Report No. 952-LSO

Appraisal of aSecond Highway ProjectLesothoFebruary 17, 1976 SE 4

Regional Projects Department 0Eastern Africa Regional Office

FOR OFFICIAL USE ONLY

tnternato-nal Bank for Reconstruction and DeveloprnentInternational Devenopment Association

This document has a restrtcted distribution and may be used by recipients

onEy tu tl nierforrmance of their official duties. Ils contents may not

otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Except as otherwise stated, all figures are quoted in U.S. Dollars (US$)

Currency Unit = Rand (R)US$1.16 = R 1US$1.00 = R 0.86

WEIGHTS AND MEASURES

1 meter (m) = 3.28 feet (ft)1 kilometer (km) = 0.62 miles (mi)1 hectare (ha) = 2.47 acres (ac)1 liter (1) = 0.22 Imperial gallon (Img)

0.26 US gallons (gal)1 kilogram (kg) = 2.2 pounds (lbs)1 metric ton (m ton) = 2,204 pounds (lbs)1 sq km (km2) = 0.386 square miles

GLOSSARY OF ABBREVIATIONS

ADT - Average Daily TrafficBADEA Arab Bank for Economic Development in AfricaCIDA - Canadian International Development AgencyCMW & PP - Central Mechanical Workshop and 'Plant PoolCRDO - Community and Rural Development OfficeFAO - Food and Agriculture OrganizationGDP - Gross Domestic. ProductGNP - Gross National ProductLCU - Labor-Intensive Construction UnitLTI - Lerotholi Technical InstituteMW - Ministry of WorksODM - Overseas Development Ministry (U.K.)RB - Roads BranchRSA - Republic of South AfricaSIDA - Swedish International Development AuthorityUNDP - United Nations Development Programmevpd - vehicles per day

KINGDOM OF LESOTHOFISCAL YEAR

April 1 - March 31

FOR OFFICIAL USE ONLY

LESOTHO

APPRAISAL OF A SECOND HIGHWAY PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ........................... i

1. INTRODUCTION ..

2. THE TRANSPORT SECTOR .......................... 2

A. Effects of Geographic and Economic Settingon Transport .............................. 2

B. The Transport System . ....................... 2- Roads and Road Transpor.. 3- Air Transport . . 3- Railways. 3- Inland Waterways . . 4

C. Transport Policy and Coordination . . 4D. Previous Projects in the Transport Sector 4

3. THE HIGHWAY SUBSECTOR .. 4

A. The Network. 4B. Traffic Growth and Characteristics 5C. Administration. 6D. Planning. 7E. Financing. 7F. Engineering. 8G. Construction ......... ....................... 8H. Maintenance. 9I. Training .10

4. LABOR-INTENSIVE CONSTRUCTION .11

5. THE PROJECT ............... 12

A. The Road Component ., 12- Objectives ............ 12- Description ........ .................... 12- Cost Estimates ....... .................. 13- Financing . ................................ 15- Implementation ....... .................. 16- Disbursements ............ 16

This report was prepared by Gabriel I. Oluonye and Brendan P.' Kennedy (Engineers)and Philip W. Blackshaw (Transport Economist) and edited by Marie Garcia-Zamor.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its coatents may not otherwise be disclo6ed without World Bank authorization.

TABLE OF CONTENTS (Continued)

Page No.

B. The Labor-Intensive Component .... ........... 16- Objectives . .16- Description . .16- Cost Estimates ................... 17- Financing . .19- Implementation . .19- Disbursements .19

C. The Total Project ............. . ........... 20- Financing ................ ............ 20- Disbursements .......................... 21

6. ECONOMIC EVALUATION ........................ .. 21

A. The Road Component .............. .............. 21- Main Benefits and Beneficiaries 21- St. Michaels-Mantsonyane .22- M.antsonyane-Thaba Tseka .22- Maintenance Facilities .23- Technical Assistance .23

B. The Labor-Intensive Component .... ........... 23

7. AGREEMENTS REACHED AND RECOMMENDATION ............ 23

TABLES

1. Road Network, 19742. Design Standards3. Vehicles on Register, 1970-734. Roads Branch Expenditures, 1970/71-74/755. Estimated Government Revenues from Road Users, 1971/72-74/756. Vehicle Operating Costs by Type of Road7. Estimated Schedule of Disbursements8. Proposed Staffing of Labor-Intensive ConstructiLon Unit9. Economic Evaluation: St. Michaels-Mantsonyane Road Construction10. Economic Evaluation: Mantsonyane-Thaba Tseka Road Construction

ANNEX

Project Progress Reporting Requirements

CHARTS:

1. Organization of Ministry of Works and Communications (WB-15004)2. Implementation Schedule (WB-15700)

MAP:

Lesotho - Second Highway Project (IBRD-11695)

LESOTRO

APPRAISAL OF A SECOND HIGHWAY PROJECT

SUMMARY AND CONCLUSIONS

i. This project's two major components, a highway component and anexperimental labor-intensive component, differ substantively in origin andjustification and are discussed separately.

li. Lesotho's rugged topography and sparse road network make internalcommunications very difficult and exclude large areas from the country'snational life. The existing road system predominantly serves the westernlowlands, where a high proportion of the nation's population and productionare concentrated. The only previous Bank Group credit in the transport sectorcontributed to the construction or reconstruction of 140 km of this lowlandroad network.

iii. As reflected in the Second Development Plan (1976-80), Government'sstrategy has shifted emphasis from lowlands development to opening up thecountry. The road construction component of this project was identified asa priority project in the recently completed British Government-financedLesotho Transportation Study. It is essential to a general program of de-veloping the mountain areas, beginning with a recently initiated MountainArea Development Project prepared under the FAO/IBRD Cooperative Program.

iv. In addition to improvement, reconstruction and construction super-vision of the 147 km St. Michaels-Thaba Tseka road, the road-related componentof the project also includes provision of maintenance facilities along theproject road and technical assistance to strengthen the Ministry of Works(MW).

v. The total cost of these elements is estimated at US$6.9 million(US$7.3 million including taxes), with a foreign component of US$5.45 million,about 79% of net of tax cost.

vi. MW will be responsible for executing this component. The road willbe improved/reconstructed under a unit-price contract which will be awardedon the basis of international competitive bidding in accordance with Bank/IDAGuidelines. Road construction, which is expected to start towards the endof 1976 and be completed by the end of 1978, will be supervised by consultantswhose employment under terms and conditions satisfactory to the Associationand the British government is a condition of credit effectiveness.

vii. The main benefits from improving the St. Michaels-Mantsonyane sectionwill be significant savings in vehicle operating costs; the estimated economicreturn is 13%. The other section, Mantsonyane-Thaba Tseka, is developmentaland has negligible traffic at present; it must be viewed as part of the MountainArea Development package, the overall rate of return on which is about 11%.Some important unquantified benefits are better integration of the remoteThaba Tseka region and mountain areas to the east in national political, socialand economic development. The maintenance and technical assistance elements

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should produce improved Roads Branch operations and an increase in trainedmanpower.

viii. The other major project component is a provision for implementingthe recommendation of the 1974 UNDP/IBRD Migrant Workers Re-employment Missionthat Government's labor-intensive construction capabilities be developed.The spectre of Lesotho's migrant workers coming home en masse from theRepublic of South Africa (RSA) in the wake of possible labor disorders hasprompted interest in a contingency employment plan. The project will estcblish,and operate for 3 years, an experimental Labor-Intensive Construction Unit(LCU) and will strengthen the employment service functions of the Labor Com-missioner's Office.

ix. Estimated cost of this componient is US$1.7 million (with a US$1.1million foreign element). There are no taxes.

x. The MW will be responsible for execution of this component, assistedby consultants employed under terms and conditions satisfactory to the Asso-ciation to manage the LCU.

xi. The main benefits from the LCU will be an increased ability to copewith any recurrence of the recent unemployment emergency and an indicationof the merits of using labor-intensive methods as a long-term employmentgenerating strategy.

xii. The combined cost of the road and labor-intensive components isUS$8.6 million (US$9.0 million, including taxes), with a foreign componentof US$6.5 million, about 76%. The project will be financed by an IDA creditof US$5.5 million, a British Government grant of US$1.5 million and a LesothoGovernment contribution of US$1.6 million net of taxes (about 19%). If theLesotho Government successfully concludes negotiations with SIDA and UNDP forUS$0.5 million and US$0.2 million respectively, its contribution would be re-duced to US$0.9 million, or 10% of the total cost.

xiii. During negotiations, assurances were obtained that Governmentwill provide required funds for local project costs and adequate road mainte-nance; review Central Mechanical Workshop and Plant Pool procedures andsubmit a plan for improvement to be discussed with the Association; appoint alocal counterpart to the expatriate economist employed by the MW PlanningUnit; and employ consultants under terms and conditions satisfactory to theAssociation.

xiv. The project is suitable for an IDA credit of US$5.5 million to theKingdom of Lesotho on the usual terms, to cover about 64% of total projectcosts excluding taxes.

xv. If the Lesotho Government successfully concludes negotiations withthe Arab Bank for Economic Development in Africa for US$2.5 million, a cor-responding amount of the proposed IDA credit will be cancelled.

T _r.S,{2TH'(I

APPRAISAL UF SECOiN_L HIGHWAY PROJECT

1 . iT U'RODUCTIO Y

1.01 The Government of Lesotho has requested IDA assistance in financinga highway project. A project suitable ;r Bank Group participation includesthe construction of a 147 km road to connect Thaba Tseka in the central miountainregion with the capital, Maseru. This road was identified as a priority pro-ject in the recently completed Lesotho Transportatioa Study (para. 3.04). Itis essential to the Governiment s recent strategy of developing the mountainregions, commencing with a recently begurk fLirst phase Mountain Area DevelopmentProject prepared under the FANUIBRD Cooperative Program (para. 6.03).

1.02 In addition, Covernment and IDA agreed that the project shouldinclude consul-ting services to finalize construction documents and superviseroad construction, provision of maintenance facilities for the road andtechnical asssistance to the MW.

1.03 PrGvision has also been made to implement the recommendation ofthe UNDP/IBRD Migrant Workers Re-employment Mission that Government developits capabilities fo- labor-intensive construction. Riecause the road-relatedproject elements differ substantively from the labor-intensive componentin origin andi justification, the two components are discussed separately

throughout this appraisal report.

1.04 Total cost of the road component is estimated at US$6.9 million(US$7.3 million including taxes), with a foreign element of US$5.45 million,about 79%. This component would be financed by IDA, the British Governmentand the Kingdom of Lesotho.

1.05 Estimated cost of the labor-intensive componenit is US$1.7 million,with a foreigra element of US$1.1 million, about 65%. This component is tobe financed by IDA and the Lesotho Government.

1.06 The combined cost of both components is US$8.6 million (US$9.0million, including taxes), with a foreign component of IJS$6.5 million, about76%. The project will be financed by an IDA credit of LS$5.5 m.illion, aBritish Government grant of US$1.5 million and a Lesothio Government contri-bution of USl .6 raillion, net of taxes. If the Lesotho Government successfullyconcludes negotiations withi STDA und UNDP for US$0.5 million and US$0.2million, respectiveliv its contribution would be reduced to US$0.9 million.Further, if the Government's negotiations with the Arab Bank for EconomicDevelopment in Africa (BADEA) for US$2.5 million are successful, a corres-ponding amount of the IDA credit wil1E be cancelled.

1.07 The project was appraised i?n April 1975 by Gabriel I. Oluonye(Engineer) and Philip W. Blackshaw (Transport Economi½stl, who, with Brendan P.Kennedy (Engineer) prepared this report. The report was edited by MarieGarcia-Zamor,

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2. THE TRANSPORT SECTOR

A. Effects of Geographic and Economic Setting on Transport

2.01 Lesotho, a small mountainous country in the southeastern Dart ofAfrica (30,300 km2), is surrounded by the Republic of South Afrira e-l3AI, onwhich it relies for external communication. Altitudes range froml about ,500m in the western lowlands to 3,500 m in the eastern mountain areas. Thistopography presents major obstacles to construction of transport facilities.

2002 In 1973 the population was about 1.1 million and is growing atapproximately 2.2% p.a. About 80% of the people live in the western lowlandsand foot:iills and in the Orange river valley, which compri'se 43% of the landarea. The rest live in the mountain region. Density averages 36 persons/km2

for the country as a whole, but in rural lowlands reaches 100/km2. Conse-quently, transport development has been concentrated in these western low-lands. There are no roads in the mountain areas apart from tracks, constructedin recent years using Food Aid Labor, 1/ which ere negotiable virtually onlyby pack animals and four-wheel drive vehicles.

2.03 Per capita GNP, about US$100 in 1973/74, is among the lowest on theAfrican continent. Agriculture, an important source of income for 85% of thepopulation, contributes almost 55% of GDP. Services contribute 35% andmanufacturing, mining and construction account for the remainder. Crop pro-duction is mainly for subsistence; wool and mohair account for the oulk ofexports. With few identified mineral resources, it seems that the country'sfuture development must largely be based on the improved use of its agriculturalresources. To date, development efforts, have concentrated on improving cropproduction in the lowlands and foothills, but population pressures haveintensified the need to make bet ter use of Lesotho's isolated mountain regions,where production, under traditional methods, is declining. Government hastherefore just started a comprehensive long-term developmelnt effort with anagriculture project, the CIDA-financed Mountain Area Development Project (para.6.03)e

B. The Transport System

2.04 While Lesotho's primary route density seems generally adequate forthe country's limited internal needs, the quality is poor. The networkcomprises 2,725 km of roads, of which 80% are tracks. Apart from a shortrail connection to the South African Railways, the only other transport

1/ Labor (mainly female) remunerated chiefly by food rations,

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infrastructure is a network of 31 airstrips. Generally, only small aircraftare used because of the need for maneuverability in landing on short stripsin mountainous terrain. Lesotho is therefore almost entirely dependent onits roads for internal transport and for access to RSA's well-developedtransport system (mainly rail and road) on which it relies for traffic beyondits boundaries.

Roads and Road Transport

2.05 This subsector is discussed in Chapter 3.

Air Transport

2.06 Of the 31 airfields in Lesotho, only two are paved and only Maseruhas terminal and navigation/communication facilities (though none for nightflying). All the others have grass or gravel surfaces. Until recently,these airfields provided the only access to many mountain areas other thanby foot or animal, but because of the recent construction of access tracksonly a few areas still rely solely on air service. Even so, air transportremains important, and the Second Five-Year Plan (1976-80) provides forimprovement of some of the more important airfields.

2.07 Maseru airport can accommodate aircraft up to the Hawker Siddley748, used to connect with RSA, although there are operational limits on accountof short runway length, the surrounding terrain and occasionally adverse windconditions. A 1972 study confirmed that, even with major expenditure, theairport could not be improved to meet the requirements of larger aircraft.A study into the feasibility of constructing a new international airportbegan in March 1974 and is nearing completion.

2.08 Lesotho Airways, a government-owned corporation which operates ata profit, provides most internal services as well as charter flights into RSA.Two South African-owned companies provide services to the southeast and north-east, chiefly for transport of migrant workers. Lesotho Airways plans totake over the services in the southeast and is investigating the possibilityof taking over the other as well. Services to Durban, Cape Town and othercenters which would serve the tourist industry are contemplated. Internationalconnections consist of 3 flights a week between Maseru and Johannesburg bySouth African Airlines on behalf of Lesotho Airways. Government would liketo participate more actively in external air transport and has initiateddiscussions with Botswana and Swaziland on the possibility of a regionalairline.

Railways

2.09 Railways play no part in the country's internal transport. However,most external freight traffic is carried by South African Railways to and fromMaseru and six railheads at border posts; the customs union transport agreements(based mainly on RSA's own regulations) favor railways for long distancetraffic. Within Lesotho, there is only 1 km of single track connecting Maseruto the South African Railways.

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Inland Waterways

2.10 This mode plays no part in the country's transport since most riversare not navigable.

C. Transport Policy and Coordination

2.11 In the past, transport policy was directed almost exclusively tcserving the main population and producition centers along the north-southlowland corridor on the western border. Present policy is directed towardsopening up the country (para. 3.13), while pursuing the long-term goal ofreducing transport dependence on RSA (paras. 2.07-.08).

2.12 The Central Planning and Development Office of the Ministry of Plan-ning and Statistics is generally responsible for overall policy and plan formu-lation and for ensuring intersectoral c:oordination. Staff shortages impair theOffice's functioning, but its capacity has been improved by recent appoint-ments.

2.13 Coordination among the transport modes is not a major issue, giventhe lack of internal rail and water transport and the essentially complement-ary tasks performed by air and road transport.

D. Previous Projects in the Transport Sector

2.14 There has been only one other Credit (82-BL, US$4.1 million) to thetransport sector, for the construction/reconstruction between 1967 and 1969of 123 km of the main north-south road from Leribe to the Matsieng turnoff, anda 27 km gravel feeder road between Leribe and Pitseng. The work was completedsatisfactorily for less than the estimated cost and it was possible to pavethe whole 123 km section of the main north-south road, instead of only 107 kmas originally envisaged.

3. THE HIGHWAY SUBSECTOR

A. The Network

3.01 The country's highways, classified in 1914 as primary, secondary ortertiary roads, comprise some 2,725 km of which only 200 km are bituminouspaved, 370 km are two-lane gravel, and the rest are dry weather tracks(Table 1). The 1,240 km primary system consists mainly of a peripheral roadin the west and south supplemented by an east-west link in the middle of thecountry and a north-south link in the east. As mentioned earlier, the better

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sections of the primary system, and virtually all other roads, are in thelowlands. While the bitumen roads have been built to an adequate standardand are satisfactorily maintained, the others were constructed to low standards

and maintenance is poor.

B. Traffic Growtlh and Characteristics

3.02 The vehicle fleet grew at an average annual rnte of 8% from 1970

to 1973, at which time there were about 5,700 vehicles in circulation (Table3), or one motor vehicle per 200 inhabitants. In 1973 ~he fleet consistedof 1,790 passenger cars, 2,620 light commercial vehicles and trucks, 170buses and 1,120 other vehicles. Most trucks are owned either by Government(32%) or by traders carrying their own goods. Although conditions forentering the trucking industry are not onerous, there are few commercialtransporters because few nationals can raise the capital and such operationsare relatively unattractive to South African operators. As a consequence,much of the freight ii carried by buses which are built to satisfy this dualrole. Under the Agrirultural Marketing Regulations, Government prescribesmaximum rates to be charged for the transport of agricultural produce. This,along with the element of competition provided by the steadily-expandingtransport operations of the Government-owned Coop Lesotho, 1/ should ensure

that any savings in vehicle operating costs from improved roads are passedon in lower freight rates.

3.03 Before 1970, the MW Roads Branch (RB) conducted traffic countsonly to provide traffic information for specific schemes. The locationsgenerally were not adequately identified, so comparison with later counts isnot possible. Since 1970, the RB has carried out regular counts at 34locations along the main and secondary roads. From those counts, a trafficpattern has been established. The traffic volumes average less than 10 vpdin the mountain area and about 70 vpd on some secondary roads; in contrast,volumes averaging 200 vpd are found on the primary system in the westernlowlands,

3.04 The Lesotho Transportation Study, completed in early 1975 bythe UK consultants, Roughton and Partners, resulted in a ten-year road develop-ment plan. This plan provides a sound developmental framewoik, but the appro-priate scale and timing of individual projects will depend otL traffic growthpatternis. Accordingly, Government has begun implementing a British Govern-ment-financed program to improve its procedures for collectinig data on trafficlevels and composition.

1/ Coop Lesotho is an agricultural cooperative under the Ministry ofAgriculture and is the biggest single public haulage organization.It transports fertilizers, seeds, crops, etc., for membors and non-members.

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C. Administration

3.05 The MW is responsible for all classified roads (Table 1) other thanthose administered by the Community and Rural Development Office (CRDO). CRDO,using Food Aid Labor, has developed and maintains a network of earth tracks inthe mountainous areas. However, there is a program for MW to progressivelytake over these tracks by 1980.

3.06 Individual MW branches (Chart 1) deal with the various aspects OLroad administration. The RB is discussed in para. 3.07 and the Planning Unitin paras. 3.11-.12. The Central Mechanical Workshop and Plant Pool (CMW &PP) provides equipment for hire to Government agencies (including the RB)and maintains the equipment. A Technicians Training School provides train-ing facilities for technicians, including road maintenance personnel.

3.07 The RB, headed by a Chief Roads Engineer, has two major sections,Planning and Design, and Maintenance and Construction. The branch presentlyplans, designs, constructs and maintains about 1,070 km of roads and maintainsthe airfields on behalf of the Civil Aviation Department. As noted in para.3.05, by 1980 it will be responsible for the whole classified network of2,725 km. Planning and design are handled at the Ministry's headquarterslocated at Maseru. Maintenance and construction are carried out through twodivisions, the Northern and Central and the Southern, each headed by anengineer currently operating from headquarters.

3.08 One of the major constraints on RB work has been the shortage ofqualified staff, due to the scarcity of trained local personnel and the diffi-culty of attracting expatriates on the terms offered. At present, some 40 ofthe 74 posts authorized for the Branch, including some top level posts normallyfilled by expatriates, remain vacant. However, given this constraint, theRB operates reasonably satisfactorily.

3.09 Some improvement is expected in the staffing situation as a resultof recent Government initiatives, including salary increases, the firstin 10 years. Also, Government has requested the British Government and theUnited Nations to provide trained senior personnel under technical assistance.However, the 2-3 year expatriate staff contracts generally result in lack ofcontinuity and high turnover costs. To increase the supply of suitably qualifiedlocal personnel, the Government, together with some donors, is financing 6nationals' study in professional technical fields and intends to sponsor 8more. However, the country's education system does not produce enough can-didates with backgrounds suitable for professional technicaLl training anduntil this situation improves (para. 3.25), Government will continue to dependon expatriates for professional staff (para. 5.06).

3.10 Road usage is regulated by the MW under the 1970 Road Traffic andTransport Regulations. Under these reguLations, which are adequate, axleloads are limited to 18,000 lbs as in RSA. Since heavy loads are usuallythose to and from RSA, Lesotho has generally relied on enforcement in RSA to

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protect its own roads. But as its internal road network and local vehiclefleet expand, Lesotho will have to carry out its own enforcement. Governmentintends to install weighbridges in Maseru, Mohale's Hoek and Leribe during1976 and to supplement these later with portable weighbridges.

D. Planning

3.11 The Central Planning and Development Office in the Ministry of Plan-ning and Statistics is responsible for overall planning and coordination, assis-ted by planning units in other ministries. The MW Planning Unit is responsiblefor preparing and evaluating capital projects, carrying projects through to theapproval stage, coordinating projects within the Ministry, framing annual capi-tal estimates and monitoring the physical and financial progress of projects.Neither the MW Planning Unit nor the RB has any capacity for major road plan-ning or evaluation, which is carried out by consultants.

3.12 The Planning Unit staff consists of one expatriate economist onshort-term contract. To ensure continuity and develop a local capacity, theMinistry should employ a local economist as a counterpart. The Associationhas received an assurance from Government that this appointment will be madeduring 1976.

3.13 Road investments planned for the Second Five-Year Plan (1976-80)are those recommended by the Lesotho Transportation Study and are primarilydirected at opening up the country. Apart from the project road, it isplanned to upgrade parts of the peripheral road and to connect Semonkong inthe foothill area by gravel road to the main north-south road in the westernlowland. This represents significantly more construction than in the precedingfive years, approximately US$17 million compared with US$4 million, and isprobably a little ambitious. The road plan is generally sound, however, andthere are substantial indications that the requisite donor financing forconstruction will be available. This work program will require a considerablestrengthening of the RB (paras. 3.08-.09), to which this project will contri-bute.

E. Financing

3.14 Capital and current estimates are prepared in the MW, reviewedby the Ministry of Finance, and then included in the General Budget forCabinet and Parliamentary approval. Annual appropriations are made in fullat the beginning of the fiscal year for capital works and quarterly in advancefor recurrent expenditure. External grants have financed practically allcapital expenditure and part of recurrent expenditure. The locally financedcomponent of appropriations can be reallocated between branches of MW withMinistry of Finance approval. While capital funds unspent at the end of theyear require reappropriation, the allocation is automatic. The unspentbalance of recurrent allocations lapses at the end of the fiscal year.

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3.15 As shown in Table 4, RB construction expenditure increased fromR 345,000 in 1970/71 to R 828,000 in 1974/75. Expenditure over these fiveyears totalled R 3.1 million which represented about half of planned expend-iture and about 15% of central government's total capital expenditure overthat period. Maintenance expenditure increased steadily (Table 4) but wasinadequate (about half the amount requested by the RB). However, allocationsfor 1975/76 are almost double those of the previous year and are now adequate.

3.16 Road users contribute to Government revenue through cuQtoms unicnduties on vehicles, fuel, lubricants and spare parts, and through locallicense and registration fees. All customs and sales duties paid into thecommon customs area (RSA, Lesotho, Botswana, Swaziland) go to a common revenuepool. Lesotho neither sets the rates nor collects the duties. No specificdata are available on exactly how much of Lesotho's share of the revenuepool is attributable to its imports of road transport equipment and fuel,but Government estimates suggest that revenue from this source was approxi-mately R 1.1 million in 1974/75. Revenue from fees and local taxes on roadusers accounted for an additional R 240,000 (Table 5). Total transport relatedrevenue for the last few years has substantially exceeded road administrationand maintenance expenditures.

F. Engineering

3.17 The RB has the capacity to design only minor roads and bridges. Itscapacity is unlikely to increase significantly until stafiE shortages are over-come. For the preparation of major road and bridge designs and constructionsupervision, the RB relies on consultants. The design of the project road andthe preparation of construction documents were carried oul: by UK consultantsRoughton and Partners, financed by the British Government. Design for theMantsonyane-Thaba Tseka section was carried out to two alternative standards,and the appropriate one, gravel 4 (Table 2) was agreed during appraisal. Theconstruction documents are being finalized accordingly.

G. Construction

3.18 Major works are done by contractors; the RB undertakes only minorworks using its own construction units which are equipment-intensive andemploy about 100 unskilled laborers. Al: present there are two suchunits; a third will be set up in the near future with UK Crown Agents assist-ance and British Government financing.

3.19 Only a few small local construction firms are active in the country;most are engaged in building construction and are not equipped for road worksdue to a shortage of trained professionals, subprofessionals and managers.Although at some future time the Bank may be able to assist in developing alocal road construction industry, there is little it can do until sufficient

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trained manpower becomes available (para. 3.25). Government, however, isanxious to improve the building trade's capacity and for this reason hasrequested the British Government to finance the setting up of a "BuildingContractors' Advisory Panel" within the Ministry of Commerce and Industryand the appointment of two Clerk of Works (Buildings) Advisors within MW.The Panel would assist and advise local contractors on tender preparation;organization, measurement and evaluation of work; equipment procurement andusage; and control of finance. The Advisors would train local clerks ofwork and contractors' site agents in organization and control of work. Therequests are under consideration by the British Government.

3.20 In view of the present interest in labor-intensive construction(Chapter 4), the appraisal mission considered the possibility of constructingthe project road by this method but concluded that the road does not presenta suitable opportunity in view of the heavy earthworks component and theabsence of a suitable organization.

H. Maintenance

3.21 RB maintains 1,070 km of which 200 km are bituminized; it also main-

tains the countryTs 31 airfields. The rest of theinetwork ism-alintained bytraders and church organizations for a nominal annual fee of R 6.0 per km andby Food Aid Labor under the CRDO of the Prime Ministerts Office. As mentioned,the tracks now maintained under the Food Aid Program are to be progressivelytaken over by RB by 1980.

3.22 The main work involved in routine road maintenance consists ofkeeping the running surface in good condition by patching potholes, correctingwheel-tracking on gravelled roads, cleaning drains and culverts, and cuttinggrass. Minor improvements, such as improving sight distances and providingnew drains, are often done as part of routine maintenance. RB policy is tocarry out periodic maintenance, consisting of resealing paved roads and resur-facing gravel/earth roads, once every five years but shortage of funds hasled to a backlog of such maintenance. While the level of maintenance onpaved roads seems satisfactory, it is poor on others due to the high cost ofmaintaining roads of low construction standards and to poor availability oftrained personnel, equipment and equipment repair facilities. Government istaking some steps to improve maintenance (paras. 3.15 and 3.24) and the pro-posed project provides for maintenance assistance (para. 5.05). The borrowerhas given an assurance that the project road and the access road fromMasianokeng to St. Michaels will be adequately maintained.

3.23 To cope with increased maintenance demands from the take over ofroads and from the extensive road development proposed over the next fiveyears, Government intends to reorganize the RB. Its activities, now directedentirely from headquarters, will be decentralized. The country will bedivided into three districts and district offices set up at Leribe, Maseru,and Mohale's Hoek, each under the direct control of a senior technical officerand ultimately under a district engineer. This should result in improvedmaintenance.

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3.24 Because poor equipment availability has limited road constructionand maintenance in Lesotho, the British Government in 1969 financed a study ofGovernment equipment, vehicles and workshops. The study recommended that Gov-ernment establish a plant pool with a management which has full responsibilityfor the purchase, maintenance and a:Llocation of equipment to Government agen-cies on a hire basis. In 1972 Government established the CMW & PP and there-after absorbed the MW's equipment into the pool. To date, the pool has notoperated as effectively as envisaged with consequent inefficiencies in. zoadconstruction and maintenance. To a large extent, this is due to lack work-shops and equipment and shortage of mechanics, which Government is takirgsteps to remedy with British Government financial assistance. Under thepresent project, the British Government will also finance a district work-shop at Thaba Tseka and technical assistance for mechanics training (paras.5.05-.06). However, the poor service provided by CMW & PP is also in largemeasure attributable to operational shortcomings. 1/ During negotiations Gov-ernment agreed to review CMW & PP organization and procedures with ODM andformulate and implement, after agreement with the Association, a plan to makethe pool more responsive to user requirements.

I. Training

3.25 Reflecting the general manpower problem in Lesotho, MW suffers froma shortage of professional and subprofessional staff and relies heavily onexpatriates provided under technical assistance. Government has taken severalsteps to improve the situation. It is financing professional studies fornationals; 6 civil engineers are presently receiving training overseas andanother 8 are to be trained during the 1976-80 Plan period., At the subpro-fessional level, a three year post-secondary course in civil engineering(shortly to be expanded to include electrical and mechanical engineering)recently commenced at the MW Technicians Training School within the LerotholiTechnical Institute. The Institute, which also provides training for artisans(mechanics, blacksmiths, welders, etc.), is being expanded under an IDAEducation Project (Credit 497-LSO, 1974). 2/

3.26 Due to lack of candidates with appropriate qualifications, theinitial output of technicians from the MW School (about 15 p.a.) will be

1/ The requirement that users transport hired equipment, the lack of hirecharges intermediate between 24 hour and three month rates, and the un-satisfactory system of assigning and charging out operators are examplesof factors which limit use of the pool.

2/ Appraisal of an Education Project: in Lesotho, IBRD/IDA ReportNo. 363a-LSO, June 14, 1974.

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insuffitient to satisfy MW's needs. Government has recognized the lack ofmathematical/science/practical content in present secondary education and,under a general program also supported by the above-mentioned IDA EducationCredit, is re-orienting secondary education accordingly. However, it willbe some time before this program produces sufficient candidates for technicaltraining. In the meantime, intake and output at the School would be sub-stantially increased by offering remedial courses, particularly in mathematics,and the present project provides for such assistance (para. 5.06).

4. LABOR-INTENSIVE CONSTRUCTION

4.01 Apart from the Food Aid Program (para. 2.02), there has been littleinterest until recently in labor-intensive construction methods in Lesothobecause of the strong demand for Basotho workers by South African miningcompanies. Presently, some 175,000 Basotho men (60% of the male labor force)and 25,000 women are employed in RSA; the number has increased by 6-7% ayear over the last decade. This makes Lesotho extremely vulnerable to condi-tions in RSA. This vulnerability was brought home sharply in the beginningof 1974 when, following disturbances in the RSA mines, between 10,000 and15,000 migrant workers suddenly returned. The total male work force in wageemployment in Lesotho was only about 16,000, and the domestic labor marketwas incapable of absorbing the sudden influx, even though it was small inrelation to the number of Basotho who could return from RSA. Accordingly,the Government requested the UNDP and the Bank to organize a mission to:(a) make proposals on how to deal with any immediate unemployment problems;(b) recommend a contingency plan which would enable the Government to handlesuch emergencies; and (c) identify broad strategies to maximize long-termemployment opportunities within Lesotho.

4.02 Although that particular emergency had abated by the time theUNDP-financed Inter-Agency Migrant Workers Re-employment mission visitedLesotho in September 1974, the mission concluded that similar emergenciescould well arise in the future and that Lesotho was particularly ill-equippedto handle them. There was no labor-recruiting agency, little previous know-ledge of or experience with labor-intensive techniques, a lack of managers andsupervisors trained in organizing and handling large labor gangs, and noready supply of projects designed for labor-intensive construction. Accord-ingly, the mission recommended the establishment of a Labor-Intensive Con-struction Unit (LCU) and ant employment service. 1/ Although the work of theLCU would not be confined to or even give priority to road construction, itis included as part of this highway project for administrative convenience(paras. 5.15-.25).

1/ Lesotho,Rport of the Migrant Workers Re-Employment Mission, IBRDReport No. 614a-LSO, April 3, 1975.

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5. THE PROJECT

A. The Road Component

Objectives

5.01 This component is designed to promote development of the centr-l1mountain area by linking it to the national capital with an all-weather road,to ensure proper maintenance of the rcoad, and to improve MW operations.

Description

5.02 The road component comprises:

(i) improving the gravel road between St. Michaels andMantsonyane (95 km) and reconstructing the earthtrack between Mantsonyane and Thaba Tseka (52 Ian);

(ii) providing consulting services to finalize the constructiondocuments and supervise the work in (i);

(iii) providing road maintenance facilities along the project road;and

(iv) strengthening MW through technical assistance.

(i) Road Improvement/Reconstruction

5.03 The two road sections will connect Thaba Tseka, the official admin-istrative center of the central mountain region and focal point of the Moun-tain Area Development Project, with the capital, Maseru. The St. Michaels-Mantsonyane section (95 km), an engineered two-laae gravel road built between1952 and 1962, has seriously deteriorated and in wet conditions is passableonly by 4-wheel drive vehicles due to poor surface condition, steep gradientsand sharp bends. Improvement to both the vertical and horizontal alignmentsis necessary to assure all weather accessibility. Stretches of the road withgradients in excess of 10%, totalling 25 km, will be bituminized and the restgravelled. This section will be built to gravel 3 standard (Table 2). TheMantsonyane-Thaba Tseka section (52 km), a single-lane earth track with gradesup to 20% and passable only by 4-wheel drive vehicles, is closed for up to 60days a year by rain or snow. The construction will involve considerable re-alignment and earthworks to improve gradients and sight distance and avoidaccumulation of snow. It will be built to gravel 4 standard (Table 2).

(ii) Consulting Services

5.04 Consulting services will be provided to finalize the constructiondocuments, to assist in prequalifying contractors, bidding procedures andevaluation, and to supervise construction.

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(iii) Maintenance Facilities

5.05 To ensure that the road is well maintained, the project will pro-vide along the road a mechanical workshop and two maintenance depots, includ-ing housing for workers and their families, small offices and storage fortools and essential materials. The project will also provide road maintenanceequipment, workshop tools and equipment, and radio communications equipment.

(iv) Technical Assistance

5.06 To help implement the project and generally increase MW's limitedoperational capacity, the project will provide five experts, each for twoyears: a costing adviser for the RB, a mathematics instructor for the MW Tech-nicians Training School, and three mechanics training supervisors.

Cost Estimates

5.07 The road component costs are estimated at US$7.3 million, or US$6.9million excluding taxes. The foreign exchange component is US$5.45 millionor 79% of cost, net of taxes, which are estimated at about 6% of total cost.Cost estimates are detailed below:

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ROAD COMPONENT

Rand '000 ----- - US$ '000 -------Local Foreign Total Local Foreign Tqtal Foreign

1. Road ImprovenentlReconstruction(i) St. Michael's-Mantsonyane (95 km) 482 1,633 2,115 559 1,894 2,453 77(ii) 'iantsonyane-Thaba Tseka (52 km) 287 972 1,259 333 1,128 1,461 77

2. Consulting Serv'ices(i) Finalization of construction documents - 11 11 - 13 13 100

(ii) Supervision of road construction works 3.52 282 434 176 327 503 65

3.. Road Maintenance Facilities(i) Buildings 123 82 205 1.43 95 238 40

(ii) Equipment 3 63 66 4 73 77 95

4. Technical Assistance (10 man-years) _ 44 176 220 51 204 255 80

Sub-total, 1-4 1,091 3,219 4,310 1,266 3,734 5,000

5. Contingencies: 12(i) Fhysical - 10% on Items 1-4 109 321 430 126 373 499(ii) Price - 2/

(a) Items 1 an3d3(i)- 356 1,028 l,384 413 1,192 1,605(b) Item 3(ii)-/ 4/ 1 24 25 1 28 29(c) Items 2(ii) and 4- 47 108 155 55 125 __180

Sub-total 5 513 1,481 1,994 595 1,718 2,313

Total Road Component Cost 1,604 4,700 6,304 1,861 5,452 7,313 75

(Total Road Component Cost net of taxes) (1=2=54 M A7=OS £5 !9542 S1455 5,L53 6 2 79

"/:TPo-L PrPc=0 COST-/ 2,125 5,643 7,768 2,465 6,546 9,011 73(Road and Labor-Intensive Components)

TOrAL PROJECT COST N7T OF TAXES (1,775) (5,643) (7,418) (2,059) (6,546) (8,605) 76(Road and Labor-Intensive Components)

1! Excluding Item 2(i).2/ 167, p.a.3/ 1976 (14%), 1977 (12%), 1978 (10%).41 10% p.a.5/ For details of the Labor-Intensive Component cost estimates see para. 5.19.

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5.08 These estimates reflect costs in January 1976, the date ofnegotiations, and were arrived at as follows:

(i) Road Improvement/Reconstruction: the costs of road improvement/reconstruction, including foreign costs, were estimated byconsultants in January 1975 on the basis of their detailedengineering. As no major road construction contract has beencarried out in Lesotho since 1968, rates and unit-prices werearrived at after a detailed study of prices published by theNational Institute for Road Research, RSA, and after a reviewof information obtained from contractors on rates for majorroad contracts executed recently in the surrounding areas.The cost estimates, which have been updated to January 1976levels, are reasonable. -Provision has been made for a physicalcontingency of 10% to cover quantity variation and a pricecontingency of about 35% to cover price escalation throughoutthe execution period. Price contingency for foreign and localcosts has been estimated on the basis of 16% p.a. for 1976,1977 and 1978. 77% of the total costs are foreign and about7% are taxes.

(ii) Consulting Services: to enable construction to start as earlyas possible, the construction documents are currently beingfinalized and assistance with tender procedures is beingprovided under contract for US$13,000 equivalent, whichshould be financed retroactively. Costs for constructionsupervision are based on estimated staff requirements andon recent average man-month expenditures by the consultantswho carried out the detailed engineering and are in accordwith international market conditions. Included are 10% forphysical contingency and a price contingency of 10% p.a.

(iii) Maintenance Facilities: the estimates are based on MW's recentexperience and include a 10% physical contingency and a pricecontingency of 16% p.a. for buildings and 14% (1976), 12%(1977) and 10% (1978) for equipment. Local costs for the equip-ment include local handling and transport costs.

(iv) Technical Assistance: costs are based on similar servicesalready being provided in Lesotho. A physical contingencyof 10% to cover possible extensions of service and a pricecontingency of 10% p.a. have been included.

Financing

5.09 The financing plan for this component is detailed in para. 5.26.

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Implementation

5.10 The MW, assisted by consultants, will be responsible for projectexecution. The road improvement/reconstruction will be put out to contract,to be let on a unit-price basis and awarded through international competitivebidding in accordance with Bank/IDA Guidelines for Procurement. There areno domestic road contractors or manufacturers, so a preference margin pro-vision for domestic contractors and manufacturers is not needed.

5.11 Since the MW does not have the capacity to supervise the constru -tion, it will be done by consultants employed under terms and conditionssatisfactory to Lesotho, the British Government and IDA. The services willbe jointly supervised by the British Government and IDA. The employment ofsupervising consultants is a condition of credit effectiveness.

5.12 The road construction contract is expected to be awarded bySeptember 1976 and work completed by the end of 1978. The road runs throughtribal land, but Government has the right of eminent domain so no problemsare expected in acquiring land for right-of-way.

5.13 During negotiations, agreement was reached with Government on aproject implementation schedule (Chart 2) and progress reporting procedures(Annex).

Disbursements

5.14 See para. 5.27.

B. The Labor-Intensive Component

Objectives

5.15 The aim of this component is to prepare Lesotho to deal adequatelywith any recurrence of the recent employment emergency, along the lines rec-ommended by the UNDP/IBRD Migrant Workers Re-employment Mission (Chapter 4).

Description

5.16 The component will consist of establishing a LCU and concomitantstrengthening of the employment service functions of the Labor Commissioner'sOffice.

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5.17 The LCU will consist of 35 staff (Table 8), together with a labor

force of about 200, 1/ engaged in ongoing labor-intensive construction. The

work program will be relatively small but the LCU is to be planned so as to

expand quicklv in the event of an employment emergency. Specifically, the

main functions of the LCU, which will be an independent entity within MW, are:

(a) to gain experience by carrying out labor-intensive

public works construction, soil conservation, etc.;

(b) to formulate administrative procedures on which to

base large-scale adoption of labor-intensive techniques;

(c) to develop an inventory of appropriately designed projects; and

(d) to provide on-the-job training for local staff of the LCIJ and

for appropriate staff from other Ministries and Agencies.

The Project will finance the establishment of the LCU and its operation for

three years, after which a decision will be taken as to its future.

5.19 To complement the LGJ, the Migrant Workers Re-employment Mission

recommended the establishment of a National Employment Service. Since that

mission's visit in September 1974, Government has established labor offices

in each district. At present these two-man offices are attempting to monitor

the employment situation while also handling numerous other labor-related

matters, such as mediation of disputes, workers' compensation, and enforcement

of minimum wage legislation. Government has requested that, instead of estah-

lishing a separate National Fmployment Service at this stage, an expert be

attached to the Labor Commissioner's Office to examine its inadequate employ-

ment service operations and recommend improvements. This may or may not entail.

the establishment of a separate National Emplovment Service. In accordance

wiLth the Government s request, the project will provide consulting services

to formulate and implement employment service procedures and to Prepare a com-

prehensive plan for future activities. Provision is also made for exoansion

and training of staff engaged in employment service functions.

Cost Estimates

5.19 Costs of the labor-intensive components are estimated at UJS$1.7

miILion (there are no taxes), of which USS1.1 million are foreign costs. Cost

estimates are detailed below:

1/ This is about half the size oriTinally envisaged by the Migrant Workers

Re-employment Mission. Government and IDA believe that this reduced scale

is more consistent with the size of other institutions in Lesotho and with

the available supply of skilled and semi-skilled local staff.

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LABOR-: NTNSTVE_COMPMO.E.NT

- Pand '000 ------ us Local Foreign Total Local Foreign Total Foreign

1. Labor-Intensive Construction Unit(i) Consulting Services - 306 306 - 355 355 100

(ii) Equipment, Plant Hire and Fuel I.6 3nnl 316 18 348 366 95(iii) Local Staff and Labor 306 - 306 355 - 355 0

.2. Labor Commissioner's Office(i) Consulting Services - 62 62 - 72 72 100(ii) Local Staff and Training 48 12 60 56 14 70 20

Sub-total 1-2 370 680 1,050 429 789 218 65

3. Contingencies:(i) Physipl - 10% on Items 1-2 37 68 105 43 79 122

(ii) Price- 114 195 309 132 226 358

Sub-total 3 151 263 414 175 305 480

Total Labor-Intensive Component Cost 521 943 1,464 604 1,094 l,698 64

Total Labor-Intensive Component Cost (5231 •29432 •642 •,6042 (1.0942 1l§6982 64net of taxes

TOTAL PROJECT COST 2 125 5 643 7,768 2465 6 546 9 011 73(Road and Labor-Intensive Components) ' - ' _ _ = ' -'

2/TOTAL PROJECT COST NET OF TAXES (1,775) (5,643) (7,418) (2,059) (6,546) (8,605) 76(Road and Labor-Intensive Components)

l/ 10% p.a. on all items except l(ii), for which the price contingency has been estimated asfollows: 1976 (14%7), 1977 (127,), 1978 (10°,).

2/ For details of the Road Component cost estimates, see para. 5.07.

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5.20 Costs are based on estimates made by the INDIP/IBRD Migrant WorkersRe-employment Mission in early 1975, adjusted to reflect the smaller scale

now envisaged (para. 5.17) and price levels in January 1976. A price contingencyof 10' p.a. thereafter has been allowed, except for equipment, for which a

higher price contingency has been allowed (see footnote 1 to cost estimates).

A 10% physical contingency has also been included.

Financing

5.21 See Dara. 5.26.

Implementation

5.22 Thae l.ClJ will be a special unit in the MW, reporting directly to

a Coordinating Committee chaired bv the Senior Permanent Secretarv in the

Prime Minister's Office and including senior representatives of relevant

Ministries (MW, Finance, Planning and Statistics, Commerce and Industrv, Agri-culture, CRDO) as well as the Labor Commissioner and the senior engineer in

charge of the LCU. The MW will be responsible for staffing and implementingthe lCU. However, in view of MW's current work load and the general short-

age of Professional mannower in Lesotho, the three senior positions for the

LCU (Table 8) will have to be filled bv expatriates. Because it would hedifficuilt to obtain individuals of the necessarv caliber who could nuicklyform an integrated team, the best course is to employ a team of consultantsfor three vears to fill these nositions, take responsibility for the operationof the LCl! and train local counterparts. During negotiations, terms ofreference for these consultants were agreed with Government who also gave

dsslil.lncez that tile (onsultants would be employed under .-ondftic,ns satisfactorvto t he As:3oc iat io,_.

53.2'3 Campine, office and radio equipment, and hand tools - all smallin number -- will be procured according to the borrower's procurement proce-dures, which are satisfactory. Other equipment (landrovers, tractors,trailers, trucks and rollers) will be hired. The LCU will use the CMW & PPr

as much as possible but, subject to the approval of the CoordinatingCommittee, shall have authority to hire from other sources.

5.24 During negotiations, aRreement was reached with Government on a

project implementation schedule (Chart 2) and progress reporting procedures

(Annex).

Disbursements

5.25 See para. 5.27,

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C. The Total Project

Financing

5.26 The combined cost of the road and labor-intensive components isUS$8.6 million (US$9.0 million including taxes), with a foreign component ofUS$6.5 million, about 76%. The project will be financed by IDA (US$5.5million), ODM (UK) (US$1.5 million), and the Kingdom of Lesotho (US$1.6million net of taxes, or US$2.0 million including taxes). Executioni anddelivery of a Grant Agreement between the Lesotho Governument and ODM4 is acondition of credit effectiveness. During negotiations, the Lesotho Govern-ment gave assurances that it would make available its contribution and providefacilities, services and other resources promptly as needed, and upon completionof the project assure continued maintenance of the project road and its accesslink (Masianokeng-St. Michaels). Lesotho has requested SIDA and UN])P assistanceof US$0.5 million and US$0.2 million, respectively, which would reduce Lesotho'scontribution to the project by a corresponding amount. Further, if the Govern-ment's negotiations with BADEA for US$2.5 million are successful, a corres-ponding amount of the IDA credit will be cancelled. The financing plan isdetailed below:

1NA&iCI_:G PLPN FOR PROJECT 1(US$ rillion)

IDA U1. Lesotho TotalLocal Foreign Total Local Foreign Total Local Foreie, Total Loc.-l _.rign 7.,l

A. Rod Co-:ncent

1. Road-lmprovcmoa:.../Po!construction/ 0.52 4.47 4.99 0.39 0.39 0.91 4.47 5.382. Cons.ltite tc-rvtcee

(i) Fin-liz.tion of construction 0.01 0.01 0.01 0.01docu :rots

(ii) Supervision oi construction 0.24 0.44 0.68 G.24 0.44 0.683. Road Maintenance Fzacilities 0,23 0.27 0.50 0.23 0.27 0.504. Technical 3ist.nce 0.07 0.27 0.34 C.07 0.27 0.34

B. Labor-Intensive Component

5. LCU(i) Consulting Services 0.50 0.50 0.50 0.50

(ii) EquiD2ant, Plant Hire and Fuel3/ 0.03 0.47 0.53 0.03 0.47 0.50(iii) :.ocal ^taff and Labor 0.50 0.50 0.50 0.50

6. Labor Coamiss onerl a Offi-e(i) Consi:itig Services4/ 0.10 0.10 0.10 0.10

(ii) Local Staff and Training4/ _ __ _ 0.08 0.02 0.10 0.08 0.02 O.10

Total 0.52 4.98 5.50 0.54 0.98 1.52 1.00 0.59 1.59 2.06 6.55 8.61

I/ Ir.cludi,-g coe,tingencifs, excluding taxes.2J Tbe 'eaCthe Covc,r_e..nz is neCotlating with BADEA for a loan of US$2.5 million towards this item.

If ncaotiations are successfully concluded, a corresponding arount of the IDA credit will be cancelled.'1/ lr.e Lsot.~ - (oert..a is negotiating with SIDA to finance this item.41 The Lesotho Government is negotiating with JNDP to finance this itemr.

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Disbursements

5.27 IDA credit funds will be disbursed on the following basis:

(a) 86% of expenditures on road improvement/reconstruction;

(b) 100% of foreign costs of consulting services for finalizing

construction documents; and

(c) 100% of the costs of consulting services for the LCU.

Retroactive financing of approximately USS13,000 will be requiredfor item (b). The estimated schedule of disbursements, reflecting the agreedimplementation schedule for the project, is shown in Table 7. Any surplusfunds remaining in the credit account upon completion of the project will be

cancelled. If Government's negotiations with BADEA for US$2.5 million towardsthe cost of the road are successfully concluded, a corresponding amount ofthe IDA credit will be cancelled and the proposed disbursements amendedaccordingly.

6. ECONOMIC EVALUATION

A. The Road Component

Main Benefits and Beneficiaries

6.01 The road improvement will provide an all-weather link between ThabaTseka, the designated administrative center for the central mountain region,and the national capital, Maseru, in the western lowlands. The main benefitsfrom the St. Michaels-Mantsonyane section are the conventional savings intransport costs. Benefits from the Mantsonyane-Thaba Tseka section accrueprimarily in the form of increased net value of production in the road'sarea of Influence. As noted in para. 3.02, Government regulation of andparticipation in transport of agricultural inputs and produce should ensurethat a significant proportion of the benefits from the road improvementsaccrue to the local population. Additionally, a major unquantified benefitwill be better integration of the remote Thaba Tseka region (and mountainareas to the east) with national economic, political, and social development,including facilitation of civil administration and improved availability ofhealth and education services.

6.02 Population in the road's direct area of influence (conservatively,10 km on either side of the road) is about 56,000. About 48,000 live alongthe St. Michaels-Mantsonyane section. The remaining 8,000 people are con-centrated on the relatively undulating area surrounding Thaba Tseka. Thealtitude of most of the region between Mantsonyane and Thaba Tseka is above2,500 m, and it is generally uninhabited, although used for summer grazing ofcattle and sheep. No income figures are available for the area of influence of

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the St. Michaels-Mantsonyane section, but a recent survey of the populationin the Mantsonyane-Thaba Tseka area of influence suggests that 80% have anannual income below US$85, more than half of this coming from earnings in RSA.

6.03 Thaba Tseka is the center of the US$8 million Mountain Area Develop-ment Project, directed at increasing crop and livestock production and atimproving living conditions in the villages through basic investments inwater supply, sanitation and forests. The improved access provided by theSecond Highway Project road should enicourage farmers to switch from mairivsubsistence maize to cash crop production of wheat, for which the lands aremuch more suitable. (This change in cropping pattern occurred west ofMantsonyane when that road was initially improved.)

6.04 As noted, this agricultural project is regarded as the first phaseof a long-term mountain area development program to be directed from ThabaTseka, whose central location will facilitate expanding road connectionsto the north, east and south. In fact, between now and 1980, the Food AidLabor Program will concentrate on improving tracks into this area, whosepopulation is estimated at 60,000-70,000 and which may be regarded as theproJect road's secondary area of influence.

6.05 The economic analysis compares the expected costs and benefits ofthe road, in constant prices, with financial costs adjusted for indirect taxesand subsidies to arrive at economic costs. Shadow pricing was not considerednecessary. Investment costs include supervision and physical contingencies.Separate analyses have been made of the two sections of the road.

St. Michaels-Mantsonyane

6.06 In 1973, traffic on this section was measured at 50 light vehiclesand 29 heavy vehicles (11 trucks and 18 buses) per day. The evaluationassumes the road improvement would initially generate new traffic equivalentto 30% of existing traffic and that traffic would grow thereafter at 5% p.a.for heavy vehicles and 8% p.a. for light vehicles. Applying the vehicleoperating cost savings shown in Table 6, the economic return on this sectionis 13% (Table 9) and the first-year rate of return is 12X. The most likelycauses of any divergence from this forecasted rate of return would be construc-tion cost or traffic level variations. If construction costs increase by 10%or if traffic growth is only half that assumed, the economic return is stillattractive at 12% and 11%, respectively.

Mantsonyane-Thaba Tseka

6.07 This section has negligible traffic at present and must be viewedas part of a total regional development package. It is not meaningful tocite a rate of return on the road in isolation. Rather, a rate of returnhas been calculated for the whole Mountain Area Development Project, basedon the report of the FAO/IBRD Cooperativre Program Preparation Mission on aPhase I Development, and assuming a Phase II commences in 1980. Thus, the

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costs of constructing and maintaining the road, as well as the costs ofagricultural inputs have been compared with benefits consisting of increasedvalue of agricultural production and vehicle operating cost savings totraffic not associated with the Development Project. The resulting rateof return is about 11% (Table 10). If Phase II is not proceeded with, therate of return on Phase I (including the road costs) is about 10%. Ananalysis was made of the incremental benefits of building the road to ahigher standard than gravel 4, but this was found unjustified at present.

Maintenance Facilities

6.08 No separate rate of return analysis has been made of the investmentin maintenance facilities. However, this investment is reflected in themaintenance costs incorporated in the economic analysis of the two roadsections (Tables 9 and 10).

Technical Assistance

6.09 The technical assistance benefits, which are not quantified, willbe improved RB performance and greater numbers of trained staff.

B. The Labor-Intensive Component

6.10 The main benefit of the experimental LCU will be Lesotho's increasedability to cope with possible employment emergencies arising from a suddenreturn of migrant workers from RSA. Further, labor-intensive methods suitablefor normal, non-emergency use may be identified. These benefits have not beenquantified.

7. AGREEMENTS REACHED AND RFCOMMENDATION

7.01 During negotiations, the Government gave assurances that it will:

(a) during 1976 appoint a local counterpart in the MW PlanningUnit (para. 3.12);

(b) review, with ODM, CMW & PP procedures and formulatea plan to improve them, for discussion and agreementwith the Association (para. 3.24);

(c) employ consultants for the LCU under terms and conditionssatisfactory to the Association (para. 5.22); and

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(d) make available the additional financing required to completeboth components of the project and expend sufficient funds toensure continued maintenance of the project road and theMasianokeng-St. Michaels access road (para. 5.26).

7.02 During negotiations, Government and the Association agreed on aproject implementation timetable and on progress reporting procedures, forboth project components (paras. 5.13 and 5.24). Also agreed or. were termsof reference for consultants for the LCU (para. 5.22).

7.03 Conditions of credit effectiveness are:

(i) the employment of consultants to supervise the roadimprovement/reconstruction (para. 5.11); and

(ii) the execution and delivery of the Grant Agreement betweenGovernment and ODM (para. 5.26).

7.04 The proposed project is suitable for an IDA credit of US$5.5 millionequivalent to the Kingdom of Lesotho, on the usual terms.

February 17, 1976

TABLE 1

LESOTHO

SECOND HIGHWAY PROJECT

Road Network, 1974

(km)

Maintainedby Primary Secondary Tertiary Total

Bitumen MW 194 7 - 201

Gravel two-lanes MW 281 64 23 368

Tracks

Gravel one-lane MW 234 253 13 500

Earth CRDO 530 411 185 1,126Traders,Missions - 424 106 530

Total 1239 1,159 327 2,725

1/ Road classification and coding system was adopted in 1974.

Source: Based on Roughton and Partner's Transportation Study, 1974.

February 1976

LESOTHO

SECOND HIGHWAY PROJECT

Design Standards 1/

Recommended MaximnumWidth (m) Croasfalj(?% Gradipnts (1)

Design speed(kph) uarrlage Pave- Shoul- CurvatureTerrain Desrale Minimum Formation way ment der Desirable Absolute Desirable MaximumBitumen 1 Rolling 100 80 9.70 6.70 2.5 5 4 6 10 30' 3 10'Hilly 80 55 9.70 6.70 2.5 5 5 8 20 301 60 45lMount 0 50 35 8.oo 6.00 2.5 5 8 10 60 30' 16 15'Gravel 1 Rblling 100 80 11.30 7.60 3 5 4 6 1o 30' 30 10'Hilly 80 55 11.30 7.60 3 5 5 8 2 30' 60 45,Mount. 50 35 8.00 6.00 3 5 8 10 60 30' 160 15'Gravel 2 Rolling 80 60 8.oo 5.50 3 5 5 8 2. 30' 5" 451

HTilly 6 50 8.oo 5.50 3 5 7 11 4h 30' 8 15'Mount. 30 25 - - 3 5 10 12 180 0' 330 0

Gravel 3 Rolling 60 50 6.oo 3.50 3 5 5 8 40 30' 80 151Hilly 50 35 6.00 3.50 3 5 8 12 60 30' 160 15'Mount. 30 25 5.00 3.50 3 5 19 ih 180 O' 330 Q,

Gravel L Rolling 50 40 4°00 3.20 6 9 6 020 14 20 1Hilly 40 25 4.00 3.20 9 13 8 50' 23° 5,Mount 20 15 4.00 3.20 12 16 23 5 38 55

Bitumen 3 Mount. 5.00 3.50

7 Adopted in 1974.

Source: Roughton and Partners; Lesotho Transportation Study, and Terms of Reference for the Mountain Road,1974

'ebruary 1976

TABLE 3

LESOTHO

SECOND HIGHWAY PROJECT

Vehicles on Register, 1970-73

1970 1971 1972 1973

Cars 1,588 1,911 1,956 1,786

Light Commercial 1,400 1,927 2,030 2,065

Trucks 538 584 547 554

Buses 148 151 135 172

Othersi' 903 1,129 1,304 1,121

Total 4,577 5,702 5,972 5,698 /

Percent Increase 2/

on Previous Year - 25% 5% -5°:-

1/ Includes motorcycles, tractors and trailers

2! Doubtful estimate

Source: Lesotho Bureau of Statistics, Annual Statistical Bulletins, 1970-1973.

February 1976

TABLE 4

LESOTHO

SECOND HIGHWAY PROJECT

Roads Branch Expenditures, 1970/71 - 74/75(R'000)

1970/71 1971/72 1972/73 1973/74 1974/75

Administration 85.8 88.0 91.0 88.2 98.0

Maintenance 278.9 309.5 407.6 333.8 424.0

Construction 345.5 533.9 805.3 601.3 828.0

Total 710.2 931.4 1,303.9 1,023.3 1,350.0

Source: Lesotho, Appropriation Accounts 1970/71-1974/75, and Ministry of Worksand Communications.

February 1976

TABLE 5

LESOTHO

SECOND HIGHWAY PROJECT

Estimated Government Revenues from Road TIsprR, lQ71/72 - 74/75

(R'000)

Fiscal Years1971/72 1972/73 1973/74 1974/75

Bicyle Tax 0 0 0 5.0

Customs and Sales 1/ 586.0 637.0 808.0 1,067.0

Motor Drivers Licenses 8.9 9.2 19.0 19.4

Motor Vehicle Registration 172.8 184.5 206.8 205.0

Road Transport Fees 0 0.1 5.5 9.9

Total 767.7 830.8 1,039.3 1,306.3

1/ Estimate (by Ministry of Finance) of the proportion of Lesotho'sshare of the South African Customs Union revenue pool which isattributable to road transport imports.

Source: Lesotho, Appropriation Accounts 1971/72 - 1974/75.

February 1976

TABLE 6

LESOTHO

SECOND HIGHWAY PROJECT

Vehicle Operating Costs by Type of Road(Cents per km: 100 cents' = 1 Rand)l/

Road ConditlonDeteriorated

Vehicle Type Track Gravel Gravel Bitumen

Light Vehicles 22.88 16.13 13.40 8.34

Trucks 50.14 34.38 26.18 13.70

Buses 70.15 47.55 36.39 21.56

1/ Net of taxes, in January 1976 prices.

Source: Derived from Roughton and Partners,Lesotho Transportation Study, 1974.

February 1976

TABLE 7

LESOTHO

SECOND HIGHWAY PROJECT

Estimated Schedule of Disbursements

IBRD/IDA Fiscal Year Cumulative Disbursementand Quarter at end of Quarter

(US$ '000)

1976/77

September 30, 1976December 31, 1976 600March 31, 1977 1,000June 30, 1977 1,500

1977/78

September 30, 1977 2,000December 31, 1977 2,500March 31, 1978 3,000June 30, 1978 3,500

1978/79

September 30, 1978 4,000December 31, 1978 4,500March 31, 1978 5,200June 30, 1979 5,300

1979/80

September 30, 1979 5,400December 31, 1979 5,500

Source: Based on implementation schedule agreed at negotiations, January 1976.

February 1976

TABLE 8

LESOTHO

SECOND HIGHWAY PROJECT

Proposed Staffing of Labor-Intensive Construction Unit

Senior Engineer in Charge* * 1Assistant Engineer (Organization and Methods) 1Chief Technical Officer* 1Senior Technical Officer 1Junior Technical Officers 2Labor/Disbursement Officer 1Foremen 5Assistant Foremen 10Operators/Drivers 6Equipment Supervisor 1Mechanic 1Chainman 1Office Support 4

35

* These positions will be filled by consultants.

Source: Mission estimates, October 1975.

February 1976

TABLE 9

LESOTHO

SECOND HIGHWAY PROJECT

Economic Evaluation(R'OOO in January 1976 prices)

St. Michael's-Mantsonyane Road Construction

Construction Maintenance Savings in VehicleYear Costs"l Costs2/ Operating Costs

1976 1,218 -34

1977 1,218 -34

1978 -11 297

1979 -11 315

1980 20 334

1981 20 355

1982 29 377

1983 29 400

1984 29 425

1985 29 451

1986 29 479

1987 29 509

1988 29 541

1989 29 575

1990 29 611

1991 29 650

1992 29 691

Economic Return 13%

1/ Economic cost is financial cost of construction plus physicalcontingencies and supervision, less indirect taxes.

2/ Represents cost of maintaining the project road, less maintenance expendi-tures which would have been made in absence of the project. Assumes periodicmaintenance is carried out continuously along the road, a quarter of thetotal length being covered each year, beginning 1980 for the improved road.

Source: Mission calculations.

February 1976

TABLE 10

LESOTHO

SECOND HIGHWAY PROJECT

Economic Evaluation(R'OOO in January 1976 prices)

Mantsonyane-Thaba Tseka Road Construction

BenefitsCosts N'7mal

Road. 1/ Road 2/ Agricultural Agricultural TransportationYear Construction Maintenance Project 3/ Project 3/ Cost Savings 4/

1977 725 -14 2011978 725 -14 3751979 - 4 554 201 751980 - 4 586 395 921981 17 633 504 1001982 17 881 646 1091983 17 956 797 1181984 17 982 1,045 1291985 17 814 1,161 1401986 17 824 1,262 1521987 17 799 1,290 1651988 17 792 1,344 1801989 17 792 1,366 1951990 17 790 1,388 2121991 17 790 1,388 2311992 17 788 1,388 2511993 17 786 1,388 2731994-2010 per annut!5/ 786 1,388

Economic Return: 11%

1/ Economic cost is financial cost of construction plus physical contingencies andsupervision, less indirect taxes.

2/ Represents cost of maintaining the project road less maintenance expenditureswhich would have been made in absence of the project. Assumes periodic main-tenance is carried out continuously along the road, a quarter of the totallength being covered each year, beginning 1981 for the improved road.

3/ Based on the FAO/ World Bank Cooperative Programme Preparation Mission Reporton Lesotho First Phase Mountain Area Development Project, 1975, and assumingimplementation of a second phase from 1980.

4/ Represents savings to traffic which is independent of the agricultural project;savings to traffic associated with agricultural project are reflected in netvalue added to agricultural production.

5/ Evaluation assumes that benefits and costs of agricultural project wouldcontinue to 2010; provides for reconstruction of road in 1994-1995.

Source: Mission calculations.

February 1976

ANNEXPage 1

LESOTHO

SECOND HIGHWAY PROJECT

Project Progress Reporting Requirements

A. Road Construction Component

1. Progress Reports should be submitted quarterly in triplicate, no

later than one calendar month after the end of the quarter. The first Report

should cover the quarter ending December 31, 1976.

2. The Report should contain the following information:

I. General Information

(a) the physical progress accomplished to date of report and

during the reporting period;

(b) actual or expected deviations from the project implementationschedule;

(c) actual or expected difficulties or delays and their effect on

implementation schedule and the actual steps taken or plannedto overcome the difficulties and avoid delays;

(d) expected changes in the completion dates of the project;

(e) key personnel changes in the staffs of the MW, consultants,and contractors;

(f) matters which may affect the cost of the project; and

(g) any development activity likely to affect the economicviability of the project components.

II. A bar-type progress chart, based on the project implementationschedule, showing the progress in each project component andincluding a planned and actual expenditure graph.

III. A financial statement set out in tabular form which shows foreach of the project components:

(a) original estimated cost;

(b) revised cost, if appropriate;

(c) actual expenditure;

(d) projected expenditures; and

ANNEXPage 2

(e) actual withdrawals and projected withdrawals from theCredit Account.

IV. Brief confirmation of the status of aetion on each of the covenantsof the Credit Agreement.

B. LCU Component

1. Progress Reports should be submitted quarterly in triplicate, nolater than one calendar month after the end of the quarter. The first Reportshould co-rer the quarter ending December 31, 1976.

2. The Report should contain the following information:

I. General Information

(a) the physical progress in setting up the unit and itsaccomplishment to date of report and during the reportingperiod;

(b) actual or expected deviations from the work program;

(c) actual or expected difficulties or delays and their effect onimplementation and the actual steps taken or planned to overcomethe difficulties and avoid delays;

(d) key personnel changes in the staff of the LCU; and

(e) matters which may affect the cost of LCU's operations.

TI. A bar-type progress chart, based on the approved work program,showing the progress in each component and including a plannedand actual expenditure graph.

III. A financial statement set out in tabular form which shows foreach component of the work program:

(a) original estimated cost;

(b) revised cost, if appropriate;

(c) actual expenditure;

(d) projected expenditure; and

(e) actual withdrawals and projected withdrawals from the CreditAccount.

LESOTHOSECOND HIGHWAY PROJECT

ORGANIZATION OF THE MINISTRY OFWORKS AND COMMUNICATIONS

1-

|Ministry of Worksand

Conrounicarrons

t Post5 and k l Worka

rr~~~~~~~~~~~--- -l - - --

Offi. B

I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I

btSurvev Northern &

- ThN Mlnintry of W,orks knd Commonkcasio-ts Design Cocstr & Mainv.

was recentiy teorganised into two separate d -t & -t

mmnistrios. DktaiLs of tha now orgaonization Drawing CIt ice | tLrb

1

were not availabln at time rof printing.X Solls ~Sr uth-rLryorcrrorh Div,trorand ConstrortionMorn ni and Minten.-

Testltis bahsed 5t

Moyhlna Hock

Source: MWC World Bayk-15004

February 1976

LESOTHOSECOND HIGHWAY PROJECT

Implementation Schedule

CALENDAR YEARS

1976 1977 1978 1979

JIFIM_A _mL iAsJ F M A M J | A |S X N J I |X F i ¶A|M | J ff

MAIN ACTIVITIES RESPONSIBLE AUTHORITY

CREDIT SIGNATURE GOVERNMENT AND IDA

CREDIT EFFECTIVENESS GOVERNMENT AND IDA

ROAD CONSTRUCTION

REVISION OF CONSTRUCTION DOCUMENTS CONSULTANTS

APPROVAL OF DOCUMENTS IDA

BIDDING PERIODBID EVALUATION CONSULTANTS, MW, IDA

BID AWiARD MW S

ROAD CONSTRUCTION _ -

CONTRACT NEGOTIATIONS WITH SUPERVISION MW, IDA

CONSULTANTSSUPERVISION SERVICES CONSULTANTS

_ r _

MAINTENANCE AND WORKSHOP FACILITIES

TENDER ARRANGEMENTS FOR SUILDINGS MW

CONSTRUCTION MW -

ORDER FOR EOUIPMENT MW

DELIVERY OF EQUIPMENT MW

TECHNICAL ASSISTANCE

CONTRACT NEGOTIATIONS TO SIGNATURE MW

IN THE FIELD MW -

LABOR INTENSIVE CONSTRUCTION UNIT

CONTRACT NEGOTIATIONS WITH CONSULTANTS MW. IDA

TO SIGNATURERECRUITING AND SECONDING LOCAL STAFF MW, CONSULTANTS

_

PREPARATION OF INITIAL WORK PROGRAM CONSULTANTS

APPROVAL OF INITIAL WORK PROGRAM COORD. COM., IDA

IMPLEMENT WORK PROGRAM LCU

REPORTING,SCHEDULE CONSULTANTS * g * M s on _

N O

EVALUATION COORD. COM., IDA

STRENGTHENING LABOR COMMISSIONER'S OFFICE

CONTRACT NEGOTIATIONS TO SIGNATURE GOVERNMENT & UNDP/ILO

FORMULATION AND IMPLEMENTATION OF IMPROVED CONSULTANT _ - - -

PROCEDURESTRAINING OF LOCAL STAFF CONSULTANT

-

February 1976 World Bank-15700

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