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CONFIDENTIAL Public Disclosure Authorized CONFIDENTIAL Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PERFORMANCE AUDIT REPORT Public Disclosure Authorized on TANZANIA REVISED FIRST HIGHWAY PROJECT (Credit 115-TA) June 26, 1975 Public Disclosure Authorized Operations Evaluation Department Public Disclosure Authorized PROJECT PERFORMANCE AUDIT REPORT TANZANIA REVISED FIRST HIGHWAY PROJECT (CREDIT 115-TA) PREFACE This report reviews the implementation and achievements of the Tanzania Revised First Highway Project, supported by IDA Credit 115-TA signed in March 1968 and closed in July 1973, The credit provided supple- mentary financing for the Tanzania First Highway Project, supported by IDA Credit 48-TA, signed in February 1964. This performance audit is based on discussions with IBRD/IDA staff, study of correspondence and reports from the IBRD/IDA files, and a brief mission to Tanzania in November 1974 to collect information and discuss the project with country officials concerned. The valuable assistance of those officials is gratefully acknowledged. Note: Currency Equivalent (Tanzania Shilling): 1964-74 -- US$ 1.00 = T Sh 7.14 PROJECT PERFORMANCE AUDIT REPORT TANZANIA REVISED FIRST HIGHWAY PROJECT (Credit 115-TA) TABLE OF CONTENTS Page No. Summary i-ii Background 1 Project Implementation 3 Project Impact 5 Road Construction 5 Traffic Growth 7 Detailed Engineering 8 Staffing and Training 9 Conclusion 11 List of Tables 1. Description of Original and Revised Projects 2. Completion Dates and Estimated and Actual Costs for the Project Components 3. Estimated and Actual Disbursement Schedule 4. Central Government Expenditures on Highway Construction and Maintenance 5. Traffic and Unit Vehicle Cost Savings on the Project Roads 6. Estimated Traffic Growth Rates on the Project Roads 7. Vehicle Fleet, 1962-72 8. Staff Authorized and Employed in Roads and Aerodromes Division, Ministry of Communications and Works Annex 1. Details about the Project Roads Map 1. Tanzania Highway System SUMMARY IDA made a US$ 14 million credit (48-TA) to Tanzania in February 1964 to finance the foreign exchange cost of a First Highway Project which included detailed engineering and construction of eight road sections. Shortly thereafter, most expatriate staff in the Roads and Aerodromes Division (RAD) of the Ministry of Communications and Works (Comworks), which had been charged with project implementation, left the country. Through their exodus, RAD's professional manpower had been depleted and project implementation seriously delayed. In addition, the work quantities of the project had been underestimated by RAD, based on preliminary engineer- ing, and prices had escalated; therefore, the cost of the project had increased considerably by 1966. Because of the delays in implementation and increased cost, the Ministry of Finance asked IDA to defer the credit's scheduled closing date and to supplement the credit to meet the increased cost. IDA reappraised and revised the project, and provided a US$3 million supplementary credit (115-TA) in March 1968 to enable achievement of a Revised First Highway Project. Compared with the original project, the revised project was to: (a) retain detailed engineering and construction of 533 mi of six of the eight road sections; (b) extend detailed engineering of the section of the Tanzam Highway between Morogoro and Iringa from 104 mi to 142 mi, but omit construction; (c) include detailed engineering of feeder roads (110 mi of four secondary roads and 98 mi of tertiary roads) on the Geita Peninsula as well as a five-year program of staffing and training for RAD; and (d) omit construction of the Musoma-North Mara road section. Construction of the project roads, about half done by the time of appraisal of Credit 115-TA, was completed satisfactorily by 1970, and the detailed engineering work was carried out as envisaged. Engineering of the Morogoro-Iringa section of the Tanzam Highway provided the detailed design for its construction, subsequently implemented under the Second Highway Project (Loan 586-TA and Credit 142-TA of 1969). Engineering of the Geita Roads, after further revision, became the basis for their upgrading, now being implemented under the Third Highway Project (Credit 265-TA of 1971). The staffing and training program was carried out to a very limited extent because of slowness in recruiting expatriates, difficulties with training by them and absolute shortage of African staff. The closing date for the credit was post- poned several times due to an outstanding contractor's claim, and the final disbursement was made on July 25, 1973, two years behind schedule. 'About US$ 16.6 million was disbursed from the two credits together, and about US$ 440,000 of Credit 115-TA was cancelled at closing. The actual cost of the revised project was US$ 22.2 million, or 3% less than estimated. Taking all aspects into account including the increase in fuel prices over the last years which adds about one percentage point to the rate of return, the rather shaky information available suggests that the overall economic return to the project probably approximates the 11% estimated in the 1968 appraisal report. Three of the roads indicate clearly lower rates - 11 - of return at audit than at appraisal and one a substantially higher return. Special allowance in the calculations for truck overloading, which appears to be only somewhat less serious a problem on these roads than on the Tan- zam highway, indicates that the effect of related additional vehicle operating cost savings will be offset or more than offset by the consequent damage to the roads and shortening of their lives. Traffic overestimation was the main factor in the shortfall from projected economic returns. The primary reasons for the traffic overesti- mation were IDA's appraisal assumption that decreased vehicle operating costs would be enough to induce substantial generated traffic and omission of an assessment of complementary investment in the regions surrounding the roads. Unstable political conditions as well as low growth of the national economy and the vehicle fleet contributed to the overestimation, but they could not have been anticipated at appraisal. Also in retrospect the staffing and training program was not for- mulated as carefully as it should have been to fulfil IDA's objective of eas- ing RAD's transition to Africanization. It appears to have been too dependent on one man, the then Permanent Secretary of Comworks, who was transferred shortly after Credit 115-TA was signed. To get the roads built it had been essential to hand over more responsibility for detailed engineer- ing and construction supervision to consultants, as was done in accordance with IDA recommendations, and some RAD Tanzanian staff have been assigned to consultants for useful training, but they did not find this as satisfac- tory as would have been an earlier transition to carrying fuller responsibility for individual works. The sudden departure of Tanzanian engineers of Asian origin in 1971-72 contributed substantially to staffing problems, but could not have been anticipated at appraisal or reappraisal. The fact that three of the road improvements, accounting for about 40% of construction investment under the project, show less than 10% economic return on current estimates, combined with the limited manner in which the project has contributed to the development of African capabilities - above all because of the sheer shortage of African secondary school and engineering graduates - suggests that the original project, feared at the time to be too big but proceeded with as a special support tothe newly independent country, should have been cut back in thel967 revision even more than it was. The considerable difficulties of doing this soundly at that time are well illus- trated by the fact that the Dar-es-Salaam-Kibiti road which was considered of most dubious economic validity at the time of the revision has turned out to be the one with the highest economic return according to current estimates - mainly due to substantial development of traffic, especially agricultural, affected by the proximity of the large Dar-es-Salaam market - while almost none of the generated traffic projected for other roads appears in fact to have materialized. It may be that the only course which would have provided more assured success was the one suggested by an Executive Director at the discussion of the original 1964 project, namely an integrated approach covering agricultural as well as transportation investments and policies, in unified or separate projects, such as has come to be applied to some extent in con- nection with the project road in the southern region, where the Bank approved support for a cashewnut development project in 1974. PROJECT PERFORMANCE AUDIT REPORT TANZANIA REVISED FIRST HIGHWAY PROJECT (Credit 115-TA) BACKGROUND IDA became involved in Tanzania's road program after the Govern- ment's 1961 decision to further develop main roads and to construct secondary and tertiary (feeder)roads. The existing network consisted of low-standard, low-cost facilities built before independence to carry light traffic between widely dispersed population centers. Main roads were upgraded to fully engineered standards through reconstruction and realignment when traffic reached appropriate levels. The first highway project developed by the Government for IDA's consideration, on the basis of preliminary discussions in 1961-63, included detailed engineering and
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