Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 363 19

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

IN THE AMOUNT OF SDR 8.3 MILLION (USD 12.3 MILLION EQUIVALENT)

AND A PROPOSED CREDIT

IN THE AMOUNT OF SDR 7.6 MILLION (US$1 1.2 MILLION EQUIVALENT

TO THE

KINGDOM OF LESOTHO

FOR

INTEGRATED TRANSPORT PROJECT

September 15,2006

This document has a restricted distribution and may. be used by recipients only in the performance o f their off icial duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective July 3 1, 2006)

ADB AG APL BADEA CAS CTP DCA FA D C I DRR DTT EC EDF FMR Genfund GIS GoL HDM ICP IDA I M T ITP KFAED KfW L O A LORSP LOSP LRMS M&E M M C MoFDP MOL

Currency Unit = Lesotho Maloti Lesotho Maloti 6.9250 = US$1

US$1.48217 = SDR1

FISCAL YEAR April 1 - March 31

ABBREVIATIONS AND ACRONYMS

African Development BanMFund Auditor General Adaptive Program Lending Arab Fund for Economic Development in Africa Country Assistance Strategy Contractors Training Program Department o f Civil Aviation Financing Agreement Development Cooperation o f Ireland Department o f Rural Roads Department o f Traffic and Transport European Commission European Development Fund Financial Management Report Norwegian Trust Fund for Gender Mainstreaming Geographic Information System Government o f Lesotho Highway Design and Maintenance Standard Model International Comparison Program International Development Association Intermediate Means o f Transport Integrated Transport Project Kuwait Fund for Arab and Economic Development Kreditanstalt f i r Wiederaufbau Entwicklungsbank Loan Department Letter o f Roads Sector Policy Letter o f Sector Policy Lesotho Road Management System Monitoring and Evaluation Maseru Municipal Council Ministry o f Finance and Development Planning Ministry o f Local Government

M o P W T PPF PRS P U RE3 RD RF RRMP RTIP R U C SADC SATCC SEA SIL SSATP TSP V C T

Ministry o f Public Works and Transport Project Preparation Facility Poverty Reduction Strategy 2004/2005 - 2006/2007 Planning Unit Road Branch Roads Directorate Road Fund Road Rehabilitation and Maintenance Project Road Transport Infrastructure Project (EC) Road User Charges Southern African Development Community Southern Africa Transport and Communication Commission Sector Environmental Assessment Specific Investment Loan Sub-Saharan Africa Transport Policy Program Transport Sector Program Voluntary Counseling and Treatment

Vice President: Gobind T. Nankani Country Managermirector: Ritva S. Reinikka

Sector Manager: C. Sanjivi Rajasingham Task Team Leader: Gylfi Palsson

Co-Task Team Leader Subhash C. Seth

LESOTHO Integrated Transport Program

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 Country and sector issues .................................................................................................... 1

Rationale for Bank involvement .......................................................................................... 2

Higher level objectives to which the project contributes .................................................... 3

1 . 2 . 3 .

B . PROJECT DESCRIPTION .................................................................................................. 4 1 . 2 . 3 . 4 . 5 . 6 .

Lending instrument .............................................................................................................. 4

Program objective and Phases ............................................................................................. 4

Project development objective and key indicators .............................................................. 4

Project components .............................................................................................................. 5 Lessons learned and reflected in the project design ............................................................ 9

Alternatives considered and reasons for rejection ............................................................... 9

C . IMPLEMENTATION ........................................................................................................... 9 Partnership arrangements .................................................................................................... 9 1 .

2 . 3 .

Institutional and implementation arrangements ................................................................ 10

Monitoring and evaluation o f outcomeshesults ............................................................... -11 4 . Sustainability ..................................................................................................................... 12

Critical risks and possible controversial aspects ............................................................... 13

Grant and Credit conditions and covenants ....................................................................... 15

5.

6 .

D . APPRAISAL SUMMARY .................................................................................................. 15 1 . Economic and financial analyses ....................................................................................... 15 2 . Technical ........................................................................................................................... 16

3. Fiduciary ............................................................................................................................ 16

4 . Social ................................................................................................................................. 17

5 . Environment ...................................................................................................................... 19

6 . Safeguard policies .............................................................................................................. 19

7 . Policy Exceptions and Readiness ...................................................................................... 20

Annex 1: Country and Sector or Program Background .......................................................... 21

Annex 2: Ma jo r Related Projects Financed by the Bank and/or other Agencies. ................. 30

Annex 3: Results Framework and Monitor ing ......................................................................... 32

Annex 4: Detailed Project Description ...................................................................................... 37

Annex 5: Project Costs ................................................................................................................ 44

Annex 6: Implementation Arrangements .................................................................................. 45

Annex 7: Financial Management and Disbursement Arrangements ..................................... 47

Annex 8: Procurement ................................................................................................................ 52

Annex 9: Economic and Financial Analysis .............................................................................. 57

Annex 10: Safeguard Policy Issues ............................................................................................. 61

Annex 11: Project Preparation and Supervision ...................................................................... 64

Annex 12: Documents in the Project F i l e .................................................................................. 66

Annex 13: Statement o f Loans and Credits ............................................................................... 66

Annex 14: L e t t e r of Transport Sector Policy ......................................................... 67

Annex 15: Country at a Glance .................................................................................................. 80

MAP: IBRD 34949 .......................................................................................... 82

LESOTHO

AS SOCIATION IDA Grant

LESOTHO INTEGRATED TRANSPORT PROJECT

7.30 5.00 12.30

PROJECT APPRAISAL DOCUMENT

EC: EUROPEAN DEVELOPMENT FUND (EDF) Total:

AFRICA

3.50 6.00 9.50

14.50 23.70 38.20

AFTTR

Date: September 19, 2006 Country Director: Ritva S. Reinikka Sector Managermirector: C. Sanjivi Raj asingham

Team Leader: Gylfi Palsson Sectors: Roads and highways (80%); General transportation sector (20%) Themes: Rural services and infrastructure (P);Administrative and civil service reform (P);Regional integration (S);Infrastructure services for private sector development (S);Municipal governance and institution building (S) Environmental screening category: Partial Assessment

Project ID: PO75566

Lending Instrument: Specific Investment Loan

[ ] Loan [XI Credit [XI Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 23.50 ProDosed terms:

Responsible Agency: Ministry o f Public Works and Transport Lesotho

Annual Cumulative

.I

Does the project require any exceptions from Bank policies? Ref: PAD D. 7 [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [ IN0

2.00 12.00 15.00 7.00 2.20 0.00 0.00 0.00 0.00 2.00 14.00 29.00 36.00 38.20 38.20 38.20 38.20 38.20

I s approval for any pol icy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Ref: PAD C.5

[ ]Yes [XINO

[XIYes [ ] N o

[XIYes [ ] N o Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D. 7 Project development objective Ref: PAD B.2, Technical Annex 3 Lesotho’s citizens are less isolated and have improved access to services and market opportunities, through a more complete, safe and affordable transport system.

Project description [one-sentence summary of each component] Ref: PAD B.3.a, Technical Annex 4 Under ITP, IDA will along with the EU take a leadership role among donors in supporting road sector reforms and capacity building, while supplementing Government and other development partners? Commitment for developing the road network and addressing isolation problems. In addition, the project will support the formulation o f integrated policies and strategies for aviation, ra i l and water transport sectors with a view towards more coordinated transport sector management.

Component A: Transport sector management i s rationalized, sustainable road maintenance financing i s achieved, and transport sector management capacity i s improved.

Component B: Targeted sections o f the road network are improved through construction, periodic maintenance, rehabilitation and upgrading.

Component C: Facilitating o f project activities, institutional reform change and monitoring & evaluation.

Which safeguard policies are triggered, if any? Ref: PAD D.6, TechnicalAnnex 10 The project involves the construction o f two new bridges along the Semonkong-Seferong road, the upgrading o f access between them and access from the Senqunyane river bridge and the Senqu river bridge. The proposed roads fol low existing alignments and the potential adverse impacts are not considered significant and are readily mitigable; the project i s accordingly categorized as a B. EAs have been undertaken o f the roads and the bridges and mitigation measures have been defined as part o f an Environmental Management Plan. In addition,

assessments have been made o f the potential impacts o f opening up the lower Senqu and Senqunyane gorges known for their conservatiodtourism values and guidance provided for their effective protection, including management plans for spiral aloe colonies and cliff-nesting birds and archaeological remains and cultural features. Discussions have been initiated with the GoL on measures to proclaim the gorges and surroundings as a conservation area. M o P W T has recruited an Environmental/Social Coordinator to ensure systematic application o f environmental management measures. Training o f relevant staff in M o P W T and other Ministr ies in environmental and social safeguards will be conducted by the Coordinator.

Significant, non-standard conditions, if any, for: Ref: PAD C. 7 Board presentation: Board presentation: N/A

Loadcredit effectiveness: The Co-financing Agreement has been executed and delivered and al l conditions prec dent to i t s effectiveness or to the right o f the Recipient to make withdrawals under it (other than the effectiveness o f the Financing Agreement) have been fulfilled.

The Project Implementation Manual has been adopted in form and substance satisfactory to the Association.

Covenants applicable to project implementation: The Financial covenants are the standard ones as stated in Article IV o f the Financing Agreement.

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and Sector Issues

1. The Government o f Lesotho’s Poverty Reduction Strategy (PRS) 2004/2005-2006/2007, identifies eight strategic areas for achieving economic growth and poverty reduction: (i) employment creation; (ii) agricultural productivity and food security; (iii) infrastructure development; (iv) democracy, governance and security; (v) health care and social welfare; (vi) quality and access to education; (vii) environmental management and conservation; and (viii) service delivery. Under infrastructure, transportation links are noted as vital to the implementation o f a l l the country’s strategic objectives. Given Lesotho’s landlocked location and mountainous terrain, it i s critical to have an efficient transport system that ensures cost-effective access to economic opportunities, markets and basic services, as well as reliable links to external markets and ports. In this context, the Government has adopted a six year Transport Sector Program 2004 - 2010, which focuses on strengthening the country’s strategic road, air and waterway transport network, both for in-country and external linkages; and improving institutional capacity to manage transport assets and services o n a more commercial basis.

2. Lesotho’s transport infrastructure comprises: (i) a road network o f 7,437 km, o f which 16% are paved, 51% are gravel and 33% are earth/other; (ii) the Moshoeshoe I International Airport, and 29 regional aerodromes and airstrips, o f which twelve are currently used for occasional charter service; (iii) a small privately operated rai l line (2.5 km) between the Maseru Bridge Border and the Maseru industrial sites; (iv) a network o f river crossings particularly in the highland areas; and (v) 221 footbridges. Road transport i s the primary means o f travel. Although the lowlands o f Lesotho are relatively we l l served wi th the existing network, about 25% o f the country’s population lives in the rugged mountains, where extreme isolation results in poor access to basic services and commodities, as wel l as market opportunities. Poor access through the mountain zones also hinders communication wi th in the country, and prevents continuous outlet to ports beyond the country’s surrounding borders with South Africa.

3. Transportation service in Lesotho i s provided almost entirely by private entrepreneurs, who operate mainly in the road transport sector. Air transport i s provided on a charter basis within the country and the only scheduled international flight i s provided by South African Airways. Rai l transport i s limited to a short stretch o f line to Maseru f rom South Africa. Government as well as private micro-enterprises provide inland river crossings in the highland areas with riverboats

4. The institutional measures identified in the Transport Sector Program (TSP) have their origins in the Government’s 1995 Letter o f Road Sub-sector Policy (LoRSP), which laid the foundation for a series o f institutional and policy reforms to be pursued, with support o f the Bank-financed Road Rehabilitation and Maintenance Project (RRMP). These included, among others: (i) rationalizing road management institutions; (ii) achieving sustainable road maintenance financing; (iii) ensuring stakeholder participation in road management; (iv) a shift away f rom force account works to contracting; and (v) building capacity o f the public and private sectors to assume their evolving roles. T o this end, RRMP oversaw the creation o f a Road Fund and Road Board, init ial consolidation o f two road management agencies (Labour Construction Unit and Civil Works Section) in the Department o f Rural Roads, the establishment o f road maintenance management capabilities, and concerted move toward private contracting, along with training o f public and private sector stakeholders. These reforms involved fundamental changes in established practices. Their achievement represents an accomplishment in i t s own right, and the reform process seems now to be in motion. Generally, the new institutions are not yet functioning efficiently or in accordance with their original purpose and the fol lowing issues remain to be addressed:

1 Further need for consolidation of road management. While some consolidation was achieved, management o f the network i s s t i l l split among two road agencies - one for primary roads (Roads

1

Branch - FU3) and one for rural roads (Department o f Rural Roads - DRR). It i s generally recognized that this leads to uncoordinated planning, incoherent budget allocation and unnecessary duplication;

Inadequate road maintenance financing. Road maintenance funding has been characterized by chronic shortfalls vis-a-vis minimum requirements for maintaining the strategic road network. Although the 1995 Sector Policy Letter envisaged the Road Fund to be self-sufficient through road user charges by 200 1, this has not occurred, as these charges have not kept pace with annual maintenance requirements. In the meantime, the Government has been providing funds for road maintenance through the budget, which draws on scarce public sector resources, and i s not seen as a regular and reliable source o f maintenance financing. This situation has been further aggravated by weak management of the Road Fund;

Lack of clear responsibility for urban road management among the municipal councils and the road agencies, resulting in a steady deterioration o f urban roads from lack o f maintenance. With the Government’s policy o f decentralization, this matter as it relates to delegation to District level o f ownership and management of specified parts of the road network, i s now moving to the forefront in terms o f need for attention;

Limited local implementation capacity. The public agencies and consultants are plagued by inability to retain local professional staff due to low salary levels and a restricted pool o f in- country qualified professionals. Although training o f local contractors has occurred under DRR, there i s limited local capacity to handle medium and large works contracts under RB; and

Lack of other transport sub-sector policies, such as rail, air and water transport, for which there i s no overall vision or strategy on how to integrate these modes with the road network.

1

5. Cognizant o f this, the Government has for the past three years been developing and evaluating a number o f reform approaches that may address these issues. Government has opted for a modest initial approach, with Cabinet’s endorsement in September 2005 o f a Policy Paper on Proposed Reform within the Road Sub-sector. The thrust o f the reform i s restructuring o f present road administration into a Roads Directorate within the Ministry o f Public Works and Transport; significant reduction o f staffing through attrition, redeployment and nurturing for private sector; delegation to Local Authorities o f ownership and management o f certain parts o f the road network, and; full funding for road maintenance.

6. pursuing these reforms with targeted strategic measures and a time-bound Action Plan

The Government though a Letter o f Sector Policy (Annex 14), confirms its commitment to

7. While the proposed reforms fall short o f fully addressing some o f the underlying deficiencies o f current institutional arrangements, for instance in terms o f ensuring that capacity can be built and retained in face o f local and regional competition for qualified staff, they do show that the Government recognizes the need for more professional road sector management. The Government’s endorsement o f this road sector reform indicates that a cautious process i s being initiated towards a rationalized and more professional road management and sustainable maintenance funding.

2. Rationale for Bank involvement

8. The rationale for Bank involvement i s that a reliable and cost-effective transport system underpins all other poverty reduction and development efforts. Poor access among Lesotho’s major regional centers and to remote populations in mountainous areas hinders social service delivery and in- country movements in support o f democratization and decentralization. It also generates high transport costs, adversely affecting the welfare o f the poor and reducing competitiveness o f Lesotho’s economy by

2

driving up the price o f inputs, farm products, consumer goods and exports, and discouraging investment in non-farm income-generating activities, such as mining and tourism.

9. The policy and sector dialogue the Bank has had with the Government for the past few years through R R M P and the preparation o f this Integrated Transport Project, has increasingly been with the involvement o f some o f the traditional development partners in transport in Lesotho, namely the European Commission (EC), Afr ican Development Bank (ADB) and Development Corporation o f Ireland (DCI). In this regard, the Bank holds a unique position in being able to engage the Government and other donors in a sector-based and coordinated dialogue, supported also by knowledge and dialogue based resources available through the Sub-Saharan Afr ica Transport Policy Program (SSATP).

10. Financing by other development partners in the transport sector has tended to focus on infrastructure investment and selected technical assistance. The support the Bank provides w i l l therefore continue to fill an otherwise unmet need to support critical sector management reforms and capacity building. In addition, the Bank wil l finance targeted investments to fill critical gaps in the network not covered by other donors, and in particular, contribute to the effort to open the South-Eastern Corridor.

11. thus further consolidating growing donor coordination in the sector.

In this project, for the first time in Lesotho, the E C has decided to co-finance the ITP with IDA,

3. Higher level objectives to which the project contributes

12. The Integrated Transport Project (ITP) wi l l contribute to the Government’s poverty reduction and economic growth strategy by improving the rural and urban population’s access to basic services, markets and employment opportunities. By assuring connectivity between and within the regions, it wi l l facilitate social service delivery and ongoing democratization and decentralization programs. By supporting sector institutional and policy reforms, it wi l l contribute to more efficient and transparent use o f public resources and governance reform programs. By funding c i v i l works, promoting labor-based methods and promoting sustainable road maintenance financing, it wi l l generate immediate and continuous employment opportunities. The ITP i s consistent with the country Poverty Reduction Strategy (PRS), which provides the country’s priorities around three key pillars o f the policy objectives: (i) Employment and income generation through higher economic growth; (ii) sharing the benefits o f growth: health, education and the environment; and (iii) improving governance and public service delivery. To support these pillars, the Country Assistance Strategy (CAS) proposes that four fo l lowing strategic objectives frame the Bank’s assistance over the coming years: 1) Fighting H I V / A I D S pandemic; 2) Sustainable Pro-poor growth and j o b creation; 3) Improved human development outcomes; and 4) Decentralization, service delivery and monitoring & evaluation.

13. The ITPs main contribution i s to pillar (i) and (iii) in the PRS and to Strategic Objective 2, through alleviation o f infrastructure bottlenecks to growth and exploitation o f growth potential in the rural economy, as wel l as to strengthening management capacity o f the transport sector through self-sustaining policy and institutional reforms. Furthermore, the I T P compliments other Strategic Objectives with a r ich H IV /A IDS agenda, significant capacity building in the transport sector and support to decentralization o f ownership and responsibility for part o f the road network to local authorities. The proposed ITP represents a significant part o f the CAS with about 50% allocation f rom the total IDA envelope for three years.

14. The project i s also consistent with the Afr ica Act ion Plan as it wi l l contribute to activities related to accelerating with development partners implementation o f the framework on harmonization, alignment and results embodied in the Paris declaration, placing effective mechanism for monitoring, reporting, and

3

following up on the delivery o f aid commitments, and to raise agricultural productivity and to connect rural poor people to the rest o f the economy through investments in roads.

B. PROJECT DESCRIPTION

1. Lending instrument

15. The Integrated Transport Project w i l l be financed under a Specific Investment Loan (SIL). This instrument has been selected as the most appropriate to support a sector reform agenda, complemented by targeted infrastructure investments, all to be accomplished within a defined period o f time.

2. Program objective and phases

16. The ITP supports a slice o f the Government’s TSP (2004 - 2010), whose overarching objective is: “...to provide an enabling environment for eflcient, cost-effective and safe transport to meet the needs of the people and the economy of Lesotho, and to facilitate construction capability to meet the needs of the economy, social services and of the population in general.” (Transport Sector Program 2004-201 0).

3. Project development objective and key indicators

17. Lesotho’s citizens are less isolated and have improved access to services and market opportunities, through a better managed, more complete, safe and affordable transport system.

18. Outcome Indicators:

1 Quality o f national road network as measured by LRMS i s improved from 27% good and 38% fair to 39% good and 46% fair by 2010.

Average travel cost to social services and markets for beneficiary populations in targeted areas along the South Eastern Corridor for emergency and regular trips i s reduced by 20% in 2009.

International Comparison Program (ICP)’ changes between the targeted areas along the South Eastern Corridor and Sekake has decreased by 20% by 2009

- 1

19. Intermediate Results and Indicators:

Component A: Transport sector management is rationalized, sustainable road maintenance financing is achieved, and transport sector management capacity is improved.

. Roads Directorate within the Ministry o f Public Works and Transport established by December 2008.

Administrative expenses as total expenditures o f Road Fund be no more than 12% by 2010.

Recruitment o f staff to the Road Fund be in accordance with the Legal Notice for Road Fund Regulation 2005.

Periodic and routine maintenance o f the national road network i s 78% and 90% funded from road user charges by 2008 and 201 0 respectively.

1

The International Comparison Program (ICP) i s a government-issued index o f the retail prices o f basic household 1

goods and services in rural areas, while the Consumer Price Index (CPI) i s used in the urban areas.

4

Road Safety Council i s established and functioning in accordance with agreed principles.

Establishment o f integrated GIS database and system used as a planning tool

An urban transport planning and management policy i s elaborated.

An integrated policy and strategic roadmap for aviation, rail, IMT and water transport i s developed

1

Component B: Targeted sections of the road network are improved through construction, periodic maintenance, rehabilitation and upgrading.

Two high-level bridges and their approaches along the South Eastern Corridor are constructed.

20 k m (Oxbow-Mokhotlong Road) i s improved through emergency repairs

25 km o f rural road (Mantsonyane-Lesobeng Road) i s upgraded.

8 km o f a rural road Likotopong-Lintsa i s upgraded.

Senqu/Senqunyane area footbridges constructed and I M T access improved

1

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- HIV/AIDS interventions

Component C: Facilitating of project activities, institutional reform change and monitoring & evaluation.

1 Project Management office reports annually on transport sector with a focus on progress towards project objectives and results indicators

MoPWT monitoring and evaluation system established and functioning

Timely and satisfactory audit report o f Project accounts and Road Fund accounts

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4. Project components

20. Under ITP, IDA wi l l along with the EC take a leadership role among donors in supporting road sector reforms and capacity building, while supplementing Government and other development partners’ commitment for developing the road network and addressing isolation problems. In addition, the project wi l l support the formulation o f integrated policies and strategies for aviation, rail and water transport sectors with a view towards more coordinated transport sector management.

21. The total estimated cost o f the project i s US$38.2 million, whereof IDA wi l l fund US$23.5 million, European Commission €7.85 mill ion (approximately US$9.5 mill ion equivalent) and the GoL US$5.2 million.

Component A: Policy and Institutional Reform in the Transport Sector. Total US$ 10.044 million: Financing: Government US$O; EC US$9.500; Bank US$0.544.

22. and w i l l have two sub-components:

This component w i l l support Government’s proposed institutional reforms in the roads sub-sector

Sub-Component Al : Support for Roads Sub-sector Institutional Reforms (1 00% funded by EC). The project w i l l support Government’s reform effort with:

Advisory services for planning change and implementation support at central and local level.

5

Capacity building for Roads Directorate

1 Refurbishinglequipment for Roads Directorate

Capacity building for Local Authorities

1 Equipment for Local Authorities

Training for staff redeployment to other public sector activities resulting from the organizational arrangements.

Preparation for private sector development to replace most remaining force account activities.

Sub-Component A2: The roads sub-sector development and capacity support funded by EC, except indicated activities) will finance technical assistance, institutional support and training resources for implementation o f key reforms stated in Government’s Letter o f Sector Policy. These include:

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.

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.

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Road safety program with focus on establishment o f driver training and examination system, vehicle inspection system, pilot dangerous spot rectifications, traffic surveillance equipment and creation o f a Road Safety Council;

Institutional capacity for database and Geographic Information System (GIs);

Road Fund (RF) revenue reforms, with a focus on improving cost recovery mechanisms and achieving full self-sufficiency by 2010, as well as improvements in RF management, RF monitoring mechanisms and road management and maintenance funding stakeholder awareness program;

Study o f basic access and mobility including Intermediate Means o f Transport (IMT) study and pilot project;

A local construction industry development plan (fully funded by IDA); Continuation o f the successful contractors training program (CTP);

TA support for Alternative surfacing standards study (fully funded by IDA); Institutionalizing environmental management;

Upgrading o f Lesotho Road Management System (LRMS) including: (a) mechanized road condition survey for RB roads; (b) annual review o f RB and DRR - and future RD road program; (c) expanding the system for urban roads.

Evaluation o f options for Department o f Traffic and Transport computerization;

Implementation o f computerization o f vehicle registers, licenses and data (fully funded by IDA);

Supporting capabilities in social assessment and monitoring, gender issues, HIV/AIDS and GIS capabilities.

TA support to implementing agencies (DRR and RB) and RD upon i t s establishment.

Sub-Component A3: Policy reformulation and capacity building in other transport sub-sectors (100% funded by EC).

23. This sub-component will finance technical assistance and studies for the elaboration of transport sub-sector policies and strategies - urban planning and transport; aviation, rail, IMT and inland water transport aligned with roads sub-sector. These sub-sectors have been preparing their development plans in isolation from each other and no comprehensive study has ever been carried out to determine the impact o f individual sub-sectors on the overall economy of the country.

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24. Maseru Urban Planning and Transport Study. In light o f the inadequate urban transport planning and management capacity within Maseru Municipal Council (MMC) and in other urban centers, M o P W T and later RD will, in the medium term, assist in the management o f the urban road network until such time that sustainable institutional and human resources capacity has been established in MMC and other urban centers to provide and maintain adequate infrastructure and related services..

25. The purpose i s to undertake a comprehensive study o f the M M C ’ s overall urban planning and management activities, wi th a special focus on the transport system. Focused studies wi l l also be undertaken in other sectors, such as utilities, housing, employment, community facilities and environmental services. The overall objectives o f the Study are as follows:

. To provide policy, institutional, financial and investment guidance regarding urban planning and management, urban transport infrastructure and transport services to the M M C for the next 10-20 years.

T o formulate strategies for development o f effective urban planning and transport system in Maseru, as wel l as suggesting short- and long-term improvements in management systems and service delivery which wil l benefit the city’s residents in the short-, medium- and long-terms.

To provide policy, institutional, financial and investment framework regarding urban public transport infrastructure and associated services to the MMC in the short-, medium- and long- terms.

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26. Integrated transport study and policies development (Civil Aviation, Rail, IMT and Inland Water Transport) aligned with the roads sub-sector. Policies, strategies, development and management o f the indicated sub-sectors have traditionally been elaborated in isolation o f each other and the road sector. In order to achieve a better integrated transport sector, this subcomponent wi l l support Government’s effort o f stock-taking and elaboration o f complete set o f policies and strategies appropriately aligned with the road sub-sector.

1 Review and formulate policy o f c iv i l aviation, rail, IMT and inland water transport with the aim o f arriving at an integrated multimodal transport policy aligned with the country’s road sub-sector policies.

Review and recommend amendments to institutional arrangements for the sub-sectors.

Develop an inventory and collect condition data for a l l aviation, rail, IMT and inland water infrastructures

Define roles and responsibilities for regulatory, safety and management aspects.

Prepare a roadmap for the development o f aviation, rail, IMT and inland water transport infrastructure and services.

1

27. Capacity Building. Capacity building through training, in l ine wi th the proposed reform, for transport sector staff. Draf t training plan exists that wi l l during implementation be discussed between Government and funding agencies.

Component B: Infrastructure Investments. Total Including Contingencies, US$23.375 million: Funding: Government US$4.700; EC US$ 0; Bank; US$18.675.

28. This component wi l l support the Government’s prioritized program for the key network improvements through rehabilitation o f paved roads wi th emergency repairs, contributing in opening o f

7

new corridors, and limited upgrading o f rural roads considered critical for improving accessibility in the isolated areas. I t wil l finance c iv i l works, design and supervision services for the fo l lowing activities:

Emergency improvement for the Northern Corridor through emergency repairs o n the paved section Oxbow - Mokhotlong, which has deteriorated rapidly due to frost susceptible material in the base course;

Contributing to South Eastern Corridor, through the construction o f two bridges over Senqu and Senqunyane rivers, their approaches and a l imited length o f access road. This investment forms part o f a multi-donor effort on the “Roma-Romabanta- Semonkong-Sekake-Qacha’s N e k ” wi l l reduce the distance by 140km between the two regional centers o f Qacha’s N e k and Maseru.

Upgrading o f Rural Roads, through the upgrading o f 25km o f Mantsonyane-Lesobeng road, currently inaccessible due to diff icult terrain, yet critical for the socioeconomic development o f the eastern region and upgrading o f 8km o f Likotopong-Lintsa feeder road.

.

SenquISenqunyane area footbridges constructed and IMT access improved

H IV /A IDS interventions undertaken

Design and supervision i s 100% funded by IDA, while c i v i l works are co-funded by Government and IDA at 20% and SO%, respectively

Component C: Project Management and Monitoring and Evaluation. Total: US$2.781; Funding: Government US$O; EC US$ 0; Bank US$2.718.

TA support for Project Office to finance the local consultant positions for Project Manager, Financial Manager, Financial Controller, Financial Accountant, Procurement Compliance Officer, Environmental and Social Coordinator, and H I V I A I D S Coordinator, with support o f Secretary, Office Assistant and Driver, as well as operating costs related to the execution o f the project.

Additional TA support to Planning Unit to finance the local consultant positions for Statistician and Assistant Statistician.

Monitor ing and evaluation, including H N / A I D S , gender, poverty alleviation and economic development associated with c iv i l works.

1

29. Fol lowing table summarizes total project costs and sharing o f these among financiers.

Component Total GoL EU IDA US$ million US$ m. US$ m. US$ m.

Component A: Policy and Institutional Reform in the Transport Sector Component B: Infrastructure Investments

10.044 9.500 0.544

23.375 4.700 18.675 1 2.781 2.781 I Component C: Project Management

and Monitoring and Evaluation PPF Refinancing 1 s o 0 1 s o 0 Gvmt counterpart financing o f PPF 0.500 0.500

TOTAL 38.2 5.2 9.5 23.5

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5. Lessons learned and reflected in the project design.

30. The fol lowing lessons are learned from the experience o f RRMP:

Responsibility for road management i s s t i l l fragmented, activities are duplicated and departments are excessively staffed, leading to inefficiencies in the management o f the sector. The project design addresses this issue by financing the preparatory steps and setting up RD headed by a Director General administratively responsible to the Principal Secretary o f MoPWT.

Poor physical access poses a serious constraint on livelihoods for the poor. This wil l be addressed through contributing to the opening o f South Eastern Corridor, upgrading o f rural roads and improving mobil ity to connect rural poor in selected remote areas.

Road maintenance i s not fully covered by road user charges and supplemental Government budgetary support i s insufficient to ensure full coverage o f maintenance needs. This has been addressed as the government has increased fuel levy for petrol f rom 15 lisente to 30 lisente and for diesel f rom 20 lisente to 40 lisente and through increasing other road user charges on heavy vehicles, and increase in the to l l tariff. These increases are expected to raise approximately Malot i 58.8 M i l l i o n or about 64% o f the resources required for annual road maintenance.

Even though there are two sources o f maintenance funds, their utilization needs to be channeled through one source to ensure appropriate coordination o f maintenance.

1

1

9

6. Alternatives considered and reasons for rejection

3 1. Originally, the project was designed as an Adaptive Program Lending (APL) Program, involving a phased approach in support o f the Government’s six-year Transport Sector Program. Whi le this approach had the advantage o f paralleling the Government’s program over time, it was determined that, in fact, under RRMP and project preparation, much o f the conceptual groundwork, testing and lessons learned for the sector reforms was already complete. In this context, it was more logical to utilize a stand alone sector-based financing instrument in support o f implementation o f the sector reforms and supplemented by targeted physical improvements on the road network.

32. The project could have focused entirely on the road sector, as with the previous Bank intervention. However, given the Government’s movement towards developing an integrated transport sector strategy, the scope was broadened to support the formulation o f policies and strategies for other modes. The main thrust i s s t i l l on the road network, but with a view to establishing a more coherent and complementary multi-modal approach.

C. IMPLEMENTATION

1. Partnership arrangements

33. Lesotho’s principal development partners in transport have in the very recent years increased their consultations and collaboration in policy dialogue with Government. The M o P W T has indicated that it intends to improve i ts lead in donor coordination in the coming years, which should further deepen the shared understanding of the development challenges faced by lack o f Lesotho transport.

34. Government through co-financing o f the ITP in the amount o f Euro 7.85 mil l ion.

These developments have now resulted in ECs willingness to participate in the support to the

9

35. M a i n international agencies, other than IDA and EC, traditionally involved in supporting the road sector in Lesotho are Development Cooperation o f Ireland (DCI); Afr ican Development Bank (ADB), BADEA, KFAED (Kuwait Fund) and KfW. However, D C I has recently announced i t s intention to withdraw from the transport sector and ADB's current three-year program does not foresee support to the sector.

2. Institutional and implementation arrangements

36. M o P W T wil l be responsible for the overall management and implementation o f the project, while other ministries, departments and agencies wi l l be involved in implementing specific project components.

37. An already established ITP Project Office wi l l coordinate the implementation and ensure day-to- day management o f the project. I t wi l l be headed by Project Manager, with a professional staff o f a Financial Manager, Financial Controller, Financial Accountant, Procurement Compliance Officer, and Environmental and Social Coordinator. The ITP Project Manager will report to the Director o f Planning at MoPWT. Annex 6 provides details and an organization chart. The responsibilities o f the Project Manager cover overall project coordination and implementation, including:

1 Project management and coordination; 1

1 Liaison with project auditors; 1

Project reporting and monitoring, including budget matters;

Development o f annual work plans.

38. In addition to the position o f Environmental and Social Coordinator, M o P W T has also recruited two researchershtatisticians to enhance the capacity o f the Planning Unit in policy development, monitoring and evaluation, environmental and social management functions. Furthermore, an H IV /A IDS Coordinator wi l l be recruited. This person wil l coordinate particular H IV /A IDS activities at the Senquhenquyane bridges site, and work to further mainstream HIV /A IDS awareness and activities within the Ministry and with key stakeholders such as the private sector.

39. Although over the l i f e o f the project, the new Roads Directorate (RD) will be established (consolidating the Roads Branch and the Department o f Rural Roads), these two agencies wi l l assume i~p lemen ta t i on responsibilities for their respective activities, until they are fully merged into the RD, which i s expected to occur in the second year o f the project.

40. The Director General o f the RD shall be appointed in accordance with clearly identified qualifications for the position. The five directors and professional staff wi l l be selected on the basis o f merit through transparent competitive selection. Other support staff wi l l be placed in the new directorate on the basis o f individual suitability o f each candidate for a particular position. All appointments into positions shall be effected by the Public Service Commission through normal channels o f the Ministry o f the Public Service.

41. The present staffing level o f the two existing roads functions i s 1309 against 1867 established positions. It i s projected that within the next five years the total staff compliment for the Roads Directorate wi l l be about 140 positions, i.e. professionals, support staff and office assistants. This wil l be after the fol lowing actions would have taken place:

Redeploy 355 officers to the Ministry o f Local Government in terms o f the Government's decentralization policy

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Redeployed 140 redundant officers within the Ministry and in other Government Ministries Le. Accounts, Stores, Human Resource Management, Administrative staff and Office Assistants.

Reduction by natural attrition and empowerment to j o i n the private sector o f 678 staff members as follows:

a. 490 laborers, 104 supervisors, 84 trained technicians b. Some o f these officers wi l l be encouraged to resign and form construction companies.

Accordingly, they wil l be trained as contractors and consultants.

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42. The project wi l l be overseen by a Project Steering Committee, chaired by Minister o f M o P W T and comprising higher level representatives f rom other Ministries (Finance and Development Planning, Public Service, Local Government) and office o f Attorney General. The Project Steering Committee can call on other stakeholders as needed, including the funders o f the program. The Steering Committee wil l have overall responsibility for deciding on policy matters and monitoring progress o f the components relating to policy and institutional reforms.

43. Planning, and which wil l also include EC and Wor ld Bank.

The project wi l l also have a standing Technical Coordination Committee, led by Director o f

44. Component A (Policy and Institutional Reform o f the Transport Sector) will be managed by M o P W T (PU), but with participation as required from RB, Department o f Road Safety (DRS), DRR, RF, the future Roads Directorate (RD), Ministry o f Local Government ( M o L G and Local Authorities), Building Design Services (BDS) the Department o f Traffic and Transport (DTT), Department o f Civil Aviation (DCA), DTT; MoLG, Local Authorities and MMC.

45. Component B (Infrastructure investments to contribute to safe, reliable and efficient core road network) w i l l be implemented by RB (rehabilitation-emergency repair o f paved roads, construction o f bridges and roads on the South Eastern Corridor) and DRR (upgrading o f rural roads and SenquEenqunyane footbridge and IMT access improvement), until such time that the Roads Directorate i s established..

46. Planning Unit and I T P Project Office.

Component C (Project Management and Monitor ing and Evaluation) wi l l be carried out by the

47. Short term international technical assistance wil l be recruited to provide intermittent support t o implementing agencies in establishing and carrying out the institutional reforms. The focus o f this assistance w i l l be on capacity building, transfer o f know-how and training.

3. Monitoring and evaluation of outcomes/results

48. The data for the project outcome and results wi l l come f rom the project progress reports, financial reports, road condition surveys, audit reports, road management system reports, and the Government published records. The ITP Project Office will be responsible for the data collection relating to agreed performance indicators, and analysis o f the project results to compare with the projected outcomes. Baseline data collection on the project’ primary outcome indicators wi l l be carried out in conjunction with the establishment o f the GIS (see below) before effectiveness; prior to mid-term review; and during the last year o f the project, i.e. in respect of:

The quality o f the national core road network;

Average travel cost to social services and markets for beneficiary populations in targeted areas along the South Eastern Corridor, and

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1 ICP changes between the targeted areas along the south eastern corridor.

49. At this stage, no specific need i s envisaged for strengthening agencies’ capacities to collect data, however in case any implementing agency i s not able to supply the data on time, the Project Office will seek the assistance o f local consultants to collect the data and analyze it for the comparison between the project outcomes and the agreed performance indicators.

50. GIS systems are in place in the Roads Branch and DRR o f MoPWT but they are not yet being used for extensive planning, monitoring and evaluation. During preparation o f the project a consultancy, financed by the Iceland Trust Fund, carried out a GIS needs assessment o f each o f the subsectors o f the MoPWT. The consultants designed a demonstration model o f an enhanced GIS which combines all o f the available transport data (LRMS, transport cost data, etc.) and integrates available demographic and poverty data and information from other sectors. The report and model were presented, discussed and endorsed at two participatory workshops; one for MoPWT stakeholders and the other for stakeholders from other sectors. In addition, under preparation the project piloted a participatory GIS methodology to capture community level information on the gender dimensions o f mobility and access to services. This methodology i s being integrated into the planned social assessments under the project and will provide important information for future prioritization o f civil works investments and their social impacts. Under the project, this unique resource will be further enhanced and the GIS will be integrated into MoPWT operations and decision making with the objective o f facilitating the monitoring o f civil works and evaluating the poverty targeting and impact o f the project. It wi l l serve as an important tool in decision making for sustainable road development by allowing stakeholders to plan and monitor the progress o f civil works and analyze multiple criteria (economic, social, environmental) in road rehabilitation selection. Ultimately, the GIS will serve as an important communication tool and enhance coordination o f development efforts and data sharing with other ministries, donors and stakeholders representing local government and communities in the country. The resulting enhanced GIS will:

1 Serve as a decision support system for sustainable road development in Lesotho;

Link the MoPWT GIS with other relevant sources o f poverty/social/environmental data in the country (Le., location o f key services such as clinics, schools, markets, transport, population and socio-economic conditions o f villages in impact zones, etc) to assist in poverty targeting and road safety initiatives;

Identify and monitor transportation sustainability and poverty/social impact indicators for the program.

Serve as an important communication tool between sub-sectors within MoPWT, other sectors in government, with district officials and local communities.

.

5 1. The Project Manager will ensure that a computerized database i s created to regularly monitor the progress on performance indicators. Appropriate reporting forms will be designed and used for sending progress reports to Project Office. This will help managers to assess project effectiveness during the project implementation and after the project i s completed.

4. Sustainability

52. The project i s based on the Government’s own six-year Transport Sector Program. In addition GoL, following an April 2006, endorsement by Cabinet, has renewed i t s commitment to pursue road sector reforms in i ts Letter o f Sector Policy, dated December 2005. The setting up o f a Steering Committee (SC) under the chairmanship o f MoPWT i s aimed at addressing higher level issues raised during implementation and in the Letter o f Sector Policy. There i s growing evidence that MoPWT and i t s technical department heads have become more proactive in implementing the proposed institutional

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reforms. The Government has shown i t s commitment through increasing fuel levy and road user charges to increase funding for road maintenance. The Government has also shown i t s commitments in adjusting upward gradually on annual basis to increase i t s own resources for road maintenance.

Risks

To project development Objectives 1. Agreed sector reform measures

53. Factors critical to the sustainability o f the project’s objectives include:

Risk Mitigation Measures Risk Rating with Mitigation

Joint Government-Bank formal H

9 The need to involve stakeholders in decision making relating to road maintenance, upgrading and construction;

The lack o f coordinated planning for roads among road agencies;

The gap between the maintenance needs and the available budget;

The need to recover the maintenance cost for financial sustainability;

The lack o f overall accountability for road maintenance and development;

The diff iculty in retaining professional staff in the sector agencies;

The inability to retrench unproductive staff;

The need to accommodate different objectives o f arterial, urban, rural and community roads; and

The lack o f ownership and clear responsibility for the management o f community roads.

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1

1

1

assessment o f reform progress and performance targets and agreed remedial

actions if necessary.

Stakeholder involvement in setting road user charges increased. Annual and

midterm review wil l examine performance o f the Road Fund in terms o f i t s revenue

and expenditures. Restructuring and downsizing the project fo l lowing midterm

review may be considered if adequate funds for maintenance are not provided in

a timelv manner.

54. The project design addresses these factors with a focus on self sustaining institutional reforms. These include consolidating road sector management and strengthening the management o f Road Fund. The strengthening o f road fund management wil l facilitate overall accountability, cost recovery and help narrow the gap between the maintenance needs and funds allocations.

H

Critical risks and possible controversial aspects

55 . N o major financial management or procurement risk i s anticipated at this stage. The tables in Annex 7 and Annex 8 identify the key risks that project management face in achieving the objectives o f the project and provide basis for determining how management should address these risks. Other risks that have been identified and associated mitigation measures are shown in the following table.

2. Financial resources for road maintenance from the Road Fund and Government budget not sufficient.

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Risks

T o Component results Component A: Policy and Institutional Reform in the Transport Sector

Limited institutional and operational capacity to implement the project.

Road Fund management in terms o f transparency and accountability not adequate.

Capacity drain continues with RD

Component'B: Infrastructure Investments

L o w contractor performance and procurement delays

Component C: Proiect Management and Monitor ing and evaluation

No significant risks are anticipated

H = High; M = Medium; L = Low

Risk Mitigation Measures

Implementation capacity wi l l be strengthened through technical assistance

program. Intermittent visits by international specialists would be planned

to provide hands on training to the national staff.

Revised road fund regulations and operating procedures wil l strengthen

management oversight.

Capacity o f the private sector in road construction and consulting industry

would be developed so that the jobs lost in the public sector can partly be picked up

by the private sector. Transfer o f maintenance and partial outsourcing to

consultants.

Richer j o b content in reformed institution, but at c iv i l service remuneration.

Adequate financial and procurement systems/operational manuals. Support to

M o P W T supervisory capacity.

If deficiencies become evident, technical assistance can be brought to support

M o P W in discharging this responsibility

Risk Rating with Mitigation

M

H

H

M

L

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Possible Controversial Aspects

56. Increasing road user charges to narrow the road maintenance financing gap. Gradual increases in the fuel levy and/or other road user charges wil l be necessary if road maintenance financing i s to become s e l f sufficient by the year 2010. This i s a controversial issue because it financially impacts o n a l l road users and transporters. However, these same users wi l l benefit f rom savings in the vehicle operation costs and a more reliable road network. This risk wil l be managed through: (a) representation o f road users, private bus operators, and other agencies f rom the public and private sector on the Road Fund Board so that the stakeholders may be able to participate in the decision making process; and (b) strengthening the management o f the Road Fund in carrying out t imely audits and publishing i t s financial reports in public newspapers, such that road users can ensure that the money collected f rom the road user charges has been properly used and quality o f road maintenance improved.

57. Social Impact o f redundancies and aggravated unemployment problems. Although the Government intends to undertake the reform without resorting to redundancies, the transition stage may cause controversy because o f perceived broader public sector reform implications. The project wi l l make every possible effort to develop local road construction and consulting industry so that the jobs lost in the public sector are immediately created in the private sector and that employees are wel l trained to be able to make the crossover. The local contractor training school and i t s wel l regarded curriculum developed under the previous project w i l l be an important resource in further developing this industry. Special attention wi l l be paid to mitigating the possible differential social impacts (i-e., gender, age, etc.) o f the transition and ensuring fair opportunities for all. The force account procedures currently being used by the road agencies w i l l be gradually phased out and other road functions such as f ie ld surveys, engineering design and supervision o f c iv i l works, including social, environmental and HTV/AIDS issues, wi l l be outsourced to the private sector.

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58.

. 59.

.

.

Grant and Credit conditions and covenants

Project effectiveness i s subject to the fo l lowing condition.

The EC Co-financing Agreement has been executed and delivered and a l l conditions precedent to i t s effectiveness or to the right o f the Recipient to make withdrawals under it (other than the effectiveness o f the Financing Agreement) have been fulfil led.

The Project Implementation Manual has been adopted in form and substance satisfactory to the Association.

The project Financing wil l be subject to fo l lowing covenants:

The Government wi l l establish and make operational a Roads Directorate no later than December 3 1, 2008.

The Financial covenants are the standard ones as stated in Article IV o f the Financial Agreement.

D APPRAISAL SUMMARY

1. Economic and financial analyses

60. Economic analysis. The c i v i l work program includes several activities such as periodic maintenance o f gravel roads, rehabilitation o f paved roads, upgrading o f rural roads and opening o f new corridors. The works for periodic maintenance and rehabilitation have been prioritized based o n a

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minimum economic internal rate o f return (ERR) o f 12%, calculated using Highway Design and Maintenance Standard Model (HDM 111). The works for upgrading of rural roads have been prioritized based on a multi-criteria analysis. The economic evaluation o f contributing to the opening o f the South Eastern Corridor includes construction o f two numbers 2-lane high- level bridges, one over the Senqu river and the other on Senqunyane river, has been undertaken using HDM I11 program. The financial cost i s estimated at US$11.7 m with an ERR o f 20% and NPV o f M 43.664 million at 12% discounted rate. The result o f the sensitivity analysis shows that the ERR varies from 16% to 21%. Other benefits include: (a) significant poverty alleviation for the population o f 20,000 in the catchment area bounded by the two rivers; and (b) access to an area with substantial agricultural, commercial and tourism potential and improved administration of central Lesotho. The completion o f this corridor, which i s an important link in the strategic road network, will result in significant shortening o f the distance between Maseru and Qacha’s Nek by about 140 km.

61. Financial analysis. While the road network i s generally in acceptable condition, it i s o f concern that in the year 2003/04 there was a shortfall o f some 30% on the estimated maintenance funding level. In addition the RF currently collects and manages only half the funding available for road maintenance, with the rest channeled through the Government central revenue fund and normal budget allocation processes. Government’s proposal for reform in the sector includes ideas for: (a) extending the revenue base for RF, (b) divert Government budget for road maintenance through RF; and (c) progressively close the road maintenance funding shortfall.

2. Technical

62. A large part o f the civil works component will be used for contributing to opening the South Eastern Corridor (Roma - Ramabanta - Semonkong - Sekake - Qacha’s Nek). Currently, the unfinished section constitutes; (a) about 45 km o f road from Semonkong to Senqunyane river ; (b) bridge over Senqunyane river; (c) about 4 km o f road in between Senqunyane river and Senqu river, (d) bridge over Senqu river; and (e) approach connection from Senqu river to connect with the existing road network in south. MoPWT with support from the African Development Bank (ADB) carried out a feasibility study including the comparative advantage of constructing a single bridge below the confluence o f the Senqu and Senqunyane rivers and two separate bridges over the Senqu and Senqunyane rivers. I t was concluded that the single bridge option would have the lower capital cost, while the two bridge option would open up Senqu valley and provide greater service to the community by providing access to the extensive cultivation and facilities between the two rivers. Moreover, this area o f land has primary and secondary schools, a clinic with the only radio in the area and an operating airstrip, which would be cut o f f in the rainy season and beyond if only a single bridge was constructed below the confluence. The design for the connecting road between the two bridges now provides direct access to the clinic, and from the clinic to the airstrip to facilitate emergency evacuations.

63. Under a PPF financing, the detailed engineering design and bidding documentation for the two bridges and approaches are ready. The implementation schedule of all civil works has been agreed with the concerned agencies and reflected in PIP. The technical and managerial capacity o f the implementing agencies wil l be strengthened through a targeted technical assistance program and training o f local staff.

3. Fiduciary

64. Procurement. An assessment o f the institutional capacity of the two main implementing agencies, RB and DRR, to handle procurement functions, has been carried out in accordance with Bank guidelines (see Annex 8). GoL’s existing procurement policies and procedures are based on i t s approved financial regulations and are centralized under the Ministry o f Finance and Development Planning, Central Tender Board, and are acceptable to IDA for locally financed procurement. However the Bank Standard

16

procurement documents wi l l be used for the IDA financed international procurement o f works, goods and consulting services. Given that the previous procurement arrangements in RRMP with the support o f foreign technical assistance were satisfactory and the staff o f implementing agencies i s now familiar with the Bank procedures, the present set up wil l continue at least until the RD i s established. T o ensure overall coordination and monitoring o f the procurement functions, the ITP Project Manager i s supported by a Procurement Compliance Officer.

65. Financial Management. During the implementation o f RRMP, an assessment o f the financial management system (FMS) was carried out and several weaknesses were noted in the existing FMS. M o P W T has amended and improved the F M S and i t s procurement, with IDA support through PPF advance. The new FMS i s able to produce the required Financial Management Report and has been installed and i s operational.

66. Wor ld Bank procedures and requirements wi l l be implemented for al l financial management, procurement and auditing activities o f the Project. Details on financial, disbursement and procurement arrangements are summarized in Annexes 7 and 8.

4. Social

67. The ITP wil l support a r ich social agenda. Five main social issues wi l l be addressed in the project: (i) access for communities living in the valleys adjacent to the Senqu and Senquyane rivers that wi l l be opened up by the construction o f the two bridges; (ii) social safeguards.triggered by the c iv i l works construction (iii) retraining o f force account workers and integration o f social issues into the labor-based works training for private operators; (iv) H IV /A IDS activities at M o P W T and in construction activities; and (v) Capacity building for managing social and environmental issues within MoPWT.

68. Community access along the Senqu and Senqunyane Rivers. The construction o f the two bridges w i l l have an enormous impact on the valley settlements that currently have no year round access to the road and services located across the rivers. This catchment area i s projected to have a population o f about 20,000 inhabitants. Communities in the area are currently dependent o n r o w boat ferries to cross the rivers and on animal transport or head-loading. During the rainy season when the rivers flood, the boats cannot pass and the communities are completely isolated. This limited access and mobi l i ty have suppressed economic growth and development opportunities in the region. The clinic o f H a Nkau, located between the two bridges, i s currently visited by1,000 patientdmonth. Patients access the clinic on foot or horseback, traveling, on average, 1Okm. each way. Villages located further up the valley (35 km.) also use this clinic. The design o f the link road between the two bridges has been realigned to provide direct access to the clinic, and from the clinic to the airstrip to facilitate emergency evacuations.

69. Prior to construction, DRR w i l l carry out a baseline socio-economic assessment (at the community and household level) o f the area to help determine criteria for rehabilitation o f existing tracks and footpaths, in addition to the Bank-financed investments. Sentinel villages wil l be identified for periodic monitoring during the course o f the project. During preparation, the project received funding from the Genfund to pi lot a participatory approach which: (i) identified several o f the gender dimensions o f access to services and mobi l i ty in the affected area (including issues o f cost and travel time); (ii) worked with local communities to determine selection criteria for rehabilitation o f footbridges and tracks; and (iii) identified potential indicators for monitoring and evaluation. This information was linked to the enhanced GIS o f M o P W T and can serve as an important tool for communication and discussion between local communities, district councils and M o P W T decision makers o f the project design, risks and benefits. Lessons from the pi lot have been discussed with M o P W T and the methods are being integrated into the social assessments and monitoring.

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70. Small civil works and IMT improvements to access and economic opportunity in the wider region. An activity has been added to the project to facilitate access in the region and beyond the bridge sites. These activities have not yet been fully defined but could take the form of footbridge construction at relevant sites, small civil works enhancements on existing footpaths to ensure safe, year-round access, provision o f well constructed accesses to communities to facilitate transporting patients to the clinic, etc. Consultations with local communities and the IMT study which will be funded by the project will help to identify opportunities for improving access in the region. Small civil works will be carried out, wherever possible, by local contractors who have participated in the labor based contractor training program. This work will be identified by the project and MoPWT staff, implemented through DRR and monitored by the MoPWT.

71. Community Radio. A small activity will support a community radio pilot in an area to be determined near the two bridges site. This program will be community based and will support community participation and outreach beyond the scope o f the civil works. I t will support efforts at decentralization in the area, by facilitating access to information and exchange o f views among community members, with local government and the broader population o f Lesotho.

72. Social safeguards at the Senqu/Senquyane bridge sites. The civil works investments for the road links and two bridges over the Senqu and Senquyane rivers will trigger OPBP 4.12. Potential impacts are judged to be moderate in scale, limited to approximately 7 km. o f road works and mitigatable. Compensation has been identified for arable and grazing land acquisition between the two rivers. There i s no need for resettlement. Flexible alignment will be designed around potentially impacted village infrastructure. The 30m road reserve mandated by the Ministry will only be invoked where it poses threats to road safety or where the sight distance i s below the standard minimum requirement. I t i s not anticipated to impact the villages or arable/grazing lands. Wherever possible, the project will recruit local labor. Social and Environmental clauses covering labor recruitment, safety, and HIV/AIDS will be used in al l contracts.

73. In preparation for the project, a Resettlement Policy Framework has been developed by the Ministry as well as the Environmental and Social guidelines under the Environmental Assessment (EA). A Resettlement Action Plan (RAP) has been prepared for the project area.

74. Reductions in workforce and redundancies. The institutional reforms supported by the project will lead to a reduction o f the workforce directly in the MoPWT. The project will support Government’s efforts in mitigating adverse impact on the staff likely to be affected, through training programs that will help them to be eligible for alternative employment in the private sector. Attention will be paid to the social issues underlying, the differential impacts on workers and the opportunities for relevant re-training to enter private sector. Emphasis will also be given to integrating the principles o f labor-based work and recruitment that have been elaborated by DRR over the past years into the contractor training program. HIV/AIDS clauses and the mitigation actions will also be covered.

75. Carrying out expanded HIV/AIDS activities and creating strategic partnerships in the project area. In an effort to enhance the efforts by government to fight HIV/AIDS in Lesotho, the project has committed funds to carryout HIV/AIDS activities and creates strategic partnerships in the project catchment area (approximately 20km radius). Al l civil works contracts will use the HIV/AIDS clauses. This call for Information Education and Communication (IEC) and HIV/AIDS activities to be carried out with workers and communities living adjacent to the project area. In addition, the project will fund activities that reach beyond the directly affected area o f road and bridge construction. Possible small projects include: upgrading the only clinic in the area at H a Nkau, assistance to the HIV/AIDS orphanage at H a Phafoli, IEC and home-based care training to communities, assistance in provision o f Voluntary Counseling and Testing (VCT) sites in the area, etc. These activities will be carried out prior, during and

18

post construction. MoPWT has begun a strategic partnership with the National AIDS Commission and the Clinton Foundation to identify relevant partners for implementation o f these activities. These activities w i l l be supervised and monitored by the Environment and Social Coordinator and the HIV/AIDS Coordinator for the project.

76. Under preparation o f the project, the Bank team and the HIV/AIDS Coordinator for AFTTR have given support to MoPWT by: Reviewing and commenting on the draft HIV/AIDS Policy for MoPWT; Helping to create a work plan for the HIV/AIDS team in the Ministry and; Facilitating identification o f possible sources o f funding for HIV/AIDS activities at the Ministry. MoPWT initiated VCT on site in 2004. Today there are 100 staff members who are covered for treatment. The project has appointed an HIV/AIDS Coordinator from the MoPWT staff to: 1. Help initiate and monitor HN/AIDS activities with contractors, local communities and strategic HIV/AIDS partners; 2. Run a series o f HN/AIDS workshops and activities with private sector (contractors, truck and taxi drivers, etc.) and 3. Coordinate all efforts with the MoPWT HIV/AIDS task forces.

77. Monitoring and evaluation o f social issues wi l l be managed by the ITP Project Manager and EnvironmentaYSocial Coordinator in the MoPWT planning unit. They wi l l be responsible for monitoring the social and HIV/AIDS clauses in contracts, social safeguards, and transfer from force accounts to private contracting, and HIV/AIDS activities and social assessments. The baseline data from the social assessments for the civil works w i l l be linked to the MoPWT GIS.

5. Environment

78. The project involves the construction o f two new bridges along the Semonkong-Seforong road, the upgrading o f access between them and access from the Senqunyane river bridge and the Senqu river bridge. The proposed roads follow existing alignments and the potential adverse impacts are not considered significant and are readily mitigable; the project i s accordingly categorized as a B. EAs have been undertaken o f the roads and the bridges and mitigation measures have been defined as part o f an Environmental Management Plan. In addition, assessments have been made o f the potential impacts o f opening up the lower Senqu and Senqunyane gorges known for their conservationhourism values and guidance provided for their effective protection, including management plans for spiral aloe colonies and cliff-nesting birds and archaeological remains and cultural features. Discussions have been initiated with the GoL on measures to proclaim the gorges and surroundings as a conservation area. MoPWT has recruited an Environmental/Social Coordinator to ensure systematic application o f environmental management measures. Training o f relevant staff in MoPWT and other Ministr ies in environmental and social safeguards wi l l be conducted by the Coordinator.

79. In addition, a Sector Environmental Assessment (SEA) for the transport sector was funded under RRMP with additional support o f a PPF. Several workshops were held to obtain feedback from key stakeholders, including the donor community. The SEA wi l l assist the development o f procedures, guidelines and capacity for the preparation and implementation o f sector- wide initiatives and individual road investments under the project and by other donors.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [I [XI

Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.11) [XI [I Involuntary Resettlement (OPBP 4.12) [XI [I

19

Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI

Safety o f Dams (OPBP 4.37) [I [XI

Projects in Disputed Areas (OP/BP/GP 7.60)' [I [XI

Projects on International Waterways (OP/BP/GP 7.50) [I [XI

OP = Operational Policy; BP = Bank Procedures; GP = Good Practices; OPN = Operational Policy Note; OD = Operational Directives

7. Policy Exceptions and Readiness

80. There i s no World Bank policy exception sought for this project.

81. Principal readiness criteria have been met. The Government has put in place needed fiduciary arrangements for implementation o f the project. Projects staff i s in place and counterpart funds are allocated for the initial year (2006/07). Tender documents for most works have been prepared. The Government has disclosed environmental assessments in country and authorized IDA to disclose. Capacity for M&E i s in place and principal indicators have been agreed on.

~

* By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination ofthe parties' claims on the disputed areas

20

Annex 1: Country and Sector or Program Background

Lesotho: Integrated Transport Program

Authority

Country Context

Type Paved Gravel I Earth/Other I Total

Lesotho i s a mountainous country o f 2.2 mi l l ion people, entirely surrounded by the Republic o f South Africa. After weathering a generation o f political discord that culminated in the upheaval o f 1998 and the introduction o f a more inclusive polit ical model in 2002, the country has elaborated the Sixth National Development Plan and a Poverty Reduction Strategy Paper (PRSP) 2004/2005 - 2006/2007. The PRSP identifies eight strategic areas for achieving economic growth and poverty reduction: (i) employment creation; (ii) agricultural productivity and food security; (iii) infrastructure development; (iv) democracy, governance and security; (v) health care and social welfare; (vi) quality and access to education; (vii) environmental management and conservation; and (viii) service delivery. Under infrastructure, transportation links are noted as v i ta l to the implementation o f a l l the country’s strategic objectives. Given the Lesotho’s landlocked location and mountainous terrain, it i s critical to have an efficient transport system that ensures cost-effective accessibility to economic opportunities, markets and basic services, as wel l as reliable links to external markets and ports.

Roads Branch (RB) Department o f Rural Roads (DRR) Maseru Municipal Council (MMC) Ministry o f Local Government (MoLG) Total

Transport System

1 150.0 1 150.0 2 230.0 2 140.0 1360.0 3 500.0

83.3 283.3 326.6 693.2 28.5 184.6 778.4 991.5

1261.8 3 757.9 2 465.0 7 436.7

Transportation in Lesotho i s provided almost entirely by private entrepreneurs, who operate mainly in the road transport sector. Air transport i s provided o n a charter basis within the country and the only scheduled international flight i s provided by South African Airways. Rai l transport i s l imited to a short stretch o f l ine to Maseru from South Africa.

Roads and road transport. Roads and road transport are the backbone o f the transportation system. Private vehicle ownership i s relatively low; however public transport i s generally operated by private companies and individuals, which operate internationally as wel l as comprehensively within the country. The road network consists o f about 7,400 km, as shown in the table below:

Road Network o f Lesotho (km)

Most o f the roads are concentrated in the Lowland portions o f the districts o f Butha-Buthe, Leribe, Beria, Maseru, Mafeteng and Mohale’s Hoek. Roads are relatively few in the Mountain districts o f Thaba Tseka, Mokhotlong, Qacha’s Nek, and Quthing. Although there are arterial roads that connect al l the districts in the country, few rural roads connect villages and towns within districts in the mountainous parts o f the

21

country, which comprise 75% o f the total area o f Lesotho, and in which about one quarter o f the population lives. This extreme isolation results in poor access to basic services and commodities, as well as market opportunities. Poor access through the mountain zones also hinders communication within the country, and prevents continuous outlets to ports beyond the country's surrounding borders with South Africa.

A core maintainable road network based on the criteria that the maintenance o f such roads, routine and periodic, would be financed from the internal resources including Road Fund and the Government budget. Based on Lesotho Road Management System (LRMS), it will include a rolling three-year priority investment program for the core maintainable road network. The key objective o f this rolling program would be to bring the core road network under a regular and sustainable maintenance program through eliminating the backlog o f deferred periodic maintenance, avoiding further deterioration o f the poor roads, and preserving the assets o f the existing core road network.

Air Transport. The air transport sub-sector i s administered by the Department o f Civil Aviation (DCA) o f the MoPWT. Air transport infrastructure consists o f the Moshoeshoe I International Airport, and 29 regional aerodromes and airstrips. Twelve o f these aerodromes incorporate clinics that are served on a weekly basis by the Lesotho Flying Doctor Service operated by the Ministry o f Health. The Government provides a budget for routine maintenance for these 12 aerodromes, however maintenance has been difficult due to heavy rains in recent years, and they are in urgent need of resurfacing. Maintenance o f these facilities i s the responsibility o f the DCA, who i s also responsible for policy development and implementation o f sub-sector strategies.

Rail Transport. Rail transport consists of a small rai l l ine (2.5 km) between the Maseru Bridge Border and the Maseru Station, the container handling facility and to the bulk grain handling facility in the Maseru industrial sites. It i s operated and maintained by the South African company, Spoornet, although the facilities at Maseru Station, the container handling facility and the bulk grain depot are owned by the Government and leased to the operator. Two freight trains run daily and there has been no regular passenger service since 1989. Hosting for the rail sector l ies with the Lesotho Revenue Authority.

Water Transport. There i s a network o f 39 inland river crossings particularly in the highland areas. At present, the services provided for inland water transport i s mainly through public and private owned aluminum rowing-boat river ferries with an average carrying capacity o f eight (8) adults. The ferry sites are not generally provided with any infrastructure due to the perennial nature o f the rivers, which vary from very low during the dry season, to being raging torrents during the heaviest rainy season (which also prevent the ferries operating for safety reasons). Landing stages, piers or any other fixed infrastructure therefore cannot be installed, as it wi l l either be out o f the water or completely inundated and in danger o f being swept away. Furthermore, the two lakes created under the Lesotho Highlands Water Project, while offering challenges to the communities along the its coast, provide the opportunity to develop inland water transport services which would be efficient, quick and competitive.

Intermediate Means of Transport. A network o f bridle paths was established in Lesotho, providing initial access into many o f the remote areas. The development o f formal roads into some o f these areas has meant that the importance o f the bridle paths to these places has reduced. However, many remote areas are s t i l l served only by these paths. The DRR, with assistance o f development partners, has continued to improve access provided on these routes by constructing footbridges over problematic rivers, to provide more reliable access during the rainy season. However maintenance o f these paths generally has been inconsistent, partly due to a lack o f formal design standards and policy on these. Up to date DRR has constructed more than 220 footbridges and more than 1 O O k m o f footpaths which 'serves as approaches to the footbridges.

22

In the urban situations, while roads into industrial areas have generally been provided, provision o f facilities for pedestrians has been limited and any consideration o f other possibilities such as bicycle paths, or provision for smaller motorised public transport appears to have been omitted. Although the natural terrain in the urban areas has mitigated against extensive use o f bicycles or other IMTs due to steep gradients, this i s a challenge which could be overcome with careful and appropriate selection o f IMT and the design o f the infrastructure to match the requirements thereof.

Sector Management Issues and Constraints to Development

Road sector institutional and policy reforms.

The Ministry o f Public Works and Transport proposes to proceed wi th institutional change with internal reforms to improve the capacity o f sub- sector in the context o f a new structure within the Ministry. Specifically, it i s proposed to restructure the present road administration structure into a Roads Directorate within the Ministry o f Public Works and Transport.

Presently the authority for roads administration i s vested with the Principal Secretary for Public Works and Transport. Under the restructured set-up that authority would be vested with a Roads Directorate that would be headed by a Chief Executive or Director General, administratively answerable to the Principal Secretary.

The proposed restructuring takes place against the background o f an already on-going decentralization program o f the Government. This means that the Ministry will, in the very near future, hand-over a majority o f staff o f the Department o f Rural Roads to the Ministry o f Local Government. The primary reason for restructuring the roads sub-sector into a directorate and not a department i s due to the need to commercialize the operations o f the roads sub-sector in order to achieve efficiency and effectiveness; to have adequate funds for road maintenance in order to protect the enormous investment in the existing road network (approximately LSL 6 billion), to retain the professional staff for management o f road assets, and to give the directorate the right profi le and to empower it through legislation. Thus, even though the directorate w i l l be an entirely Civil Service institution, the Government intends that i ts j o b content be enriched as wel l as to empower it to carry out critical functions under the roads sub-sector. T o this end, the directorate w i l l be mandated to undertake many functions that wi l l ensure a comprehensive and an improved scope o f the management o f the sub-sector, at the core o f which wi l l be improved implementation o f national road network development and maintenance.

A critical factor in the reform i s to remove the burdensome administrative, bureaucratic structure and systems to allow a more efficient operation. It i s diff icult to comprehend how the Directorate can remain entirely a C iv i l service institution if it i s to operate in that environment o f greater efficiency and quicker decision making processes without better incentives commensurate with the tasks and responsibilities for the staff. This issue i s therefore recognized as a major risk factor if not addressed. The c i v i l service structure and incentive mechanisms are unlikely to permit the necessary timely decision making process and incentives to motivate the staff.

Organizational structure: The current organizational structure o f two separate departments, one for primary roads o f national importance, and other for rural roads, has been recognized as inefficient and ineffective. Un-coordinated planning, incoherent budget allocation and prioritization o f works, duplication o f decentralization o f resources, and insufficient road users participation in the decision making process are al l contributory factors. Based on this experience and after evaluating several organizational options, M o P W T wil l set up a Roads Directorate comprising of:

(i) Roads Network Planning

23

(ii) Roads Network Development (iii) Roads Network Maintenance (iv) Roads Quality Assurance (v) Administrative Support Services

The directorate wi l l be headed by a Director General who wil l be administratively answerable to the Principal Secretary o f the Ministry o f Public Works and Transport Also, the Government intends to:

Amend the Road Fund regulations to solve structural deficiencies and solve management weaknesses; Achieve progressive maintenance self-financing, through gradual increases road user charges, in close collaboration wi th road users and stakeholders, with a goal o f complete self-financing by 2010; Continue to improve public and private sector capacity and reduce the amount o f force account works; Elaborate an urban roads policy framework and amendment o f existing legal acts, so as to clarify management and maintenance responsibilities; and Elaborate coordinated sub-sector transport policies, strategies, and management plans for the country’s air, ra i l and water transport services.

.

.

. 9

. The functions o f the Directorate will be to:

Prepare proposals and designs for construction and upgrading o f roads o n the primary and secondary road network.

Plan, design and implement road maintenance programs for a l l primary and secondary roads.

Procure and manage contracts for development and maintenance o f a l l road projects

Carry out traffic and condition monitoring on any roads, as and when found necessary.

Prepare strategic road network development plans.

Set and enforce road standards across the country and carry out technical and performance audit for a l l public roads in Lesotho.

Contribute to the development o f the road construction industry in Lesotho.

Undertake assessment and classification o f road construction contractors and maintain a register.

Provide technical training in equipment based and labour based methods o f road construction and maintenance.

Provide technical support to District and Community Councils for road maintenance and development on consultancy basis.

Acquire and protect land earmarked for road network development.

Determine and make recommendations to the Minister on the need to declare road reserves and building restrictions along any road.

Determine and make recommendations to the Minister on the need to declare corridors for road network development as selected areas.

Identify and select a suitable place on land from which to source material such as quarry necessary for construction and maintenance o f roads and request a relevant authority to set aside such land for that purpose.

24

(xv)

(xvi) (xvii)

Ensure mitigation o f negative environmental impacts f rom road construction and rehabilitate affected areas, in accordance with environmental guidelines.

Recommend to the Minister the toll ing o f any road under i t s jurisdiction.

Protect a l l road furniture and ensure cost recovery f rom offenders who damage road furniture and the road itself .

Financing for road maintenance: The 1995 LoRSP envisaged that by December 2001, RF would have achieved the objective o f 100% financing o f road maintenance on a sustainable basis. This target was not reached, and as a result Ministry o f Finance Development Planning (MoFDP) has been providing additional funding for the maintenance direct to road agencies. Funding road maintenance from two different sources has proven to make monitoring and management o f road maintenance operations difficult. A recent study on the generation o f RF revenues showed that the maintenance financing shortfall o f 16% in year 2001/02 increased to 30% in year 2003/04, and that the level o f current road user charges (RUC) need to be increased to narrow the financing gap. The study indicated that, based o n gradual, affordable increases, one can achieve cost coverage at the least-cost maintenance scenario within five years. The new RUC wil l need to be agreed upon with interest groups (road users and transport operators) and gain Government approval prior to implementation.

Road Fund management: The management o f RF has been found weak in the fol lowing respects: (i) lack o f clear and comprehensive guidelines for the selection o f top-level positions in RF Secretariat. (ii) weak financial management system to monitor f l ow o f funds, and in producing appropriate management reports; (iii) delay in the preparation o f annual financial statements and in carrying out the annual audit o f RF accounts; (iv) delay in the recruitment o f qualified and experienced staff; and (v) delay in the nomination o f RF Board members, when their term i s expired affecting the functionality o f RF for some time. The Government has recognized these weaknesses and has amended the RF regulations.

Implementation capacity: The experience under RRMP has shown that the implementation capacity o f the road agencies i s inadequate because o f (a) an inability to retain local professional staff in road agencies on account o f comparatively l o w salaries being paid in the public sector; (b) a restricted pool o f qualified candidates in the country, and (c) dependence o n the foreign funded technical assistance program. In addition, the capacity o f the local consulting and contracting industry i s also inadequate and as such Lesotho depends largely on foreign consultants and contractors. For minor works, DRR successfully trained 65 new entrepreneurs to promote labor based work methods for rural road maintenance, but for medium and large works there i s critical need for developing implementation capacity in the private sector.

Responsibility for the management of urban roads: The Municipal Councils are responsible for the planning and control o f urban roads. Maseru Municipal Council (MMC) i s the only formal functional authority at present, while instruments o f Local Government have not yet been established in the other ten urban areas. Currently at the district level, the office o f District Administrator performs the functions o f Municipal Councils with regard to roads, and M o P W T carries out the road works on transfer o f budget from the districts. The urban roads have suffered from lack o f clear responsibility and underfunding o f maintenance operations. There i s a need to define a policy framework and clear responsibilities for the management o f urban roads within the proposed institutional reforms for establishing a Roads Directorate.

Policies for other sub-sectors of the transport system: The policy and management o f a l l other transport sub-sectors, including air, rail, and water need to be reviewed and enhanced to ensure effective integration wi th the roads sub-sector. By and large, these policies and strategies do not exist.

25

Government Response

In the above context, the Government has adopted a six year Transport Sector Program (2004 - 2010), which focuses on strengthening the country’s strategic road, air and waterway transport network, both for in-country and external linkages; and improving institutional capacity to manage transport assets and services on a more commercial basis. Under the Program, the Government intends to pursue institutional and management reforms, as well as investments aimed at achieving basic access within the country and to its vital external links.

The Program provides the basis for an updated Letter o f Transport Sector Policy (Annex 15), which reaffirms its commitment to pursuing the basic reforms enunciated in 1995, but with targeted strategic measures and a time-bound Action Plan, comprised, among others, o f the following:

Creation o f a Roads Directorate (RD; Enforcement o f the Road Fund regulations to solve structural deficiencies and solve management weaknesses; Achieve progressive maintenance self-financing, through gradual increases in road user charges,

1

. in close collaboration with road users and stakeholders,-with a goal o f complete self-financing by 2010;

9

1

Continue to improve public and private sector capacity and reduce the amount o f force account works; Elaborate an urban roads policy framework and amendment o f existing legal acts, so as to clarify management and maintenance responsibilities; and Elaborate coordinated sub-sector transport policies, strategies, and management plans for the country’s air, rail and water transport services.

Under its Transport Sector Program, the Government intends to pursue institutional and management reforms, as well as investments aimed at achieving basic access within the country and to its vital external links. The total cost for the six year TSP, including routine and periodic maintenance, i s estimated at Maloti 2,259 million (US$ 350 m), with some Maloti 922 million (40%) identified to be financed by the Government, and the remainder (Maloti 1,336 or US$ 200 m) to be sought with support o f donor assistance (Annex 1 provides a detailed breakdown). However, with two important development partners in recent months exiting at least for now from the transport sector, the Government will find it difficult to fully fund the TSP. Estimated donor financing for various types o f investments includes:

Donors

European Commission

Development Cooperation Ire land

African Development Bank

Investment Type/Location

Institutional strengthening, rehabilitation o f main roads and improvement o f access in the

rural areas Support to rural access in the form o f

upgrading o f earth roads to gravel standard, construction o f footbridges and minor

bridges. In addition, support to ILO/TRL study on establishment o f appropriate

unpaved roads standards and life-cycle cost. Ongoing support -future support to transport

not envisioned in upcoming program Construction o f 3 lkm o f Likalaneng to Thaba-tseka road and two bridges (lotl)

Ongoing support - transport not in upcoming

26

Estimated Amount U S $ million

38.0

1.5

15.0

BADEA

KFAED

IDA

3 year program Construction o f 27km o f Likalaneng to

Thaba-tseka road (lot2) Construction o f 27km o f Likalaneng to

Thaba-tseka road (lot3) Support with regard to institutional and

management reforms; upgrading o f access roads to gravel standard, rehabilitation o f

gravel roads, emergency repair o f Oxbow to Mokhotlong Road and provision access

through vital external links (construction o f two bridges across Senqu and Senqunyane Rivers). Furthermore, the support includes

Capacity building within transport sector and policy formulation.

10.0

10.0

23.5

Mapping Poverty and Transport

Complementary to the preparation o f the ITP, the Bank project team received funding from Norwegian Trust Fund for Gender Mainstreaming (GENFUND) to undertake poverty mapping o f the Senqu valley, which i s an area affected by the IDA funding o f two bridges in the ITP. Fol lowing three pages i s an excerpt on the emergency travel costs to Semongkong from the report:

Transport Service and Emergency Access

The map to the right [below] shows the area south o f Semongkong to the end o f the existing track in H a Topa. The road from Semongkong to H a Matlosa i s wel l maintained, but from this point on the track begins to deteriorate and road conditions progressively worsen. The entire distance i s only about 30 km, but while the f irst 12 km take about an hour to travel, the remaining distance takes about 3-5 hours in a four wheel drive vehicle. In some seasons and weather conditions, roads are completely impassable.

The arrow on the right represents typical transport costs for services provided by taxis and vans in Semongkong to each o f the villages along the main track. Although the route and standard prices have been assigned by the Department o f Traffic and Transport (DTT) in Maseru, their existence o n paper does not promise regular services in reality.

For example, the red arrow on the left represents prices charged by taxi drivers for emergency access services to and from the same villages. This means that while a regular trip from H a Lepekola to Semongkong costs 15 maloti - under emergency conditions it can cost up to 700 maloti - almost 47 times the normal price. Calling an emergency taxi requires that someone from the village must f i rst travel for several hours by horse to Semongkong, locate a willing driver, and then return for the patient. Tax i drivers insist on cash payment up front regardless o f whether the patient i s alive or dead.

Interviews revealed that people are forced to borrow from family and friends (sometimes at very high interest rates), to sell important assets at l o w prices, or as some participants noted, even to sell their labor and harvests for periods o f as long as two years into the future. Moreover, horses, the main IMT for facilitating emergency access, cost between 1,800 and 2,000 maloti each. Even under normal circumstances, few women own or have regular access to horses or donkeys, and many older women

2

2 N a t i o n a l t ax i a n d bus service costs are calculated by the DTT based on i n f o r m a t i o n from the L e s o t h o R o a d M a n a g e m e n t System &RIMS).

27

cannot use them at all. As a result, women are especially affected when local midwives cannot deal with complicated deliveries at home and they need to be quickly evacuated.

In interviews with taxi service providers, drivers noted that they increase rates because they are not regularly paid by local car owners. Regulation o f the transport services, enforcement o the tariffs established by the DTT, and greater focus on the extreme costs o f emergency service could help to alleviate unnecessary burdens on local communities. Together high transport costs and irregular access have an immediate impact on other factors underlying key health related MDGs.

Above: Map of standard taxi rates (on right ofstraight line) and average emezeny seruice costs (on the l$).

Delayed access to healthcare during obstructed labor and limited neo-natal care affect both the maternal mortality and child health. Previous rapid qualitative interviews in Lesotho also found that villagers are charged for transporting HIV/ADS patients to clinics and their corpses to mortuaries. Taxi drivers said that high prices were necessary to cover the costs o f purifying their vehicles afterward^.^ This

3 In a u n i q u e co l l abo ra t i on b e t w e e n t h e t ranspor t a n d hea l th sectors, f i ve t ranspor t re la ted quest ions w e r e i nse r ted into the 2004-05 DHS focus ing on cost, &stance, t i m e a n d access. These results can b e disaggregated by gender a n d a l l clusters are geo-referenced, so i n f o r m a t i o n c a n b e in tegrated into the MoPWT GIS. Resul ts will h e l p to unders tand the

28

Annex 2: Major Related Projects Financed by the Bank and other Agencies

Lesotho: Integrated Transport Program

EUROPEAN ASSISTANCE (EC)

Under EDF 8, EC financial assistance to Road Transport Infrastructure Project (RTIP) amounted to Euro 37.7 Million. The financing Agreement was signed in August 1999 and wi l l be completed by first quarter o f 2008. RTIP was developed in support o f the Road Rehabilitation and Maintenance Project (RRMP) which was partly funded by IDA. The overall objectives were “to improve well-being and livelihood, and to create an environment for increased economic activity”. The project purpose was “to improve access to isolated areas and to basic services”. The five RTIP components consist of: (a) upgrading o f 1 14km o f gravel roads to bitumen standard in Maseru and Mafeteng Districts, (b) upgrading o f 61.5km o f earth roads to gravel standard, (c) training o f 10 local contractors, (d) road safety improvement Program (Technical Assistant and infrastructure improvement). In addition, the assistance includes the Preliminary Design Feasibility study with the contract value o f Euro 0.75million which wi l l be followed by detailed design for 1 1 O k m o f the main roads. ITP w i l l be co-financed by IDA and EC and the latter w i l l contribute Euro 7.85 million.

DeveloDment Cooperation of Ireland (DCI)

Under completed phase o f the DCI, government was given funds amounting to about M16,000,000 annually over a period o f three years o f footbridges, access roads and drainage structures. During the current phase (2005-2007), D C I has. given funds amounting to Euro 1,215,000 for construction o f rural access transport infrastructure which consist o f roads, footbridges, minor bridges, Study on unpaved roads l i f e cycle cost and capacity building.

for construction

AFRICAN DEVELOPMENT BANK (ADB)

African Development Bank has provided a loan amounting to US$9 mill ion for the construction o f recently completed Mpharane - Bela Bela road in Berea District. Furthermore, ADB has approved funds amounting to US$15million for construction o f 3 lkm o f Likalaneng to Thabatseka road (lot 1) including construction o f one bridges Marakabei. The project i s at construction stage.

Kuwait Fund has approved a loan amounting to US$ 1 Omillion for construction o f 27km o f Likalaneng to Thabatseka road (lot 2).

Badea has approved a loan amounting to US$ 1Omillion for construction o f 27km o f Likalaneng to Thabatseka. Road (lot 3). Contractor wi l l be on site in October 2006. Funding for the Likalaneng to Thabatseka road i s s t i l l only partly funded.

K F W has been providing financial assistance for upgrading o f rural roads using labour intensive methods since early eighties. Under the last two Phases, K f W provided 1.53million Euro and 2.71 mill ion Euro under phase IV and V respectively. The KfW assistance has been phased out within road sub-sector. The

30

f inal evaluation for the two phases was completed on the 5* o f October, 2005. Upon evaluation it i s found that the project met i t s objective.

IDA and other Cooperating Partners including EC and DCI funded Lesotho Road Rehabilitation and Maintenance Project (RRMP) which was completed in 2003. The overall a im o f the R R M P was to support both economic growth and the country’s poverty reduction strategy by developing the GOL’s capacity to regularly maintain the whole classified road network, and upgrade priority roads to improved serviceability standards; improving access to isolated areas and basic services in district centers by facilitating road traffic, and lowering transport costs; further developing the emerging private local road construction and maintenance industry, using mainly labour-based methods to generate productive employment; strengthening the planning, implementation and management capacity o f the Roads Sector agencies, through policy and institutional reforms and capacity building support. IDA init ially approved a loan amounting US$ 40 mi l l ion which was revised down to US$ 22.9million during mid-term review due to the low rate o f disbursement. The project was successfully completed

31

Annex 3: Results Framework and Monitoring

Lesotho: Integrated Transport Program

Results Framework

and have improved access to services and market opportunities, through a better managed, more complete, safe and affordable

transport system

and sector management capacity i s

come Quality o f national road network as measured by LRMS i s improved from 27% good and 38% fair to 39% good and 46% fair by 2010

Average travel cost to social services and markets for beneficiary

populations in targeted areas along the South Eastern Corridor for emergency and regular trips i s

reduced by 20% in 2009.

ICP changes between the targeted areas along the South Eastern

Corridor and Sekake has decreased by 20% by 2009

Roads Directorate within the Ministry o f Public Works and

Transport established by December 2008.

Administrative expenses as total expenditures o f Road Fund be no

more than 12% by 20 10

Use o f Outcome Information Monitor and review progress (including quality) towards

achievement o f outcome indicators, identify implementation constraints

and remedy as necessary.

The ICP i s expected to change in this area both because o f improved

access and purchasing choices at either Sekake or Semonkong.

ring

Monitor and review progress (including quality) towards

achievement of outcome indicators, identify implementation constraints

and remedy as necessary.

Recruitment o f staff to the Road Fund be in accordance with the

Legal Notice for Road Fund Regulation 2005

Periodic and routine maintenance o f the national road network i s 78% and 90% funded from road user

charges by 2008 and 2010, respectively.

Road Safety Council i s established and functioning in accordance with

agreed principles.

Establishment o f integrated GIS database and system used as a

planning tool I

32

Sub-sector transport policies are reformulated.

water transport i s developed COMPONENT B Targeted sections o f the road

An urban transport planning and transport study i s elaborated.

network are improved through construction, periodic maintenance, rehabilitation and upgrading.

COMPONENT C Facilitating o f project activities, institutional reform change and monitoring & evaluation

Two high-level bridges, their approaches and road links along the

South Eastern Corridor are constructed.

20 km Oxbow-Mokhotlong Road i s rehabilitated through emergency

repairs.

25 km o f Mantsonyane-Lesobeng Road i s upgraded.

SenquISenqunyane area footbridges constructed and IMT access

improved.

HIVIAIDS interventions undertaken

Project Management office reports annually on transport sector with a focus on progress towards project objectives and results indicators

Monitoring and evaluation system established and functioning

Timely and satisfactory audit report o f Project accounts and Road Fund

accounts

Information used for prioritization o f future investments

Monitor and review progress (including quality and social

impacts) towards achievement o f outcome indicators, identify

implementation constraints and remedy as necessary

Monitor and review progress (including quality) towards

achievement o f outcome indicators, identify implementation constraints

and remedy as necessary

33

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Monitoring & Evaluation: methodology and arrangements. Each implementing agency will monitor progress against agreed upon performance monitoring indicators, as shown in the Results Framework. The ITP Project Office will be responsible for ensuring that such reports are submitted in a timely manner and in accordance with the agreed formats. The ITP Project Office will also support each implementation agency, primarily in procurement, quality assurance and reporting - the latter including the drafting of an Executive Summary o f the combined status reports. In addition, Technical (and Financial) Audits at 12 month intervals (or as necessary) will be carried out to provide further quality assurance.

Reporting: Full details o f programs (including outcome and results indicator data, analysis and recommendations) will be reported in regular quarterly reports prepared as well as audit reports. For the Institutional Strengthening and reform subcomponents, the indictors will track the implementation o f key sectoral reforms and improved sector management. For the Civil Works subcomponents, the indicators will track annual achievement o f annual physical targets.

Quarterly progress reports (including financial and procurement status reports) will be established by the ITP Project Office on the basis o f the project implementation plan Bank’s supervision missions will be conducted jointly with the EC, and will generally take place twice a year, with an Early Implementation Assessment 12 months after effectiveness; and An Implementation Completion Report (ICR) will be prepared at the end o f the Project and presented within six months o f the closing date o f the Grant and Credit. Baseline and annual monitoring studies will assess the impacts o f the entire Program. The monitoring activities will verify if program and project objectives are being achieved, as well as financial management and procurement aspects.

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Annex 4: Detai led Project Description

Lesotho: Integrated Transport P r o g r a m

Overview

Under ITP, IDA wil l take a leadership role among donors in supporting ongoing road sector reforms and capacity building, while supplementing Government and other donor commitments for developing the road network and addressing isolation problems. In addition, IDA will support the formulation o f policies and strategies for air, ra i l and water transport sectors with a view towards more integrated and coordinated transport sector management. T o accomplish this, the project wil l have three components:

Component A: Policy and Institutional Reform in the Transport Sector Component B: Investments to Contribute to Safe Reliable and Efficient Core Road Network Component C: Project Management and Monitoring and Evaluation

Component A: Policy and Institutional Reform in the Transport Sector. Total US$ 10.044 million: Financing: Government US$O; EC US$9.500; Bank US$0.544.

This component wi l l continue institutional reforms o f the roads sub-sector initiated under RRMP and wil l support the Ministry o f Transport to establish Road Directorate that wi l l be headed by Director General reporting to Principal Secretary. In addition, this component wi l l support the planning for and establishment o f a Roads Directorate, assist in planning for delegation o f certain tertiary and feeder roads to Local Authorities, assist the Government in bringing about a sustainable funding for routine and periodic road maintenance and improve performance o f the Road Fund. Support wi l l also be made available to other auxiliary functions o f the MoPWT, such as to road safety, contractor development and developing institutional capacity and GIs.

This component wi l l also finance technical assistance and studies for the elaboration o f transport sub- sector policies and strategies - urban planning and transport; c i v i l aviation, rail, IMT and inland water transport.

In support o f these objectives, Component A wil l have three interrelated sub-components:

Sub Component Al : Support for roads sub-sector institutional reform including preparatory steps for setting up a Roads Directorate (Ro)

This subcomponent wi l l provide technical assistance for setting up the organizational and legal structure o f the new RD, assist in planning for delegation o f certain tertiary and feeder roads to Local Authorities, training for staff redeployment or redundancies resulting from the organizational arrangements, and management assistance to the RD and Local Authorities in the first years o f implementation. The key elements towards achieving this goal include:

Formulating the necessary legislative amendments; Re-aligning present budgeting and financial arrangements; Detailed preparation o f the organizational structures for the proposed RD and road sub-sector decentralized structures including: (a) amending M o P W T organizational structure; (b) adequate planning for the redundancy o f professional, technical and administrative staff to be trained as consultants, contractors, or with alternative skills; (c) refurbishinglpurchasing equipment for Roads Directorate and Local Authorities , and (d) a detailed action plan with time schedules for setting up o f a RD including transfer o f responsibilities for feeder and tertiary roads to RD.

Sub-Component A2: The roads sub-sector development and capacity support This subcomponent will finance technical assistance, institutional support and training resources for implementation of key reforms stated in Government’s Letter o f Sector Policy. These include:

. Road Safety Program. This will focus on the following proposals to improve road safety in Lesotho: (a) establishing vehicle roadworthy inspection and roadside vehicle inspection procedures; (b) establishing procedures for driver training and driver’s examination; (c) supporting the traffic surveillance efforts; (d) strengthening institutional capacity o f traffic police, and (d) providing Technical Assistance support to the Department o f Road Safety to assist in establishment o f Road Safety Council. Also, to pilot dangerous spot rectifications and traffic surveillance equipment. This involves continuation o f the urgent actions relating to road transport policy issues, which are key to preservation o f the infrastructure, including road safety, axle-load control legislation and procedures.

1 Institutional Capacity for Database and Geographic Information System (GIs). To support formulation o f data-sharing policy and data standards at national level; to support the development and implementation o f a GIs-based Decision Support System (DSS) to support multi-modal transportation studies, and a GIs-based information system to be used for transportation planning and project management; and provide GIS capabilities to the MoPWT.

. Road Fund Revenue Reforms and Road Management and Maintenance Funding Stakeholder Awareness Program. This will focus on raising awareness among stakeholders and decision makers on the importance o f maintenance and improving cost recovery mechanism for maintenance expenditures through appropriate increase o f road user charges (fuel levy, licensing fees, border fees, transit fees, and fines on overloaded vehicles) and/or reallocation o f other road user taxes to mobilize adequate funding for road maintenance. LoSP will provide Government commitment to narrow down the funding gap from the Road Fund and MoFDP from 40 % in 2004 to 0% in 2010. It will also include strengthening the management o f RF in respect o f financial management and technical auditing. Currently the budget for road maintenance i s received from both RF and MoFDP, and to ensure effective utilization and monitoring o f road maintenance budgets, it i s planned that it will be channeled through RF.

1 Study of Basic Access Standard and Needs. The study will (a) identify the scale o f rural access requirements; (b) develop an agreed standard for basic access; (c) identify cost effective ways o f providing access (such as spot improvements); (d) identify appropriate contractual arrangements for maintenance to assure year-round accessibility; (e) estimate the costs o f providing the agreed standard o f rural access throughout Lesotho; and (0 develop an appropriate prioritization procedure for rural road access based on integrated approach. The study will also consider the role played by intermediate means of transport (IMT) in providing rural access and the appropriate provision of infrastructure for IMT.

Local Construction Industry Development Plan. Strengthening the local road construction industry in parallel with setting up o f RD, through a gradual increase in contracting out activities for the functions currently being handled by the existing road agencies. This will include preparation o f a time based action plan for phasing out o f specific road functions in conjunction with the training o f consultants and contractors. ITP will support MoPWT in formulation o f Construction Development and Built Environment Policy and drafting Built Environment Professions Act. In addition, ITP will support implementation o f the recommendations o f the Road Construction Industry study, which includes: (a) developing curriculum for training o f contractors and their employee in management, financial and technical skills for the purpose o f

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eventually undertaking al l routine and periodic maintenance through a gradual increase in contracting out activities; (b) a steering committee to commence the process o f setting up a national construction council (NCC), to set up legal and regulatory framework to obtain private sector support, and enforce quality and safety standards; (c) identify activities that are able to be controlled and delivered through N C C and develop a time frame for this to occur, and (d) establish construction industry quality and safety standards including registration and certification procedures, which are critical to the reform process, and i s an important step in changing the culture o f the industry.

1 Contractor's training program (CTP). This wil l involve continuation and expansion o f the ongoing CTP to promote labor-based work methods for road maintenance, rehabilitation and upgrading. ITP would support the expansion o f CTP to carry out rural road upgrading in addition to maintenance and rehabilitation. This wil l help DRR in: (a) phasing out force-account construction units for road upgrading; (b) creating employment opportunities for the rural poor; and (c) enhancing the scope o f works that can be taken up by the private sector. The ongoing force accounts procedures o f road maintenance in RB will be gradually phased out to contract system.

1 IMT pilot project. Support to implement recommendations o f the IMT component o f the basic access and mobil ity study and it w i l l be carried out in selected representative urban and rural areas.

9 Alternative surfacing standards study. The support for the determination o f appropriate and cost effective surfacing for l o w volume roads.

. Environmental Management. This wil l involve support to the establishment o f an Environmental and Social Monitor ing Unit(s) within the Ministry to ensure conformance wi th environmental standards when the road improvement programs are at the planning stage and enforcement o f environmental guidelines when road programs are executed.

Enhancement o f LRMS. Upgrading o f Lesotho Road Management System (LRMS) including: (a) mechanized road condition survey for REI roads; (b) annual review o f RB and DRR road program; (c) expanding the system for urban roads.

Evaluation of options for DTT computerization. DTT has a computerized system for vehicle registration, which i s currently used for Maseru district only. The present system i s consistent wi th the vehicle registration system being used in neighboring countries RSA. RSA has provided the basic system free o f cost to DTT under certain conditions that DTT wil l have to pay extra cost if DTT decides to modify the system even slightly. DTT i s considering integrating vehicle registration system with a system o f driving licensing, but this seems to be diff icult under the current conditions o f contract being used for the vehicle registration system. I T P wil l support DTT to engage a consultant for carrying out an evaluation o f the existing system and to come up with various options including the continuation o f the existing system or to adopt a new system, implementation o f which ITP wil l support.

1 Implementation of computerization of vehicle registers, licenses and data

1 Social Aspects, HIV/AIDS and GIS Capabilities. The project wi l l support enhancement o f the agencies' competencies in addressing poverty, gender, H IV /A IDS and other social aspects in road planning, construction and maintenance. These competencies wi l l be furthered wi th development o f a comprehensive GIS to support decision making, planning and monitoring.

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TA support to Roads Branch. Support to contract Management for DRR and FU3 works.

Sub-Component A3: Policy reformulation and capacity building in other transport sub-sectors

This sub-component will finance technical assistance and studies for the elaboration o f transport sub- sector policies and strategies - urban planning and transport; civil aviation, rail, IMT and inland water transport, as well as capacity building in the sectors. These sub-sectors have been preparing their development plans in isolation from each other and no comprehensive study has ever been carried out to determine the impact o f individual sub-sectors on the overall economy o f the country. Experience in other countries has shown that, prior to earmarking resources and budgetary provisions for each sub sector, it i s important to review the impact o f al l sub-sectors in a coherent manner on poverty reduction and economic development. To address this concern, this component will include the following series o f policy studies, which will result in the elaboration o f a more coherent set o f transport sector policies.

Maseru Urban Planning and Transport Study

In light o f the inadequate urban transport planning and management capacity within Maseru Municipal Council (MMC) and in other urban centers, MOPWT and later RD will, in the medium term, assist in the management o f the urban road network until such time that sustainable institutional and human resources capacity has been established in MMC and other urban centers to provide and maintain adequate infrastructure and related services. For the purposes o f preparing for such transfer o f responsibilities for the urban transport network to the local governments, a comprehensive study will be undertaken.

The purpose i s to undertake a comprehensive study o f the MMC’s overall urban planning and management activities, with a special focus on the transport system. Focused studies will also be undertaken in other sectors, such as utilities, housing, employment, community facilities and environmental services. The overall objectives o f the Study are as follows:

To provide policy, institutional, financial and investment guidance regarding urban planning and management, urban transport infrastructure and transport services to the MMC for the next 10-20 years.

To formulate strategies for development o f effective urban planning and transport system in Maseru, as well as suggesting short- and long-term improvements in management systems and service delivery which will benefit the city’s residents in the short-, medium- and long-terms.

To provide policy, institutional, financial and investment framework regarding urban public transport infrastructure and associated services to the MMC in the short-, medium- and long- terms.

1

.

Integrated Transport Study and Policies Development (Civil Aviation, Rail and Inland, Water, IMT) Aligned with Road Sub-sector.

Policies, strategies, development and management o f the indicated sub-sectors have traditionally been elaborated in isolation o f each other and the road sector. In order to achieve a better integrated transport sector, this subcomponent will support Government’s effort o f stock-taking and elaboration o f complete set of policies and strategies appropriately aligned with the road sector.

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1 Review and formulate policy o f c i v i l aviation, rail, IMT and inland water transport with the aim at arriving at an integrated multimodal transport policy aligned with the country’s road sector policies. Review and recommend amendments to institutional arrangements for the sub-sectors. Develop an inventory and collect condition data for a l l c iv i l aviation, rail, IMT and inland water infrastructures Define roles and responsibilities for regulatory, safety and management aspects. Prepare a roadmap for the development o f c iv i l aviation, rail, IMT and inland water transport infrastructure and services.

1

1

1 . Cavacitv Building

A training program based on short-term courses by experts, and attendance o f training courses in the region and elsewhere designed for the enhancement o f professional and technical ski l ls.

Component B: Infrastructure Investments. Total Including Contingencies, US$23.375 million: Funding: Government US$4.700; EC US$ 0; Bank; US$18.675.

This component wi l l support the Government’s key network improvements: rehabilitation o f paved roads wi th emergency repairs, contributing in opening o f new corridors, and limited upgrading o f rural roads that have been considered critical for improving accessibility in the isolated areas. It wi l l finance c iv i l works, environmental assessments and design and supervision services for the fol lowing activities:

Rehabilitation of Paved Roads. The project wi l l finance only emergency repairs on the paved Northern Corridor section Oxbow - Mokhotlong, which has deteriorated rapidly due to frost susceptible material in the base course. The Oxbow - Mokhotlong Road i s in the Nor th o f Lesotho and runs over a high plateau at altitudes up to 3270 meters. This road was upgraded to a paved standard relatively recently; however, it has deteriorated rapidly due mainly to the use o f frost susceptible materials in the base course. Emergency repairs have been completed on part o f

. the 65km section from Oxbow to Mapholaneng. The maintenance o f this asset i s justif ied as this road forms part o f the strategic orbital network and links the district center o f Mokhot long to Maseru by paved road. The Letseng diamond mine has been re-opened and there are movements to establish a ski center near the Oxbow lodge. It i s proposed to carry out further emergency repairs over 20km to keep the access open to Mokhotlong along wi th 15km o f rehabilitation on selected sections.

Contributing to South Eastern Corridor. The project wi l l finance the construction o f two bridges over Senqu and Senqunyane rivers, their approaches and a l imited length o f access road, cost estimated at US$1l07m. This investment forms part o f a multi-donor effort o n the “Roma - Ramabanta- Semonkong - Sekake -Qacha’s N e k ” wi l l reduce by approximately 140km between the two regional centers o f Qacha’Nek and Maseru. This will not only develop the economy o f the two regions, but wil l reduce substantially the transport costs for both imports and exports, which are relatively high o n account o f long distances from the ports that Lesotho uses being a landlocked country. The development o f this corridor to acceptable engineering standards wil l require several interventions including construction o f new bridges, change in alignment o f the existing rural roadshracks, opening o f new roads in selected sections, and upgrading/ rehabilitation o f existing roads in the area. With the support o f African Development Bank (ADB), G o L has completed a feasibility study, preliminary design o f the whole corridor, and the detailed engineering design o f bridges and i t s approaches.

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1 Upgrading of Rural Roads. The project wi l l finance the upgrading o f Mantsonyane- Lesobeng road, currently inaccessible due to diff icult terrain, yet critical for the socioeconomic development o f the central region. The engineering design o f this road was completed under RRMP, but it could not be upgraded as planned due to lack o f funding. In addition, the project wi l l support the upgrading o f 8km o f Likotopong to Lintsa road, subject to the condition that the proposed investments are consistent wi th the pre-determined multi criteria (see Annex - x) based on sound economic, social and environmental justifications.

Construction of Senqu/Senqunyane area Footbridges and I M T access improvements. This activity has been added to the project to facilitate access in the region beyond the bridge sites. These activities have not yet been fully defined but could take the form o f footbridge construction at relevant sites, small c i v i l works enhancements on existing bridle and footpaths to ensure safe year-round access, provision o f wel l constructed access to local communities to facilitate transporting patients to the clinic, etc. Consultations with local communities and the IMT study which wil l be funded by the project wi l l also help to identify opportunities for improving access for al l in the region. Small c iv i l works wi l l be carried out, wherever possible, by local contractors who have participated in the DRR contractor training program. This work wi l l be identified by project and M o P W T (mainly DRR) staff in consultation with affected communities and monitored by the Planning Unit.

1 HIV /A IDS interventions undertaken

Design and supervision i s 100% funded by IDA, while c iv i l works are co-funded by Government and IDA at 21% and 79%, respectively

Component C: Project Management and Monitoring and Evaluation. Total: US$2.781; Funding: Government US$O; EC US$ 0; Bank US$2.718.

1 ITP Project Management Office. TA support for Project Office to finance the local consultant positions for Project Manager, Financial Manager, Financial Controller, Financial Accountant, Procurement Compliance Officer, and Evaluation and Social Coordinator Officer, with support of Secretary, Office Assistant and Driver, as well as operating costs related to the execution of the project. Additional TA support to Planning Unit to finance the local consultant positions for Statistician and Assistant Statistician. Monitor ing and evaluation, including HIV and AIDS, gender, poverty alleviation and economic development associated with c iv i l works.

1

1

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INTEGRATED TRANSPORT PROGRAM - PLANNED ACTIVITIES GOLlEUllDA Funded AMOUNTS IN US $ million

GoL % EU % IDA % Total Cost US$ m. US$ m. US$ m.

A. POLICY AND INSTITUTIONAL REFORMS IN TRANSPORT SECTOR 10.044 0.000 9.500 0.544 A-i - Support for Roads Sector Institutional Reforms 2.960 0.000 2.960 0.000

Advisory services for planning change and implementation support at central and local level 1.000 1,000 100% Capacity Building for Roads Directorate 0.500 0.500 100% RefurbishinglEquipment for Roads Directorate 0.750 0.750 100% Capacity Building for Local Authorities 0.200 0.200 100% Equipment for Local Authorities 0.110 0.110 100% Reskilling staff for redeployment to other public service 0.150 0.150 100% Elaboration for private sector development 0.250 0.250 100%

A-ii Road Sector Development & Capacity Support 5.904 0.000 5.360 0.544 Road Safety Program 3.000 3.000 100% Institutional Capacity for Database and GIS 0.400 0.400 100% Road Manaaement and Maintenance Fundina Stakeholder Awareness Program 0.115 0.115 100% Study of Basic access standards and needs 0.500 0.500 100% Local construction industry development plan 0.144 0.144 100% Labor based contractor training program 0.100 0,100 100% IMT pilot project 0.200 0.200 100% Alternative surfacing standards study 0.100 0.100 100% Environment and social agenda management study 0.200 0.200 100%

Evaluation of options for DTT computerization 0.021 0.021 100% Enhancement of LRMS 0.240 0.240 100%

Implementation of computerization of vehicle registers, licenses and data 0.200 100%

TA support to Roads Branch 0.384 0.384 100%

0.300 0.200

0.300 100% Social sector activities, including HIVlAIDS, gender, poverty alleviation

A-iil Other Sub-sector Development & Capacity Support 1.180 0.000 1.180 0.000 Integrated transport study and policies development (Civil Aviation, Rail, Inland Water, IMT) aligned with road sector 0.250 0.250 100% Maseru Urban Planning and Transport Study 0.400 0.400 100% Capacity building 0.530 0.530 100%

B. INFRASTRUCTURE INVESTMENTS 21.250 4.254 0.000 16.996 DesignlSupv of SenqulSenqunyane River Bridges, approaches & road Supervision of upgrading of Mantsonyane - Lesobeng Road

CMI SenaulSenaunvane area footbridges and NMT access

0.850 0.145

0.850 100% 0.145 100%

CMI SenqulSenqunyane River Bridges, approaches & roads 11.855 2.490 21 % 9,365 79%

0.500 0.105 21%

Government contribution EU (Euro 7.85 million equivalent) IDA credit and grant TOTAL FINANCING GAP

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5.200 9.500

23.500 38.200

0.000

Annex 5: Project Costs

Lesotho: Integrated Transport Program

Total US$ GoL U S $ EU US$ IDA US$ Project Cost By Component andor Activity million million million million

Component A: Policy and Institutional Reform in the Transport 10.044 9.500 0.544 Sector Component B: Infrastructure Investments Component C: Project Management and Monitoring and Evaluation

21.250 4.254 16.996

2.781 2.781

Total Baseline Cost 34.075 4.254 9.500 20.321

Physical Contingencies 1.275 0.268 1.007

Price Contingencies 0.850 0.179 0.672

PPF Reimbursement 1.500 1.500

Gvmt counterpart financing o f PPF 0.500 0.500

Total Project Costs 38.200 5.200 9.500 23.500

Interest during construction

Front-end Fee

Total Financing Required 38.2 5.2 9.5 23.5

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Annex 6: Implementation Arrangements

Lesotho: Integrated Transport Program

Overview. MoPWT wi l l be responsible for the overall management and implementation o f the project, while other ministries, departments and agencies wi l l be involved in implementing specific project components. Although over the l i fe o f the project, the new Roads Directorate (RD) wi l l be established (consolidating the Roads Branch and the Department o f Rural Roads), these two agencies wil l assume implementation responsibilities for their respective activities, until they are fully merged into the RD, which i s expected to occur in the third year of the project.

Project Steering Committee. Under the chairpersonship o f the Minister o f MoPWT, GoL will set up a project steering committee comprising members from other Ministries (Finance and Development Planning, Public Service, Local Government, and Attorney General) o f the project. The Steering Committee wil l have overall responsibility for deciding on policy matters and monitoring progress o f the components relating to policy and institutional reforms.

The project wi l l also have a standing Technical Coordination Committee, led by Director of Planning, and which wi l l also include EC and World Bank.

Project coordination and management. In order to coordinate the implementation and ensure day-to- day management, MoPWT has established an ITP Project Office, headed by a Project Manager, and staffed with a Financial Manager, Financial Controller and Financial Accountant, a Procurement Compliance Officer, and an Environmental and Social Coordinator, with support staff of Assistance/Secretary, office assistance and driver. The ITP Project Manager wil l report to the Director o f Planning o f MoPWT,. MoPWT has also recruited two statisticians who wi l l be assisted by Environmental and Social Coordinator to enhance the capacity o f Planning Unit in policy development, monitoring and environmental management functions. Monitoring and evaluation wi l l be carried out by Planning Unit and ITP staff.

ITP PROJECT OFFICE

ITP Project Manager a Project Secretary a

Financial Manager Coordinator

Financial Controller H Assistant Sta bsticia n E3 Financiel Accountant D

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The Procurement Compliance Officer will be responsible for advising and guiding executing agencies in Bank procurement policies and procedures, managing and arranging evaluation and selection committees, procurement scheduling, reviewing al l procurement documents before submission to IDA for no objection and for ensuring overall integrity o f the Bank procurement procedures.

The Planning Unit and ITP office will be responsible for monitoring progress of components in association with two research officers/statisticians placed in Planning Unit, so as to ensure comprehensive monitoring and data processing during ITP and the sustainability o f monitoring system after ITP i s completed.

Component A (Policy and Institutional Reform o f the Transport Sector) will be managed by MoPWT (Planning Unit), but with participation as required from RB, DRR, RF, the newly created Roads Directorate (RD), the Department o f Road Safety, the Department o f Traffic and Transport (DTT), Building Design Service, Ministry o f Local Government and Local Authorities, Department o f Civil Aviation (DCA), and DTT; MoLG, Local Authorities and MMC.

.Component B (Infrastructure investments to contribute to safe, reliable and efficient core road network) wi l l be implemented by RB (rehabilitation o f paved roads, construction o f bridges and roads on the South Eastern Corridor) and DRR (upgrading o f rural roads and construction o f SenqdSenqunyane footbridges and IMT access improvement).

Technical assistance and training. Short term international technical assistance will be recruited to provide intermittent support to implementing agencies in establishing and carrying out the institutional reforms. The focus o f this assistance will be on capacity building, transfer o f know-how and training. During RRMP implementation, it was very difficult for the road agencies to retain local professional and technical staff, due to the low salary structure in the Government compared to the private sector. To address this constraint, the road agencies have been largely dependant upon the externally-funded technical assistance (TA) programs.

Based on an assessment o f the existing capacity, and considering the scope o f works to be implemented, a program for capacity building through provisions o f TA and training selected .

staff, has been agreed during project appraisal. As the current road agencies will be phased out to form new RD, TA will be recruited only for short/medium-term assignments, with intermittent missions to Lesotho aimed to provide hands-on training to the national staff, rather than long- term resident assistance.

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Annex 7: Financial Management and Disbursement Arrangements

Lesotho: Integrated Transport Program

1. Country Financial Issues

The Public Expenditure Management and Financial Accountability Review (PEMFAR) for Lesotho has just been completed, but i s s t i l l to be finalized. Thus any understanding o f the Lesotho fiduciary environment i s currently derived from country experience. The country experience points towards rapid growth and development in the area o f Financial Management over the last few years, although there i s s t i l l a general lack o f capacity and experience. There are a growing number o f qualified indigenous Accountants being churned out by the Lesotho Institute o f Accountants. The Institute provides only academic training and certification. In the large majority o f cases, the practical development o f these Accountants in projects has been under the direction o f outside/expatriate advisors (finance, procurement, and technical) to assist the projects in their implementation efforts.

As far as the Government o f Lesotho (GOL) i s concerned, budgeting and financial management i s run on GOLFIS, the Government o f Lesotho Financial Information System. This i s a very old but wel l established system combining the operation o f manual Vote Books and electronic summaries and processing. The Accountant General o f Lesotho has participated in the Public Expenditure and Financial Accountability (PEFA) workshops organized by the Bank in collaboration with other development partners, and has since decided to, not upgrade the GOLFIS, but replace it completely with a modern Integrated Financial Management Information System (IFMIS). Work i s ongoing in this area with the assistance o f DFID and EC.

On the project side, each project tends to use stand alone systems, although a good number has moved onto FINPRO/TOMPRO, which i s proven project management software in use by several Bank financed projects in the Southern and East Afr ican regions.

2. Summary Risk Assessment

Per the risk assessment schedule in the full Financial Management Assessment, the entity risk i s estimated as l ow due to the prior experience o f implementing a Bank supported project (Road Rehabilitation and Maintenance Project - RRMP) satisfactorily, as wel l as the existence o f qualified and experienced staff. Internal control issues that were raised in RRMP, were due to inappropriate system used, while in ITP a recognized and tried software package has been installed. Likewise the control risk i s also estimated as low due to the existence o f wel l established policies and procedures.

3. Summary Assessment o f the Financial Management System

Staffing of the Accounting Function

For the Ministry o f Public Works and Transport, this i s a fo l low on project to the RRMP, and the existing arrangement in the Finance/Accounting department wil l be retained. The finance function at the ITP Project Office i s composed o f a Finance Manager, a Financial Controller, and a Financial Accountant. The latter two are inherited directly f rom the old project, thus they are fully versed with Bank procedures and requirements. The head o f the section, the Financial Manager, i s the only new member o f staff within that section. Although without much prior Bank project experience, the Finance Manager has been in place for some months now, attended training on Bank procedures offered by Bank partner institutions in

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the region, as well as handled the preparation o f the accounts for the PPF as well as the related audit. Overall rating for staffing o f the accounting function i s assessed as satisfactory.

Internal Controls including policies and procedures

A manual acceptable to the Bank was in use by the RRMP. The consultants that were hired to develop and install new accounting software also updated the procedures as well as produce a simple User Guide for the new system, and a Financial Management and Accounting Manual. The user guide has been finalized and the installation i s complete. This means that the project complies with the relevant Bank policies (OPBP 10.02). The requirements include the need to establish internal controls and proper accounting procedures, which are documented in a Financial and Admin Manual. The Manual includes general administrative procedures, financial management procedures, staffing requirements, identification o f accounting and auditing standards to be adhered to by the project, project reporting and monitoring, procurement procedures, procedures for banking, and procedures for the management o f cash.

The basis o f accounting i s the cash basis, per Government o f Lesotho regulations. The assessment o f internal controls and procedures at the project i s rated satisfactory.

Record Keeping

The RRMP record keeping / filing system was found to be satisfactory. I t will form the backbone o f the records management system of the new project.

Internal Audit

The Accountant General established, not so long ago, an internal audit department which has responsibility for the internal audit o f all government ministries. Its effectiveness will however be measured with time.

The internal audit function, when available, compliments physical project monitoring efforts, and i s a ‘nice to have’.

Financial Management Reporting and Monitoring

The ITP Project Office, with the assistance o f the IT consultants, designed the appropriate Financial Management Reports (FMRs) which wil l be produced quarterly. The formats to be used during the new project were reviewed and agreed. They include the following:

Special Account Reconciliation Statement Maloti Bank Account Reconciliation Statement Project Sources and Uses o f Funds Uses o f Funds by Project Activity / budget vs actual

Project progress reporting

. 9 . 1 Contract Status Report

1 Procurement reports The project has already demonstrated its ability to produce the new FMR s using the new system. Additional reports to satisfy the requirements o f report - based disbursement will now be introduced, as the project will use report based disbursement from the outset. These new reports include :

Special Account (SA) activity statement Summary SA expenditures for contracts subject to prior review

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Summary SA expenditure for contracts not subject to prior rev iew.

Budgeting and Planning

The budgeting process i s driven by annual work plans developed by the technical heads o f the physical activities.

Computerized Accounting Systems

The RRMP accounts were run on a Microsoft Access based database. Whi le this worked satisfactorily, the new project opted to go the conventional accounting package route. Per above, the selected package, called FINPRO, i s a proven system that i s in use by several Bank supported projects across Southern and Eastern Africa. Implementation at ITP i s complete, and the system i s functioning satisfactorily.

External Audit Arrangements

The ITP i s subject to audit by the Auditor General (AG) o f Lesotho. This arrangement i s satisfactory to the Bank. Lesotho law also allows the AG to subcontract some o f the work where in her opinion it i s prudent to do so. Whenever this i s done, the sub-contracting has to be on terms and conditions that are acceptable to the Bank.

Audited financial statements for the project and Road Fund wil l be submitted to the Bank within six months o f the end o f the financial year reported on. The financial statements have to be accompanied by a detailed audit comments (management) letter.

Conclusion

The financial management arrangements in place at the project meet the Bank's minimum requirements for financial management.

4. Financial Management Action Plan

Negotiations

None

Effectiveness

None

Other . Complete training on the new accounting system.

5. Financial Covenants and Supervision Plan

The following covenants relate to financial matters and form part o f the F A :

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1 The Government will cause Ministry o f Works (ITP Project Office) to have i ts records, accounts and financial statements audited each year, commencing with the accounts for the year ending March 2007; The ITP Project Office will submit quarterly FMRs, starting with the first quarter after effectiveness.

a

Conditions for the Credit and Grant Effectiveness

None

Supervision Plan

The reports o f the progress o f project implementation will be monitored in detail during supervision missions. FMRs wil l be reviewed on a quarterly basis by the field based Financial Management Specialist (FMS) and the results or issues followed up during the supervision missions. The project’s audit reports will be reviewed and issues identified will be followed up. The field based FMS will monitor the agreed action plan to ensure appropriate actions have been implemented by the project.

6. Disbursement and flow of funds

6.1 Flow of Funds The project i s expected to operate one U S Dollar Special Account for all project components. However, the MoPWT will ensure that for al l categories, the Grant portion will be disbursed first; and after that the disbursement will follow for the Credit portion. The Special Account will be held at a Central Bank o f Lesotho, which i s an acceptable host for the account. It will be managed by the ITP Project Office. The project will also operate a local currency (Maloti) project account for processing eligible payments in local currency. Advances to the Special Account will be based on six months forecast requirements. Transfers to the local currency account will be done monthly, based on each month’s estimated local currency commitments. Counterpart contributions will be paid for directly by the Ministry o f Public Works and Transport. Hence there will generally be two checks (one for the Bank contribution, another for the counter part) for a l l payments requiring a counter part contribution.

6.2 Disbursement

Disbursements from the loan will be made on the basis o f FMRs with documentation retained at the ITP Office. Direct payments will also be used where appropriate.

Direct Payments

This method will be used when there i s need to pay a third party for goods and services supplied, but the amount to be paid i s higher than can be reasonably sustained by the Special Account. There should generally not be too many o f these ‘direct’ payments, but when they do occur, the following details need to be supplied to the Disbursement Office, in addition to the relevant supporting documentation:

- - - Category o f expenditure - Eligibility Percentage - Supplier’s banking details

Name and address o f the third party to whom payment will be made Brief description o f the goodslservices supplied

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Replenishment Method

This method wil l be used where payments to third parties have been made out o f the Special Account, and the replenishments are used to restore the Special Account advance to projected levels o f usage.

SDecial Account

As per the ‘Flow o f Funds’ section above, the project will have only one Special Account, opened at a Central Bank.

Disbursements from IDA will be made on the basis o f FMRs, and the Special Account will be operated on the basis of an advance based on six monthly forecasts. The advance will be used by the Borrower to finance IDA’S share o f program expenditures under the proposed Financing.

Replenishment o f funds from IDA to the Special Account will be made upon evidence o f satisfactory utilization o f the advance, reflected in the quarterly FMRs. If ineligible expenditures are found to have been made from the Special Account, the Borrower will be obliged to refund the same. If the Special Account remains inactive for more than six months, the Borrower may be requested to refund to IDA amounts advanced to the Special Account.

IDA will have the right, as reflected in the Financing Agreement, to suspend disbursement o f the funds, if reporting requirements are not complied with.

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Annex 8: Procurement

Lesotho: Integrated Transport Program

Table A: Project Costs by Procurement Arrangements (US$ million equivalent)

Procurement Method'

Expenditure Category ICB NCB Other2 N.B.F. Total Cost 1. Works 15.03 2.65 0.00 5.00 22.68

(15.03) (2.65) (0.00) (0.00) (17.68) 2. Goods 0.00 0.30 0.30 2.48 3.08

(0.00) (0.30) (0.30) (0.00) (0.60) 3. Services 0.00 0.00 4.62 7.22 11.84

(0.00) (0.00) (4.62) (0.00) (4.62) 4. Operating Costs 0.00 0.00 0.6 0.00 0.6

(0.00) (0.00) (0.6) (0.6) (0.6) 5. Refunding o f PPF 0.00 0.00 0.00 0.00 0.00 (US$ 1.5 included in (0.00) (0.00) (0.00) (0.00) (0.00)

6. [Unallocated (US$ .89 0.00 0.00 0.00 0.00 0.00 included in amount for (0.00) (0.00) (0.00) (0.00) (0.00)

amount for other categories)

other categories)]

Total 15.03 2.95 5.52 14.70 38.2 (1 5.03) (2.95) (5.52) (0.00) (23.50)

'Figures in parentheses are the a m o u n t s to b e f i nanced by IDA. All costs i n c l u d e contingencies.

? Inc ludes c i v i l works a n d goods to b e p r o c u r e d through na t iona l shopping, consu l t i ng services, services of con t rac ted s t a f f of t h e p r o j e c t management of f ice, training, technica l assistance services, a n d inc remen ta l ope ra t i ng costs re la ted to (i) manag ing the project, a n d (ii) re- lend ing p r o j e c t f u n d s to loca l g o v e r n m e n t u n i t s .

Table A 1 : Consultant Selection Arrangements (optional) (US$ million equivalent)

Selection Method

Total QCBS QBS SFB LCS CQ Other N.B.F. Consultant Services Expenditure Category

A. Firms 3.32 0.00 0.00 0.00 0.00 0.00 7.10 10.42

B. Individuals 1.30 0.00 0.00 0.00 0.00 0.00 0.12 1.62 (3.32) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (3.72)

(1.30) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (1.42)

Total 4.62 0.00 0.00 0.00 0.00 0.00 7.22 11.84 (4.62) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (5.22)

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Table B: Thresholds for Procurement Methods and Prior Review'

1. Works 500 and above Less than 500 ICB

NCB

Contract Value Contracts Subject to

(US$ thousands) (US$ thousands) Expenditure Category Threshold Procurement Method Prior Review

Al l 3 00

A l l 100 and above

2. Goods 100 and above ICB Less than 100 NCB

3. Services Firms 100 and above QCBS

50-100 CQ Al l

TORS

Individual Less than 50 CQ TORS Single Source TORS

4. Miscellaneous 5. Miscellaneous 6. Miscellaneous

'Thresholds generally di f fer by country and project. Consult OD 11.04 "Review o f Procurement Documentat ion" and contact the Regional Procurement Adviser for guidance.

Total value o f contracts subject to prior review: {US$300,000 and above for civil works and US$lOO,OOO and above for consultancy services (Firm) and US$50,000 and above for individual consultant}

Overall Procurement Risk Assessment: Average

Frequency o f procurement supervision missions proposed: One every 6 months (includes special procurement supervision for post-review/audits).

Table C: Allocation o f Grant and Credit Proceeds

Category Amount o f the Grant Amount of the Credit Percentage of Allocated (Expressed Allocated (Expressed Expenditures to be

in SDR) in SDR) Financed (1) Civil works 3,600,000 7,600,000 80

(2) Goods 400,000 0 100

(3) Consultants' services 2,200,000 0 100

(under Component 1 and 2 o f the project

(under Component 1 and 3 o f the project)

and training (under Component 2 and 3 o f the project)

(4) Operating Costs 400,000 0 100

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(under Component 3 o f the project)

(5) Refunding o f Project 1,100,000 0 Amount payable Preparation Advance pursuant to Section

Conditions 2.07 o f the General

(6) Unallocated 600,000 0

TOTAL AMOUNT 8,300,000 7,600,000

General

The Country Procurement Assessment Report (CPAR) for Lesotho was carried out in 1997. Apart from increasing the Central Tender Board (CTB ) prior review threshold from M10,OOO (about US$1,500) to M30,000( about US$4,500) and further increasing it to M100,OOO (about US$14,925), there i s not much progress in implementation o f the CPAR’s recommendations. This means that the status of public procurement system i s the same as in 1997 when the CPAR was carried out. The CPAR recommended several actions to be taken by the Government to make those national procurement systems more economic, efficient, transparent, and accountable. Key recommendations as a result o f 1997 CPAR included, inter alia:

Government o f Lesotho (GOL) to prepare a comprehensive procurement law based on the United Nation Commission and International Trade Law (UNCITRAL) model and Regulations; To raise substantially the CTB prior review thresholds; To restructure, realign and strengthen the CTB to support the work o f line ministries; The GOL to carry out a study on a cost/benefit analysis o f procurement decentralization; The GOL to restructure the Government monopolies as sole supplier or buying agents.

U s e of Bank Guidelines.

Civil works and goods for the proposed project will be procured in accordance with the “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004; and the provisions stipulated in the Financing Agreement. Al l procurement o f consultant services will be done in accordance with Guidelines: “Selection and Employment o f Consultants by World Bank Recipients dated May 2004”, and the provisions stipulated in the Financing Agreement. Bank’s Standard Request for Proposals and evaluation forms will be used where applicable. For each contract to be financed by IDA, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame will be agreed between the MoPWT and IDA. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Procurement Manual

Procurement procedures will be detailed in the Procurement Manual, which i s under preparation and will be used for procurement o f works, goods, and consultants’ services under this project.

Procurement Methods

Procurement of Works: Works to be procured under this project would include mostly road works including periodic maintenance, rehabilitation, upgrading and construction o f roads and bridges. The

54

procurement wi l l be done using the Bank’s Standard Bidding Documents (SBDs) and Standard Bid Evaluation Forms for works and goods for a l l ICB contracts. Since MoPWT, except for labor based works, does not have national Standard Bidding Documents for procurement o f works, M o P W T wil l continue using bidding documents developed for National Competitive Bidding (NCB) during the implementation o f IDA financed Road Rehabilitation and Maintenance Project (RRMP) recently closed on December 3 1,2003.

Procurement o f Goods: Goods to be procured under this project would include computers, printers, scanners, accounting software, motor vehicles, office furniture, and office equipment. The procurement w i l l be done using Bank’s SBDs and Standard Bid Evaluation Forms for works and goods for al l I C B contracts. Since M o P W T does not have national Standard Bidding Documents for procurement o f goods, M o P W T wil l continue using bidding documents developed for National Competitive Bidding (NCB) during the implementation o f IDA financed RRMP. Contracts for the goods and other small quantities o f office supplies and other consumable materials, which are available locally at economical prices would be procured through national shopping procedures based on price quotations obtained from at least three reliable suppliers.

Selection of Consultants: The consultants’ service to be procured under the project would include the design and supervision o f c i v i l works; technical studies aimed at institutional reforms, and technical assistance services to build the institutional capacity in project management, financial management and social aspects. All consulting services contracts costing more that US$lOO,OOO equivalent per contract for firms wil l be awarded through quality and cost Based Selection (QCBS) method. Short l is ts o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contracts may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. Consulting services contracts estimated to cost les than US$ 100,000 for firms may be awarded through Consultants’ Qualification (CQ) method. All services o f individual consultants wi l l be procured under individual contracts in accordance with provisions o f paragraphs 5.1 to 5.3 o f the Guidelines.

Implementation Arrangements

M o P W T wil l be responsible for the overall management and implementation o f the Project. However in implementation o f the various project components other Ministries, Departments, and agencies wi l l be involved, which w i l l be responsible for the preparation o f technical specifications, bidding documents and evaluation reports. In order to coordinate the implementation o f project activities under al l components in an efficient and effective manner, ITP project office wi l l be set up for the day-to-day management. The Project office wi l l be headed by a Project Manager who w i l l be supported by a Procurement Compliance Officer (PCO). The PCO wil l be responsible for advising and guiding implementing agencies in Bank procurement policies and procedures, procurement planning and reviewing a l l procurement documents before submission to IDA for no objection and for ensuring overall integrity o f the Bank procurement procedures.

Procurement Capacity Assessment.

A formal assessment o f the capacity for the main implementing agencies Roads Branch and Department o f Rural Roads has been conducted in accordance with Procurement Services Policy Group (OCSPR) guidelines dated August 11, 1998. This judgment assessed the overall risks as average. The procurement arrangement in the previous IDA- financed RRMP, where a l l the implementing agencies were responsible for procurement wi l l continue until the proposed new institutional arrangements are in place. In the previous project, the handling o f the procurement functions has been found in general satisfactory. Nevertheless the fol lowing weaknesses were observed: (a) untimely and incomplete procurement planning, (b) lack o f procurement expertise to handle complex situations, and (c) delay in completion o f

55

contracts compared with the agreed time schedules. These weaknesses could be explained by the fact that there was no centralized procurement unit within MoPWT although the RB and DRR engineers have considerable experience in procurement. To address these weaknesses, important measures are being undertaken and an action plan has been agreed, which primarily include: (a) appointments o f Procurement Compliance Officer, who has joined the project management unit in MopWT; (b) preparation o f procurement procedures manual and (c) training o f procurement staff.

CTB and Procurement Levels According to the existing Procurement Regulations, CTB i s the authority for awarding a contract o f value LSL 100,000 (about U S $ 14,925 equivalent) and above. This threshold was revised in June 2005 from the previous threshold o f LSL 30,000 (about US$4,500 equivalent). The CTB does not review draft bidding documents or RFPs regardless o f the value o f the contract. Furthermore, the Financial (Amendment) Regulation 2005 provides the following limits in procurement o f contracts and stores:

rn “not exceeding LSL30,OOO in total value, by local purchase order; rn exceeding LSL30,OOO but not exceeding LSLlO0,OOO after obtaining

exceeding LSL 100,000 by contract after public tender” quotations from at least three firms; and

rn

However, in accordance with Financial Regulation 1973 “ Where the quantity o f building and engineering works i s so great that supervision can not be exercised by Government professional officers, the Permanent Secretary, Works, may approve the employment o f private firms and consultants, subject to the prior concurrence o f the Permanent Secretary for Finance. The Permanent Secretary, Works, shall approve the fees payable in such cases.”

The current CTB secretariat i s staffed by 3 people. Two o f them are procurement proficient. The board i s constituted by 6 members from: Ministry o f Education (1) Ministry o f Works and Transport (2) Ministry o f Agriculture (1) Ministry o f Trade, Industry and Marketing (1); and Lesotho Revenue Authority (1). The chairman o f the Board i s from the Ministry o f Finance and Development Planning. Despite revision of the prior review thresholds upwards, almost every contract being processed by MoPWT will pass through CTB because o f the low thresholds. Due to highly centralized procurement system and inadequate capacity of CTB, award o f contracts i s likely to be delayed. According to MoPWT’s experience, an International Competitive Bidding (ICB) contract may take about 6-9 months from the preparation o f bidding documents up to awarded stage. There i s a need for the GoL to implement the 1997 CPAR recommendations in order to mitigate such problems. It i s expected that the Bank will carry out another CPAR in FY07, recommendations o f which will implemented as far as they address issues in the ITP.

Procurement Plan

The indicative procurement plan for the complete project period and detailed procurement plan for the first 18 months was discussed and agreed with MoPWT during the appraisal mission. The procurement plan will be updated in agreement with MoPWT annually or as required to reflect the actual project implementation needs and improvements in the institutional capacity.

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Annex 9: Economic and Financial Analysis

Lesotho: Integrated Transport Program

Economic Analvsis

The c iv i l work program includes several activities such as rehabilitation o f paved roads, upgrading o f rural roads and opening o f new corridor.

A. Upgrading Rural Roads

Main Assumptions. The works for periodic maintenance and rehabilitation have been prioritized based on a minimum economic internal rate o f return (ERR) o f 12%, calculated using Highway Design and Maintenance Standard Model (HDM 111).

B. South Eastern Corridor

Main Assumptions. The economic evaluation o f contributing to the opening o f the South Eastern Corridor includes construction o f two numbers 2-lane high- level bridges, one over the Senqu river and the other on Senqunyane river, has been undertaken using HDM I11 program. The “Without Scenario” considers the present road network f rom Roma (Mazenod) through Mafeteng and QuthinglQachas Nek, (existing longer route) including maintenance as per normal practices. The “With Scenario” considers the new road network f rom Roma (Mazenod) through Ramabanta and Semongkong (new shorter route). This option requires the construction o f two bridges across the Senqu and the Senquanyane rivers, and 46 km o f road works and maintenance. IDA will finance the cost o f only two bridges with approaches, and a road o f few kms between the bridges and in the south.

Costs and benefits. The economic evaluation o f the proposed corridor i s based on projected traffic volume, construction costs and economic pricing factors. The financial cost i s estimated at M77.0 mi l l ion (US$8.25m). Other benefits include: (a) significant poverty alleviation in the densely populated area bounded by the two rivers; and (b) access to an area with substantial agricultural, commercial and tourism potential Improved administration o f central Lesotho. The completion o f this corridor, which i s an important link in the strategic road network, wi l l give significant savings in distance between Maseru and Qacha’s N e k that wi l l reduce by 140 km.

Economic Analvsis

Main Findings

The methodological approach for the project’s economic evaluation i s consistent with best practices on infrastructure projects economic evaluation. The consultant based the Conversion Factors (CF) estimation o n previous assessments. Nevertheless, in several cases the study improved or detailed the calculations. For example, under the study the CF for traded and non-traded goods have been separated and re-calculated. It was not possible to review the traffic forecasts because they are not present in the economic evaluation. The results (ERR, NPV and B/C) can be accepted as reflecting the projects’ economic merits. The base-case ERR and the sensitivity analysis allow concluding that the road meets the minimal criteria to be accepted as an economically and socially justifiable investment.

1

1

Project Economic Evaluation Review

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Under the project an all-weather asphalt surfaced road wi l l be constructed from Roma to Sekake, al lowing direct link from the Maseru to the southern city o f Qacha’s Nek. Without the project traffic between the two extremes goes around v ia Quthing, a total o f 252.6 km. The investment encompasses two lots:

L o t lA, f rom Roma to Semonkong, about 82 km, with the existing fo l lowing sections: 20 km paved, 5 km made up o f an engineered gravel road and the remaining 57 km made up o f unengineered gravel road). L o t 1B2, from Semonkong to Sekake, 70 km, currently made up o f horse tracks and unengineered gravel roads.

1

A project’s economic evaluation has been carried out by the consultant WSP International Ltd. The consultant’s global approach i s consistent with best practices on infrastructure projects’ economic evaluation: (i) a methodology to change market and financial prices into economic valuation, (shadow pricing); (ii) traffic forecasts; (iii) investment and recurrent costs estimation; (iv) benefits; and (v) economic performance indicators’ reckoning.

Shadow pricing

The consultant states that earlier studies used shadow pricing under a cumulative basis, meaning that each new study relied upon the shadow prices used in a prior study. In the current evaluation the consultant also relied on previous assessments, but introduced a new approach, with a distinction between non- traded and traded good.

Non-traded goods

The Consultant sorted out a Standard Conversion Factor (SCF) using the simplified method recommended in L i t t le and Mi r less (L&M):

ExBortsFOB + imDortsCIF ExportsFOB + Im portsCIF + Taxes

The average for the last three years i s 0.86

Traded goods except fuel

The conversion into economic prices assumed an implied duty on imports o f 17% (not considered in economic pricing) and a trading margin on landed cost o f 15%, corrected by the general factor 0.86. The result i s a SCF o f 0.78 to be used on traded goods’ correction.

Fuel prices

Fuel price i s considered, as the exception to the relative prices’ maintenance over the period o f appraisal. The price projection assumed the World Bank long term projection: $25/bbl. The economic prices have been calculated as $0.29 and $0.28 for petrol and diesel, respectively.

Labour

Using the L&M methodology, the consultant derived correction factors (SWR) for unskilled and skilled labour: 0.56 and 0.84, respectively.

Time values

58

The consultant used a time value derived f rom per capita GDP. Differently f rom previous studies the consultant differentiated time values between the different vehicle categories. The results for hourly time values for productive trips are in the fol lowing table:

Car/4WD 0.41

Util i tyAight Light bus Heavy bus 0.37 0.09 0.05

Time consumed in leisure trips has been assumed as having no economic value.

costs

Vehicle Operating Costs (VOC)

The V O C have been differentiated accordingly to the different vehicle types. Operating Costs per vehicle type have been broken down by component (maintenance, fuel, lubricants, etc.) and multiplied by the applicable Correction Factor (SCF or SWR).

Road Maintenance Unit Costs

Financial costs have been multiplied by a constant factor: 0.80. For this case the consultant did not differentiate the cost components (labour, and goods).

Construction costs

The consultant considers the level o f detail in the investment costs as being insufficient and as such did not create a new correction factor. The factor used in other studies has been utilized: 0.82.

Economic appraisal

The consultant used H D M - 4 as the vehicle for the economic appraisal. For evaluation purposes the total investment, $82.4 Mio, has been divided into 3 existing sections (treated inside the HDM as upgrades) and the construction o f 1 section (new construction in the model). The investment amounts to $82.4 mi l l ion (LSL779 million, rate LSL9.45/$US). The CF 0.82 (see 4.3) lead to the economic equivalent: $67.6 million, or LSL638.8 mi l l ion.

Benefits to diverting traflc

Each o f the 4 road sections w i l l divert traffic f rom other roads and tracks. The weighted distance saving per vehicle i s 101.7 km.

Benefits to the Generated traflc

The study assumed the generated traffic has being 36% o f normal traffic, generating benefits per unit ha l f o f those to normal (consumer surplus method).

Producer surplus

The consultant evaluated two types o f impacts in the production structure: (i) roads may induce higher production due to the use o f more available fertilizers and easier access to the market; (ii) better access to the markets may induce the production o f higher value products.

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Accident costs

Given that the major part o f future traffic wi l l be diverted from the Quthing road, it i s acceptable to consider that smaller distance trips wil l originate fewer accidents.

Appraisal results

The indicators chosen to evaluate the project’s economic performance are: (i) Economic Internal Rate o f Return (EIRR); (ii) Net Present Value (NPV) at a discount rate o f 12%; (iii) First Year Rate o f Return (FYRR); and (iv) Benefit to cost ratio (BE). The salient results o f the appraisal are: ERR 15.8% N P V 108.77 Malot i mi l l ion FYRR 8.4% B /C 1.32

The project i s deemed economically justifiable.

Sensitivity analysis

The consultant tested the results making some changes in assumptions, such as (i) increasingldecreasing the investment by +/- 10%; (ii) increasing the investment by 20%; (iii) halving and removing the benefits to generated traffic; (iv) introducing producers surplus benefits, (v) reducing the investment to a gravel standard; and(vi) investment in new link only. The EIRR varies between 11 -6% and 23.0%.

Financial Analysis

While the road network i s generally in acceptable condition, it i s o f concern that in the year 2003/04 there was a shortfall o f some 30% on the estimated maintenance funding level. In addition the RF currently collects and manages only h a l f the funding available for road maintenance, with the rest channeled through the Government central revenue fund and normal budget allocation processes. Proposals are being developed under the proposed institutional reforms to: (a) extend the revenue base for RF, (b) divert Government budget for road maintenance through RF; and (c) progressively close the funding road maintenance shortfall. The G o L has prepared a plan to increase the level o f revenues to RF in order to meet 100% road maintenance needs by 201 0.

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Annex 10: Safeguard Policy Issues

Lesotho: Integrated Transport Program

Environmental Category and Justification

Components o f the project l ikely to generate environmental impacts concern c i v i l works investments involving emergency repairs to paved sections o f the Northern Corridor, construction o f two bridges over the Senqu and Senquyane Rivers, upgrading o f their approaches and 7 km o f access road, and upgrading o f rural roads. Alignments fol low existing tracks and potential impacts are judged to be minimal in scale, local in extent and readily mitigated by sound engineering design and construction and environmental/social planning and management practices. The major c i v i l works project at the Senqu/Senquyane bridges involves some land take (small sections o f fields) but there i s no need for resettlement or movement o f permanent structures. Accordingly, the project i s classified as category B.

Environmental Assessments Carried Out

A Sectoral Environmental Assessment (SEA) was undertaken during preparation to assess macro-scale development alternatives in the transport sector and formulate guidance for attaining environmentally sustainable development goals. It highlights the benefits and costs o f sector-wide actions by comparing strategies and defines responsibilities o f the various agencies, including inter-agency coordination. As much as a process as a product, the SEA summarizes the prevailing environmental/social situation in Lesotho, identifies the activities under the Integrated Transport Project (ITP) and assess their environmental and social impacts (positive and negative); it also evaluates in-country capability, the regulatory framework and procedures operating in Lesotho and institutional capability. Recommendations are made to address these and other issues and to ensure environmental screening o f projects i s conducted, individual EAs are undertaken as appropriate and EMPs are developed and implemented along wi th supervision and monitoring. Lastly, guidelines in the form o f an Environmental Management Framework provide a planning, management and monitoring approach for implementation o f environmental and social safeguards within the ITP and the transport sector as a whole.

Environmental guidelines for the Road Sector have also been developed under the project (covering environmental and 'social safeguards and integrating environmental and social contract clauses). These wil l help ensure the application o f any mitigation measures and their effective implementation through reflection o f the Guidelines in the Project Implementation Manual and environmental and social clauses in the bidding and other contract documents.

A Resettlement Policy Framework (RF'F) was written during preparation (disclosure date; 12/01/2003). It outlines the policy framework for addressing social safeguards and gives guidance on attaining social safeguards goals. The document outlines the institutional capacity, regulatory framework and procedures (i.e., R A P and implementation) for addressing the social safeguards in the transport sector in Lesotho.

An EA, EAP and RAP have a l l been carried out for the SenqdSenquyane c iv i l works project which i s projected to be carried out during the f irst year o f the project (disclosure dates: EA: 0/4/06; RAP: 07/19/2006). The EA findings concluded that the road rehabilitation and bridges construction would induce minimal adverse environmental impacts that are mitigable. The R A P found that while there was no need for resettlement, some land take o f strips o f fields wil l be necessary especially in the area between the two bridges.

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The RAP has identified 36 potentially affected households by the upgrading of the road and the construction o f the two bridges. Strips o f farmland will be acquisitioned by the road construction. A fence and community water tank will also be affected. The alternatives have looked at shifting alignments with two primary objectives: 1. facilitating access to the Ha Nkau clinic (currently serving 1,000 patients/month) for the roughly 20,000 population in the catchment area and 2. disturbing as few parcels o f farmland as possible. The RAP involved community consultations and made a preliminary survey o f potentially affected properties, identified the landholders, and estimated compensation costs.

The appraisal mission visited the field site several times during the mission in December 2005 with members o f the project team from MoPWT. The entire length between the bridges was walked several times, alternative alignments discussed with local communities and the design consultants. The follow-up work on the RAP by the consultants has also entailed holding pitsos4 at Hloahloeng (1 04 participants) and Seforong (64 participants). Previous pitsos have found that that the communities feel the road and bridges will be very important to them in terms o f providing year-round access to basic services and transportation o f necessary goods.

Impacts and Safeguard-related Risks

Road investments (construction and rehabilitation) although mainly beneficial to the local communities, sometimes have adverse impacts on the biophysical environment (water and air quality, land and hydrology, vegetation, etc.). The potential negative effects o f this project include: soil erosion, temporary loss o f some strips o f farmland along the alignment, disturbances in water quality, noise, air pollution, etc.). In addition to the potential environmental impacts are adverse social impacts (some loss of land, housing, livelihoods, involuntary resettlement, STD and HIV/AIDS contamination).

Mitigation Measures and Environmental Management Plan

To mitigate the negative environmental impacts the MoPWT has taken the following measures: 1. Carried out an SEA which outlines the environmental guidelines and procedures, 2. Created road sector Environmental Guidelines which will be in the Project Implementation Manual and 3. Committed to using environmental clauses in the contracts and bidding documents. Compliance will be monitored by the office o f the Environmental and Social Coordinator for the project.

Measures taken to mitigate the possible negative social impacts are: 1. Agreement on alignment that maximizes social gains (i.e, access to clinic) and minimizes land take. 2. The establishment o f a statistical unit at MoPWT to help design and carryout the social assessments in the area measuring impacts o f the improvements; 3. Establishment o f the Environmental and Social Coordinator position to monitor adherence to social and environmental safeguards, 4. Establishment o f an HIV/AIDS coordinator to aid the contractor in designing an effective HIV/AIDS program for workers and integrating community level activities, 5. Establishment o f a Resettlement desk in the MoPWT which i s responsible for compensation issues 6. Inclusion o f social and HIV/AIDS clauses in the contract and bidding documents.

Institutional Arrangements for Implementation of EMP

As part o f preparation for the ITP, several positions have been created within the Project Office and the MoPWT to be able to address and monitor the necessary work on safeguards and other issues such as HIV/AIDS. The SEA, Environmental Guidelines and RPF al l serve to outline the relevant policies and give guidance on the necessary measures for implementation.

Pitsos: Public gathering 4

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1. Creation o f the position o f Environment and Social Coordinator. This person i s charged with overall responsibility and monitoring o f the safeguard issues, social and environmental clauses, and other social issues such as j o b training, HIV/AIDS, community radio component etc. They w i l l also play an important role in the in-house training on social and environmental issues wi th in M o P W T and wil l help to identify the necessary components o f a environment/social office in the new Road Agency.

2. Creation o f a Resettlement Desk covering both environment and social safeguards. There are two compensation officers and one environmental safeguards officer at the MoPWT. They are currently housed in the Human Resources and M a i n Roads Branch offices respectively. The project wi l l facilitate the creation o f a single office to help with coordination, and wi l l help ensure that they receive the proper training wi th the Environment and Social Coordinator.

3. Creation o f an H IV /A IDS coordinator. This person has been recruited f rom within the M o P W T and wil l be an important coordinator o f H N / A I D S activities within the Ministry, with contractors at c iv i l works sites, and wi th c i v i l society partners and private sector stakeholders. The position w i l l be responsible for helping to ensure that H IV /A IDS activities are properly conducted, that they coordinate, wherever possible, with existing initiatives (such as the Clinton Foundation work in the H a Phafoli area) and that they comprehensively address the needs o f workers and local populations.

4. Creation o f statistical office within the MoPWT. This office now has two statistical officers charged with identifying and analyzing relevant statistical data f rom al l o f the Ministry sub- sectors. They are also playing an important role in designing the methodology and data retrieval systems for ongoing social impact monitoring at the c i v i l works sites.

5. GIS officer. Significant work has been done during preparation o n enhancing the existing GIS system at the M o P W T to facilitate decision support, coordination and analysis at a l l levels. In addition, a methodology has been created to facilitate in inclusion o f data f rom social assessments, monitoring o f safeguards, and inclusion o f stakeholder perceptions (community and local government levels, etc.) into the overall system. This work wi l l continue throughout the project and it i s anticipated that there wi l l be significant training offered for many o f the potential users o f such data.

From the side o f the Wor ld Bank, throughout preparation, the environment and social specialists have been involved in training, identification o f issues and preparation o f mitigation plans.

Special Safeguard Measures

As mentioned above, both an EA and RAP have been prepared for the Senqu/Senquyane c iv i l works project.

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Annex 11: Project Preparation and Supervision

Lesotho: Integrated Transport Program

Planned Actual PCN review 11/20/2002 0811 412003 Initial PID to PIC Initial ISDS to PIC Appraisal Negotiations BoardfRVP approval Planned date o f effectiveness Planned date o f mid-term review Planned closing date

10/01/2003 1 010 112003 05/19/2006 0811 512006 10/03/2006 1211 5/2006 11/01/2008 06/30/2011

10/01/2003 10/01/2003 0 5/ 1 91 2006 0811 512006 1011 712006 01/31/2007 011 15f2009 06/30/2011

Key institutions responsible for preparation o f the project:

Ministry o f Public Works and Transport Ministry o f Finance and Development Planning

Bank staff and consultants who worked on the project included:

Name Title Unit Carlos Fonseca Transport Economist - Consultant AFTTR

Gylf i Palsson Sr. Transport Specialist / TTL AFTTR Henri Aka Procurement Specialist AFTPC Jonathan Nyamukapa Sr. Financial management Specialist AFTFM Linda Patnelli Language Program Assistant TUDTR Sariette J. Jippe STT AFTTR Subhash C. Seth Sr. Highway Engr / co-TTL AFTTR Suzanne Morris Sr. Finance Officer LOAG2 T. Mpoy-Kamulayi Lead Counsel LEGAF Tawia Addo-Ashong Transport Specialist AFTTR Wendy M. Walker Social Scientist - Consultant AFTTR

Colin Rees Environment Specialist -Consultant QAG

Bank funds expended to date on project preparation: 1. Bank resources: U S $ 370,770 2. Trust funds: US$ 127,871 3. Total: U S $ 498,641

Preparation costs o f this ITP to Board are likely to exceed regional average for S I L by nearly 10% (excluding TF costs which in this case were for very specific interventions). This i s mainly due to the unusual long time for continuous and needed policy dialogue with Government before preparation could be viewed completed.

Estimated Approval and Supervision costs: Remaining costs to approval: US$ 70,000 Estimated annual supervision cost: U S $ 1 10,000

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Annex 12: Documents in the Project F i l e

Lesotho: Integrated Transport P r o g r a m

Project Concept Note

Project Information Document

Integrated Safeguard Data Sheet

Quality Enhancement Assessment 7 (FY4-5)

Economic Assessment on Road and Bridges (March 2006)

Transport Sector Policy (June 2005& February 2006)

Financial Management Report

Social Economic Report (2006)

PPF Quarterly Reports (latest, April-June2006)

Road Fund Audit Report (ApriVMarch 2004/5)

Environment Impact Assessment & Relocation Action Plan for Roma Sekake Road (March 2006)

Environment Impact Assessment for the Senqu & Senqunyane Bridges and connecting Roads

Financial Management & Accounting Manual (November 2005)

Urban Planning & Transport Study (January 2005)

Training material, User Guide

Sectoral Environmental Assessment (December 2005)

Quarterly Progress Report (June-September 2005)

National Road Authority Study (April 2002)

Bridges feasibility Report

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Annex 13: Statement o f Loans and Credits

Lesotho: Integrated Transport Program

September 7,2006 Difference Between

Expected and Actual Disbursements

Orig. Frm Rev'd

Original Amount in US$ Millions

Project I D FY Project Name IBRD IDA GRANT Cancel. Undisb.

PO81269 2004 LS-ESDP I1 APL - Phase 2 PO52367 2002 LS-GEF Maloti Drakens Cnsrv & Dev PO87843 2005 LS-HIV/AIDS Cap Bldg TAL PO76658 2006 LS-Health Sec Reform Phase 2 APL PO01409 1998 LS-Hiland Water IB PO70673 2001 LS-Utilities Sec Reform SIL

PO56418 2005 LS-Water Sec Improvements APL

Orig. Frm Rev'd IBRD IDA Grants Cancel. Undisb.

21.0 6.68 0.97 7.36 3.77 2.63 0.04

5 .O 4.41 2.83 6.5 6.01 -0.16

45.0 9 14.34 23.34 14.34 28.6 9.10 6.22 5.04

14.1 12.33 0.33

Total 45.0 75.2 7.36 9 56.64 36.16 19.42

LESOTHO STATEMENT OF IFC's

Held and Disbursed Portfolio In Millions o f US Dollars

Committed Disbursed

IFC I F C

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

~~~ ~~~

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic

Total pending commitment 0 00 0 00 0 00 0 00

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Annex 14: Transport Sector’s Policies and Strategies

Lesotho: Integrated Transport Program

Mrs. Ritva Reinikka Country Director Lesotho, Botswana, Namibia, South Afr ica and Swaziland Afr ica Region The Wor ld Bank 18 18 H. Street, N. W. Washington D.C. U S A

Dear Mrs. Ritva Reinikka,

SUBJECT: LESOTHO’S TRANSPORT SECTOR’S POLICIES AND STRATEGIES

The transport sector in Lesotho continues to play a pivotal role in the development strategies and objectives o f the Government through the promotion o f social development, economic growth and poverty reduction. By this letter, I wish to highlight to the International Development Association (IDA), the steps that the Government o f Lesotho (GOL), through the Ministry o f Public Works and Transport (MOPWT) has taken and/ or i s planning to take, in order to transform the transport sector into a vital service sector it needs to be in order to assist Government to attain i t s objectives, in particular, the Poverty Reduction Strategy and National Vis ion 2020 for Lesotho. The envisaged IDA and European Commission (EC) - supported Integrated Transport Project (ITP), as wel l as other donor supported initiatives, form a very important and integral part o f this transformation.

1. BACKGROUND

The Ministry o f Public Works and Transport has taken several steps in providing the platform for the envisaged transformation. These include, inter alia, the Transport Sector Policy (Feb. 2006) based on the strategies drawn up into a Transport Sector Program (TSP). The latter proposes practical maintenance and development initiatives to achieve the implementation o f the policies and strategies proposed. The Government o f Lesotho, together with i ts main development partners o f the IDA, European Commission, African Development Bank, BADEA, Kuwai t Fund and Development Co-operation o f Ireland, has committed resources to the TSP, which will, over time see improvements in maintenance, infrastructure development, resource utilization, efficiency and effectiveness in the transport sector.

During the previous (1997-2003) IDA funded project, namely the Road Rehabilitation and Maintenance Project (RRMP), the GOL embarked on a number o f initiatives that included the phasing out o f the labour based maintenance and rehabilitation force account units o n gravel roads; merger o f Labour Construction Unit (LCU) and Civil Works Section (CWS) into the Department o f Rural Roads (DRR); the restructuring o f Plant and Vehicle Pool Service (PVPS) into a privately run entity; the creation o f a Road Fund; reduction o f road accidents and fatalities (reduction f rom 105 to 69 fatalities per 10,000 vehicles f rom 1985/6 to 2004 according to Department o f Road Safety Records) establishment o f a Department o f Road Safety; environmental impact studies and analyses; building o f the local road construction capacity and creation o f jobs; improving road and bridge standards; training and capacity building that included institutional reform studies; and maintenance and rehabilitation o f 5900 kilometers o f roads. Although the

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RRMP initially experienced problems that negatively affected progress that resulted in the cancellation o f a large portion o f IDA Credit (USD 12.6 Million), at mid-term o f the project, the Government was however able to improve performance to successfully complete the RRh4P with the remaining resources. This experience has made it possible for the Government to approach IDA to fund the Proposed lntegrated Transport Project (ITP) with confidence that the requested resources will be fully utilized to achieve the objectives identified.

2. COMPREHENSIVE TRANSPORT SECTOR POLICY

The Transport Sector Policy aims at developing and unifying existing specific sub-sector policies into a comprehensive transport policy. The Government’s Transport Sector Policy i s meant to provide an enabling environment for efficient, cost effective and safe transport, within Lesotho, regionally and internationally; to facilitate sustainable development o f the economy; social services and o f the population in general. This Policy i s underpinned by comprehensive transport sub-policies which are:

i.

11.

... 111.

iv.

V.

vi.

vii.

... v111.

ix.

X.

Planning for an integrated transport system for the entire country, using al l modes in complimentary roles, to serve the economy, a l l sectors and the population at large in both the urban and rural context, with the appropriate level o f service.

Ensuring the maintenance o f existing transport infrastructure, as a priority to protect the enormous previous investment in this valuable commodity.

Rationalizing where necessary, and upgrading or extending where justified, transport infrastructure, in accordance with the planning for the integrated transport system.

Facilitating safe and efficient international movement o f goods and persons, by air, rail and road transport, through development and implementation o f multi-lateral and bi-lateral international agreements.

Facilitating, promoting and enabling private entrepreneurs to provide the transport infrastructure and services necessary to meet demands o f the economy and the population for transport in each o f the modes, on a commercial, competitive, transparent, and accountable basis.

Ensuring and improving safety in all modes o f transport.

Developing relevant skills amongst poor members o f society that will help them make rational investment decisions giving due regard to financial constraints, in providing transport infrastructure and services, even if the cost recovery i s not guaranteed.

Applying, as far as possible, cost recovery principles to ensure that direct operating and maintenance costs for facilities and services are recovered through direct charges, as the main key to sustainability.

Investigating and where appropriate, developing intermediate and non-motorised form o f transport, especially where these can enhance the quality o f l i f e for the rural and urban poor.

Promoting and ensuring that inland water transport i s developed safely and appropriately to serve communities in areas surrounding lakes, or in areas where access i s only possible using ferryboats across water courses.

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xi.

xii.

... x111.

xiv.

Ensuring socio-economic, environmental, good governance, employment creation, safety and security, gender and HIV and AIDS issues are dealt with holistically in policy formulation and in the planning and implementation o f operation for the development o f the Sector.

Ensuring that the transport needs o f priority population groups such as herd boys, children, orphans, youth, teenage mothers, domestic workers, illiterates, people with disabilities, guardians, elderly, the sick, women and correctional services inmates are included in policy formulation, planning and implementation o f transport infrastructure and services.

Mobilizing Sector-wide skills, expertise and support by consultation on policy, planning and issues relating to transport, on the widest possible basis.

Maintaining eff ic ient and appropriate institutions and structures to administer the Sector, coordinated under a Ministry responsible for Transport, which have responsibility for the administering the following sub-sectors:

a. Road Infrastructure b. Road Transport C. Air Transport d. Road Safety e. Rail Transport f. Inland Water Transport €5 Intermediate Means o f Transport

Specifically, the Ministry w i l l plan for and administer the integration o f the various modes o f transport into complimentary roles in the overall transport system. At the same time, it w i l l monitor and address transport related problems o f priority population groups and cross cutting issues o f a social, good governance, gender, environmental and HIV/AIDS nature in line with detailed transport sector policy and suitable legislation for the Sector.

3. INSTITUTIONAL DEVELOPMENT

I t i s the Government’s intention to restructure and rationalize the structure and the management o f the MOPWT by right-sizing in l ine with the Public Service Reform process, This i s even more important in the light o f the approved reform within the roads sub-sector and decentralization o f some responsibilities to Local Authorities. It means therefore, that the MOPWT wi l l focus more intensively on the planning; policy formulation and implementation; coordination o f investment projects; monitoring; evaluation and impact analyses. The Ministry’s focus w i l l be more on standards, quality assurance and regulatory framework setting through i t s various divisions and departments (some departments are more on the building construction, architectural and engineering fields). The Ministry w i l l also continue its efforts in tackling the scourge o f HIV and AIDS by ensuring that in all transport sector operations, HIV and AIDS awareness, prevention, care, support and treatment campaigns and initiatives are incorporated.

The departments and or divisions that w i l l be affected by the rationalization are (i) Department o f Traffic and Transport (ii) Planning Unit (iii) Building Design Services Department (iv) Department o f Civ i l Aviation (v) Accounts Section (vi) Human Resource Department and (vii) Department o f Road Safety.

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3. I INSTITUTIONAL REFORM IN THE ROADS SUB-SECTOR

In line with the decentralization policy and in order to improve the efficiency o f delivery in the roads sub- sector and to achieve the desired ratio in the road sub-sector o f about 4 employees per 100 kilometers o f road in terms o f internationally acceptable average ratios, the Government has approved Policy Paper on Reform within the Road Sub-sector. It i s the Government’s bel ief that by the reform o f the road sector, efficiencies wil l be realized through overhead savings, retention o f professionals, greater participation o f the private sector in the maintenance, development and rehabilitation o f roads, better designed and maintained roads, lower vehicle operating costs, transparency through greater stakeholder participation and ultimately, the reduction o f poverty through creation o f more jobs.

3.1.1 Establishment o f a Roads Directorate

The plan o f the Government i s to reform and restructure the road administration in Lesotho by the establishment o f the Roads Directorate. Presently the authority for roads administration i s vested with the Principal Secretary for Public Works and Transport. Under the restructured set-up, that authority would be vested with the Roads Directorate that would be headed by the Director General, and administratively answerable to the Principal Secretary o f the Ministry o f Public Works and Transport. The Director General w i l l be assisted by five Directors in charge o f the fol lowing sections:

(9 Roads Network Planning (ii) Roads Network Development (iii) Roads Network Maintenance (iv> Roads Quality Assurance (v) Administrative Support Services

The functions o f the Directorate wi l l be to:

i

11 iii

iv

v i

v i i

vi i i i x

V

X

x i x i i

... X l l l

Prepare proposals and designs for construction and upgrading o f roads o n the primary and secondary roads network. Plan, design and implement road maintenance programs for a l l primary and secondary roads. Procure and manage contracts for development and maintenance o f mainly primary and secondary road projects. Carry out traffic and condition monitoring on any roads, as and when found necessary. Prepare strategic road network development plans. Set and enforce road construction and maintenance standards across the country and carry out technical and performance audit for a l l public roads in Lesotho. Contribute to the development o f the road construction industry in Lesotho by development of contractors and consultants. Undertake assessment and classification o f road construction contractors and maintain a register. Provide technical training in equipment based and labour based methods o f road construction and maintenance. Provide technical support to District and Community Councils for road maintenance and development on consultancy basis. Acquire and protect land earmarked for road network development. Determine and make recommendations to the Minister on the need to declare road reserves and building restrictions along any road. Determine and make recommendations to the Minister on the need to declare corridors for road network development as selected areas.

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xiv

xv

x v i xv i i

The

Identify and select a suitable place from which to source material such as quarry necessary for construction and maintenance o f roads and request a relevant authority to set aside such land for that purpose. Ensure mitigation o f negative environmental impacts f rom road construction and rehabilitate affected areas, in accordance with environmental guidelines. Recommend to the Minister toll ing o f any road under i t s jurisdiction. Protect a l l road furniture and ensure cost recovery f rom offenders who damage road furniture and the road itself .

primary reason for restructuring the roads sub-sector into a Directorate i s due to the need to commercialize the operations o f the roads sub-sector in order to achieve efficiency and effectiveness; to have adequate funds for road maintenance in order to protect the enormous investment in the existing road network (approximately L S L 6 billion), to retain the professional staff for management o f road assets, and to give road sub-sector the right profi le and to empower it to have operational autonomy through legislation. Thus, even though the Directorate wi l l be a Civil Service institution, it i s planned to enrich i t s j o b content as wel l as to empower it to carry out critical functions under the roads sub-sector. T o this end, the Directorate wi l l be mandated to undertake above functions that wi l l ensure a comprehensive and an improved scope o f the management o f the sub-sector, at the core o f which w i l l be improved implementation o f road network development and maintenance.

More clarity as to responsibilities in the sub-sector i s now assured by decentralization and formation o f the Directorate. The roads have been classified into four distinct types for purposes o f clearly indicating their status within the network and those that wi l l be the responsibility o f the Directorate as opposed to those that wi l l fa l l under Local Authorities.

Roads under the Roads Directorate

Primary roads, which are a l l inter-district roads and roads on main corridors, including international links, part o f primary roads that bypass town centers and primary roads which pass through city centers and urban areas where there are no bypasses.

Secondary roads, which are roads within a District to major communities/points o f economic importance.

Roads under the Local Authorities

Tertiary roads within a District, which cut across more than one community Council, which are not secondary roads.

Feeder roads, which are access roads, streets, tracks and bridle paths entirely wi th in a single Community Council.

Urban roads, which include roads, streets and Intermediate Means o f Transport infrastructure within urban areas.

In addition to the above, the Local Authorities shall remain responsible for roads that enter into the city/towns where there are primary roads, which by-pass towdc i t y centers and for lighting o f al l primary and secondary roads within urban and city limits.

The Directorate shall be responsible for setting and monitoring road standards in the country through i t s Quality Assurance section. In addition, it wi l l continue to implement works through labour-based and

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equipment-based methods wherever possible and it will make use o f consultants and contractors. However, one o f the major challenges facing the proposed Roads Directorate i s to convert the well established force account maintenance o f the primary and secondary road network, into a maintenance contracting system.

This reform i s a first step towards restructuring o f the road sub-sector which may lead to formation of a semi-autonomous roads authority which i s in line with the regional and international standards and practices as encouraged by the Southern Africa Development Community (SADC), the World Bank, United Nations and Economic Commission for Africa (UNECA) through the Sub-Saharan Africa Transport Policy Program (SSATP).

3.1.2 Roads Infrastructure Sub-sector Policy

The Government’s overall policy for roads infrastructure as stated in the Transport Sector Policy (2006 Feb.) i s “to manage, through the Roads Directorate and Local Authorities, and ensure that the existing roads are comprehensively and regularly maintained, are rehabilitated when required, and are upgraded and extended in an efficient manner, to meet the needs o f the economy and the population”.

This policy will be implemented through number o f strategies including but not limited to the following;

(i) Creating and maintaining comprehensive database and condition records o f a l l roads and bridge infrastructure.

(ii) Updating the existing classification o f roads and applying this classification to a l l roads (iii) Developing a comprehensive plan and strategy for roads and access infrastructure

maintenance and development, this will be coordinated by the MoPWT in consultation with a l l road agencies. Ensuring that all roads are comprehensively managed with routine maintenance, periodic maintenance and rehabilitation at appropriate intervals, in order of priority for funding. Upgrading roads to reduce transport costs, where traffic flows, economic analysis, socio- economic assessments or maintenance requirements indicate that improvement i s justified. Continuing to commercialize operations in the road infrastructure Sub-sector by:

(iv)

(v)

(vi)

a. b.

d. C.

e.

f.

Reducing force account units to agreed minimum levels. Privatizing maintenance operations. Contracting out road works generally as far as possible. Offering training in labour based works and small scale contractor operations to personnel locally and from other countries. Ensuring, as far as possible, that sufficient works are contracted out in a manner that will sustain the industry and maintain a healthy level o f competition among contractors. Offering technical and laboratory services in the industry where no other commercial sources o f these services exist.

(vii) Continuing to promote and develop the local road construction industry by:

a. Encouraging the formation o f an Association o f Contractors for the benefit o f the industry and to provide a forum for interaction with the Government.

b. Facilitating training o f contractors in operational and business skills.

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c.

In implementing Road Infrastructure policy, the Sector wi l l ensure that:

Encouraging professional and technical development by requiring the use o f qualified personnel by such contractors.

(vii)

a. Lesotho Road Design Standards are maintained up to date. b. All roads are constructed and maintained in accordance with these Standards. c. Ensuring that there are funds allocated for maintenance o f a l l new infrastructure.

4.

With a merger o f both the recurrent and capital budgets under the Government Medium-term Expenditure Framework (MTEF), the Ministry wil l strengthen the budgeting capacities o f both accounts and Planning functions with the Finance Section, playing a more collaborative and symbiotic role in the budgeting and programming o f the Ministry’s finances. The Government has embraced the MTEF and exercises such as the Public Expenditure Review (PER) to annually analyse, review and revise the allocation o f the Ministry’s financial resources.

FINANCING, DEVELOPMENT AND MAINTENANCE OF ROADS TRANSPORT INFRASTRUCTURE AND SERVICES

4.1 ROAD MAINTENANCE FUNDING Funding for road maintenance has been one o f the driving issues behind the establishment o f the Road Fund and Road Fund Board in 1995, and remains a key issue in the success o f the proposed institutional reform for the roads sub-sector. The pivotal role that the Road Fund wil l play i s to receive and administer al l the revenue available for road maintenance. The policy o f the Road Fund which i s to fund, first, routine road maintenance, then periodic maintenance, has been entrenched in the operation o f the Fund. The Road Fund has been established as the f i rst step in placing the maintenance o f roads, as far as possible, on a user charge basis. It has encountered several problems in the earlier years, suffering f rom administrative problems and a lack o f staff at various times. The problems have now been resolved and operations are normal and there i s now a second generation Road Fund.

While the road network i s generally in acceptable condition (paved roads are 60% good and 30% fair while unpaved roads are 20% good and 50% fair), it i s o f concern to the Government that the study of Road Maintenance Needs and Funding (2003) indicates a shortfall o f about 40% o f the estimated required routine and periodic maintenance funds (LSL 90 M i l l i o n annually). The Road Fund collects only about 28% o f the funding necessary for road maintenance from road user charges and 32% o f the road maintenance i s subsidized by the Government as a result, the condition o f roads i s deteriorating due to the fact that some roads do not receive maintenance funds at all. In order to restore the roads asset and to start to make up for the shortfall in financing o f road maintenance, the Government has approved increase o f road user charges as follows:

(i) The Road Maintenance Levy (RML) has been increased by 100% to 30 LisenteLi t re o f petrol and 40 LisenteLitre o f D iese l (effectively increasing the price o f fuel) with effect f rom lst June 2006.

(ii) Border Post to l l charges wil l be increased at an average amount o f more than 300% with effect f rom lst July 2006.

(iii) Vehicle licenses have been revised as a majority o f the current ones were set in 1981 and a few revised in 2001.

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As a result o f above increase in user fees, the Government wi l l increase Road Fund Revenue through user fees to achieve about 64% coverage o f full routine and periodic needs o f road network in 2006/07. As this w i l l raise only part o f the required revenue, Government w i l l allocate some revenues from general taxation to road maintenance, continuing the inequity o f this financing mechanism. Accordingly, it i s planned that road users begin to shoulder the full cost o f road maintenance through gradual increase o f user charges over a period o f four (4) years starting from 2006/07 to 2009/10.

For Road Fund to effectively manage this increased revenue, i t s structure wi l l be improved as envisioned in Road Fund Regulation o f 2005. Furthermore, routine and periodic maintenance o f the country’s road network wi l l be taken as a priority and no other road works can be financed unless maintenance i s fully funded; and measures wi l l be investigated and undertaken to ensure that administrative costs o f the Road Fund are brought to reasonable levels.

4.2 ROAD REHABILITATION FUNDING

Road rehabilitation funding i s an element o f maintaining the road network which has been growing in the recent past, due both to the rapid expansion o f the road network, indicating a growth in the amount o f road that will, in time, be rehabilitated, as well as the ageing o f large portions o f the network to the point where this type o f treatment i s necessary. I t i s acknowledged that, for true sustainability o f the network, the rehabilitation o f roads should be undertaken out o f Government’s own resources. However the present need to open up areas to serve rural poor, and provide access for poverty alleviation purposes means that a balance between this capital expensive exercise and the poverty alleviation strategies must be maintained. In the short term, the Government therefore anticipates continuing to source funds for vital rehabilitation activity from external donors. Both donor grants and soft loans w i l l continue to be the preferred methods o f funding. In the longer term, as the country’s economy improves, i t i s the Government’s intention to increase funding for rehabilitation purposes from i t s own resources.

The successful transition from force account to contract system in the maintenance and rehabilitation o f some o f low volume secondary roads w i l l be further pursued through use o f trained labour-based small scale contractors. The private contractors w i l l also do the maintenance o f primary and other secondary roads during the project period. All primary road rehabilitation i s already done by contract.

The Government has actively encouraged the development o f local road construction industry and has since 1994 to date, provided training to approximately sixty contractors to carry out small-scale contracts. The Government intends to continue with further development o f the local industry by means o f training, formulation o f local construction industry policy and encouragement o f professionalizing the industry.

4.3 ROAD DEVELOPMENT AND UPGRADING

Roads within the network are continually reaching thresholds where upgrading i s economically justified, and new links in the network need to be established to serve areas where there has previously been no access for normal vehicles. Government sees provision o f basic access as being a key element to alleviate poverty in remote rural areas.

The lowlands o f Lesotho are relatively well served with the existing road network. The rugged and mountainous terrain has made it impossible for the Government with limited resources to develop the mountain region. This has left a significant number o f the population living in these mountainous areas, without access to any o f the basic services and commodities necessary to overcome their poverty.

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Therefore, the Government approach to upgrading and development o f roads wil l be based on amongst others, the following;

i. Progressive development o f corridors that improve transport integration within the country and with the surrounding Republic o f South Africa, especially o n the routes that provide access to the sea ports.

ii. Upgrading roads to reduce transport costs, where traffic flows, economic analysis, socio- economic assessments or maintenance requirements indicate that improvement i s justified.

iii. Ensuring that the Roads Directorate and the Local Authorities provide for the special needs o f rural access, labour based work methods and employment creation to alleviate poverty in areas where road operations are carried out.

iv. Plans for development o f any road must be approved by the Ministry o f Public Works and Transport.

4.4 ROAD TRANSPORT SERVICES AND SAFETY

The road transport continues to be the most important mode, with more than 90% o f passenger’s traffic and approximately 66% o f goods transported by this mode. Most road transport operations are already in the hands o f the private sector and government i s already in i t s rightful role o f regulator and will continue to encourage private entrepreneurs to provide public passenger and freight transport on a commercial basis to best meet the needs o f the economy and the population. The review o f existing policies and regulations i s ongoing with a v iew towards enabling efficiency, profitability and safety in the sub-sector. To assist this process, Government has already started the road transport information systems to obtain vehicle, driver and other traffic data to provide a platform for improved administration o f the sector.

The Government puts special emphasis o n road safety. The poor safety record in Lesotho as illustrated by the number o f road accidents (3678 accidents in 2004) and fatalities (69 fatalities per 10,000 vehicles in 2004) demands attention. Through assistance from various donor agencies, the Government wi l l strengthen the newly established Department o f Road Safety by employing qualified professionals in road safety and actively increase awareness o f the need for road safety, through the establishment o f a Road Safety Council, promoting and encouraging campaigns to reduce road accidents, identify accident problem areas on the road network and develop holistic solutions to these by safe sharing o f the road facilities within the project period. Furthermore, the Government wi l l provide training and equipment to the recruited staff to sharpen their effectiveness and efficiency in the quest to reduce the accidents by 20% during the ten years plan period o f the TSP.

The Government wi l l increase the number o f traffic police and inspectors o n the roads and review and revise old traffic laws. The National Traffic Information System (NATIS) wi l l be introduced in al l districts o f Lesotho. Due to the shortcomings o f NATIS, during the project period the system wil l be reviewed and modified to minimize the shortcomings. This wil l improve data collection and licensing o f vehicles. The use o f weighbridges to curb the incidence o f overloading that lead to rapid deterioration o f roads and fatal road accidents wi l l continue. Advanced (defensive) driving lessons wil l be maintained for the public transport operators and drivers.

To augment the above efforts, the Ministry will, in collaboration with Maseru Municipal Council (MMC), commission a study called Maseru Urban Planning and Transport Study. This study wil l entail an in- depth assessment o f urban planning policies, procedures and enforcement, as wel l assessing existing

75

urban transport services, facilities, planning processes, institutional arrangements in order to identify where existing systems fal l short o f expectations. Through i ts recommendations, the study i s expected to help to improve the transport system.

5. COORDINATION, POLICY, MONITORING AND EVALUATION

The planning and policy formulation skills wi l l be enhanced during the plan period. I t i s the intention o f the Ministry to provide policy formulation ski l ls and to improve planning techniques and effectiveness to i t s planners and economists. This wil l be done through on-the-job training, long and short term courses, and study visits to various SADC countries.

Since the core functions o f the Ministerial Planners include budgeting; data collection, analysis and dissemination; research and coordination o f projects, ski l ls in these areas are essential.

T o ensure that the Policy formulation takes place, the Planning Unit has expanded by adding the statistical and research division. This unit will help in the consolidation o f various statistics that exist within the various departments o f the Ministry. The Ministry wi l l set up a Transport Information System that wi l l be integrated to al l the Ministry’s departments, with a further long-term vision o f integrating the system to the districts. These statistics wi l l also include information sourced through Lesotho Road Maintenance System (LRMS). Competencies in the above areas and others w i l l ultimately see the present unit being transformed into a fully-fledged department which wil l coordinate al l capital investments and assist in formulation o f transport policies and strategies for the Ministry including for the Directorate.

6. OTHER TRANSPORT SUB-SECTORS

Government wi l l continue to maintain efficient and appropriate institutions and structures to administer the other transport sub-sectors, coordinated under a Ministry responsible for Transport, which shall have responsibility for:

Providing air transport infrastructure, including a fairly equipped international airport and a rational network o f aerodromes and airstrips through out Lesotho, and administering air transport to facilitate safe, reliable and efficient air transport services to meet the demands o f the economy and the needs o f the population, both internationally and domestically.

0 Developing and promoting safe and efficient use o f Intermediate Means o f Transport and infrastructure where appropriate.

Administering ra i l transport to facilitate safe, efficient and effective ra i l transport, and to facilitate improved mode transfer services, to serve the import and export demand o f the economy satisfactorily.

0 Promoting, administering and regulating inland water transport to compliment other transport modes safely and efficiently.

During the project period, the Government w i l l carry out an integrated transport study which wil l lead to formulation o f specific transport sub-sector policies and regulations.

6.1 AIR TRANSPORT SUB-SECTOR

76

The development o f Lesotho tourism industry and the air transport sub-sector are closely intertwined. It i s the Government’s policy to improve maintenance o f rural airstrips for disaster preparedness and flying doctor purposes in the remote inaccessible mountain areas, as wel l as the development o f the Moshoesohoe I International Airport (MIA) for freight and international passengers. The passenger traffic between MIA and Johannesburg declined by 34% between 1995 and 2001 and has stabilized at an average o f 25,000 per year. The cost per passenger has on the one hand increased by 25% between 1999 and 2001. The Government wi l l continue to maintain the MIA by amongst others, replacing the obsolete safety and security equipment and providing training for the aviation staff. The Government i s looking into options o f introducing l imited domestic passenger flights into some parts o f Lesotho. The latter wi l l help stimulate tourism into the remote mountain areas in the light o f jo in t ventures between the R S A and Lesotho in the preservation and establishment o f nature parks along the mountain border areas between the two countries.

6.2 INTERMEDIATE MEANS OF TRANSPORT (IMT) SUB-SECTOR

The need for people in the urban, most remote, and sparsely populated areas to have reasonable access to the main transport network necessitates consideration o f development o f non-motorised and intermediate means o f transport. Pack animals and or motorcycle-based transport can significantly reduce transport costs if such systems wil l meet the needs o f the urban poor and communities in the remote villages. Further research and development o f these proposals are intended during the project period. In addition, there i s a need to do the following:

a. Provide standard designs for infrastructure to facilitate the provision o f WIT services to these sections o f the population on a rational and prioritized basis; and

b. Promote and assist the provision o f IMT services that are appropriate and affordable, especially in the areas identified.

6.3 INLAND WATER TRANSPORT SUB-SECTOR

The Government inland water transport policy i s to provide safe, efficient, economical and environmentally sustainable inland water transport system and it wi l l be implemented by:

a) Developing and implementing inland water transport policy and legislation. b) Facilitating the commercial operation o f ferries across rivers and lakes. c) Encouraging the development o f water transport on the lakes in Lesotho, to serve the

communities living in these areas. d) Providing ferry crossings o f major rivers at strategic points where no other means o f

crossing are available. e) Ensuring that conveyance o f goods and passengers by boat i s operated to the appropriate

standards o f environment and human safety.

During the project period, in addition to the provision o f riverboats across large rivers as part o f transport system, the Government wi l l formulate comprehensive inland water transport policy and regulations.

6.4 RAIL TRANSPORT SUB-SECTOR

Rai l transport used to be an important mode o f transport for both passengers and freight on the international routes. But over the years, the road transport took over and it i s now the most important mode o f transport for both passengers and freight or cargo. It i s worth mentioning that Lesotho has about

77

2km o f rai l that extends from the Maseru Border Post to the container terminal. Due to the increasing demand for rail transport between the RSA ports and Lesotho railway terminal, the Government made feasibility study with the assistance o f EC into measures that need to be taken in order to improve and expand the rail terminal to efficiently store and process the containers that keep on increasing with Lesotho’s industrial developments. The Government o f Lesotho and Republic o f South Africa’s Spoornet Company i s making pre-feasibility studies into the possibility o f making a rai l track that will run through Lesotho from western part to the eastern region to the ports o f Durban or Port Elizabeth. It i s the Government’s rai l transport policy to:

i. Maintain a dynamic liaison between all role players in the Rail Sub-sector, convened on a regular basis and coordinated by the Ministry o f Public Works and Transport.

ii. Facilitate coordinated planning for rai l transport to compliment and be complimented by other modes in the transport system.

... 111.

iv.

Encourage investment to provide suitable facilities for a modern mode interchange, and station facility in Maseru. Investigate the feasibility o f extending the rail infrastructure to serve industrial areas that justify such investments, and investigating the possibility o f mobilizing investors for such facilities.

7. ENVIRONMENTAL MANAGEMENT, COMPENSATION AND RESETTLEMENT

The Government will ensure that the environmental concerns are thoroughly assessed before any project i s implemented. The Ministry will establish either within the Planning Department or as a stand alone, an environmental unit that will be manned and equipped with qualified environmentalists who will make sure that every project complies with the minimum environmental standards as promulgated in the country’s statute books and donors’ requirements. Furthermore, due to the nature o f work to be carried out by the Roads Directorate; it will employ one environmental and social officer. Specifically the Ministry including the Directorate will:

i. Continue and improve measures to protect the bio-physical and socio-economic environment in accordance with donor community requirements; relevant national and international legislation, where road infrastructure development and transport service operations have resulted in adverse environmental impacts.

ii. Ensure fair and equitable compensation and relocation policies are applied in acquiring property for road construction or abstracting road building materials.

8. HUMAN RESOURCE DEVELOPMENT AND MANAGEMENT

The Government has introduced departments o f human resource management at all its sectors or ministries. The MoPWT has recruited a Director o f Human Resource and other senior human resources officers within each department. The Ministry will improve the stature and importance of this department as it i s the linchpin o f the Ministry’s success. Motivated, efficient and resourceful staff i s an asset for any organization. The Human resource department wil l play a very important lead role in the proposed institutional reform processes o f the MOPWT. The Human resource section will be established within the Directorate to assist in al l human resource related issues.

78

9. HIV AND AIDS

The prevalence o f HIV and A IDS infection in Lesotho i s said to be around 30 percent. The hard hit sectors include transport, where a high infection rate o f freight and passenger operators i s found. The Ministry o f Public Works and Transport, in line with the Government strategy, wi l l intensify i t s efforts in the prevention strategies by amongst others, holding workshops, seminars, fun walks, awareness campaigns, games, music concerts and providing counseling services to both the infected and the affected. The provision o f free condoms wil l also be increased. There i s a concern that if the Ministry does not intensify i t s efforts in the fight against the disease, i t s professional staff with rare ski l ls wi l l also be seriously affected thereby curtailing the nation’s operations and capabilities. Due to these, the Government i s intensifying implementation o f i t s strategies to reduce the negative impact.

10. OTHER IMPORTANT MOPWT NON-TRANSPORT INITIATIVES

The Ministry’s Building Design Services Department i s one such area that the Government has intended that it improves i t s service delivery. The department i s responsible for a l l GOL buildings in Lesotho and abroad. It designs, constructs, supervises and maintains the buildings through i t s architects, surveyors, engineers and technicians sections. The Department can also benefit by rationalizing i t s service delivery, improving management and acquiring sk i l ls in procurement and contracts law as wel l as increasing i t s sk i l ls in computer based designing program. The Department categories and accredits contractors in Lesotho. During project implementation, the Ministry wil l formulate the Construction Industry Policy with the purpose o f creating enabling environment for development o f construction industry.

79

Annex 15: Country at a Glance

Lesotho: Integrated Transport Program

Lesotho at a glance 8/130 6

POVERTY and SO ClAL

2bb5 Population. mid-war fmMr?iOnsl . G NI per capita (A L s method. Usm

Averane annwl nrowth. 1999-05

Population f%) Labor brce f%)

Most reoert estimate [latest war available, 1999-051

Povem f% ofpopmbdmnbe/ownadiona/ p o r e r f v k e l b a n ~ w u l a 8 o n A otbtalmpmbCon) Lile expeaancvat birth (warn) hfant moftalh h e r 1,000 #re births) Child malnutrition i%otcMdmnundPrS) h e s s t o an imDroUed watersoume f%ofpoaulbtiorrl Litenc~f%ofpop&dmnaae 15+) Gross primarvenrollment f% o f s c h o k a e population)

GNI f A L s method. US$ b W n s )

hbk Femle

KEY ECONOMIC WTIOS and LONG-TERM TRENDS 1985

GDP fUSS bAJhns1 029 Gross mpbl fumation/GDP 43.5 6 ~ c r t s of aoods and senicesm DP 14.1 Gross domestic sawnasmDP -66 6

h r e n t account balanoelO DP -42 hteren pawents4GDP 1 A Total debtmop 60 6 Total debt servioehxports 6 8 Present ualue ofdebtlGDP Present ualue of debtkxports

Gmss nnional sb4nasiG DP 38 6

1985-95 1995-05 fareraae an^/ proOHth) GDP 5.3 2.3 GDP ~ e r eabita 3.9 1 7 € w o r n vf avvds and senices 9.8 14.1

Lesotho

1.8 950 1.7

0.2 -0.3

l e 38 80 18

82 131 131 131

70

1995 0.Q3 60.5 21.3

-38.4 26.8

-32.3 1.7

73.4 6 .O

2004

3.1 3.3

13.0

Sub- Lover- Sahran middle-

Africa lrcome

741 2,475 745 1.918 552 4,747

2.3 1D 2.3 1 4

37 48 48 70

100 33 29 12 56 82

89 93 114 Q Q 115 87 113

2004 2005 1.4 16

41.1 42.1

-7.7 -2 8

-4.3 -0 2

55.8 55.0

33.9 38.7

55.8 1.1

4.9 40.9 51.6

2005 2005-09

1.2 16 1.4 0 4 3.2 - 1 a

U* expectancy

T GNI Gross >er --I primary

enrollmem :apita

3cricrric ratio9

Tnde

I

hdebtedness

~ ~~~

STRUCTURE oft he ECONOMY

f%ofGDPI &ancubre hduslrv

SeMms

kbusehold final conarmmion emendmre Genenl a o h Inal consumtion exoenditure hpvrts vf avvds and Serwces

Manufaaunna

faWraWQ ar?/?Ud/QfO&h) rn r icub re hdusVv

Seruioes

tbusehold final consumption ewendiarre Geneml pout fnal consumtion expendnure Gross capiel fometion hports of aoods and services

Manufaacturina

1985 1995

228 17.8

500 42.9

272 39.3 122 15.9

1453 120.4 20.7 17.9

1240 120.2

1985-95 1995-05

10 1.5 8 9 3.4 8 3 4.2 43 2.2 3.3 -2.4 2 8 0.0 9.7 -0.3 5 3 0 .o

2404 2045

17.1 17.5 43.1 40.0 20.3 19.2 39.8 41.5

93.5 88.4 14.2 14.4

104.8 99.8

2004 2005

0.2 28 3 .O 5.8 4.4 3.8 5 .1

-4.7 6 .7 -2.7 3 D 4.5 7 A

Erorvthof clpitai and GDP l%l I

Growthd ewa-ts and i rnpats (%I I a

13

0

.I5

M e : 2005 data are preliminaryeslimates. Thiseble was pmducgd tvmthe Develvpment Ewnvrrics LDB database. 'The diamnds show burkevindieatorsinthe coumrv[in bo1d)oompared with its lnmme-Qroupa\enae. lfdata are missina.the diamnd will

be incorrolete.

80

PRICES and GOVERNMENT FINANCE

Domestic wkes f%cchafiWeI Conamer prices tnplicit G DP delator

G ~ e m m n t f i n ~ t ~ e f % o f G D P , h c M s c m F A ~ m & ) Current revenue Current budaet balance O e i a l l surplusCdelcit

TRADE

(US$m AVons) Total e m o m [fob)

Clothing and h e r goods Machinewand othe requipment Manufauures

Total impom (ufl Food Fuel and enemv CaDital aoods

Emit price index IZPPO=f PPI tnport price index PPOP=1QQI Terms o f m d e QPPO=1OBI

BALANCEd PAYMENTS

(US$mAVonsl Emortsof aoodsand senices tnportsofaoods and seruices Rsource balance

Net inmrne Net currentmnsfers

Current acmunt balance

Finandna items (net) Changes in net resems

M m R s e m s includina aold {US$ mNons) bnwrsion rate? ( O K , bcaVUS$)

EXTERNRL DEBTard RE SOURCE FLOWS

fUS$mAVons) Total debt ovtstandina and disbursed

IBRD IDA

Total debt senice IBRD IDA

Oflcial amts Oflcial creditors Private credtors Foreign direa inwstmemt (net inflows) Portbli o eguitv(na inlows)

World Bank tmaiam Commitments Disbursements Principal repawrents Net l o w s hterest paments Net man sfers

bmposition of net resource flows

1985

142

24.4 69 5s

1985

1985

41 360

-319

233 74

-12

18 -6

44 2 2

1985

175 0

62

19 0 1

45 35 -6 0 0

4 8 b 8 1 8

1995

9.3

480 16D 0.3

1995

151

913

1995

193 1 p 4 2 -849

33 7 210

-30 1

41 0 -109

439 3.6

1995

88 4 5 4

153

41 4 2

59 37 12

275 0

11 20

1 19

5 14

2004

6 3

45 .1 10 5

3 .4

2004

640 470 13 99

1.230 292

55 132

128 100 128

2004

703 1.329 -626

314 253

-59

111 -52

443 6 5

2004

764 16

268

53 4 7

61 4

-9 123

0

14 16 8 8 2 5

2605

3 8

47 8 112 3 5

2005

673 494 14

104 1 2 5 1

297 56

134

133 1 OD 133

2005

738 1352 -614

324 287

-2

-4 6

447 6.4

2005

13 258

4 7

13 g 5 3 2

I

I Expat ard irnprt IeYelS [US$ mill .]

C u r d accout bdarce to GDP b3 I

C a r p c d i o n o f 2 m 4 d e t t [ US$ mill .] I

b e : Thistable was produced t o m me Oewlopment Economics LDB database.

81

8 n 3106

MAP SECTION

T H A B A - T S E K A

Q A C H A’ S N E K

Q U T H I N G

M O H A L E ’ SH O E K

M A F E T E N G

M A S E R U

L E R I B E

B E R E A

B U T H A -B U T H E

M O K H O T L O N G

Project bridgesand connecting

road

To Fouriesburg

To Clocolan

To Fouriesburg

To Bloemfontein

To Himeville

To Himeville

To Lady Grey

To Matatiele

To Kokstad

To Dewetsdorp

To Zastron

MakhalanyaneMachekoaneng

Matukeng

Boinyatso

Mokema

Khoarai

CheleMofoka

Bereng

Tsoaing

RotheThabana-mohlomi

Mapotu

Makotoko

NazarethKhotso

St. Michael´s

Thuathe MasheanePitsaneng

PulaneMateka

Sefikeng

Hangers drift

Berea MissionMaqhaka

Senekal

Rakolo

KolonyamaToloto

MamatheMokhathi

Phoofolo

FobaneMakhula

LintsaRamaboela

Qamo

Tabbla

Maputsoe

St. Monica´s Mission

MpharaneMathokoane

Mate

Levi´s nek

Mahobong

Manase

Matlakeng

Caledon´spoort

SerutleJoels drift

QhobelaHlasoa Malefiloane

Mohapinyane

MakhunoaneLibono

Monontsa

Liqhobong

Oxbow

Ramalieletse

KaoNkoeng

Matlameng

KoasaPitseng

Ramapepe

Bela-bela

Khotsi

Phororong

Mohlokaqala

Mathealira

Peka bridge

Linakeng

Mothae

Letseng-la-terae

QaqaPae-la-ithlatsoa

Khethisa

Molika-liko Masaleng

Lechesa

Boiketlo

MalefiloaneSakeng

Mateanong

ThabangNtlenyana

Sani Pass

Motsehare

Rafolatsane

Molumong

Tlokoeng

Ralebese

NomorongNkisi

Lejone

Seshote

Methafaneng

Mokhethi Bobete

Bokong

Mohlanapeng

Letuka

Mantsonyahe

Nyane

MafaThaboMethalaneng

Monyahane

Tsoeunyane

Moalosi

Marakabei

Lekhooa (Makefane)

Likalaneng

Thaba-putsoaMolika-liko

Jordane

MoitsupeliTlali

MakoetjeTsilo

Phohleli

MatsiengMorija

Motsekuoa

RamohapiTsakholo

Tsupane gate

Van Rooyens gateRamoihloe

Mohlehli

Bongalla

Ramohapi

Sephuta

Shale

Malumeng

Khobotle Qaba

Matelile

Malealea

Thabana-MorenaLeboto

LifatengTsoloane

Sephapo´s gate

Mohalinyane

Riet-Vlei

Moletsane

Old Hoek

Tsepo

Morabe

Qobong

Mafika-lisiu

Mokhethi

Ntsupe

Ramabanta

Semonkong

MokopungBolatella

KubungQhoali

Mphaki

Malibe

LethenaMt. Moorosi

Qiaita

Nohana

TosingPontseng

St. Gabriel

BolahlaMakatseng

Ntho

BasiengLihlabeng

KosaSeaka

MasitiseTele bridge

Dilli-dilli

Sixondo

Ntozimande

QomoqomongLiphapeng

Ongeluk´s nek

Qanya

Tebellong

QhobaneMaseepho

Mpiti

MaqasaneMpakising

RankakalaTsoelike

Moshebi

RamokakalaMosiuoa

Sehlabathebe

Semenanyane

Sephelane

TaungBokhoasa

Koma-koma

Khutlo-se-metse

Lesobeng

Maseru bridge

Security Boom

Ramahlape

BorderMasiloHa Hoolo

Masianokena

Lake Sid

Moletsane

Thamblock

St. Theresa

Mafeteng

Mohale’sHoek

Quthing

Thaba-Tseka

Mokhotlong

Butha-Buthe

Leribe

Teyateyaneng

Qacha’sNek

MASERU

SOUTH AFRICA

SOUTH AFRICA

Tsoaing

R.

Caledon R.

Phiring R.Phuthiatsana

Tebetebeng R.

Cale

don

R.

Mal

ibam

atso

R.

Phuthiatsana R.

Makhalen

g R.

Seng

u R.

Sengu R.

Seng

u R.

Senqunyane R.

R.

27°30´

28°00´ 28°30´ 29°00´

29°00´

29°30´

30°00´

29°30´

30°00´

30°30´

27°30´ 28°00´

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

0 5 10 15 20 25 30 KILOMETERS

LESOTHO

INTEGRATED TRANSPORT PROJECTPAVED ROADS

GRAVEL ROADS

EARTH ROADS/TRACKS

SELECTED CITIES AND TOWNS

DISTRICT HEADQUARTERS

NATIONAL CAPITAL

DISTRICT BOUNDARIES

INTERNATIONAL BOUNDARIES

PROJECT WORKS:

EMERGENCY REPAIRS

RURAL ROAD UPGRADING

BRIDGE CONSTRUCTION

IBRD 34949

AUGUST 2006

NAMIBIA

LESOTHOArea of map

SOUTH AFRICA

Maseru

SWAZILAND

MOZAMBIQUEBOTSWANA

ATLANTICOCEAN

INDIANOCEAN