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AFRICAN DEVELOPMENT BANK GROUP MULTINATIONAL BUSEGA-MPIGI AND KAGITUMBA-KAYONZA-RUSUMO ROADS PROJECT APPRAISAL REPORT OITC DEPARTMENT May 2016 TABLE OF CONTENTS Acronyms & Abbreviations i Loan Information ii Project Summary iv Result-Based Logical Frameworks vi Project Timeframe viii I. STRATEGIC THRUST AND RATIONALE 1 1.1 Project Linkages with Country Strategy and Objectives 1 1.2 Rationale for Bank’s Involvement 1 1.3 Donors Coordination 2 II. PROJECT DESCRIPTION 2 2.1 Project Objectives 3 2.2 Project Components 4 2.3 Technical Solution Retained and Other Alternatives Explored 4 2.4 Project Type 4 2.5 Project Cost and Financing Arrangements 4 2.6 Project’s Target Area and Population 5 2.7 Participatory Processes for Project Identification, Design and Implementation 6 2.8 Bank Group Experiences and Lessons Reflected in Project Design 6 2.9 Key Performance Indicators 7 III. PROJECT FEASIBILITY 7 3.1 Economic and Financial Performance 7 3.2 Environmental and Social Impacts 8 IV. IMPLEMENTATION 11 4.1 Implementation Arrangements 11 4.2 Monitoring 13 4.3 Governance 13 4.4 Sustainability 14 4.5 Risk Management 16 4.6 Knowledge Building 16 V: LEGAL INSTRUMENTS AND AUTHORITY 16 5.1 Legal Instrument 16 5.2 Conditions Associated with Bank’s Intervention 16 5.3 Compliance with Bank Policies 17 VI. RECOMMENDATION 17 Appendices I. Country’s Comparative Socio-Economic Indicators I II. Table of ADB’s Portfolio in Uganda and Rwanda III III. Key Related Projects Financed by the Bank and Other Development Partners in Uganda V and Rwanda IV. Map of the Project Area VII V. Project Cost and Financing Arrangements VIII Currency Equivalents As of 31 March 2016 1UA = 1 SDR 1UA = UGX4625.39 1UA = RWF1052.98 1UA = USD1.40882 1UA = EUR1.23744 1UA = JPY158.675 1USD = UGX 3283.164 1USD = RWF 747.4206 Fiscal Year Uganda/Rwanda: 01 July-30 June Weights and Measures 1 metric tonne = 2204 pounds (lbs). 1 kilogram (kg) = 2.200 lbs. 1 meter (m) = 3.28 feet (ft) 1 millimeter (mm) = 0.3937 inch (“) 1 kilometre (km) = 0.62 mile 1 square kilometre (km2) = 0.386 square mile 1 hectare (ha) = 0.01 km2 = 2.471 acres i Acronyms and Abbreviations AADT Annual Average Daily Traffic MININFRA Ministry of Infrastructure AC Asphalt Concrete MoFPED Ministry of Finance, Planning & Econ Devt ADB African Development Bank MoWT Ministry of Works and Transport ADF African Development Fund NC Northern Corridor AIF African Investment Facility NDP National Development Plan CC Central Corridor NEMA National Environment Management Authority CPIA Country Policy and Institutional Assessment NEPAD New Partnership for Africa’s Development CSP Country Strategy Paper NGO Non-Government Organization DANIDA Danish International Development Agency NPV Net Present Value DBST Double Bitumen Surface Treatment OMC Operation and Maintenance Concession DFID Department for International Development OSBP One Stop Border Post DP Development Partner OPRC Output and Performance Based Road Contract DRC Democratic Republic of Congo PAP Project Affected Persons EAC Eastern Africa Community PBA Performance Based Allocation EA-RISP E asternE Africa Regional Integration PIDA Program for Infrastructure Devt for Africa Strategy Paper QCBC Quality and Cost Based Selection EDPRSII Econ Devt & Poverty Reduction Strategy EIRR Economic Internal Rate of Return RAP Resettlement Action Plan ESIA Environmental and Social Impact Assessment REMA Rwanda Environmental Management Authority ESMP Environmental and Social Management Plan RMF Road Maintenance Fund EU European Union RSDP Road Sector Development Program FE Foreign Exchange RSSP Road Sector Support Project GDP Gross Domestic Product RWF Rwanda Francs GOR Government of Rwanda RWFO Rwanda Field Office GOU Government of Uganda RTDA Rwanda Transport Development Agency HDM - 4 Highway Devt &Management Model 4 SPIU Single Project Implementation Unit HIV/AIDS Human Immuno Virus/Acquired Immune STI Sexually Transmitted Infections Deficiency Syndrome. TMC Term Maintenance Contract ICB International Competitive Bidding TMEA Trade mark East Africa IDA International Devt Association / World Bank UA Unit of Account IFC International Finance Corporation UGFO Uganda Field Office JPCC Intergovernmental Panel on Climate Change UGX Uganda Shillings JICA Japan International Cooperation Agency UNRA Uganda National Roads Authority LC Local Currency URF Uganda Road Fund MCC Milk Collection Centers UTSDPG Uganda Transport Sector Devt Partners Group MINECOFIN Ministry of Finance & Economic Planning VOC Vehicle Operating Costs i Loan Information Client’s information BORROWERS: Governments of Uganda and Rwanda EXECUTING AGENCIES: Uganda National Roads Authority and Rwanda Transport Development Agency Financing plan Source Amount (UA) Instrument Uganda ADB 64.44 million (USD 91 million) Loan ADF 42.5 million Loan GOU 29.19 million Counterpart Financing TOTAL COST 136.13million Rwanda ADF 66.56 million Loan EU-AITF 15.91 million Investment Grant JICA 40.0 million Loan GOR 8.64 million Counterpart Financing TOTAL COST 131.11 million GRAND TOTAL 267.25 million ADF and ADB’s key financing information ADF Loan Currency Unit of Account (UA) Interest Type Not Applicable Interest Rate Spread Not Applicable Service Charge 0.75% per annum on amount disbursed and outstanding Commitment Fee 0.50% per annum on the un-disbursed loan amount Tenor 40 years Grace Period 10 years ADB Loan Currency United States Dollar (USD) Loan type Fully Flexible Loan (FEL) Interest Rate Base Rate + Funding Cost Margin + Lending Margin ++ + Maturity Premium Base Rate Floating Base Rate based on 6-month LIBOR Funding Cost Margin Refer to Footnote1 Lending Margin 60 basis points (0.60%) Maturity Premium2 Refer to Footnote Fees Refer to Footnote Tenor Up to 25 years inclusive of Grace Period Grace Period Up to 8 years Average Loan Maturity 16.75 years Entire Project EIRR (Base case scenario) 18.2% NPV (Base case scenario) USD64.26 million 1 The six months adjusted average of the difference between: (i) the refinancing rate of the Bank as to the borrowings linked to 6- month LIBOR and allocated to all its floating interest loans denominated in USD and (ii) 6-month LIBOR ending on 30 June and on 31 December. This spread shall apply to the 6-month LIBOR which resets on 1 February and on 1 August. The Funding Cost Margin shall be determined twice per year on 1 January for the semester ending on 31 December and on 1 July for the semester ending on 30 June. 2 The Maturity Premium is based on the Average Loan Maturity, which is defined as the weighted average time to repay a loan, calculated as the average number of years until each principal repayment amount of the loan is due, weighted by the principal repayment amounts. Loans with – an Average Loan Maturity less than or equal to 12.75 years will incur no (Nil) Maturity Premium; an Average Loan Maturity greater than 12.75 years and up to 15 years will incur 10 bps (0.10%) Maturity Premium; an Average Loan Maturity greater than 15 years and up to 17 years will incur 20 bps (0.20%) Maturity Premium. ii Timeframe - Main Milestones (expected) Negotiation April 2016 Project approval May 2016 Effectiveness October 2016 Last Date of Disbursement (ADB&ADF) 31 December 2020 Last repayment (ADB Loan) June 2041 Last repayment (ADF Loan) June 2056 iii Project Summary Project Overview: The Project is a multinational operation covering Uganda and Rwanda. The Uganda side of the project road (Busega-Mpigi) is located in Central Uganda and forms part of the Northern Corridor. The Rwanda side of the project road (Kagitumba-Kayonza-Rusumo) lies on two of the most important Program for Infrastructure Development in Africa (PIDA) transport corridors, the Northern and Central Corridors. The road is located in the eastern part of Rwanda and is a regional priority road connecting Rwanda with Uganda and Tanzania. The project roads are vital missing links, which support the regional integration objectives of partner states of East Africa Community (EAC) and Great Lakes Region. This is an important project that will contribute to socio-economic development, poverty reduction and regional integration between Uganda, Rwanda and Tanzania. The overall project cost for the two countries is estimated as UA 267.25 million. The Uganda project cost is UA 136.13 million and is to be financed by African Development Bank (ADB) and African Development Fund (ADF) loans and Government of Uganda (GOU) counterpart funding. The project involves the construction of a four-lane express highway (23.7km). The Rwanda project cost estimate is UA 131.1 million to be financed by African Development Fund (ADF) and Japan International Cooperation Agency (JICA) loans, European Union (EU) grant and Government of Rwanda (GOR) counterpart contribution. It comprises the rehabilitation of 208 km. In both countries, the project also includes (i) consultancy services for the supervision of the civil works and technical audits. (ii) pipeline projects; training and support for capacity building for cross-border women traders and traders in Busega Market; (iii) a study to finalize the Road Sector Development Program 3 in Uganda; (iv) two cross-border markets at Kagitumba and Rusumo and (v) Technical Assistance for Rwanda Transport Development Agency (RTDA) and capacity building and support to the Transport Sector Working Group (TSWG) secretariat. The construction period of the roads is 2 ½ years. Project Beneficiaries: The direct beneficiaries of the project outputs are traders and transporters using the Northern Corridor via Mirama Hills/Kagitumba and the Central Corridor, via Rusumo and 2.14 million people living within the Busega-Mpigi and Kagitumba-Kayonza-Rusumo areas. The outcomes of the project are reduction in transport costs; increased economic empowerment of women and improved performance of the transport sector institutions. The project will contribute to poverty reduction by improving household incomes and well-being through increased access to markets and social services. Additional benefits will emanate from jobs created during construction, sub-contracts for supply of goods and services and roadside socio-economic activities.
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