AFRICAN DEVELOPMENT FUND NACALA ROAD CORRIDOR DEVELOPMENT PROJECT- PHASE IV MULTINATIONAL (MALAWI/ ZAMBIA) PROJECT APPRAISAL REPORT

Transcription

1 AFRICAN DEVELOPMENT FUND NACALA ROAD CORRIDOR DEVELOPMENT PROJECT- PHASE IV COUNTRY: MULTINATIONAL (MALAWI/ ZAMBIA) PROJECT APPRAISAL REPORT OITC DEPARTMENT November 2013

2 TABLE OF CONTENTS I - STATEGIC THRUST & RATIONALE Project linkages with country strategy and objectives Rationale for the Bank's involvement Donors coordination. 3 II- PROJECT DECSRIPTION Project development objctives components Project components Technical solution retained and other alternatives explored Project type Project cost and financing arrangments Project's target area and population Particpatory process for project identification, design and implementation Bank Group experience, lessons reflected in project design Key performance indicators... 9 III- PROJECT FEASIBILITY Economic and financial performance Environmental and social impact 11 IV - IMPLEMENTATION Implementation arrangements Monitoring Governannce Sustainability Risk management Knowledge building 19 V - LEGAL INSTRUMENTS Legal intrument Conditions associated with Bank's intervention Compliance with Bank Policies.. 20 VI - RECOMMENDATION 20 Appendix IA. Malawi's Country comparative socio-economic indicators Appendix IB. Zambia's Country comparative socio-economic indicators Appendix IIA. Table of AfDB's portfolio in Malawi (September 2013) Appendix IIB. Table of AfDB's portfolio in Zambia (September 2013) Appendix IIIA. Key related projects financed by the Bank and other development partners in Malawi (September 2013) Appendix IIIB. Key related projects financed by the Bank and other development partners in Zambia (September 2013) Appendix IV. Map of the Project Area Appendix VA. Justification of 10% counterpart funding waiver for Malawi Appendix VB. Justification 10% counterpart funding waiver for Zambia

3 CURRENCY AND EQUIVALENTS 19, August, UA = 1 SDR 1UA = USD UA = MWK UA = ZMK8.129 FISCAL YEAR Malawi: 01 July - 30 June Zambia: 01 January - 31 December WEIGHTS AND MEASURES 1metric tonne = 2204 pounds (lbs) 1 Kilogramme (kg) = lbs 1 metre (m) = 3.28 feet (ft) 1 millimetre (mm) = inch ( ) 1 kilometre (km) = 0.62 mile 1 hectare (ha) = i

4 AfDB ADF CPIA CSP DANIDA DFID DPs EU EIB GoM GoZ IRR JICA MDC MGDS MWFO MoTPW MoTWSC NGO NPV ORPF OSBP PAPs NRFA RA RAP RDA RFA RMCs RDA RISP RSP SADC SDI SNDP SWG TA TSIP VOC WB ABBREVIATIONS African Development Bank African Development Fund Country Political and Institutional Assessment Country Strategy Paper Danish International Development Agency Department for International Development Development Partners European Union European Investment Bank Government of Malawi Government of Zambia Internal Rate of Return Japan International Corporation Agency Mtwara Development Corridor Malawi Growth and Development Strategy Malawi Field Office Ministry of Transport and public Works Ministry of Transport, Works, Supply and Communications Non-Governmental Organization Net Present Value Procurement and Fiduciary Services of the Bank One Stop Border Post Project Affected Persons National Roads Fund Agency Roads Authority Resettlement Action Plan Road Development Agency Roads Fund Administration Regional Member Countries Roads Development Agency Southern Africa Regional Investment Paper Road Sector Programme South African Development Community Spatial Development Initiative Sixth National Development Plan Sector Working Group Technical Assistant Transport Sector Investment Programme Vehicle Operating Costs World Bank ii

5 LOAN/ GRANT INFORAMTION Client s information BORROWER: REPUBLIC OF MALAWI REPUBLIC OF ZAMBIA EXECUTING AGENCY: ROADS AUTHORITY ROADS DEVELOPMENT AGENCY Financing plan Source (Amount in UA million) Country ADF-12 ADF-12 ADF-12 CF Total PBA RO Grant Malawi Zambia Total Note: CF: Counterpart Funding ADB s key financing information Loan / grant currency UA (Unit of Account) Interest type N/A Interest rate spread N/A Commitment fee 0.5% Service Charge 0.75% Tenor 50 years Grace period 10 years NPV (base case) US$ 14 million EIRR (base case) 15.5% Timeframe - Main Milestones (expected) Concept Note approval date 20 June 2013 Project Approval date 04 December, 2013 Effectiveness date 30 June, 2014 Completion date 30 June 2018 Last disbursement date 31 December 2018 iii

6 PROJECT SUMMARY Project overview: The proposed project will involve rehabilitation of a 75 km road between Liwonde and Mangochi in Malawi along the Nacala Road Corridor as well as establishment of One-Stop-Boarder-Posts (OSBPs) between Malawi and Mozambique and between Malawi and Zambia. The total project cost estimate for Malawi is UA million net of taxes. The Bank is expected to contribute UA million (95%), and the Government of Malawi will contribute UA million (5%). Bank financing will comprise of an ADF loan in the sum of UA million and an ADF grant of UA million. The total project cost estimate for Zambia side is UA5.500 million net of taxes. The Bank is expected to contribute an UA 5.00 million (91%) and the Government of Zambia will contribute UA 0.5 million (9%). The project duration is expected to be 5 years as follows: design review, preparation of bidding documents and tendering (12 months), construction period (36 months), and defects liability period (12 months). Project objectives: The project development objectives are two-fold: (i) at regional level, the objective is to contribute to improving road transportation and trade facilitation along the Nacala Road Corridor. The Nacala Road Corridor stretches from Lusaka in Zambia and through Malawi to the port of Nacala in Mozambique; and (ii) at national level, specifically in Malawi where a 75 km road is planned to be rehabilitated between the towns of Liwonde and Mangochi, the project is expected to contribute to improving transport services in the Balaka-Mangochi districts as a result of reductions in transportation, which in turn is expected to support stimulation of local economic activities in agriculture, agro-forestry, fisheries and tourism. Project beneficiaries: The project target area is the entire Nacala Road Corridor starting from Lusaka in Zambia through Malawi and Mozambique to the Nacala Port with an estimated population of over 2 million people. In Malawi in particular, where a 75 km road is planned to be constructed between Liwonde and Mangochi as well as spot-improvement of about 100 km of feeder roads, the target area is Balaka and Mangochi districts which have a combined population of approximately 1,266, 000 comprising 70% youth. The proposed road to be rehabilitated and spot-improvement of feeder roads in this area, is expected to create about 400 temporary direct jobs and 100 permanent jobs during project implementation and after project completion respectively. In addition to the above, roadside markets will be constructed at selected locations along the road and will provide business opportunities for women as they make the majority of people selling in markets. It is expected that, the above social-inclusiveness activities shall contribute to improved incomes and therefore poverty reduction of the households living in the Balaka-Mangochi districts. Project Rationale and Need: Long distance to the sea-ports grossly contributes to high transportation costs in Malawi and Zambia and is a major impedance to regional and international trade. At the moment several projects are underway, including improvement of port facilities at Nacala and road and rail infrastructure leading to Nacala Port being financially supported by various International Financial Institutions with the aim of making the Nacala Transport Corridor efficient, and once this is done, Malawi and Zambia are expected to benefit from the short distance in comparison to using the Port of Durban, which is currently the preferred port. The proposed project will contribute to improving transport and trade facilitation along the Nacala Transport Corridor and is in-line with the Bank s Ten Year Strategy ( ) objectives which includes: (i) provision of infrastructure to unlock potential of the private sector, and to champion gender equality and community participation iv

7 (inclusive growth); and (ii) ensuring sustainable growth, protecting livelihoods and natural resources, and to promote resilience to climate change (green growth). Bank s Value Added: The Bank has been financing large scale road projects in Malawi and other regional Member States and therefore will bring to bear a wealth of experience necessary to guide the Road Agencies in Malawi and Zambia to satisfactorily implement the proposed project. In addition to the above, the Bank has experience in financing regional transport projects, and this experience will be useful in implementing the proposed project. Knowledge management: The involvement of the Bank in both the feasibility study and actual implementation of OSBP in Malawi, Mozambique and Zambia will provide important lessons which can be used to improve project design in similar future OSBP projects. Secondly socio-inclusiveness activities under the proposed project will as well provide important lessons which will be used to improve project design of social-inclusiveness elements in future projects.. v

8 OUTCOMES IMPACT RESULTS-BASED-LOGICAL-FRAMEWORK Country and Project Name: Purpose of Project: Malawi/ Zambia: Multinational Nacala Road Corridor Development Project Phase IV To improve key road sections and border crossings along the Nacala Transport Corridor. RESULTS CHAIN 1) Contribute to trade competitiveness in the SADC region. 1) Improvement in road transport between Liwonde and Mangochi (75 km) and the Nacala Road Corridor as a whole. 2) Improvement in processing of imports and exports at border crossing between Malawi and Mozambique and between Malawi and Zambia 3) Improvement in road safety along the Liwonde-Mangochi Road section of the Nacala corridor. Indicator (including CSI) 1) Trade volumes (tonnes) along the Nacala Road Corridor 1) Average composite vehicle operating costs (VOCs) and average travel time between Liwonde and Mangochi in hours 2) Reduction in truck wait-time at border crossings 3) Reduction (%) in road accidents along the Liwonde-Mangochi Road PERFORMANCE INDICATORS Baseline 1) Base-line data to be collected by the M&E Consultant to be hired on the project 1) Average composite VOC is 0.89USD/veh-km and 2 Hours travel time. 2) Up to 12 hours during peak-time. 3) Baseline to be established by an M & E Consultant to be hired on the project. Target 1) To increase by 5% by 2017 and by 15% by ) Composite VOC to reduce by 40% to 0.53USD per veh-km; and travel time to reduce by 42% to about 1 hour 10 minutes by ) 3 hours during peak time by ) 20% reduction in accidents by 2017 MEANS OF VERIFICATION 1) Annual Traffic Statistics Reports produced by NSO 2) Customs returns 1) Roads Authority traffic survey reports(traffic counts, vehicle operating costs and travel time) 2) Malawi Revenue Authority returns and quarterly and annual reports from the Ministry of Trade and Industry 3) Project M&E Consultant Reports RISKS/MITIGATION MEASURES (i) Failure to operationalize the OSBPs: Differences in capacity to manage OSBP between Malawi and Zambia, and between Malawi and Mozambique. A TA will be hired to assist setting the OSBP. In addition the project will provide for training of customs and revenue personnel in Zambia and Malawi the 2 countries, training of freight forwarders and women and men cross- border-traders. (i) Failure to maintain the road after rehabilitation: Changing economic policy in Malawi may lead to a shift of resources from the road sector. The Bank with other donors will continuously dialogue with Government to ensure that fiscal policies do not impact negatively on road sector financing. vi

9 KEY ACTIVITIES OUTPUTS (1) Rehabilitation of the Liwonde- Mangochi road (75 km) (2) Establishment of OSBPs at Chiponde and Mchinji (3) Spot improvement of feeder Roads (100 km) (4) Road-side markets constructed (5) Tree planting and catchment conservation (6) Employment creation (400 jobs) (7) Freight forwarders/ women and men traders trained in cross border trading ( (8) Customs staff (Malawi/ Zambia) (9) M & E System (MoTPW-Zambia (10) Project management COMPONENTS (1) Length of road rehabilitated (km) (2) OSBP established and functional (3) Length of feeder roads (Km) (4) Nos. of Road- Markets constructed (5). Hectares of trees planted (6) No. of jobs created (7) No. Freight forwarders/ men trained (8) No. of customs staff trained; (9) M & E system functioning; and (10) Progress reports, financial audit reports, None (1) 75 km of road rehab. by 2017 (2) OSBP x 2 by 2017 (3) 100km feeder roads improved by 2017 (4) Three (3) roadside markets to be constructed. (5) 50 Hectares by 2017 (6) 700 temporary jobs created by 2017 and 100 permanent jobs created by women by 2018; (7) 50 trained by 2016 (8)40 customs staff trained; (9) M & E system functioning (Zambia functioning); and (10) Quarterly progress reports, annual audit reports. 1) Road rehabilitation and road improvement: Rehabilitation of Liwonde-Mangochi Road sections (75 km); Design review, pre-contract services, and supervision; Road safety audit; compensation and resettlement. 2) Transport and trade facilitation: Design review, pre-contract services and supervision of works (OSBPs); Construction of OSBP at Chiponde (Malawi/ Mozambique border); construction of OSBP at Mchinji (Malawi/ Zambia border) on the Malawi side; ); construction of OSBP at Mchinji (Malawi/ Zambia border) on the Zambia side; OSBP computer hardware at Chiponde and Mchinji; OSBP technical assistance; and capacity building; 3) Social inclusiveness activities: Spot improvement of 100 km of feeder roads within the Liwonde-Mangochi road corridor in Malawi; construction of 3 road side markets along the Liwonde-Mangochi road; tree planting and catchment conservation; road safety awareness campaign; and HIV/ AIDs, STIs, and gender sensitization; 4) Support to project management: Support to project coordinator; financial audit; technical audit; and monitoring and evaluation (M&E) services. As above Implementation delays: delays in procurement of services and works; and construction delays due to poor design may slow down progress of the project, particularly on the Malawian side where a road will be rehabilitated. To avoid the delays due to the above factors, the Government of Malawi will conduct advance procurement; and during design review stage of the works, the Bank will insist on the borrowers to accept designs which are as complete as possible from the Consultants. INPUTS Cost Estimate in UA million Component Amount Component Component Component Component Base Cost Physical contingency (7.5%) Price contingency (7.5%) Total Cost vii

10 PROJECT TIMEFRAME Activity Project approval Publication of GPN Effectiveness Services - Pre-contract services and supervision (Liwonde-Mangochi road) EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Civil works Rehabilitation of Liwonde-Mangochi road (75 km) SPN/ Pre-qualification/ Bidding/ Contract award Implementation Services - Technical advisory services (OSBP: Malawi/ Zambia) EOI/ Shortlist/ Bidding/ Contract award Implementation Services - Construction supervision (OSBP: Malawi/ Zambia) EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Civil works Construction of OSBP (Malawi/ Zambia) SPN/ Bidding/ Contract award Implementation Services - M & E EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Services- Road safety EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Services - Technical audit EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Services- Financial audit services EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Services - Road safety awareness campaigns EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Services - HIV AIDS/ STI and gender sensitization EOI/ Shortlist/ RFP/ Bidding/ Contract award Implementation Note: Detailed timings (dates) are given in the procurement plan (Technical Annex B.9) Defects Liability Period viii

11 REPORT AND RECOMMENDATION OF MANAGEMENT ON A PROPOSED LOAN TO THE GOVERNMENT OF MALAWI FOR THE MULTINATIONAL NACALA ROAD CORRIDOR DEVELOPMENT, PHASE IV Management submits the following Report and Recommendation on a proposed loan of UA and a grant of UA0.610 million to the Government of Malawi and a proposed loan of UA5.00 million to the Government of Zambia to finance Multinational Nacala Road Corridor Development Project Phase IV (Rehabilitation of Liwonde-Mangochi Road and establishment of One Stop Boarder Post between Malawi and Mozambique and between Malawi and Zambia. I STRATEGIC THRUST & RATIONALE 1.1 Project linkages with country strategy and objectives The Nacala Road Corridor is one of the important trade corridors in Southern Africa and its development is critical to enhancing regional and international trade competitiveness particularly for landlocked countries such as Malawi and Zambia. In recognition of the above, the SADC Secretariat has included the development of the Nacala Road Corridor in its Regional Master Plan ( ). The road and rail transport infrastructure along the Corridor is considered to be anchor infrastructure along which spatial development in other economic sub-sectors can develop, such as energy, mining, agriculture, agro-forestry, fisheries, and tourism. To operationalize this concept, Malawi, Mozambique and Zambia with support from SADC have signed a tripartite Spatial Development Initiative (SDI) agreement for the Nacala Transport Corridor with the aim of working jointly to package and develop economic projects along the Corridor to enhance national and regional economic integration and growth The proposed project will involve rehabilitation of a 75 km road between Liwonde and Mangochi (75 km) along the Nacala Road Corridor in Malawi and construction and establishment of One-Stop-Boarder-Posts (OSBP) between Malawi and Mozambique at Chiponde and between Malawi and Zambia at Mchinji/ Mwami border post. The project is expected contribute to improving efficiency along the Nacala Road Corridor. The project components have been designed taking into consideration the Bank s Ten Year Strategy ( ) objectives which includes: (i) provision of infrastructure to unlock potential of the private sector, and to champion gender equality and community participation (inclusive growth); and (ii) ensuring sustainable growth, protecting livelihoods and natural resources, and to promote resilience to climate change (green growth) The project is expected to draw synergies from other on-going trade and transport facilitation projects being implemented in Malawi, Mozambique, namely: the current on-going expansion and improvement of the Nacala Port in Mozambique by JICA. The port handling efficiency and cargo dwell-time is expected to improve once the project is completed; the Doing Business reform programme in Malawi, which involves improvements in the trading process and upgrading of the customs information system to Asycuda World and implementation of a National Single Window. The GoM has requested the Bank to support these activities through separate financing arrangements; and the Doing Business reform programme in Zambia, in which the government is upgrading its local Asycuda (++ Asycuda) to Asycuda World. It is expected that, the Doing Business programmes will help to improve trade competitiveness of the two countries. According to Doing Business survey, Malawi ranks 168 and Zambia ranks 156 out of 185 countries in terms of trading across borders. With the above programmes in place, Malawi is targeting to be among 100 best ranking economies. In addition to the above mentioned projects, AfDB, EU and EIB are parallel financing the road section 1

12 from Luangwa Bridge to the border between Malawi and Zambia at Mwami. Similarly in Mozambique, the AfDB, JICA, and Korea Exim Bank are co-financing sections of the road from Nampula to Lichinga through Chiponde, the border between Malawi and Mozambique The proposed project is within the development objectives of the Malawi Growth and Development Strategy (MGDS ) and the Zambia Sixth National Development Plan (SNDP ). The focus of the national development strategies of both countries is, among others, transport infrastructure development to sustained growth in economic sectors such as agriculture, mining, agro-forestry, and tourism. The Bank s Country Strategy Papers for Malawi (CSP, ) and for Zambia (CSP, ) have been designed within the framework of the national development strategies of the individual countries, the Bank s Southern Africa Regional Investment Strategy Paper (RISP), and the main thrust is to support the two countries address infrastructure bottlenecks and to support actions that expand private sector investment and trade with a view of enhancing their regional and international trade competitiveness. 1.2 Rationale for Bank s involvement Long distances to the sea ports grossly contribute to high transportation costs in Malawi and Zambia. The Port of Durban is currently the preferred port for most shippers from Malawi and Zambia because of its efficiency, however, the Nacala Port is the closest, with Beira being slightly further and usually serving as a satellite port for the port of Durban. The proposed project is one of the many programmes and interventions being carried out along the Nacala Corridor, which includes expansion and improvement of handling facilities at the Port of Nacala by JICA, rehabilitation of several road sections by the AfDB, EU, JICA, EIB, and Exim Bank of South Korea, in Zambia, Malawi and Mozambique. It is expected that, the proposed project, together with other on-going projects, will contribute to making the Nacala Corridor competitive in the near future, and by directing imports and exports to the Nacala Port, Malawi and Zambia will benefit from the short distance. This is within the development objectives of the Bank s Ten Year Strategy ( ), whose pillars are: regional and economic integration in which the Bank has committed to linking landlocked countries to international markets and to support intra-africa trade; private sector development, in which the Bank has committed to contribute to activities that respond to challenges of the private sector The proposed project is Phase 4 of the on-going Nacala Road Corridor Development Project which the Bank is supporting in Mozambique, Malawi and Zambia. Phase 1 involves rehabilitation of 348 km of road from Nampula to Cuamba in Mozambique and construction of 13 km Bypass road west of Lilongwe city in Malawi; Phase 2 involves rehabilitation of 360 km of road from Luangwa Bridge to Mwami in Zambia; Phase 3 involves rehabilitation of 175 km Cuamba -Mandimba-Lichinga road in Mozambique. The proposed project is complementary to the on-going projects mentioned above, and it is therefore important for the Bank to support financing of the project to ensure realization of full economic benefits along the corridor by providing a seamless good condition road infrastructure from Lusaka in Zambia to the Nacala Port in Mozambique through Malawi and by removing non-tariff barriers at the border crossings. In terms of progress, the Phase 1 project in Mozambique is 40% complete and is rated satisfactory, and in Malawi, the project is 8% complete and is rated moderately satisfactory. For the Phase 2 project in Zambia, the civil works contract was awarded in April 2013 and the contractor has mobilized, and the rating is Satisfactory; for Phase 3 in Mozambique, the project is at bidding stage, and the rating is satisfactory. 2

13 1.3 Donors coordination There is strong collaboration among the sector Development Partners (DPs) in both Malawi and Zambia. The DPs are mainly engaged in policy dialogue on sector issues, financing road projects and programmes, and Economic and Economic Work. The shared economic sector work and joint discussions among the donors in both countries has been particularly helpful in shaping sector policy and financing to the sector in the two countries Both countries have prepared Road Sector Investment programmes which prioritize economically important roads. The donors support financing of the priority roads under the respective Road Sector Investment Programmes. In terms of contribution to sector financing, the contribution of the DPs to the sector in Malawi is about 44%, as presented in Table 1 and in Zambia is about 26.6% as presented in Table 2. Table 1: Donor Support - Malawi Sector or subsector* Size GDP Exports Labor Force Road Sub-Sector [4.2%] [N/A [%] Public Annual Expenditure in the Road Sector ( ) Government Donors AfDB 13% UA m [UA82 m] [UA 26 m] EU 49% % [56%] [44%] JICA 37% WB 1% Level of Donor Coordination Existence of Thematic Working Groups Existence of SWAPs or Integrated Sector Approaches ADB's Involvement in donors coordination*** * as most appropriate ** Years [yy1 to yy2] *** for this sector or sub-sector **** L: leader, M: member but not leader, none: no involvement [YES] [YES] [Member]**** Sector or subsector* Table 2: Donor Support Zambia Size GDP Exports Labor Force Road Sub-Sector [%] [% [%] Public Annual Expenditure in the Road Sector ( ) Government Donors EU 40% UA m [UA65.81 m] [UA m] WB 30% % [73.3%] [26.6%] DANIDA 157% KFW 10% OPEC 5% Level of Donor Coordination Existence of Thematic Working Groups Existence of SWAPs or Integrated Sector Approaches ADB's Involvement in donors coordination*** * as most appropriate ** Years [yy1 to yy2] *** for this sector or sub-sector **** L: leader, M: member but not leader, none: no involvement [YES] [YES] [Leader]**** In Malawi, the DPs are part of the Sector Working Group (SWG) which is chaired by the Ministry of Transport and Public Works. The main task of the SWG is to assess and report on progress on the implementation of agreed programmes and projects in the transport sector in general and the road sector in particular. The SWG comprises: the DPs, the Roads Authority, the Roads Fund 3

14 Administration, the National Roads Safety Council, the National Construction Industry Council and the Private Sector (Transport Operators Association, and Chamber of Commerce). The DPs who are active in Malawi are: AfDB, WB, EU, JICA, and DFID Similarly, in Zambia, the DPs are part of the SWG, comprising of Ministry of Transport, Works, Supply and Communications; Ministry of Finance, Road Development Agency, the National Roads Fund Agency, Ministry of Local Government and Housing, The National Construction Council, and the Private Sector (Chamber of Commerce, and Transport Operators). The DPs active in the sector are: AfDB, WB, EU, JICA, and DANIDA. 2.1 Project development objectives II PROJECT DESCRIPTION The overarching project development objectives are two-fold as follows: (i) at regional level, the objective is to contribute to improving transportation and trade facilitation along the Nacala Road Corridor from Lusaka in Zambia through Malawi and Mozambique to the Port of Nacala and therefore to enhance competitiveness and socio-economic integration between the three countries; and (ii) at national level, specifically in Malawi where a 75 km road will be reconstructed between the towns of Liwonde and Mangochi, the objective is to contribute to improving transport services in the Balaka and Mangochi districts which in turn is expected to support local economic activities which include agriculture, fisheries, and tourism. 2.2 Project components The proposed project will consist of 4 components, namely: road rehabilitation and safety improvements; transport and trade facilitation; social inclusiveness activities; and support to project management. The activities under each of the components and cost estimates are presented below: Road rehabilitation and road safety improvement (UA ): (i) Rehabilitation of Liwonde- Mangochi road (75 km) in Malawi; (ii) design review, pre-contract services and supervision of civil works; (iii) road safety audit; and (iv) compensation and resettlement Transport and trade facilitation (UA million): (i) Construction of OSBP at the Malawi/ Mozambique border post, including installation of equipment and software, and project management related costs; (ii) Construction of OSBP at the Malawi/ Zambia border post, including installation of equipment and software, and project management related costs; and (iii) and Technical Assistance (TA) in establishing OSBP and capacity building activities in both Malawi and Zambia Social inclusiveness activities (UA million): (i) In Malawi, the component activities will involve spot improvement of 100 km of feeder roads within the Liwonde-Mangochi road corridor; construction of 3 road side markets along the Liwonde-Mangochi; tree planting; road safety awareness campaigns; and HIV/ AIDs and STI sensitization; and (ii) In Zambia, the component activities will involve, road safety awareness campaigns; and HIV/ AIDs and STI sensitization Project management (UA million): (i) In Malawi, the component activities will involve, support to Project Coordinator; financial audit; technical audit; and monitoring and evaluation (M&E) services; and (ii) In Zambia, the component activities will involve, support to Project Coordinator; financial audit; technical audit; and monitoring and evaluation (M&E) services. 4

15 2.3 Technical solution retained and other alternatives explored The project will involve rehabilitation of 75 km road between Liwonde and Mangochi in Malawi and establishment of 2 One-Stop-Border-Posts (OSBP) between Malawi and Mozambique and between Malawi and Mozambique. In relation to the OSBPs, there is currently an on-going feasibility which is being supervised by the SADC. The study will recommended the physical design of the OSBPs and operating models which will then be implemented under this proposed project. The study is being funded by a NEPAD-IPPF grant and is being supervised by the SADC secretariat and SARC from the Bank side In relation to the road to be rehabilitated on the Malawi side between Liwonde and Mangochi, the road will follow the existing alignment and hence in terms of horizontal alignment, there are no alternatives to consider. In terms of the pavement structure three alternative structures have been considered, namely: Cape Seal, Double Bituminous Surface (DBST), and Asphalt Concrete (AC) each of 20-year service life. The results of the economic analysis for the three alternatives pavement structures are as follows: Cape Seal, NPV is USD 14.7 million and IRR is 15.7%; (ii) DBST, NPV is USD 14.0 million and IRR is 15.5%); and (iii) AC, NPV is USD 13.7 million and IRR is 8.1% Among the three alternatives, Cape Seal has the highest NPV and IRR, followed by DBST. This was mainly due to the lower cost of Cape Seal compared to the other 2 alternatives. However, the DBST surfacing has been selected even though it has a slightly lower NPV and IRR compared to Cape Seal. This is because the DBST is a superior surface compared to the Cape Seal surfacing and in addition to this, the NPV was positive and the IRR is higher than 12%, the opportunity cost of capital in Malawi. The assumptions in the economic analysis are elaborated under the section on Project Feasibility of this report (Section 3.0). 2.4 Project type The proposed project shall be a standalone operation as at the moment, the Bank considers standalone operations to be ideal for the road sector as they enable close supervision of the projects and fiduciary oversight. There is currently a study going-on which is assessing the suitability of country procurement systems and legal framework in Malawi. It is anticipated that, in future, with the strengthening of the procurement and monitoring country systems SWAPs under basket funding and/ or budget support may be considered in Bank lending operations. 2.5 Project cost and financing arrangements The project costs by component and by category of expenditure are presented below in Tables 3 to 6 for Malawi and Tables 7 to 10 for Zambia. At the time of preparing this report (August 2013), the inflation rate in Malawi was 23.3% and in Zambia was 7%. The project costs have been worked out in US dollars because of the volatility and high inflation rate in Malawi. In both Malawi and Zambia, contingent funds of 15% have been provided to allow for variations in works (7.5%) and price escalation (7.5%). The 7.5% allowed for price escalation is considered conservative because CPI on materials and labour in dollar terms is in the range of 2-3%. 5

16 Malawi The total project cost estimate is UA million net of taxes. The Bank is expected to contribute UA million (95%), and the Government of Malawi will contribute UA million (5%). Bank financing will comprise of an ADF loan in the sum of UA million and an ADF grant of UA million. The financing arrangement is presented in Table 4 below. The grant will be utilised for design review, pre-contract services and supervision of construction works for the OSBPs at Chiponde and Mchinji. The Bank will finance the full cost of all the components except for compensation and resettlement which will be financed by the Government of Malawi. Table 3: Project cost estimates by component [amounts in million UA equivalents] Component For. Currency Loc. Currency Total Cost % Foreign Road rehabilitation Transport and trade facilitation Social inclusiveness activities Project management Base Cost Physical contingency (7.5%) Price contingency (7.5%) Total Cost Table 4: Project cost by category of expenditure [amounts in million UA equivalents] Category of Expenditure For. Currency Loc. Currency Total Cost % Foreign Works Services Goods Base Cost Physical contingency (7.5%) Price contingency (7.5%) Total Cost Table 5: Sources of financing [amounts in million UA equivalents] Instrument For. Currency Loc. Currency Total Costs % Foreign Currency ADF Loan (PBA) ADF Loan(RO) ADF Grant GoM* TOTAL GoM*: Government of Malawi will finance compensation and resettlement Table 6: Expenditure schedule by component (in Million UA equivalent) Component TOTAL Road rehabilitation and road safety improvement Transport and trade facilitation Social inclusiveness activities Project management Total Zambia The total project cost estimate is UA5.500 million net of taxes. The Bank is expected to contribute an UA 5.00 million (91%) and the Government of Zambia will contribute UA 0.5 million (9%). Bank financing will comprise of an ADF loan for the construction and establishment of a OSBP 6

17 at Mwami. The financing arrangement is presented in Table 8 below. The Bank will finance the full cost of all the components except for compensation and resettlement which will be financed by the Government of Zambia. Table 7: Project cost estimates by component [amounts in million UA equivalents] Component For. Currency Loc. Currency Total Cost % Foreign Transport and Trade facilitation Project Management Base Cost Physical Contingency (7.5%) Price Contingency (7.5%) Total Table 8: Project cost by category of expenditure [amounts in million UA equivalents] Category of Expenditure For. Currency Loc. Currency Total Cost % Foreign Works Services Goods Base Cost Physical contingency (7.5%) Price contingency (7.5%) Total Cost Table 9: Sources of financing [amounts in million UA equivalents] Instrument For. Currency Loc. Currency Total Costs % Foreign Currency ADF Loan (PBA) GoZ* TOTAL GoZ*: Government of Zambia will finance compensation and resettlement Table 10: Expenditure schedule by component (in Million UA equivalent) Component Total Transport and Trade Facilitation Project Management Total Project s target area and population Regionally, the project target area is the entire Nacala Road Corridor from Lusaka in Zambia through Malawi and Mozambique to the Nacala Port, and in this respect the target population are the people in the three countries that use the Nacala Road Corridor whose extent is described above. Approximate population of people living along the corridor in Zambia, Malawi and Mozambique is estimated to be over 2 million people In Malawi, where the road is proposed to be rehabilitated between the towns of Liwonde and Mangochi, the target area is Balaka and Mangochi districts, of which according to the Integrated Household Survey (2011), the two districts have a combined population size of approximately 1,126, 000 comprising 70% youth. The proposed road to be rehabilitated in this area is expected to create about 400 temporary direct jobs during the rehabilitation period and 100 permanent jobs after project completion for which labour will be required for maintenance of the road. The project is expected to employ mainly youth with 25% of the jobs reserved for women in accordance with the Roads Authority employment policy in Malawi. 7

18 2.6.3 In addition to the rehabilitation of the Liwonde-Mangochi road in Malawi, the proposed project will provide for construction of 3 road-side markets and spot improvement of about 100 km of selected feeder roads along the same road corridor. The roadside markets will provide business opportunities for women as they make the majority of people selling in markets. Spot improvement of feeder roads will target drainage problem areas along feeder roads to make them accessible all-year round. Socioeconomic benefits of improving the feeder roads will include: creation of about 300 temporary jobs of which 25% will be reserved for women, and will provide communities with improved access to socioeconomic centres. This is expected to contribute to reducing isolation and poverty prevalence. 2.7 Participatory process for project identification, design and implementation The Nacala Road Corridor Development Project has been prioritized by the SADC in consultation with Member States, specifically the governments of Malawi, Mozambique and Zambia. The proposed project is phase 4 of the Nacala Road Corridor Development Project and has benefited from stakeholder consultations made during project preparation and appraisal of Phase I in Malawi and Mozambique, Phase II in Zambia and Phase III in Mozambique Stakeholder consultations in Malawi, where the road will be rehabilitated between Liwonde and Mangochi, took the form of open discussions with the relevant institutions at local and district levels, with representations from village headpersons, NGOs and community based organizations and residents from communities living along the project areas. Consultations with the stakeholders were conducted in all the traditional authorities along the road namely Makwangwala, Nsamala, Amidu, Kalembo, Chimwala and Mponda The community members and traditional leaders unanimously accepted the proposed project as it was observed that it will generate economic opportunities in the area, however they also raised concerns about the project, some of which included: (i) need for clarification on project commencement dates; (ii) compensation payment method; (iii) mitigation measures against the spread of HIV/AIDS and social tensions due to the influx of construction workers from other towns; (v) the need for proper location and rehabilitation of borrow pits and quarries and the need to ensure acceptable disposal of spoil material from the road works. The stakeholders were assured by the Government officials that their concerns and suggestions will be considered in the design and implementation of the project. The ESMP has spelt out mechanisms to address the issues raised during consultations. 2.8 Bank Group experience, lessons reflected in project design Regional Economic Committees (RECs) Secretariats, such as SADC Secretariat, plays a very important function in identifying projects and bringing member Governments together to ensure their commitment. Under this project, the SADC Secretariat s involvement in the feasibility study of the OSBP has helped smooth coordination between Malawi, Mozambique and Zambia In both Malawi and Zambia, the Ministries responsible for Transport are not able to effectively monitor progress of investment projects because of weak M & E systems and as a result projects tend to take long to either commence or to complete. In Malawi, the Bank is financing an M & E capacity building at the Ministry of Transport and Public Works in a separate road infrastructure project, the Mzuzu-Nkhata Bay Road Rehabilitation Project. In Zambia, the Bank is financing M& E capacity building at the RDA through the on-going Phase II of Nacala Road Corridor Development Project 8

19 financed by the ADF. It is hoped that, with working M & E systems, the government will be able to monitor and evaluate investment projects in the sector more proficiently Appointment of a dedicated Project Coordinator from the road agencies contributes positively to project implementation. Under the proposed project, dedicated Project Coordinators within the Roads Authority in Malawi and Road Development Agency in Zambia will be appointed to manage day to day operations of the project From past and on-going projects, it has been observed that, projects delay in becoming effective because of the requirement for Government to compensate persons affected by the project for at least section of the road before a project is declared effective. Based on the above lesson and in order not to delay effectiveness for the proposed project, compensation shall not be made a condition for project effectiveness however it shall be a condition for commencement of works, as this is the only way that the Bank can ensure that persons affected by the project are compensated and/ resettled. 2.9 Key performance indicators A Monitoring and Evaluation (M & E) Consultant shall be hired in Malawi and Zambia to collect baseline data as well as intermediate data before and after completion of the project. The Roads Authority in Malawi and the Road Development Agency in Zambia shall be responsible for data collection and will therefore supervise the M & E consultant. The overarching impact of the project will be to contribute to improving transport and trade competitiveness in the SADC region. The proxy measure for this impact will be increase in traffic volume along the Nacala Road Corridor. The Project M & E consultants will work with the Ministries responsible for Transport and trade in Malawi and Zambia to collect traffic data information at border crossings before and after project completion. In terms of outcomes, there are 3 main outcomes identified under the project, as presented below Improvement of road transport between Liwonde and Mangochi: This outcome will be measured by reduction in transportation costs comprising vehicle operating costs and reduction in travel time. The data for this indicator will be collected through the Roads Authority s routine road condition surveys which include travel time and roughness of the road. After road rehabilitation, transportation costs are expected to reduce by 40% from 0.8 USD / vehicle-km to 0.53 USD / vehiclekm and travel time is expected to reduce by 42% from 2 hours to 1 hour and 10 minutes. Improvement in clearance of traffic at border crossings: This outcome will be measured by the time taken for trucks to cross the border posts between Malawi and Mozambique and between Malawi and Zambia before and after establishment of OSBPs. The M&E consultant shall collect the baseline data, intermediate and target data and report on progress. Improvement in road safety: An independent road safety engineer will be hired to audit the design and recommend road safety features to be incorporated in the construction. The project M & E consultant shall work with the road safety engineer to collect baseline accident data and intermediate and assess the impact of the interventions. 3.1 Economic and financial performance III PROJECT FEASIBILITY Methodology: The economic evaluation of the project is based on benefit-cost analysis by comparing the with and without project scenarios over a period of 20 years, using the Highway Development and Management Model (HDM-4). A discount rate of 12%, cost of capital in Malawi has been used in the analysis. Existing Traffic Volume: The base year average daily traffic (ADT) 9

20 determined in June 2013 is presented in Table 11 below. Based on traffic volume characterization, the project road exhibits 2 distinct sections Liwonde-Mpale Bridge and Mpale Bridge-Mangochi. The vehicle class composition for Mangochi-Mpale Bridge section is: 44% for light passenger vehicles, 24% for freight vehicles, 29% for buses, and 3% for motor cycles; and for Liwonde-Mpale Bridge section, the composition is: 49% for light passenger vehicles, 19% for freight vehicles, 28% for buses and 4% for motor cycles. Table 11: Traffic counts results-liwonde Mangochi road (June 2013) Road Section ADT ADT (Motorized Traffic) (Non-Motorized Traffic) Liwonde-Mpale Bridge Mangochi (33.6 km) Mpale Bridge-Mangochi (41.6 km) 650 2,215 Source: Roads Authority- June 2012 Traffic Counts & ADF Appraisal Mission July Traffic Projection: Growth rates for normal traffic is assumed to be 5% for the period and 4% for the period based on the current and projected trends in Malawi. (ii) Generated traffic is assumed to be 25% of the base year traffic at the opening of the project road. (iii) A discount rate of 12% is assumed, which is the opportunity cost for capital in Malawi. Traffic is expected to be generated from: increase in trips due to improved condition of the road; induced economic activities in the project road area, in mainly, agriculture, fishing and tourism sectors; and increase in traffic on the Mozambican side of the Nacala Road Corridor because of improved road condition from Nacala port to the border with Malawi. The Road from Nampula in Mozambique to Chiponde, the border between Malawi and Mozambique, is currently being upgraded with the support from the AfDB, JICA, and Exim Bank of South Korea. In addition to this, the Nacala port is being expended and port facilities improved by JICA. These improvements will attract traffic to the Nacala Road Corridor Project Benefits and Costs: the benefits includes: (i) expected reductions in vehicle operating costs (VOCs) per vehicle km. This is expected to reduce by 40% from USD0.89 per veh-km on the existing road (2013) to USD0.53 per veh-km in 2017 after the road is rehabilitated. (ii) Savings in average travel time from Liwonde-Mangochi. This is expected to reduce by 42% from the current 2 hours to 1 hour and 10 minutes when the road is open to traffic in Project costs includes: (i) Road investment costs; (ii) Road maintenance costs; and (iii) Road agency costs Economic Evaluation Results: Three road structural design alternatives were considered as presented in Table 8 below, namely: (i) Cape Seal; (ii) Double Bituminous Surface Dressing (DBST); and (iii) Asphalt Concrete (AC). Based on the traffic projections and economic assumptions, the IRR and NPV of the three alternatives were determined as presented in Table 12. Cape-Seal had the highest IRR and NPV. However, option DBST was adopted because of its superior specification compared to Cape seal in terms of pavement performance. It should be noted that, the economic analysis results are conservative because due to unavailability of data, the analysis did not consider exogenous benefits likely to accrue from: (i) increased outputs from agricultural activities, fisheries, and tourism as a result of improved road condition between Liwonde and Mangochi; and (ii) cost savings related to time savings at Chiponde and Mchinji border crossings due to establishment of OSBPs. 10

21 Table 12: Base case economic evaluation results base case - Liwonde-Mangochi road (75 km) Design Options EIRR % NPV Million USD Liwonde-Mpale Bridge (33.6km),Traffic class (T4), ADT (742), NMT ADT (2215) Mpale Bridge - Mangochi (41.6 km), Traffic class (T4), ADT (570), NMT, NMT ADT (829) Design Alternative 1: (2m SBST shoulders, 7m carriageway, recycle existing base to 200mm subbase (including raising the road in some sections), provide 175mm crushed stone base and Cape Seal Surfacing (i.e. 14mm chips covered by slurry seal) Design Alternative 2: 2m wide SBST shoulders, 7m carriageway, recycle existing base to 200mm sub-base (including raising the road in some sections), and provide 175mm crushed stone base and DBST surfacing. Design Alternative 3: 2m wide AC shoulders, 7m carriageway, recycle existing base to 200mm sub-base (including raising the road in some sections), provide 175mm crushed stone base and AC surfacing 11 Total Cost/ Unit Cost(USD) 49,769, (710,993/km) ,750, (725,000/km) ,186, (902,660/km) Source: Roads Authority & ADF Appraisal Mission July US$1= Malawi Kwacha 383 (June 2013) Sensitivity Analysis: Sensitivity analysis was carried out on the selected alternative (DBST surfacing) by considering a worst-case scenario where project costs where increased by 20% and benefits reduced by 20%. The results indicated that, even under the described worst-case scenario, DBST alternative had an IRR of 12.1% and NPV of USD million. Based on the above results, the DBST option was considered to be economically viable. 3.2 Environmental and Social impacts Environment The project road is 75 km which exceeds the Bank threshold for linear projects of 50 km and is expected to affect approximately 1,616 households representing 6,464 persons in Malawi. Because of the above and in accordance with Bank s Environmental and Social Assessment Procedures, the project is classified as Category 1. The Environmental and Social Impact Assessment (ESIA), Resettlement Action Plan (RAP), and the Environmental and Social Management Plan have been prepared and the summaries were posted on the Bank website on 5 th August Major anticipated project negative environmental impacts include: (i) Land-take: The road project will require acquisition of about ha mainly along the road reserve. Households shall be affected in various ways either by losing structures, fences, crops, trees and/or farms; (ii) Quarries and borrow sites will be opened for extraction of road construction materials. Three existing quarries will be used to extract rock aggregates for the production of about 250,000 m3 crushed rock base. Nine existing borrow sites will be used to source for 300,000 m3 gravel required for sub base material. These are likely to impact natural habitats and create breeding sites for mosquitoes if not adequately rehabilitated; (iii) Vegetation loss: There is likely to be vegetation loss due to land clearance for road width expansion, diversions, access roads for material sites and construction camps; and (iv) Impact on Water Resources: the daily construction water demand may adversely impact on water quantity and quality in the project area related to increase of suspended sediment and risk of residual chemical contamination from bridge construction, earthworks and other construction activities Mitigation measures have been provided in the ESMP and these include: (i) A Resettlement Action Plan: No construction shall commence until all project affected persons have

22 been compensated and/ or resettled; (ii) Rehabilitation of borrow-pits and quarries: borrow areas and quarries for construction materials shall be adequately rehabilitated in accordance to the specifications in the ESMP; (iii) Vegetation clearance: Clearing and grabbing of vegetation shall limited to project areas. The Contractor shall seek approval prior to felling trees and where trees are felled, these will be compensated by replanting at appropriate locations or compensation of the owners; (iv) Management of water resources: Alternative water supply sources shall be provided for construction camp sites to avoid interference with local water supplies. The Roads Authority in Malawi shall be responsible for the implementation of the ESMP for the road works and shall be implemented by the contractor under the supervision of the Supervision Engineer. Similarly the Roads Authority in Malawi shall be responsible for implementation of the ESMP for the OSBP in Malawi and the Roads Development Agency in Zambia shall be responsible for implementation of the ESMP for the OSBP in Zambia. In addition, and as per legal requirements, the Environmental Ministries/ Agencies in both Malawi and Zambia shall monitor the implementation of the ESMP and shall issue clearance certificates as necessary. Climate Change In Malawi, where a 75 km road is planned to be constructed between Liwonde and Mangochi, the Roads Authority will work with the communities and the District Forest Officers to identify areas where to plant trees within the hydrological catchment area of the road as part of the forest conservation to create carbon sinks. The proneness of the road to climate change will also be taken care of in the design by: adapting an higher storm return-periods for the purposes of designing drainage structures (i.e 1 in 30 years for pipe culverts, and 1 in 100 years for box culverts and small bridges of > 20m spans); the road will be raised from its current elevation to reduce the likelihood of overtopping and wash-aways; and soil erosion protective measures will be undertaken on the upstream side of the road through provision of catch-water-drains and where necessary planting vegetation. Gender The project will facilitate economic activities in the area and will offer employment benefits for both men and women during construction. It is expected that approximately 400 direct jobs will be created out of which 25% will be allocated to women in accordance with the Roads Authority employment policy. The project design has included construction of roadside markets where over 60% of the traders are women. The project will further enhance knowledge for women in dealing with immigration and custom formalities linked to the operations of OSBP and trade facilitation interventions through training in import and export procedures and business management in general. The HIV/AIDS awareness programs shall give an opportunity to affected communities to getting firsthand information about these diseases and how they can be prevented and/ or managed The project will ensure that the contractor puts in place a gender sensitive management plan which will, among others: address employment opportunities for both women and men, ensure gender awareness, provide a code of conduct for both workers and employers and establish mechanisms for reporting incidents of sexual abuse. Further, to ensure that the work environment is suitable for women, the contractor will be required to provide appropriate facilities at the work sites to include clean toilets, clean water for drinking and bathing, change rooms; and adequate occupational health (protective attire, equipment and safe working conditions). The project will also engage in public awareness campaigns on gender mainstreaming and equality. 12

23 Social The 2011 Integrated Household Survey results put average poverty levels at 44% for Mangochi and Balaka districts in Malawi. Although these rates have improved by an average of 29% from the 2005 levels, the area still suffers from economic hardship which will be alleviated to some extent by the project. The project is expected to create about 400 jobs direct temporary jobs and 100 permanent jobs for road maintenance. Additional indirect jobs will be created through supply contracts and provision of goods and services to the project works and construction workers. In Malawi, the Mangochi area is the main tourist belt of the country and the road will facilitate movement of tourists to the holiday resorts. Similarly, Mangochi and parts of Balaka and Machinga have significant catches of fish from Lakes Malawi and Malombe and the Shire River. A good road infrastructure will facilitate transportation of fish and other fresh products to markets in Zomba and Blantyre. The project has also included spot improvement of 100 km of feeder roads connecting remote areas in at least 3 Traditional Authorities using labour-based methods which will offer employment to local communities, again of which the majority to be employed will be women. Spot improvement of feeder roads will provide improved access of local communities to socio-economic centres On the downside, the project area has a high prevalence rate of HIV/AIDS (10%) hence the influx of construction workers from other parts of the country will exacerbate the spread of the disease. In light of this, the project has included in its design implementation, awareness and prevention campaigns for HIV AIDS/ and STIs. Similarly, the road once completed will potentially result in increased rate of road accidents because of the anticipated high speeds of vehicles due to improved condition of the road. To mitigate this, road safety audit will be conducted under the project which will ensure that road safety features are incorporated in the construction of the road. Involuntary resettlement Rehabilitation of the road in Malawi between Liwonde and Mangochi shall necessitate acquisition of land to obtain the required Right of Way (RoW) which is 30 meters from the centerline either side of the road for a length of 75 km. This will result in disturbing approximately 1,616 households or 6464 persons in form of loss of residential houses and other structures, community assets such as water points, markets, prayer houses, schools, clinics, agricultural land, crops, trees, and in some cases small shops. To reduce the impact of loss of properties by the communities, and in accordance with the Bank Involuntary Policy, a full RAP has been prepared under the project, and an estimated budget of MWK 964,026, (equivalent of USD 2,954,694) for the Liwonde-Mangochi road section has been provided. 4.1 Implementation arrangements Executing agency IV IMPLEMENTATION Responsible agency: The Roads Authority (RA) will be responsible for the implementation of the project in Malawi and the Roads Development Agency (RDA) shall be responsible for the implementation of the project in Zambia. The two road agencies have successfully implemented similar road projects funded by donors and have sufficient experience to execute the proposed project in the 2 countries. The experience gained so far will help the two road agencies to manage the proposed project more efficiently. 13

24 A capacity assessment conducted on the 2 Road Agencies in Malawi and Zambia is rated satisfactory. A cross-border Steering Committee shall be constituted between Malawi and Mozambique to oversee the construction and establishment of the OSBP at Chiponde, similarly a cross-border steering committee shall be constituted between Malawi and Zambia to oversee the construction and establishment of the OSBP at Mchinji/ Mwami Border Project coordination: The RA in Malawi and the RDA in Zambia will each nominate within its organization structure a Project Coordinator (PC) who will among other functions, supervise consultants and contractors, conduct regular inspection of works; submit progress reports to the Bank and ensure that all the covenants in the Loan Agreement are executed. The PC shall collaborate with construction teams and relevant government agencies and Ministries to ensure implementation of the ESMP, and the RAP for the road in Malawi and ARAP for the OSBPs. Financial management Responsible agency: The Roads Fund Administration (RFA) in Malawi and the National Roads Fund Agency (NRFA) in Zambia shall be responsible for financial management of the project in the two respective countries. The two road fund agencies have adequately experienced staff in managing Bank financed operations. In Malawi where a 90% of the resources will be expended, the performance of the RFA under the two ongoing Bank projects, the Malawi Trunk Roads Rehabilitation Project and the Multinational Nacala Road Corridor Development Project Phase II, has been assessed to be satisfactory, with no outstanding audit reports after the submission for the 2012 financial year, which was found acceptable and with no significant management letter issues Disbursement method and financial reporting: Both in Malawi and Zambia, the Bank shall disburse funds to the project through the Direct Payment Method and through a Special Account for capacity building related activities. Project accounting and financial reporting shall be based on International Financial Reporting Standards as guided by the existing financial policies and procedures. The Internal Audit department, which has also been assessed to be effective shall include the operations of the Project within its work plans Financial audits: The National Audit Office (NAO) in Malawi and the Office of the Auditor General (OAG) in Zambia shall be responsible for carrying out the annual external audits; however, the auditing services may be outsourced to independent external Audit firms and provision has been made in the project costing for this purpose. In all cases, the audit will be carried out in accordance with the Bank s approved Terms of Reference. The audit reports along with a management letter shall be submitted to the Bank not later than 6 calendar months after the respective year end. Procurement Procurement arrangements: Procurement of works, goods and services shall be carried out in accordance with the Bank s procurement rules and procedures. The procurement methods to be employed under each of the components are indicated below in Table 13 for Zambia and Table 14 for Malawi. Civil works for road rehabilitation in Malawi shall be implemented in one single contract and the method of procurement shall be International Competitive Bidding (ICB). Contractors shall be prequalified prior to invitation of bids, as the cost of works are expected to be above USD10 million. OSBP at Chiponde and Mchinji in Malawi shall be packaged under one contract as two lots. The OSBP contracts shall be subject to post-review as they are expected to be below USD 10 million. Regional and/ or domestic preference shall be applicable for the works and consultancy services both in Malawi and Zambia. 14

25 Zambia Table 13: Procurement arrangements [amounts in million UA equivalents] Category and Items ICB NCB Shortlist Other Non- Bank Fund 1.0 Civil Works 1.1 Construction of the OSBP at Mwami Subtotal Goods 2.1 Installation of computer hardware and software (OSBP at Mwami) M & E (RDA and MoTWSC) Subtotal Services 3.1 Pre-contract services and supervision of works (OSBP at Mwami) Technical Assistance (Establishment of OSBP) Training of customs and revenue Authority staff Capacity building HIV AIDS/ STI awareness campaigns Financial audit Technical audit M & E capacity building (RDA/ MoTWSC) Subtotal Operating Costs and Miscellaneous 4.1 Compensation and resettlement Support to Project Coordinator Subtotal TOTAL Total Malawi Table 14: Procurement arrangements [amounts in million UA equivalents] Category and Items ICB NCB Shortlist Other Non- Bank Fund 1.0 Civil Works 1.1 Rehabilitation of Liwonde-Mangochi road (75 km) Construction of OSBP at Chiponde (Malawi side) Construction of OSBP at Mchinji (Malawi side) Spot improvement of feeder roads (100 km) Construction of road side markets Subtotal Goods Installation of computer hardware and software (OSBP- Chiponde) Installation of computer hardware and software (OSBP- Mchinji) Tree planting (catchment area conservation) Subtotal Services 3.1 Pre-contract services and supervision (Road works) Design review, pre-contract services and supervision (OSBP) Technical Assistance (OSBP at Chiponde and Mchinji) Capacity building Training of Customs and revenue authority staff HIV/ AIDS/ STI/ Gender awareness campaigns Total

26 3.7 Road safety audit Road safety awareness campaign Financial audit Technical audit M & E services Subtotal Operating Costs and Miscellaneous 4.1 Compensation and resettlement (Liwonde-Mangochi road) Compensation and resettlement (OSBP- Chiponde/Mchinji) Support to project management Subtotal TOTAL Procurement Plan: The Procurement Plan shall cover an initial period of at least 18 months. The government shall update the Procurement Plan on an annual basis or as when needed. Any revisions proposed to the Procurement Plan shall be furnished to the Bank for its prior approval Advance Contracting: The Roads Authority will carry out advance procurement for civil works and consultancy services for design review and pre-contract services for the rehabilitation of the Liwonde-Mangochi Road subject to the following conditions: (i) procurement shall be carried out using the Bank s Rules and Procedures for the Use of Consultants; (ii) advance contracting shall be undertaken at the Government s own risk and shall not commit the Bank in any way to approve the financing of the project; and (iii) announcements, in case of advance procurement shall indicate that Government has applied for financing from the Fund, and that disbursement, in respect of any contracts signed will be subject to approval of the Financing by the Bank. 4.2 Monitoring Regional level: At regional level, the SADC Secretariat monitors and reports on the progress on planned developments along the main regional transport corridors, this includes the Nacala Road Corridor. The Bank is represented at the regional level by staff from the Southern Africa Regional Resource Center (SARC). In addition to the above, a Nacala Road Transport Corridor Steering Committee comprising of senior Government officials from Malawi, Mozambique and Zambia, has been established to ensure improved coordination of projects along the Nacala Transport Corridor National level: In Malawi, the Malawi Growth and Development Strategy (MGDS) has itemized key outcome indicators expected in the medium to long term from all economic sectors including the transport sector. To monitor the MGDS indicators, the Government has set-up a Committee of Principal Secretaries, chaired by the Ministry of Economic Planning and Development (MEPD). The Principal Secretaries report progress on performance indicators from their respective sectors to the MEPD. The MEPD in turn reports the progress to Cabinet, which is chaired by the President. In Zambia, the Ministry of Finance chairs an Inter-Ministerial Committee that monitors the progress of all projects in the Revised Sixth National Development Plan (RSNDP), which includes the transport sector. The Minister of Finance then reports the progress to cabinet which is chaired by the President Sector level: In Malawi, the Government has prepared a Transport Sector Programme (TSIP) which is a culmination of sub-sector programmes (road, rail, water, and air transport). In the road sector, the Roads Authority has prepared a Road sector Programme (RSP) as part of the TSIP. The progress of the overall TSIP, which includes the RSP, is monitored by a Sector Working Group (SWG) 16

27 chaired by the MoTPW and comprising of selected Government Ministries, DPs and the Private Sector. In Zambia, the Government has prepared a Road Sector Framework of 2012 to guide road infrastructure development. The progress of the Road Sector Framework is monitored by a Steering Committee chaired by the Ministry of Transport Works Supply and Communications comprising members from various selected Government Ministries and Agencies. The Steering Committee reports to a Committee of Ministers on Road Management Initiative (RMI) comprising the Ministry of Finance, the Ministry of Transport Works Supply and Communications, and the Minister of Local Government and Housing, Ministry of Agriculture and Cooperatives, Ministry of Energy and Water Development, and Ministry of Justice Project level: The M & E Consultant shall be hired by the Roads Authority in Malawi, and will be responsible for collecting data and reporting on the road project in Malawi as well the OSBPs between Malawi and Mozambique and between Malawi and Zambia. The Bank Task Team will conduct supervision mission twice a year to monitor: (i) compliance with the loan covenants; (ii) compliance with the Bank s procurement and financial management rules and procedures; (iii) compliance with work plans; and (iv) project performance indicators. The Malawi Field Office (MWFO) and the Zambia Field Office (ZMFO) shall also monitor the project in the respective countries on a regular basis to ensure smooth progression. 4.3 Governance The Bank s Procurement Rules and Procedures shall be used for all procurement processes on the project. The Road Agencies in Malawi and Zambia shall include, on their Tender Evaluation Committees, officials from the Malawi National Procurement Board and from the Zambia Procurement Agency and other government Ministries to improve transparency in the awarding of the contracts; all procurement activities shall be subject to prior review by the Bank; and finally but not least, the project will be audited once per year by independent auditors in both Zambia and Malawi. 4.4 Sustainability Institutional: In both Malawi and Zambia, the governments have set-up sustainable legal and institutional frameworks which ensure consistency in the management and financing of the public road networks. In Malawi, a Roads Authority (RA) has been established and in Zambia, a Road Development Agency (RDA) has been formed. The two road agencies are charged with the responsibility to manage the public road networks. In addition to the above, in Malawi a Roads Fund Administration has been established and in Zambia a National Road Fund Agency (NRFA) has been established. These two agencies are charged with the responsibility to mobilise and manage resources for the road sector and to perform fiduciary functions. The above arrangements ensure sustainability in the management and financing of the public road networks in the two respective countries Financial: The three main sources of funds to the road sector in both Malawi and Zambia are: (i) the Road Fund (average 24%). This is mainly from the fuel levy and is used for routine maintenance; (ii) Government development budget (average 32%). This is used for upgrades and periodic maintenance; and (iii) Loans and grants from development partners (average 44%). In both countries, the Governments are: (i) expanding Roads Funds to include other road user fees, such international transit fees, and motor vehicle licensing; and (ii) increasing development budget allocations; and (iii) leveraging additional financing from the development partners. In addition, to sustain the road network in good and fair condition, governments are prioritizing maintenance as 17

28 opposed to upgrading and construction of new roads. In Zambia an SI has recently been passed in August 2013, to introduce toll gates on some selected busy roads as a way of raising funds for financing road maintenance Construction industry capacity: Both Malawi and Zambia have a low supply of contractors to carry out large scale road construction and periodic maintenance works. This means that most of the contractors have to be contracted from outside the country. The two governments have put in place policies to promote growth of the SMEs in the construction industry through training organised by the National Construction Industry Council (NCIC) in Malawi and National Construction Council (NCC) in Zambia, and by promoting subcontracting of works to local contractors by main contractors who are mostly from abroad. In relation to consulting firms, both Malawian and Zambian firms usually team up with foreign consultants. This arrangement is working well in terms of technology transfer, and is likely to help develop a good cadre of local consultants in the medium to long term in the two countries Axe load control: In both countries, Malawi and Zambia, the governments have embarked-on installing permanent axle load weighbridges at strategic locations throughout in their respective counties to stop overloading on the roads. While the axle load programmes in both countries is a long way to complete, this is being supplemented by mobile axle load weigh bridges. It is hoped that, axle load control will help to prevent early deterioration of the road due to overloading. 4.5 Risk management Failure to operationalize the OSBPs: Experience elsewhere has shown that countries are sometimes not at the same level in terms of preparedness and capacity to operate OSBPs. In such a situation, OSBPs have failed to operate as desired. Under this project, a firm with technical advisory experience in setting up border posts will be hired to work with the Governments of Malawi, Mozambique and Zambia to set-up and operationalize the OSBPs. The technical advisory services will also provide knowledge transfer in terms of skills to ensure sustainability of the OSBPs operations in both countries. The projects also provides for training of freight forwarders, women and cross-border traders, and Customs and Revenue Authority personnel in both Malawi and Zambia Failure by the Government of Malawi to maintain the road after rehabilitation: Changing economic policy may lead to a shift of resources from the road sector to other competing sectors which may in turn lead to inadequate resources for road maintenance. The Bank with other donors will closely monitor economic policies and continuously dialogue with Government to ensure that fiscal policies do not impact negatively on road sector financing Implementation delays: Implementation delays usually result in price escalation and time related costs, both of which result in cost overruns. Past and on-going Bank financed projects in the road sector have experienced implementation delays mainly on account of delays in procurement of services and works; and construction delays due to poor design which often results in the contractor waiting for the design or redoing the works. To reduce on procurement lead time, particularly on the Malawian side where a road will be rehabilitated, the Bank will encourage the government to carryout advance procurement and to reduce construction delays, the Bank will insist on having a road design which is as complete as possible prior to preparation of bidding documents. 18

29 4.6 Knowledge building The involvement of the Bank in both the feasibility study and implementation of OSBPs will provide important lessons which will be handy in improving design and implementation of future OSBP in other Regional Member States (RMS). Secondly socio-inclusiveness activities under the project will provide important lessons which will be used to improve project design of social inclusiveness elements in future Bank financed projects. 5.1 Legal Instrument V- LEGAL INSTRUMENTS AND AUTHORITY The legal instrument for the project is an ADF Loan and ADF grant which will be given to the Republic of Malawi and ADF grant which will be given to the Republic of Zambia. 5.2 Conditions associated with Bank s intervention Conditions Precedent to Entry into Force: The entry into force of the Loan Agreement shall be subject to the fulfilment by the Government of Malawi and the Government of Zambia of the provisions of Section of the General Conditions Applicable to the African Development Fund Loan and Grant Agreements Condition Precedent to First Disbursement: (i) Governments of Zambia and Malawi to submit evidence to the Fund of the opening of a United States Dollar denominated special account (the special account ) in a bank acceptable to the fund; and (ii) Government of Malawi to submit a works and compensation schedule detailing (A) each section of the Liwonde-Mangochi road under the Project, and (B) the timeframe for compensation and resettlement of all Project Affected Persons in respect of each such road section Other Conditions: (i) the Governments of Malawi and Zambia shall, within three (3) months of the signing date of the Loan/ Grant Agreement, provide evidence in form and substance satisfactory to the Fund of the appointment of Project Coordinators, with qualifications, experience and terms of reference acceptable to the Fund; (ii) On or prior to 30 June 2014, the Governments of Malawi and Zambia shall provide evidence, satisfactory in form and substance to the Fund, of establishment of: (A) a crossborder Steering Committee with terms of reference and composition acceptable to the Fund for the Chiponde OSBP (Malawi/ Mozambique border); and (B) a cross-border Steering Committee with terms of reference and composition acceptable to the Fund for the Mchinji/ Mwami OSBP (Malawi/ Zambia border); (iii) On or prior to 30 June 2014, the Governments of Malawi and Zambia shall submit, in form and substance satisfactory to the Fund, an Environmental and Social Management Plan (ESMP) relating to: (A) the construction of the OSBP at Chiponde for the establishment of a OSBP at Mchinji/ Mwami border (Malawi/ Zambia border); and (B) Government of Malawi Zambia shall submit, in form and substance satisfactory to the Fund, an Environmental and Social Management Plan (ESMP) for the establishment of a OSBP at Chiponde (Malawi/ Mozambique); (iv) On or prior to 30 June 2014, the Governments of Malawi and Zambia shall submit, in form and substance to the Fund an abbreviated Resettlement Action Plan (ARAP) or a Resettlement Action Plan (RAP), as the case may be, relating to: (A) construction of a OSBP at Mchinji/ Mwami border: and (B) construction of a OSBP at Chiponde; and (v) Prior to commencement of civil works, the Governments of Malawi and Zambia shall submit to the Fund evidence, in form and substance satisfactory to the Fund, of having compensated all Project Affected Persons. 19

30 5.2.4 Undertaking: (i) The Borrower shall submit quarterly reports in a format acceptable to the Fund indicating the implementation status of: (A) physical and financial progress of the works and other project activities; (B) each RAP / ARAP as applicable; (ii) The Governments of Malawi shall implement the Project in accordance with (A) national legislation, (B) provisions and conditions of any environmental licenses issued in relation to the Project, (C) recommendations and procedures described in the ESMP, and (D) this agreement; (iii) the Governments of Malawi and Zambia shall maintain proper records of account, pursuant to Section 9.09 of the General Conditions, and submit, no later than six (6) months after the end of each Project financial year, (A) an audit report, carried out in accordance with Terms of Reference (TOR) approved by the Fund and (B) the corresponding Management Letter including, inter alia, responses on areas of the Project s financial management systems that require special attention or improvement. 5.3 Compliance with Bank Policies This project complies with all applicable Bank policies. VI RECOMMENDATION Management recommends that the Board of Directors approve the proposed loan of UA and a grant of UA0.610 million to the Government of Malawi and a proposed loan of UA5.00 million to the Government of Zambia to finance the Multinational Nacala Road Corridor Development Project Phase IV. 20

31 % Appendix IA- Malawi s comparative socio-economic indicators Indicators Unit (e) NDNational Accounts GNI at Current Prices Million US $ 1,797 3,035 3,397 3,921 4,477 4, GNI per Capita US$ GDP at Current Prices Million US $ 1,744 3,117 3,648 4,088 4,728 5,132 5,890 GDP at 2000 Constant prices Million US $ 1,744 2,093 2,208 2,398 2,580 2,753 2,913 Real GDP Growth Rate % Real per Capita GDP Growth Rate % Gross Domestic Investment % GDP Public Investment % GDP Private Investment % GDP Gross National Savings % GDP Prices and Money Inflation (CPI) % Exchange Rate (Annual Average) local currency/us$ Monetary Growth (M2) % Money and Quasi Money as % of GDP % Government Finance Total Revenue and Grants % GDP Total Expenditure and Net Lending % GDP Overall Deficit (-) / Surplus (+) % GDP External Sector Exports Volume Growth (Goods) % Imports Volume Growth (Goods) % Terms of Trade Growth % Current Account Balance Million US $ ,069 Current Account Balance % GDP External Reserves months of imports Debt and Financial Flows Debt Service % exports External Debt % GDP Net Total Financial Flows Million US $ Net Official Development Assistance Million US $ , Net Foreign Direct Investment Million US $ Real GDP Growth Rate, Inflation (CPI), Current Account Balance as % of GDP, i

32 Appendix IB- Zambia comparative socio-economic indicators National Accounts GNI per capita, Atlas method (current USD) ,060 1,080 1,180 1,350 GDP (current USD, millions) 5,439 7,179 10,702 11,541 14,641 12,805 16,190 19,204 20,678 GDP (constant 2005 USD, millions) 6,815 7,179 7,627 8,097 8,587 9,106 9,800 10,470 11,236 Real GDP grow th rate (annual %) GDP per Capita Grow th Rate (annual %) Gross capital formation (% of GDP) Gross Domestic Sav ings (% of GDP) General gov ernment final consumption ex penditure (% of GDP) Household final consumption ex penditure (% of GDP) Price and Money Inflation (CPI, annual %) Real Effectiv e Ex change Rate Index (2005 = 100) Money and quasi money (M2) as % of GDP Money and quasi money grow th (annual %) Sector Value Added Agriculture, v alue added (% of GDP) Industry, v alue added (% of GDP) Manufacturing, v alue added (% of GDP) Serv ices, v alue added (% of GDP) Electric pow er consumption (kwh per capita) Government Finance Central gov ernment, total rev enue and grants (% of GDP) Central gov ernment, total ex penditure and net lending (% of GDP) Central gov ernment, Fiscal Balance (% of GDP) External Sector Ex ports of goods and serv ices (% of GDP) Imports of goods and serv ices (% of GDP) Terms of Trade Grow th (2000 = 100) Current Account Balance (USD, millions) , , Current Account Balance (% of GDP) Gross international reserv es in months of imports Gross international reserv es (current USD, millions) ,090 1,096 1,892 2,094 2,324 3,042 Debt and Financial Flows Debt Serv ice (% of ex ports) Ex ternal Debt Stocks (% of GNI) Net Total Financial Flow s (USD, millions) 1,897 2, , Net ODA receiv ed (% of GDP) Net Foreign Direct Inv estment (USD, millions) 616 1, Source: World Dev elopment Indicators, African Economic Outlook, Zambia Central Stastics Office ii

33 Appendix IIA ADB s portfolio in Malawi (February 2013) AGRICULTURE SECTOR Sectors/Operations 1 Smallholder Crop Production & Marketing Approval Date Closing Date Funding Type Approved Amount (UA m) Disbursement (UA m) Disbursement Rate ADF 26/07/06 30/06/14 Grant % Agriculture Infrastructure Support ADF 09/09/09 30/06/15 Loan % 3.2 SOCIAL SECTOR 3 Support to the Health Sector Programme ADF 24/11/05 31/12/12 Grant % Support to Secondary Education V ADF 07/06/06 31/12/12 Grant % Support to Higher Education Science & Technology (HEST) * ** ADF 08/02/12 31/12/17 Loan % 0.7 ADF Grant % NTF Loan % 6 Support to Local Economic Development ADF 24/09/08 31/12/14 Loan % 4.1 Supplementary Loan Local Economic Development ADF 09/12/10 31/12/14 Loan % Competitiveness and Job Creation Project in Private Sector ADF 16/12/11 31/12/17 Loan % 0.9 WATER & SANITATION SECTOR 8 National Water Development Program ADF 02/07/08 31/12/13 Loan % 4.3 ADF Grant % RWSS Trust Fund Grant % TRANSPORT SECTOR 9 Trunk Road Rehabilitation Blantyre-Zomba (Loan) 22/05/09 31/12/14 Loan % 3.5 Ntcheu-Tsangano-Mwanza Feasibility Study 31/12/13 Grant % 10 Multinational: Nacala Road Corridor ADF 24/06/09 31/12/13 Loan % 3.4 MULTI SECTOR 11 Restoration of Fiscal Stability and Social Protection ** ADF 11/07/12 31/10/13 Grant % 0.3 TOTAL % 3.6 Total Loan % Total Grant % Projects under Bank Group Initiatives*** 1 Climate Adaptation for Rural Livelihoods and Agr Project ** Global Environment Facility 10/11/11 30/06/15 Grant % Access to Water & Sanitation for Urban Poor 28/12/09 30/09/14 AWF % Strengthening Water Sector M&E in Malawi 28/01/10 31/12/13 AWF % Songwe River Basin Development Study 25/05/10 31/05/14 AWF % Shire Zambezi Water Development Feasibility Study 31/05/11 30/09/14 AWF % 1.4 NEPAD-IPPF % Enhancing Good Governance in District Public Service 6 Delivery (Governance Trust Fund) 17/04/11 15/12/12 Grant % 1.5 TOTAL % * The disbursement for HEST Project took place on 2nd November 201** 1st Supervision mission planned in the 4th Quarter of *** These initiatives include trust funds from African Water Facility, Governance, and NEPAD-IPPF. Highly Satisfactory Satisfactory Unsatisfactory Not yet rated (1st Supervision Mission is planned in the 4th Quarter of 2012) Age Implementation Progress (IP) Development Objectives (DO) iii

34 Appendix IIB ADB s portfolio in Zambia (September 2013) No Long name Status Approval Date 1 COMMUNITY WATER MANAGEMENT IMPROVEMENT 2 LIVESTOCK INFRASTRUCTURE SUPPORT PROJECT 3 PROJECT PREPARATION FACILITY - ZM LISP 4 PROG. D'AMENAG. LAC TANGANYIKA(ZAMBIA) Signature Date Effective Date Closing Date Crcy ADB ADF NTF OTEHRS TOTAL COST Disb Ratio (%) Amt Disb IP DO Age PFI STATUS OnGo 12-Nov Apr Apr Dec-13 UAC , , , NON PP / NON PPP APVD 19-Jun Oct-18 UAC - 12,000,000-1,710,000 13,710, NO SUPERVISION APVD 29-Mar-13 7-Jun Jul-14 UAC - 300, , NO SUPERVISION OnGo 17-Nov May Sep Mar-14 UAC - 3,260, ,000 3,829, ,463, NON PP / PPP - 15,560,000-2,938,218 18,498, % 1,991, INVESTRUST ZAMBIA OnGo 24-Sep Sep-09 4-Mar-10 1-Oct-13 UAC 2,161, ,383 2,315, ,315, NOT RATED 6 FAPA TA GRANT FOR ZAMBIAN OnGo 10-Nov Apr-10 5-Oct Dec-13 UAC , , , NOT RATED SMES 7 PFSL- FAPA TA - ZAMBIA OnGo 13-Jul Jul-09 4-Sep Dec-14 UAC , , , NO SUPERVISION 2,161, ,468,054 3,629, % 3,147, ITEZHI-TEZHI POWER APVD 13-Jun Dec Dec-18 UAC - 30,000,000 6,400,000-36,400, NO SUPERVISION TRANSMISSION PROJECT 9 ITEZHI-TEZHI POWER PROJECT APVD 13-Jun Dec Dec-18 UAC 35,000, ,719, ,719, NO SUPERVISION 10 ITEZHI-TEZHI POWER STAND BY PROJECT APVD 13-Jun Dec-18 UAC 1,875, ,875, NO SUPERVISION 36,875,270 30,000,000 6,400, ,719, ,994,270 0% NO SUPERVISION 11 BOTSWANA/ZAMBIA-KAZUNGULA OnGo 7-Dec Feb-12 3-Sep Dec-19 UAC - 51,000, ,060, ,060, NOT RATED / BRIDGE PROJECT 12 NACALA CORRIDOR PROJECT OnGo 27-Sep Jan Jun Mar-15 UAC - 69,369, ,000 69,471, ,064, NON PP / NON PPP PHASE II(ZAMBIA) - 120,369, ,162, ,531, % 5,064, MULTIPURPOSE SMALL DAMS OnGo 4-Sep May Aug Jan-16 UAC , , NO SUPERVISION 14 NKANA WATER SUPPLY AND OnGo 27-Nov Dec Jun Dec-14 UAC - 35,000, ,000, ,520, NON PP / NON PPP SANITATION PROJ. 15 RURAL WATER SUPPLY & OnGo 31-Oct May Nov Dec-13 UAC - 15,000,000-62,400,000 77,400, ,845, NON PP / PPP SANITATION PROGRAM - 50,000,000-63,215, ,215, % 50,365, ,036, ,929,000 6,400, ,503, ,868, % 60,569, iv

35 Appendix III A Key related projects financed by the Bank and other development partners in Malawi (September 2013) No. 1 Project Malawi Trunk Roads Rehabilitation: Blantyre-Zomba Road Rehabilitation Project Multinational: Nacala Road Corridor Rehabilitation 2 Project Lilongwe West Bypass Road Construction Project 3 The Project on the Rehabilitation of Ntcheu-Mwanza- Neno-Tsangano Road 4 5 Feasibility study of One-stop-Border-Posts (OSBP) between Malawi/Zambia and Malawi/ Mozambique Shire Zambezi Waterways Development Financing Organization AfDB (ADF Loan) AfDB (ADF Loan) AfDB (Grant) AfDB NEPAD- IPPF Grant AFDB (African Water Facility/ NEPAD- IPPF) Amount Million USD$ Status 6 Project for Replacement South Rukuru Bridge north JICA 8.80 On-going. of Malawi on the Muzu -Karonga Road 7 The Project for Improvement of Blantyre City Roads (Phase II) JICA 9.30 On-going 8 The Project for Replacement of Air Navigation System at Kamuzu International Airport JICA 7.90 On-going 9 The Study on Urban Development Master Plan for Lilongwe JICA - On-going 10 The Project for the Study on Development of the Sena Corridor JICA - On-going 12 The Project for the improvement of Major Roads in the City of Lilongwe JICA - On-going 13 Sena Corridor Development Study 14 JICA - Road Transport sector policy support programme EU Rural Infrastructure Development Programme Rehabilitation of roads and bridges EU Rural Feeder Roads Programme: Upgrading of Mchinji-Kawere feeder road and spot improvement of EU numerous other feeder roads in all three regions of the Budget Support country 17 Rural Roads Project (Additional Financing) WB/ DFID Transaction advise for Malawi Rail Concession Renegotiation 19 Road Safety Audit 20 Southern Africa Trade and Transport Facilitation Project. Expected to include the Karonga-Songwe reahbilitation, safety improvement on the M1, trade facilitation and HIV/AIDS activities 21 Feasibility studies for the Mwanza and Dedza border posts On-going. Expected to complete by December 2014 On-going. Expected to complete by December 2013 On-going. Expected to complete by March 2013 On-going. Expected to complete by June 2013 On-going. Expected to be completed by June 2013 Completed EU/WB 0.15 On-going WB (GRSF Grant) WB Subject to regional financing On-going. Expected to complete by Dec 2015 On-going. Expected to complete by Dec Feeder road at different levels of completion WB component in progress. DFID financing under preparation 0.35 Under preparation Under preparation Design to be finalized through COMESA. Procurement to start. WB Under Preparation v

36 Appendix III B Key related projects financed by the Bank and other development partners in Zambia No. Project Financing Organization Contract Amount Million USD$ 1 Nacala Corridor Road Project Phase II AfDB Nyimba-Sinda 114km (ADF Loan) Rehabilitation of the Great East Road (T4) Lot EDF (grant), EIB, 1: Luangwa Bridge Nyimb AFD (loan) Rehabilitation of the Great East Road (T4) Lot EDF (grant), EIB, 2: Sinda - Katete - Mutenguleni AFD (loan) Rehabilitation of the Great East Road (T4) Lot EDF (grant), EIB, 3: Mutenguleni Chipata - Mwami Border AFD (loan) Construction of the Sioma/ Zambezi Bridge at Maziba Bay in Senanga/Shangombo District DBSA 14.8 of Western Province 6 Contract No. RDA/CE/002/012: Rehabilitation of T2: Lusaka-Chirundu Road- WB 39.8 Links 1 & 2 Km to Km Rehabilitation of T2: Lusaka-Chirundu Road- Link 3 Km to Km WB Construction of a Bridge at Chiawa across the Kafue River WB Implementation of the RAP for Mufuchani Bridge WB 3.15 Ongoing Status On-going. Expected to complete by June 2015 On-going. Expected to complete by Sept 2015 On-going. Expected to complete by Sept 2015 On-going. Expected to complete by Sept 2015 On-going. Expected to complete by Feb 2015 On-going. Expected to complete by Feb 2015 On-going. Expected to complete by end 2013 On-going. Expected to complete by Jun Construction of Weighbridges in Eastern Province and Copperbelt Provinces 11 Construction of Construction Materials Testing Centre at the School of Engineering of the University of Zambia (UNZA) amended to Laboratory Improvement and Equipment for the Engineering School of UNZA 12 OPRC Package 1 Choma 13 OPRC Package 4 Chipata & Katete 14 Contract No. TB/SP/023/09-204: Engineering Design and Construction of the Mongu- Kalabo Road 15 The Engineering Design, Rehabilitation and Construction/upgrading of selected Lusaka Urban Roads (Approximately 360 Km) in Lusaka City, Lusaka Province 16 Construction Works on Approximately km of Mbala-Nakonde Road in Northern Province 17 Design and Construction of Mansa to Luwingu (M3) Road (175Km) in the Luapula and Northern Provinces and 30Km of Township Roads in Mansa and Luwingu WB Tender Process on going WB 1.2 Tender Process on-going WB 10.5 WB 7.3 Exim Bank China (loan) Exim Bank China (loan) Exim Bank China (loan) Exim Bank China (loan) Ongoing. To end Feb 204 Ongoing. To end Feb 204 Ongoing. Expected to complete by Mar 2016 Ongoing. Expected to complete by Jan 2016 Ongoing. Expected to complete by Jan 2016 Ongoing. Expected to complete by May 2016 vi

37 Appendix IV Location map: Liwonde-Mangochi Road (75 km) in Malawi and Nacala Road Corridor from Nacala in Mozambique to Lusaka in Zambia Chiponde Ntcheu Nsipe Liwonde Project Road Nacala Transport Corridor Source: TLC Logistics Consulting (RSA) Source: Google maps ( Please note that, the start and end of the road is only approximate. The map is only for the purposes of showing the location of the project road (total distance 175 km). vii