears under ROCS 1 and ROCS 2 has increased the demand for routine and periodicmaintenance activities. There is a consensus among donors that under ROCS-3, the programmewill not exceed the maintenance capacity of the ANE. The Government has committed itself togive priority to the maintenance of the road network in the development of the country. Theoverall objective is to implement routine and periodic maintenance on all maintainable primaryand secondary roads and basic routine maintenance on all passable tertiary roads by 2003. Themaintainable road network has increased from 3,900 km in 1994 to 15,000 in 1998. The target isto have the full network in a maintainable condition by 2003.

3.6.2 A maintenance management system is in place, which reviews maintenance servicelevels, performance standards, unit prices, reporting and control procedures. Maintenance ofroads and bridges was traditionally undertaken by parastatal organisations known as “Empresasde Construcao e Manutencao” (ECMEPS) while the plant pool was managed by “Empresas deAluguer de Equipmento” (EAEs). The ECMEPs have been restructured on a commercial basisand merged into three separate entities covering the south, central and north of the country. TheEAEs have also been commercialised. Initially the new ECMEPS and EAEs will have majorityownership from the Government, however, it is foreseen that shares will eventually be sold to theprivate sector and 20% will be reserved for the employees.

3.6.3 Government policy is to incrementally place less reliance on force account and to createmore opportunities for local contractors. All maintenance work will henceforth be carried out onthe basis of competitive bidding. In the case of routine maintenance this will be local competitivebidding and in the case of periodic maintenance by international competitive bidding. Thecreation of a strong national road contracting industry is seen as vital for reducing roadmaintenance costs in the long term and creating employment. To this end, the Government hasformulated a programme to develop emerging local road contractors through the nationalcontractors’ association EMPREMO. The training has now reached the implementation phasewith eleven local companies in Phase 1 having been awarded contracts for routine gravel roadmaintenance and have actually commenced fieldwork on site. This will be followed by anothertwenty contractors being awarded contracts in Phase II. The training is planned for five years atthe end of which a select group of the local contractors will progress into competitive bidding formore demanding operations. At the end of the training, the local contracting industry is expectedto undertake some 30% of the annual maintenance workload.

3.7 The Project Area

3.7.1 The Vanduzi – Changara road is found mainly in the Manica and Tete Provinces. In bothprovinces, problems of poverty are widespread. For instance the incidence of poverty in TeteProvince estimated at 82.3% is above the national average of 70%. The corresponding rate forManica province is 62.6 percent. As a whole, a number of districts suffer from problems of foodinsecurity due to low levels of agricultural production, frequent floods and periodic drought.

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Persistent problems of food insecurity in Changara and Mutarara districts are good examples inthis regard.

3.7.2 The road follows a flat to gently undulating terrain from the junction of the Beira-Machipanda road to Vanduzi; and becomes more rolling with many rivers at the Pungwe River;Catandica and Guro. From Guro to Changara the road traverses rolling to hilly terrain with thetopography becoming more severe around 250-269 km. The climate of the area is typicallytropical with an average annual rainfall of 1400 mm. The road lies in altitudes ranging between400-850 m and traverses generally rolling to hilly terrain with numerous stream and rivercrossings. The road lies in an area of metamorphic rocks belonging to two formations: fromtieraand barue. Soils are generally moderately deep although some shallow gravely soils areencountered near river crossings where weathered rocks are evident close to the surface. Thereis little leaching and there is excellent vegetative cover. In the northern section hardwood forestsare present and the vegetation is particularly dense.

3.7.3 The immediate zone of influence of the project road is the northern half of Manicaprovince consisting of Barue and Guro districts, however, the general area of influence due to theinternational role of the road is Tete and Manica Provinces. The estimated population (1997) forBarue district was 71,000; and 57,110 for Guru. Because of the civil war many people fled theimmediate project area and the stability of the population has been affected. A survey of 5villages showed a rate of growth between 59% and 149% in 1993 reflecting the return ofrefugees. Currently the rate of growth is around 2.5%. The estimated 1997 population for Teteand Manica provinces is 1.21 million and 1.02 million respectively.

3.7.4 Nearly all the economic activity in the project area is family agriculture with somecommercial farmers close to Catandica and in other parts of Manica Province. The principalcrops are maize, sorghum, groundnuts, cassava, rice, beans, cotton and sunflower. On theaverage about 61,975 tonnes, 24,955 tonnes and 24,424 tonnes respectively of maize, rice andsunflower are produced.

3.7.5 The project road in addition to serving the rural population in the corridor is alsoimportant for the movement of food relief supplies from the port of Beira to different parts ofTete Province and Malawi. Other commodities are fuel and coal. At the peak of the reliefoperations, about 200,000 tonnes of food were ferried to these areas and this has tapered to about80,000 tonnes currently. The implication is that 2 and 3 axle trucks and trailers are used on theproject road for the transport of food aid.

3.7.6 The most significant traffic on the project road is the international transit traffic, whichconsists of the flow of imports and exports between Malawi and the port of Beira. The Beira-Blantyre route is 1,200 km compared to the 800 km via Vanduzi, which is a saving of 400 km.With the opening of the Vanduzi-Changara road in 1992 after hostilities, Malawi transit trafficwas diverted to this route. Currently (1998) a significant portion of about 11,300 tonnes ofexports and 8,200 tonnes of imports pass on the project road to and from Beira. The mainexports are sugar, tobacco, tea, cotton and coffee. Imports include wheat, fertilizer, sugar anddrought relief.

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3.8 Existing Road Situation

3.8.1 The project road, which is 270 km long, constitutes a vital link in the national roadnetwork, providing a connection between the Beira-Machipanda Road and the Cuchamamon-Zóbué Road, thus serving as the link between Tete Province and Malawi. The road wasconstructed in the middle sixties and traffic was relatively normal up to independence in 1975.During the civil war that started after independence, the road was subjected to several sabotages,the most serious one being the destruction of three of the five spans of the bridge over thePungwe River in 1976. A temporary one lane composite steel and timber structure was installed.For 10 to 15 years, the road was only used by protected convoys and military traffic. Over thesame period the road suffered from lack of maintenance due to the security problems.

3.8.2 The road generally has a 6.0 m wide bituminous pavement (with the exception of the first13.0 km where it is 6.5 m wide) and 0.5 to 1.0 m wide earth shoulders. For most of its length,the pavement is cracked on its outer edges and the shoulders are eroded. In many instances thepavement width is reduced because of edge ravelling. The bridge survey indicated that in generalterms, the condition of most bridges is fair, requiring only minor repairs and maintenance type ofwork. The bridge approaches are in a poor condition for the majority of the bridges, withpronounced settlement having occurred. In some cases drainage of the approaches is either pooror not existing, resulting in scouring of the road formation at the abutments. Reconstruction ofthe destroyed Pungwe and Mocumbezi bridges started in April 1999 . The Pungwe bridge willbe built to a 150.4m 5-span continous PC concrete hollow slab with abutments of bored piledfoundation. The Mocumbezi bridge will be stiffened to the slab. It will be financed by a US$1.5 million grant assistance from the Government of Japan. This is a positive developmentwhich compliments the proposed intervention of the Bank.

4. THE PROJECT

4.1 Project Objectives

4.1.1 The sector goal is to improve economic activities through the rehabilitation andmaintenance of transport infrastructure so as to protect past investments and to stimulate andrecover the previous traffic levels of the national and rural road networks. The main objective ofthe project is to reduce vehicle operating and road maintenance costs and thereby increase thequality of service as well as protect the investment in road infrastructure made thus far. Themain objective is therefore to increase the quality of service and protect investment in road sub-sector.

4.2 Project Outputs

4.2.1 The output of the project will be a rehabilitated two-lane 270-km bitumen surfaced roadwith a 6.0 m wide carriageway and 1.0 m bitumen surface shoulders between Vanduzi andChangara.

4.3 Description of the Project Components

4.3.1 The project is part of ROCS-3 and comprises the following components: (a) constructionworks; (b) supervision consultancy services; (c) project audit services; and (d) institutionalsupport to the National Road Administration (ANE).

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Detailed Description of Activities and Components

A. Construction Works

4.3.2 The works comprise the rehabilitation of the 270 km long Vanduzi - Changara road.Rehabilitation of the road has been accorded a priority by the GOM considering the rapiddeterioration that is taking place due to the increased volume of transit traffic to and from theneighbouring countries. Six rehabilitation strategies have been prescribed based on the pavementcondition, and the severity and extent of the distresses. The road cross-section shall consist of acarriageway of 6.0 m carriageway width with 1 m surfaced shoulders (Annex 4). The six broadcategories of rehabilitation strategies and the corresponding lengths and condition are describedbelow. After the remedial measures have been taken into consideration, the surface will beprimed and double sealed. Where the existing surfacing is retained, a single seal will be applied.

Class CurrentCondition

Length(km)

% Rehabilitation Strategy

AGood to VeryGood

25.1 9.3Repair side drains, potholes, edges, crackseal, removal and rebuilding of top 75 mm ofshoulders.

B Fair to Good 131.4 48.7As for (A), but entails more edge works andthe skimming and reinstating of theshoulders to a depth of 125 mm.

C Fair 76.7 28.4

As for (B), but entails the replacement ofedge strips up to a width of 750 mm on bothsides of carriageway the skimming andreinstating of the shoulders to a depth of 150mm.

D Poor to Fair 22.7 8.4As for (C), but entails the replacement ofedge strips up to 1500 mm.

E Very Poor 9.8 3.6Placement over the full width of thepavement and shoulders of a new 150 mmthick cement stabilized base course

F Distressed BridgeApproaches

4.3 1.6 As for (F), but in addition removal andreplacement of 150 mm of sub-base

Total 270 100

B. Supervision Consultancy Services

4.3.3 A firm of consultants will be retained to provide the pre-contract and supervisionservices, as well as other services during the maintenance defects liability period. The selectedconsulted will help in evaluating tenders, contract negotiations, oversee, the civil works contract;provide quality control, and provide a liaison for ANE vis-à-vis other agencies.

C. Project Audit Services

4.3.4 A firm of auditors will provide audit services over the project implementation period. Theauditors shall monitor the internal financial control procedures applied by the executing agencyand make recommendations for the good management of the project.

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D. Institutional Support to ANE

4.3.5 The institutional support component comprises short-term technical assistance to thenewly formed ANE in the fields of planning, contract administration, pavement engineering andmaterials. In all, four technical assistants will be recruited by the ANE to fill each of these fields.

4.3.6 The training sub-component will provide four fellowships for post-graduate training inengineering management, planning, contract administration and pavement/materials engineeringfor ANE staff. The proposed training will enable the selected staff members to assume positionsof increased responsibility within the proposed organisational structure of the ANE.

4.4 Project Assumptions and Risks

4.4.1 There are two related risks facing the execution of the project. These are the delays inimplementation and the associated project cost increase due to these delays. The GOM has beengenerally slow in procurement activities due to weak institutional arrangements. In the ongoingimplementation of the Pemba-Montepuez Road Project, it has taken two years to appoint aconsultant, and the tendering for the civil works has just been completed. Technical assistanceand training have been envisaged in the project, to mitigate the perceived institutional risks.

4.4.2 In order to further minimise the risks of delay in implementation, Advance ProcurementAction (APA) will be used for the civil works while direct negotiations for supervision serviceswill be adopted. This will reduce delays by at least 12 months. With this it is expected thatproject cost can be contained. The project cost is robust going by the unit rates for recentcontracts as well as the competition which is expected. Once the works start the supervisionconsultants would provide the buffer to control costs and advance progress.

4.5 Project Costs

4.5.1 The project cost has been estimated from quantities and unit prices prepared by thedesign consultant. The total cost of the project is MT 351,403 million or UA 20.79 million. Thisincludes a 10% allowance for physical contingencies and a price escalation of 5% on foreigncosts and 10% on local costs per annum. The cost estimates are summarised in Table 4.1 and thedetailed estimates are presented in Annex 5.

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Table 4.1: Summary of Project Cost Estimates

MT (million) UA (million)ComponentF.E. L.C. Total F.E. L.C. Total %

Civil Works 202830.0 36002.33 238832.33 12.00 2.13 14.13 68Supervision Consultancy 21297.15 3718.55 25015.70 1.26 0.22 1.48 7Project Audit Services 1183.18 - 1183.18 0.07 - 0.07 0.5Institutional Support 11155.65 1183.18 12338.83 0.66 0.07 0.73 3.5Total Base Cost 236465.98 40904.05 277370.03 13.99 2.42 16.41Physical Contingency 23663.50 4056.60 27720.10 1.40 0.24 1.64 7Price Contingency 34143.05 12169.80 46312.85 2.02 0.72 2.74 13Total (net of taxes) 294272.53 57130.45 351402.98 17.41 3.38 20.79

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4.6 Sources of Financing

4.6.1 The project will be financed jointly by ADF and GOM and parallel with Japan. The Bankfinancing is expected to come from ADF and TAF grant. ADF will finance rehabilitation of theproposed road. The ADF loan will finance 93.37% of the foreign exchange costs and 39% of thelocal costs amounting to a total of UA 16.79 million. The ADF loan, which is 84.37% of the totalcost, will cover purchase of foreign cost based construction machinery and equipment, bitumenand steel rods and finance part of local costs relating to civil works. The local costs involveconstruction of labour camps, development of quarry sites and burrow pits and theircorresponding environmental mitigating measures, and procurement of fuel. The GOM willfinance 61% of the local cost of the project amounting to UA 2.01 million, net of taxes. Anytaxes or duty that may be payable under the project will be financed by GOM. TheGovernment’s contribution, which is 10.13% of the total cost, will be used mainly for theproduction of aggregates, sand, cement and labour costs. The proposed financing plan of theproject is presented in Table 4.2a. A TAF amounting to UA 0.89 million will be used to financeinstitutional support to ANE. TAF will finance 100% of the foreign costs amounting to UA 0.80million, which will cover foreign based costs of technical assistants and training of localcounterparts. GOM will finance 100% of the local costs amounting to UA 0.09 million and thiswill be used to cover local based costs incurred by technical assistants. The proposed financingplan of the project is presented in Table 4.2b.

Table 4.2a: Financing Plan by Source for ADF (UA million)

Source F.E L.C Total %ADF 15.51 1.28 16.79 84.37Japan 1.10 - 1.10 5.52GoM - 2.01 2.01 10.11Total 16.61 3.29 19.90 100

Table 4.2b: Financing Plan by Source for TAF (UA million)

Source F.E L.C Total %TAF 0.80 - 0.80 90GoM - 0.09 0.09 10Total 0.80 0.09 0.89 100

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4.6.2 The financing of a portion of the local cost, using ADF resources, is justified on thefollowing grounds. Firstly, having just emerged from the first phase of its reconstructionprogramme after a devastating 16-year civil war, Mozambique is still struggling to generatedomestic revenues for its public expenditures from a low income-base. In addition to the taxburden, GoM has contributed the equivalent of USD 111 million in counterpart funds under theROCs project so far. Considering the level of poverty in general and the social transformation thecountry is going through after the civil war, the GoM is making substantial efforts in these areasand cannot finance a high proportion of this project without affecting other programs. Requiringthe GoM to meet the local costs fully from internal generated resources would add to the burdenof the recently introduced Value Added Tax or to other possible source of tax revenue. Thiswould either vitiate the goals of consumption-enhancing poverty alleviation measures targeted atlow income group, or constitute disincentives to investment. The financing plan of the project bycomponent is presented in Table 4.3.

Table 4.3: Financing Plan by Component(In UA Million)

Component ADF TAF Japan GOM Total %Civil Works 15.00 - 1.10 1.81 17.91 86.1Supervision Consultancy 1.70 - - 0.20 1.90 9.1Project Audit Services 0.09 - - - 0.09 0.5Institutional Support - 0.80 - 0.09 0.89 4.3Total Cost 16.79 0.80 1.10 2.10 20.79 100

4.7 Environmental Impact

4.7.1 The project involves the rehabilitation of the existing 270 km bitumenized road betweenVanduzi in Manica Province and Changara in Tete Province. Environmental Impact Assessmentstudy done by the ANE and consultants showed that the project will have minimal negativeimpacts. These impacts would be taken care of through the implementation of the mitigationmeasures during construction and operation of the project. Consequently, the project isclassified as category II according to the Bank's environmental guidelines.

4.7.2 The main positive impact of the project is the overall improvement in road quality thatwill consequently reduce travel time and potentiality of accidents, improve drainage, increaseemployment and business opportunities, and facilitate access to health, educational and marketcentres. In addition, the project will use a number of local labourers and supplies duringconstruction, which will improve the socio-economic conditions with a wage related income inthe two provinces.

4.7.3 Negative impacts during site preparation will include noise and air pollution, trafficsafety, soil erosion, surface and groundwater pollution, social disruption, visual impacts,community dissatisfaction in addition to safety issues. Construction will result in the short-termdisruption of free flow of traffic, noise, temporary increase in dust, temporary decline ineconomic activity, increase in road accidents, limited loss of vegetation and natural habitat,limited surface water pollution, soil erosion and visual impacts. Annex 6 provides explanation ofenvironmental impacts and the pertinent mitigation measures. To ensure that the pertinentmitigation measures are adhered to, it will be a loan condition that the civil works contract reflectthese measures.

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4.8 Impact on Women

4.8.1 In Mozambique, as in many developing countries, women feature prominently among thepoor and vulnerable groups. The significant gender gaps between men and women in educationalattainment, access to health services, access to economic resources and sustainable livelihoodsuggest a feminization of poverty. For instance, the gender difference in adult literacy rate isconsiderable. For males it is 59. 3 percent and for females it is 23.6 percent for females thusindicating a wide gap in this regard. As a whole the literacy rate is the lowest for rural women at15.7 percent. The gender difference in completion rates for primary school for the 18-65 yearsgroup is also wide. Nationally, this rate is 17.4 percent. The corresponding rates for males andfemales are 25.5 percent and 10. 4 percent, respectively thus indicating another wide gap in theeducational status by gender. However, enrolment rates for primary school age boys and girls (7-11 years of age) show some encouraging sign in that the gap in enrolment the difference in therates is relatively small. For instance, the enrolment rate for this group is 53.9 percent for boysand 44.7 percent for girls.

4.8.2 Given the nature of the socio-economic constraints that women in Tete and Manica face,the impact of the project on improvements on the well being of women in the project area isconsiderable. The economic constraints include limited opportunities for involvement in market-oriented activities. The main problem in this regard is the long distance to markets and otherpublic facilities. For instance, in rural areas the average distance to markets is 16.3 kilometresand that to a bank is 71.1 kilometres. In terms of access to health services, the average distanceto a doctor is 45.5 kilometres. The corresponding distance to a nurse, midwife and a health centreis 19.5, 20.6 and 28,7 kilometres, respectively. It is clear from the above that Mozambique facessevere socio-economic infrastructure with important implications for the well being of theoverall population, especially for women.

4.8.4 The direct economic benefits of the project, therefore, include market opportunities dueto the increase of the volume of traffic. For instance, the activities of women in Tete and Manicawho are involved in the trade of fruits will benefit from the frequency of traffic as well as thereduction in transport costs. This should translate into increased income and reduced poverty.The improvement in the quality of the road is also expected to lead to improvements in theefficiency of NGOs who are providing socio-economic services, particularly those on health,nutrition, and agricultural extension geared towards to women. The provision of micro-financeservices to women groups should increase as a result of the rehabilitation of the road. On theother hand, the increased earning ability of women in the two provinces is likely to increase therepayment of the their loans as well as the investment on the education and health of theirchildren.

4.9 Poverty Reduction

4.9.1 An important feature of the Mozambican economy is that poverty is widespread.According to results from a 1996/97 national household survey, close to 70 percent of thepopulation is living in absolute poverty.

4.9.2 The problem of poverty in Mozambique is attributed mainly to the low level ofagricultural technology. Maize is the principal crop and the production of cash crops such ascotton and cashews is relatively limited. The agricultural production system is characterized byheavy dependence on rain (only 3 percent of farmers use some irrigation), negligible use of

18

fertilizer (used by only 1.8 percent of farmers) and limited use of farm equipment (4.9 percentuse animal traction, 2.1 percent use tractors, and only 9 percent use some form of farmequipment). In other words, the farming system is dominated by the hoe culture with little use ofmodern technology and most of what is produced is consumed on the farm. In addition, the roleof women in agricultural production, especially in food production is significant. Clearly, the lowlevels of agricultural technology at all stages of the agricultural production system show thatpoverty in Mozambique is pervasive. The underdevelopment of the road system contributes itsshare in this regard.

4.9.3 In general, the national averages for social indicators such as infant mortality rates,primary school enrolment rates (49.2 percent), and adult literacy rates (40 percent) are the lowestin the world. These rates are even worse for the poor. It is important to note that Tete is one ofthe provinces where poverty is the highest (the others are Sofala and Inhambane provinces). Inthese provinces, the level of human capital and agricultural productivity is low. In addition, thephysical infrastructure is weak and access to basic services including potable water, healthfacilities and transportation and communication is poor.

4.9.4 Given the poor state of the socio-economic conditions and infrastructure, therehabilitation of the road has a high potential for contributing both directly and indirectly toimprovements in both the quantity and quality of the basic socio-economic services highlightedabove. In the short run, additional benefits include direct and indirect employment opportunitiesduring the project period and enhancement of the efficiency of emergency programs associatedwith recurrent drought and floods in a number of districts in the two provinces

4.9.5 In the long-run, the reduction in overall transport costs due to the rehabilitation of theroad and the accompanying increases in land and labour productivity should increase farm andnon-farm income for farmers as well traders in Tete and Manica provinces. This is because of thefact that the reduction in agricultural prices at final markets and the changes in prices forproducers in rural areas increases farm incomes and food security and subsequently reducespoverty. In addition, the reduction in transport costs is expected to enhance the delivery of socialservices related to education, health, nutrition and food for work programs including communitybased development activities supported by a number of NGOs in the two provinces.

4.10 Regional Integration

4.10.1 Mozambique is an active member of SADC and has responsibility for co-ordinatingregional integration in the transport sector through the South African Transport andCommunications Commission (SATCC) which is based in Maputo. The three regional transportcorridors (Beira, Nacala and Maputo) play a strategic role in freight handling to and from theland-locked neighbouring countries of Zimbabwe, Zambia and Malawi and South Africa. Withthe return of peace and the creation of an enabling environment for investment in the region,Mozambique stands to reap substantial benefits, particularly from the use of its ports andtransport corridors.

4.10.2 The Vanduzi – Changara road is an important regional transit route for the countries ofMalawi, Zambia and Zimbabwe, which use the port of Beira for their external trade. Plans areunderway in SADC to further develop the Beira Corridor and the rehabilitation of the Vanduzi-Changara road is considered to be an important part of this initiative.

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5. PROJECT IMPLEMENTATION

5.1 Executing Agency

The execution agency will be the Ministry of Public Works and Housing through theSupervision Department of ANE. The Department has successfully supervised road projectsunder ROCS 1 and ROCS 2 and has sufficient experience and capacity for the execution of thecomponents proposed in the project.

5.2 Organisation and Management

5.2.1 In order to ensure proper co-ordination, monitoring and supervision of implementation, itwill be necessary for ANE to designate one of its engineers with the requisite qualifications andexperience to act as the Project Co-ordinator. The Co-ordinator will be a Civil Engineer with 8years experience in project management. His duties will include preparation of progress report,processing of payment certificates and the preparation of the Borrower’s Project CompletionReport. The assigning of an engineer for this purpose will be a loan condition. The capacity formonitoring and supervision of project implementation will be further enhanced through theinstitutional support component of the project.

5.2.2 The civil works will be executed through a contract supervised by a consulting firm ofengineers. The same consulting firm will assist in carrying out tender evaluations and contractnegotiations as well as maintenance supervision during the 12-month contractual defects liabilityperiod.

5.3 Procurement of Goods, Works and Services

5.3.1 Procurement arrangements are summarized in Table 5.1 below and shown in detail inAnnex 7. All procurement of goods, works and acquisition of consulting services financed by thebank will be in accordance with the Bank’s Rules of Procedure for Procurement of Goods andWorks or, as appropriate, Rules of Procedure for the Use of Consultants, using the relevant bankStandard Bidding Documents.

Table 5.1: Summary of Procurement Arrangements

UA (million)Category ICB Other (-) Short-list

(*)Non Bank

FundedTotal

Civil Works 16.81 (15.00) 1.10 17.91 (16.10)SupervisionConsultancy

1.90 (1.70) 1.90 (1.70)

Audit Services 0.09 (0.09) 0.09 (0.09)Technical Assistance 0.80 (0.80) 0.80 (0.80)Training Component 0.09 (0.09) 0.09 (0.09)

Total 16.81 (15.00) 1.99 (1.79) 0.89 (0.89) 1.10 20.79 (18.78)

* Short List applies to the use of consulting services only_ Other may be LIC, International or National Shopping, Direct Purchase or Force Account.+ Figures in brackets are amounts financed by the Fund.

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5.3.2 Civil Works: Procurement of civil works for the rehabilitation of the Vanduzi-Changararoad valued in total at approximately UA 17.91 million will be carried out in one contract underInternational Competitive Bidding (ICB) procedures. Pre-qualification of contractors will berequired. In order to ensure early contracting of the works, the GoM has requested for AdvanceProcurement Action (APA). The justification for requesting APA is that any significant delay instarting the project would lead to an increase in project cost due to the rapid deterioration that istaking place. It has also been found necessary to advance the rehabilitation works on the Vanduzi– Changara road to match the implementation schedule of the on-going reconstruction of thePungwe and Mocumbeze bridges.

5.3.3 Supervision Consulting Services: The GoM has requested that the firm of consultingengineers that undertook the feasibility and detailed engineering design and prepared tenderdocuments be retained to supervise the civil works. The firm that carried out the feasibility anddetailed design studies was appointed in 1993 in accordance with Bank rules for the selection ofconsultants. The study was financed by an ADF Grant and was completed in 1996. The studieswere later updated in 1998 and 1999 by the same firm. The output of both the feasibility studiesand the detailed design, as well as the performance of the firm was judged to be satisfactory.The consultant is capable, experienced and has the requisite personnel to supervise the project.The consultant has supervised similar projects and it is familiar with the Mozambicanenvironment.

5.3.4 The retention of the firm will ensure that design and contract documents are interpretedproperly during project implementation. It will avoid pre-contract services with its attendantuncertainties and potential cost increases. If any modifications in design are found necessary inthe course of construction, these will be done at no additional cost and according to the originaldesign principles. The cost of the services will be negotiated and subject to review by the Bankand will be based on current rates in the supervision of road projects in Mozambique.Specifically, the unit rates for the assignment will reflect the prevailing rates for similarassignments under the current ROCS project in Mozambique. The retention of the designconsultant is consistent with the desire to advance the implementation of the project and is inconformity with the Bank’s Rules of Procedure for the Use of Consultants. In addition it isexpected to improve project implementation and avoid protracted delays as currently beingexperienced on an on-going project. Therefore the request by GoM to retain the designconsultant for supervision services is acceptable.

5.3.5 Technical Assistance: The short term consultants under the institutional supportcomponent will be employed by ANE as individual consultants. The executing agency shallprepare a short-list of 3 - 4 consultants for each assignment. The GoM shall, on the basis of thecurriculum vitae and other relevant information available to it, carry out the evaluation andselection. The Bank only requires that the TOR, professional and academic references of theconsultants and terms of recruitment be submitted for its approval prior to the negotiations.

5.3.6 Training: The postgraduate training under the institutional support will be carried out attraining institutions located in the member countries of the Bank.

5.3.7 Audit Services: Audit services will be procured in accordance with the Bank's Rules ofProcedure for the Use of Consultants. As the amount is less than UA 350,000, the publication ofthe announcement will be limited to national and regional newspapers. However, any eligibleconsultant, being regional or not, may express his desire to be short-listed.

21

5.3.8 National Procedures and Regulations: Mozambique's national procurement laws andregulations have been reviewed and determined to be acceptable.

5.3.9 MOPWH through ANE will be responsible for the procurement of works and consultancyservices. The resources, capacity, expertise and experience of ANE are adequate to carry out theprocurement.

5.3.10 General Procurement Notice: The text of the General Procurement Notice (GPN) hasbeen agreed with ANE and it will be issued for publication in Development Business inNovember 1999 as part of the APA.

5.3.11 Review Procedures: The following documents are subject to review and approval bythe Bank before promulgation:

i) Specific Procurement Noticesii) Pre-qualification Invitation Documentsiii) Tender Documents or Requests for Proposals from Consultantsiv) Tender Evaluation Reports, including recommendations for Contract Awardv) Draft contracts, if these have been amended from the drafts included in the tender

invitation documents.

5.4 Tentative Implementation Plan and Expenditure Schedule

5.4.1 The construction period will be 30 months. Allowing for the time required for theprocurement of consulting services and construction contract, the commencement of constructionworks is expected to be in August 2000 and its completion in January 2003 followed by the 12months defects liability period. The implementation plan is presented below and in Annex 8.

Loan Processing

Activity Action/Agency Target Date

Project Appraisal ADF Aug/Sept 1999Loan Negotiations GOM/ADF November 1999Board Presentation ADF December 1999

Schedule of Civil Works

Activity Action/Agency Target DateGeneral Procurement Notice Issued ANE/ADF November, 1999Specific Procurement Notice Issued(Pre-qualification of Contractors)

ANE December, 1999

Pre-qualification Report Approved ANE/ADF March, 1999Tenders Invited ANE March, 1999Tenders Received ANE May, 1999Evaluation and Approval ANE/ADF June, 2000Contract Awarded ANE July, 2000Commencement of Works ANE August, 2000Completion of Works ANE January, 2003End of Maintenance Period ANE January, 2004

22

Schedule of Consultancy Services (Supervision)

Activity Action/Agency Target DateContract Negotiations ANE December, 1999Draft Contract Approval ADF January, 2000Consultant appointed GOM February, 2000Consultancy Services Commenced ANE March, 2000Consultancy Services Completed ANE January, 2004

5.4.2 Expenditure Schedule: A forecast expenditure by category is presented in the Table 5.2below:

Table 5.2: Expenditure Schedule by Category (UA million)

Category 1999 2000 2001 2002 2003 TotalCivil Works 0.55 3.59 4.82 5.37 3.58 17.91Supervision - 0.38 0.57 0.57 0.38 1.90Audit - - 0.03 0.03 0.03 0.09Institutional Support - 0.18 0.27 0.27 0.17 0.89

Total 0.55 4.15 5.69 6.24 4.16 20.79

5.4.3 A forecast expenditure schedule by source of finance is presented in Table 5.3 below:

Table 5.3: Expenditure Schedule by Source (UA million)

Source 1999 2000 2001 2002 2003 TotalADF - 3.02 4.82 5.37 3.58 16.79TAF - 0.16 0.24 0.24 0.16 0.80Japan 0.55 - - - - 1.10GoM - 0.42 0.63 0.63 0.42 2.10Total 0.55 4.15 5.69 6.24 4.16 20.79

5.5 Monitoring, and Evaluation

5.5.1 The monitoring of the implementation will be done through monthly progress reportsprepared by the consultant and quarterly progress reports prepared by the GOM in the Bank'sformat. In addition, the project will be monitored through ADF supervision missions, and a mid-term review.

5.5.2 Pursuant to the general conditions of Bank loans, ANE will prepare a project completionreport (PCR) within six months of completion of the project and subsequently ADF will prepareits own PCR in the established format. The ADF completion report will form the basis for post-evaluation of the project.

5.5.3 The officer in charge of environmental issues within ANE will monitor theimplementation of the environmental mitigative measures. The ANE has preparedcomprehensive environmental guidelines for road works in Mozambique. These guidelinesfollow largely the World Bank model and cover effectively all relevant topics. Implementation is

23

planned for later this year. Assistance will also be provided by (Ministry of Co-ordination ofEnvironmental Affairs) MICOA through participation in the steering committee.

5.6 Recurrent Costs

5.6.1 Throughout the construction and guarantee period, the construction firm will beresponsible for the road maintenance. One year after commissioning, the maintenanceexpenditure will be taken over by the ENE and will be charged to the road maintenance butget.The maintenance activities comply with the current maintenance policy comprising routinemaintenance and periodic maintenance every seven years.

5.6.2 It is estimated that about US$ 2.60 million would be needed every seven years forperiodic maintenance. For routine maintenance about US$ 0.146 million is expected to be theexpenditure for routine maintenance. All these maintenance expenditure wouldl be met by theGoM through the Road Fund.

5.7 Financial Reporting and Auditing

The Directorate of Administration of the ANE will operate and maintain separateaccounts for this project in accordance with sound and acceptable accounting standards. ANE’saccounts will be audited in accordance with international standards. Some funds have beenallowed in the cost estimate for an annual audit of the project. The selected auditor shall makeuse of the Bank’s guidelines for auditing projects.

6. TECHNICAL AND ECONOMIC JUSTIFICATION

6.1 Technical Justification

6.1.1 The project road exhibits defects that are less related to traffic induced damages or actualphysical wear, and more to the impact of the environment and lack of maintenance over theyears. Although most of the road sections are approaching what is normally considered the endof their design life in years, these sections have not in fact carried the design number ofequivalent axle loads. The presence of longitudinal and block cracks coupled with thickvegetation on the shoulders have allowed almost unimpeded access of surface water into thepavement layers and subgrade.

6.1.2 The prescribed rehabilitation strategies (para. 4.3.2) have been reviewed and have beenfound to be cost-effective and adequate over the design period of 20 years. During this period thepavement will be serviced through periodic and routine maintenance. The strategies aim tominimize the physical widening of the road formation, which would ohterwise be very costlywith an excessive volume of earthworks. The pavement rehabilitation design has taken intoaccount traffic conditions and the insitu strength parameters of the pavement components. Theproject will also involve significant improvements to the drainage structures in order to protectthe pavement.

6.2 Project Benefits

6.2.1 The principal project benefits included in the economic analysis are road user savings,and maintenance cost savings. Road user savings consist of the difference in the cost of vehicle

24

wear and tear between the non-rehabilitation and rehabilitation alternatives. The maindetermining factor of roughness which causes higher operating costs are due to increased tyrewear, fuel consumption, and depreciation of vehicles.

6.2.2 With regard to savings in road maintenance costs, a completely rehabilitated road isgenerally associated with lower maintenance costs than an unimproved road, which needsconstant maintenance. The degree of deterioration is affected markedly by the composition oftraffic whereby the larger the number of heavy trucks the more rapid will be the deteriorated andhence the higher the maintenance costs for a non-rehabilitated road. Traffic levels further affectthis concept: the more vehicles there are in the traffic flow, the more the operating cost savingsare generated by road improvement.

6.2.3 Other non-quantifiable benefits include time savings and intangible benefits of reductionof accidents and the impetus for general economic development following the rehabilitation ofthe road. Time savings are important because it is major consideration by road users in theselection of routes, and it has direct impact on the level of vehicle utilization and vehicleoperating costs.

6.3 Economic Justification

6.3.1 The traffic volumes used for projections were obtained from the latest traffic data reportprepared and issued by ANE. Since 1992, consultants and the ANE have undertaken classifiedcounts, an origin and destination (O and D) survey and shipping interviews. The 1999 classifiedcounts by ANE establishes the base year traffic by vehicle type for projection purposes; the Oand D survey served to indicate characteristics of traffic flow; while the interviews with majoreconomic entities provided information for present and future production and its distribution onthe project road. In 1996, the ADT ranged from 361 (Catandica – Guro) to 567 (Catandica –Vanduzi).

6.3.2 For purposes of analysis the road is divided into four links (Annex 9); and 2% growthrate is applied. This figure is conservative and lower than the estimated current populationgrowth rate of 2.5% in Mozambique and 12.7% current growth in GDP (1997). The idea is to becautious in anticipated traffic growth in view of the fact that the revival and current growth in theeconomy is from a low base. The traffic is international and it will take a while for theMozambican economy to be considered stabilized. The traffic volumes for 1999 are: Beira RoadJunction-Vanduzi 586; Vanduzi-Catandica 602; Catandica-Guro 383; and Guro-Changara 349.The volumes during 2021, which is the final year of the analysis ranges from 1,248; 1,478; 1,012and 984 respectively.

6.3.3 For each of the proposed design alternatives and maintenance scenario, the economiccosts were established and utilized in the HDM model economic analysis. The economicanalysis is based on the comparison of the situation without the road rehabilitation (assumingbasic maintenance); compared with the different project rehabilitation scenario, in this case therehabilitation strategy described in para 4.3.2. The costs and benefits for each alternative arecalculated for the project 20 years design period and the resulting net benefit discounted toobtain the economic internal rate of return of 29% (Annex 9)

6.3.4 The estimated EIRR was subjected to sensitivity analysis in terms of probable increasesin costs and reduction in benefits. The results of these sensitivity tests show that an increase of

25

20% of project costs would reduce the EIRR to 25.3% while the corresponding 20% decrease inbenefits yielded an EIRR of 25.5%. These rates indicate that the project is still beneficial andworthwhile to finance.

7. CONCLUSION AND RECOMMENDATIONS

Conclusions

7.1 The Government of Mozambique is aware of the importance of maintaining continuity ofthe rehabilitation, maintenance and capacity building efforts initiated under the ROCS 1 and 2Projects. The Vanduzi – Changara road project will support Government policy for restoringeconomic growth through improving road transport and protecting past road investments byrehabilitating priority roads. The project will also contribute to the creation of a self-sufficientRoad Authority capable of efficiently managing and maintaining a completely rehabilitated roadnetwork. The overall gains made during the implementation of ROCS I and 2 will beconsolidated.

7.2 As a whole, the project objective is consistent with the government’s poverty reductionaction plan, which focuses on economic growth, the development of the human capital of thepoor and the provision of social protection for vulnerable groups within the Mozambican society.The reduction in overall transport costs due to the rehabilitation of the road and theaccompanying increases in land and labour productivity will increase farm and non-farm incomefor farmers as well as traders in Tete and Manica provinces. In addition, the delivery of socialservices related to education, health, nutrition and food for work programs including communitybased development activities supported by a number of NGOs in the two provinces will befacilitated.

7.3 The project is technically feasible, economically viable, and environmentally sustainable.Using only the quantifiable economic benefits, the project yields an economic internal rate ofreturn of 29%.

Recommendations

7.4 It is recommended that an ADF loan not exceeding UA 17.90 million be given to theGovernment of Mozambique for the rehabilitation of the Vanduzi – Changara Road and a TAFGrant amounting to UA 0.80 million for institutional support. The loan shall be subject to thefollowing specific and particular conditions:

A) Conditions Precedent to Entry Into Force:

The entry into force of the Agreements shall be subject to the fulfilment by the Borrowerof the conditions set forth in Section 5.01 of the General Conditions Applicable to Loansand Guarantee Agreements of the Fund.

26

B) Conditions Precedent to First Disbursement:

The obligations of the Fund to make the first disbursement shall be conditional uponentry into force of this Loan Agreement as provided in section 7.4 (A) above and theBorrower shall have to the satisfaction of the Fund:

i) Appointed a project coordinator whose qualifications and experience areacceptable to the Fund (para 5.2.1);

ii) Given evidence of the adoption of the administrative mechanisms for theautonomy of the Road Fund within the set up of ANE (para 3.4.6);

iii) Given an undertaking that the measures for the protection and enhancement of theenvironment specified in Annex 6 shall be carried out during the implementationof the project and included in the civil works contract (para 4.7.3).

C) Other Conditions

The Borrower shall:

i) Provide quarterly reports to the Fund on the progress being made withinstitutional reforms in the ANE/Road Fund (para 3.4.6);

ii) Prior to signing the civil works contract, give evidence to the Fund of havingincorporated in the civil works contract adequate measures for the protection andenhancement of the environment along the project road (para 4.7.3).

ANNEX 1MOZAMBIQUE

VANDUZI – CHANGARA ROAD REHABILITATION PROJECTPROJECT LOCATION MAP

Project Road

This map has been prepared by the ADB Group’s staff exclusively for the convenience of the readers ofthe report to which it is attached. The denominations used and the boundaries shown on this map do notimply on the part of the Group and its affiliates, any judgement on the legal status of any territory or anyendorsement or acceptance of such boundaries.

ANNEX 2MOZAMBIQUE

VANDUZI – CHANGARA ROAD REHABILITATION PROJECT

Road Network

Province TotalKm

PrimaryKm

SecondaryKm

TertiaryKm

PavedKm

Gravelkm

Earthkm

Maputo 1,527 429 393 705 410 373 744Gaza 2,418 166 787 1,465 455 1,126 837Inhambane 2,572 559 259 1,754 617 431 1,524Sofala 2,505 567 883 1,055 434 178 1,894Manica 2,203 501 392 1,311 578 993 632Tete 3,081 270 1,084 1,727 881 215 1,985Zambezia 5,162 724 1,380 3,057 529 874 3,759Nampula 3,902 734 954 2,214 536 1,392 1,974Cabo Delgado 2,650 167 993 1,491 633 586 1,431Niassa 2,937 193 1,001 1,744 192 710 2,034

TOTAL COUNTRY 28,958 4,309 8,125 16,523 5,265 6,878 16,814

Source: ANE, September 1999

Source: ANE, September 1999

Annex 3

MOZAMBIQUEVANDUZI-CHANGARA ROAD REHABILITATION PROJECT

ORGANIZATIONAL STRUCTURE FOR THE NATIONAL ROAD ADMINISTRATION

Directorate ofNational Roads

ProvincialRoad

Authorities

LocalRoad

Authorities

Directorate ofRegional Roads

Directorate forRoad Fund

DirectorateAdministration

President/Chief Executive Office (CEO)

Administration Council

Minister ofPublic Worksand Housing

Annex 4MOZAMBIQUE

VANDUZI-CHANGARA ROAD REHABILITATION PROJECT

Road Design Standard

1.0 Geometric

1.1 Cross – Section- carriageway width - 6.0- shoulder width - 2 x 1.5 m

1.2 Design Speed - 100 kph

1.3 Horizontal Alignment - minimum curve 450 m

1.4 Vertical Alignment - maximum gradient 6%

2.0 Pavement

2.1 Design life - 20 years

2.2 Traffic Loading EquivalentStandard Axle (ESA) - 1.12 million

2.3 Subgrade strength (CBR) - 13 – 52

2.4 Subbase - Existing base

2.5 Base - 150 mm stabilize gravel

2.6 Surfacing - Double seal surface dressing

---------------Source: ANE, September 1999

ANNEX 5

MOZAMBIQUE

VANDUZI – CHANGARA ROAD REHABILITATION PROJECT

DETAILED COST ESTIMATES

USD MillionItem

F.E L.C TotalGeneral Provision 2.01 0.35 2.36

Earthworks 1.17 0.21 1.38

Drainage 0.33 0.06 0.39

Pavement 10.65 1.88 12.53

Road Furniture 0.55 0.10 0.65

Dayworks 0.13 0.02 0.15

Bridges 1.55 0.27 1.82

Sub Total 16.39 2.89 19.28

Supervision 1.72 0.30 2.02

Audit Services 0.10 0.10

Technical Assistance 0.80 0.10 0.90

Training 0.10 0.10

Contingencies 4.67 1.31 5.98

Grand Total (Net of Taxes) 23.78 4.60 28.38

Source: ANE and ADF Mission, September1999

CATEGORY OF EXPENDITURE(UA million)

ADF* TAF** TOTALCategoryF.E. L.C. Total F.E L.C. Total F.E. L.C. Total

Civil Works 10.90 0.83 11.73 - - - 12.00 2.13 14.13Supervision 1.26 0.08 1.34 - - - 1.26 0.22 1.48Audit 0.07 - 0.07 - - - 0.07 - 0.07TA - - - 0.57 - 0.57 0.57 0.07 0.64Training - - - 0.09 - 0.09 0.09 - 0.09Unallocated 3.28 0.37 3.65 0.14 - 0.14 3.42 0.96 4.38Total 15.51 1.28 16.79 0.80 - 0.80 17.41 3.38 20.79

* ADF will finance 84.37% of total cost of civil works; GoM 10.11% and Japan 5.52%.** TAF will finance 90% of institutional support and GoM 10%.

ANNEX 6

Page 1 of 2

MOZAMBIQUE

VANDUZI – CHANGARA ROAD REHABILITATION PROJECT

Environmental Impact Assessment

I. Justification of categorization:

The project is not located in or close to an environmental sensitive area XProject is listed under category II of figure 1 of the ADB Environmental Assessment Guidelines XThe project has no major physical interventions in the human and natural environment XThe project is a rehabilitation project XThe project is a small scale projectThe project is a low-cost project

II. Project Area

The project area is typically tropic with an average annual rainfall of 1400 mm andtemperature range of 14 – 24oC. The topography is mainly rolling with many rivers andstreams crossing the route where Rio Pungue is the major river with a distinctive incisedvalley. In general, the landscape has significant aesthetic value and fine views areencountered along the route.

Vegetation along the route is generally thick, especially along streams and rivers. However,in spite of the natural habitat, larger mammals existence is very limited and only few sitingsof grey duiker were noted. On the other hand, a reasonable spectrum of bird species ispresent, which is consistent with the rich vegetation.

The area is sparsely populated with limited employment opportunities. There are noidentified archaeological sites or graves. Manica province contains a number of protectedareas including the Gorongosa National Park that is located to the east of the road. However,some assigned protected areas are currently under review within the new forestry and wildlifelegislation.

III. Environmental Impacts and Mitigation

The project will lead to substantial increase in traffic levels resulting in improved transport ofgoods in and out of the region, facilitated movement of people and improved communication.Consequent increase in agricultural activity will result in marked increase in the wellbeing ofthe local population. In addition, the overall improvement in road quality that willconsequently reduce dust level in the air, improve drainage, increase employment andbusiness opportunities, and facilitate access to health, education and market centers.

Negative impacts, will vary during the different phases of the project implementation, andwill be limited to short to medium term soil erosion, surface and groundwater pollution,social disruption, visual impacts, temporary community dissatisfaction, road safety issues,disruption of traffic, noise, temporary increase in dust, temporary decline in economicactivity, and increase in road accidents. On the medium and long term, construction willcause a limited loss of vegetation and natural habitat, limited surface water pollution, soilerosion and visual impacts due to embankment and deep cuts, fills and quarries.

ANNEX 6

Page 2 of 2

In the last phase, operation and maintenance, negative impacts will be limited to expectedincrease in road accidents. Poor maintenance could minimise project positive impacts inaddition to increased soil erosion, water and soil pollution and visual impacts. Finally, theincreased traffic on the road will lead to the displacement of the existing small populations oflarger mammals. As wildlife population is considerably small, the impact of the project onwildlife is not expected to be significant.

The following measures will be implemented to mitigate the anticipated negative impacts:

- Even though new alignments are not proposed, vegetation clearance and grubbing shouldbe kept to a minimum and made after the rainy season. Large, well-established trees andshrubs must remain in situ and if not possible carefully relocated;

- Borrow pits and quarries must be fenced off during use. Sides and bottom should be re-vegetated as soon as possible after closure;

- Sensitive wetlands in the vicinity of rivers and stream crossings would be identified andavoided during clearing and earth-moving;

- Care will be taken to prevent spillage of noxious liquids and solvents and run-off enteringand leaving the pit must be strictly controlled with velocity decreased and kept free ofrefuse;

- Proper road drainage system will be maintained using curvatures and gradients. Inaddition, drainage structures will be regularly cleared of debris and silt;

- Where feasible, roads will be water sprayed during construction to control dust;

- Traffic disruption will be scheduled and published to affected parties;

- Traffic management measures including urban/rural speed control, pedestrian crossingsand ample sign posts will be adopted;

- The contractor will be committed to the employment of local labor with job opportunitiesequally distributed among the local chiefdoms;

- Construction camps of non-local resident workers will be situated away from existingsettlements;

- Campsites and yards will be sited on land, which is currently free. Permanentmaintenance campsites already exist and will be reoccupied;

- Community must be educated about the pits and quarries locations and safety measures tobe implemented.

Annex 7MOZAMBIQUE

VANDUZI – CHANGARA ROAD REHABILITATION PROJECT

Detailed Procurement Arrangements

2000 2001Category

J F M A M J J A S O N D J F M A M J J A S O N D

Amount(UA

million)

ProcurementProcedure

I. Civil Works 17.91* ICB

A

B

I

C

II. Supervision 1.90 Retention

C

III. Audit Services 0.09 Short-list

S

L

C

IV. Technical Assistance 0.89 Short-list

S

L

C

Legend:

A: Advertising B: Approval of Bidding Documents

I: Issue of Invitation to bid S: Approval of Short-list

C: Signature of Contract L: Issue of Requests for Proposals (RFPs)

* Less UA 1.10 million which is the cost of the 2 bridges being constructed through Japanese grant.

ANNEX 8MOZAMBIQUE

VANDUZI – CHANGARA ROAD REHABILITATION PROJECT

Implementation Schedule2000 2001 2002 2003

1st Qr. 2ndQr.

3rdQr.

4th Qr. 1st Qr. 2ndQr.

3rdQr.

4th Qr. 1st Qr. 2ndQr.

3rdQr.

4th Qr. 1st Qr. 2ndQr.

3rdQr.

4th Qr.

ACTIVITY

1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3

I. Civil Works

1. Prequalification of

Contractors

2. Bidding/Contract Award

3. Mobilisation

4. Works Execution

5. Maintenance Period

II. Supervision Consultant

1. Precontract Services

2. Works Supervision

3. Maintenance Period

Annex 9Page 1 of 2

MOZAMBIQUEVANDUZI-CHANGARA ROAD REHABILITATION PROJECT

Economic Evaluation

A. TRAFFIC PROJECTIONS

NO. LINK LENGTH (KM) 1999(AADT)

2002(AADT)

2021(AADT)

1. Beira Road Jct-Vanduzi 13 586 622 1,2482. Vanduzi-Catandica 107 602 639 1,4783. Catandica-Guro 78 383 407 1,0124. Guro - Changara 72 348 370 984

270km

B. HDM III REPORT VEHICLE OPERATING COST ($/1000 km)

DO NOTHING

YEAR AUTO PICKUP BUS MEDTRK ARTTRK

1999 4399.5 3947 8432.5 13919.6 21500.32003 4433.7 3992.8 8461.2 14214.5 21881.12007 4530.4 4123.7 8530.1 14947.4 22840.72011 4738.8 4407.5 8645.1 16187.2 24500.22015 5100.8 4898.4 8822.1 17881.8 26813.32021 5311.9 5183.3 8922.2 18808 28094

REHABILITATION

YEAR AUTO PICKUP BUS MEDTRK ARTTRK

1999 4399.5 3947 8432.5 13919.6 21500.32003 4160.4 3628 8247.8 12029.9 19046.52007 4185.9 3661.5 8276 12300.9 19385.22011 4214.7 3699.5 8306.3 12594.9 19755.32015 4247.4 3742.8 8339.3 12915.4 20161.32021 4285.5 3793.5 8374.4 13267.4 22796.5

SOURCE: Consultants Reports and ADB Appraisal Mission, September 1999

Annex 9Page 2 of 2

C. CALCULATION OF ECONOMIC INTERNAL RATE OF RETURN (EIRR)

(US $ MILLION)

YEAR CAPITALCOSTS (1)

RECURRENTCOSTS(2)

VOCBENEFITS(3)

NETBENEFITS

2000 4.69 .450 0 (5.14)01 7.03 (.134) 0 (7.16)02 7.03 (.134) 3.91 (2.99)03 4.69 (.134) 4.20 (0.36)04 (.134) 4.72 4.8505 (.134) 5.44 5.5706 (.150) 6.35 6.5007 (.142) 7.48 7.6208 (.581) 8.49 9.0709 (.000) 8.17 8.1710 2.60 (.000) 9.28 6.6811 (.005) 10.56 10.5712 (.050) 12.03 12.0813 (.095) 13.74 13.8414 (.133) 15.81 15.9415 (.122) 18.24 18.3616 (.089) 20.76 20.8517 (.065) 24.08 24.1518 2.60 (.055) 26.75 24.2119 (.050) 29.17 29.22

2020 (.046) 31.90 31.9521 (9.40) (4) (.041) 33.88 43.32

EIRR = 29%

Notes: 1. Capital costs include basic cost of Civil works; including supervisionPhysical contingency, periodic maintenance, but less price escalation.

2. Routine maintenance

3. Mainly vehicle operating cost savings

4. Salvage value