1

AFRICAN DEVELOPMENT FUND

REF. N° : TAN/PTTR/2001/01
LANGUAGE : ENGLISH
ORIGINAL : ENGLISH

APPRAISAL REPORT

ROADS REHABILITATION/ UPGRADING PROJECT

UNITED REPUBLIC OF TANZANIA

This document contains corrigenda and/or addenda (see Annexes).

COUNTRY DEPARTMENT OCDE

EAST REGION MAY 2001
TANZANIA : PROPOSAL FOR AN ADF LOAN OF UA 38.65 MILLION
TO FINANCE THE ROAD REHABILITATION PROJECT
ADDENDUM*
Please find below an addendum to the above-mentioned Appraisal Report.
It was agreed that:
The procurement of civil works for the rehabilitation works comprising 8 lots of
regional roads will be through ICB with domestic preference margin of 10 per
cent in accordance with the Bank Group’s “Rules of Procedures for Procurement
of Goods and Works” (Page 21, paragraph 5.4.2).
 TABLE OF CONTENTS
Page
PROJECT INFORMATION SHEET, CURRENCY AND MEASURES,
LIST OF TABLES, LIST OF ANNEXES, LIST OF ABBREVIATIONS,
BASIC DATA SHEET, PROJECT LOGICAL FRAMEWORK,
EXECUTIVE SUMMARY i - ix

1. ORIGIN AND HISTORY OF THE PROJECT 1

2. THE TRANSPORT SECTOR 1

2.1 The Transport System 1

2.2 Transport Policy, Planning and Co-ordination 4
2.3 Intervention of Other Donors in the Sector 5

3. THE ROAD SUB-SECTOR 5

3.1 The Road Network, Vehicle Fleet and Traffic 5

3.2 The Road Transport Industry 6
3.3 Road Administration and Training 7
3.4 Road Planning and Financing 8
3.5 Road Engineering and Construction 9
3.6 Road Maintenance 10

4. THE PROJECT 10

4.1 Project Concept and Rationale 10

4.2 Project Area and Project Beneficiaries 11
4.3 Strategic Context 12
4.4 Project Objective 13
4.5 Project Description 13
4.6 Environmental Impact 14
4.7 Social Impact 16
4.8 Project Costs 16
4.9 Sources of Finance and Expenditure Schedule 17

5. PROJECT IMPLEMENTATION 19

5.1 Executing Agency 19

5.2 Institutional Arrangements 19
5.3 Supervision and Implementation Schedules 19
5.4 Procurement Arrangements 21
5.5 Disbursement Arrangements 22
5.6 Monitoring and Evaluation 22
5.7 Financial Reporting and Auditing 23
5.8 Aid Co-ordination 23
6. PROJECT SUSTAINABILITY AND RISKS 24

6.1 Recurrent Costs 24

6.2 Project Sustainability 24
6.3 Critical Risks and Mitigation Measures 24

7. PROJECT BENEFITS 25

7.1 Economic Analysis 25

7.2 Social Impact Analysis 26
7.3 Sensitivity Analysis and Risks 26

8. CONCLUSIONS AND RECOMMENDATIONS 27

8.1 Conclusions 27
8.2 Recommendations and Conditions for Loan Approval 28

_____________________________________________________________________________

This appraisal report was prepared by Messrs. E. K Yamoah (Chief Transport

Engineer, Ext. 4546) A. Kies (Principal Transport Economist Ext. 4317) E. Shannon (Principal
Environmentalist Ext. 5558), A. Yahie (Principal Socio-Economist Ext. 4288) following their
mission to Tanzania in March, 2001. Any inquiries relating to this report may be referred to
either the authors or to Mr. G. MBESHERUBUSA, Division Manager, OCDE.4, Ext. 4131.
_____________________________________________________________________________
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AFRICAN DEVELOPMENT FUND

01 B.P. 1387 - ABIDJAN
Tel: 20 20-44-44
Fax: (225) 20 20-49-86
Telex: 23717, 22202, 22203

PROJECT INFORMATION SHEET

The information given hereunder is intended to provide some guidance to prospective

suppliers, contractors and consultants and to all persons interested in the procurement of goods and services
for project approved by the Board of Directors of the Bank Group. More detailed information and
guidance should be obtained from the Executing Agency of the Borrower.

1. COUNTRY : Tanzania

2. PROJECT TITLE : Roads Rehabilitation/Upgrading Project

3. LOCATION : Kagera, Dodoma, Singida and Tabora

Regions, Tanzania,

4. BORROWER : United Republic of Tanzania.

5. EXECUTING AGENCY : Tanzania National Roads Agency

(TANROADS)
3rd Floor, Maktaba Building,
Bibi Titi Mohammed Road,
P.O. Box 11364,
Dar Es Salaam
Tel: (255) 22 215 2576/2150932
Fax: (255) 22 215 0022
E-mail:tanroadshq@cats-nets.com

6. DESCRIPTION : The project consists of:

a) Rehabilitation of about 923 km of regional roads in

four regions of Kagera, Dodoma, Singida and
Tabora to gravel standards and upgrading to
bituminous standard of about 154 km of gravel road
between Kagoma and Lusahunga.

b) Consultancy services for the supervision of above

construction works.

c) Project audit services.

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7. TOTAL COST : UA 42.94 million

i) Foreign Exchange : UA 29.90 million

ii) Local Cost : UA 13.04 million

8. BANK GROUP LOAN

ADF : UA 38.65 million

9. OTHER SOURCE OF FINANCE

GOT : UA 4.29 million

10. DATE OF APPROVAL : June, 2001

11. ESTIMATED STARTING

DATE OF PROJECT
AND DURATION : August 2002-December 2005
(41 months)

12. PROCUREMENT OF
GOODS AND WORKS : International Competitive Bidding (ICB) for construction
works, among contractors from member countries of ADB
and ADF State participants in accordance with the Bank's
"Rules of Procedure for Procurement of Goods and Works".

13. CONSULTANCY SERVICES

REQUIRED AND STAGE
OF SELECTION : Consultancy services will be required for the supervision of
construction works. Procurement will be in accordance with
the Bank's "Rules of Procedure for Use of Consultants". The
procurement will be through competition on the basis of
shortlist of firms.

: Project audit services will be procured through competition

on the basis of a shortlist of auditing firms.

1 SDR = UA 1
1 UA = US$ 1.29248
1 UA = TZS 1046.58 (March, 2001)
 iii

CURRENCY AND MEASURES

Currency Equivalents
(March, 2001 Exchange Rates)

Currency Unit = Tanzania shilling (TZS)

1 UA = TZS 1046.58
1 UA = US$ 1.29248
1 US$ = TZS 809.74

WEIGHTS AND MEASURES

1 metric tonne (t) = 2,205 lbs

1 kilogramme (kg) = 2.205 lbs
1 metre (m) = 3.281 ft
1 foot (ft) = 0.305 m
1 kilometre (km) = 0.621 mile
1 square kilometre (km2) = 0.386 square mile
1 hectare (ha) = 0.01 km2 = 2.471 acres

FISCAL YEAR

July 1 - June 30

LIST OF TABLES

Table 3.1 : Road Sub-Sector Investment and Recurrent Expenditure

Table 3.2 : Summary of Road Fund Disbursements
Table 4.1 : Summary of Project Cost by Component
Table 4.2 : Summary of Project Cost by Category of Expenditure
Table 4.3 : Sources of Finance
Table 4.4 : Expenditure Schedule by Component
Table 4.5 : Expenditure Schedule by Sources of Finance
Table 5.1 : Summary of Implementation Schedule
Table 5.2 : Summary of Procurement Arrangements

LIST OF ANNEXES

Annex. Titles No of Pages

1. Map of Country and Project Area 1
2. Organizational Charts 1
3. List of Regional Roads 1
4. Project Implementation Schedule 1
5. Provisional List of Goods and Services 1
6. Summary Economic Analysis 3
7. Environmental Screening Memorandum 1
8. Summary of Existing Portfolio as at 31/12/2000 1
9. List of Annexes in Project Implementation Document 1
 iv

LIST OF ABBREVIATIONS

AADT = Average Annual Daily Traffic

ADB = African Development Bank
ADF = African Development Fund
ATC = Air Tanzania Corporation
CBR = California Bearing Ratio
CRB = Contracts Registration Board
CTLA = Central Transport Licensing Authority
CSP = Country Strategy Paper
CODAP = Coordination Office for Donor Assisted Projects
DANIDA = Danish International Development Agency
DCA = Directorate of Civil Aviation
DRC = Democratic Republic of Congo
EAC = East African Community
EU = European Union
EIA = Environmental Impact Assessment
EIRR = Economic Internal Rate of Return
ESA = Equivalent Standard Axles
FE = Foreign Exchange
GDP = Gross Domestic Product
GOT = Government of Tanzania
HDM = Highway Design and Maintenance Standard Model
HIPC = Heavily Indebted Poor Countries
ICB = International Competitive Bidding
IDA = International Development Association (World Bank)
IRP = Integrated Roads Project
kph = Kilometres Per Hour
MCT = Ministry of Communication and Transport
MOF = Ministry of Finance
MORALG = Ministry of Regional Administration and Local Government
MOW = Ministry of Works
MTEF = Medium Term Expenditure Framework
NEMC = National Environmental Management Council
NORAD = Norwegian Agency for Development
NTP = National Transport Policy
NPC = National Planning Commission
NPV = Net Present Value
OPEC = Organization of Petroleum Exporting Countries
PMO = Prime Minister's Office
PID = Project Implementation Document
PRSP = Poverty Reduction Strategy Paper
RE = Regional Engineer
REO = Regional Engineer's Office
RETCO = Regional Transport Company
 v

SDC = Swiss Development Cooperation

TCAA = Tanzania Civil Aviation Authority
THA = Tanzania Harbours Authority
TANLAB = Tanzania Roads Agency Laboratory
TANROADS = Tanzania Roads Agency
TAZARA = Tanzania-Zambia Railway Authority
TRC = Tanzania Railways Corporation
TRL = Transport Research Laboratory
TZS = Tanzania Shillings
UDA = Shirika La Usafiri Dar Es Salaam Bus Company
UA = Bank Unit of Account
URRP = Urgent Road Rehabilitation Programme
VOC = Vehicle Operating Costs
Vpd = Vehicles Per Day
vi
 vii
TANZANIA
ROADS REHABILITATION/UPGRADING PROJECT
PROJECT MATRIX
DESIGN TEAM: E.K. YAMOAH/A. KIES
DATE (REVISED) March, 2001

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

Goal: (Goal to super goal)

1.1. Rehabilitation, of about 1.1 Annual regional and
1. The sector goal is to improve the 4,500 km of regional trunk road construction 1.1.Other productive sectors
road network in order to support roads and the Central statistics from implement the right policies to
economic growth and poverty and Lake Corridors TANROADS. stimulate economic and social
alleviation. under the URRP by development.
2006. 1.2 Traffic Statistics.

Project Objective: Project objective to Goal

2. To reduce transport costs by
minimizing vehicle operating and
maintenance costs in Kagera,
Dodoma, Singida and Tabora
Regions.
2.1 Average vehicle operating 1.1 Calculate VOC using data 1.1.Adequate Government
cost on the proposed roads on the project roads and commitment for the success-ful
reduced by about 30% by change in road mainte- implementation of the Road
year 2006. nance costs. sector component of the PRSP.
2.2 Roughness less than 3,000 1.2 Measure roughness
mm/km for trunk road and
less than 7,000mm/km for
regional roads throughout
the service life of the
proposed roads.

Outputs (Outputs to Project Objective)

3.1 Rehabilitation to gravel standard 3.1 923 km of regional roads 1.1 Quarterly Progress Reports 1.1.Road Agency will maintain
of regional roads in four regions. rehabilitated by year 2004. (QPRs) the road after its completion.
1.2 Supervision Reports(SRs) 1.2 URRP implemented as
3.2 2-lane bituminous standard 3.2 154 km of bituminous 1.3 Project Completion scheduled.
road with 6.5m wide road completed between Report (PCR)
carriageway and two 1.5m Kagoma and Lusahunga by 1.4 Audit Reports
shoulders from Kagoma to Year 2006.
Lusahunga constructed.
Activities Input/Resources (Activity to Output)
4. Construction works
4.1 Prequalification of contractors for 4. Input Million UA
the trunk road and the Issue and 1.1 All procurement actions
receipt of tenders, Evaluation, 4.1 Civil Works 34.34 1. Appraisal Report estimates. are on schedule
negotiation and award of 4.2 Supervision 2. Supervision Reports 1.2 Payments for invoices are
contracts. Works and 3. Quarterly Progress Reports not delayed
Audit 2.12 4. PCR 1.3 Timely release of local
4.2 a) Rehabilitation of regional 4.3 Contingencies 5. Audit Reports counterpart funds
roads: Physical 3.65 6. Disbursement Records. 1.4 Effective supervision by
Lot 1 – 101 km Lot 2 - 87 km Price 2.94 the Bank and Executing
Lot 3 – 103 km Lot 4 – 126 km Total 42.94 Agency.
Lot 5 – 151 km Lot 6 –116 km
Lot 7 – 156 km Lot 8 - 83 km 5.0 Resources
b) Upgrading of Kagoma- ADF 38.65
Lusahunga Road (154km) GOT 4.29
Total 42.94
5.2. Consultancy Services:
5.1 Approval of Short list, and RFP
5.2 Issue and receipt of RFP
5.3 Evaluation and approval of
proposals.
5.4 Award of consultancy services
2.1 Commencement of services.
 viii

EXECUTIVE SUMMARY

1. Project Background

1.1 Within the framework of the Poverty Reduction Strategy Paper (PRSP), the Ministry of Works
(MOW) prepared a 6 year Urgent Roads Rehabilitation Programme (URRP) in year 2000 which was
presented to and adopted by donors. The overall estimated cost of the programme is about US$ 590
million of which donors are expected to contribute approximately US$ 535 million and the Government
of Tanzania (GOT), the balance.

1.2 It is in this context that the GOT approached the Bank to consider financing a Roads Programme
which consists of (i) a trunk road from Kagoma to Lusahunga (154 Km) on the Lake Corridor and (ii)
923 km of regional roads in Kagera, Dodoma, Singida and Tabora Regions. The proposed trunk road is
a continuation of previous ADF contribution on the same corridor, both in Tanzania and Uganda
whereas the regional roads were selected on the basis of the highest priority roads within the four
poorest regions in the country. The study for the Kagoma-Lusahunga Road was part of the previous
study for the Mutukula-Muhutwe-Lusahunga Road and was completed in 1992 under Bank finance.
The study was updated in 2001 whereas the regional roads were studied in 2000 and 2001.

2. Purpose of the loan

The ADF loan of UA 38.65 million, amounting to 90 % of the total project cost, will be
used to finance 100% of the foreign exchange (UA 29.90 million) and 67.10% of the local cost (UA
8.75 million).

3. Sector Goal and Project Objective

The sector goal is to improve the road network and thus to support poverty alleviation. The project
objective is to reduce transport costs by minimising vehicle operating costs and maintenance costs in
Kagera, Dodoma, Singida and Tabora Regions in Tanzania.

4. Brief Description of the Project’s Outputs

In order to achieve these objectives, the project will focus attention on:

i. Rehabilitation to gravel standard of 22 regional roads (923 km) in four regions.

ii. Upgrading of Kagoma-Lusahunga trunk road (154 km) from gravel to bitumen
standard.

5. Project Cost

The total project cost is estimated at UA 42.94 million out of which UA 29.90 million (69.64%)
will be in foreign currency and UA 13.04 million (30.36%) will be in local currency.
 ix

6. Sources of Finance

The Project will be financed by the ADF and the GOT. ADF Funds amounting to UA 38.65
million representing 90% of the total cost will be utilised to finance civil works and consultancy
services. The GOT’s contribution of UA 4.29 million, representing 10 % of the total project costs, will
be utilised to cover 32.90% of local costs.

7. Project Implementation

The duration of implementation of physical works is 41 months from August, 2002 to December,
2005. The Implementing Agency will be Tanzania Roads Agency (TANROADS).

8. Conclusions and Recommendations

8.1 The project is in line with the Government’s stated policy on roads infrastructure development
and aims at supporting the Government goal of poverty reduction. Lastly, the project is consistent with
the Bank Group Country Strategy Paper for 1999/2001 period. It is technically feasible and
economically viable. In addition, the project is environmentally sustainable, and socially desirable.
Furthermore, the project would support poverty alleviation and promote regional integration in
Tanzania and the landlocked neighbouring countries and regions.

8.2 It is recommended that a loan not exceeding UA 38.65 million from ADF resources be granted
to the Government of Tanzania for the purpose of implementing the project as described in this report,
subject to conditions specified in the loan agreement.
1. ORIGIN AND HISTORY OF THE PROJECT

INTRODUCTION

1.1 The Government of Tanzania (GOT), has embarked on the restoration of the network
through a 10-year Integrated Roads Programme (IRP), which was initiated in 1990. Despite the
achievement, the overall condition of the Tanzania Road network continues to be unsatisfactory
with 65 percent of the road network still in poor condition. This is due to the maintenance backlog
and the devastating effect of the “El-Nino” weather phenomenon that left more than a third of the
country flooded in 1999. As such, substantial investments are required to improve the network to
maintainable condition and to sustain it through regular maintenance. In view of the above, and
within the framework of the Poverty Reduction Strategy Paper (PRSP), the Ministry of Works
(MOW) prepared a 6-year Urgent Roads Rehabilitation Programme (URRP) in year 2000 which
was presented to and adopted by donors. The overall estimated cost of the programme is about US$
590 million of which donors are expected to contribute US$ 535 million and GOT, the balance.

1.2 Within this framework, the GOT approached the African Development Bank Group
to support the programme by financing (i) a trunk road from Kagoma to Lusahunga (154 km) in
Kagera Region and (ii) 923 km of regional roads in Kagera, Dodoma, Singida and Tabora Regions.
In addition to the Bank, nine other donors are participating in the URRP programme. More details
of the URRP are given in section 2.3.2 of the report.

1.3 The Bank contribution to the URRP is a continuation of previous Bank interventions
both in Tanzania and Uganda in the sub-sector, particularly along the Lake and Central corridors.
These two corridors are among the most prioritized of the nine major Tanzanian corridors and
promote regional integration by linking the neighbouring landlocked countries to the Ocean ports.
The regional roads identified within the PRSP, were selected on the basis of the highest priority
roads within the poorest regions in the country.

1.4 The study for the Kagoma-Lusahunga Road was completed in 1992 under Bank
finance and updated in 2001 whereas the regional roads were studied in 2000 and 2001. This
appraisal report is based on these studies, discussions held with concerned ministries and agencies
of GOT, as well as data and information collected by the Bank appraisal mission to Tanzania in
March, 2001.

2. TRANSPORT SECTOR

2.1 The Transport System

General

2.1.1 In Tanzania, the transport sector is estimated to account for 3% of GDP with the road
transport sub-sector contributing 2.5%. It also accounts for between 15% to 21% of the country’s
foreign exchange earnings. The importance of the transport sector is not limited to its direct
contribution to the GDP but it also enables other sectors (agriculture, mining and tourism) to
generate added value. Tanzania, also, serves as an important transit corridor for the landlocked
countries of Rwanda and Burundi and to a lesser extent Uganda, Zambia and the Democratic
Republic of Congo (DRC).

2.1.2 The transport system consists of: (i) a road network of about 115,000 km; (ii) two
railway systems – the Tanzania Zambia Railway (TAZARA) which links Dar Es Salaam with
 2
Zambia and Tanzania Railways Corporation (TRC), which serves the central and northern regions
and provides transit access to DRC, Rwanda, Burundi and Uganda; (iii) one dominant and three
subsidiary ports; Dar Es Salaam, Zanzibar, Tanga and Mtwara; and (iv) a civil aviation sub-sector
consisting of several small airlines, three international airports and more than 60 smaller domestic
airports and air strips. The physical capacity of Tanzania’s transport system, whether ports, railways
or the road system, is adequate to handle not only present but significantly higher traffic volumes.
However, its condition represents a constraint. This generally poor condition, particularly for roads,
is mainly due to inadequate maintenance. A brief discussion on the individual modes and their role
in the country’s economy follows.
Road Transport

2.1.3 Tanzania has a relatively limited classified network of about 85,000 km of which 5%
is paved. The density of this network of 96.5m/km2 (5.0m/km² for paved roads) is quite low, much
lower than in the other East African Community (EAC) member states, Kenya and Uganda, where
it is respectively 261.9 m/km² (15.2 m/km² for paved roads) and 330.8m/km² (14.5m/km² for paved
roads).

2.1.4 As a consequence of the backlog of maintenance and rehabilitation and the

devastating effect of the “El Nino” weather pattern, the overall condition of the Tanzania road
network is unsatisfactory with 65% in poor condition. Unless an urgent and massive intervention is
undertaken, there is a serious danger of losing the benefits of recent investments in the road
network. To address this need, the Ministry of Works (MOW) has prepared the URRP.

Railways

2.1.5 Tanzania operates two railway systems within its territory. These are managed by
the Tanzania Railways Corporation (TRC) and the Tanzania Zambia Railway Authority
(TAZARA). The railways systems play an important role in the country’s overall transport system.
They form, with the ports, transport corridors for the country’s trade flows and they also carry
transit traffic for the landlocked regional countries.

Tanzania Railway Corporation (TRC)

2.1.6 The TRC network consists of 2,580 km of single lane track of which 2,251 km are
part of the main line network and 329 km in branch lines. From its establishment in 1977, TRC
suffered from declining traffic level. Tonnage-km freight volumes has declined from 1.7 million in
1977 to 1.1 million in 2000, and passenger-km fell from 800 million to 413 million. The principal
causes of this low level of performance were poor availability and utilization of assets, inadequate
maintenance, overstaffing and road competition.

2.1.7 As part of the new Government’s policy towards transport, the TRC is being
considered for privatization by concessionning the operations of rail assets while the Government
retains ownership of assets. It is expected that the preferred concessionaire will be identified, latest,
by second quarter of year 2002.
 3

Tanzania Zambia Railway Authority (TAZARA)

2.1.8 The TAZARA, jointly owned by the two Governments of Tanzania and Zambia, is
predominantly a freight railway across Tanzania to Zambia, Malawi and DRC. It links Dar Es
Salaam with Kapiri-Moshi in Zambia through 1,860 km of single track of which 975 km are in
Tanzania.

2.1.9 Total freight traffic decreased from about 1.0 million tons in 1990 to 0.6 million tons
today, well below its design capacity of 5.0 million tons per year. This reduction is mainly due to
lower freight traffic volumes generated by the landlocked countries Zambia and DRC. Domestic
freight traffic represents only 20% of the total traffic while transit traffic accounts for between 50%
to 60% almost exclusively from Zambia. Passenger traffic has been more stable at around 1.2
million passengers a year throughout the ten year period.

2.1.10 The recent institutional development of TAZARA to achieve an efficient

commercially viable railway has not been successful and both Governments have commissioned a
study to look into a possible joint-venture with a parastatal railway company from the Peoples
Republic of China.

Maritime Transport

2.1.11 The principal ocean ports are Dar Es Salaam, Tanga and Mtwara. In addition, there
are port facilities at lake Victoria, Tanganyika and Mwanza for lake services. Dar Es Salaam
throughput is the second largest in the eastern coast of Africa after the port of Mombasa. The port
of Dar Es Salaam with the two railway systems and the different road corridors serves the mainland
and the regional economies of Zambia, Malawi, DRC, Burundi, Rwanda and Uganda.

2.1.12 Dar Es Salaam port handles 90% of the total country ocean freight with an average
of 4 million-ton per year. Fluctuations from year to year do take place. Transit traffic which
constitutes 80% of the total output declined from 35.3% of the total port throughput in 1995 to
29.4% in 2000. This decline in transit traffic may be partly attributable to economic slowdown of
the neighbouring countries, but also to the increasing port competition in the region. For Dar Es
Salaam to retain competitiveness against other regional ports, it is essential to improve railway
systems, road corridors and reduce the “time clearance”.

2.1.13 The principal ports are managed by the Tanzania Harbours Authority (THA), a
public corporation wholly owned by the Government of Tanzania. Following the recommendation
of a commercialization study undertaken in 1996, the Government started to privatize THA. The
Strategy, approved in 1997 for THA, was for Government to retain ownership of the major port
assets through THA and to concession the port operations. In May 2000, the Government approved
the contract for leasing the THA container terminal in Dar Es Salaam for a period of ten years. For
the remaining activities carried out by THA, the Government is launching a study to re-examine the
privatisation options and to confirm or otherwise its original reform strategy for THA excluding the
container terminal.

Air Transport

2.1.14 Tanzania is served by about 63 airports and landing strips of which three (Dar Es
Salaam, Kilimanjaro and Zanzibar) are used for scheduled international flights. The industry was
liberalized in 1992 as part of the on-going economic reforms, thereby opening up for private
participation in the market hitherto a monopoly of Air Tanzania Corporation (ATC). Alongside
ATC, 30 private airlines are providing scheduled and charter services throughout the country.
Furthermore, the Government has restructured the Department of Civil Aviation and created the
Tanzania Civil Aviation Authority (TCAA) to regulate services and the operation of aerodromes. At
 4
a latter stage, it is expected that TCAA will come under the umbrella of a multi-modal regulatory
body now in the formative stage. In 1999, Kilimanjaro airport was privatized and a concession let
for its operation and maintenance. For the remaining airports and the ATC, a study on options for
privatisation is being initiated.

2.2 Transport Policy, Planning and Co-ordination

2.2.1 Since 1997, the Government has made a special effort to formulate its policy
objectives and strategies. Several major policy documents were published during year 2000 of
which the most important are Vision 2025, the Tanzania Assistance Strategy and the Poverty
Reduction Strategy Paper. In the same context, the Ministry of Communication and Transport
(MCT), initiated in 1998, the preparation of a National Transport Policy (NTP). As summarized in
these documents, the Government policy objectives in the Transport sector are to:

• Develop a well integrated national transport network which will serve all sectors of the
national economy and segments of the population with maximum cost-effectiveness;

• Improve the quality and safety of transport services in the country;

• Minimize environmental degradation as a result of transport related development and

operational activities; and

• Maximize transport sector earning capacity particularly in transit/international transport

trade.

2.2.2 To achieve the above objectives, the Government is liberalizing the transport sector
with the private sector being increasingly involved in the various transport undertakings including
infrastructure development and service provision. This is reflected by the on-going private
concessionning process of the ATC, TRC (with TAZARA considering to take similar action), parts
of THA and the establishment of TANROADS, a commercially operated, but publicly owned road
agency. Simultaneously, the Government has dissolved most of the publicly owned operated
passenger and freight transport corporations with road transport activities presently fully in the
hands of private operators. The Government’s intention is to limit its role to policy making,
strategic planning, regulatory and performance monitoring in the sector. These roles are sound and
the legislation and regulation required to establish the new institutions are being worked out. In this
regard, the Government is currently studying the establishment of a joint regulatory body for the
transport sector. This single regulatory body will incorporate all the existing agencies such as
TCAA and THA, and would help the Government to exercise its inter-modal co-ordination and
performance monitoring roles. In addition to this, a study is on-going to improve inter-modal
integration and complementarity between all transport modes.

2.2.3 As far as the development of road infrastructure is concerned, NTP objective is both
to “Facilitate road transport corridor development and ensure that they are furnished with all
weather bitumen roads” and “to develop and expand the infrastructure and ensure easy
accessibility”. This would ensure that the nine road corridors with their link sections are accessible
and contribute to the growth of economic activities.
 5

2.3 Intervention of Otrher Donors in the Sector

2.3.1 Donors have, over the last decade, supported the Government’s Economic Recovery
Programme with a comprehensive transport sector programme for each of the key sub-sectors;
through the Port Modernisation Project, Railway Restructuring Project and the IRP. The port and
the Railway projects, which consisted of rehabilitation works and institutional support prepared the
way for the privatization process of these sub-sectors (see paras. 2.1.7 and 2.1.13).

2.3.2 Under the road sub-sector, the donors supported different programmes of which IRP
was the last and amounted to US$ 1.6 billion. Eighteen donors including ADF supported this 10-
year programme (1990-2000). The programme is being followed by the current 6-year URRP to the
tune of US$ 590 million. The costs include US$ 359 million for trunk roads and US$ 214 million
for regional roads. Others are US$ 2.5 million for ferries, US$ 9.2 million for Axle Load Control
and US$ 5.3 million for overheads.

2.3.3 The URPP has been divided into two phases: Phase 1 covers projects to be carried
out in the first three years (2001-2003), consisting mainly of on-going projects and accumulated
rehabilitation works on most of the paved roads and some high priority unpaved trunk and regional
roads; and phase 2 will cover the following three years (2004-2006), consisting mainly of
upgrading, regravelling and urgent periodic maintenance works. The expected donor contribution is
US$ 535 million. In addition to the Bank, nine other donors are supporting the programme as
shown in the Table below. The total commitment so far is US$ 336.85 million, leaving a gap of
US$ 198.15 million which will be partly filled with further World Bank contribution of US$ 140
million.

Donor Contribution to URRP (in US$ million)

DONOR AMOUNT
DANIDA 15.35
NORAD 11.16
E.U. 108.31
ITALY 2.24
JICA 25.41
KUWAIT FUND/OPEC 26.30
SAUDI FUND 16.80
WORLD BANK 51.60
ADB 79.68
REMAINING TO BE FINANCED 198.15
TOTAL 535.00

3. THE ROAD SUB-SECTOR

3.1 Road Network, Vehicle Fleet and Traffic

3.1.1 The classified road network is estimated at 85,000 km and can be distributed into
five classes as shown in the following table:
 6

Length in km
Paved Unpaved Total

Trunk Roads 3,830 6,470 10,300

Regional Roads 100 24,600 24,700
District Roads 30 19,970 20,000
Feeder Roads 0 27,550 27,550
Urban Roads 470 1,980 2,450
Total 4,430 80,570 85,000
Source: MOW (Highway Act)

3.1.2 Trunk roads include nine major traffic corridors and constitute the primary road
system of which 40% is paved. Regional roads link the trunk roads with economic centers, and
district and feeder roads provide the inter-village tertiary road network.

3.1.3 There is limited available data on the size and characteristics of the vehicle
population in the country. The best estimates suggest a total fleet size of about 130,000 growing at
the rate of 6% per year for the last five years. On the road network, daily traffic is generally light,
with only two major roads (Tanzam highway and Central corridor) currently handling over 1,000
vehicles per day (vpd); most paved roads carry between 200 and 500 vpd.

3.1.4 Tanzania is among the countries with very high rates of accidents despite its small
size of vehicle fleet. In 2000, about 150 persons per 10,000 vehicles were killed in Tanzania as a
result of road accidents. This rate is about 20-30 times the average of developed countries and
double that of some Southern African countries. The costs in economy and social terms are
enormous. The GOT, with the aim to tackle the road safety problem, established a Road Safety
Unit in 1992. The Unit is currently implementing a road safety program comprising; accident
recording and analysis system, vehicle licensing and inspection, axle load control, traffic
engineering and driver training.

3.2 The Road Transport Industry

3.2.1 The MCT regulates the whole land transport sector, including entry into the business
of passenger and freight transportation directly through the Central Transport Licensing Authority
(CTLA). However, due to the inadequacies in human resources, technology and funding, CTLA
currently does little more than issuing permits to operate vehicles. As part of the on-going reforms,
the regulatory role of the CTLA will be transferred to the sector wide, Tanzania transport
Regulatory Authority (see para. 2.2.2).

3.2.2 The commercial vehicles are estimated at 36,000, out of which freight vehicles
number 23,000, mainly, in the 0-5 ton capacity range. About 93% are one vehicle owner/operator
and known to have a low level of technical and managerial expertise and a limited financial
capacity to adapt to changes in market conditions and economic downturn. This is an important
issue and attention needs to be focussed in encouraging private operators to form strong
partnership/organization in provision of freight and passenger services.

3.2.3 The freight market is totally dominated by the private sector after the divestiture of
nine out of the ten state-owned Regional Transport Companies (RETCOS) in year 2000. Road
passenger transport services are also provided by the private sector with the exception of about 10%
of Dar Es Salaam’s market which is served by Shirika La Usafari Dar Es Salaam Bus company
(UDA). Like the RETCO’s, UDA is lined up for divestiture by selling 75% of the shares to
investiture where as 25% will be held by the Dar Es Salaam City Council.
 7
3.2.4 There is adequate supporting evidence suggesting that the national road freight
demand is lower than supply. Firstly, the private sector reports declining freight rates in real terms
and consequently reduced profitability, which suggests a tightening market situation. Secondly,
imports of new trucks have slowed down in recent years. However, it must be noted that a domestic
freight demand is highly seasonal, and therefore shortages occur during the peak harvest seasons.

3.3 Road Administration and Training

3.3.1 The responsibility for administration of the classified road network is shared by the
Ministry of Works (MOW) and Ministry of Regional Administration and Local Government
(MORALG). The MOW is responsible for trunk and regional roads. The role of the MOW
includes policy formulation, strategic planning and regulation in the road sub-sector. It is also
responsible for monitoring the performance of the following agencies: Tanzania National Road
Agency (TANROADS), Building Agency, Government Stores Agency and Electrical and
Mechanical Agency.

3.3.2 The TANROADS was established on 1st July, 2000 as a semi-autonomous road
agency with the responsibility for the maintenance and development of the classified trunk and
regional road networks. The establishment Act of the TANROADS is included in the Project
Implementation Document (PID), whereas the organisational structure is given in Annex 2.

3.3.3 The Directorate of TANROADS consists of a Chief Executive with its functions
divided among four departments of Maintenance, Development, Technical and Finance and
Administration. TANROADS is to be staffed in July 2001, with a total of 652 staff of which 162
are engineers. Most of the required qualified staff are in place. The recruitment process is on-going
and is expected to be completed according to the initial business plan. The staff is spread over the
head office in Dar es Salaam and 20 regions across the country.

3.3.4 TANROADS has the requisite organization to manage its function to maintain and
develop the classified trunk and regional road network in the country. Procedure for procurement,
accounting and supervision are well established. This has enabled TANROADS to already take
over on-going development projects from the World Bank, the E.U. and the ADF and performing
road maintenance activities country wide on all the classified trunk and regional roads.

3.3.5 With regards to training, a total of US$ 105 million was expended under the IRP on
capacity building effort through staff training and Technical Assistance. Sixty-three staff of the
MOW were trained to the level of Master of Science while 379 more staff received short-term skill
training provided by local and international training institutions within the country, namely the
University of Dar es Salaam, Morogoro Ujenzi Training Institute, Mbeya (Kiwira) Appropriate
Technology Training Institutue and the Eastern and Southern African Management Institute. Also
in the National Construction Council, a total of 15 staff received advanced training.
 8
3.3.6 TANROADS has initiated a local contractor support programme through training
financed by the Swiss Development Corporation, relaxation of tender conditions for demonstration
sites and have planned trial contracts of about TZS 750 million in the next ten years.

3.4 Road Planning and Financing

3.4.1 MOW through the Policy and Planning Division is responsible for road planning,
construction, rehabilitation and maintenance of the classified road network. Its proposals are
subject to review and approval by the Ministry of Finance (MOF) and National Planning
Commission (NPC) which have responsibility for inter-sectorial co-ordination and planning.

3.4.2 The road sub-sector is funded respectively from the national budget, donor
community and road user charges. As shown in table 3.1, road expenditures for MOW have
increased, in nominal terms, from TZS 21.14 billion in FY97/98 to TZS 47.19 billion in FY99/00.
There have been substantial variations between budgeted financial resources and actual
expenditures both from the Government and the donor community. Over the period, the budgeted
commitment by the donor community was about twice as large as the commitment of the
Government. This high level of commitment was in anticipation of the second phase of the IRP that
was expected to start in 1997. However, due to the delay in finalization of the institutional reform
in the management of the road sector, out of the total commitment of TZS 124.54 billion for the
period (1997/2000), only TZS 41.82 billion was released. The Government on its part, provided
TZS 77.41 billion out of which TZS 72.88 billion was from the road fund (94%) and the rest (TZS
4.53 billion) from general government budget. This latter represents an average of 4% of the total
Government expenditures. This is a relatively modest amount considering the size of the country
and the development of the road network. However, it is expected that in future, the Government
contribution will increase due to savings in elimination of subsidies and investments in the other
transport modes as a result of the privatization process.

Table 3.1
Road Sub Sector Investment and Recurrent Expenditure (TZS million)
FY/97/98 FY/98/99 FY/99/00 Total
Budget Actual Actual Budge Actual Actual Budget Actual Actual Budget Actual Actual
Sources % t % % %
Budget Budget Budget Budget
Devel.
Budget 3,945 2,195 56% - - - 4,000 2,333 58% 7,945 4,528 57%
Donor 41,635 4,448 11% 51,148 19,115 37% 31,735 18,263 58% 124,541 41,826 34%
Road Fund 20,000 14,500 73% 32,250 31,777 99% 32,640 26,600 81% 84,890 72,877 86%
Total 65,580 21,143 32% 83,398 50,892 61% 68,398 47,196 69% 217,376 119,231 55%

Source: MOW

3.4.3 The funding of road maintenance activities is through a Road Fund created in 1995
by an Act of Parliament. The Act which established the Road Fund was amended in 1998 to clarify
the allocation of resources between development and maintenance of the network and between
trunk roads and rural roads. The main resource of the Road Fund is a levy, presently TZS 80, on
each litre of fuel. Additional fees collected are: transit fees, vehicle over-loading fines, heavy
vehicle license fees and any other service approved by the Parliament from time to time.
 9
3.4.4 The Road Fund is administered by a Board, composed of nine persons. The Board
includes representatives of the Ministries responsible for roads (works, finance and local
government) as well as the private sector. The funds are collected by MOF and MCT according to
their respective competencies and deposited into the Fund. Ninety percent of the funds are ring-
fenced exclusively for road maintenance of which seventy percent is for trunk and regional roads
and thirty percent is for district and urban roads. Ten percent is to be used for the road
development.

3.4.5 Since the amendment of the Act (1998), the performance of the Road Fund has
improved. Funds that have been collected have been disbursed to MOW and Prime Minister’s
Office/MORALG as shown in the table below. Moreover, during the FY 1998/99 the treasury
disbursed more funds compared to what was in the Road fund account to support the restoration of
network that was destroyed by “El Nino” rains. However, despite the significant effort in the
collection and release of funds to the MOW and MORALG, there is still a gap to meet the
maintenance requirement which is estimated over the period 2000-2004 at about TZS 90 billion per
year. This gap is due to the backlog maintenance and to the “El Nino” effect.

Table 3.2
Summary of Road Fund Disbursements (TZS billion)

Year Total Collections MOW MORALG

1996/97 33.93 16.00 3.45
1997/98 36.70 14.50 26.00
1998/99 38.39 31.77 13.60
1999/00 38.00 26.60 11.40
Source: Road Fund

3.4.6 The collection process is undertaken with too many entities involved and long transit
time for the funds. According to a recent study, it takes about 60 days for up-country fuel levy
collections to be deposited in the road fund collection account. It also takes three weeks for the
funds deposited in the Bank of Tanzania Road Toll Collection Account to reach the Road Fund
Board’s account. Therefore, the time taken by the whole process is quite long, and time for the
release of funds is quite unpredictable which results in serious cash flow problems during the
implementation of the road maintenance contracts.

3.4.7 The Government recognizes that sustainability of the road network requires more
finance than current revenue levels and timely release of the fund. The Government is therefore
contemplating different actions to be taken, among which are: (i) launching of a study, financed by
the Swiss Development Corporation and the Road Fund, to review road user charges, current
collections and use of funds, in order to recommend more efficient procedures and to widen the
sources of revenue for the fund, (ii) request for donor contribution to the maintenance program, and
(iii) minimizing damage on the roads by already introducing and enforcing appropriate axle-load
and vehicle regulations.

3.5 Road Engineering and Construction

3.5.1 The MOW maintains a small design and construction section, which among other
duties establishes principles and procedure for route locations and Right of Way demarcations in
addition to the review of technical standards and specifications for road works. The TANROADS
is in charge of detailed engineering design of minor roads and bridges and checks feasibility study
reports and design and tender documents prepared by consultants or by in-house teams. Foreign
consultants undertake most of the studies and designs for large and complex projects. Local
consultancy firms have been encouraged to undertake consultancy assignments in the sector, in
 10
association with foreign consultants, as a result of the high investments in the road infrastructure
over the last decade.

3.5.2 The Central Materials Laboratory, now known as TANLAB, provides testing of soils
and other civil engineering construction materials for Government, consultants and contractors.
Regional Material Laboratories under the regional managers' offices undertake soil, pavement and
other tests in support of the regions’ maintenance and development works.

3.5.3 Foreign contractors play a significant role in the execution of a majority of the road
construction works. Despite the effort made under IRP to promote the local contracting industry,
yet the industry is still weak with only about 50 contractors, which are mainly involved in basic
routine and periodic maintenance works. This is a major concern to the nascent private contracting
industry in Tanzania and the GOT intends to continue to develop the industry to keep pace with the
work volumes. Within this framework, TANROADS has initiated a local contractor support
programme of trial contracts of about TZS 750 million over the next two years (see para. 3.3.6).

3.6 Road Maintenance

3.6.1 TANROADS is tasked with the maintenance of the classified Trunk and Regional
Roads network under agreement with the MOW. In order to achieve this, TANROADS has divided
the country into 4 zones comprising 4 to 6 regions per zone, with each region under the control of a
Regional Manager. Each zone is headed by a zonal director who reports directly to the Chief
Executive in the Head Office.

3.6.2 The Regional Managers are responsible for routine maintenance carried out by force account
while local contractors are utilised to undertake periodic maintenance and minor rehabilitation
works. As far as equipment is concerned, TANROADS is developing a self-financing Equipment
Hire Unit in four regions in order to provide service to their field offices and to contractors
undertaking maintenance works.

3.6.3 During the first half of the current fiscal year, TANROADS has maintained about 2,500 km
of the trunk roads and 2,300 km of the regional roads which represent 45 per cent and 11 per cent of
the classified trunk and regional roads respectively. Given that the TANROADS has been recently
established (July 2000), this achievement is considered satisfactory.

4. THE PROJECT

4.1 Project Concept and Rationale

4.1.1 The rationale for ADF involvement in the proposed project is a logical continuation
of its past interventions along these two corridors. In the past 10 years, the Bank, along with three
other donors namely, E.U., World Bank and OPEC Fund have mobilised a total of US$ 310 million
for rehabilitation of the Central and Lake Corridors. These two corridors are among the most
prioritized of the nine major Tanzanian Corridors based on their socio-economic significance in
terms of population, social welfare, agriculture, mining, tourism and international trade with
landlocked countries. They connect major urban centres, ports and border points with inland
regions and vast rural areas, and function as a vital lifeline for a large number of people. They also
serve as transit corridor to neighbouring land-locked countries. Therefore the project will
contribute to the regional integration between Tanzania and its neighbouring countries.

4.1.2 In the discussions with the stakeholders carried out during the social impact
assessment, the project beneficiaries expressed a strong desire to improve the road infrastructure
 11
that will provide them with better access to markets, health and education facilities and to other
basic services. These anticipated impacts are consistent with the objective of strengthening
economic infrastructure, which has been identified in the Country Strategy Paper (CSP), as a key
element in the poverty reduction strategy.

4.1.3 Various technical options for the upgrading and rehabilitation of the trunk and
regional roads were examined during the feasibility studies in order to select viable economic routes
with minimum of adverse impact on natural environmental sites and human settlements. The
resulting options were to upgrade the trunk road from gravel surface to a 6.5 meter wide bituminous
surfaced road with two 1.5 meter wide shoulders, and to rehabilitate the regional roads to gravel
standard as the most economically justifiable propositions. These specifications are in conformity
with the Tanzania Road Standards.

4.1.4 The Bank Group has extended loans to help finance 8 road projects in the sub-sector.
Five projects have been completed and implementation of the remaining projects is on-going.
Project completion reports (PCRs) were completed for four road projects. The main findings of
these reports and the lessons learnt are that most of the transport sector projects/studies have been
characterized by (i) long start-up delays ranging from 1 to 3 years due to the long time taken in
fulfilling the conditions precedent for loan effectiveness, and (ii) long implementation delays
caused by ineffective and weak institutional structures, procurement problems and lack of local
counterpart funding. Other donor assistance has suffered from similar problems. Besides theses
lessons, the recent Implementation Completion Report of the IRP prepared by the World Bank
identified the following lessons: (i) the need to update technical documentation before actual
commencement of works and (ii) the need to maintain donor interest through the whole period of a
major initiative. The proposed project incorporates these lessons learnt by the Bank and other
donors involved in the sector by (i) the implementation of the project by the TANROADS, which is
already executing projects to the satisfaction of donors such as E.U., World Bank and ADF. It is
expected that TANROADS will review the technical documentation before commencement of the
works; (ii) the GOT commitment at a high level to increase and release timely, its contribution to
the road sectors; furthermore the project is already included in the Medium-Term Expenditure
Framework of Government; (iii) the establishment of a dedicated unit for donor co-ordination under
TANROADS and (iv) the close monitoring of the implementation schedule by the Bank through
intensified supervisions.

4.2 Project Area and Project Beneficiaries

A) Project Area

4.2.1 The project area lies along the Central Corridor and the Lake Corridor and covers
four regions, namely the Kagera, Dodoma, Singida and Tabora regions which is about 178,625
square kilometres of Tanzania Mainland. The four regions have a combined population of 5.7
million (18% of the country’s total population) out of which 95% are rural. Seventy one percent
(71%) of the population (10 years and above) are economically active and over 91% of them are
engaged in agriculture while the remaining 9% are engaged in other occupational categories most of
which are in the service sector. The main crops grown include maize, millet, cassava, wheat,
cotton, groundnuts and tobacco while livestock keeping is an economic activity second to
agriculture. The regions are among the poorest in the country.

4.2.2 In terms of per capita income, the regions rank very low with Kagera and Dodoma
being the most deprived regions with per capita income as low as TZS 39,604 (US$72) for Dodoma
as compared to national average of US$161. As far as infant mortality and school enrolement are
concerned, the four regions are also among the most deprived regions with a rate as high as 130 per
1,000 and 220 per 1,000 for infant mortalities and under five mortality respectively.
 12

4.2.3 Women are traditionally most active in the day to day upkeep of rural life. Studies
carried out in the target regions show that women account for 76% of time spent on transport and
85% of load carried while men account for 21% of the time and 11% of the load carried. As a result,
it is found common that women move about 50kg per day over a distance of 4km, spend 75% of
total transport time walking long distances to and from farms and other production units, and
largely contribute to the tonne-km of the households on head or back loading. However, the amount
produced is small due to time wasted, as walking constitutes the major transport means. The
situation becomes more difficult for pregnant women and lactating mothers and small children who
also have to walk long distances to access basic services. This is partly due to inadequate and poor
transport service caused by poor rural transport infrastructure.

B) Project Beneficiaries.

4.2.4 Different stakeholders and the country as a whole will benefit from the project roads.
Transport operators and passengers mainly constituting of the rural poor, those located far from
markets and women would also directly benefit. Other beneficiary groups include those suffering
from poor access to credit to allow diversification, commercialization, and/or marketing of goods in
wider markets.

4.2.5 On a broader scale, the roads being on the Central and Lake Corridors, will promote
regional integration between Tanzania and the landlocked neighbouring countries and regions, such
as Uganda, Burundi, Rwanda and the DRC. This will reduce the transport costs on their imports
and exports resulting in greater competitiveness for their markets and would therefore support
poverty alleviation in these countries.

4.3 Strategic Context

The objective of the URRP is to improve the road network, thus to support poverty
alleviation (i) removing major constraints to transport services on the country’s road network; (ii)
improving accessibility to socio-economically important rural areas, and (iii) contributing to
promoting economic activity. The proposed project would support the URRP by rehabilitating 22
regional road priority links and upgrading of a section of a trunk road. In the project area, the poor
condition of the network constitutes a major constraint to the poverty reduction strategy. This
condition does not enable the movement of agricultural products; it limits access to markets and
raises the costs of access to markets. It is expected that the project will reduce transportation costs
of agricultural products. Improved road services would raise the producer price of export crops and
reduce farm-level costs of fertilizer and other inputs. It will also improve links between villages
and markets. The project is therefore in line with the sector goal as outlined in the URRP and is
consistent with the Bank Group Country Assistance Strategy and the Government defined PRSP.

4.4 Project Objective

The sectorial objective is to improve the road network in order to support economic
growth and poverty alleviation. The objective of the project is to reduce transport costs by
minimizing the road maintenance and vehicle operating costs in four regions: Kagera, Dodoma,
Singida and Tabora.
 13
4.5 Project Description

4.5.1 The project consists of the following components:

i) Rehabilitation of twenty-two (22) Regional Roads (923 km) in Kagera,

Dodoma, Singida and Tabora Regions. The list of the roads is given in
Annex 3.

ii) Construction works for the upgrading of gravel surfaced road to bitumen
standard with 6.5 m wide carriageway with 1.5m wide shoulders on each side
for a total length of 154 km between Kagoma and Lusahunga.

iii) Consultancy Services for:

- Supervision of Construction works of (i) and (ii) above.

- Project Audit Service

Detailed Description of Activities and Components

A. Civil Works

(i) Rehabilitation Works

4.5.2 The roads to be rehabilitated are all gravel and earth roads which have to be
improved to bring them to acceptable design standards for regional roads classification. They lack
adequate drainage structures and the surface severely degenerated without gravel. The existing
alignment of the roads will generally be followed in most cases. The design of the roads consists of
200 mm thick and 5.5 m wide gravel layer with 0.7m. wide shoulder on either side. Materials for
base construction and gravel surface layer are available from within each project area. The road
structure is designed for a service life of ten years after which a periodic maintenance activity
involving regravelling must be undertaken every five years.

(ii) Upgrading Works

4.5.3 The alignment of the proposed road nearly follows the existing one without any
major changes except at certain places where minor modifications were done to achieve economy.
The proposed road has been designed in accordance with Tanzanian geometrical design standards
for trunk roads. A carriageway width of 6.5 m with 1.5 m shoulders has been adopted with a design
speed of 100 kph in the flat terrain and 65 kph in the hilly areas. Improvements to horizontal and
vertical alignments have been made to meet the desirable geometric criteria to meet traffic safety
requirements.

4.5.4 The road foundations will be protected by side drains which will be paved where the
gradient exceeds 5%. As there are no major bridge structures along the road, almost all the
drainage structures will be in the form of multiple corrugated metal pipe culverts and these together
with side drains will be constructed along the whole stretch of the road.

4.5.5 The design of the pavement was based on sub-grade evaluation of CBR tests taken
along the alignment after soil sampling and compaction tests . A CBR value between 5 to 7 percent
has been used in the pavement design which has been carried out in accordance with TRRL road
note No.31 and is based on the estimated traffic, using a design life of 20 years. The road pavement
 14
shall be of Double Bitumen Surface Treatment Standard placed on 150-200 mm thick coment/lime
stabilized base over a cement/lime modified sub-base of varying thickness.

4.5.6 Large outcrops of dolerite rock have been identified at four major parts along the
road at Km 42.8, 86.1, 96.5 and 106.5 on the Muleba to Lusahunga Road with hauls ranging from
1.5km to 34 km. These have been found to be suitable for crushed stone base material, surfacing
and for concrete works. The most common gravel occurring along the project road are laterite and
ferricrete, which is much more like laterite but often has many cavities. These can be used as
selected fill and sub-base materials. Road signs and road line markings are provided in compliance
with Tanzanian standards. Guard rails, marker posts and kilometer posts shall be provided as
required.

B. Consultancy Services

4.5.7 Consultancy services for the supervision of the road construction works will be
carried out by two reputable firms of consultants on behalf of TANROADS. The selected firm will
supervise the construction, monitor quality control testing performed by the contractors, track
progress and costs, prepare progress reports and maintain close liaison with TANROADS, the
ministries responsible for the project and the Bank during project implementation.

4.5.8 Audit services for the project will be undertaken by a consultant who will, as part of
his services, submit the audit reports every year of the project implementation and at the completion
of the project.

4.6 Environmental Impact

4.6.1 In accordance with the Bank’s Environmental Guidelines, the project has been
classified as category II. A review of the Environmental Impact Assessment (EIA) reports on the
proposed roads indicate that the project roads follow the existing alignments with minor
improvements to the horizontal and vertical alignments. The studies further indicate that the
resulting environmental impacts due to the rehabilitation/upgrading of the roads will be minimal
and only of a temporary nature and can therefore be controlled to acceptable levels by the
implementation of the requisite mitigation measures and good construction practices.

4.6.2 The Government of Tanzania completed its Environmental Policy and Legal
Frameworks in 1996. The Policy and Legal Frameworks are intended to ensure the improvement
and management of the country’s environmental resources, such as, the forests, wildlife, soils, water
bodies, minerals, etc. The Environmental department within the office of the Vice President
ensures the implementation of environmental policies and co-ordination of environ-mental
activities. There exists also, the National Environmental Management Council (NEMC)
whose task it is to institutionalize EIA in the various sectors of government by assisting the sectors
in the preparation of EIA Guidelines and Checklists.

4.6.3 Positive and negative environmental impacts are expected to be associated with the
project. The proposed mitigation measures to alleviate the adverse effects have been recommended.
Also, the related costs for the implementation of these measures have been included within the
project cost.

Negative Environmental Impacts

4.6.4 The potential negative impacts will include the following: non-reclaimed burrow
pits; demolition of seven adobe brick houses; modification of the natural drainage patterns;
landslides; erosion; and stream and lake sedimentation. Others will include interference with the
 15
movement of wildlife, livestock and local residents; air and soil pollution from asphalt plants and
dust; noise pollution from construction equipment and blasting; and the presence of a non-resident
labour that may induce the spread of HIV/Aids.

Mitigation Measures

4.6.5 The requisite mitigation measures recommended to alleviate the potential negative
impacts include the reclamation of non-reclaimed borrow pits; compensation to families for the loss
of seven adobe brick houses which fall within the road alignment; and the improvement of the
drainage systems by the provision of infiltration ditches for silt and pollutants. Other mitigation
measures will consist of the stabilisation of slopes by re-vegetating so as to reduce erosion,
landslides, erosion and stream and lake sedimentation; installation of speed breakers, speed control
signs, radar detectors, and placement of traffic police within the Game Reserve. One example of
where these types of mitigation measures are successful are within the Mikumi Game Reserve of
Tanzania, where the Morogoro-Mbeya trunk road passes through one of the largest Game Parks of
Tanzania. The installation of a radar system, speed bumpers and traffic police has reduced car
accidents and human fatality rate by more than eighty percent.

Environmental Monitoring and Management Plan

4.6.6 An Environmental Management and Monitoring Plan as well Compensation Plan

will be prepared by the GOT. TANROADS has the capacity and the expertise to prepare this plan
which will be submitted to the Bank prior to first disbursement of the loan. This has been included
as a loan condition.

Mitigation Cost

4.6.7 The cost for the seven houses to be demolished is calculated at 2,000,000 TZS (UA
1,910). The cost has been negotiated and accepted by the owners who have expressed willingness
to vacate their property. This cost will be borne by the GOT and will be reflected in the
Compensation Plan. The other mitigation costs estimated at UA 0.3 million are included in the
engineering cost of the project.

4.7 Social Impact

4.7.1 Poor roads and the resultant inadequate transport limit the facilitating role of the
transport sector in both production and consumption of social and economic services. In particular,
the Tanzania PRSP underlines that transport improvement is critical for rural development and
poverty reduction. The link and impact of improvements in roads lie in the fact that it leads to
improved accessibility to social services such as health and economic opportunities by reducing
transport costs. It also ensures increased agricultural productivity; opens up room for participation
in non-agricultural activities through time saving effect, particularly, for women; eases accessibility
to markets and social services; and links the rural sector to the rest of the economy. Since women
constitute 51% of the population in the project target area and account for 76% of time spent on
transport and 85% of load carried, the improvement of the roads in the project area is expected to
reduce this physical and emotional burden while increasing their productivity and overall wellbeing.

4.7.2 During the construction and maintenance of the project roads, it is expected that the
local population, both men and women - will benefit from the employment opportunities to be
generated. It has been estimated, that a total of more than 1,500 skilled and unskilled laborers will
be employed during the construction while at least 200 permanent employment opportunities will
be created during the maintenance of the roads. The income generated from the employment will
improve the livelihood of the local population.
 16

4.7.3 It is not anticipated that the project will generate significant negative social impacts.
However, the introduction of the road may expose the communities, particularly women, to limited
social problems. It is anticipated that the higher disposable income of the laborers would lead to life
styles that could spread sexually transmitted diseases and unwanted pregnancies. Furthermore after
the construction of the roads, traffic accidents are likely to increase due to high speed.

4.7.4 To mitigate these negative impacts, sensitization and awareness raising workshops
on sexually transmitted diseases will be organized for the workers. In addition to raising the
awareness of local communities, the contractors will be expected to distribute to their workers,
protection material. With respect to enhancing road safety, the project will install traffic signs and
speed-break signs in critical junctions of the road.

4.8 Project Costs

4.8.1 The project cost is estimated at UA 42.94 million net of taxes, made up of UA 29.90
million (69.64%) in foreign exchange cost and UA 13.04 million (30.36%) in local costs. A
provision of 10% has been made to cover physical contingency as well as an average price
escalation of 3% per annum on foreign exchange and 5% per annum on local currency. An amount
of UA 2.06 million representing 6% of base cost, was provided for supervision consultancy
services. A lump sum amount of UA 0.06 million has been included for the consultancy services for
audit.

4.8.2 A summary of the project cost estimates is presented in Table 4.1 below while the
project cost by category of expenditure is presented in Table 4.2.

Table 4.1
Summary of Project Cost by Component

TZS billion UA million

Component F.E. L.C. Total F.E. L.C. Total
A. Civil Works:
- Rehabilitation 10.12 6.75 16.87 9.67 6.45 16.12
- Upgrading 14.68 4.39 19.07 14.03 4.19 18.22
B. Consultancy Services:
-Supervision 1.94 0.22 2.16 1.85 0.21 2.06
-Audit 0.07 - 0.07 0.06 - 0.06
Total Base Cost 26.81 11.36 38.17 25.61 10.85 36.46
Physical contingency (10%) 2.68 1.13 3.81 2.56 1.09 3.65
Price Contingency 1.80 1.15 2.95 1.73 1.10 2.83
Total 31.29 13.64 44.93 29.90 13.04 42.94
% 69.64 30.36 100.00 69.64 30.36 100.00

Table 4.2
Summary of Project Cost by Category of Expenditure
TZS billion UA million
Category of Expenditure F.E. L.C. Total F.E. L.C. Total
A. Civil Works: 24.80 11.14 35.94 23.70 10.64 34.34
B. Consultancy Services: 2.01 0.22 2.23 1.91 0.21 2.12
Total Base Cost 26.81 11.36 38.17 25.61 10.85 36.46
Physical Contingency (10%) 2.68 1.13 3.81 2.56 1.09 3.65
Price Contingency 1.80 1.15 2.95 1.73 1.10 2.83
Total 31.29 13.64 44.93 29.90 13.04 42.94
 17

4.9 Sources of Finance and Expenditure Schedule

4.9.1 The project will be financed jointly by ADF and GOT. ADF will finance 100% of
the foreign exchange costs and 67.10% of the local costs amounting to UA 8.75 million. The GOT
will finance 32.90% of the local costs amounting to UA 4.29 million. Overall, ADF will finance
90% of the total project cost with GOT meeting the remaining 10% plus taxes and duties. The
source of finance is shown in Table 4.3 below.

Table 4.3
Sources of Finance (In Million UA)
Source F.E. L.C. Total % of Total

ADF 29.90 8.75 38.65 90.0

GOT - 4.29 4.29 10.0
Total 29.90 13.04 42.94 100

4.9.2 The financing of part of local costs by ADF is justified by the GOT's strong efforts
towards the mobilization of internal and external resources to support its long term development
strategy. As part of this effort, the GOT has introduced important measures to broaden its tax
revenue base and also to improve tax collection. These measures include the establishment of the
Tanzania Revenue Authority which has helped reverse the decline in revenue performance.
However, in spite of these efforts, the Government is not yet able to generate enough resources to
finance the whole of the local costs of externally financed projects.

4.9.3 Tanzania's external finance requirements are large and the country relies mostly on
grants and concessionary loans to meet these requirements. Additional resources will be provided
under the enhanced HIPC Initiative which will be targeted towards poverty reduction activity such
as improvement of transport service. Through the World Bank and the Bank Group Structural
Adjustment loans and other budget support programmes, GOT receives resources which are used to
finance the foreign exchange costs of goods and services that the economy needs to expand and for
the implementation of development projects.

4.9.4 The Government of Tanzania has adopted the Medium-Term Expenditure

Framework as an instrument for allocating budgetary resources to priority sectors. The shift
towards a medium-term framework for expenditure planning has improved the prioritization of
expenditures across and within sectors. These priority sectors which are covered by the current
MTEF include roads.

4.9.5 In view of the above, the proposed ADF share of 67.40% of local currency financing
for the project is justified. The Bank local cost contribution will finance important components of
the project that can be procured locally, such as, skilled and unskilled labour, construction of road
camps, development of quarry sites and the production of aggregates for the successful
implementation of the project.

4.9.6 The expenditure schedule by component of the project is derived from the
implementation programme and is in proportion to the works and services programmed for each
year of the project implementation. The yearly expenditure plans by component and by sources of
finance are shown in Tables 4.4 and 4.5 respectively.
 18
Table 4.4
Expenditure Schedule by Component (in UA million)
Component 2002 2003 2004 2005 Total

A. Civil Works-Rehabilitation 5.69 11.39 1.90 - 18.98

B. Civil Works-Upgrading 4.29 5.36 5.36 6.44 21.45
C. Consultancy Services
-Supervision-Rehabilitation 0.34 0.68 0.12 1.14
-Supervision-Upgrading 0.26 0.32 0.33 0.38 1.29
-Audit 0.02 0.03 0.02 0.01 0.08
Total 10.60 17.78 7.73 6.83 42.94

Table 4.5
Expenditure Schedule by Sources of Finance (In Millions UA)
Source 2002 2003 2004 2005 Total
ADF 9.54 16.00 6.96 6.15 38.65
GOT 1.06 1.78 0.77 0.68 4.29
Total 10.60 17.78 7.73 6.83 42.94

5. PROJECT IMPLEMENTATION

5.1 Executing Agency

The Executing Agency for the project will be TANROADS under the directorate of
development. TANROADS is well established and successfully implementing road projects
financed by the World Bank and E.U. TANROADS has the requisite organisation to manage its
functions. It is well staffed and equipped to execute the project (paras. 3.3.2-3.3.4).

5.2 Institutional Arrangements

The implementation of the project will fall directly under the control of the
development director who reports to the Chief executive. A civil engineer, whose qualifications and
experience are acceptable to the Fund, will be designated from TANROADS as project co-ordinator
to monitor the proposed project during implementation. This has been included as a condition
precedent to first disbursement of the loan. This co-ordinator will work in conjunction with NEMC
and the Safety Unit of TANROADS to monitor the implementation of the environmental mitigation
measures.

5.3 Supervision and Implementation Schedules

5.3.1 The rehabilitation of regional roads will be executed in eight lots while the
upgrading of the trunk road will be undertaken as one package. The works will be supervised by
two reputable firms of civil engineering consultants on behalf of the Executing Agency; one for the
rehabilitation works and another for the upgrading works.

5.3.2 The duration of the construction works for each lot of the regional roads will be 18
months commencing in August 2003 and ending in February 2004. The construction work for the
trunk road will be completed over a period of 36 months commencing in January 2003 and ending
in December 2005. Each road project will be followed by a one year maintenance period. A
 19
summary of tentative implementation schedule for the project is given in Table 5.1 below and more
details are given in Annex 4.

Table 5.1
Summary of Implementation Schedule
Activity Agency Responsible Date
A. Civil Works
A.1 Rehabilitation
- GPN issue TANROADS/ADF Aug. 2001
- SPN issue TANROADS/ADF Sep. 2001
- Issue of Tenders TANROADS Oct. 2001
- Receipt of Tenders TANROADS Jan. 2002
- Approval of Tenders Apr. 2002
TANROADS/ADF
- Award of Contract May 2002
- Commencement of Works TANROADS Aug. 2002
- Completion of Works TANROADS Feb. 2004
TANROADS
A.2 Upgrading
- GNP issue TANROADS/ADF Aug. 2001
- SPN issue TANROADS/ADF Sep. 2001
- Prequalification submission TANROADS Nov. 2001
- Approval of prequalification TANROADS/ADF Feb. 2002
- Issue of Tenders TANROADS Mar. 2002
- Receipt of Tenders TANROADS Jun. 2002
- Approval of Tenders Sep. 2002
TANROADS/ADF
- Award of Contract Oct. 2002
- Commencement of works TANROADS Jan. 2003
- Completion of works TANROADS Dec. 2005
TANROADS
B. Supervision
B.1 Rehabilitation
- GNP issue TANROADS/ADF Aug. 2001
- SPN issue TANROADS/ADF Sep. 2001
- Approval of Shortlist TANROADS/ADF Nov. 2001
- Issue of RFP TANROADS/ Nov. 2001
- Recept of RFP Jan. 2002
TANROADS
- Approval of RFP Apr. 2002
- Award of Contract TANROADS May 2002
- Commencement of Supervision TANROADS Jul. 2002
- Completion of Supervision TANROADS Mar. 2004
TANROADS
B.2 Upgrading
- GNP issue TANROADS/ADF Aug. 2001
- SPN issue TANROADS/ADF Sep. 2001
- Approval of Shortlist TANROADS/ADF Nov. 2001
- Issue of RFP
TANROADS/ Nov. 2001
- Recept of RFP
- Approval of RFP TANROADS Jan. 2002
- Award of Contract TANROADS Apr. 2002
- Commencement of Supervision TANROADS May 2002
- Completion of Supervision Works TANROADS Dec. 2002
TANROADS Jan.2006

5.3.3 Consultancy supervision services will commence in July 2002 for the regional road
lots and in December 2002 for the trunk road project and terminate in March 2004 for the regional
roads, and in January 2006 for the trunk road. The consultants will be responsible for the day to day
supervision of the works, quality control and certification of the works done.
 20
5.3.4 The Bank will intensify its field supervisions over the project implementation period.
Details are given in the PID.

5.4 Procurement Arrangements

5.4.1 The procurement arrangements are summarised in Table 5.2 below. All procurement
for construction works and acquisition of consultancy services financed by the Bank will be in
accordance with the “Bank’s Rules and Procedures for Procurement of Goods and Works” and
“Rules of Procedures for the Use of Consultants” using the relevant Standard Bidding Documents
(SBD).

Table 5.2
Summary of Procurement Arrangements (UA million)

Project Category ICB NCB Others Shortlist Total

1. Civil Works:
1.1 Rehabilitation 18.98 (17.08) 18.98 (17.08)
1.2 Upgrading 21.45 (19.31) 21.45 (19.31)

2. Consultancy Services:
2.1 Supervision
- Rehabilitation 1.14 (1.02) 1.14 (1.02)
- Upgrading 1.29 (1.16) 1.29 (1.16
2.2 Audit 0.08 (0.08) 0.08 (0.08
TOTAL 40.43 (36.39) 2.51 (2.26) 42.94 (38.65)
Notes: Figures in parenthesis are the respective amounts financed by ADF.

Civil Works

5.4.2 The Civil Works contracts for the regional roads rehabilitation works costing UA
18.98 million has been packaged into eight lots, taking into consideration the geographical spread of
the road sections. The works will be procured under International Competitive Bidding (ICB), and
bidding documents for procurement works will be prepared for each lot to facilitate contractors to
bid separately for one lot or a combination of a maximum of three lots. The trunk road upgrading
works costing UA 21.45 million will form one package and will be procured on the basis of ICB
with pre-qualification.

Consultancy Services

5.4.3 Procurement of consultancy services as detailed in the table above, will be

undertaken in accordance with the "Bank's Rules of Procedure for the Use of Consultants".

Consultancy Services for Supervision

5.4.4 Given that the works are not of complex nature, procurement of supervision
consultancy services for (i) rehabilitation works in four regions (UA 1.14 million); and (ii)
upgrading of Kagoma-Lusahanga trunk road (UA 1.29 million), will be undertaken on the basis of
shortlist of qualified consultants, in accordance with Bank’s guidelines. The selection of consulting
firm(s) for the supervision of works, will be based on technical quality with price as a factor, in
accordance with the Bank Group “Rules of Procedure for the Use of Consultants.” The Executing
Agency shall complete both technical and financial evaluations and obtain the Bank’s “No
Objection” in one step.
 21

Audit Services

5.4.5 Audit services will be procured in accordance with the Bank’s “Rules of Procedure
for the Use of Consultants”. The selection procedure combining technical quality with price
consideration shall be used. As the amount is less than UA 350,000, the Borrower may limit the
publication of the announcement to national or regional newspapers. However, any eligible
consultant, being regional or not, may express his/her desire to be short-listed.

National Procedures, Regulations and Executing Agency

5.4.6 Tanzania’s National procurement laws and regulations have been reviewed and
determined to be acceptable. The executing agency (TANROADS) will be responsible for the
procurement of works and acquisition of consultancy services.

General Procurement Notice and Review Procedures

5.4.7 The text of a General Procurement Notice (GPN) has been agreed with TANROADS
and it will be issued for publication in “Development Business”, upon approval by the Board of
Directors of the loan proposal.

5.4.8 The following documents are subject to review and approval by the Bank before
promulgation: (i) Specific Procurement Notice; (ii) Pre-qualification invitation documents; (iii)
Tender documents/Requests for Proposals; (iv) Tender Evaluation Reports or reports on Evaluation
of Consultant’s proposals including recommendations for contract award; and (v) Draft Contracts if
these have been amended from the drafts included in the tender invitation documents.

5.5 Disbursement Arrangements

The loan will be disbursed against two categories of expenditure, viz. Civil works
and Consulting Services, using the direct payment method against standard documentation as
specified in the Bank's Disbursement Handbook.

5.6 Monitoring and Evaluation

5.6.1 TANROADS shall regularly provide the Bank with Quarterly Progress Reports
(QPR's), in line with the Bank's format covering all aspects of the project not later than one month
after the end of each quarter. The reports will include progress achieved against implementation and
disbursement schedules, key performance indicators, work programmes and cost estimates for the
next quarter. The progress report will provide an updated information on project implementation,
highlighting key issues and problem areas, and recommending action plans for resolving identified
bottlenecks.

5.6.2 The implementation of the EIA mitigation measures will be supervised by the
supervision consultants and also be monitored by the Environmental Unit of the TANROADS with
NEMC. The consultant will prepare a quarterly brief on the implementation of the identified
mitigative measures and forward to the Bank and TANROADS. The consultant is required to
prepare and submit to the Executing Agency and the Bank, a final report at the completion of the
Project. Thereafter, TANROADS will prepare and submit to the Bank, the Borrower's Project
Completion Report (PCR), not later than six months after project completion. The consultants' final
reports and the Borrower's PCR, will provide the background documents for the preparation of the
Bank's PCR required to facilitate post evaluation of the project.
 22
5.7 Financial Reporting and Auditing

5.7.1 The Finance and Administration Division of TANROADS will be responsible for
financial management and reporting procedures for the project and for other donor assisted projects.
The Division has been fully established with its full complement of staff in accordance with the
organizational structure. TANROADS has already prepared an Accounting Manual which is in use.
This will ensure that accounting and auditing functions are carried out in a sound and desirable
manner.

5.7.2 Project Audit will be carried out once every year and a final audit will be prepared at
the completion of the project. The audit report shall be submitted to the Bank not later than three
months after the completion of the project audit.

5.7.3 Provision has been made as part of project cost for annual audit of the project during
implementation and a final audit at the end of the project in line with the Bank's Guidelines for
Project Audit. The auditing services will be undertaken by a qualified, experienced and independent
audit consulting firm procured in accordance with the Bank guidelines.

5.8 Aid Co-ordination

5.8.1 The project is part of the URRP, which will be financed by various donors. Nine
donors as well as the Bank have already committed themselves to funding part of the programme.
The programme was a result of extensive consultation and collaboration between the GOT and the
donor agencies organized through the co-ordination of Donor Assisted Projects (CODAP) which
operates directly under the Permanent Secretary of MOW. This unit has the function of (i) co-
ordinating the planning and implementation of the URRP and the inputs and requirements of the
programme; (ii) undertaking annual reviews with proposals for any required programme
adjustments; and (iv) organizing donor meetings. As part of the institutional reform the role of the
CODAP is being transferred to a dedicated unit within TANROADS.

5.8.2 Besides this official framework, there is a regular and ad hoc donor co-ordinating
meeting by the various resident donors in Dar es Salaam. The Bank attends some of these meetings
and has been kept informed of the deliberations of these meetings. In the future, efforts will be
made to synchronize Bank missions with meetings.
 23

6. PROJECT SUSTAINABILITY AND RISKS

6.1 Recurrent costs

6.1.1 Through the construction and guarantee period, the construction firms will be
responsible for the road maintenance. One year after commissioning, the maintenance expenditure
of the project will be taken on by TANROADS and will be charged to the road maintenance budget.
The maintenance activities comply with the current maintenance policy mostly comprising: (i)
routine maintenance of the road side, ancillary works including patching for the trunk road, and
grading and spot regravelling for the regional roads; and ii) periodic maintenance comprising of
resurfacing of the surface dressing every 7 years for the trunk road and regravelling after every 5
years for gravel roads.

6.1.2 Maintenance expenditures that would be required to maintain the project to good
quality standard during their service life are estimated by the HDM Model in economic costs, to be
TZS 0.03 billion per year and TZS 0.8 billion every 7 years for the trunk road; and TZS 2.0 billion
per year and TZS 28.8 billion every 5 years for the regional roads. All maintenance expenditures are
expected to be met from the established Road Fund (see para. 3.4.3).

6.2 Project Sustainability

The sustainability of the project will depend on maintenance financing. Road

maintenance is financed through a road fund which was established in 1995 by an Act and amended
in 1998. Since the amendment, the road fund is working to the satisfacation of stakeholders.
However, due to the maintenance backlog and the “El Nino” weather effect, the road fund has not
been adequate to cover the maintenance requirements. The Government is concerned and is
commissioning a study to widen the source of further revenue (see para. 3.4.7).

6.3 Critical Risks and Mitigation Measures

The principal risks to the achievement of the project developmental objectives

include (i) prolonged delays in procurement; (ii) available and timely release of local counterpart
funds, (iii) delays in project implementation and (iv) low traffic volumes as a result of economic
slowdown. To guard against these risks, experience gained from past projects have been
incorporated in the project design by (i) implementing the project through TANROADS which is
effectively and efficiently handling procurement activities for World Bank and E.U. projects; (ii)
the commitment from Government to increase its road sector contribution as this sector has been
recognised as priority in the PRSP; furthermore, since the project has been recognized as a priority,
there is already some allocation in the MTEF., (iii) appointing competent consultants and by
undertaking intensive Bank supervision missions, and (iv) Government implementation over the
last years of the right policies to stimulate economic and social development.
 24
7. PROJECT BENEFITS

7.1 Economic Analysis

7.1.1 Base year (2003) traffic levels are estimated on available MOW time series, as
adjusted to reflect location of counting stations, on manual classified and origin-destination surveys
carried out under the studies. The traffic projections reflect growth prospects for GDP which is in
line with Government macroeconomic and demographic projections. These projections, supported
by the donors, assume that the real GDP will gradually increase from 4.5% in 2000 to 6 percent a
year in the late 2010’s. Traffic projections also attempt to reflect the foreseeable impact on market
structure and vehicle usage of the on-going regulation and liberalization policy. Based on these
assumptions, a recently completed study estimated the average growth rate at 6.5 percent over the
analysis period (2003-2025). In order to monitor the assumptions made with regards to the traffic
proejctions, the Government will continue to collect on regular basis, traffic count on the project
road and at other important locations on the road network. This requirement has been included as a
condition of the proposed loan.

7.1.2 The proposed roads, being located along two of the nine major Corridors of
Tanzania, will provide incentives for increased economic activities leading to increased agricultural
production and increased transit freight. Given the great potential of the areas, improvement of
these roads will generate demand for road transport which has been assumed to be about 30% of
normal traffic. This is a conservative estimate as traffic growth on rehabilitated roads in Tanzania
has more than doubled the estimates in most of the recent feasibility studies. No diverted traffic
was considered as there is no modal competition. Base year (2003) traffic level for each road are
given in Annex 6. Future foreasts covering normal and generated traffic for each road are given in
the PID.

7.1.3 The unit construction and maintenance costs were based on engineering design
estimates prepared by the consultant and the MOW for the trunk road and regional roads
respectively, and were reviewed during the appraisal mission. Construction costs considered in the
analysis include 10% allowance for physical contingencies and 6% allowance for supervision. The
vehicle operating costs (VOC) are estimated based on cost inputs generated by the Tanzanian fleet.
The analysis was conducted in economic terms using a discount rate of 12% for the opportunity cost
of capital. Economic costs were estimated from financial costs, through the use of a standard
conversion for no-traded goods (estimated at 0.86); and a shadow wage rate (estimated at 0.82, 0.55
and 1.06 for skilled, unskilled and expatriate labour, respectively). Prices were assumed at their
2001 level.

7.1.4 The World Bank’s developed economic model HDM III was used to analyze the
costs and benefits for each road. The model calculates the stream of benefits in the form of savings
between the rehabilitation/upgrading solution and the “without project” alternative for VOC costs
and road maintenance costs. These are then compared with the capital costs of
rehabilitation/upgrading to produce the NPV and the EIRR.

7.1.5 The analysis assumed that construction of Kagoma-Lusahunga road would start at
the beginning of year 2003 and would last for 3 years with the road being fully opened in 2006.
For the regional roads, construction would commence in 2002 and would open in year 2004.

7.1.6 The detailed results of the HDM III for each road are available in the PID and are
summarized in Annex 6. From this Annex, it can be seen that all the proposed roads are
economically feasible giving a combined EIRR for the project of 18.68% (weighted by investment).
 25
7.2 Social Impact Analysis

7.2.1 The investments identified for ADF financing form part of a program that would
restore the essential role and function of roads. The project roads are expected to improve access to
markets and the quality of transport services available to the rural population by linking under-
served rural areas with the country’s national and regional networks. The project will also yield
substantial benefits, mainly in terms of savings on vehicle operating costs that would result from
improved road conditions. It should be noted, that the population of project target area which is
estimated at 5.7 million, are primarily engaged in the agricultural sector which employs 75% of the
population. Therefore, since the roads selected for rehabilitation are located in zones of good
agricultural production and serve as two major transit corridors (central and lake circuit), most of
these savings will be passed on to the producers and consumers and will enhance rural incomes.

7.2.2 The proposed road improvement in the project target area is expected to benefit the
poor in rural areas who mostly constitute women in many ways. Villages will be opened up to the
rest of the world and access to markets, transport costs will be reduced, and if the market is
competitive by improved trader’s access to villages, then the price of their produce will increase.
Improved roads in the target area would also enable the poor rural population to access basic social
services such as safe water, education and health facilities, as well as agricultural extension services
and inputs. Recent studies in the project target area, found that villages with better physical
infrastructure have fertilizer costs 14% lower, wages 12% higher, and crop production 32% higher
than villages with poor infrastructure. This, combined with lower transport cost reflected in time
saved and higher opportunity cost of time would translate to reduced cost of produce, which would
enhance competitiveness. Therefore, in the long run, it is expected that the real value added of
agriculture is estimated to increase in the target area at an average annual rate of about 5%
compared to the 3.6% during 1990-98. As a result, this would reduce the proportion of the rural
poor below the poverty line from 57% to 49.5%.

7.2.3 Presently, the very poor condition of much of the roads in the project target area
must undoubtedly act as a deterrent to travel. This applies not only to travelers themselves, who
must endure slow and uncomfortable conditions on the project road, but also to owners of vehicles
and potential entrepreneurs who could be attracted to the two regions. The latter has a great
potential of generating additional employment and income opportunities, particularly as the traffic
levels increase and could result in the release of suppressed demand for more economic and social
services.

7.3 Sensitivity Analysis and Risks

7.3.1 The two main variables, which would affect the economic benefits of the project, are
(a) failure of the economy to continue its recovery, hence for traffic not to increase as estimated;
and (b) rehabilitation and upgrading costs to exceed estimates as a result of prolonged delays in
project procurement and implementation, timely release of local counterpart funds or unforeseen
additional works. To test the effect of these variables, sensitivity analyses were carried out on the
base case values, assuming either a lower growth rate for the traffic or a higher construction cost.
To this extent, construction costs were increased by 20% and the traffic growth rate decreased by 2
points (30%). A summary of these analyses, given in Annex 6, show that the conclusions drawn
from the base cases are still sustainable with either the lower volumes of traffic or the higher
construction costs leading to slightly lower values for the corresponding NPV’s and EIRR’s. The
results, also, suggest that, even under the extreme scenario the average EIRR for the total roads
(weighted by investment) would be still estimated at about 15.70%. Further, the risks of higher
costs is less because although the project construction costs are based on current contracts, there are
indications that the unit cost of construction is declining as the economy is further liberalised and
 26
competition increases in the sector. With regard to the traffic, recent experience has shown traffic
increase of twice or more than original feasibility estimates suggesting that there is considerable
surplus demand.

7.3.2 In order to assist project monitoring during implementation, switching values

analysis for the project roads was also carried out. The corresponding multipliers for construction
costs and basic traffic to yield an EIRR of 12% are indicated in Annex 6. The results are in line
with the finding presented in section 7.1 above and show that there is considerable headroom for the
economic feasibility of the proposed investments except for the Bwanga-Uyovu, the Hogoro
Junction-Dosidosi and the Sepuka-Ndago roads. In the case of these sections, the analysis leads to
the conclusion that it would not be economically feasible if the costs are 30% above their base value
or if the traffic in the opening year is between 80-90% of the projected value. Costs and benefits
associated with these three roads will be subject to close monitoring during project implementation.

8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions

8.1.1 The roads project in four regions, that comprise the rehabilitation of regional roads in
Kagera, Dodoma, Singida and Tabora regions and the upgrading of the Kagoma-Lusahunga road, is
in line with the Government’s stated policy on roads infrastructure development. The project aims
at supporting the Governmental goal of poverty reduction. Lastly, the project is consistent with the
Bank Country Strategy Paper for 1999/2001 period.

8.1.2 The project is technically feasible and economically viable. The EIRR of the
Kagoma-Lusahunga trunk road upgrading project of 16.5% and an EIRR range of between 16% and
31% for the regional roads is based only on quantifiable economic benefits in terms of vehicle
operating cost savings and maintenance savings. The combined weighted EIRR of 18.68% is
higher than the opportunity cost of capital of 12% for Tanzania. On the basis of economic
justification, therefore, the project is economically viable.

8.1.3 In addition, the project is environmentally sustainable and socially desirable as it will
generate employment of skilled and unskilled labour in the project area during construction and
permanent employment opportunities during the maintenance of the roads, thereby improving the
livelihood of the local population through the income generated from the employment.

8.1.4 Furthermore, the project would support poverty alleviation, promote agricultural
production and lead to market integration and economic growth through improved accessibility to
market and production centres and to social facilities.

8.1.5 Finally, the roads lie along the Central and Lake Corridors. These corridors are
listed by the East African Co-operation as among the road priority network. The project is therefore
considered of strategic importance in the promotion of international trade, movement of persons and
co-operation in the Great Lakes region. The Kagoma-Lusahunga road will complement past Bank
and other donor interventions to upgrade the Lake Corridor, which provides Rwanda, Burundi and
Uganda with alternative access to the Indian Ocean. The project will also promote regional
integration between Tanzania and the landlocked neighbouring countries and regions. This will
reduce the transport costs on their imports and exports resulting in greater competitiveness for their
markets.
 27
8.2 Recommendations and Conditions for Loan Approval

It is recommended that a loan not exceeding UA 38.65 million be given to the

Government of Tanzania for the rehabilitation of twenty-two roads (923 km) in four regions in
Tanzania that lie along the Central and Lake Corridors, and the Kagoma-Lusahunga Road (154 km)
in the Lake Corridor, subject to the loan conditions below:

A. Conditions Precedent to the Entry into Force of the Loan Agreement

The obligations of the Fund to make the first disbursement of the loan shall
be conditional upon entry into force of the loan agreement as provided in
Section 5.01 of the General Conditions Applicable to Loan Agreements and
Guarantee Agreements of the Fund and fulfillment by the borrower of the
following conditions.

B. Conditions Precedent to First Disbursement

The borrower shall:

i) Submit to the Fund the Environmental Management and Monitoring

Plan as well as a Compensation Plan (para. 4.6.6);

ii) Designate a civil engineer from TANROADS, whose qualifications

and experience are acceptable to the Fund to co-ordinate and monitor
the project during implementation (para 5.2.1).

C. Other conditions:

The Borrower shall:

i) Continue to collect on a regular basis, traffic counts on the project

road and at other important locations on the road network (para.
7.1.1).
 TANZANIA Annex 1
ROADS REHABILITATION/UPGRADING PROJECT
LOCATION MAP

BUKOBA

MU SOMA
Muhutwe

Kagoma
MWANZA
 ANNEX 3

TANZANIA
ROADS REHABILITATION/UPGRADING PROJECT
Proposed Regional Roads

REGION ROAD SECTION LENGTH (KM)

KAGERA
Nyakahura-Murusangamba 20
Lot 1 Rulenge-Murusagamba 35
Bwanga-Uyovu 46
Sub-Total 101
Bukoba-Kabango Bay 47
Lot 2 Katoma-Kanyigo 40
Sub-Total 87
TOTAL 188
DODOMA
Kolo-Dalai 72
Lot 3 Kondoa-Bicha-Dalai 31

Sub-Total 103
Hogoro Jct-Dosidosi 55
Lot 4 Chenene-Itiso-Izava 55
Mbande-Kongwa 16
Sub-Total 126
TOTAL 229
SINGIDA
Singida-Sepuka 36
Sepuka-Ndago 30
Lot 5 Ndago-Kizaga 18
Kititimo-Kinyamshindo 46
Misigiri-Kiombol 21
Sub-Total 151
Igugumo-Nduguti 40
Lot 6 Ilongero-Ngamu 28
Ilongero-Gumanga 48
Sub-Total 116
TOTAL 267
TABORA
Urambo-Kaliua 36
Lot 7 Kaliua-Chagu-Malagarasi 120
Sub-Total 156
Lot 8 Tabora-Ulyankulu 55
Ziba-Choma 28
Sub-Total 83
TOTAL 239
OVERALL TOTAL 923
 ANNEX 5

TANZANIA
ROADS REHABILITATION/UPGRADING PROJECT

Provisional List of Goods and Services

TZ Billion UA Million Co-Financing

Categories F.E. L.C. Total F.E. L.C. Total ADF. GOT
1. Civil Works
1.1 Rehabilitation 10.12 6.75 16.87 9.67 6.45 16.12 14.00 2.12
1.2 Upgrading 14.68 4.39 19.07 14.03 4.19 18.22 16.84 1.38

2. Consultancy Services
2.1 Supervision:
- Rehabilitation 0.91 0.10 1.01 0.87 0.10 0.97 0.94 0.03
- Upgrading 1.03 0.12 1.15 0.98 0.11 1.09 1.05 0.04

2.2 Audit 0.07 - 0.07 0.06 - 0.06 0.06 -

Total Base Cost 26.81 11.36 38.17 25.61 10.85 36.46 32.89 3.57
Physical Contingency (10%) 2.68 1.13 3.81 2.56 1.09 3.65 3.29 0.36
Price Contingency 1.80 1.15 2.95 1.72 1.10 2.83 2.47 0.36

TOTAL 31.29 13.64 44.93 29.90 13.04 42.94 38.65 4.29

Source: ADB Mission, March/April 2001

 2

ANNEX 6
Page 1 of 3
TANZANIA
ROADS REHABILITATION/UPGRADING PROJECT
ECONOMIC ANALYSIS SUMMARY

1. Methodology

The economic model used for the analysis was HDM.III. The model Calculates benefits in the
form of savings in vehicle operating costs, road maintenance costs, travel time costs and allows
inclusion of exogenous benefits stream such as savings in accident costs. But these with the
time savings have not been considered for the present study. Discounted benefits are then
compared to discounted costs to obtain the Net Present Value (NPV) and the Economic Internal
Rate of Return (EIRR).

The analysis was conducted in economic terms, using a discount rate of 12% for the opportunity
cost of capital. Financial costs are converted to economic costs, through the use of a standard
conversion factor for non-traded goods (estimated at 0.86); and a shadow wage rate (estimated at
0.82, 0.55 and 1.06 for skilled, unskilled and expatriate labour, respectively). Prices were
assumed at their April 2001.

Construction was assumed to start in 2002, and to last for 3 years and 2 years for the trunk roads
and regional roads respectively. The analysis periods end in 2025 and 2015 for the trunk roads
the regional roads respectively, and the investment is assigned 10% residual value.

2. Evaluation results:

The results of the HDM III analysis are available, in the PID and are summarised below.
 ANNEX 6.
Page 2 of 3
Table 1: Summary of Economic Evaluation

ADT Economic cost NPV (at 12%) EIRR

Roads 2003 (Billion TZS) (in Billion TZS) (in%)

Kagoma-Lusahunga 21.56
Base case 10.40 16.50
(i) Cost increased by 20% 14.60
(ii) Traffic growth Rate decreased by 2 points (30%) 13.90
Kolo-Dalai 140 1.34
Base case 1.10 26.70
(i) Cost increased by 20% 21.40
(ii) Traffic growth Rate decreased by 2 points (30%) 23.90
Kondoa-Bicha-Dalai 140 0.58
Base case 0.40 24.90
(i) Cost increased by 20% 21
(ii) Traffic growth Rate decreased by 2 points (30%) 22.10
Hogoro Jct-Dosidosi 90 1
Base case 0.30 17.30
(i) Cost increased by 20% 13.40
(ii) Traffic growth Rate decreased by 2 points (30%) 13.70
Chenene-Itiso-Izava 98 0.79
Base case 0.60 25.10
(i) Cost increased by 20% 19.50
(ii) Traffic growth Rate decreased by 2 points (30%) 21.70
Mbande-Kongwa 93 0.3
Base case 0.10 18.70
(i) Cost increased by 20% 15
(ii) Traffic growth Rate decreased by 2 points (30%) 15.20
Nyakahura-Murusagamba 0.38
Base case 0.30 25.10
(i) Cost increased by 20% 19.70
(ii) Traffic growth Rate decreased by 2 points (30%) 22.40
Rulenge-Murusagamba 132 0.65
Base case 0.50 25.10
(i) Cost increased by 20% 21.80
(ii) Traffic growth Rate decreased by 2 points (30%) 22.40
Bwanga-Uyovu 85 0.86
Base case 0.20 17
(i) Cost increased by 20% 14.70
(ii) Traffic growth Rate decreased by 2 points (30%) 13.60
Bukoba-Kabango Bay 106 0.88
Base case 0.70 26.30
(i) Cost increased by 20% 21.20
(ii) Traffic growth Rate decreased by 2 points (30%) 23.20
Katoma-Kanyigo 184 0.88
Base case 0.9 31
(i) Cost increased by 20% 24.80
(ii) Traffic growth Rate decreased by 2 points (30%) 28.70
Singida-Sepuka 73 0.60
Base case 0.21 20.40
(i) Cost increased by 20% 16
(iii) Traffic growth Rate decreased by 2 points (30%) 16.30
Sepuka-Ndago 73 0.50
Base case 0.95 16
(i) Cost increased by 20% 12.10
(ii) Traffic growth Rate decreased by 2 points (30%) 12.10
Ndago-Kizaga 89 0.30
Base case 0.19 23.20
(i) Cost increased by 20% 16.60
(ii) Traffic growth Rate decreased by 2 points (30%) 18.80
Igugumo-Ndugali 78 0.66
Base case 0.23 18.50
(i) Cost increased by 20% 15.50
(ii) Traffic growth Rate decreased by 2 points (30%) 14.90
 2
ANNEX 6
Page 3 of 3
ADT Economic cost NPV (at 12%) EIRR
Roads 2003 (Billion TZS) (in Billion TZS) (in%)

Kititimo-Kinyamshindo 120 0.76

Base case .67 26.4
(i) Cost increased by 20% 20.7
(ii) Traffic growth Rate decreased by 2 points (30%) 23.4
Ilongero-Ngamu 110 0.46
Base case 0.27 21.9
(i) Cost increased by 20% 17.9
(ii) Traffic growth Rate decreased by 2 points (30%) 18.7
Ilongeroa-Gumanga 91 0.79
Base case 0..25
(i) Cost increased by 20% 14.7
(ii) Traffic growth Rate decreased by 2 points (30%) 16.3
Misigiri-Kiomboi 133 0.35
Base case 0.2 18.9
(i) Cost increased by 20% 15.4
(ii) Traffic growth Rate decreased by 2 points (30%) 15.3
Urambo-Kaliua 96 0.59
Base case 0.2 18.1
(i) Cost increased by 20% 15.0
(ii) Traffic growth Rate decreased by 2 points (30%) 14.8
Tabora-Ulyankulu 92 0.91
Base case 0.03 18.3
(i) Cost increased by 20% 13.9
(ii) Traffic growth Rate decreased by 2 points (30%) 14.6
Ziba-Choma 126 0.46
Base case 0.37 24.8
(i) Cost increased by 20% 20.3
(ii) Traffic growth Rate decreased by 2 points (30%) 21.8
Kaliua-Chagu-Malagarasi 74 2
Base case 0.54 17.3
(i) Cost increased by 20% 13.3
(ii) Traffic growth Rate decreased by 2 points (30%) 13.4

Table 2 - Multipliers to Yield an EIRR of 12%

Road Construction Base

Cost Traffic
Kagoma-Lusahunga 1.6 0.6
Kolo-Dalai 1.8 0.6
Kondoa-Dalai 1.6 0.5
Hogoro Jct-Dosidosi 1.3 0.8
Chenene-Isto-Ezava 1.7 0.8
Mbande-Kongwa 1.4 0.8
Nyakahura-Murusagamba 1.7 0.7
Rulenge-Murusagamba 1.7 0.6
Bwanga-Uyovu 1.3 0.8
Bukoba-Kabango Bay 1.8 0.6
Katoma-Kanyigo 2.1 0.5
Singida-Sepuka 1.4 0.4
Sepuka-Ndago 1.2 0.7
Ndago-Kizaga 1.6 0.7
Iguugumo-Nduguli 1.3 0.5
Kititimo-Kinyamshindo 1.7 0.5
Ilongero-Ngamu 1.5 0.3
Ilongero-Gumanga 1.5 0.4
Misigiri-Kiomboi 1.5 0.5
Urambo-Kaliua 1.4 0.5
Tabora-Ulyankulu 1.3 0.5
Ziba-Choma 1.3 0.5
Kaliua-Chagu-Malagarasi 1.7 0.3
 3
ANNEX 7
TANZANIA
ROADS REHABILITATION/UPGRADING PROJECT
ENVIRONMENTAL SCREENING MEMORANDUM

A. ENVIRONMENTAL CATEGORY II

JUSTIFICATION FOR ENVIRONMENTAL CATEGORIZATION

The project has been classified as category II, indicating that the project has minor negative aspects for which the requisite
mitigation measures have been recommended and included into its design. Two EIA studies were part of the feasibility
study and mitigation measures earmarked have been integrated into the design and budgeting of the project.

B. BRIEF DESCRIPTION OF THE PROJECT

The project is comprised of twenty-two regional roads and one trunk road. Five regional roads with a total of 229km are
within the region of Dodoma, five are in the Kagera region with a total of 188 km, eight are in Singida region with a total
of 267 km and four in Tabora region with a total of 239 km. The Lusahunga-Kagoma, 154 km in length, is a trunk road,
which is to be upgraded to bitumen standard. All of the existing twenty-two regional roads will be rehabilitated to gravel
standard.

The overall aim of this project is to reduce poverty in the rural areas through the reduction in traveling time and operation
costs for passengers, goods and vehicles; accessibility to market, health and education facilities; improved connectivity to
the main roads, districts and regions.
C. POTENTIAL ENVIRONMENTAL IMPACTS

• Loss of vegetative cover;

• Modification of natural drainage patterns;
• Land slides, erosion, stream and lake sedimentation;
• Interference with movements of wildlife, livestock, and local residents;
• Air and soil pollution from asphalt plants and dust;
• Noise pollution from construction equipment and blasting;
• Improper disposal of trash and garbage;
• Presence of non-resident labor force; and
* Loss of property.
D. MITIGATION MEASURES RECOMMENDED

• Reclamation of degraded areas;

• Re-habilitate burrow pits;
• Improve drainage systems and provide infiltration ditches for silt and pollutants;
• Re-stabilize slopes by vegetating;
• Compensate affected families for properties lost;
• Carry out periodic wetting of surface to reduce dust;
• Provide ear muffs at quarry and construction sites;
• Control the spread of HIV/Aids and other STDs;
• Dispose of garbage and trash by burning, burial or composting;
* Install speed bumbers, speed reduction signs, safety signs, and where necessary, overhead and under passes
E. PUBLIC CONSULTATION

Before and during the implementation of the project, the government and the consultant will periodically discuss
The project objectives with the stakeholders, with the view to ensuring their fullest participation in the project.
F. RE-SETTLEMENT REQUIRED

Considering the size of the affected people, re-settlement will not be necessary. However, families affected as a
result of the demolition of their houses found in the right of way will be compensated. The total amount
calculated for the seven houses to be demolished is TZS 2,000,000 (UA 1,910.00).
 2

ANNEX 9

TANZANIA
ROADS REHABILITAITON/UPGRADING PROJECT

PROJECT IMPLEMENTATION DOCUMENT (PID)

1. Tanzania at a glance
2. Project maps
3. Feasibility and Technical Studies for the Trunk Road
4. Strip Map of Regional Roads
5. Bank Supervision Plan
6. Traffic Demand and Road User Prices
7. Detailed Economic Analysis
8. Geometric Design Standards for Roads (3pp)
9. Environmental and Social Impacts Assessment Reports for Regional Roads
TANZANIA : PROPOSAL FOR AN ADF LOAN OF UA 38.65 MILLION
TO FINANCE THE ROAD REHABILITATION PROJECT
ADDENDUM*
Please find below an addendum to the above-mentioned Appraisal Report.
It was agreed that:
The procurement of civil works for the rehabilitation works comprising 8 lots of
regional roads will be through ICB with domestic preference margin of 10 per
cent in accordance with the Bank Group’s “Rules of Procedures for Procurement
of Goods and Works” (Page 21, paragraph 5.4.2).