Docwumt of The World Bank
Fon oMcm, usE ONLY Public Disclosure Authorized Repert No. P4118-ZA
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED CREDIT
OF SDR 3.0 MILLION
Public Disclosure Authorized TO THE REPUBLIC OF ZAMBIA
FOR A
TAZAMA PIPELINE REHABILITATION ENGINEERING PROJECT
August 30, 1985 Public Disclosure Authorized
This de.a Ia a SdS disriblem ad may be usd by rediulems ely la the performace of their edlal ale. Its cmt may et thrwis be disdue=e withou Wedd Bak atherwlino. CURREW EqUI S
Currency Unit Zambian Kwacha (K)
US$ 1.00 - K 2.34 K 1.00 - US$ 0.43
The Zambian Kwacha is officially valued in terms of a basket of currencies, for which the US dollar is the intervention currency. Since July 1983, the Government has followed a flexible exchange rate policy, making periodic adjustments in the official value of the Kwacha. The rates expressed above are as of March 31, 1985. The following are average annual exchange rates for recent years.
1980 US$ 1.00 = K 0.7885 1981 US$ 1.00 = K 0.8684 1982 US$ 1.00 = K 0.9282 1983 US$ 1.00 = K 1.2506 1984 US$ 1.00 = K 1.7943
WEICBTS AND MKASURES
I kilometer (km) = 0.62 miles 1 sq kilometer (km2 ) = 0.386 sq miles 1 metric ton (tonne) = 1,000 kg - 2,204.6 pounds
ABBREVIATIONS
DOE - Department of Energy (of the Ministry of Power, Transport and Comunications) EIB - European Investment Bank MPTC - Ministry of Power, Transport and Communications NEC - National Energy Council NOSCO - Ndola Oil Storage Company TOE - Tons of Oil Equivalent ZCCM - Zambia Consolidated Copper Mines ZESCO - Zambia Electricity Supply Corporation ZIMCO - Zambia Industrial and Mining Corporation, Ltd. FOR OFFICIAL USE ONLY
REPUBLIC OF ZAMBIA
TAZAMA PIPELINE REHABILITATION ENGINEERING PROJECT
CREDIT AND PROJECT SUMMARY
Borrower: Republic of Zambia.
Beneficiary: Tazama Pipelines Limited.
Amount: SDR 3.0 million (US$3.1 million).
Terms: Standard.
Onlending: For 20 years, including 5 years grace, at an interest rate of 9 percent; the beneficiary bearing the foreign exchange risk.
Purpose: The project would carry out a magnetic (or intelligence pig) survey of the 1,700 km Tazama Pipeline between Dar es Salaam.port and Ndola in Zambia to determine the extent of damage caused by corrosion. Progressive development of serious leaks threatens the pipeline's continued operation as the sole means of transporting feedstock to Zambia's INDENI Refinery. Apart from the survey, the project would: (a) examine various aspects of the pipeline's operations and management; (b) recommend initial measures to meet urgent operational and maintenance needs; and (c) carry out an engineering investigation and prepare an implementation program and cost estimates for the pipeline's rehabilitation.
Benefits and Risks: The project's systematic approach to preparing the pipeline's rehabilitation and the proposals for putting the pipeline company on a sounder operational and management footing will help safeguard the vital supply of feedstock to Zambia's only refinery at a time when continued supply of petroleum imports is essential to the economy. If the pipeline ceased to operate, the economy would be burdened with an additional annual freight cost of US$24 million. The continued viability of the pipeline operation is also important in terms of employment of a significant nuiber of Zambians and Tanzanians, duties and service charges paid at the port of Dar es Salaam, and the potential supply of the final refined products to Malawi, Zaire and Zimbabwe. A risk that the cleaning and surveying of the pipeline will aggravate the
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii -
leakage and cause environmental damar . will be mitigated by the close monitoring o: "ach stage of the pipeline being worked on. There is also a risk that the project will be delayed by a delay in the delivery of oil, which is required to propel the various survey devices through the pipeline. Purchase and delivery schedules will be agreed with the Government before the credit becomes effective.
Estimated Cost US$ Thousand Local Foreign Total
1. Pipeline and Tank Cleaning 50 80 130 2. Pipeline Modifications for Intelligence Pig Survey 50 90 140 3. Intelligence Pig Survey 60 1,883 1,943 4. Comprehensive Study of Pipeline, Pump Station, Tank Farm, Telecommunications and Operations; Training Needs - 905 905 5. Tank Drainage 50 90 140 6. Technical Assistance 50 170 220 7. Spare Parts and Equipment - 100 100 Base Cost 260 3,318 3,578
8. Physical Contingencies 26 322 348 9. Price Contingencies 14 160 174
Total Project Cost 300 3,800 4,100 (Taxes and Duties Exempt)
US$ Thousand Financing Plan Local Foreign Total
IDA - 3,100 3,100 EIB - 370 370 Tazama Pipelines Ltd. 300 330 630 Total 300 3,800 4,100
Estimated Disbursements:
IDA Fiscal Year 86 87 88
Annual 2,000 1,050 50 Cumulative 2,000 3,050 3,100
Economic Rate of Return: Not applicable.
Appraisal Report: None.
IBRD No. 16844. INTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF ZAMBIA FOR A TAZAMA PIPELINE REHABILITATION ENGINEERING PROJECT
1. I submit the following report and recommendation on a proposed credit to the Republic of Zambia of SDR 3.0 million (approximately US$3.1 million equivalent) on standard terms to help finance the Tazama Pipeline Rehabilitation Engineering Project. Proceeds would be onlent to Tazama Pipelines Limited. Cofinancing of 500,000 ECUs (about US$370,000) is expected from the European Investment Bank.
PART I - THE ECONOMY
2. A Country Economic Memorandum on Zambia (Report No. 5000-ZA) was distributed to the Executive Directors on April 24, 1984. This part is based on that report's findings and on subsequent information received from the Zambian authorities. Country data sheets are attached as Annex I.
3. Zambia's economy is heavily dependent on external trade and on government activity. Imports and exports range between 30 and 40 percent of GDP. Government expenditures amount to about 35 percent of GDP, and the Government owns a majority share of mining and most manufacturing enterprises. Copper mining provides over 90 percent of foreign exchange earnings and 15 percent of gross value added. Much economic activity is dependent on expatriate technical, managerial, and administrative skills.
Current Economic Situation
4. Zambia is currently in an acute stage of economic and financial crisis. Production has declined steadily for three consecutive years in most sectors due to reductions in import volumes. External trade has moved to a cash basis, because of the refusal of banks to open new letters of credit without reducing existing ones. Due in part to continued declines in the copper price, scheduled external debt service obligations amount to over 70 percent of export earnings. Debt rescheduling is required for the third year in a row, but the prospects for rescheduling are problematical in view of large arrears that have accumulated to members of the Paris Club and the INF. Disbursements of external loans have fallen sharply due to reductions in capital expenditure by both the Government and many public enterprises. As a result, a multi-faceted foreign exchange constraint now grips the country and threatens to override the positive effects of the Government's economic recovery program initiated in 1983. To avoid this, a major coordinated effort of debt restructuring and renewed financial flows is required for the Government's program to succeed. - 2 -
5. Zambia's economic and financial problems were initiated by a sharp decline in the copper price in 1975. Zambia's terms of trade have deteriorated steadily since then, and by 1984, were 70 percent below the average for the early 1970s. In 1982, and again in 1984, copper prices reached their lowest level in real terms during the post-World War II era. Real GDP has been in a general downward trend since 1975, declining on an average by about 1.5 percent per year. With population growing by 3.1 percent per annum, real GDP per capita is 25 percent lower than in 1974. GNP per capita was estimated at US$580 in 1983, using the World Bank Atlas methodology, but is now much lower as a result of major devaluations of the Kwacha in 1983 and 1984.
6. The balance of payments has been in chronic disequilibrium since 1975, with current account deficits climbing to an average of 19 percent of GDP in 1980-82. Nevertheless, the volume of imp-rts declined steadily and is now 50 percent below its level in 1980 and 75 percent below its level in 1974. This has resulted in an economy-wide problem of severe underutilization of capacity and, especially in' the mining sector, a large backlog of maintenance and rehabilitation expenditure that has contributed directly to a declining trend in copper production and exports. In 1984, copper exports fell to their lowest level (525,000 tonnes) since Zambia's independence. The current level of imports is now inadequate to sustain copper production and to provide a critical minimum for the rest of the economy to function efficiently. The large current account deficits have also led directly to Zambia's high level of external indebtedness. At the end of 1984, Zambia's total external liabilities stood at US$4.4 billion, including drawings from the IMF (US$740 million) and US$500 million in overdue commercial payments. By comparison, exports of goods and services amounted to somewhat over US$900 million.
7. The decline in copper prices also severely affected Zambia's fiscal and monetary positions. In the past, mineral taxes provided a large share of government revenue, but they have been negligible since 1976. A new mineral export tax was introduced in 1983, however, which now contributes about 10 percent of Government's revenue. Deficit financing absorbed a large share of net domestic credit and contributed to a sharp rise in consumer prices, averaging 20 percent per annum during 1976-78 and 12 percent per annum in 1979-82. Price increases have accelerated in 1983 and 1984 to about 20 percent per annum, reflecting the decontrol of prices in December 1982 and the devaluations of the Kwacha during the past two years.
8. There is no doubt that external factors have been an important cause of Zambia's present economic difficulties. Apart from low copper prices, other factors over which the Government has little or no control include transport difficulties in neighboring countries on which Zambia is dependent for the movement of foreign trade, and severe droughts which for three consecutive years have necessitated substantial food imports. In addition, copper mining in Zambia is past its peak, and for technical reasons, such as sinking deeper shafts and tapping less rich ore bodies, production costs are rising as ore reserves are depleted. -3-
9. Nevertheless, inappropriate policies and shortcomings in economic management have exacerbated the economic difficulties. The main deficiencies in economic policies were that: (i) pricing and subsidy policies favored the urban consumer at the expense of the agricultural producer, depressing the latter's income and incentive to produce for the market; also, controlled industrial prices led to low profitability in the manufacturing sector and a decrease in resources available for reinvestment; (ii) tax incentives and low interest rates led to a pattern of capital-intensive investment; (iii) exchange rate and tariff policies encouraged the use of artificially cheap imported raw materials and other inputs and discouraged the use of local materials and the development of non-mineral exports. As a result, a highly capital and import-intensive productive structure was created that proved to be very vulnerable to prolonged declines in the availability of foreign exchange.
Strategy for Economic Restructuring
10. Economically exploitable ore reserves are only sufficient to maintain present levels of copper production for another 15 years or so, after which production can be expected to decline sharply. In the long run, therefore, the copper industry cannot be counted on to provide the domestic and external resources required for development. In the absence of policies and programs to develop new sources of income, employment and foreign exchange, Zambia may expect a drastic fall in living standards and social well-being by the turn of the century. However, Zambia has the potential to develop alternative sources of income, employment, and exports. The greatest potential is in agriculture, where there are opportunities for import substitution (cotton, oilseeds, livestock, grains, forestry products, and fish) and for exports (betf, cotton, coffee, tobacco, groundnuts, and sugar). Once a good start is made with agricultural development, possibilities will be created for agro-based industries.
11. For any long-term growth strategy to succeed, however, it is of the utmost importance that financial balance be restored in the economy. As the main provider of foreign exchange, the copper industry has a major role to play. Without a rehabilitated copper industry, the Government's diversification effort would fail for lack of financial resources. For this reason, in 1984, the Bank approved an Export Rehabilitation and Diversification Project which aims to increase the efficiency of the mining industry and make it competitive again by international standards. This project was accompanied by an agreement on changes that would be needed in macro-economic and sector policies in order to restructure and diversify the rest of the economy and create the conditions for developing new sources of income, employment and exports.
12. The Government, with Bank and Fund assistance, has developed a wide-ranging package of policies and measures to bring about better economic management and a policy environment conducive to healthy economic growth and diversification. The Government's economic restructuring policies may be summarized as follows: -4 -
- Providing a system of incentives to producers and exporters of agricultural and industrial products in which prices are responsive to market forces;
- Ensuring the competitiveness of exports through an active exchange rate policy;
- Using tariffs and interest rate policies to reverse past trends of import dependence and capital intensity;
- Liberalizing administrative restrictions on foreign trade and the licensing of production, in order to improve the allocation of resources and to encourage investment in productive activities;
- Reducing the Government's deficit and recourse to domestic bank borrowing by reducing expenditure on personnel costs, subsidies and other non-development related activities;
- Improving planning and budgetary procedures to shift resources to productive uses and economic investments;
- Allowing greater competition in the procurement and selling of food crops. The National Agricultural Marketing Board (NAMBOARD), the Government's agricultural matketing agency, will move towards the role of buyer and seller of last resort, using a system of floor and ceiling prices for agricultural produce and inputs, respectively;
- Strengthening the technical and managerial capacity of Zambia Industrial and Mining Corporation (ZIMCO), which is the holding company of most state-controlled enterprises;
- Restructuring the energy sector to bring about lesser dependence on imported oil.
13. In the past two years, the Government has made significant progress in translating the above policies into tangible action. Stand-by arrangements were agreed with the IMF in 1983 and 1984. Under these programs, the Kwacha was linked to a basket of currencies and was depreciated in a gradual manner such that it is now more than 60 percent lower (in foreign exchange terms) than at the end of 1982. Because the Government has been successful in holding wage increases to considerably less than rises in the cost of living, it has maintained the benefits of devaluation in real terms, which has improved the competitiveness of exports. Debt rescheduling with members of the Paris Club, commercial banks and non-OECD governments was also obtained. Further measures taken under the IMF program included increases in interest rates and tough budgetary measures (including reductions in subsidies and a cap on new government employment) aimed at reducing the Government's domestic borrowing. Under the programs, the current account deficit was reduced to - 5 -
8.5 percent of GDP in each year and domestic bank borrowing by the Government to 3-4 percent of GDP in each year.
14. In terms of improving conditions for longer-term growth, the most significant of the above financial measures was no doubt the exchange rate adjustments. But other measures with significant long-term impact have been introduced as well. In December 1982, in order to allow market forces to play a more important role in the economy, the Government abolished the control of all wholesale and retail prices except for three essential commodities: wheat flour, maize flour and candles. Since then, prices for a wide range of commodities have increased, thereby helping to restrain domestic demand, while increasing the profitability of firms. Most recently, the price of wheat flour and bread was also decontrolled. Over the last three years, producer prices for most agricultural crops have been increased considerably in real terms. Together with concessionary tax rates for agricultural income and freer marketing arrangements for the livestock sector, these measures have already led to increases in the area under cultivation and in the marketed production of various crops. The Government has also improved the incentives affecting foreign trade by introducing a foreign exchange retention scheme and concessional tax rates for non-traditional exports, and by imposing a minimum tariff on many non-dutiable imports which should reduce the high rates of effective protection afforded to import-intensive industries.
15. As part of its economic recovery plans, the Government presented a three-year expenditure program to the Consultative Group for Zambia in May 1984. The Consultative Group strongly endorsed the Government's new policy initiatives, as well as its expenditure program which emphasizes rehabilitation of existing infrastructure, increased capacity utilization and selected investments to diversify the economy, especially in agriculture. As a result, the Group indicated that its members are prepared to increase their assistance to Zambia, although these indications have yet to materialize in new loan commitments. A follow-up meeting of the Group was held in June 1985, at which the Government's reform program was again endorsed. Increased financial assistance was indicated and, in addition, various members indicated that in view of Zambia's serious financial position, they are converting their assistance programs to a grant basis. Several members announced their willingness to make assistance available in the form of quickly disbursing loans and grants.
16. The Government's efforts over the past two years represent a major reformulation of economic policies and incentives. This progress is currently in danger of being set back, however, due to insufficient foreign exchange to maintain production (and exports) and to honor external debt obligations. On one hand, the Government wishes to improve the supply of essential consumer goods and thus show some benefits from the considerable sacrifices its policies have required of the population. In particular, a rapid increase in the consumer price of maize (resulting from higher producer prices, drought induced imports and lower subsidies) has heightened the political sensitivity of further reforms that result in higher prices for other goods and services. On the other hand, the Government must allocate considerable foreign exchange to debt service that cannot be rescheduled. 17. In facing this dilemma, the Government has opted for adopting a more liberal foreign exchange system in recognition of the need for greater efficiency in the allocation of these resources. This should also help mobilize additional foreign exchange for the official market from sources both within and outside Zambia, namely, from unrecorded exports and from official development agencies that would be willing to support such a significant policy change with quickly disbursing assistance. This strategy risks uprooting a hard-won political consensus that the economic reform program must continue, however. Against the hope that additional foreign exchange resources will materialize, the Government's decision to adopt a more liberal system is being taken with the clear expectation that higher prices will inevitably follow further depreciation of the Kwacha. It is therefore essential that additional foreign exchange resources be made available for the new system to work and for an increase in production to occur, in order to expand the supply of basic consumer goods and minimize upward pressure on prices. Along with the new system, the Government intends to introduce a wide range of supporting measures, including decontrol of interest rates, conversion of the import licensing system to one of import registration, and further measures to reduce government expenditure and borrowing from the banking system.
Creditworthiness
18. Scheduled service on public and publicly guaranteed (PPG) external debt will remain over US$400 million per annum for the next three years, or about 40 percent of export earnings at today's copper prices. Of this amount, about US$65 million per annum is due to the World Bank Group, including the IFC. (The Bank currently holds US$430 million, or 15 percent of Zambia's US$2.8 billion PPG debt disbursed and outstanding). In addition, about US$200 million per annum in payments is due to the IMF and another US$50-70 million per annum on Zambia's pipeline of commercial payment arrears and short-term borrowings. In total, then, scheduled debt service will amount to over US$700 million per annum for the next three years, and it will thus be necessary for the Government to continue its financial stabilization policies in cooperation with the IMF and to seek d 'ot relief through further rescheduling. Even with maximum debt relief, however, Zambia will continue to owe over US$400 million per annum in debt service that cannot be rescheduled. The Government should, therefore, avoid as much as possible borrowing on commercial terms, and additional borrowing should carry sufficiently long grace periods and maturities.
19. In the longer term, the restoration of Zambia's creditworthin--, depends on the vigor with which the Government continues to pursue its economic restructuring policies. The Government is well underway in adjusting its economic policies and is fully committed to take further steps towards economic reform and the restructuring of Zambia's productive industries. Assuming successful economic policies, careful financial management and adequate external assistance, Zambia could achieve a reasonable measure of export growth and diversification in 10 to 12 years and reduce its overall debt service ratio to 30 percent of exports. - 7 -
PART II - BANK GROUP OPERATIONS
20. Since 1956, the Bank Group has made 28 loans and 14 credits to Zambia, totalling about US$780 million (net of cancellations). Two additional Bank loans were made to Zambia and Zimbabwe jointly to finance shared power facilities on the Zambezi River. Fourteen loans and six credits have financed energy, transportation, communications and rural water supply projects. Four loans and one credit for education have helped expand Zambia's secondary and higher education systems, teacher training, and commercial, agricultural and technical education systems. Two program loans have helped Zambia maintain its development program in periods of severe economic dislocation. In agriculture, forestry and fisheries, six loans and six credits have been for industrial forest plantations and wood processing, livestock, commercial crops, integrated family farming, coffee production and smallholder dairy and fisheries development. Agricultural projects in the Eastern and Southern Provinces are assisting smallholder farmers and an Agricultural Rehabilitation Project is providing inputs to the sector in support of policy reforms. Other loans have assisted Zambia's urban development program, copper mining and, through the Development Bank of Zambia, its manufacturing, agricultural and industrial sectors. A technical qssistance credit is helping the Government improve its planning and project preparation.
21. The International Finance Corporation (IFC) has invested about US$85 million in eleven projects in Zambia since 1972. Two investments were in shoe manufacturing, two in a packaging materials plant, two in textiles and one each in the Development Bank of Zambia, cobalt production, copper production, tourism and in food and food processing.
22. The implementation of Bank-assisted projects in Zambia has deteriorated significantly in recent years, and serious delays have been experienced in the execution of a number of these projects. There are several reasons for this, the main one being the lack of budgetary resources with which to finance local counterpart expenditures and to prefinance local expenditures which are subsequently to be reimbursed by the Bank loan. Most seriously affected have been the Bank's agricultural projects for which funds, although budgeted, have not been released to the executing agencies for several months. Other reasons for the lagging implementation of projects are ineffective project management and inadequate inter-agency coordination. The Bank-assisted agricultural projects, which require careful management and effective coordination due to their complex design, have suffered from these problems, as has the Third Highway Project.
23. The deterioration of project implementation has, as expected, substantially reduced the rate of disbursements on Bank Group loans and credits. During the first four years of the period FY77-81, the disburse- ment rate on loans and credits to Zambia averaged slightly over 25 percent per annum, higher than the Bankwide average of 21.2 percent, or the 21.5 percent average for the Eastern Africa Region, and well above the 22.2 percent for Tanzania, 23.4 percent for Senegal and 20.2 percent for Bolivia. In FY81, however, the rate dropped to just over 16 percent, - 8 - compared with 20.7 percent Bankwide, 16.5 percent for Eastern Africa, 23.6 percent for Tanzania, 20.8 percent for Senegal and 21.2 percent for Bolivia. The rate has risen since FY81, reaching 20.1 percent in FY83, which was slightly below the average for the Eastern Africa Region (20.7 percent) and for the Bank overall (20.8 percent). To alleviate the problem, provision is being made for technical assistance in projects to strengthen implementing agencies and increased use of the Resident Mission in monitoring project execution. Revolving funds are being established under new and ongoing projects which should ease the Government's financial burden and accelerate disbursements. The Bank or IDA makes advance deposits into these funds to eliminate the need for prefinancing by the Government of local expenditures financed by the Bank/IDA. In addition, estimates of counterpart funds required and when the funds should be made available are being prepared by Bank/IDA staff well in advance of their need to allow implementing agencies as much lead time as possible to plan for these expenditures. As of December 1983, IBRD loans disbursed and outstanding were about 12 percent of Zambia's total medium and long-term debt disbursed and outstanding.
24. The Bank Group's strategy in Zambia is to support the country's efforts to diversify and increase econouic efficiency. Raising the efficiency of the mining industry through the Export Rehabilitation and Diversification loan so that the industry may contribute resources to diversification programs was the first step in carrying out this strategy. Subsequent operations, such as the recently-approved Agricultural Rehabilitation Project and the upcoming Industrial Reorientation Project, will focus on improving sector policies in agriculture and industry, which are, respectively, the sectors with the best potential for production and export growth and for employment creation. The Group's strategy also gives priority to reducing consumption of imported petroleum, substituting indigenous energy resources and raising the efficiency of energy and transportation services. Emphasis will be given to rehabilitation and maintenance, rather than expansion, of infrastructure and Bank Group assistance is expected to include a significant proportion of quick- disbursing resources. Support in addressing the longer-term development constraints, e.g., improving economic management, education, population, health, etc., is also part of the strategy. Policy and institutional reform programs in each of the sectors, as well as on the macroeconomic level, are being agreed with the Government.
PART III - THE ENERGY SECTOR
(a) Background
25. During the past 20 years, Zambia has moved from complete dependence on energy imports to a high degree of self-sufficiency. The country is a net exporter of hydro power, but is still totally dependent on imports for its petroleum needs. Of total energy consumption in 1983/84 of 4.6 million tons of oil equivalent, 45 percent was from woodfuel, 33 percent as electricity and 13 percent in the form of petroleum - 9 - products. The mining sector has remained the dominant user of commercial energy, accounting for 60 percent of consumption, followed by industry and commerce (24 percent) and transportation (9 percent).
26. With depressed economic conditions, domestic power consumption will at best grow slowly over the next three to five years and exports are expected to fall during the second half of the decade as Zimbabwe's consumption is also fairly static while it is increasing its thermal generation capacity. Zambia's substantial power capacity surplus will therefore increase over this period, postponing the need for investment in generating plant to meet domestic demand beyond 1995. The resulting low marginal cost of power over the next 10 years has important implications for the utilization of electricity, including its use as household energy, the needs of which are largely met by char-oal. As the price of charcoal is rising rapidly with deforestation in the main consuming areas, and as the cost of kerosene is high, substitution of electricity for existing household fuels is an ircreasingly attractive option. Meanwhile, the domestic charcoal industry is growing in response to Zambia's rapid and relatively high urbanization.
27. Coal production at Maamba, Zambia's only colliery, has fallen progressively in recent years to about 480,000 tonnes in 1983/84, which is under 50 percent of the colliery's design capacity. The fall is due mainly to inadequate replacement, repair and maintenance of plant, aggravated by shortage of foreign exchange, difficult mining conditions and problems of management and technical supervision. To cover the resulting shortfall, about 58,000 tonnes of coal were imported from Zimbabwe in 1983/84.
28. In the sphere of energy substitution, progress has been made in the substitution of electric for diesel power in the copper mines, and annual savings of US$8.0 million a year are expected to be made by Zambia Consolidated Copper Mines (ZCCM). Significant savings are also technically possible by substituting coal for heavy fuel oil in most copper smelting operations. Outside the mines, progress in energy conservation has been limited. A proposed industrial conservation audit of the 20 largest industrial consumers of petroleum fuels has been delayed because of a lack of technical knowledge and equipment.
29. Energy Sector Institutions. All energy sector executing agencies are either wholly or partly owned and controlled by the ZIMCO group, the parastatal industrial and commercial holding company. Among ZIMCO's subsidiaries are the Zambia Electricity Supply Corporation (ZESCO), Indeni Petrolesm Refinery, and Ndola Oil Storage Company (NOSCO). ZIMCO also holds a majority share holding in the Tazama Pioelines Ltd and most of the large energy user entities, including ZCCM, Chilanga Cement, Zambia Railways and the United Bus Company of Zambia. All aspects of energy sector activities from procurement to consumption have a direct impact on and are influenced by ZIMCO subsidiaries. Although sparse, much of the country's expertise in the technical areas of energy pricing, procurement and investment analysis is also assembled in this group. To make better use of such skills, ZIMCO should consider rationalizing its corporate structure in the area of petroleum procurement, transportation, refining and wholesaling. The existing structure of four separate companies in the - 10 - petroleum subsector inhibits efficient use of scarce manpower and apparently has few major operational advantages. Strengthening of ZIMCO's energy advisory unit to also recommended to increase its impact on the energy policy and decisions of major companies in the ZIMCO group of its contribution to the development and implementation of a national strategy.
30. Recognizing the need for institutionalizing energy sector policy formulation and coordination, the Government established in 1980 the National Energy Council (NEC), whose 12 members represent energy suppliers, the private sector, academia and some branches of Government. The NEC's role is to advise the Minister of Power, Transport and Communications (MPTC) on key issues of energy policy and planning; but its status as An advisory body and its lack of executing authority have limited its impact on energy sector coordination and decisions. The long delay tn establish- ing the secretariat and the fact that senior officials of the MPTC do not serve on the council has also handicapped its performance. Subsequently, MPTC established a Department of Energy (DOE). A director was appointed in 1984 and has a professional staff of eleven, most of whom were appointed in 1984. The Department's princip&l activities are: (a) carrying out an energy consumption survey, organized jointly with the NEC; (b) establishing a computerized database; (c) upgrading the energy balance and developing an energy planning model; (d) research and development of possible new and renewable energy applications, particularly in the rural sector; and (e) planning an industrial energy conservation audit. The DOE does not as yet have a comprehensive work program covering the full range of major energy sector issues (investment strategy, pricing, etc), and its effec- tiveness suffers because several major issues, such as coal, petroleum exploration and woodfuel policy, are outside the Ministry's direct sphere of responsibility. Both DOE and NEC are in the process of developing their respective roles and institutional capabilities. However, in view of the energy sector's pressing problems and scarce skills, the existing institutional structure is not suited to produce a clear and comprehensive strategy for the sector and make best use cf the scarce analytical talent that is available. The Bank's Energy Assessment (para. 43) recommended that these two bodies be merged into a single one, responsible for advising on the formulation and execution of energy policy across the whole sector. The issue would be addressed by a proposed UNDP/World Bank technical assistance operation to improve energy planning.
(b) The Petroleum and Refining Sector
31. On a per capita basis, Zambia is not a petroleum intensive economy by international standards. Per capita petroleum consumption of around 133 kilograms (kg) is lower than most middle-income countries with about the same per capita income levels. However, because Zambia is landlocked, its capacity to meet petroleum products demand is entirely dependant on the Dar es Salaam-Ndola pipeline and on the INDENI refinery. The technical limitations of the imbalanced refinery, which was built in 1973, constrain its ability to adjust product output to the changing patterns of energy demand in Zambia. The petroleum bill has been making increasing claims on declining export earnings even while the country is reducing petroleum fuels consumption. The US$134 million cost of petroleum - 11 - imports in 1983/84 represented 17 percent of export earnings. This heavy burden has contributed to preventing Zambia from rehabilitating the pipeline and modifying the refinery. To reduce consumption levels, the Government introduced in 1976 rationing and pricing measures, which, coupled with a decline in economic activity, resulted in an average annual fall of 4.4 percent in the overall consumption level of petroleum products. However, the potential for further reductions through rationing and pricing measures without seriously affecting vital services are limited. Thus the Government has initiated programs to reduce petroleum demand by substitution with domestically-produced energy supplies. Notably, a program has begun to increase supplies of locally-produced hydro-electricity and coal to replace fuel and diesel oil used in the mining sector (para. 28). As a result mainly of the reduced demand for fuel oil, there is a relatively greater need for middle petroleum distillates. These are projected to increase from 54 percent of petroleum fuels demand in 1980/81 to 69 percent by 1990. This demand can be met only through changes in the output pattern of INDENI Refinery (para. 35).
32. Pricing. Refined product prices, both ex-refinery and at the consumer level, are set by the Government. While the pricing policy ensures that petroleum products on average reflect the full economic cost of imports to the country, in practice the prices of premium and regular gasoline have been kept disproportionately high in order to subsidize fuel oil as a concession to the mines, which were required to switch from coal to fuel oil when the refinery at Ndola was commissioned in 1973. Wholesale gasoline is priced 40-50 percent above import parity equivalent, diesel oil 2 percent above, kerosene at parity and wholesale fuel oil 23 percent below. Taxes on gasoline are roughly 50 percent, on diesel oil 60 percent and on kerosene 20 percent. Fuel oil is not taxed. The impact of these price differentials and cross-subsidies will be reviewed as part of the Government-Bank dialogue on the formulation of an energy sector strategy (para. 43).
33. Indigenous Potential. Until the early 1980's Zambia had never been explored for hydrocarbons. In 1982, with the Bank assistance, the Government began a regional exploration program over several prospective areas. An aeromagnetic survey was followed in 1984 by several gravity pro- files, complemented by a petroleum geologic study. Two major prospective areas have been identified: (a) the Luangwa and Iano valleys, which are classic rift basins in eastern Zambia; and (b) the Western Zambia Basin, covering about 160,000 square miles. Forty-four private oil companies attended a promotion meeting in June 1985 and some of them are expected to submit by November 1985 proposals for the next stage of exploration.
34. Petroleum Supply and Refining. Crude oil and refined products are bought from major international companies by ZIMCO, on behalf of the MPTC, which arranges shipping from the Middle East to Dar es Salaam. Funding is by means of a revolving fund, with a credit ceiling of US$100 million, established for oil purchase by a consortium of banks led by Bank of America. The crude oil is transported from Dar es Salaam to the INDENI Refinery in Ndola by Tazama Pipelines Limited (para. 37). Refining is done by the INDENI Petroleum Refining Company Limited (INDENI Refinery). The - 12 - refinery supplies the petroleum products needs of Zambia except those imported direct by the marketing companies. Storage of refined products is handled by the NOSCO, a wholly owned subsidiary of ZIMCO. The subsidiary is also responsible for the sale of the refined products on behalf of ZIMCO to oil marketing companies at Government-controlled prices. Distribution and retail sales are carried by local affiliates of five international oil marketing companies - Shell/BP, AGIP, Mobil, CALTEX and Total.
35. INDENI Refinery. The INDENI Petroleum Refinery Company Limited at Ndola is a subsidiary of ZIMCO and is owned equally by ZIMCO and AGIP. The refinery is well managed, the organizational structure is suitable for the present plant, and monitoring of operations is good. Equipment is kept in excellent condition and operating costs are within acceptable limits. The refinery has a capacity of 25,000 barrels per stream day (bpsd) or about 1.1 million metric tons per annum. On completion in 1973, the refinery was expected to meet the petroleum fuel needs of Zambia, as well as a substantial part of the requirements of neighboring Zimbabwe, Malawi and eastern Zaire, at least during the initial years of its operation when its design capacity exceeded the demands of the Zambia market. Relatively high initial throughput levels were disrupted after 1977 through increases in petroleum prices and foreign exchange shortages. These encouraged conservation efforts in Zambia as well as the neighboring countries, resulting in a decrease in consumption of the petroleum products. At the same time the refinery's production pattern fell out of balance with the increasing need for middle distillates. The refinery began its operation by processing Iranian light crude oil with up to 25 percent spike (i.e. 75 percent light crude oil, 17 percent diesel oil and 8 percent naphtha), actual quantities of spiking components being varied to meet market demand. But because the design production pattern was not suited to meet changing market demand, the refinery progressively changed to a feedstock consisting primarily of Arabian light crude oil with a spike above 40 percent. At present, the refinery produces an excess of heavy fuel oil in trying to satisfy domestic demand for lighter products, such as diesel, kerosene and gasolene. Also, potential for petroleum fuels export from Zambia to the neighboring countries can be exploited only if the refinery can produce the required product slate. A yield pattern consistent with the changing demand profile at an affordable investment cost is currently being considered in the context of an ongoing Bank-financed engineering project.
(c) Tazama Pipeline
36. After Independence in 1965, the Zambian Government decided to provide the country with a more reliable and less costly oil supply. As a result, the Tazama Pipeline was constructed and placed in service in 1968 as a refined product facility from Dar es Salaam, Tanzania, to Ndola, Zambia. The 1,700 km line consisted of 8-5/8 ins. outside diameter steel linepipe and five pump stations. In 1972/73 the system was converted to a crude oil (spiked with distillate) carrier to provide feedstock for the INDENI Refinery (para. 35). To increase capacity, a 12-3/4 in. outside diameter linepipe was laid parallel to the original pipeline in several u-hill stretches, amounting to a total of 769 kilometers, as well as two - 13 - additional pump stations and an additional engine/pump unit at each of the original stations. The original construction and the expansion was carried out by Italian consultants with Italian banks providing the finance. To accommodate the conversion to crude oil, a tank farm consisting of six floating roof storage tanks, a tanker mooring/offloading facility and a submarine pipeline were installed at Dar es Salaam Port. These marine facilities are capable of handling 100,000 - 120,000 deadweight ton tankers discharging at a maximum rate of 6,000 metric tons per hour. The converted pipeline system capacity is rated at 160 cubic meters per hour, or about 1,120 barrels per hour. The current annual volume of oil transported by the pipeline is 600,000 tons, valued at US$140 million.
37. The pipeline company, Tazama Pipelines Limited, is a joint venture registered in Zambia and owned 67 percent by the Zambia Government and 33 percent by the Tanzania Government. The Zambian majority shareholding in the pipeline company is held by ZIMO (para. 29). There are four Zambian members of the Board, the most senior of whom is the executive director of ZIMCO, and three Tanzanians, including the chairman of the Tanzanian Petroleum Development Corporation. The company has a senior management staff of eight and about 500 other employees, including 5 expatriates and 280 Tanzanians. The company's optimum staff requirements are currently being reviewed (para. 51).
38. Financial Position. The pipeline company had net assets at the end of December 1984 of US$18.5 million, of which US$15.7 million were fixed assets. Share capital of the two governments totaled US$3.8 million, supported by reserves of US$9.9 million. Outstanding debt of US$4.6 million included the US$2.9 balance of a long-term loan from Finanziario S.P.P., Italy. Debt service during 1984/85 amounted to about US$1.0 million, and the ratio of debt to equity was about 0.3:1. Throughput tariffs charged to ZIMCO have been progressively increased, from about US$7 per metric ton in 1979 to about US$10.3 in 1984, to satisfy the 1967 Convention between Zambia and Tanzania concerning the pipeline's operation, in which both governments are committed to the principle of tariffs being adjusted to meet the pipeline company's operating and maintenance costs and debt obligations. But because throughput was less than forecast in 1984/85 as a result of a reduction in oil imports, the company experienced an operating loss of about US$1.2 million. The pipeline company agreed that it will annually review financial forecasts, and act promptly to rectify any threatened shortfall in the coverage of operational and maintenance costs and debt in accordance with the tariff provisions of the existing Convention between the Zambian and Tanzanian governments (draft Project Agreement, Section 4.02).
39. The Convention governing the pipeline's operation provides for the governments to make available for the use of the pipeline company required public land or easements, and assist the company in the compulsory purchase of any private land. Rights of access to the pipeline and its installations by staff of the pipeline company is assured under the Convention. The company does not have to pay rent or other charges for pipeline company's use of public land in the two countries. As a standing arrangement, the Tanzanian Government has undertaken not to levy tax or duty in Tanzania on petroleum products or crude oil carried by the pipeline, except for port dues and wharfage charges. - 14 -
40. Pipeline Leakage. At the time the Bank appraised and approved its loan in 1982 for investigating modification of the INDENI Refinery, the pipeline was operating without any significant technical problem, and leakage that had been detected was minimal and not considered unusual. However, a progressive increase in the incidence of the leakage was noted over a period of about 18 months, particularly in the initial 250 km sections of the pipeline from the port at Dar es Salaam. This was the result of corrosion caused by the acidic soil in the region, and, to a lesser extent, by the entry of sea-water into the system. The cost of oil lost through leakage during the year 1983/84 is roughly estimated at about $2.0 million, but this estimate is not reliable because of the lack of sophisticated measuring facilities. The loss has been borne by ZIMCO and is not covered by insurance, because offshore insurers consider the operation a high risk, requiring high premiums. During the past few months, consultants advising Tazama have reported a marked increase in the incidence of leakage evidenced by a fall in hydrostatic pressure in sections of the pipeline, significant staining of the soil where leakages occur, and advanced state of deterioration of pipeline sections that have been replaced. Consequently, fears have grown that the operation of the pipeline may be threatened if nothing is done.
41. Over the years, the pipeline company's maintenance operations have included measures to improve cathodic protection of the pipeline, reduction of seawater entering the system, and improved identification of the more seriously damaged sections of the pipeline. There has been an ad hoc series of measures to repair these sections. More recently, the company's efforts have been focused on repairing the frequently occurring leakages to prevent interruption of feedstock flow to the refinery. This has detracted from the company's ability to assess systematically the extent of damage and conduct a comprehensive maintenance program. The company's problems have been compounded by a lack of foreign exchange to buy spare parts. The proposed project will provide for spare parts to carry out the most urgent repairs, pending the eventual full rehabilitation.
(d) Bank Role and Strategy in Sector
42. The Bank's lending for energy in Zambia has focussed in the past on the development of hydropower generation, including expansion of the transmission network. More recently, the Bank has helped the Government prepare for the rehabilitation of the coal industry and modification of the country's only refinery. Bank assistance has especially helped to strengthen the management and planning of key institutions in the energy sector, notably ZESCO; ZIMCO (para. 29); the Central Africa Power Corporation (CAPC), which the Bank helped to establish to encourage joint energy development between Zambia and Zimbabwe; the coal industry; the energy planning function of MPTC; and the oil exploration capacity of the Department of Geological Survey. Technical assistance is currently proposed under the UNDP/World Bank Energy Sector Management Assistance Program to recommend institutional restructuring or other improvements to enhance energy planning and coordination. The Bank's first loan (Loan 145-RN; June 1956) was made prior to Zambia's independence, to assist with - 15 - construction of the Kariba Dan and the South Bank power station. The second loan (Loan 392-RN; October 1964), the first to independent Zambia, helped finance a 330 kv high-tension transmission line, while the third (Loan 701-ZA; July 1970) was for the Kariba North Power Station. A fourth operation (Loan 919-ZA; July 1973) helped construct the Kafue Stage II hydroelectric project and was followed by a supplementary loan for Kariba North in 1974. In May 1982, an engineering project was approved (Loan 2151-ZA; June 1982) to study the technical and economic feasibility of modifying the INDENI Refinery (para. 35). The Bank also assisted a project (Loan 2152-ZA; June 1982) for carrying out detailed aeromagnetic and gravity surveys to provide data to attract exploration of hydrocarbons by foreign oil companies (para. 33); and helped finance an engineering project (Credit 1333-ZA; March 1983) to prepare the rehabilitation of Maamba Colliery.
43. The joint UNDP/World Bank Energy Assessment reportl/ published in 1983, identified Zambia's energy sector major issues to be: (a) imbalanced configuration of the Indeni Refinery; (b) inadequate knowledge of the potential for substituting domestic for imported energy; (c) exces- sive distribution losses and inadequate maintenance of the power system; (d) inefficiencies in the production and transport of coal; (e) localized shortages in supply of woodfuels and inadequate afforestation programs; (f) inappropriate pricing of energy products; and (g) short-comings in energy-planning and policy implementation. A Bank mission visited Zambia in December 1984 to review the status of the assessment recommendations, and the Bank's dialogue with the Government is continuing. The Bank's findings are compatible with "Economic Crusade, 1985," the Government's short-term economic program announced in late 1984, which sets out the country's economic priorities as follows: reduce inessential imports to conserve foreign exchange; eschew investment in new projects and focus on essential rehabilitation of existing plant and infrastructure; and seek new export opportunities. These priorities mirror closely the major thrust of the Energy Assessment Report, which recommended reducing energy imports, particularly of petroleum; improving the reliability of the existing power system; rehabilitating the Maamba colliery; and rationalizing energy prices to promote efficient consumption. With the level of energy demand unchanged, foreign exchange even more scarce and the growing backlog of essential maintenance and rehabilitation, those recommendations become even more urgent.
44. During the period since the Assessment, one of the main positive developments has been completion of pre-investment evaluations relating to several of these priority investment recommendations. These include feasibility analyses of alternative modifications to the INDENI Refinery that would adjust its produce mix better to match demand and thereby reduce the cost of petroleum imports; and rehabilitation needs of the Maamba colliery to raise its output capacity sufficient to meet potential domestic and export demand for coal. Modest progress has been made in energy substitution, particularly of diesel and fuel oil in the copper mines; in rationalization of energy prices; and in strengthening
1 Zambia: Issues and Options in Energy Sector, Report No. 4110-ZA, January 1983. - 16 -
are needed to energy sector institutions. In several areas, further steps implement the Assessment recommendations. The household energy supply system needs to be strengthened through a combination of afforestation and programs, better charcoal production, marketing and consumption surveys review of substitution possibilities, including electricity and coal briquettes. Potential rural electrification investments need to be carefully evaluated and implemented only if economically justified. Institutional capability in the energy sector needs to be strengthened and responsibility for the coordination of energy policy centralized.
45. Following completion of the pre-investment studies, there is now a need for: (i) a carefully structured and selective energy sector investment program, consistent with current economic priorities and avail- able resources; and (ii) technical assistance to ensure that the investment program is complemented by appropriate policy action and that the remaining essential pre-investment work is completed. Zambia faces a difficult task in planning energy sector investment over the remainder of this decade. Due to the urgent need to reduce oil imports, the backlog of essential maintenance and rehabilitation work on the energy supply system, and the rising cost of woodfuel, there are a large number of energy investment options. The likely scarcity of external resources, relative to potential energy sector investment projects, neces-sitates careful prioritization of the alternative investments outlined above.
PART IV - THE PROJECT
Background
46. After growing evidence during 1983-84 of progressive deteciora- tion of the pipeline, the company engaged engineering consultants to undertake a preliminary survey of the pipeline and its associated installations and propose a detailed engineering and financial plan for a systematic survey. The company accepted that a magnetic survey of the entire pipeline should be carried out to provide a comprehensive and accurate assessment of corrosion damage. Terms of reference and bid documents for such a survey have been drawn up with the assistance of the consultants and the Bank. Appraisal of the engineering project for implementing the survey was carried out in March/April 1985. The Government of Tanzania has informed the Bank that it fully endorses the project's objectives. Negotiations were held in Washington, D.C. on August 7 and 8, 1985. The Zambia delegation was led by Mr. F. M. Siame, Senior Under Secretary, Ministry of Finance. Annex III contains Supplementary Project Data.
Project Objectives
47. The project would carry out a magnetic (intelligence pig) survey of all 1,700 km of the Tazama Pipeline, from Dar es Salaam port to the terminal point at the INDENI Refinery in Ndola, Zambia, to determine the extent of corrosion damage. Based on the survey's findings, and an exam- ination of all associated facilities, a report would be prepared on the - 17 - pipeline system's status and future management, financial, operational and maintenance needs. Also, an engineering investigation would be carried out, and cost estimates and an implementation program prepared, for rehabilitation of the pipeline, for which the Bank is prepared to consider providing assistance.
Project Description
48. The project would provide for:
(a) Cleaning of the Tazama Pipeline and associated tankage.
(b) Pipeline modifications required for Intelligence Pig Survey.
(c) Intelligence Pig Survey.
(d) Comprehensive study of the pipeline, pump station, tank farm and telecommunications facilities; systems review; study of training needs.
(e) Seawater drainage from tanks.
(f) Technical assistance for project management.
(g) Spare parts for urgent repairs.
Detailed Features
49. The magnetic survey would identify elements of the pipeline system which may require modification or rehabilitation if the pipeline is to constitute an efficient and reliable means of transporting crude oil to Zambia. The entire 1,700 km pipeline, which has been laid about a metre underground, would be made ready for the survey by use of a cleaning pig. It would be followed by an intelligence pig for inspecting and recording the condition of the pipe-wall through use of a magnetic field which would locate internal and external pipeline damage. Priority would be given to the most critical 250 km of the pipeline near its terminal in Dar es Salaam, where soil acidity and internal corrosion have resulted in the most severe leakage. Urgent interim repairs would be defined and scheduled for any severely damaged sections that threaten widespread rupture. As both the cleaning and intelligence pigs need to be carried through the pipeline by the flow of crude oil, the Government will, as a condition of credit effectiveness, submit to the Association an acceptable program for the supply and flow pattern of the crude oil (draft Development Credit Agreement, Section 5.01 (b)).
50. Investigations would also be carried out into all other aspects of the pipeline's operation, including a survey of soil chemistry, the effect of different pumping rates and operating pressures on the pipewall, and the possibility of providing replacement to relieve badly-damaged sections. Three of the six tanks at the Dar es Salaam Tank Farm would be modified to enable accumulated sea water to be drained off. These modifications would include the replacement of drains and piping and - 18 - improvements to the Tank Farm communications system. In addition, an examination would be carried out of the pipeline company's operational and maintenance procedures and its technical information system.
51. Based on the comprehensive findings of the survey, a report would be prepared recommending: (a) a rehabilitation program for the pipeline; (b) immediate actions required to improve operations, including surveillan- ce, maintenance, telecommunications and data-processing; and (c) a training program for the pipeline company. These recommendations would be comple- mented by a study to be conducted by ZIMCO on the pipeline company's management structure, and an ongoing study by the pipeline company to identify staffing economies. The project includes Technical Assistance for project management (para. 52).
Costs and Financing; Onlending
52. The project's total costs, including contingencies, are estimated at US$4.1 million, of which US$3.8 million are foreign. The project is exempt from taxes and duties. Costs of equipment and materials account for 10 percent of base costs and technical and consultancy work for 90 percent. Although the pipeline company's recurrent costs for maintenance will be increased as a result of the consultants' recommendations, overall recurrent costs to the economy are likely to be reduced as oil losses are eliminated. The base costs of consultancies and equipment are calculated on the basis of April 1985 prices. Average physical contingencies have been estimated at 10 percent. All price contingencies are included at 5 percent for FY86 and FY87, reflecting the likelihood that nearly all contracts will be signed in the first few months of project implementation.
53. The US$3.8 million foreign exchange required by the project would be provided by the IDA credit of US$3.1 million (which would finance 82 percent of foreign costs, or 76 percent of total project costs), a concessional loan of US$370,000 by the European Investment Bank and US$330,000 by Tazama Pipelines Ltd. The IDA credit would finance consultancy and technical services and some spare parts for the most urgent repairs. The EIB loan would finance mainly equipment, materials and spare parts (e.g. purchase of cleaning pig, pipeline sections, pumping and telecommunications equipment) and some civil works. The pipeline company will finance local costs of US$300,000. The Government would onlend the IDA credit at 9 percent for 20 years, including 5 years of grace, to the pipeline company, which would bear the foreign exchange risk. The twenty-year term is consistent with that of government lending to parastatals. Execution of a subsidiary loan agreement between the Government of Zambia and Tazama Pipelines Ltd is a condition of credit effectiveness (draft Development Credit Agreement, Section 5.01 (a)). The pipeline company has received the endorsement of the Tanzanian Government, as shareholder, for the company to undertake the loan obligation.
Project Execution and Monitoring
54. Overall responsibility for the project would be vested in a supervisory committee, already established, consisting of the senior management of ZIMCO and the pipeline company, which would approve planning - 19 - and proposals for programs, scheduling, commitments, contracts and expenditures; and ensure, and participate in, monitoring of progress and performance reporting (draft Development Credit Agreement, Section 3.04). Execution would be carried out by a project unit recently established and consisting of existing technical and financial staff of the pipeline company. The unit will be headed by a project-financed Engineering Manager, who would serve also as executive secretary to the supervisory committee. The pipeline company and the Association will, by February 28, 1986, agree on prompt implementation of the most urgently required maintenance measures identified by the consultants atd phased implementation of the recommendations of the management study being conducted by ZIMCO, particularly in regard to coat-reduction measures identified (para. 51) (draft Project Agreement, Section 2.07). The consultants' final report and the detailed proposals for rehabilitation would be completed by June 30, 1986. These proposals would be discussed by the pipeline company and the Association, and a program for phased implementation drawn up by September 30, 1986, based upon agreed recommendations (draft Project Agreement, Section 2.08).
Procurement
55. Procurement and hire of consultants for IDA-financed components would be according to Bank guidelines. The -intelligence pig survey" (US$1.9 million) is regarded as a technical service and would be procured through invitations to tender to the several companies specializing in such a service. Consulting services for the general study and engineering work (US$605,000) would be provided by a suitably-qualified international firm already selected. The firm is currently retained by the pipeline company to carry out the initial assessment of the pipeline investigations. Because of the urgency of the situation, and the special knowledge of the pipeline and the terrain that the consultants have developed in recent months, the Association accepts continuation of the consultancy for the proposed project. The consultants' terms of reference have been prepared with the assistance of the Bank and are acceptable to the Association. The Bank has also approved the consultants' contract. Procurement of spare parts financed by IDA (e.g., pipes, pumps, chemicals, valves, cleaning pigs or pig parts, and telecommunications parts) will be by international shopping, but allowing for purchase of spares from original suppliers as appropriate. Goods and services to be financed by EIB would be procured according to EIB's preferences, and would involve procurement mainly in member countries of the European Economic Community. Altogether, the project would finance 120 staff months of consultancy services and 24 man-months of technical assistance (for the engineering manager position).
Disbursements
56. Disbursement of the IDA credit of US$3.1 million equivalent would be for 100 percent of foreign expenditures for technical services (US$2.4 million), and 100 percent of foreign expenditures for consultant services for project management (US$170,000), and 100 percent of foreign expenditures for urgent spare parts and equipment (US$100,000). There would be an unallocated amount of US$430,000 to be allocated as appropriate to other categories during project implementation. Disbursements would be - 20 - made against full documentation for all other expenditures, except for reimbursements under contract for goods and services with a contract value below US$20,000 whlich will be made solely on the basis of statements of expenditures. Supporting documents for these withdrawal applications would be retained in one central location available for inspection by IDA. To expedite disbursements and facilitate project implementation, a Special Account would be established in a commercial bank in Zambia with an initial deposit of SDR 100,000 equivalent. The Special Account would be used exclusively for the financing of the above-mentioned items. It is expected that the credit would be fully disbursed by March 31, 1988 (draft Development Credit Agreement, Schedule 3).
Audit and Accounts
57. Project funds would be administered by Tazama Pipelines Ltd., subject to the regular monitoring and approval of commitments, contracts and expenditures by the supervisory committee (para. 54). The project's financial records would be maintained by existing accounting staff under the Finance Manager and reviewed by the supervisory committee. A special project accounting system will be introduced, to the satisfaction of the Association, in which details of authorizations, levels of authority and provisions and limitations will be spelt out. Project accounts would be audited by the pipeline company's existing auditors, an international firm of repute, whose qualifications and experience are acceptable to the Association; and the company's audited accounts, together with the auditor's report, submitted to the Bank not later than six months following the end of the fiscal year, including those for expenditures made under the Special Account and in conjunction with statements of expenditure (draft Project Agreement, Section 4.01).
Benefits
58. The Tazama Pipeline is vital to the Zambian economy as the sole means of importing crude oil feedstock for the country's refinery at Ndola, which receives about 600,000 metric tons a year, valued at US$140 million. The probability is increasing of a major breakdown, which would require Zambia to move crude oil and petroleum products by rail or road-tankers at an additional cost of about US$40 per ton - representing an extra burden to the Zambian economy of at least US$24.0 million a year, apart from the question of logistics and reliability of supply. The proposed engineering project's comprehensive investigation of the pipeline's condition and operational status will prepare the way for rehabilitation of the entire system in an orderly and organized manner that would ensure comprehensive rehabilitation at controlled cost, as well as recommend measures to strengthen management, expand training, ensure adequate technical surveillance and maintenance, and ensure that tariffs are adequate to protect the pipeline company's operational and financial viability. With eventual adjustment of the refinery's output pattern and rehabilitation of the pipeline, there would be potential for some export of refined products to Malawi, Zaire and Zimbabwe. IDA is justified in supporting the project because of the dependence of Zambia's economy on a secure fuel supply. IDA's support is enhanced by the Bank Group's extensive energy lending and sector work. - 21 -
Risks
59. A risk that the cleaning and surveying of the pipeline will aggravate the leakage and cause environmental damage will be mitigated by the close monitoring of each stage of the pipeline being worked on. The project could also be affected by delays in the purchase and delivery of crude oil, which is necessary for pcopelling the cleaning and surveying pigs. For this reason, the Government will, as a condition of credit effec- tiveness, submit an acceptable program of purchase and delivery of crude oil (draft Development Credit Agreement, Section 5.01(b)).
PART V - LEGAL INSTRUMENTS AND AUTHORITY
60. The draft Development Credit Agreement between the Republic of Zambia and the Association, the draft Project Agreement between the Association and Tazama Pipelines Limited and the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately.
6i. Special conditions of the Project are listed in Section III of Annex III. Special conditions of effectiveness are: (a) execution of the subsidiary loan agreement between the Government of Zambia and Tazama Pipelines Ltd; and (b) submission to the Association of an acceptable program for the supply and flow pattern of crude oil.
62. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association.
PART VI - RECOMMENDATION
63. I recommend that the ExecutinR Directors approve the proposed credit.
A. W. Clausen President
Washington, D.C. August 30, 1985 - 22 - ANNEX I ' Page'1 of ± =A ² Li 21, . а . 2 АМ²16 ²aRRNCtf OM! 1 i0NTL0 АК МАОÆ ² 1 О /! _ ´О £¢ trCiM!iYTLlAi1U fZ lN{1LM. 1970( 11Ʋ¢ Л1Аlf( ±/LiC6² . Ë fNUÏ1 а. A r ºlcA ² D ±Aat ¸ ³» (l ²оо¸ ²р. ²t) . i0'[§. 7 Æ . ± 73L6 )3L6 . . . М .МIº¯ П.SОÆ LL ¸ 7. А ]f!s 101.6 . . . OR!ia ¡£ 1Æ (Ор ) .. .. l О. о 1 ор . 11 Æ .9 ¸оо Oowo s2o. ÂRа³r ³¿а . . iKi1 ЛCRA1 01 OIL Oi11ALaN'i) .. 3DL0 443.0 l61.S 627.! fQOYlIO £ О 9iT ±L Ri!>;/! t lО³Оt »¢ 10r.1¢ а -²АR( ºП01О А110 а) 7141.0 A1Sf.0 62SS.0 .OR щ f ³0lOL111Si0N (= 0 ¢О'fAL) 17. ³ 30. ± 46. а 32.0 l9.0 0 U[AiZOM T10TLCT10C8 roMMS10M iN Y1LAt 200D (!¢LW L3.0 . . ²ÂАÂl о¸А¼ ³ro ³nwr ºoM ( a1f.) s ·. о . . ³О³n ¸Â¸¸l а¼²r »¼ 2. о . . ³о³0 ¸Âl ´ О r²º¿ р As ss а. · ьl.1 ·7. ± ³fLRn 6Q.sQ. io1.1. АОаº. rar ´ 7.9 tо.ь 1s.º 1Æ . е А7о.1 ¼ео¸¿ оr .cs ² Ái ое¸е а ) А ² ² ± ²· t0-1½ ²А ´ass s2s3.0 s1.aL.1 ¸As.!. · ' s1sS. sÍ..S¸ 6S ANDA10VL 2.4 2.S 2.3 bl ·.3 !OlOGSI011 ÁlW1s А¸  ÂОÂА1. . 2.3 2.s ·.1 ьs :. а 1R110t !.1 ±. ± 6.2 3.1 4 ´ ¡1¤D[ DI1 ¿Æ 1tAT6 (!6 А i £О±S) А9. ± И . О l0.0 ²7.0 ²0.0 ¡¤ 06 06А'Dl lAiL (!6R Sf00S) 22.1 1а.7 16.0 I3.0 11.5 ¡¯04S RQ²001CП 01f l i6 .2 ·. · 3.3 ·.2 2. а А¼[1. Å ¿ ¸ Мºl AOCQrOSS. ¼ÂО¿i. ¡Â110 ¸s) .. .. asees Á: or w²º¸о wо ²¸) .. .. i.o ².² Å1 » Âо0 о²²о²о¿t Ï 0 М _ ºN¿а о³ r0oo ³еоË ² а ³»³³ÂА (19 ±9-71 100) 99.0 96.0 95.0 62.9 93.1 PEt ¡АГ1?А 81Rt1T 0Ï _ CALORII4 (i О! RapOLlm²iNiel) 100.0 9².0 91.0 96.3 11 а. ³ ¿ о³LiS (aiuas ³¸ >1 61.0 6А. о S6A 3S.A 77.r G! fRIQ1 A²II1AL A9D lOL46 1А.0 16.0 1А.0 L l ±.S 17.8 ¡8I1 Л ( А 1-4) аЕА2 Н tA'[L 31.6 2±.2 19.0 16.6 12.6 Æ АL'1f LIfL aP6Ct. А¢ 8П 1t (YLA1t5) ²i.7 46.3 50.3 3b0 37.i ¿ ³А¼r ÎаÂ. ÏА¿ ¡³n ÂÏооs) Æ 1.s 12s.o 1оо.о 1ае.е 9±.а ACGESS SO 5А³6 £А'1ER (: ГОе) ¢О'rAL .. 37.0 ±±. ± а А³. ±7.2 ORL¹ .. 70.0 ±7 А ´ 67.5 93. А tO ²AL .. 2³.0 66.4 _ 35.6 13.6 AO 4S  Е1 Е'fA D15ГО$AL Á: о³ ³оео¸ ÂÂÁr) £О'!AL .. 16.0 10.0 2l.9 65.9 ORaAN .. 12.0 ²D.0 37.7 63.0 ¿11RAt. .. 16.0 АО. О ´ 20.7 2±.6 Î ³GiJliLON РÆ ²¸¢32G1 А1t 9 ·S0.0 s1 ²0.0 7670.0/_ I1791.7 s331.6 РО¢. РЕ[ MOR5INC!lRSDM 9920.0 /f Æ 70.0 17Í0. О L ² 2А39. ± 18AS.0 РО£. PLR pOSГITAL f6D ÂоÂА1. ·±о.0 Íоа о ³10.0 . 961.1 621.s Оа1А² 1²о. о L .. ·±о.а j ͱs. ² s.s.o ²i0. оÂааº .. ³¼ . оÆ а·7ь9 ³s Æ.· А¸ ¿ss ºо4ь ³В ! £оl М Â¸ . 1Ео .. .. 31.0 ( n.z 2s.7 ao0s ºrc A9LÏACL 5 Æ Е О£ ё00S6901a 707AL .. t.i ...... ОО АК ...... RORAL ...... AVLtACC 30. Q PlStJ0l15/ Ï00! ¢ОlAL .. 2. ± ...... 0l1 ²В ...... 1lORAL ...... ratcQ³rA а ¹ 6LSSa Гw1 vnº LLLCr. º²t...... ³w z s ...... ааi¸ь ...... 23 - ANM i TaMLE 34 Page 2 of 6
SOCIAL INGVATORS MIrå- Kmesma = (UKM1TED avKRAMI-=. mgr (msr m= csnuTm).& m~ INMO NIDDLC 1~6 196db 197d-b :MCTC/a AVKICA 9'. or 0~ 9. AFRIEU CAST
ÅDJUSM EKROUXEKT RATIOS Pan^ TOTAL 420 89.0 96.0 95.7 89.8 9.0 0 100.0 103.7 KALS si. 101. ?CKALc 34.0 79.0 9LO 83.2 75.2
SECONDAMz TOTAL 2.0 13.0 11.0 17.3 42.9 KALK 3.0 17.0 2LO 25.0 Y0.9 v~ 1.0 11.0 12.0 W 14.8 34.5
MATIOKAL c% av SECOMU) 27.8 3.2 2.3 /d 5.9 10.0
PUP11d-TEAMER &&TIO PRI1~ 50.0 47.0 48.0 Id 41.1 29.7 szCOMM 14.0 22.0 22.0 W 25.3 16.8 comeeNP~ PASS9MR CARSITNOMED POP 10.4 14.5 18.7 20.8 17.8 RADIO ra 4.8 fl 18.0 26.3 107.8 175.9 TV 26= cas/THOUMD POP 4.1 11.4 2M 31.2 ompam C9MILT GENSKAL Eursen" CIRCOLATTOM PER 7609~ POPULMON 5.1 13.7 10.7 18.4 37.2 CDEM AJUML ATTENDk~ CAPITA, 0.3 /b 0.4 2.4
LAXER TOM LAXOR 70= (INUS) 1295.0 162LO 116LO rum (PERMT) 33.3 32.6 33.0 M:z 11.9 MMICULTURE 091~ ) 79.0 73.0 67.0 ».3 42.4 MEDUSIW (PER1MI) 7.0 9.0 11.0 loj 27.9
PAX=MTION 2= MIMMI) TOTAL 412 39.0 34.6 3GB 26.2 Kw 53:3 52.9 47.5 47.1 46.2 FEUELE 27.3 25.2 22.6 27.2 5.8
Sca~ DEVER0~ RATIO 1.2 1.2 1.5 11 1.8
19^ Diexeler~ MCENT or FKXVA= im= UCCIVED m DIG~ sz ar amvå~ 33.7 234.01 5;. El~ 209 OF HOUSEMDS 58.2 63.0 3:7 LGMT = or mousge~ 5.4 3.8 tý 10= 40Z or sougze~ 13.0 10.1 11.11 ~ MOUEN m4ffim Amåunå rom= im= LZM Ws$ pm CAP~ ur= »7.0 M7 22K3 7~ 168.0 273.3 134.0
SsTa~ WELATIVK rovmy mm =VEL M$ PER. CA~ 12&0 345.6 431.3 83.0 201.1 326.0
UTDIAM PM. B6ZOW A3SM.UTS PolVERIT lm= LXTEL URM
mr AVÄXIME or Arrl,~ 8 0 T 9 9
.La Mm tromp meragew for ~ lofteator are mulacl~loud özl~ m«% Cioveup 09 c~~ ~M the Indl~ 44~ cm avalIMMCY of d~ &ad U not maltom
/b Valem otb~ « noteK Nata for 19«r refer to m¥ yoer betmoa 11139 ämd 1961; "äste for 1979r bmw*om 1969 and 1971; »d d~ ter *Nomt ~ getimote ber^ 1981 ud 1983.
41 c_ 1977*. d 1980; ja_ 1979; 1963; & 1978; & 1976.- «& 19621 111973. -24 - ANEX I Page 3 of 6
DEFINITIONS OF SOCIAL INDICATORS - Notes: Although the data are drawn from sources generally judged the man authoritative and reliable. it should also be noted that they may not be internatloaly I comparable because of the lack of standardized definitions and concepts aed by different countries In collecting the data. The data asm. onetheles uaeful to describe orders of magnitude. indicate trends. and characterine certain major differences between countries. The reference groups are (1I the am country group of the subject country and (2) a country group with somewhat higher average income than the country group of the subject country lscept for "High Income Oil Exporters" group where "Middle Income North Africa and Middle Eat"ischoun because of stronger socio-cultural affinitics). In the reference group data the averages aft population weighted arithmetic means for each indicator and shown only when majority ofthe countries in a group has data for that indicator. Since the coverage of countries among the indicators depends on the availability of data and is not uniform. caution must beexercised in relating averages of one indicator to another. These averages are only useful in comparing the value of one indicator at a time among dte country and reference groups.
AR.A (thousand sq.km.) Crue Birth Rse (per thesmad)--Number of live births in the year Teral-Total surface area comprising land area and inland waters: per thousand of mid-year population; 1960. 1970. and 1983 data. 1960. 1970 and 1933 data. Crude Deatk Rare (per thouswsd)-Number of deaths in the year Agriculhrl-Estimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970, and 1983 data. permanently for crops. pastures, market and kitchen gardens or to Gross Reproductlon Rar-Average number of daughters a woman lie fallow. 1960,1970 and 1982 data. will bear in her normal reproductive period if she experiences present age-specific fertility rates usually five-year averages ending GNP PER CAPITA (US$)-GNP per capita estimates at current in 1960, 1970, and 1983. market prices. calculated by same conversion method as World Aeuy Pkisliqgr-Accelsers, Anual (thousands)-Annual num- Sank Atlas (193143 basis): 1983 data. ber ofacceptrs of birth-control devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy (coal and lignit Fadily Pmaie-Users (percent ofm krried smies)-The percn- petroleum. natural gas and hydro-. nuclear and geothermal dec- tage of married women of child-bearing age who are practicing or tricity) in kilograms of oil equivalent per capita 1960. 1970. and whose husbands are practicing any form ofcontraception. Women 1982 data. of child-bearing age are generally women aged 15-49. although for some countries contraceptive usage is measured for other age POPULATION AND VITAL STATISTICS groups. ToealPoplaion. Mid-Year (themadr)-As ofriuly 1; 1960. 1970. FOOD AND NUTRITION and 1983 data. Urban Ppuaaia (percearr of toaln-Ratio of urban o fe haderefodh riue Pear Capia (1919-71 a100)-Index of per capita annual production of all food commodities. Production population; different definitions of urban areas may affect compar- excludes animal feed and seed for agriculture. Food commodities ability of data among countries: 1960. 1970. and 1983 data. include primary commodities (e.g. sugarcane nstcad of sugarl bpeke ajecsions which are edible and contain nutrients (e.g. coffee and tea are Plptdation in year 2000-The projection of population for 2000. excluded): they comprise cereals, root crops. pulses. oil seeds. made for each economy separately. Starting with information on vegetables. fruits. nuts. sugarcane and sugar beets. livestock. and total population by age and sex. fertility rates, mortality rates. and livestock products. Aggregate production of each country is based interrational migration in the base year 1930. these parameters on national average producer price weights: 1961-65. 1970. and were projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. Per Capa Spply ofClories (pecat efrefireseas)-Comput- Stationary population-Is one in which age- and sex-specific mor- ed from calorie equivalent of act food supplies available in country tality rates have not changed over a long period. while age-specific per capita per day. Available supplies comprise domestic produc- fertility rates have simultaneously remained at replacement level ion, imports less exports. and changes in stock. Net supplies (net reproduction rate- 1). In such a population. the birth rate is exclude animal feed. seeds for use in agriculture, quantities used in constant and equal to the death rate. the age structure is also rood processing and losses in distribution. Requirements were constant, and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected characteristics of and health considering environmental temperature. body weights. the population in the year 2000. and the rate of decline of fertility age and sex distibution of population. and allowing 10 percent for rate to replacement level. waste at household level: 196!. 1970 and 1932 data. Poplation Monsennum--Is the tendency for population growth to Per Capita Sapply of Ptroein (grams per day)-Protein content of continue beyond the time that replacement-level fertiliy has been per capita net supply of food per day. Net supply of food is defined achieved; that is. even after the net reproduction rate has reached as above. Requirements for all counries established by USDA unity. The momentum of a population in the year t is measured as provide for minimum allowances of 6U grams of total protein per a ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 grams the year t. given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those of ment level from year t onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as an Pop-latdon Dersiry average for the world. proposed by FAO in the Third World Food Per sq.km.-Mid-year population per square kilometer (100 hec- Supply- 1961. 1970 and 1932 data. tares) of total area 1960. 1970. and 1933 data. Per Capita Protein Supply Foms Aniarl and PaIse-Protein tupply Per sq.km. agricutural land-Computed as above for agricultural of food derived from animals and pulses in grams per day: 1961-65. land only. 1960. 1970. and 1982 data. 1970 and 1977 data. Pbpulatiu Age Structure (percrar)-Children (0-14 years). work- Child ages 1-4) Death Rare (per thousuad)-Number or deaths of ing age (15-64 years). and retired (65 years and over) as percentage children aged 1-4 years per tnousand children in the same age of mid-year population; 1960. 1970. and 1983 data. group in a given year. For most developing countries data derived ApsAtien Growth Rare (percenr)--toral-Annual growth rates of from life table 1960.1970 and 1933 data. total mid-year population for 1950-60. 1960-70. and 1970-83. HEAITH Popartonr Growth Rare (percent)--arba-Annual growth rates ife Expectancy rairrk (years)-Number of years a newborn of urban population for 1950-60. 1960-70. and 1970-43 data. infant would live if prevailing patterns of mortality for all people I -25 - ANNEX Page 4 of 6 at the time of of its birth were to stay the same throughout Its life; Ap#-echer Ratio - primary. and secondary-Total students en- 1960. 1970 and &983data. rolled In primary and secondary levels divided by numbers of Iur MrtaMt ae (per thamand)-Number of infants who die teachers in the corresponding levels. before reaching one year of age per thousend live births In a given year; 1960. 1970 and 1983 data. CONSUMPITON Access a Sq# N0aer (erar f piepalsad -ea, Aham, and P asser Cas (per thMs&ed poplrlo)-Psenpr cars coM- rsaIL-Number of people (total, urban, and rural) with reasonable prise motor chrs seating less thal eight persons excludes ambul- access to safe water supply (Includes treated smrthee waters or ances, heares and military vehicles. untreated but uncontaminated water such as that from protected RedO Recekers (per thoundp.putise)-All types of receivers boreholes, springs and sanitary wells) as percentages of their respec- for radio broadcasts to general public per thousand of population. tive populations. In an urban area a public fountain or standpost excludes un-licensed receivers in countries and in years when located not more than 200 meters from a house may be considered registration of radio sets was in efect; data for recent years may a being within reasonable access of that house. In rural area not be comparable since most countries abolished licensing. reasonable acess would imply that the housewife or members of the TREMI(.la~~,,h.JT eevr o racs bouselbold do not have to spend a disproportionate part of the d TV eerlspi (per tho sad populat -TV receivers for broadcast in fetching the family's water needs. to peeral public per thousand population; excludes unlicensed TV incars f ing tEamia waerew of w0. receivers in countries and in years when registration of TV sets was Access to Envrets Dispeal (percent ef p.puleles)-tral, whra incet and rar-Numberof people (total, urban, and rural) served by excreta disposal as percentages of their respective populations. Newspiper Cbealsalaso (per dheisadpopasleo)-Showsthe aver- Exacts disposal may include the collection and disposal, with or age circulation of "daily general interest newspapeec defined as a without treatment, of human excreta and waste-water by water- periodical publication devoted primarily to recording general news. borne systems or the use of pit privies and similar installations. It is considered to be 'daily" if it appears at least four times a week. Apultionper Phyuhin-Sopulation divided by number of prac- Cies Amnoast Attendance per Cpire per Year-Based on the timing physicians qualified from a medical school at university level. number of tickets sold during the year. including admissions to Papuldom per NArsl Perseo-Population divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurses, assistant nurves' L.BOR FORCE practical nurses and nursing auxiliaries. Poulaios per Hosptdl Be&-d-oa. -bn.n and taraP-P1 opulation Total Lubor Fmrce (elawaml!si-Economically active persons, in- (total, urban, and rural) divided by their respecaive nume of cluding armed forces and unemployed but excluding housewives, hosptalbedn pblicandpriate avilale geierl -A ~students, etc.. covering population of ail ages. Definitions in hospital beds available ipublic and priae general and specdato l9.d hospitals and reluabilization centers. Hospitals ar salihet various countries are not comparabli-, 1960.,1970 and 1983 data. permanendy staffed by at least one physician. Establishments pOW Femefr (percea)-Femalelabor force as percentage of total labor iding principally custodial care are not included. Rural hospitals, force. however include health and medical centers not permanently staffed Agricawure (percerat)-Labor force in farming, forestry, hunting - by a physician (but by a medical assistant, nurse, midwifk. etc.) and fishing as percentage of total labor force; 1960. 1970 and 1980 which offer in-patient accommodation and provide a limited range data. of medical facilities. Industry (percarj-Labor force in mining. construction, manu- Admissions per Hospiral ed-Total number of admissions to or facturing and electricity, water and gas as percentage of total labor discharges from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data. Articipaion Rase (percvar)-rarel,ae,andfemval- tpation HOUSING or activity rates are computed as total, male, and female labor force Average Ma of HanseAd (perseus per housrhold)--rs. wham, as percentages of total, male and female population of all ages airarat-A household consists of a group of individuals who share respectively: 1960, 1970, and 1983 data. These are based on ILO's living quarters and their main meals. A boarder or lodger may or participationates reflecting age-sex structure ofthe population and may not be included in the household for statistical purposes. long time trend. A few estimates are from national sources. Average Nomher of Persons per Reoe-roral, harbo, and rural- Economic Dependency ario-Ratio of population under 15. and Average number of persons per room in all urban, and rural 65 and over, to the working age population (those aged 15-64). occupied conventional dwellings. respectively. Dwellings exclude non-permanent structures and unoccupied parts. INCOME DISTRIBUTION Perceargeof Daeffgs witk Eecrricty--al, -ah, and rural- Perctlge of Totl Dsposoble aicoase (6oth r cash and kid)- Conventional dwellings with electricity in living quarters as percen- Accruing to percentile groups of households ranked by total house- tage of total. urban, and rural dwellings resvectively. hold income.
EDUCATION POVERTY TARGET GROUPS Adjurred Earofimeat Ratios The following estimates are very approximate measures of poverty Primary school - toral male and female--ross total, male and levels, and should be interpreted with considerable caution. female enrollment of all ages at the primary level as percentages of EsmaredAbsolre Awerty Incnse Leel (L per capira)-aran respective primary school-age populations. While many countries and rarm---Absolute poverty income level is that income level consider primary school age to be 6-11 years. others do not. The below which a minimal nutritionally adequate diet plus essential differences in country practices in the ages and duration of school non-food requirements is not affordable. are reflected in the ratios given. For some countries with universal Estimated ReAtive Poverty Incone Level (US5per capirs)-arban education, gross enrollment may exceed 100 percent since some and raral-Rural relative poverty income level is one-third of pupils are below or above the country's standard primary-school average per capita personal income of the country. Urban level is age. derived from the rural level with adjustment for higher cost of Secondar) scol - total. male andfeiale-Computed as above; living in urban areas. secondary education requires at least four years of approved pri- Estinated Population Below Absolue Poverty lcomne Level fper- mary instruction; provides general. vocational, or teacher traiing cenr--arbnand rar&- Percent of population (urban and rural instructions for pupils usually of 12 to 17 years of age; correspond- who are "absolute poor." ence courses are generally excluded. Vocational Enrollmeni (percent of seconciy)-Vocational institu- Comparative Analysis and Data Division tions include technical, industrial. or other programs which operate Economic Analysis and Projections Department independently or as departments of secondary institutions. June 1985 - 26 - ANNEX i Page 5 of 6 WMA: Emo D MAM
Fn2pi1aicm: 6.225 =UWlm (ed-1983) GE per Capita: US$50 (eLd-1983)
Nånml rrOMLfi
1984 BS BPrmnt Anmm1 G~cuth Rats (2) inMden~r Millm Cif CEP 1975-00 1981 1982 1983 1984
CP, Factr oft 2157 84 -0.7 2.7 -2.1 -. 0 -20
GP, M~ Pr 2558 100 -1.1 6.2 -2.8 -2.0 -1.3 4~nutce 377 15 0.5 8.2 -11.7 8.4 9.7 mIi[~ 359 14 -3.0 4.7 0.0 3.0 -8.0 0b~r Trd~.ty 646 25 -0.2 5.1 0.9 -5.1 -1.3 Services 1176 46 0.4 6.5 -1.6 -4.3 -3.5 cti~r 2193 86 0.0 9.3 -. 8 -4.4 -1.5 G~a nesn nt 359 14 -16.9 -11.1 -23.5 -24.2 -4.2 Exp~ots e Gods 6 MiS 908 35 -3.5 -12.8 15.7 -9.7 -LO 4ports of G 1 ModleS 902 35 -6.9 -16.0 -22.0 -15.6 -13.5
Gram stc vi~gs 365 14 0.0 -48.2 -26.6 83.9 6.3
OMERE FIDM Gen Germet2 Otral Govermnt (1984) Win.) z of G (KI in.) Zof GDP
arent Re~aits 1,170 24.7 Gu~t 5~r"t"~" 1»241 26.2 öur=ent Srpus -71 -1.5 Capital 1&Tenditma 275 5.8 1BenUl FinXanrfr 60 1.3 mm, mdp MS1 19M 17 I8 1981 1982 1983 1984 (ERm K, End Beriod)
e and Qusi Money 493 907 979 1309 1444 1703 adk C~edit to Gmemmnx 318 1355 1495 1983 299 2287 Bak C Mdit to Prvate SectOr3 393 505 765 905 1033 1202
(ernrae of Ide Numers)
Money and Q~i ~ny s % f GP 31.3 X.1 28.4 36.7 34.2 36.0 U»mslanl Pelce Inde (1966-100)4 188.6 424.2 475.9 542.8 663.7 832.0 nl pernry chage in: lh,lai.e rLc Todec 16.6 11.1 12.2 14.1 22.2 25.4 Bak Credit to Gumern 406.9 2.8 10.3 32.7 5.8 9.0 b&r1 Cedt to Private Sector3 17.0 4.6 51.4 18.3 14.1 16.4
1 I.MM,ar-d~rni, cnstructim, electricty, gs and ter. 2 gu do t differ slgudftemnely from "Cntral Goverrint. 3 Tnrl-s Pram 1 n~ ~0n- FA.ISA 4 M fflgd a1y umed go.June 1985 -27- ANNEX I Page 6 of 6
Z~ET 1MA1 P~=NI AMD CMDI FKM
&MLE æ PiEiS !ME~ E!= 1984
1981 192 193 1984 - li1an"iUY -EiS MDn. 2 Exports of Cxxis, 1*S 1,12 1,067 1,W5 M8 (bpper 685 83 apo~ts af Gds,ÆS 1633 1410 1,03 902 r1C~t 55 7 Resur~ Gap (decte m -) -fl -3 6 mda Zin 45 5 Allther 39 5 Factor Service (net) -218 -235 -188 -174 1hs aI Net Tranfers -158 -72 -m -50 - - 1blæann n Orret kvemts - - EEIEl IEz~, Dec. 31, 1984 OEficiGrants 26 30 42 50 Direct Fore~ Inestnmt ...... i M1n. Nat =L Borrw~i 2I 258 12 134 bblic Dabt, tuil. gmratæ 2,817 DixstutaW -W Iv N-ræte ur PrlvateDett .. AIDtiz~1e a 187 92 48 21 1b=al Qatseenr & Disb~eert I"I" Net W 367 -57 64 75 cafffrcial Paym~ne Aremts 53 240 -M 25 OthEr Tem (n.e.i.) 176 267 67 -71 I si u RED M 1984 Q Inge ~nseres 3B -68 25 5 - inremase) Egglc Dbt, incl. pnør=~tæd 7.4 b Meo=rtnIteus NnGunteed Pdivate 1ht . Gbtal astandig MDhsbu d =4 b Græs Tht'1. Peserves 52 140 115 110 (~eeks of T~ports) (1.7) (5.2) (5.7) (6.3) Qrent A/C Bal. as Z GE -21.9 -16.7 -6.2 -4.2 MII~ IEMID, Ikrch 31, 1985 .. Offitm UMS RAES æ 1E E IED IIk
Cut~nrir &Dshesr 337.92 43.03 1981 tS$1.00 - 0.884 Undlsbured 108.23 139.52 1982 0.922 autsit~nir incl. 1983 1.2506 hdlsbsed 446.15 182.55 1984 1.7943 --
a Exrc~ aimreau an Interest und amwte~.rim pyts and æøs~ esne i- b Acul debt servic pøid n Bulk and blml.1y Gnaætead debt, e wiudlg armess and Dr epywats. Sc~ e debt service dm cn F debt u= valnt to 46.1 pernt af ~orts af goods and non-fctor servls. .. not avafi~e June 19f5 - 28 - ANNEX II Page 1 of 2
STATUS OF BANK GROUP OPERATIONS IN ZAMBIA
A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of March 31, 1985)
Amount in US$ Million (Less Cancellations) Loan Credit Undisbursed No. No. Year Borrower Purpose Bank IDA Loan Credit 1/
20 Loans fully disbursed 432.06
1424 1977 Zambia Industrial Forestry 16.80 0.08 1566 798 1978 Zambia Third Highway 11.25 11.25 11.25 5.29 863 1979 Zambia Coffee Production 6.00 0.45 873 1979 Zambia Technical Assistance 5.00 1.84 1790 973 1980 Zambia Third Railway 25.00 15.00 7.35 1.84 1923 1981 Development Second Development Bank of Zambia Finance Company 15.00 0.59 2001 1981 Zambia Eastern Province Agric. Development 11.00 7.99 1193 1982 Zambia Southern Province Agric. Development 18.00 15.19 1196 1982 Zambia Smallholder Dairy Dev. 7.50 6.74 1251 1982 Zambia Fifth Education 25.00 18.01 2151 1982 Zambia Indus- trial 6 Mining Company Oil Refinery Mod. Eng. 5.10 4.25 2152 1982 Zambia Pet. Exploration Prom. 6.60 2.90 1333 1983 Zambia Maamba Coal Eng. 4.30 3.14 1362 1983 Zambia Rural Water Supply 10.00 9.24 SP2 1983 Zambia Rural Water Supply 6.00 4.37 1437 1984 Zambia Indi Forestry-PhaseITI 22.40 21.48 2391 1984 Zambia Export Rehab. & Diver. 75.00 73.82 1985 Zambia Fisheries 7.10 7.10 1985 Zambia Agricultural Rehab. 25.00 25.00 1985 Zambia Fourth Railways _ 20.00 20.00
Total 597.81 182.55 108.23 139.52 of which has been repaid 151.66 -
Total now outstanding 446.15 182.55 Amounts sold 28.58 of which has been repaid 28.58
Total now held by Bank/IDA 446.15 182.55 of which is undisbursed 108.23 139.52
NOTES: The status of the projects listed in Part A is described in a separate report on all Bank/IDA-financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31.
II Credits denominated in SDRs (Credit 1193-EA and above) are shown in US Dollar equivalents, based on the exchange rate in effect at the time of negotiations. - 29 -
AMNEX II Page 2 of 2
B. STATEMENT OF IFC INVESTMENTS (as of July 31, 1985)
Investment Commitment US$ Million Equivalent No. Year Type of Business Loan Equity Total
216-ZA 1972 Zambia Bata Shoe 0.85 0.23 1.08 Company Limited Shoe Manufacturing
250-ZA 1973 Zambia Bata Shoe Shoe Manufacturing Company Limited and Tannery 1.20 - 1.20 307-ZA 1975 Century Packages Limited Packaging Materials 0.78 0.21 0.99
324-ZA 1976 Development Bank Development Finance of Zambia Company - 0.54 0.54
394-ZA 1978 Century Padkages Limited Packaging Materials 0.10. - 0.10
483-ZA 1980 Zabia Consoli- Copper and Cobalt dated Copper Mines Production 28.00 - 28.00 427-ZA 1980 Kafue Textiles of Zambia Limited Textiles & Fibers 7.60 - 7.60 600-ZA 1982 Zambia Consoli- dated Copper Mines Copper Production 25.14 - 25.14 709-ZA 1984 Zambia Hotel Properties Ltd. Tourism 15.79 - 15.79
743-ZA 1985 Mpongwe Develop- Food and Food ment Co. Ltd., Processing 1.54 0.29 1.83
721-ZA 1985 Kafue Textiles of Textiles & Fibers 3.15 - 3.15 Zambia Limited
Total gross commitments 84.15 1.27 85.42 Less cancellations, terminations, repayment and sales -32.25 0.20 32.45
Total now held by IFC 51.90 1.07 52.97
Total undisbursed 7.47 - 7.47 - 30 -
AMI III
wIB3LIC oF zMU' TAZK -RLI -MZT -BXW MDJKCI sumitWWHIE DATA -HB
I. Timetable of Key Events
(a) Time taken to prepare project: 2 months.
(b) First presentation to Bank: December 1984.
(c) Appraisal mission: March/April 1985.
(d) Negotiations: Anqust 7 and 8, 1985.
(e) Planned date of effectiveness: October 1985.
II. Special IDA Implementation Action
None.
III. Special Conditions
(a) Conditions of Effectiveness:
(i) Execution of subsidiary loan agreement (para. 53).
(ii) Submission of acceptable program for supply of oil (para. 49).
(b) Other Special Conditions
(i) Interim program initiated for maintenance measures and management improvements (para. 54).
(ii) Project supervisory committee to approve contracts and expenditures,.ensure monitoring, and meet regularly (para. 54).
(iii) Implementation program for pipeline rehabilitation to be agreed (para. 54). ffl D 158 ,. ---- ZAMBIA FUEL RESOURCES AND FACILITIES •.T A N Z A N l A
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