AFRICAN DEVELOPMENT BANK NAM/PTTR/2002/01 LANGUAGE : ENGLIH ORIGINAL :ENGLISH

APPRAISAL REPORT

AUS-ROSH PINAH ROAD PROJECT

REPUBLIC OF NAMIBIA

INFRASTRUCTURE DEPARTMENT ONIN NORTH, EAST AND SOUTH REGION AUGUST 2002 TABLE OF CONTENTS

Page

PROJECT INFORMATION SHEET, CURRENCY AND MEASURES, LIST OF ABBREVIATIONS, LIST OF TABLES, LIST OF ANNEXES, BASIC DATA SHEET, EXECUTIVE SUMMARY, PROJECT MATRIX (i-ix)

1. ORIGIN AND HISTORY OF THE PROJECT 1

2. THE TRANSPORT SECTOR 2 2.1 The Transport System 2 2.2 Transport Policy, Planning and Co-ordination 3 2.3 Intervention of Other Donors in the Sector 4

3. THE ROAD SUB-SECTOR 4 3.1 Road Network, Vehicle Fleet and Traffic 4 3.2 Road Transport Industry 5 3.3 Road Administration and Training 6 3.4 Road Planning and Financing 7 3.5 Road Engineering and Construction 9 3.6 Road Maintenance 9

4. THE PROJECT 10 4.1 Project Concept and Rationale 10 4.2 Project Area and Beneficiaries 11 4.3 Strategic Context 12 4.4 Project Objective 13 4.5 Project Description 13 4.6 Environmental and Social Impact 14 4.7 Project Costs 16 4.8 Sources of Finance and Expenditure Schedule 16

5. PROJECT IMPLEMENTATION 18 5.1 Executing Agency 18 5.2 Institutional Arrangements 18 5.3 Supervision and Implementation Schedules 19 5.4 Procurement Arrangements 20 5.5 Disbursement Arrangements 21 5.6 Monitoring and Evaluation 22 5.7 Financial Reporting and Auditing 22 5.8 Aid Co-ordination 22 5.9 Regional Integration 22 6. PROJECT SUSTAINABILITY AND RISKS 23 6.1 Recurrent Costs 23 6.2 Project Sustainability 23 6.3 Critical Risks and Mitigating Measures 23

7. PROJECT BENEFITS 24 7.1 Economic Analysis 24 7.2 Social Impact Analysis 25 7.3 Sensitivity Analysis 26

8. CONCLUSIONS AND RECOMMENDATIONS 26 8.1 Conclusions 26 8.2 Recommendations 27

------This report has been prepared by Messrs. A. Rugamba (Principal Transport Engineer), A. Kies (Principal Transport Economist), J.B. Kayongo (Principal Financial Analyst) and W. Soliman (Senior Environmentalist) following an appraisal mission to Namibia in June 2002. Any matters relating to this report may be referred to Mr. G. Mbesherubusa, (Manager, ONIN.3 ext. 4131). ------i

AFRICAN DEVELOPMENT BANK O1 B.P, 1387 ABIDJAN Tel: 20 20 44 44; 20 20 48 48 FAX: (225) 20 22-70-04

PROJECT INFORMATION SHEET DATE: AUGUST 2002

The information given below is intended to provide some guidance to prospective suppliers, contractors, consultants and all persons interested in the procurement of goods, works and services for projects approved by the Board of Directors of the Bank Group. More details and guidance should be obtained from the Executing Agency of the Borrower.

1. COUNTRY - Namibia

2. PROJECT TITLE - Aus-Rosh Pinah Road Project

3. LOCATION - Karas Region

4. BORROWER - The Republic of Namibia

5. EXECUTING AGENCY - Roads Authority of Namibia Private Bag 12030 Ausspannplatz Windhoek, Namibia Tel: 264-61 284 7000 Fax: 264-61 235325 E-mail: [email protected]

6. PROJECT DESCRIPTION - The project consists of:

a) Upgrading of 169 km of gravel road to bitumen standards from Aus to Rosh Pinah of a width of 6.8-metre carriageway and 1.5- metre gravel shoulders on either side.

b) Consultant services for the supervision of the above civil works; and

c) Project audit services.

7. TOTAL COST: - ZAR 339.85 million Foreign - ZAR 255.72 million Local - ZAR 84.13 million ii

8. ADB Loan - ZAR 205.13 million

9. OTHER SOURCES OF FINANCE

BADEA - ZAR 98.48 million

The Republic of Namibia - ZAR 36.24 million

10. DATE OF APPROVAL - October, 2002

11. EST. STARTING DATE OF PROJECT: Civil Works, August 2003 AND DURATION 27 months

12. PROCUREMENT: International Competitive Bidding (ICB) for the civil works among pre-qualified contractors in accordance with the Bank’s ‘Rules of Procedure for Procurement of Goods and Works’ for Bank funded components. BADEA components would be procured according to their rules of procurement.

13. CONSULTING SERVICES REQUIRED AND STAGE OF SELECTION:

The consultant services for the supervision of civil works and audit services for the overall project (including ADB components) will be financed by GRN and have already been procured according to GRN procurement rules. iii

EQUIVALENTS AND ABBREVIATIONS CURRENCY EQUIVALENTS (June 2002 Exchange Rates)

UA 1.0 = U$ 1.26429 UA 1.0 = ZAR 12.6375 UA 1.0 = N$ 12.6375 ZAR 1.0 = N$ 1.0

WEIGHTS AND MEASURES

1.00 metre (m) = 3.281 ft 1.00 kilometre (km) = 0.621 mile 1.00 square kilometre (km2) = 0.386 square mile 1.00 hectare (ha) = 2.471 acres 1.00 kilogramme (kg) = 2.205 lbs 1.00 metric ton (t) = 2,205 lbs

FISCAL YEAR = April 1st - March 31st

ABBREVIATIONS

AADT - Average Annual Daily Traffic ADB - African Development Bank BADEA - Arab Bank for Economic Development in Africa CBR - California Bearing Ratio CEO - Chief Executive Officer DOT - Department of Transport EA - Executing Agency EIRR - Economic Internal Rate of Return EMP - Environnemental Management programme GRN - Government of the Republic of Namibia HDM - Highway Development and Management Model ICB - International Competitive Bidding KfW - Kreditanstalt fur Wiederanfbaw Km - Kilometer Kph - Kilometer Per Hour MET - Ministry of Environment and Tourism MoF - Ministry of Finance MSL - Mean Sea Level MWTC - Ministry of Works, Transport and Communication N$ - Namibia Dollar NDP-2 - Second National Development Plan NPC - National Planning Commission PCR - Project Completion Report PMS - Pavement Management System PSIP - Public Sector Investment Programme RA - Roads Authority RCC - Roads Contractor Company iv

RFA - Road Fund Administration RSA - Republic of South Africa RTTA - Road Traffic and Transport Act SADC - Southern African Development Community SATCC - Southern Africa Transport and Communications Commission SIDA - Swedish International Development Agency STD - Sexually Transmitted Diseases UA - Unit of Account URMS - Unsealed Roads Management System US$ - United States Dollar VOC - Vehicle Operating Costs vpd - Vehicles Per Day ZAR - South African Rand

LIST OF TABLES Table No Title Page

3.1 Road Sub-sector Investment and Maintenance Expenditure 8 3.2 Five-Year Road Sub-Sector Expenditure Plan 9 4.1 Summary of Project Cost Estimates 16 4.2 Sources of Finance 17 4.3 Sources of Finance by Component 17 4.4 Expenditure Schedule by Source of Finance 18 4.5 Expenditure Schedule by Component 18 5.1 Summary of Procurement Arrangements 20

LIST OF ANNEXES

Annex No Title No of Pages

1. Project Location Map 1 2. Organization Structures of DOT and RA 2 3. ADB Group On-going Operations in Namibia 1 4. Environnemental Management Plan (Summary) 2 5. Category of Expenditure 1 6. Implementation Schedule 1 7. Economic Analysis Summary 3 8. List of Annexes in the Project Implementation Document (PID) 1 v

Namibia COMPARATIVESOCIO-ECONOMICINDICATORS

Develo- Develo- Year Namibia Africa ping ped Countries Countries Basic Indicators Area ( '000 Km²) 824 30 061 80 976 54 658 GNI per capita US $ Total Population (millions) 2001 1.8 811.6 4,940.3 1,193.9 2500 Urban Population (% of Total) 2001 30.7 38.0 40.4 76.0 2000 Population Density (per Km²) 2001 2.2 27.0 61.0 21.9 1500 GNI per Capita (US $) 2000 2 050 671 1 250 25 890 1000 Labor Force Participation - Total (%) 2000 39.6 43.1 … … 500 Labor Force Participation - Female (%) 2000 32.4 33.8 … … 0 1 1 1 1 1 1 1 1 2

Gender -Related Development Index Value 9 9 9 9 9 9 9 9 0 1999 0.594 0.476 0.634 0.916 9 9 9 9 9 9 9 9 0 Human Develop. Index (Rank among 174 countries) 1999 111 n.a. n.a. n.a. 2 3 4 5 6 7 8 9 0 Namibia Africa Popul. Living Below $ 1 a Day (% of Population) 1993 34.9 45.0 32.2 …

Demographic Indicators Population Growth Rate - Total (%) 2001 1.8 2.4 1.5 0.2 Population Growth Rate - Urban (%) 2001 3.0 4.1 2.9 0.5 Population < 15 years (%) 2001 43.6 42.4 32.4 18.0 Population >= 65 years (%) 2001 3.8 3.3 5.1 14.3 Population Growth Rate (%) Dependency Ratio (%) 2001 89.4 85.5 61.1 48.3 3.0 Sex Ratio (per 100 female) 2001 71.4 73.9 103.3 94.7 2.5 Female Population 15-49 years (% of total population) 2001 23.0 23.6 26.9 25.4 Life Expectancy at Birth - Total (years) 2001 36.6 52.5 64.5 75.7 2.0 Life Expectancy at Birth - Female (years) 2001 44.3 53.5 66.3 79.3 1.5 Crude Birth Rate (per 1,000) 2001 35.1 37.3 23.4 10.9 1.0 Crude Death Rate (per 1,000) 2001 17.8 14.0 8.4 10.3 0.5 Infant Mortality Rate (per 1,000) 2001 67.6 79.6 57.6 8.9 0.0 Child Mortality Rate (per 1,000) 1 1 1 1 1 1 1 2 2

2001 124.7 116.3 79.8 10.2 9 9 9 9 9 9 9 0 0 9 9 9 9 9 9 9 0 0

Maternal Mortality Rate (per 100,000) 1998 230 641 491 13 3 4 5 6 7 8 9 0 1 Total Fertility Rate (per woman) 2001 5.0 5.1 2.8 1.6 Namibia Africa Women Using Contraception (%) 1997 5.6 … 56.0 70.0

Health & Nutrition Indicators Physicians (per 100,000 people) 1998 29 37 78 287 Nurses (per 100,000 people) 1997 168 106 98 782 Life Expectancy at Birth (Years) Births attended by Trained Health Personnel (%) 1998 44 38 58 99 Access to Safe Water (% of Population) 2000 77 60 72 100 71 Access to Health Services (% of Population) 1999 59 62 80 100 61 Access to Sanitation (% of Population) 2000 41 60 44 100 51 Percent. of Adults (aged 15-49) Living with HIV/AIDS 41 1999 19.5 5.7 … … 31 Incidence of Tuberculosis (per 100,000) 2000 596 105 157 24 21 Child Immunization Against Tuberculosis (%) 2000 77 63 82 93 11 1 Child Immunization Against Measles (%) 1 1 1 1 1 1 1 2 2 2000 69 58 79 90 9 9 9 9 9 9 9 0 0 9 9 9 9 9 9 9 0 0 Underweight Children (% of children under 5 years) 1999 26 26 31 … 3 4 5 6 7 8 9 0 1 Daily Calorie Supply per Capita 1999 2 096 2 408 2 663 3 380 Nam ibia Africa Public Expenditure on Health (as % of GDP) 1998 4.1 3.3 1.8 6.3

Education Indicators Gross Enrolment Ratio (%) PrimarySchool - Total 1998 134.0 80.7 100.7 102.3 PrimarySchool - Female 1998 135.0 73.4 94.5 101.9 Infant Mortality Rate Secondary School - Total 1998 64.0 29.3 50.9 99.5 ( Per 1000 ) Secondary School - Female 1996 66.2 25.7 45.8 100.8 90 Primary School Female Teaching Staff (% of Total) 1996 66.2 40.9 51.0 82.0 80 Adult Illiteracy Rate - Total (%) 2001 17.3 37.7 26.6 1.2 70 Adult Illiteracy Rate - Male (%) 2001 16.6 29.7 19.0 0.8 60 50 Adult Illiteracy Rate - Female (%) 2001 18.1 46.8 34.2 1.6 40 Percentage of GDP Spent on Education 1998 9.1 3.5 3.9 5.9 30 20 Environmental Indicators 10 0 Land Use (Arable Land as % of Total Land Area) 1 1 1 1 1 1 1 2 2 1999 1.0 6.0 9.9 11.6 9 9 9 9 9 9 9 0 0 9 9 9 9 9 9 9 0 0 Annual Rate of Deforestation (%) 1995 0.3 0.7 0.4 -0.2 3 4 5 6 7 8 9 0 1 Annual Rate of Reforestation (%) 1981-90 … 4.0 … … Nam ibia Africa Per Capita CO2 Emissions (metric tons) 1997 … 1.1 2.1 12.5

Source : Compiled by the Statistics Division from ADB databases; UNAIDS; World Bank Live Database and United Nations Population Division. Notes: n.a. Not Applicable; … DataNotAvailable. vi

EXECUTIVE SUMMARY

1. Project Background

The transport sector policy of Government of Namibia (GRN) lays special emphasis on the importance of a good road network for the economic and social development of the country. The proposed Aus-Rosh Pinah road section located in the Karas Region will connect to the paved road network at Aus between Luderitz and Keetmanshoop. Further, the existing gravel road between Aus and Rosh Pinah (169 km) links the railhead at Aus, on the Luderitz- Keetmanshoop rail section, with the lead-zinc mining town of Rosh Pinah. Besides significant reduction in vehicle operating costs and road maintenance cost, the project aims at solving the problems of dust, drainage and traffic safety caused by the existing gravel road. This problem will assume alarming proportions in view of the expected large increase in heavy vehicle traffic attributable to the planned development of the zinc-lead mines at Rosh Pinah and the development of another mine at Skorpion (20 km Northwest of Rosh Pinah). Also, the future development of the town of Rosh Pinah, tourism and agricultural development in the project area will result in large volumes of traffic plying the route between Rosh Pinah and Aus. The project has been accorded high priority within the Second National Development Plan (NDP-2) and forms part of the Public Sector Investment Programme (PSIP).

2. Purpose of the Loan

An ADB loan of ZAR 205.13 million (UA 16.23) million will meet part of the cost of the civil works for upgrading the Aus – Rosh Road Project. The principal terms of the loan are as follows:

i) Loan Amount : ZAR 205.13 million

ii) Currency : South African Rand (ZAR)

iii) Type of Loan : Floating Interest Rate Loan

iv) Interest Rate: Six (6) months Jibar plus a lending spread of 50 basis points.

v) Commitment Fee: 0.75 per cent per annum on the undisbursed amount, commencing 60 days after the signature of the loan agreement. The Borrower may be eligible for a waiver of up to 50 basis points, subject to the discretion of the Bank.

vi) Loan Maturity: The loan will have a maturity of twenty (20) years, inclusive of a five (5) year grace period.

vii) Loan Repayment: The loan will be repayable in thirty (30) equal and consecutive semi-annual installments commencing on the loan repayment date immediately following the expiration of the grace period. vii

3. Sector Goal and Project Objectives

The sector goal is to facilitate economic development and poverty alleviation by improving the efficiency of national transport infrastructure.

The objective of the project is to upgrade the 169 km road from Aus to Rosh Pinah in order to reduce total transport costs.

4. Project Components

A. Civil Works: The civil works comprise upgrading of the road between Aus and Rosh Pinah (169 km) to bitumen standard.

B. Consultant Services for Pre-Contract and Supervision: Experienced firms of consultants will undertake pre-contract and supervision services of the civil works.

C. Project Audit Services: A firm of external auditors will provide project audit services on behalf of the Auditor General’s Office.

For the purpose of co-financing of the project by BADEA and ADB, the project road has been split into two contracts as described below:

 Contract A (118 km) to be financed by ADB/GRN from Rosh Pinah to km 118.

 Contract B (51 km) to be financed by BADEA/GRN from the end of Contract A to Aus.

5. Project Cost and Sources of Finance

The total cost of the project is estimated at ZAR 339.85 million, net of taxes and duties. These costs are based on June 2002 prices and are derived from consultant’s reports and on-going contracts. ADB will finance 60 percent (ZAR 205.13 million) of the total project cost; BADEA will finance 29 percent (ZAR 98.48 million) and the GRN will finance 11 percent (ZAR 36.24 million) of the total project cost as well as duties and 15% VAT.

6. Project Implementation

The Roads Authority will be responsible for the implementation of the project. Allowing for the time required for procurement, commencement of the civil works of the ADB financed component (Contract A - 118 km) is expected to be in August 2003 and its completion in October 2005 (a period of 27 months), followed by a 12-month maintenance defects liability period.

For the BADEA financed component (Contract B - 51 km), the civil works will be implemented over a period of 15 months commencing August 2004 and ending October 2005, followed by a 12-month maintenance defects liability period. viii

7. Conclusions and Recommendations

The Government is committed to developing the road sector in general as demonstrated by the successful reforms undertaken and to the implementation of this project in particular. The project will support the economic growth of the Karas Region and the country at large by reducing the transportation cost of mining products, agricultural inputs and produce and reducing travel time between Aus and Rosh Pinah. Also, the road will eventually connect to RSA thereby contributing towards the promotion of tourism and regional integration. The objective of the project is consistent with the government’s poverty reduction action plan provision of infrastructure and the delivery of social services.

It is recommended that an ADB loan not exceeding ZAR 205.13 million (UA 16.23 million) be granted to the Republic of Namibia for the purpose of implementing the project as described in this report, subject to the conditions specified in the loan agreement. ix

NAMIBIA: AUS-ROSH PINAH ROAD PROJECT PROJECT MATRIX

PROJECT TEAM: RUGAMBA/KIES/KAYONGO/SOLIMAN

Narrative Summary (NS) Verifiable Indicators(VI) Means of Verification Assumptions/Risks

Goal (Goal to supergoal) 1. To facilitate economic 1.1 Increase in the all-weather 1.1 Annual road construction 1.1 Other productive sectors development and poverty national road network in and pavement evaluation implement the right policies to alleviation by improving Namibia by 100 km per year. statistics stimulate economic and social the efficiency of the development. national transport 1.2 Overall growth in traffic of 1.2 Transport and Road infrastructure. 3% per annum. Statistics of Bureau of Statistics.

Project Objective (Project Objective to Goal) 1. To upgrade the 169 km 1.1 Transport costs reduced by 30% 1.1 Calculate transport costs 1.1 Availability of resources for road from Aus to Rosh in the year 2006 when the road using HDM model maintenance. Pinah in order to reduce is fully opened to traffic in total transport costs. 2006. 1.2 International Roughness 1.2 Government commitment for 1.2 Roughness of about 2000 Index (IRI) the successful implementation mm/km throughout the life of of the Project road up to year 2026. 1.3 Traffic Counts 1.3 AADT of 200-250 vehicles for the project road by 2006. Outputs: (Outputs to Project Objective) 1. A completely upgraded 1.1 Total length of 169 km of 1.1 Quarterly Progress Reports 1.1 Competent contractor two lane bitumen road bitumen road completed by (QPRs). selected. linking Aus and Rosh 2006. 1.2 Quarterly EMP reports. 1.2 Project implemented as per Pinah and linking with 1.3 Supervision Reports (SRs). schedule. the rest of Namibian road 1.4 Project Completion Report network. (PCR). 1.5 Audit Reports Activities: 1. Input/ Resources ZAR (Activity to Output) (million) 1.1 Appraisal estimates 1. Civil Works 1.1 All procurement actions are 1.1 Pre-qualification of 1.1 Civil works 281.36 1.2 QPR on schedule and competent contractors 1.2 Supervision 13.75 consultant and contractors 1.2 Issue and receipt of 1.3 Audit 0.60 1.3 Supervision Report selected tenders evaluation, 1.4 Contingencies negotiation and award of Price : 29.35 1.4 PCR 1.2 Payments for invoices are not contracts. Physical 14.79 delayed and there are no cost 1.3 Civil works of the roads TOTAL 339.85 1.5 Audited accounts overruns. totaling 169 km. 2. Financing Plan ZAR (million) 1.6 Disbursements records. 1.3 Timely payment of counterpart local funds by ADB 205.13 GRN BADEA 98.48 GRN 36.24 1.4 Effective supervision by the TOTAL 339.85 Bank, Consultant and Roads Authority 1. ORIGIN AND HISTORY OF THE PROJECT

1.1 The transport sector of Namibia is crucial to the overriding objectives of Namibia’s development, which are to stimulate economic growth, diversify the production base, create jobs, and reduce income inequality. This is because the vast but sparsely populated country has considerable resources whose efficient exploitation requires a modern transport network to bring workers, and to haul inputs and outputs, to and from the production sites. In addition, the strategic location of the country’s main seaport of Walvis Bay on the Atlantic Ocean makes it an advantageous transit route for the haulage of import and export goods by neighbouring countries from and to the Western Hemisphere. As a result, an important aspect of the transport policy of the Government of the Republic of Namibia (GRN) is to upgrade the sector’s infrastructure (road, rail, seaports and airports), thereby contributing to the improvement of the living conditions of the people through the achievement of the overriding objectives of the sector. The Country Strategy Paper (CSP) for Namibia, as adopted by the Government and a wide range of stakeholders during consultations in the field and as approved by the Board, duly gives reflection to this importance of the sector in Namibia’s development, and targets road upgrading and road construction as one of the priority sectors of the Bank’s interventions in the country. In particular, the site of the project road, in the Karas region, is currently inadequately serviced by a gravel road leading from Aus (south of the seaport town of Luderitz) to the Orange River, whilst the whole area has potential in mining as well as agricultural diversification and tourism opportunities. The establishment of a bitumen standard road from Oranjemund town on the Orange River to the trailhead at Aus and further to Luderitz port has become a matter of strategic importance. It is one of the operations prioritised in the CSP.

1.2 In light of the low level of transport services and the expected developments in the project area, the Government in 1998 commissioned a study on the possible upgrading of roads leading to Oranjemund. The Ministry of Works Transport and Communications (MWTC) administered the study, with financing from the Arab Bank for Economic Development in Africa (BADEA). The results of the feasibility study indicated that the investment on the road section between Aus and Rosh Pinah - 169 km (See Annex 1) would be economically justified and this section was recommended for construction as Phase 1 of the project. This would be extended further, in Phase II, to Oranjemund near the Republic of South Africa (RSA) border with a view to eventually linking to the RSA road network. The upgrading of the existing road to bitumen standards would substantially improve the current level of transport services apart from promoting regional integration with RSA.

1.3 Based on the feasibility study recommendation, the Government formally requested the Bank, in December 2000, to co-finance the Aus-Rosh Pinah Road Upgrading Project with BADEA. In response to the Government request, the Bank mounted a preparation mission in March 2001, which was followed by a joint (ADB/BADEA) appraisal mission in June 2002. This appraisal report is based on the feasibility, detailed engineering design and environmental & socio-economic impact assessment studies as well as the findings of the joint mission.

1.4 The proposed project has been accorded high priority by the Government within the Second National Development Plan (NDP-2) covering the period 2000/2001 to 2005/2006 and forms part of the Public Sector Investment Program (PSIP). 2

2. THE TRANSPORT SECTOR

2.1 The Transport System

Overview

2.1.1 Namibia’s transport system comprises four major modes, namely roads, railway, air and maritime transport. The transport sector occupies a central position in the development of all sectors of the economy, and in facilitating the integration of the national economy internally and internationally. It is also a major factor in agricultural and industrial production, exploitation of natural resources, marketing of products locally and abroad, development of tourism, and in facilitating mobility in both rural and urban areas. The sector is estimated to account for about 4% of GDP. Namibia, also, serves as transit route for Botswana, South Africa, Zambia, and Zimbabwe through the port of Walvis Bay. The Trans- Kalahari and the Trans-Caprivi Highways are the principal transit corridors in Namibia.

2.1.2 The Namibian transport system consists of: i) 63,000 km of roads; ii) a railway network of 2,382 km; iii) 14 public airports (two international airports at Windhoek and Eros) and 13 licensed private aerodromes; and iv) two sea ports at Luderitz and Walvis Bay. The transport system is skewed in distribution with the northern and north-eastern areas, which is inhabited, by over 50% of the population having less than 10% of the transport system.

2.1.3 Roads: Namibia has a relatively well-established road infrastructure comprising of about 40,000 km classified road of which about 5,240 km is paved and the rest either being of gravel surface, gypsum/salt roads or earth and tracks. Because of the skewed nature of the distribution of the road network, road development since independence has, as a priority been directed to the underserved areas in the north and north-eastern areas, including rural access roads and those major trunk roads leading to the neighbouring countries.

2.1.4 Railways: The rail network consists of 2,382 km with one main line and five branch lines. The main line, which is about 1,300 km, starts at Ariamsvlei (border with RSA) and runs through Keetmanshoop to Windhoek, Okahandja, Swakopmund and terminates at Walvis Bay. Currently this network is in the process of being extended northwards from Tsumeb to Oshikango at the border with Angola and to Oshakati, the first phase of the project is co-financed by the ADB, BADEA, the Kuwait Fund and GRN.

2.1.5 As part of the new Government’s policy towards transport, the legal framework governing the railway of Namibia has undergone considerable change recently. The shareholding and other functions of Government with regard to the state-owned TransNamib Holdings Limited have been separated. This company operates the railway system on commercial basis, while the Ministry of Finance (MoF) is the shareholder. On the other hand, the MWTC owns the railway infrastructure as well as regulates the rail transport services.

2.1.6 Ports: With a coastline of about 1,400 km, Namibia has two operating ports at Walvis Bay and Luderitz. The Walvis Bay port has superior facilities than Luderitz port, which include berths with a quay wall of 1.4 km in length. The overall capacity of the port is estimated at 5 million tones per annum capable of being increased to 10 million per annum although present traffic stands at about 2 million tones. The port has, therefore considerable potential to take on inter regional traffic. 3

2.1.7 The two ports are operated by the state owned Namibian Ports Authority on commercial basis, while the Directorate of Maritime Affairs performs regulatory functions related to maritime safety and environmental protection services to the maritime industry of Namibia and to foreign vessels in Namibian territorial waters. The GRN is planning to transform the Directorate into an autonomous authority.

2.1.8 Air Transport: Namibia is well served by 14 public airports, 13 licensed private aerodromes and 108 unlicensed airstrips, with a variation between asphalt runways to gravel and sand landing strips. The Hosea Kutako International Airport, which is located 40 km east of Windhoek, is the only airport in Namibia with adequate facilities to accommodate international flights. Eight major aerodromes are operated by the state owned Namibian Airports Company, while the Government has retained ownership and responsibility for the smaller aerodromes.

2.1.9 As part of the on-going institutional reforms, the air transport industry has been liberalized, thereby opening up for private participation in the market. In addition to the government owned Air Namibia, privately owned airlines provide scheduled and unscheduled local, regional and international services. To increase efficiency in the industry, Government has commenced consultations with stakeholders on the restructuring of the Department of Civil Aviation with a view to creating an autonomous Civil Aviation Authority. The proposed authority will report directly to the Minister of the MWTC on technical aspects related to aviation safety and security.

2.2 Transport Policy, Planning and Co-ordination

2.2.1 Development of the transport sector is guided by the NDP-2. Within this plan, the Government’s general objective of the transport sector is to provide efficient, safe, cost- effective and fully integrated infrastructure and operations, which best meet the needs of customers and promote economic and social development while being environmentally and economically sustainable.

2.2.2 The MWTC has overall responsibility for transport policy, legislation, planning and coordination for all transportation modes, including obligations in international transport. Some of the functions of planning development and maintenance of infrastructure are performed through specialised entities of the Ministry and the private sector. The organization structure of the Department of Transport (DOT) within the MWTC is shown in Annex 2. In Namibia, the current transport, policy and institutional organisation are based on the following principles:

- Integration of Namibia’s transport system into the regional network in line with the SADC Transport and Communications Protocol;

- Implementation of institutional reforms to improve efficiency of state bodies and to separate regulatory and operational functions; and

- Reduction of Government spending and direct participation in the transport sector.

2.2.3 On the basis of the above principles, the MWTC launched the MWTC 2000 Project in 1995 to restructure the transport sector with the aim of achieving more efficient transport by transferring all the MWTC operational (non-core) activities to state-owned operational 4 entities. The Ministry will remain with the core functions of policy formulation and regulation. The aims and objectives of the Project are in conformity with Government’s strategy for achieving sustainable development.

2.2.4 Under the MWTC 2000 Project a comprehensive study on the restructuring and commercialisation of the road related functions of the Department of Transport was carried out. The main recommendation of the study was for the GRN to create three new agencies, the Road Fund Administration (RFA) to manage the road fund and the road user charges, the Roads Authority (RA) to manage the national road network, and the Roads Contractor Company (RCC) to serve as a provider of road maintenance and construction services using the plant and personnel of the Department of Transport. The recommendations were accepted by the GRN, which established the three entities under three separate pieces of legislation, viz. the Road Fund Administration Act, the Roads Authority Act and the Roads Contractor Company Act, all of which became effective in October 1999. The RA and RCC fall under the Minster responsible for Transport while the RFA is under the Minister responsible for Finance.

2.2.5 The National Planning Commission (NPC) and MOF play an important role in helping to coordinate transport strategies, providing guidelines for sectoral development plans and setting overall levels of investment for each of the sub-sector plans. Effective coordination exists between the MWTC, NPC, and MOF.

2.3 Intervention of Other Donors in the Sector

In the road sub-sector, the ADB, European Union, BADEA and KfW have been financing technical studies as well as rehabilitation and development projects. SIDA in particular played a leading role in supporting the institutional reforms in the road sector. The proposed Aus-Rosh Pinah Road project is co-financed by ADB, BADEA and the GRN. Within the railway sub-sector, the Northern Railway Extension Project is being implemented as part of the NDP-2 and is co-financed by the ADB, the Kuwait Fund, BADEA and GRN.

3. THE ROAD SUB-SECTOR

3.1 Road Network, Vehicle Fleet and Traffic

3.1.1 The classified road network comprises about 40,000 km of trunk, main and district roads, and about 23,000 km of proclaimed farm roads. Of the trunk, main and district roads, about 5,240 km are bitumen surfaced, about 26,500 are gravel surfaced, about 240 km are gypsum/salt roads and the remaining 8,020 km are earth roads and tracks. In comparison with other SADC member countries, the road network of Namibia is currently in a relatively good condition due to the timely maintenance and rehabilitation that is usually implemented. The country has a well developed road infrastructure, mainly serving the major areas of economic activity in the central and southern parts of the country. Road transport services in the rural northern parts of Namibia are still limited. The current priorities of GRN are to maintain and rehabilitate the existing road network, to provide roads primarily in the under-developed regions and to improve road linkages with neighbouring countries.

3.1.2 About 90% of the paved roads and 80% of the unpaved roads are in good condition. This compares well with the road conditions in the rest of the SADC countries. While the situation looks favorable, it should be highlighted that some of the paved roads are older than 5

20 years, and others over 30 years old. It is necessary to rehabilitate the majority of these roads and while they can still be classified as in good condition. It is estimated that 30-40% of these roads will require major rehabilitation in the near future. Continuous periodic maintenance efforts of the network can be seen as preventive maintenance and these have considerably slowed the pace of deterioration.

3.1.3 The Transport services in Namibia are provided by an estimated fleet of some 175,000 vehicles of which over 46% are registered in Windhoek. The current rate of vehicles per 1,000 persons compares favorably to SADC countries but is 35% lower than South Africa. On the road network daily traffic, growing by about 4% per year is generally light (less than 1000 vehicles) with only three roads (Windhoek-Okahandja, Oshakati- Ondangwa and Walvis Bay-Swakopmund) handling more than 3000 vehicles per day.

3.2 Road Transport Industry

3.2.1 The Road Traffic and Transport Act, (RTTA) that came into effect on 6 April 2001, deals among things, with the control of traffic on public roads. It provides for the appointment of traffic officers, road transport inspectors and vehicle inspectors. Aspects such as transport operations, legal axle and mass limits, abnormal loads and traffic fines are also dealt with in the RTTA. Persons undertaking freight transport within the borders of Namibia no longer require road carrier permits, however permits are required for cross-border operations. For the period April 2001 to March 2002, a total of 637 cross-border permits were issued for transporters from South Africa, Zimbabwe, Botswana, Zambia and Swaziland. Namibia is a signatory to the SADC Protocol on Transport, Communications and Meteorology. In terms of this agreement Namibia has undertaken certain obligations to the other member countries that include the simplification and harmonization of documentation and procedures for the movement of persons and goods.

3.2.2 The commercial vehicles are estimated at 89,000 vehicles of which freight vehicles number 11,500 in the 3.5-20 ton capacity range. There are about 200 road haulage operators registered in the country with the largest operator being TransNamib Carriers with a fleet of 671 heavy goods vehicles. There are only another twelve large operators with fleets ranging from 120 to 364 in size. The remainder of the operators run smaller fleets. With the exception of TransNamib, all other operators are from the private sector. Road passenger services are also being provided by the private sector with the exception of less than 20% of Windhoek market, which is served by the municipality bus company.

3.2.3 The current policy direction of the GRN is that the road haulage market and the long distance bus operators be deregulated. In terms of the taxis and buses in urban areas, Government’s emphasis is on improving the services to areas with poor accessibility without even having to subsidize the operators. More specifically, this approach involves replacement of the conventional bus service with a form of combi/taxi service.

3.2.4 Until recently, the Government maintained a uniform official tariff structure throughout the country. The tariffs did not reflect long run marginal costs taking into account capital replacement costs, capital finance costs or the type of circumstances in which the services were provided (paved, gravel or earth surface roads). In order to improve the road transport services, the GRN has deregulated the freight tariffs.

3.2.5 The Department of Transport (DOT) shares responsibility through the Roads Authority with the Namibian Police for control of overloading. It is estimated 28% of all 6 vehicles are overloaded. This is costing an estimated N$28 million per annum in additional maintenance on the road network. The Roads Authority through its Road Transport Inspection Services Division has adopted a strategy to build a network of weighbridge facilities to control overloading. The Division has five regional offices in Windhoek, Keetmanshoop, Walvis Bay, Grootfontein and Ohangwena respectively. During 2001, a total of 13,864 vehicles were weighed at all weighbridges. The number of overloaded vehicles was 2,179 (16%) compared to 31% in 2000. A pro-active approach to control of overloading has been embarked upon to improve the cooperation and educate road users, especially operators, through the media on the effects of overloading in Namibia. Total fines collected in 2001 in respect of overloading amounted to N$ 2.6 million. A new overload fee structure is under consideration as part of the overall strategy that will serve as a deterrent and will thus lead to a reduction in overloading and savings in maintenance costs.

3.2.6 The increased length and the improved condition of roads in the country calls for more attention to road safety issues. In 2000, the number of accidents recorded was 10,063 compared to 9,424 accidents in 1999 and 6,225 in 1996. This represents an average increase of 750 accidents per year. On the other hand, fatality statistics for Namibia are comparatively better than other SADC countries with only 7 fatalities per 10,000 vehicles compared to 16 for RSA, 260 for Mozambique, and 194 for Malawi.

3.2.7 Road Safety is a key output of the Roads Authority operations and in this regard, safety elements are incorporated into the planning, design, construction and maintenance of roads. Extensive safety audits are carried out on specific roads to identify the necessary remedial measures. The National Road Safety Council is the statutory body charged with the promotion of road safety. A programme has been approved aimed at mainly providing educational information to complement efforts of the Roads Authority and the law enforcement agencies including the Namibian Police and local authorities. The programme includes the development of a collision information management system, a traffic safety management system and seasonal awareness campaigns with a view to further reduce the number of accidents and their associated human suffering.

3.3 Road Administration and Training

3.3.1 The Roads Authority commenced its operations on 1st April 2000 and is responsible for managing the national road network of Namibia comprising 40,000 km of road with an asset value of N$ 4 billion and a replacement value of N$ 7.7 billion. According to the legislation, it is the responsibility of the Roads Authority on behalf of Government to ensure that this network is safe and efficient. The primary functions of the Roads Authority to meet these objectives are planning and design, construction and maintenance of roads, quality control, operation of a road management system and road traffic inspection services. In a relatively short period, the Roads Authority has been able to position itself to effectively render these services.

3.3.2 The total number of established posts is 278 of which 260 are filled with 36% women and 64% men. The corporate headquarters of the RA are located in Windhoek. The corporate governance structure comprises the Board of Directors, the Audit Committee, the office of the Chief Executive Officer, four Divisions and three Sections. The organization chart of the Roads Authority is presented in Annex 2.

3.3.3 The Minister of Works Transport and Communications monitors the Authority on the basis of a Performance Statement containing particulars that include the short and medium 7 term operational objectives and strategies. For the period April 2000 to March 2001, the Roads Authority achieved its targets in accordance with the Performance Statement. The main achievement was the finalisation of the Authority’s organizational structure, job descriptions, job categories and salary scales. In addition, all senior appointments were made.

3.3.4 With its unique responsibility as the road network manager, it is a requirement that a high level of professionalism is maintained within the Roads Authority. The main constraint faced by the Authority is the shortage of local technical staff. Initiatives to address this problem include in-house training of engineers and technicians by Technical Assistants working with the RA. In addition, an intensive training programme for Namibian engineers and technicians has been prepared. The RA has earmarked N$10 million as seed money to start the programme and external support is being solicited. Training for technicians will be done locally in Namibia; however, engineering degrees can only be done outside the country since the University of Namibia does not offer such courses yet.

3.4 Road Planning and Financing

3.4.1 The Roads Authority is responsible for preparing the budget for the national road network. In so doing, the RA makes use of its Pavement Management System (PMS) as a scientific planning tool to determine road conditions, remaining life, backlog rehabilitation needs and the optimal funding requirements for the maintenance and rehabilitation of the paved road network. An Unsealed Roads Management System (URMS) is also under development to assist in the planning of economical maintenance of the unpaved road network. The main part of the URMS will be the identification and prioritization of regravelling projects.

3.4.2 Although the road network condition can be described as good, the PMS indicates that a backlog has developed in terms of rehabilitation needs. The current situation is that 2% of the network would require rehabilitation each year for the next five years. The average annual requirement for the maintenance and rehabilitation of the paved roads has been calculated at N$250 million. This funding level will ensure that: i) the current backlog is eliminated within 5 to 10 years: ii) the structural life increases to more than ten years; and iii) the current condition can be improved further and sustained.

3.4.3 The RA budget is submitted to the RFA who undertake a separate analysis before deciding on a final allocation from the Road Fund. The inherent system of road sector agencies validating each other’s budget projections and assumptions is important for achieving cost-effectives and has been found to work well in Namibia.

3.4.4 An important factor behind the road sector reforms was the need to separate the road funding function, which is regulatory in nature, from the road management function, which is operational in nature. Prior to the road sector reforms, roads were funded entirely out of the Government’s budget. Under the present system, the Road Fund Administration has the task of managing the road user charging system and administering the Road Fund. All income from the road user charging system accrues to the Road Fund, to fund a safe and efficient road sector. The RFA provides funding for roads according to efficiency and equity principles. Apart from the national road network, the RFA also provides funding for related projects and programme such as contributions to maintenance operations for local authority roads, traffic law enforcement (including overload control), and contributions towards the operating costs of vehicle testing stations and driver testing centres. The funding of social and strategic roads continues to be Government’s responsibility or a combination of the road user 8 charges and Government funding. The Government’s contribution comes from the general budget or bilateral/multilateral grants.

3.4.5 Road expenditures have increased from N$ 163 million in 1995 to N$ 478 million in 2001 or by a factor of 3 as shown in Table 3.1. The maintenance expenditure increased in the same terms. These rates reflect the recognition of the importance of improving transport as a basis for the development of various sectors particularly mining, agriculture and tourism.

Table 3.1 Road Sub-sector Investment and Maintenance Expenditure (N$ Million)

Y e a r Activity 1995 1996 1997 1998 1999 2000 2001 Development/ 51 73 105.2 132.7 129.49 201 164.71 Rehabilitation Maintenance 112.7 148.4 154.9 161.5 186.55 211.6 309.47 Total 163.7 221.4 260.1 294.2 316.04 412.6 474.18

3.4.6 The RFA has the legal powers to levy road user charges for this purpose, though mainly licence fees, fuel levies, weight-distances charges, and cross-border transport charges. Fuel companies are responsible for collecting the road user levy on bulk sales and to deposit the money directly to the RFA’s bank account on a monthly basis. With regard to vehicle license and registration fees, registering authorities, appointed by the Ministry of Works, Transport and Communication, collect the fees and deposit the money into the RFA’s bank account on daily basis. The cross-border charges are collected by a RFA agent and deposited in the RFA’s account on a weekly basis. The Ministry of Home Affairs (Namibian Police) or the Ministry of Justice collects overloading fines. The system of weight distance charges collection revenue is being worked out and is expected to be implemented by December 2002. For 2000/01 and 2001/02 financial year, RFA’s revenue collection amounted to N$ 489 million and N$ 548 million, respectively, of which about 70% was collection from fuel levies, 11% from vehicle license fees and 19% from other sources such as government contribution, interest revenue, and loans.

3.4.7 The RFA staff is relatively small with an establishment of nineteen people, including a maximum of five executive directors, a chief executive officer and three managers. At present its staff complement consists of three executive directors and eleven staff members, including the Chief Executive Officer. The Board of directors is autonomous in being able to take decisions about the level of road user charges and to determine the expenditure in roads, both as far as maintenance and investment is concerned.

3.4.8 The decisions by the RFA on both revenue resources and expenditure commitments are detailed in a 5-year business plan to be made available every year. The business plan, inter alia, identifies the allocations for the 1st year of the 5-year period and indicative commitments for the next four years to ensure long-term stability of the financing of road and road-related projects and programs. The RFA has powers to monitor and ensure that the RA and other recipient authorities efficiently use funding allocations.

3.4.9 The RA has prepared for the period 2002 – 2006 a multi-annual expenditure plans for the sector. As shown in Table 3.2 below, the plan reflects commitment to maintain the existing network with a decrease on construction in year 2006. Of the total expenditure 9 budget, about 75% will be met by the RFA from road user charges and the balance will come from direct government funding.

Table 3.2 Five-Year Road Sub-sector Expenditure Plan

Y e a r Activity 2002 2003 2004 2005 2006 Construction as percent of 38.26% 49.40% 51.47% 53.86% 30.36% the total Maintenance as percent of 61.74% 50.60% 48.53% 46.14% 69.64% the total Total (N$ million) 554.15 730.27 822.3 934.24 668.41

3.5 Road Engineering and Construction

3.5.1 The GRN has adopted the design standards established by SATCC for road and bridge design in the Southern Africa Development Community (SADC). A total of about 15 Namibian consulting engineering firms provide design services to the Roads Authority. The National Laboratory in Windhoek carries out soils and materials testing. There are four commercial laboratories in the country with adequate facilities for carrying out tests.

3.5.2 The RA does not directly undertake road construction and maintenance work, but lets it out through a tendering process. Currently a significant amount of road rehabilitation work is going on, which is mainly being carried out by local and foreign contractors. In some instances, local contractors have teamed up with the foreign firms as sub-contractors or in joint ventures. The Construction Industries Federation (CIF) of Namibia represents national interests of the Namibian construction industry with the Government. It also promotes harmonious working relationships between its members and coordinates the skills and training needs of the industry.

3.6 Road Maintenance

3.6.1 The Maintenance Division of the Roads Authority is for responsible for maintaining the roads forming part of the national road network. Parts of the Division are located in the four regions into which the Namibian road network has been divided for maintenance purposes: Oshakati, Otjiwarongo, Windhoek, and Keetmanshoop. Each year the Division produces a set of objectives outlining the maintenance activities to be carried out and the target production levels. Activities typically include bitumen surface maintenance, resealing, road marking, bush clearing, and regravelling. With the funds available, the minimum maintenance standards in terms of riding quality and accessibility are generally met and at times exceeded. The dry climatic conditions and good road building materials in Namibia have also facilitated the extension of the expected life of roads.

3.6.2 The Government has committed itself to give priority to the maintenance of the road network in the development of the country. Labour-based maintenance techniques are encouraged to the extent possible with a view to create employment thereby reducing poverty in the rural areas. 10

3.6.3 Maintenance of roads and bridges is carried out by the Roads Contractor Company and local contractors. The RCC evolved from the Maintenance and Construction units in the Ministry of Works, Transport and Communication. With a staff complement of 1,800, the RCC is Namibia’s biggest civil engineering company. It operates on sound and generally accepted business principles and is responsible for the maintenance of the proclaimed road network under contract with the Roads Authority. The company has been given a period of three years of preferential treatment whereby the maintenance contract of the road network will be assured for the purpose of establishing itself in the contracting industry after which the road maintenance contracts will be open to a competitive bidding process. The RCC has a Small and Medium Enterprises Development Programme, which aims to empower operational teams to become independent and private contractors using both labour and mechanically based methods.

3.6.4 During the period 2002/2003, the main challenge of the Maintenance Division is to get the RCC ready for the fully competitive market, and to prepare appropriate contract documentation to procure the maintenance activities under competitive bidding for the year 2003/4 and onwards. Emphasis will also be placed on training of personnel, and on recruitment where necessary.

4. THE PROJECT

4.1 Project Concept and Rationale

4.1.1 The Vision of NDP-2 is “Sustainable and equitable improvement in the quality of life of all the people in Namibia”. This long-term vision will be addressed through the implementation of NDP-2 objectives which include measures to: a) reduce poverty; b) increase employment opportunities; c) promote economic development; d) reduce inequalities in income distribution; e) promote gender equality and equity; and enhance environmental and ecological sustainability. The realization of these objectives will entail devising appropriate strategies that encompass a range of development approaches that can be translated into viable programmes and projects. The Plan’s national strategies will focus, among other things, on promoting and strengthening an enabling environment for economic growth and development.

4.1.2 Under NDP-2 Government will maintain prudent policies on macroeconomic management, borrowing, and external assistance in order to ensure economic and financial sustainability of its programmes. Borrowing will be undertaken largely for direct productive investments. The proposed project is in line with the NDP-2 objectives and in addition will contribute to promoting regional integration. It is also in conformity with the Bank Group’s country strategy for Namibia, which focuses on diversification of the production base through infrastructure development and on employment creation.

4.1.3 The feasibility study, which included public participation examined two route options, one leading from Aus via Rosh Pinah to Oranjemund (the so-called ‘inland route’), and the other leading from Luderitz to Oranjemund (the so-called ‘coastal route’). The feasibility study showed that the inland route was preferable to the coastal route, based on current and projected traffic flows, and in particular taking into account the significant contribution of the Skorpion Zinc Mine near Rosh Pinah to the viability of the road. The option of developing a railway line between Aus and Rosh Pinah as an alternative to upgrading the road was investigated as part of the feasibility study. The study showed that higher volumes of traffic 11 would be required to make the railway option viable. For all scenarios tested negative Net Present Values were obtained and therefore the rail option was not considered any further.

4.1.4 On the basis of the predicted traffic volumes as well as the composition of the traffic which will be dominated by heavy goods vehicles transporting ore from the Rosh Pinah Mine and refined zinc from the Skorpion Mine, the project seeks to upgrade the existing gravel road to bitumen standards of a standard width of 6.8 meters and 1.5-meter gravel shoulders on either side. This would significantly decrease road maintenance costs. Secondly, by sealing the road with bitumen, the current problem of dust will be solved and this will consequently lead to a reduction in the incidence of road accidents caused by poor visibility.

4.1.5 In the road sub-sector, the Bank has financed two projects viz. i) Trans-Kalahari Highway upgrading project, and ii) detailed design study for some sections of the Trans- Caprivi Highway. Both these have been completed successfully. Besides these, a railway line construction project (Northern Railway Extension) was approved in September 2001. The main lessons of past performance of Bank funded transport sector operations in Namibia are: (i) lack of familiarity with Bank procurement and disbursement procedures can cause delays thereby affecting project costs; and (ii) the implementation schedule should be closely monitored and target dates should be respected by all parties. In order to address these, the Bank organised a workshop in Namibia in June 2002 for project staff to familiarise them with the Bank’s procurement and disbursement procedures. This will help to minimise delays in project implementation.

4.1.6 An important lesson that has been learnt from the completed Trans-Kalahari Road Project, is the need to protect road infrastructure from rapid deterioration by controlling overloading of vehicles and in particular the heavy goods vehicles. As part of the Government’s Overload Control Programme, a weighbridge will be installed at a strategic point along the Aus - Rosh Pinah road and this will be part of the construction contract.

4.2 Project Area and Beneficiaries

Project Area

4.2.1 The project lies in the Karas Region, Namibian’s least densely populated region, at 162,384 km2 and 0.4 people per square kilometer. The altitude of the project area varies from sea level to over 1000 m. Average daily minimum and maximum temperatures range from about 6 degrees centigrade in winter to 35 degrees centigrade in summer. The mean annual rainfall is generally less than 100 mm. The economy of the Karas Region is dominated by mining, tourism, agriculture and increasingly, the port of Luderitz. Much of Namibia’s mining revenue is generated in the Karas Region with diamond mining generally 12% of State tax revenue. In addition, the most important development in the Namibian mining industry is taking place in the same region at Rosh Pinah. This is the Skorpion Zinc mine that is being constructed at a cost of US$ 320 million, which is the largest single investment in Namibia to date. It will produce 150,000 tons refined zinc per year making it one of the top ten largest zinc mines in the world. The first export of zinc from Skorpion through the Luderitz Port is expected in February 2003.

4.2.2 For the past years, the Karas Region has been the country’s fourth most important tourism region. Foreign visitors to the Region reach a total of over 75,000 or 13% of the national total, local tourists account for 35,000 or 11% of the national total. The region contains a number of attractions including the Fish River Canyon (second largest canyon in 12 the world), Ais-Ais hot springs, the Sperrgebiet (the restricted Diamond Area 1 with deserted diamond towns) and Luderitz (a sea side town). In addition, the natural scenery along the Orange River, as well as that in the Namib Desert will attract more and more tourists. Tourists like to use ring roads when they plan their holiday trips. It is foreseen that the Noordoewer - Rosh Pinah – Aus road will in the long run become the preferred route for tourists entering Namibia from South Africa and wishing to visit Luderitz and all the attractions in the south-western corner of Namibia, en route to Walvis Bay and Namibia’s most popular tourist town Swakopmund. The return trip would then be along a different route via Windhoek back to South Africa. The tourist attractions of the region collectively have the potential of becoming the most popular attraction in Namibia.

4.2.3 With respect to the agricultural sector in the Karas Region, successful development has occurred in irrigated agriculture and that there is indication of scope for further investment of this nature at Naute Dam and Aussen Kehr. These two farms produce 460,000 cartons of table grapes for export and there are ambitious plans to expand the production to 4 million cartons of grapes. In the light of the success of the Aussen Kehr project, a number of new irrigation projects have been proposed in the region.

4.2.4 Karas Region is comparatively well served by communications and social services. It has a high standard road network, however, one important gap in this network is the project road. With regard to social services, the region has access to safe drinking water, sanitary means of human waste disposal, sanitary means of solid waste disposal with low child disease incidence and malnutrition. The percentage of children malnourished is 17% compared to the national average of 31.4%. HIV/AIDS infection rates are below the national norm, although it is higher in locations such as Luderitz and Rosh Pinah.

Project Beneficiaries

4.2.5 The Karas region has a population of about 70,000 (3.8% of the country’s total population) of which 54% are males reflecting the in-migration character of the region as males come from the north to the region in search of employment opportunities. Household size in the Karas region, at 4.1 people per household, is smaller than the national norm of 5.1

4.2.6 The Karas Region has the nation’s second highest level of per capita income. Nevertheless, income inequality is very high with 21.4% of the region’s population classified as very poor. Unemployment is lower than in most other regions, at 21%, compared to 34.8% nationally. There an estimated 10,900 formal sector jobs in the Karas Region, or 5.5% of all formal jobs nationwide (compared to a population of 3.8% of the national total). It is estimated that 70.8% of the Karas Region households rely on formal sector employment as their main source of income. 64% of all household members in employment are male, compared to 35.5% for females. The high reliance on wage employment is evident from the fact that a number of households are established in the region specifically to seek employment.

4.3 Strategic Context

Namibia’s multi-modal transport system has played a key role in the development of the various tourist, mining, agricultural, and industrial sectors of economic activity, and this role is destined to become more important in the immediate years ahead. In particular, the southern and western parts of the country offer exciting prospects of dynamic economic growth and job creation in mining activities with the new Skorpion zinc mine and in labour- 13 intensive agricultural activities with projected expansions of areas under grape cultivation around Oranjemund. Support for these activities constitutes an integral part of NDP-2. The project road will provide a cost-effective transport system for goods haulage and passenger travel for the Karas region, since it will link areas of dynamic agricultural growth potential in the south with mining areas to the west and, in phase II of the project, with the power- generation, fishing, and fish-processing hubs around Luderitz and Walvis Bay to the north- west.

4.4 Project Objective

The sector goal is to facilitate economic development and poverty alleviation by improving the efficiency of national transport infrastructure. The objective of the project is to upgrade the 169 km road between Aus and Rosh Pinah in order to reduce total transport costs.

4.5 Project Description

4.5.1 The project components are: A) civil works for the upgrading of 169 km of gravel road to bitumen standard of a width of 6.8-meter carriageway and 1.5-meter gravel shoulders on either side; (B) consulting services for the supervision of the above civil works; and (C) provision of project audit services. A brief description of these components is as under:

(A) Civil Works

4.5.2 In order to provide an all-weather road between Aus and Rosh Pinah, the existing gavel road needs to be improved to accommodate the heavy vehicle traffic. The civil works shall consist of improvement to the horizontal and vertical alignments, creation of new road formation, construction of new pavement layers, culverts and drainage structures. Detailed surveys and engineering investigations were carried out along the chosen route before finalizing the geometric standards to minimize construction costs and maximize economic benefits.

4.5.3 For the purpose of co-financing of the project by BADEA and ADB, the project road has been split into two contracts as described below:

 Contract A (118 km) to be financed by ADB/GRN from Rosh Pinah to km 118.  Contract B (51 km) to be financed by BADEA/GRN from the end of Contract A to Aus.

4.5.4 The alignment of the proposed road has been designed in accordance with the RA design standards and where necessary complemented by those of Southern Africa Transport and Communications Commission (SATCC) design standards for a Class C road. A carriageway width of 6.8 meters with 1.5-meter gravel shoulders on either side has been adopted with a design speed of 120 kph. Improvements to horizontal and vertical alignments have been made to meet the desirable geometric criteria and traffic safety requirements.

4.5.5 The design of the pavement was based on sub-grade evaluation of California Bearing Ratio (CBR) tests taken along the alignment after soil sampling and compaction tests. A minimum value of 7% for the lower layer and 15% for the upper layer has been used in the design. The National Institute for Transport and Road Research Technical recommendations for Highways No. 17 (NITRR TRH17) as well as SATCC standards are employed in the 14 pavement design. It is based on the estimated traffic of 1.7 million Equivalent Standard Axles (ESA) over a 20-year design life of the road representing Class B2 traffic (0.8-3.0 x 106 E80’s per lane). The existing pavement has to be scarified to a depth of 200 mm and to properly mix and re-compact at uniform density. The pavement is generally designed to a total thickness of 450mm and is made up of 2x150 mm of gravel sub-base and 150 mm of crushed rock base. The surfacing will be a double seal (19 mm and 9.5 mm aggregates) for the carriageway and gravel shoulders. Road furniture has been provided to enhance road safety on the completed road.

4.5.6 Concrete pipe culverts to convey storm water run-off have been provided to carry the calculated run-off from the catchment areas along the road. To support the ground cross slopes, necessary retaining walls have been provided. Side drains invert levels have been kept about a meter below the back of the shoulders to effectively lower the water table and prevent the ingress of water into the pavement layers. Where the material in which the side drains of cuts is found friable, these drains are protected by lining with concrete or stone pitching. Normal cross drainage using nominal concrete pipe culverts have been adopted and are sufficient to take the required discharge. Mitre drains and banks have been provided at a number of places for draining of water from the side drains for erosion protection.

(B) Consultant Services for Pre-Contract Services and Supervision

4.5.7 A firm of experienced consultants will undertake pre-contract and supervision services of the civil works. The responsibility of the firm will include, inter alia, the following: assisting the Executing Agency in tendering and tender evaluation, contract award process for the civil works; review of prior arrangements made for the diversion of services and public utilities; supervision of the civil works; superintendence during the maintenance defects liability period; provision of monthly and quarterly progress reports; and preparation and submission of progress reports and final completion report. There will be a Resident Engineer for each contract.

(C) Project Audit Services

4.5.8 A firm of external auditors will provide project audit services on behalf of the Auditor General’s Office. The purpose of the audit will be to ensure that the proceeds of the loan are used economically, efficiently and solely for the purpose for which they are intended. The selected auditor shall verify the accounts of the operation of the project and make recommendations for project management. In addition, the auditor shall conduct a physical check of the facilities and supplies provided by the contractors.

4.6 Environmental and Social Impact

Environmental Impact

4.6.1 The proposed road follows the existing alignment except in a few places where some slight modifications are required to ease the sharp curves. Overall, the project road does not transverse virgin lands and is not within or close to environmentally sensitive areas. The project has been environmentally classified as category II, in accordance with the Bank’s environmental guidelines. The project will lead to an increase in traffic levels resulting in improved transport of goods and mining products, facilitate movement of people and improve communication. In addition, the overall improvement in road quality will consequently 15 reduce dust level in the air, improve visibility, improve drainage systems, reduce accidents and facilitate access to health, education and market centers.

4.6.2 The negative aspects are limited to short to medium term soil erosion, loss or disturbance of vegetation and natural habitat, groundwater overexploitation and pollution, visual impacts, safety issues, disruption of traffic, noise, temporary increase in dust, On the medium and long term, construction will cause a limited loss of vegetation, limited surface water pollution and soil erosion. A summary of the environmental impacts and the necessary mitigation measures are given in Annex 4.

Social Impact

4.6.3 The social impact assessment of the proposed project highlighted the negative effects of poor road quality, and consequent poor public transport services, on the lives of people in the area. Deferred trips were generally associated with social linkages, with high values placed on social linkages particularly for women. Improved road conditions and the consequent expansion of public transport services, will improve social linkages, job-seeking possibilities and more generally access to various social services in the Karas Region.

4.6.4 The project would attract a large labour force, which could result in social repercussions and tensions within the host communities as this mobile labour force would have a relatively high disposable income compared to the local community. Contractors will be required to source all unskilled labour locally, through standard labour channels. To the extent possible, skilled labour shall also be sourced from the area.

4.6.5 Social problems associated with the labour force include the transmission of sexually transmitted diseases (STDs), in particular HIV/AIDS. Specific attention will be given to the prevention of HIV/AIDS at the road camps. There would also be curative and preventive health facilities in the construction camps as well as budget in the civil works contract for awareness raising measures and education on HIV/AIDS, which would be managed through the contract.

4.6.6 One of the negative impacts of the growth of Rosh Pinah has been the rise in commercial sex workers as a consequence of the development of the mine. There will be a need to continue and intensify measures aimed at curbing the spread of HIV/AIDS once the road is completed due to increased accessibility of Rosh Pinah. Government has embarked on a series of activities to prevent and control the spread of HIV/AIDS infection. The programme aims at strengthening and decentralising the national HIV/AIDS control activities to the regional, local and community levels. The National Social Marketing Programme based in the Ministry of Health and Social Services, operates out of a regional office in Keetmanshoop and has activities in the Rosh Pinah area. These include condom distribution, development of behaviour change communication materials and awareness campaigns. The target groups are the commercial sex workers, road workers, mine workers and the residents of the project area at large.

Monitoring

4.6.7 The Roads Authority and supervision consultant will have the overall responsibility of supervising and monitoring the environmental aspects of the project. An Environmental Management Plan (EMP) was prepared for the RA by a consulting firm in accordance with the policy of the Ministry of Environment and Tourism. According to the EMP, a Safety and 16

Health and Environment Officer (SHE – reporting to construction manager) and an Environmental Control Officer (ECO – reporting to site engineer) will be appointed at the start of the project. The SHE and ECO will ensure the execution of the EMP, which includes an detailed monitoring plan covering land use and topography, vegetation, soils, fauna, resources, air quality and noise, archaeology and history, and socio-economic aspects of the project.

4.6.8 The Ministry of Environment and Tourism, through its local office in the Karas Region (as part of their regular activities), will be involved in the monitoring of the construction activities in order to ensure that proper environmental mitigation measures are employed. The supervision missions of the Bank and BADEA will validate and crosscheck whether the agencies responsible for environmental management and monitoring have ensured that the mitigation measures have been carried out. For the mitigating measures to be adhered to by the contractor, the supervision consultant will ensure that the civil works contract reflects the mitigating measures in the design of the project. Annex 4 provides the outline of the EMP. The implementation of the EMP and the submission of quarterly progress reports will be a loan condition.

4.7 Project Costs

4.7.1 The total cost of the project is estimated at ZAR 339.85 million (UA 26.90 million). These costs are based on June 2002 prices and are derived from consultant’s reports and on- going contracts. The total cost of the project includes a 5% allowance for physical contingencies and a price escalation of 3% per annum on the foreign exchange component and 10% per annum on the local cost component, but excludes 15% VAT. The detailed cost estimates are given in the PID and a summary is presented in Table 4.1 below.

Table 4.1: Summary of Project Cost Estimates

Components (in millions of ZAR) (in millions of UA) % F.E L.C Total F.E L.C Total F.E. Civil Works 229.43 51.93 281.36 18.15 4.11 22.26 82 Supervision Consultancy - 13.75 13.75 - 1.09 1.09 0 Project Audit Services - 0.6 0.6 - 0.05 0.05 0 Total Base Cost 229.43 66.28 295.71 18.15 5.25 23.40 78 Physical Contingencies (5%) 11.47 3.32 14.79 0.91 0.26 1.17 78 Price Contingencies (3%, 10%) 14.82 14.53 29.35 1.17 1.15 2.32 50 TOTAL PROJECT COST 255.72 84.13 339.85 20.23 6.66 26.89 75

4.7.2 The foreign exchange content of the base cost amounts to 78 percent. This includes the cost of imported materials, equipment and salaries of expatriate staff. The local cost covers locally produced construction materials, construction of labour camps, development of quarry sites and borrow pits and their corresponding environmental mitigating measures and wages.

4.8 Sources of Finance and Expenditure Schedule

4.8.1 The project will be co-financed by the ADB, BADEA and the GRN. According to the financing plan, ADB will provide 60 percent of the total cost (ZAR 205.13 million or UA 16.23 million). BADEA will provide 29 percent of the total cost (ZAR 98.47 million or UA 7.79 million). The GRN will provide 11 percent of the total cost (ZAR 36.24 million or UA 17

2.87 million), and in addition, the 15% Value Added Tax. The financing plan by source is presented in the Table 4.2 below.

Table 4.2: Sources of Finance

(in millions of ZAR) (in millions of UA) Source F.E. L.C. Total F.E. L.C. Total % ADB 177.56 27.57 205.13 14.05 2.18 16.23 60 BADEA 78.04 20.44 98.48 6.18 1.62 7.80 29 GRN - 36.24 36.24 - 2.87 2.87 11 Total 255.60 84.25 339.85 20.23 6.66 26.90 100

4.8.2 More specifically, the GRN will fully finance supervision and project audit. The ADB will finance 100% of the foreign exchange cost and 60% of the local cost of the civil works for Contract A. The GRN will finance the remaining 40% of the local cost of the civil works for Contract A. BADEA will finance the entire cost of the civil works (foreign and local) for Contract B. The GRN has opted for a Rand-Denominated loan from the ADB. The BADEA loan shall be denominated in US dollar. The provision of proof of approval by BADEA for financing part of the cost of the project required for upgrading 51 km of the road from the Aus end shall be a loan condition. The source of finance by component is given in Table 4.3.

Table 4.3: Sources of Finance by Component

Overall Project

(in millions of ZAR) Component ADB BADEA GRN Total F.E. L.C. Total F.E. L.C. Total F.E L.C. Total F.E. L.C. Total Civil 160.37 21.99 182.36 69.02 15.32 84.34 - 14.65 14.65 229.39 51.96 281.35 Works Supervision ------13.75 13.75 - 13.75 13.75 Audit ------0.60 0.60 - 0.60 0.60 Base Cost 160.37 21.99 182.36 69.02 15.32 84.34 - 29.00 29.00 229.39 66.31 295.70 Physical 8.02 1.10 9.12 3.45 0.77 4.22 - 1.45 1.45 11.47 3.23 14.79 Price 9.17 4.48 13.65 5.57 4.35 9.92 - 5.79 5.79 14.74 14.62 29.36 Total 177.56 27.57 205.13 78.04 20.44 98.48 - 36.24 36.24 255.60 84.25 339.85

ADB Financed Contract A

(in millions of ZAR) Component ADB GRN Total F.E. L.C. Total F.E L.C. Total F.E. L.C. Total Civil Works 160.37 21.99 182.36 - 14.51 14.51 160.37 36.50 196.87 Supervision - - - - 9.60 9.60 - 9.60 9.60 Audit - - - - 0.51 0.51 - 0.51 0.51 Physical 8.02 1.10 9.12 - 1.23 1.23 8.02 2.33 10.35 Price 9.17 4.48 13.65 - 3.81 3.81 9.17 8.29 17.46 Total 177.56 27.57 205.13 - 29.66 29.66 177.56 57.23 234.79

4.8.3 The local cost amounts to 12% of the ADB loan. This is justified because the Government has a Public Sector Borrowing Requirement, and the cost of ADB funds is lower 18 than borrowing on the domestic markets. Additionally, the Government is pursuing a prudent fiscal and monetary policy, the former being characterised by the choice of a fiscal deficit target below 3% in the medium term, the latter being guided by the need to contain inflationary pressures unleashed by the recent sharp depreciation of the Namibia dollar, which is pegged to the Rand.

Expenditure Schedule

4.8.4 The forecast expenditure schedules by sources of finance and component are shown below in Tables 4.4 and 4.5 respectively.

Table 4.4: Expenditure Schedule by Source of Finance

(in millions of ZAR) Source 2003 2004 2005 Total ADB 82.05 82.05 41.03 205.13 BADEA - 49.24 49.24 98.48 GON 15.51 14.50 7.24 36.24 Total 96.55 145.79 97.51 339.85

Table 4.5: Expenditure Schedule by Component

(in millions of ZAR) Component 2003 2004 2005 Total Civil Works 75.95 120.96 84.45 281.36 Supervision 3.72 5.92 4.11 13.75 Audit 0.17 0.27 0.16 0.60 Unallocated - 11.88 32.26 44.14 Total 79.84 139.03 120.98 339.85

5. PROJECT IMPLEMENTATION

5.1 Executing Agency

The Executing Agency will be the Roads Authority (RA). The RA has successfully supervised similar road projects funded by donors and has sufficient experience and capacity for the execution of the components proposed in the project.

5.2 Institutional Arrangements 5.2.1 The Roads Authority will be responsible for the direct supervision of project implementation. In order to ensure proper co-ordination, monitoring and liaison with the financiers, it will be necessary for the RA to designate a Project Coordinator from the Network Planning and Consultation Division. In addition, the Construction and Rehabilitation Division of the RA shall nominate one of its engineers with the requisite qualifications and experience to act as the Contracts Engineer. His/her duties will include contract supervision, preparation of progress reports, processing of payment certificates and the preparation of the Borrower’s Project Completion Report. The Contracts Engineer shall attend the monthly site meetings and provide the Project Coordinator with monthly reports. 19

The assigning of a Project Coordinator and Contracts Engineer for this purpose will be a loan condition.

5.2.2 A reputable consulting firm on behalf of the Executing Agency will supervise the civil works for each contract. The same consulting firm will assist in carrying out tender evaluation and contract negotiations as well as maintenance supervision during the 12-month contractual defects liability period.

5.3 Supervision and Implementation Schedules

5.3.1 The construction of the road will be implemented under two contracts (Contract A and Contract B). The implementation schedules for the ADB and BADEA components have been harmonised such that the two contracts are completed at the same time. In this regard, Contract A financed by the ADB which covers the longer section (118 km) will start ahead of Contract B, which covers the shorter section (51 km). Simultaneous completion of the two sections would ensure that the expected benefits of upgrading the road are realised as early as possible.

5.3.2 The civil works for Contract A will be implemented over a period of 27 months. Allowing for the time required for procurement, civil works on Contract A would start in August 2003 and end in October 2005, followed by a 12 months maintenance defects liability period. For the BADEA financed Contract B, the civil works will be implemented over a period of 15 months starting in August 2004 and ending October 2005, followed by a 12- month maintenance defects liability period.

5.3.3 The consulting services for the detailed design and supervision of the civil works, being financed by the GRN, have already commenced and will terminate October 2006 at the end of the maintenance defects liability period. A summary of the implementation schedule for the overall project is presented below and details on Contract A are given in Annex 6.

5.3.4 Supervision by the Bank will amount to two field supervision missions entailing 4 man-weeks of field supervision per year. Desk supervision in Abidjan for review of documents, reports and disbursement issues will take additional 4 man-weeks per year. A launching mission is planned for March 2003. In addition, a mid-term review will take place not later than July 2004. It is envisaged that at least one supervision mission per year and the mid-term review will be jointly conducted with BADEA.

Loan Processing – ADB Loan Activity Action/Agency Target Date Appraisal ADB/BADEA/GRN June 2002 Loan Negotiations ADB/GRN August 2002 Board Presentation ADB October 2002 Loan Signature ADB/GRN March 2003 Loan Effectiveness ADB May 2003 20

Schedule of Civil Works – Contract A (ADB Component) Activity Action/Agency Target Date General Procurement Notice Issued RA/ADB October, 2002 Specific Procurement Notice Issued RA November, 2002 Pre-qualification Submissions Received RA January, 2003 Pre-qualification Evaluation Report Approved RA/ADB February, 2003 Tenders Invited RA February, 2003 Tenders Received RA April, 2003 Evaluation and Approval RA/ADB June, 2003 Contract Awarded RA July, 2003 Commencement of Works RA August, 2003 Completion of Works RA October, 2005 End of Maintenance Period RA October, 2006

Loan Processing – BADEA Loan Activity Action/Agency Target Date Appraisal ADB/BADEA/GRN June, 2002 Board Presentation BADEA March 2003 Loan Negotiations and Signature BADEA/GRN April 2003 Loan Effectiveness BADEA July 2003

Schedule of Civil Works – Contract B (BADEA Component) Activity Action/Agency Target Date Tenders Invited RA November, 2003 Tenders Received RA January, 2004 Evaluation and Approval RA/BADEA April, 2004 Contract Awarded RA June, 2004 Commencement of Works RA August, 2004 Completion of Works RA October, 2005 End of Maintenance Period RA October, 2006

5.4 Procurement Arrangements

5.4.1 The procurement arrangements under the project are summarised in Table 5.1. All procurement of goods, works and where applicable, the acquisition of consulting services financed by the Bank will be in accordance with the Bank’s ‘Rules of Procedure for Procurement of Goods and Works’ or, as appropriate, ‘Rules of Procedure for the use of Consultants’, using the relevant Bank Standard Bidding Documents (SBD).

Table 5.1: Summary of Procurement Arrangements (ZAR million) ZAR million Category ICB Non Bank Total Funded Civil Works - Contract A (118 km) 227.01(205.13) 227.01 (205.13) - Contract B (51 km) 98.48 98.48 Supervision Consultant 13.75 13.75 Services Audit Services 0.60 0.60 Total 227.01(205.13) 112.83 339.84 (205.13) * Figures in brackets are amounts financed by ADB. 21

Civil Works

5.4.2 The procurement of civil works of the ADB financed component (Contract A) valued in total at approximately ZAR 227.01 million will be through International Competitive Bidding (ICB) under a single contract with regional preference. Pre-qualification of contractors will be required. The BADEA financed component (Contract B) will be procured according to their rules of procurement.

Supervision Consulting Services for Civil Works

5.4.3 The GRN has requested that the firm of consultants that undertook the detailed design studies be retained for the supervision of the overall project. The consultant services have been procured through competitive bidding in accordance with Namibia’s procurement rules. The Joint ADB/BADEA mission reviewed the Terms of Reference of the consultant for supervision, and was satisfied with the various tasks to be performed during the implementation stage of the project. The consultant has supervised earlier similar road construction projects in Namibia and in other Southern African countries and has a good track record in the fields of planning, design and supervision.

Audit Services

5.4.4 Audit services shall be provided by independent external auditors to be selected and appointed by the Roads Authority.

National Procedures, Regulations and Executing Agency

5.4.5 Namibia's national procurement laws and regulations have been reviewed and determined to be acceptable. The RA will be responsible for the procurement of works and services. The resources, capacity and expertise of RA are adequate to carry out the procurement activities based on its experience with KfW, Kuwait Fund, BADEA, EU and Bank financed projects.

General Procurement Notice and Review Procedures

5.4.6 The text of the General Procurement Notice (GPN) has been agreed with the Executing Agency and it will be issued for publication in United Nations Development Business, upon approval of the loan by the ADB.

5.4.7 The following documents are subject to review and approval by the Bank before promulgation: (i) General/ Specific Procurement Notices; (ii) Pre-qualification Invitation Documents; iii) Tender Documents; (iv) Tender Evaluation Reports, including recommendations for contract award; and (v) Draft contracts, if there are changes in the Bank’s SBD.

5.5 Disbursement Arrangements

The loan will be disbursed against the ADB-financed civil works Contract A in direct payment method in accordance with guidelines in the Bank’s Disbursement Handbook. 22

5.6 Monitoring and Evaluation

5.6.1 The RA shall regularly provide the Bank with quarterly progress reports for the project including environmental protection measures in the established format covering all aspects of the project components. These reports will include performance indicators, which will assist in verifying whether or not the objectives are being accomplished. The reports will provide updated information on project implementation, highlighting key issues and problem areas, and recommending action plans for resolving identified bottlenecks. In addition, the project will be monitored through the ADB field supervision missions (twice a year) in accordance with the Bank Group Operational Manual.

5.6.2 The Consultant is required to prepare and submit to the Executing Agency and the Bank a final report at the completion of the project. Pursuant to the general conditions of Bank loans, the RA will prepare a Project Completion Report (PCR) within six months of completion of the project. The final reports prepared by the consultants and the Borrower’s PCR will provide the background documents for the preparation of the Bank’s PCR in the established format. The ADB PCR will form the basis for post-evaluation of the project.

5.7 Financial Reporting and Auditing

The Roads Authority shall submit to the Bank quarterly reports on the use of the loan proceeds, and the progress of implementation of the components being financed by the Bank. The Roads Authority shall maintain separate financial records for the proceeds of the loan, and make such records available to ADB supervision missions, as well as to its external auditors. Such records will include the summary loan ledger, category of expenditure ledger, and contract ledger. The Roads Authority will cause its external auditors, during their annual audits, to write a separate opinion on the utilisation of the loan in accordance with the Bank’s Guidelines for Financial Reporting and Auditing of Projects.

5.8 Aid Co-ordination

5.8.1 The Network Planning and Consultation Division of the Roads Authority is responsible for preparing the budget of the Roads Authority and donor coordination in the road sector. The main donors involved in the road sector are SIDA, KfW, BADEA, EU and ADB. The financing arrangements are handled by the Ministry of Finance in the case of loans and the National Planning Commission in the case of grants.

5.8.2 The Aus – Rosh Pinah road project will be co-financed by the ADB, BADEA and GRN. During the joint appraisal mission (June 2002), project components to be financed by the two donors were identified and agreed upon. Besides project implementation responsibilities, the Executing Agency is to co-ordinate and to follow up with the donors on procurement and implementation schedules and joint supervision missions.

5.9 Regional Integration

5.9.1 The proposed project will not only benefit the population of the area and the mining activities but also will have an important regional impact with a view to promote long-term collective, self-sustaining and integrated social, cultural and economic development with neighboring Republic of South Africa (RSA). Currently, the only public road access to 23

Oranjemund (which is in Namibia) is located on RSA territory. It is of strategic importance to GON that a public access road be constructed to link Oranjemund with Namibia to the country’s trunk road network. In order to achieve this, the GRN is planning to extend the proposed road project from Rosh Pinah to Oranjemund (93 km) in the near future.

5.9.2 The concept of cross-border Peace Parks is gaining momentum in Southern Africa, an initiative whereby nature reserves along common international borders are linked. The Gariep Peace Park (2774 sq. km; 28% in Namibia) and the Ais-Ais/Richtersveld Peace Park (6222 sq. km; 50% in Namibia) are two such initiatives. The upgrading of the Aus – Rosh Pinah road will facilitate the marketing of these attractions and will attract more tourists in future.

6. PROJECT SUSTAINABILITY AND RISKS

6.1 Recurrent Costs

Throughout the construction and the defects liability period, the contractors will be responsible for road maintenance of the contract sections. One year after commissioning, the maintenance will be taken over by the RA and the related expenditure will be met by RFA through the Road Fund. The maintenance activities comply with the current maintenance policy mostly comprising routine maintenance of the roadside, ancillary works including pothole patching. Also periodic maintenance, comprising resealing of the surface would be undertaken to ensure sustainability. Over the 20-year analysis period in real terms, the maintenance costs were estimated at N$8.7 million for the routine maintenance and N$24.6 million for the periodic maintenance.

6.2 Project Sustainability

6.2.1 The GRN has put in place reforms to ensure the sustainability of the road sector including the establishment of an effective Roads Authority and an independent road user charging system based on the principles of economic efficiency and cost recovery. By forming the Roads Contractor Company the GRN has created adequate road construction capacity to maintain the network. Stakeholders were fully involved in the reform process and are regularly consulted through the Transport Advisory Board.

6.2.2 With respect to the project, the beneficiaries were consulted during the different stages of the studies through focus group discussions, household surveys and questionnaires. The beneficiaries showed strong support for the upgrading of the road.

6.3 Critical Risks and Mitigating Measures

6.3.1 The project does not involve any significant technical risks since it has been designed according to well-known engineering principles and would be implemented by competent contractors and consultants. However, three factors could influence the viability of the project. Firstly, an increase in the project cost could arise from depreciation of the Rand or a delay in project implementation. Secondly, the traffic growth could be lower than anticipated due to a decline in economic activity in the region. Thirdly a delay in implementing the component financed by BADEA would impact on the economic viability of the ADB financed component. 24

6.3.2 Adequate contingencies have been provided within the overall project cost estimates to cover the possible depreciation of the Rand. The risk of delay in the implementation will be minimized by close monitoring of the programme by the Supervision Consultant and the Construction and Rehabilitation Division of the Roads Authority and intensive supervision at the critical stages of contract award and start-up of works. With regard to the risk associated with traffic growth, the Government is implementing the right policies for attracting investment into the country and particularly in the mining sector. Prospecting and exploration activities are on the increase in the project area suggesting that the outlook for the mining sector is positive. These factors were taken into account in the economic analysis, which showed that the project would remain economically viable even with an increase of 20% in cost or a decrease of 20% in the traffic growth rate.

6.3.3 The risk associated with a delay in the implementation of Contract B is minimal. Recent co-financing experience with BADEA on the Namibia Northern Railway Extension project has been positive. The implementation schedule for the project was jointly prepared by ADB and BADEA during the appraisal mission and it took into account the internal approval processes of each institution.

7. PROJECT BENEFITS

7.1 Economic Analysis

7.1.1 The Economic Analysis was based on a feasibility study developed by Consultants which results were reviewed during appraisal for consistency. A copy of the feasibility report with the Appraisal Mission Aide-Memoire and the detailed results of the analysis carried out during appraisal are available in the Project Implementation Document (PID). Main assumptions of the analysis are indicated in the following sections.

7.1.2 Two types of benefits (i.e., savings in road user costs and road maintenance costs) would result from the road upgrading in comparison to the continuation of the existing gravel road with basic maintenance. The road user cost savings consist of the difference in vehicle operating costs (both distance and time related) between the improved and existing road options. As to the road maintenance savings, the upgraded road will call for much lower maintenance costs as compared to a deteriorated road that needs constant attention.

7.1.3 The economic appraisal was carried out by comparing costs of ‘with project’ and ‘without project’ situations over the 20-year economic life of the road. Upgrading the existing road to paved standard represents the ‘with project’ situation where as the existing road without any improvement connotes the ‘without project’ situation. The economic appraisal was carried out using the World Bank Highway Development and Management Model (HDM-IV) and the project viability assessed on the basis of Economic Internal Rate of Return (EIRR). For the purpose of analysis, the road was divided into four links to reflect different traffic and physical characteristics.

7.1.4 The unit construction and maintenance costs were based on engineering design estimates prepared by the consultant and were reviewed during the appraisal mission. Construction costs considered in the analysis include supervision costs and 5% allowance for physical contingencies. The Vehicle Operating Costs (VOCs) are estimated based on cost inputs generated by the Namibian fleet. The economic costs were estimated from financial costs, though the use of standard conversion factors of 0.73 and 0.82 for construction costs and maintenance costs respectively. Prices were assumed at their mid-2002 level. 25

7.1.5 The analysis assumed that construction of ADB section would start in year 2003 and would last for 27 months. For BADEA section, construction would commence in 2004 and finishing in 2005, and both sections will be fully open in 2006.

7.1.6 The level of traffic for the base year (2002) was assessed at 129 vehicles per day (vpd) on the Aus-Skorpion road section and 163 vpd on Skorpion-Rosh Pinah Road section. Normal traffic projections were carried out on a detailed assessment of growth for mining, tourism and general development of both the project area and the country. The resulting growth is 3% per annum. These forecasts are plausible over a 20-year period and consistent with past observed traffic growth.

7.1.7 With the upgrading of the project road to bitumen standards, an alternative all- weather bitumen road that will be shorter by about 100 km, will be available for the traffic moving to/from north of Namibia via Steinkopf, Keetmanshoop and Windhoek. In addition, there will be saving in time and avoidance of inconvenience associated with elimination of 4 border post formalities. In view of this advantage, based on the information gathered during the study, a total of 34 vpd has been estimated to divert to the project road by the year 2006 when the upgrading will be completed.

7.1.8 Generated traffic, comprising developmental and induced traffic, results from the changes in trip making and land use triggered by the reduction in transport costs on the upgraded road. Major developments that have been considered in assessing the generated traffic component include: I) construction and commissioning of the Skorpion Mine to the north of Rosh Pinah, and the related growth in Rosh Pinah where mine personnel will be located; ii) increased production levels at the existing Rosh Pinah Mine; iii) agricultural developments in the region; iv) possibility of extension of the mines depending on the results of on-going prospecting activities; and v) anticipated increase in tourism activities and shipping sector.

7.1.9 Base year (2002) traffic for each section is given in Annex 7. Future forecasts covering normal, generated and diverted traffic for each section are given the PID.

7.1.10 The detailed results of the HDM IV for the two sections are available in the PID are summarized in Annex 7. From this Annex, it can be seen that the two sections are economically viable and technically feasible giving a combined EIRR for the entire road of 14 %, which is above the economic opportunity cost (10%) in the country.

7.2 Social Impact Analysis

7.2.1 The feasibility study was complemented by socio-economic and environmental assessments. The socio-economic assessment showed that the project is socially desirable and will help in alleviating poverty and improving the situation of both women and men. During discussions with stakeholders during the feasibility studies, the project beneficiaries expressed a strong desire to upgrade the existing gravel road in order to improve the riding quality and to reduce vehicle-operating costs. Road users also cited the frequent road accidents caused by dust conditions as a problem that could increase if no improvements are done to the road.

7.2.2 Formal jobs associated with construction will be the most important impact of the road. Estimates are that more than 400 unskilled and 130 skilled jobs will be creating during 26 the construction. It is estimated that 20% of the unskilled jobs will be filled by women. As part of Government policy, the use of labour on the project will be maximized as a means of poverty reduction. The items of work suited to hand labour include bush clearing, excavation and backfilling for minor culverts, mixing and placing concrete of low strength, erection of road signs and stone pitching. Income generated from direct employment on the project will add to the economic activity in Aus and Rosh Pinah

7.2.3 Few long-term job impacts will arise from the road, but will rather be more due to increased economic activity in the area associated with the Skorpion mine at Rosh Pinah. The road will nevertheless enhance economic activity in the area, and this will include small enterprises in the Rosh Pinah and Aus areas. Increased mobility for the poor in Rosh Pinah, will improve economic and social linkages and assist in household risk-reduction strategies. Nevertheless, the presence of the mine at Rosh Pinah will heighten social differentiation in the area, as skilled personnel associated with mine operations settle in the area. These households will also benefit from the increased mobility arising from the road, suggesting that the impacts of the road will spread across a number of economic groups.

7.3 Sensitivity Analysis

7.3.1 The economic performance of the project was tested to determine the sensitivity of the investment to increased construction costs and to normal traffic growth rates lower than expected. To this extent, construction costs were increased by 20% and the traffic growth decreased by 20%. The results of the sensitivity tests, as indication in Annex 7, show that in both case the corresponding EIRRs are unlikely to deviate more than 2.5% points below the base case scenario. The results, also, suggest that, even under the extreme scenario the EIRR for the total project would be estimated at 12 %.

7.3.2 As part of the analysis, switching values analysis for the two sectors was also carried out. The corresponding multipliers for construction costs and basic traffic to yield an EIRR of 10% are given in Annex 7. The results are consistent with the sensitivity analysis carried out in section 7.3.1 and support the recommendation on BADEA section.

8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions

8.1.1 The Government is committed to developing the road sector in general as demonstrated by the successful reforms undertaken and to the implementation of this project in particular. The project will support the economic growth of the Karas Region and the country at large by reducing the transportation cost of mining products, agricultural inputs and produce and reducing travel time between Aus and Rosh Pinah. Also, the road will eventually connect to RSA thereby contributing towards the promotion of tourism and regional integration. The objective of the project is consistent with the government’s poverty reduction action plan and the delivery of social services.

8.1.2 The project is well conceived, technically feasible, economically viable, and environmentally sustainable. Using only the quantifiable road user benefits, the project road yields an EIRR of 14 %. The upgrading of the road will give rise to other economic and social benefits, which will have significant impact on poverty reduction in the project area. 27

8.2 Recommendations

8.2.1 It is recommended that an ADB loan not exceeding ZAR 205.13 million be granted to the Republic of Namibia for the Aus-Rosh Pinah Road Project. The loan shall be subject to the following specific and particular conditions:

A) Conditions Precedent to Entry Into Force:

The entry into force of the Agreements shall be subject to the fulfillment by the Borrower of the conditions set forth in Section 5.01 of the General Conditions Applicable to Loans and Guarantee Agreements of the Bank and fulfillment by the borrower of the following conditions.

B) Conditions Precedent to First Disbursement:

The obligations of the Bank to make the first disbursement of the loan shall be conditional upon entry into force of this Loan Agreement as provided in paragraph 8.2.1 (A) above and the Borrower shall have to the satisfaction of the Bank:

i) appointed a Project Coordinator and Contracts Engineer from within the Roads Authority whose qualifications and experience are acceptable to the Bank (para 5.2.1);

ii) provided proof of approval by BADEA for financing part of the cost of the Project required for upgrading 51 km of the road from the Aus end (para 4.8.2);

iii) provided an undertaking to implement the environmental mitigating measures as identified in the Environmental and Management Plan (EMP) (para. 4.6.8).

C) Other Conditions

The Borrower shall implement the EMP and submit to the Bank status reports on the implementation of the EMP on a quarterly basis, starting from the date of the signature of the civil works contract (para 4.6.8). Annex 1

NAMIBIA AUS-ROSH PINAH ROAD UPGRADING PROJECT PROJECT LOCATION MAP

The map has been drawn by the African Development Group exclusively for the use of the readers of the report to which it is attached. The names used and borders which don’t imply on the part the Bank and its members any judgment concerning the legal status of a territory nor any approval or acceptance of the border Annex 2 Page 1 of 2 NAMIBIA Aus – Rosh Pinah Road Project Organization Chart of Department of Transport – DOT

Ministry of Works, Transport and Communication (MWTC) Roads Contractor Roads Company Authority Department of Transport (DOT)

Directorate Directorate Directorate of Directorate of Directorate of of Civil Transportation Policy Maritime Affairs Railway Affairs Transportation Aviation and Regulation Infrastructure

Transportation Transportation Transportation Transportation Transportation Transportation Regulation Policy Legislation Auxiliary Services Infrastructure Infrastructure Division Division Division Division Planning Division Management Division Annex 2 Page 2 of 2 NAMIBIA AUS – ROSH PINAH ROAD PROJECT ROADS AUTHORITY – ORGANISATION CHART

Board of Directors Internal Audit Sub-Committee

Chief Executive Officer Internal Audit Section

Personal Assistant/ Secretary to the CEO

Administration & Construction and Network Planning & Strategic Transportation Road Transport Corporate Affairs Rehabilitation Consultation Division Management Information & Agent Inspection Service Division Division Support Section Section Section

Zone 1 Zone 2 Zone 3

Source: Roads Authority, Namibia, June 2002 Annex 3

NAMIBIA Aus – Rosh Pinah Road Project African Development Bank Group Operations in Namibia

Date Loan/Grant Amount (UA million) Project Title Approved ADB ADF TAF NTF Total A. Completed Projects

1. Trans-Kalahari Highway Project 25/05/92 8.289 8.289 (4.822) (4.822)

2. Study of the Agricultural Resources 30/10/91 0.631 0.631 of the Northern Communal Lands (0.036) (0.036)

3. Groundwater Investigation Study 26/08/92 2.120 2.120 (1.357) (1.357)

4. Trade Policy Reform Study 26/02/92 0.783 0.783 (0.012) (0.012)

5. Trans-Caprivi Road Study 29/10/92 2.026 2.026 (1.052) (1.052)

8.289 5.560 13.849 Sub-total (A) (4.822) (2.457) (7.279)

B. On-Going Projects

1. Basic Teacher Education Project 23/06/93 9.210 9.210

2. Human Resources Development Project 21/01/95 3.860 3.860

3. First Line of Credit to Agribank 13/12/99 7.097 7.097

4. Electricity I Project 29/04/98 7.420 7.420

5. Northern Railway Extension Project 19/09/01 21.20 21.200 Sub-total (B) 35.71 9.210 3.860 48.787 B. OnTotal-Going (A+B) Projects 35.71 17.499 5.560 69.987 (4.822) (2.457) 3.860 (7.279) Note: Figures in the brackets indicate the loan/grant amounts cancelled. Annex 4 Page 1 of 2 NAMIBIA Aus – Rosh Pinah Road Project

ENVIRONMENTAL MANAGEMENT PLAN SUMMARY

A) Justification for Environmental Classification The proposed road follows the existing alignment except in a few places where some slight modifications are required to ease the sharp curves. Overall, the project road does not transverse virgin lands and is not within or close to environmentally sensitive areas. The project has accordingly been environmentally classified as category II, in accordance with the Bank’s environmental guidelines. An EIA was carried out as part of the feasibility study. In addition, an environmental management plan (EMP) consisting of an impact management plan and a monitoring plan has been prepared. Brief Description of the project The project involves upgrading the existing 169 km Aus – Rush Pinah Road to a bitumen standard of a width of 6.8-meter carriageway and 1.5-meter gravel shoulders on either side including the provision of good drainage management. Present land use in the project area includes commercial farming, mining and to a lesser extent tourism. Tourism is expected to become increasingly more important in future.

B) Potential Environmental Impacts Positive Impacts: The overall improvement in the standard of the road will lead to: (i) improved transport of people, goods and mining products; (ii) reduced dust in the air and improved visibility and road safety; (iii) improved road drainage that consequently reduces soil erosion and gulling; (iv) increased business and employment opportunities; and (v) improved access to health, educational, services and market centers.

Negative Impacts: (i) the proliferation of tracks in areas outside of the construction corridor due to the movement of machinery and vehicles could potentially devalue the scenery and the tourism potential. (ii) borrow pits are a negative visual impact that could decrease the value of the future road. (iii) traffic detours, by-passes, haulage roads, construction camps and workshops cause visual impacts (iv) construction camps, water pipelines and the drilling of boreholes cause disturbance of habitat and groundwater overexploitation (v) scrap and other industrial waste devalue the tourism potential and impacts on wildlife and plants (vi) littering from traffic on the completed road could lead to visual impacts and pollution (vii) dust emissions and noise from increased traffic and construction work could impact on road safety and the health of employees and residents of the project area (viii) bush clearing and the movement of machinery and vehicles could cause loss of habitat and vegetation

C) Mitigation Measures The EMP was developed for the Roads Authority (RA) by a consulting firm following the policy of the Ministry of Environment and Tourism (MET). All negative impacts identified in the EIA are included in the EMP. The following mitigation measures will be undertaken and where relevant, reflected in the project specifications and contracts: - All vehicle movement will be restricted to clearly demarcated construction corridor, access routes to borrow pits and other existing tracks and roads; - Campsites and yards will be sited on land, which is currently vacant. Permanent maintenance campsites already in existence will be reoccupied; Annex 4 Page 2 of 2

- Pipelines carrying water for construction will be laid within the road reserve and will be removed upon termination of works; - Scrap, oil and other wastes will be disposed properly at designated sites in Rosh Pinah and Aus (permission will be obtained from relevant town representatives) with special care paid to hazardous materials; - Since the road mainly follows the existing alignment, vegetation clearance and grubbing will be kept to a minimum; - Borrow pits will be fenced off during use with maximum use of existing ones. Borrow pits not required for maintenance will be rehabilitated; - Where feasible, the road will be water sprayed during construction to control dust. However, water abstraction for construction activities will be done carefully to limit any potential negative impacts (in terms of quality and quantity); - Measures of occupational health, including suitable sanitary facilities, will be maintained with proper training to the labour force; - Traffic management measures including urban/rural speed control, pedestrian crossings and ample signposts will be adopted; - Picnic sites will be provided and maintained in designated areas.

D) Monitoring and Institutional Arrangements

The overall responsibility for implementation and monitoring of the EMP will rest with the RA and the MET. A Safety and Health and Environment Officer (SHE – reporting to construction manager) and Environmental Control Officer (ECO – reporting to site engineer) will be appointed at the start of the project. The SHE and ECO will ensure the execution of the EMP, which include a monitoring plan, during different phases of implementation. The ECO and SHE will be part of the supervision consultant team. The supervision missions of the Bank and BADEA will ensure fulfillment of such surveillance. In addition, it will be a loan condition for the Borrower to submit quarterly status reports on the implementation of the EMP starting from the date of the signature of the civil works contract.

E) Public Consultations and Disclosure Requirements Public consultation was done as part of the EIA process. Consulted stakeholders included, among others, local communities, business holders, town councils and the mining companies. The stakeholders support the project and are satisfied with the benefits that would be derived from its execution. There will be no re-settlement and therefore no re-settlement plan will be required. Annex 5 NAMIBIA Aus – Rosh Pinah Road Project

CATEGORY OF EXPENDITURE – ADB Component – Contract A (ZAR million)

Total Cost ADB Contribution Category F.E. L.C. Total F.E. L.C. Total % Civil Works 160.37 36.65 197.02 160.37 21.99 182.36 93 Supervision 0 9.60 9.60 0 0 0 0 Audit 0 0.51 0.51 0 0 0 0 Unallocated 17.19 10.62 27.80 17.19 5.58 22.77 82 Total 177.56 57.37 234.93 177.56 27.57 205.13 87

Source: ADB Mission Estimates, June 2002 Annex 6 NAMIBIA Aus – Rosh Pinah Road Project Implementation Schedule – ADB Component – Contract A

2002 2003 2004 2005 2006 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th ACTIVITY Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. Qr. 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 I. Civil Works 1. Pre-qualification of Contractors 2. Bidding/Contract Award 3. Works Execution 4. Maintenance Period

II. Supervision Consultant 1. Short-listing 2. Bidding/Contract Award 3. Mobilization 4. Pre-contract Services 5. Works Supervision - Construction Period - Maintenance Period

Source: Roads Authority/ADB Mission, June 2002 Annex 7 Page 1 of 3 NAMIBIA Aus–Rosh Pinah Road Project

Economic Analysis Summary

1. Methodology

2. The World Bank’s economic model HDM-IV was used to analyse the costs and benefits of the upgrading option for each section. The HDM-IV models the interaction between the evolution of road condition and vehicle operating costs (VOC) though lime. The model estimates the streams of VOC as a function of the deterioration in road condition. This deterioration is, in turn, a function of initial road condition of the volume and composition of traffic, and of the exogenously investment and maintenance.

2. Intervention

The intervention modeled was:

o The “do nothing” case: maintain the existing gravel road o Full upgrade to bitumen road standard: 2 x 3.4m carriageway and 2 x 1.5 m shoulders.

3. Definition of Sections

For the economic analysis the following homogenous sections were defined:

Section Length in Km Chainage Km Contract B From To 1. BADEA 51.0 0.0 51.0

Contract A 2. ADB.1 37 51.0 88 3. ADB.2 32 88 120 4. ADB.3 49 120 169

4. Construction

The construction costs were estimated from recent contracts as follows:

Economic Costs Option (N$/km) Full up-grade to Bitumen 1,335,500 Annex 7 Page 2 of 3 The financial costs were converted to economic costs using the standard conversion factor, SCF of 0.73 for construction projects.

The present condition of the road was estimated from visual inspection 2002.

5. Maintenance Strategies The following maintenance strategies were modeled: GR2 = Blading twice a year, spot re-gravelling 1/year and re-gravelling at 30mm gravel thickness.

PHT4 = pothole patching, crack sealing, rejuvenation plus reseal at 10% damage area and overlay at 4 IRI.

The former is also the definition of the base or “do nothing” case with which the intervention option is compared.

PHT4 is applied after upgrading and includes a reseal and an overlay at the specified triggers.

The maintenance costs were taken from the quarterly report of the RA maintenance division and are follows:

Item Economic Costs N$/M2 Pothole patching 106.60 Edge repair 66.06 Crack Sealing 65.19

Rejuvenation 3.97

Reseal, double surface 18.53

Treatment Overlay 25mm AC 33.10

Financial costs were converted to economic cost by applying SCF of 0.82 for maintenance activities.

6. Traffic Volumes, Composition and Growth

The 2002 traffic varies by section between 129 AADT on sections 1, 2, & 3 and 163 on section 4. As estimated in the feasibility study 34 vehicles per day are expected to divert to the new route saving approx. 100kms and generated traffic was estimated at 20% of normal traffic for light vehicles and at 30% for heavy vehicles. The traffic growth was estimated in the feasibility study to be a total growth of 3% p.a. Annex 7 Page 3 of 3

7. Evaluation Results

The results of the analysis are available in the PID and are summarized below:

Table 7.1: Summary of Economic Evaluation

Section AADT Economic Costs NPV at 10% EIRR 2002 (N$ million) (N$ million) (10%) BADEA Base case 129 68.11 16.31 13 20% increase in Project costs 4.46 11 20% decreased in traffic rate 10.28 12

ADB Base case 163 157.58 56.29 14 20% increase in Project costs 28.85 12 20% decreased in traffic growth rate 47.71 14

Total Project

Base case 225.69 72.6 14 20% increase in Project costs 35.13 12 20% decreased in traffic growth rate 57.99 13

Table 7.2: Multipliers to Yield an EIRR of 10%

Section Construction Cost Base Traffic BADEA +25% -75% ADB +38% -85% Total +32% -82% Annex 8

NAMIBIA Aus – Rosh Pinah Road Project List of Annexes in the Project Implementation Document (PID)

1. Feasibility Study Report, Volumes 1, 2 and 3. 2. Joint Appraisal Mission Aide-Memoire. 3. Annual Reports of 2001 for the RA, RFA and RCC. 4. Detailed Cost Estimates. 5. Detailed Results of the Economic Analysis. 6. Business Plan for the RFA (2001/2 – 2005/6). 7. Environmental Management Programme (Aus to Rosh Pinah). 8. Poverty Reduction Strategy for Namibia. 9. MWTC Annual Report 2001 – 2002. 10. Memorandum of Agreement – RA/VKE Consultants. 11. Investigation of Poverty Alleviation and Gender Issues for the Aus-Rosh Pinah Road. 12. National Transportation Master Plan for Namibia, 1998. 13. Roads Authority Procurement and Tender Policy, Regulations and Procedures. 14. Acts of Parliament. (i) Road Fund Administration Act, 1999 (ii) Roads Contractor Company Act, 1999 (iii) Roads Authority Act, 1999 (iv) Road Traffic and Transport, 1999 (v) Tender Board of Namibia Act, 1996.